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United States Regional Economic Development Authority, LLC v. Matthews

United States District Court, D. Connecticut

May 10, 2018




         This case involves a series of wire transfers from Plaintiff United States Regional Economic Development Authority, LLC ("USREDA" or "Plaintiff") to the bank account of Defendants Gerry D. Matthews and Matthews Commercial Properties, LLC (collectively, "Defendants"). Defendants have moved for summary judgment on all claims; presently pending before the Court is Plaintiff's Motion to Defer Consideration of Defendants' Motion for Summary Judgment, made pursuant to Rule 56(d) of the Federal Rules of Civil Procedure. Also pending are related discovery motions: Motions by Defendants to quash two subpoenas; and a motion by Plaintiff to compel responses to its Second Requests for Production. Each of the discovery-related motions has been opposed, and the motions are ripe for decision. This Ruling resolves them.

         I. BACKGROUND

         Plaintiff brings this action against Defendants, alleging claims of breach of contract, unjust enrichment, and fraud. The dispute involves a sum of $529, 843, which is the total sent by four separate wire transfers to Defendants between April 15, 2013, and July 26, 2013. Familiarity with the facts alleged in the Second Amended Complaint and with the Court's prior Rulings are assumed, and will be discussed below only as necessary.

         Discovery in this matter was set to close on October 30, 2017. The matter appeared to be proceeding uneventfully toward that deadline when, on October 11, 2017, Defendants filed motions to quash two separate non-party subpoenas. Docs. 53, 54. The first subpoena, directed at non-party Webster Bank (the "Webster Subpoena"), seeks the production of certain financial documents related to a bank account in the name of Defendant Matthews Commercial Properties, LLC ("MCP"). The second subpoena, directed at non-party Barbara Petrowski, an employee at MCP (the "Petrowski Subpoena"), seeks to compel Ms. Petrowski's testimony by way of a deposition. Then, on October 26, 2017, Plaintiff moved to compel responses to Plaintiff's Second Set of Requests for Production. Doc. 56.

         Amid this welter of motion activity, Plaintiff filed a motion to amend its complaint, seeking to add two counts, sounding in fraud. Doc. 55. On December 4, 2017, the Court issued a Ruling denying Plaintiff's motion to amend, with leave to file a renewed motion, pursuant to Rule 15(a) of the Federal Rules of Civil Procedure. Recognizing that the question of the controlling claims may inform the resolution of the discovery disputes, the Court stayed the remaining deadlines on the matter, including its consideration of the pending discovery motions, until the question of amendment was resolved. Doc. 67.

         On January 10, 2018, Plaintiff filed its renewed motion for leave to amend; when the matter became ripe, on March 21, 2018, the Court granted Plaintiff leave to file a Second Amended Complaint, adding two counts sounding in fraud. Doc. 75. The Court lifted the stay it had previously imposed, and issued a Scheduling Order that provided for, inter alia, the filing of the Second Amended Complaint, and the filing of dispositive motions. Doc. 77. In light of newly-added claims of fraud, and aiding and abetting fraud, the Court also directed the parties to engage in a renewed effort to resolve by agreement the discovery issues presented by the pending discovery motions, and to file a joint status report indicating the result of the parties' conferences. See Doc. 77.

         Plaintiff filed its Second Amended Complaint on March 27, 2018, Doc. 76; two days later, Defendants filed both an Amended Answer, Doc. 79, and a motion for summary judgment. Doc. 80.

         On April 12, 2018, Plaintiff filed a status report, indicating that despite several efforts, it was unable to reach an agreement with Defendants in terms of the pending discovery requests. See Doc. 83. Defendant echoed this sentiment in its own report on April 16, 2018, stating simply that counsel were unable to resolve the outstanding issues regarding discovery and that the pending discovery motions "continue to require resolution by the Court." Doc. 85.

         With its deadline to respond to Defendants' motion for summary judgment looming, on April 13, 2018, Plaintiff filed a motion to defer consideration of Defendants' dispositive motion, pursuant to Rule 56(d). Doc. 84. The additional discovery discussed in Plaintiff's Rule 56(d) motion is also at issue in Plaintiff's pending motion to compel, and in Defendants' motions to quash. All of the discovery-related motions are ripe for consideration.[1] The Court will first address Plaintiff's Rule 56(d) motion.


         Rule 26(b)(1) of the Federal Rules of Civil Procedure sets forth the scope and limitations of permissible discovery:

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.

Fed. R. Civ. P. 26. "The party resisting discovery bears the burden of showing why discovery should be denied." Cole v. Towers Perrin Forster & Crosby, 256 F.R.D. 79, 80 (D. Conn. 2009).

         The Second Circuit has made it clear that "summary judgment should only be granted if after discovery, the nonmoving party has failed to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof." Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 303 (2d Cir. 2003) (quotation marks omitted) (emphasis in original) (quoting Hellstrom v. U.S. Dep't of Veterans Affairs, 201 F.2d 94, 97 (2d Cir. 2000)). Indeed, "[t]he nonmoving party must have had the opportunity to discover information that is essential to its opposition to the motion for summary judgment, " and it is therefore "only in the rarest of cases may summary judgment be granted against a nonmovant who has not been afforded the opportunity to conduct discovery." Lego A/S v. Best-Lock Constr. Toys, Inc., 319 F.R.D. 440, 455 (D. Conn. 2017) (quotation marks omitted) (quoting Hellstrom, 201 F.3d at 97).

         Rule 56(d) of the Federal Rules of Civil Procedure permits a court, in the exercise of its discretion, to defer or deny a decision on summary judgment if a "nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition[.]" Fed.R.Civ.P. 56(d). "The affidavit must include the nature of the uncompleted discovery; how the facts sought are reasonably expected to create a genuine issue of material fact; what efforts the affiant has made to obtain those facts; and why those efforts were unsuccessful." Paddington Partners v. Bouchard, 34 F.3d 1132, 1138 (2d Cir. 1994)[2]; see also Alphonse Hotel Corp. v. Tran, 828 F.3d 146, 151 (2d Cir. 2016) (same). The affidavit must explain with specificity how the facts sought are reasonably expected to create a genuine issue of material fact. Alphonse Hotel Corp., 828 F.3d at 151.

         "'[A] court plainly has discretion to reject a request for discovery if the evidence sought would be cumulative or if the request is based only on speculation as to what potentially could be discovered, and a bare assertion that the evidence supporting plaintiff's allegations is in the hands of the moving party is insufficient to justify the denial of summary judgment." Crye Precision LLC v. Duro Textiles, LLC, 689 Fed.Appx. 104, 108 (2d Cir. 2017) (quoting In re Dana Corp., 574 F.3d 129, 148-48 (2d Cir. 2009)); see also Alphonse Hotel Corp., 828 F.3d at 151-52 ("[B]are, generalized assertions cannot justify delaying the resolution of a summary judgment motion."); Paddington Partners, 34 F.3d at 1138 ("A court can reject a request for discovery, even if properly and timely made through a Rule 56[d] affidavit, if it deems the request to be based on speculation as to what potentially could be discovered.").

         Thus, the party seeking to delay resolution of a summary judgment motion pursuant to Rule 56(d) must also provide the basis for believing that the discovery requested exists. Alphonse Hotel Corp., 828 F.3d at 151. "The requirement that a party identify what facts are sought and how they are to be obtained precludes the party from making purely speculative requests with the hope that beneficial evidence will serendipitously materialize." Am. Home Assur. Co. v. ZIM JAMAICA, 418 F.Supp.2d 537, 547 (S.D.N.Y. 2006) (emphasis in the original) (citation omitted).


         A. 56(d) Motion

         The Court will first address whether Plaintiff has made a showing under Rule 56(d) that it requires further discovery to justify its opposition to Defendants' motion for summary judgment. The discovery sought by Plaintiff's prior discovery requests and the subpoenas it previously served to non-parties Webster Bank and Barbara Petrowski form the basis for Plaintiff's motion to defer consideration.

         The Webster Bank subpoena, served on October 3, 2017, commands the bank to produce several financial documents related to the MCP savings account into which Plaintiff's funds were deposited. Specifically, the subpoena requests the 1099INT interest statement for 2013; "all statements, signature cards, bank resolutions and bank deposit agreements . . . for the entire period that the account was open . . . through the most recent statement;" and finally, "all documents identifying all persons who have or had signature powers or other authority to direct the transfer of funds into and/or out of" the subject bank account. Doc. 53-1 at 24.

         The subpoena directed to Ms. Petrowski commands her appearance for a deposition, and was served on October 3, 2017, after Plaintiff requested that Defendants voluntarily produce Ms. Petrowski for a deposition based on the testimony of Defendant Gerry Matthews, [3] and Defendants refused.[4] Doc. 58-5 at 2, 3.

         Finally, Plaintiff's Second Request for the Production of Documents, served on September 28, 2017, following Gerry's deposition, includes requests for the production of financial records related to a Chase Freedom credit card account and the MCP account; documents concerning the brokerage listing by Gerry for the sale of the former Cross Pen plant; documents concerning payments or transfers of property by MCP or Gerry to or for the benefit of Robert Matthews, Gerry's brother; documents concerning payments or transfers of property by Robert to or for the benefit of Gerry or MCP; documents concerning any debt of Robert owed to Gerry or MCP; and documents concerning any debt of Gerry or MCP owed to Robert.

         Plaintiff asserts that it requires the above discovery to respond to Defendants' motion for summary judgment, as it would likely lead to evidence that is reasonably expected to create genuine issues of fact as to each ground for summary judgment raised in Defendants' motion. Plaintiff argues that the discovery it seeks is neither cumulative nor speculative and it was timely requested. Plaintiff sets forth by Declaration the facts it expects to discover and how that evidence would raise material issues of fact. Defendants argue that Plaintiff's motion should be denied, as the discovery sought is not relevant to the issues raised in the motion for summary judgment, and because the affidavit in support of the motion to defer is deficient.

         Consideration of Plaintiff's 56(d) motion requires the Court to visit the grounds upon which Defendants have moved for summary judgment. Defendants seek summary judgment on each of the counts of the Second Amended Complaint: breach of contract, or, in the alternative, unjust enrichment; fraudulent misrepresentation or inducement; and aiding and abetting fraud.

         On Plaintiff's breach of contract claim, Defendants argue that there are no facts that would show an offer, an acceptance of an offer, or a meeting of the minds as between Plaintiff and these Defendants, since the subject loans were between Plaintiff and Robert, not Defendants Gerry or MCP, and because there were no communications between Plaintiff and Defendants prior to the transfers of the funds. Defendants also contend that Plaintiff's breach of contract claim is barred by the statute of frauds. In making this argument, Defendants claim that an equitable estoppel contention could not succeed as Plaintiff cannot establish Defendants' knowledge or assent of the transactions, since the transactions were solely for Robert's benefit.

         Defendants also argue that Plaintiff's unjust enrichment count fails, as Defendants received no benefit from the money loaned. Defendants claim that there is no evidence that Defendants were aware that the funds in question came from Plaintiff, as they were transferred into the MCP account through Robert's attorney, Les Evans. Finally, Defendants make several arguments in favor of summary judgment on Plaintiff's newly added claims sounding in fraud and aiding and abetting fraud. Relevant here, Defendants argue that there is no evidence that Defendants made any misrepresentations in order to induce Plaintiff to act, and there is no evidence that Defendants knowingly and substantially assisted Robert's alleged fraudulent misrepresentations.

         In its 56(d) motion, Plaintiff asserts that it seeks to discover evidence to show that Gerry benefitted from the loaned funds, which would contradict both Gerry's claim and Robert's affidavit that Robert was the only beneficiary. Plaintiff contends that some of the requested discovery - specifically, the 2013 interest statement from Webster Bank; bank statements; documents showing payments, transfers or debt owed between Gerry and Robert; and Petrowski's testimony - would show that the loaned funds went directly to Gerry. Plaintiff also seeks bank statements, signature cards, bank deposit agreements, bank resolutions, credit card statements, a QuickBooks ledger and Petrowski's testimony to show that Robert used the MCP bank account both before and after the funds were transferred in and out of the account, which would provide evidence of a pattern and practice of Gerry assisting Robert in hiding funds from creditors. The information contained in the bank statements, credit card statements, and the QuickBooks ledger, along with Petrowski's testimony, would also show that the funds - and other creditors' funds - went to Robert's own accounts, which Plaintiff asserts would provide evidence of pattern and practice of defrauding creditors through the use of the MCP account.

         It is clear to the that the discovery Plaintiff seeks could reasonably lead to evidence, which, if credited, would justify denial of ...

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