United States District Court, D. Connecticut
RICHARD M. COAN, TRUSTEE, et al.
v.
SEAN DUNNE, et al.
RULING ON MOTION TO COMPEL (DOC. NO. 64)
Robert
M. Spector United States Magistrate Judge.
I.
BACKGROUND
The
genesis of this case lies in a judgment entered by the High
Court of Ireland on March 9, 2012, in the amount of
€185, 299, 627.78 against Sean Dunne and in favor of
National Asset Loan Management, LLC [“NALM” or
“NAMA”]. On July 11, 2012, NALM commenced a civil
action in the Connecticut Superior Court to, inter
alia, avoid fraudulent transfers, require an accounting
of assets transferred, require disgorgement of certain
transferred assets, impress the transferred assets with a
constructive trust for the benefit of a creditor of Sean
Dunne, and for related relief. See NALM v. Dunne et
al., Conn. Super. Ct. C.A. No. FST0CV1205013922-S
(“State Court Action”).[1] Several discovery disputes
arose during the course of discovery in the State Court
Action, and on March 29, 2013, the defendant Sean Dunne filed
a petition for relief under Chapter 7 of the United States
Bankruptcy Code, In re Sean Dunne, Bankruptcy No.
13-50484 (AHWS) (“Bankruptcy Case”), and the
Superior Court case was stayed. Richard M. Coan is serving as
the Trustee of Sean Dunne's bankruptcy estate. On June 4,
2013, the Bankruptcy Court granted Ulster Bank a relief from
the stay to serve Dunne with an involuntary bankruptcy
petition in Ireland. Dual bankruptcy actions proceeded - here
and in Ireland.
Based
on testimony from Dunne taken during the Bankruptcy Case,
NALM commenced an adversary proceeding on July 8, 2013
objecting to Dunne's discharge pursuant to 11 U.S.C.
§§ 727(a)(4) (False Oaths) and 727 (a)(2)(A)
(Removal, Transfer and/or Concealment of Assets). NALM v.
Dunne, Bankr. D. Conn. Adv. Proc. No. 13-05033. The
gravamen of NALM's complaint in the adversary proceeding
was Dunne's concealment and transfer of assets through
Gayle Killilea and other persons and entities in hinderance
of his creditors. Discovery proceeded in that action, with
extensive motion practice through August 2014. On August 20,
2014, Dunne moved to dismiss his Chapter 7 Bankruptcy Case,
to which the Trustee objected, citing Dunne and
Killilea's failure to participate in discovery. NALM
rescheduled the pending discovery motions which had been
stayed because of Dunne's motion to dismiss. Dunne then
withdrew his motion to dismiss and, on December 10, 2014,
voluntarily waived his discharge by entry of an Order of the
Bankruptcy Court, which rendered the adversary proceeding and
the discovery motions therein moot.
On
January 12, 2015, the Trustee removed the State Court Action
to this court (Doc. No. 1); thereafter, United States
District Court Judge Jeffrey Alker Meyer granted the
Trustee's Motion to Intervene as Party Plaintiff and
denied defendant Killilea's Motion for Remand. (Doc. No.
38). No. action occurred in this case over the next two
years. During that time, on March 29, 2015, the Trustee
commenced an adversary proceeding in the Bankruptcy Court,
Coan, Trustee v. Gayle Killilea, et al., Adversary
Proceeding No. 15-5019 (“Adversary Proceeding”),
in which the parties engaged in discovery and other pretrial
proceedings. (See Doc. Nos. 39-40, 43).
The
gravamen of the Trustee's case against the defendants is
the avoidance of various transfers and the concealment of
assets made by Sean Dunne to and through related persons and
entities, including the defendants, with the intent to
hinder, delay or defraud his creditors. Dunne contends that
he transferred ownership of certain assets to defendant
Killilea and others prior to the bankruptcy and the look back
period. The Trustee alleges that the alleged transfers
occurred for no consideration, at a time when Dunne was
insolvent and for the sole purpose of defeating creditor
claims. The defendants are the recipients of Dunne's
alleged transfers.
On
September 11, 2018, this case was consolidated with the
Adversary Proceeding. (Doc. Nos. 50-52). On October 30, 2018,
the Trustee filed, inter alia, the pending Motion to
Compel (Doc. No. 64) in which the Trustee seeks documents and
information that it contends “are already the subject
of prior orders in both the Connecticut Superior Court and
the Adversary Proceeding[, ]” in response to which the
defendants filed their objection on November 9, 2018. (Doc.
No. 78). On November 16, 2018, the Court held a motion
hearing to address the “motions or other discovery
matters that remain of consequence” from the Adversary
Proceeding (Doc. No. 59), including this pending Motion to
Compel.
Following
oral argument, during which the Court noted that it would
need a “much more detailed recitation of exactly what
it is that's believed to be deficient[, ]” (Doc.
No. 99 at 29), the Court referred the Trustee's Motion to
Compel to this Magistrate Judge and ordered the Trustee to
file “a proposed order and detailed itemization of the
alleged deficiencies in defendants' document production
within the scope of the allegations in the existing motion to
compel.” (Doc. No. 82; see Doc. No. 83;
see also Doc. 99 at 40-41). The Court then set a
December 21, 2018 deadline for the Trustee to disclose its
expert report and damages analysis.
On
November 26, 2018, the Trustee filed an Itemization of
Categories of Discovery Requested by the Trustee and
Deficiencies in Defendants' Response Thereto
[“Itemization”], and a Proposed Order on
Trustee's Motion to Compel Discovery Responses and to
Overrule Defendants' Privilege Objections. (Doc. No. 90,
Exs. A-B). In the Itemization, the Trustee lists 23
categories of documents. (Doc. No. 90, Ex. A at 2-6). On
November 30, 3018, this Magistrate Judge held a telephonic
conference regarding the Trustee's submission, during
which the defendants argued that this Itemization did not
comply with the November 16, 2018 Order. The defendants
represented that they would produce additional documents, but
needed more information as to the documents the Trustee
claimed were missing. The Trustee agreed to revise its
Itemization to specify, more particularly, the documents he
was requesting, and the defendant agreed to file a response
to the revised submission.
On
December 5, 2018, the Trustee filed his Supplemental
Itemization of Categories of Discovery Requested by Trustee
and Deficiencies in Defendants' Response Thereto. (Doc.
No. 109). On December 11, 2018, the defendants filed their
brief in opposition in which they argue that the
Trustee's supplementation has expanded rather than
narrowed the focus of the discovery requests. (Doc. No. 120).
On December 13, 2018, the Trustee filed his reply brief.
(Doc. No. 125).
For the
reasons set forth below, the Trustee's Motion to Compel
(Doc. No. 64) is granted in part and denied in part.
II.
LEGAL STANDARD
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 the
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(b)(1). The advisory committee's notes
to the 2015 amendment of Rule 26 further explain that
[a] party claiming that a request is important to resolve the
issues should be able to explain the ways in which the
underlying information bears on the issues as that party
understands them. The court's responsibility, using all
the information provided by the parties, is to consider these
and all the other factors in reaching a case-specific
determination of the appropriate scope of discovery.
Fed. R. Civ. P. 25 advisory committee's note to 2015
amendment.
“[T]o
fall within the scope of permissible discovery, information
must be ‘relevant to any party's claim or
defense.' In order to be ‘relevant' for Civil
Rule 26 discovery purposes, information and evidentiary
material must be ‘relevant' as defined in Rule of
Evidence 401.” Bagley v. Yale Univ., No. 3:13
CV 1890 (CSH), 2015 WL 8750901, at *8 (D. Conn. Dec. 14,
2015); see Fed. R. Civ. P. 26(b)(1), advisory
committee notes to the 2015 amendments. “Discovery,
however, ‘is concerned with ‘relevant
information'-not ‘relevant evidence'-and that
as a result the scope of relevance for discovery purposes is
necessarily broader than trial relevance.'”
A.M. v. Am. Sch. for the Deaf, No. 3:13 CV 1337
(WWE), 2016 WL 1117363, at *2 (D. Conn. Mar. 22, 2016)
(quoting Steven S. Gensler, 1 Federal Rules of Civil
Procedure, Rules and Commentary Rule 26, V. Depositions and
Discovery (February 2016 Update) (footnotes omitted).
“The Court ‘must limit' discovery otherwise
allowed if the discovery sought is ‘unreasonably
cumulative or duplicative, or can be obtained from some other
source that is more convenient, less burdensome, or less
expensive[.]'” Family Wireless #1, LLC v. Auto.
Techs., Inc., No. 3:15 CV 01310 (JCH), 2016 WL 3911870,
at *2 (D. Conn. July 15, 2016) (quoting Fed. R. Civ.
P. 26(b)(2)(C)(i)).
III.
DISCUSSION
A.
ITEMIZATION NO. 1 - NEWINVEST
The
Trustee seeks documents responsive to his Document Request
No. 69 to Killilea and Document Request No. 51 to John Dunne,
in which the Trustee requests as follows:
Request No. 69: Documents and communications between you and
Newinvest concerning any loans or mortgage advanced by or
granted to Newinvest, including, but not limited to, any loan
closing files, mortgage, and any bank records showing the
receipt or disposition of monies related thereto.
Request No. 51: Any application for financing you prepared or
submitted on behalf of TJD 21.
In its
Supplemental Itemization, the Trustee requests as follows:
1. Documents and communications concerning the capitalization
of Newinvest Holding International Ltd.
(“Newinvest”), including, but not limited to, any
account opening document, bank statement, wire receipt,
deposit slip, withdrawal slip or check.
2. Documents and communications concerning the source of
funds used by Newinvest to make loans to the Defendants,
including, but not limited to, any account opening document,
bank statement, wire receipt, deposit slip, withdrawal slip
or check.
3. Documents and communications concerning the ownership of
Newinvest, including, but not limited to, any stock ledger,
schedule of beneficiaries, membership interests or other
documents identifying the owners.
4. Documents concerning the domicile of Newinvest, Totalserve
and/or Line Trust Corporation Ltd.
5. Documents and communications concerning any loan to
Newinvest, including, but not limited to, Killilea's loan
of $1.8 million to Newinvest and the source of funds for such
loan.
6. Communications between or among the Defendants and
Newinvest.
7. Communications between the Defendants and Sean Dunne,
James Ryan, Ross Connolly, Roy Abramowitz, Jospeh Leshkowitz,
Hassans International Law Firm, Line Trust Corporation Ltd.,
Totalserve or any third party concerning Newinvest.
8. Documents and communications concerning the $25, 000,
000.00 loan facility that Killilea made available to Line
Trust Corporation Ltd. and the source of funds for such loan
facility.
(Doc. No. 109 at 2-3).
At oral
argument before the Court on November 16, 2018, the Trustee
argued that the documents related to Newinvest are relevant
because Newinvest, which is a lender, is an entity formed by
the Hassan Law Firm, and managed by Totalserve. Once
Newinvest received funds from the Dunne family, it then lent
money to other Dunne-controlled entities (ex: to TJD21, to an
entity that owned 42 Bote Road, to defendant Wahl LLC). (Doc.
No. 99 at 23). Additionally, defendant Mountbrook USA
transferred significant funds to Newinvest after the
bankruptcy case was filed. (Doc. No. 99 at 24-25). The
Trustee represented that it is requesting documents from
Newinvest dating back to the time it was formed in 2007-2008.
(Doc. No. 99 at 25).
At oral
argument, the defendants agreed to make “additional
disclosure on Newinvest.” (Doc. No. 99 at 37). Now in
their response to the Trustee's Supplemental Itemization,
the defendants argue that they produced “all Newinvest
loan agreements and have provided a supplemental production
including incorporation documents and client account
records.” (Doc. No. 120 at 4). In his reply, the
Trustee notes that, on December 11, 2018, the defendants,
“produced for the first time highly relevant documents
demonstrating that Killilea was the direct source of the
Newinvest funds used to fund the Dunnes' various real
estate projects[, ]” and that the defendants failure to
produce this information earlier is “sheer
obstructionism.” (Doc. No. 125 at 1-2).
To the
extent there are additional documents responsive to the
foregoing requests relating to Newinvest, the defendants
shall produce such documents on or before December 21,
2018.[2]
B.
ITEMIZATION NO. 2 - WALFORD
The
Trustee seeks documents responsive to his Document Request
Nos. 92-95 to Killilea[3] and Document Request No. 51 to John Dunne,
which requests state as follows:
Request No. 92: All documents concerning your selection or
acquisition of Walford, including but not limited to the
closing file.
Request No. 93: Documents and communications concerning the
source of funds used to acquire the Walford property.
Request No. 94: Documents and communications concerning any
consideration you paid to acquire the Walford property.
Request No. 95: All documents concerning the marketing and
sale of Walford, including but not limited to the closing
file.
The
Trustee now seeks the following:
1. Documents and communications concerning the capitalization
of Yesreb Holding Limited (“Yesreb”), including
but not limited to, any account opening document, bank
statement, wire receipt, deposit slip, withdrawal slip or
check.
2. Documents and communications concerning the source of
funds used by Yesreb to purchase Walford, including, but not
limited to, any account opening document, bank statement,
wire receipt, deposit slip, withdrawal slip or check.
3. Documents and communications concerning ownership of
Yesreb, including, but not limited to, any stock ledger,
schedule of beneficiaries, membership interests or other
documents identifying the owners.
4. Documents and communications concerning any loan to
Yesreb, including, but not limited to, the €15, 000,
000.00 credit facility made available to Yesreb by Killilea
and the source of funds for such credit facility.
5. Communication between or among the Defendants and Yesreb.
6. Communications between the Defendants and the Debtor,
James Ryan, Ross Connolly, Roy Abramowitz, Joseph Leshkowitz
or any third party concerning Yesreb.
(Doc. No. 109 at 3-4).
At oral
argument on November 16, 2018, the Trustee explained his
understanding of the 2005 Walford property transaction
(see Doc. No. 99 at 19-22), and the defendants
reiterate the transaction in their brief in opposition to the
Trustee's supplemental filing. (See Doc. No. 120
at 7-8). The parties explain that Dunne purchased Walford on
July 1, 2005, in trust, for €54, 000, 000.00. Then Dunne
transferred his rights to the Walford property to an entity
known as Matsack Nominees which held that property for the
benefit of Killilea. In 2013, the property was transferred to
Yesreb, a Cypriot company which is managed by an entity known
as Totalserve, which was established by a Gibraltar law firm
known as Hassans. (Doc. No. 99 at 19-20; see Doc.
No. 120, at 7-8). The Trustee believes, based on disclosed
documents, that Killilea lent Yesreb the money so that Yesreb
could buy the Walford property for her, and the beneficial
owners of Yesreb are the minor children of Sean Dunne and
Gayle Killilea Dunne, through a trust. (Doc. No. 99 at 20).
Additionally, according to the Trustee, after the bankruptcy
case was filed, Yesreb sold the property to another entity in
Ireland. (Doc. No. 99 at 20-21).
The
Trustee has explained the link between Yesreb and the Walford
transaction, thereby establishing the relevance of the
requests directed toward Yesreb. Although Yesreb is not a
party to the Trustee's actions and is the subject of
litigation in Ireland, the Trustee has explained that the
documents related to the Walford transaction relate to his
allegations of fraud. (See Doc. No. 99 at 22).
The
additional itemized requests listed above relate to the
Walford transaction. At the November 16, 2018 oral argument,
defense counsel stated that the defendants could produce the
transactional documents that reflect money related to Walford
or the properties that have been named at issue in this case.
(Doc. No. 99 at 38-39) (“[W]e can produce the actual
transactional documents. And if they need a backup of the
bank record on that transaction, we will produce that. . . .
Many of these documents have already been produced as a
result of our providing all the Irish discovery to the
trustee.”). To the extent that the defendants have not
already produced the documents that they committed to
producing during the November 16, 2018 proceeding, they shall
do so on or before December 21, 2018. Additionally,
on or before December 21, 2018, the defendants shall
provide documents responsive to the categories of documents
listed above relating to Yesreb.
C.
ITEMIZATION NO. 3 - SOURCES OF FUNDS USED TO PURCHASE THE
U.S. PROPERTIES[4]
In
Document Requests Nos. 64, 67, 69, [5] 71, 82 and 87 to Killilea
and Request No. 51 to John Dunne, the Trustee sought
documents and communications concerning the “source of
the funds used to purchase” certain identified
properties, and in Request No. 51 to John Dunne, the Trustee
sought “[a]ny application for financing you prepared or
submitted on behalf of TJD 21.” In his Supplemental
Itemization, the Trustee seeks the following documents:
1. Documents and communications concerning the source of
funds, direct and indirect, used to purchase 38 Bush Avenue,
Greenwich, CT.
2. Documents and communications concerning the distribution
of the sale proceeds of 38 Bush Avenue, Greenwich, CT,
including but not limited to, closing statements, bank
statements, wire receipts, checks, deposit slips or
withdrawal slips.
3. Documents and communications concerning the source of
funds, direct or indirect, used to purchase 42 Bote Road,
Greenwich, CT.
4. Documents and communications concerning the distribution
of the sale proceeds of 42 Bote Road, Greenwich, CT,
including but not limited to, closing statements, bank
statements, wire receipts, checks, deposit slips or
withdrawal slips.
5. Documents and communications concerning the source of
funds, direct and indirect, used to purchase 1 Hidden Springs
Lane, Rye, NY.
6. Documents and communications concerning the distribution
of sale proceeds [for] 1 Hidden Springs Lane, Rye, NY,
including but not limited to closing statements, bank
statements, wire receipts, checks, deposit slips or
withdrawal slips.
7. Documents and communications concerning the source of
funds, direct and indirect, used to purchase 74 Grand Street,
New York, NY.
8. Documents and communications concerning the distribution
of the sale proceeds [for] 74 Grand Street, New York, NY,
including, but not limited to, closing statements bank
statements, wire receipts, checks, deposit slips or
withdrawal slips.
9. Documents and communications concerning the source of
funds, direct and indirect, used to purchase 22 Stillman
Lane, Greenwich, CT.
10. Documents and communications concerning the source of
funds, direct and indirect, used to purchase 151 Milbank,
Greenwich, CT.
11. Documents and communications concerning the source of the
funds used to pay the security deposit and lease payments for
421 Field Point Road, Greenwich, CT.
12. Documents and communications concerning the source of the
funds used to pay the security deposit and lease payments for
526 Indian Field Road, Greenwich, CT.
(Doc. No. 109 at 5-6). The Trustee contends that the
defendants have refused to produce the documents showing the
sources of funds used to purchase these U.S. ...