CVL Real Estate Holding Co. LLC v Weinstein

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CVL Real Estate Holding Co. LLC v Weinstein 2012 NY Slip Op 31030(U) February 24, 2012 Supreme Court, New York County Docket Number: 602868/2007 Judge: Eileen Bransten Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. , ON 411 812012 [* 1] SUPREME COURT OF THE STATE OF NEWYORK NEW YORK COUNTY - - -1 - 1 60286812007 CVL REAL ESTATE HOLDING Justice -' '' - WEINSTEIN, ELI INDEXNO. SEQUENCE NUMBER. 009 MOTION DATE -- PREL INJUNCT / TEMP REST ORDER MOTION SEP. NO. -- '- I 7 i - ~ i ( 1 II 11 RUTIFW OT MouoniUrder to Show Causa hls motion tolfor - Affldavlts - Exhibita Answerlng Affidavits - Exhlbitr Replylng Affldavlta INo(@d. INds). INo(s). - -3 Upon the foregoing papen, It I ordered that this rnotlon Is s I. CHECK ONE: ..................................................................... E'NON-FINAL DISPOSITIOI ........................... MOTION IS: 0GRANTED c DENIED 0GRANTED IN PART uOTHEF ] CHECK IF APPROPRIATE: ................................................ 0SElTLE ORDER SUBMIT ORDER IZIDO NOT POST FIDUCIARY APPOINTMENT nREFERENC 2. CHECK AS APPROPRIATE: 3. CASE DISPOSED [* 2] SUPREME COURT OF THE STAI E OF NEW YORK COUNTY OF NEW Y O N : IAS PART THREE Index No. 602868107 Motion Date: 8/12/20 1 1 Motion Seq. Nos.: 009 Defendant Eli Weinstein (, Defendant )moves to vacate the contempt order and arrest warrant that this court issued on March 26, 2009 and April 30, 2009, respectively. In the alternative, Defendant moves to stay the contempt order and arrest warrant until the conclusion of a criminal action against him that is currently pending in federal court. Plaintiff opposes the motion. 1 I 2012 I. Background C0IINI-y On April 1 1, 2008, Plaintiff obtained a judgment against Defendant for $j$w@~,c~ RK plus interest. Defcndant s Memorandum of Law in Support of Order to Show Cause ( Defendant s Memo ), p. 3. Defendant did not perfect an appeal of the judgment. Affirmation of David Carlbach in Support ol Ordcr to Show Cause ( Carlbach Affirm, ), Ex. R, p. 2 1. On February 4,2009, Plaintiff atttcmpted to serve upon Defendant a Subpoena Duces Tecum, Subpoena Ad Testifkandum, Restraining Notice, Notice of Judgment Debtor and Information Subpoena to ascertain the location and amount of Defendant s asscts. [* 3] CVL Real Estate Holding Co. LLC v. E i Weinstein l Index No. 602868/07 Page No. 2 Defendant s Memo, p. 3. Defendant contested the validity of the subpoenas and rcfused to provide the information requcsted therein. Id, On Febniary 26, 2009, Plaintiff moved for an order holding Defendant in contempt of court for failing to comply with the subpoenas. Carlbach Affirm., Ex. E, p. 2. On March 18, 2009, Plaintiff s and Defendant s attorneys appeared in court for oral argument on Plaintiffs motion. Carlbach Affirm., Ex. I;, p. 1. Mi. Weinstein did not attend the hearing. Id. at p. 14. The court warned Defendant s counsel that if Defendant did not appear in court the following day, he would be in contempt of court. Id, at p. 19. Defendant failed to appear. On March 26,2009, the court granted Plaintiff s contempt motion. Carlbach Affirm., Ex. I. p. 1. On April 30, 2009, the court issucd an additional order holding Defendant in contempt of court for failing to respond to Plaintiffs subpoenas and for failing to appear at the hearings on March 18 and 19. Carlbach Affirm., Ex. J, p. 2. The court ordered the Clerk of the Court to issue a warrant for Defendant s arrest. Id. On August 25, 2009, Defcndant moved to vacate the contempt order and arrest warrant. Carlbach Affirm., p. 5. The court denied the motion on the grounds that Defendant had done nothing to cure the contempt. Carlbach Affirm., Ex. M, p. 1. On October 28,2009, Defendant rcsponded to the lnfonnation Subpoena, providing answers to questions and over 5,000 documents. Id. Defendant subsequently made over 50,000 additional documents available for inspection at Defendant s counsel s o f k e . Id. at p. 7. [* 4] C VL Real E.rtute Holding Co. LLC v. Eli Weinstein Index No. 602868/07 Page No. 3 On December 1, 2009, Defendant moved to vacate the contempt order and arrest warrant, asserting that he had cured his contempt. In opposition, Plaintiff claimed that, despite Defendant s voluininous document production, Defendant had not produced several key records. Carlbach Affirm., Ex. 1, p. 6. Plaintiff asserted that Defendant had failed to produce information about Defendant s pcrsonal bank accounts and records for a number of Defendant s Limited Liability Companies ( T,LCs ). Id. Defendant also did not respond to the Subpoena Ad Testificandum. Id, On February 4, 2010, thc court denied Defendant s motion to vacate the contempt order. The court held that Defcndant had not fully complied with the Subpoena Duces Tecum or the Subpoena Ad Testificandum. Carlbach Affirm., Ex. M, p. 1. On August 1 1 2010, the Federal Government filed criminal charges against Defendant. Defendant is alleged to have induced a number of individuals and banks to invest over $200,000,000 in fraudulent real estate projects between 2003 and 20 1 1. Carlbach Affirm., Ex. V, pp. 2-6. On August 12,2010, the Federal Bureau of Investigation ( FBI ) executed a search upon Defendant s home and office. Carlbach Aff;irm., Ex. W, pp. 3-1 8 . The FBI seized computers, documents, jcwelry and othcr valuables. Id. Defcndant now once again moves to vacate this court s contempt order and arrest warrant. Defendant claims that he cannot comply with the Subpoena Duces Tecum because fedcral agents seized his personal and business records. Defcndant s Memo, p. 14. Defendant further claims that compelling hiin to comply with the Subpoena Ad TcstiGcanduin and to producc the documents requested in the Subpoena Duces Tecum [* 5] CVL Real &state Holding C o. LLC v. Eli Weinstein Index No. 602868/07 Page No. 4 would violate his rights against self-incrimination under the Fifth Amendment to the United States Constitution. Id. at 14-15 . Finally, Defendant argues that the contempt order should be vacated because it impedes Defendant s ability to pursue a lawsuit against his former business partner, Michael Gandi. Emergency Ai firmation of David Carlbach ( Carlbach Emergency Affirm. ), p. 2. Plaintiff maiiitains that Defendant s motion must be denied because the only way to ensure that Defendant fully complies with the Subpoena Duces Tecum and the Subpoena Ad Testificandum is to leave the contempt order and awest warrant in place. Plaintiff/Judgment Creditor s Memorandum of Lriw in Opposition to Defendant s Third Ordcr to Show Cause to Vacate Arrest Warrant ( Plaintiffs Memo ), pp. 8-9. Plaintiff asserts that the arguments Defendant sets forth are a merely a ploy to hamper Plaintiff s ability to collect on its judgmcnt. Id. 11. Analysis A. Personal Banking Records Defendant stated in his answers to the Information Subpoena that he currently has no personal bank accounts. Affirmation of Wallace Necl in Opposition to Defendant s Third Order to Show Cause to Vacate Arrest Warrant ( Wallace Affirm. ),Ex. 3, p. 8. However, PlaintifY asserts that it found evidence of several pcrsonal bank accounts amongst the documents that Defendant produced. Carlbach Affirm., Ex. T, p. 6. This evidence consists of cancelled checks from a number ofpcrsonal accounts. Id. Plaintiff seeks the coinpletc bank records + or each of thesc accounts. [* 6] CVL Real Estate Holding Co. LLC v. Eli Weinstein Index No. 602868/07 Page No. 5 Defendant claims that, [iln ight ofthe Crimina Proceeding, it is now impossible for Defendant to cure his contempt, since Defendant must waive his Fifth Amendment right against Self-incrimination by testifying about and producing thc subpoenaed documents. Defendant s Memo, p. 14. Plaintiff contends that producing the requested documents would not violate Defendant s rights because Fifth Amendment protection docs not apply to financial records. Plaintift s Memo, p. 10, n. 4. In United Stutes v. Doe, 465 U.S. 605 (1984), the United States Supreme Court held that the Fifth Amendment protects the person asserting the privilege only froin compelled self-incrimination. Where the preparation of business records is voluntary, no compulsion is present. Id. at 610-1 1 (emphasis in original). The Supreme Court went on to apply this reasoning to records of personal iinances such as tax returns and to the financial records of sole proprietorships. Id. at 61 1-12. Similarly, Defendant here does not contend that he prepared the [requested] docunicnts involuntarily or that the subpoena would force him to restate, repeat, or affirm the truth of their contents, Thc fact that the records arc in respondent s possession is irrelevant to thc detcrmination or whether the creation of the records was compelled. Id. Thc contents of Defendant s pcrsonal bank records are therefore not protected from disclosure under the Fifth Amendment. Although the contents ofa document may not be privileged, the act of producing the document may be. Id, at 6 12- 13. The act of producing documents can be a testimonial act because [cloinpliance with the subpoena tacitly concedes the existence of the papers [* 7] CVL Real Estate Ilolding Co. LLC v. Eli Weinstein Index No. 602868/07 Page No. 6 demanded and their possession or control by the person producing the documents. Id. at 613. It also would indicate the . . . belief that the papers are those described in the subpoena. Id. Consequently, while the contents of Defendant s personal financial records are not privileged, the act of producing those records may be. To establish a fifth amendment violation, [Defendant] must. , . demonstrate the existence of three elements: 1) compulsion, 2) a testimonial communication, and 3) the incriminating nature of that communication. Re Grand Jury Subpoena, 826 F.2d 1166, 1168 (2d Cir. 1987). The element of compulsion is met here as Defendant is subject to a subpoena and a contempt order. Next, the court must consider whether the production of Defendant s financial records is testimonial. Under the Fifth Amcndrnent, evidence is deemed testimonial when it reveals defendant s subjective knowledge or thought processes -when it expresses the contents of defendant s mind. People v. Havrish, 8 N.Y.3d 389, 395 (2007) (citing Doe v. United States, 465 U.S. 201,2 11 (1988)). The surrender ofcvidence can be testimonial if, by doing so, defendant tacitly conccdes that the item demanded exists or is in defendant s possession or control when these facts are unknown to the authorities and would not have been discovered through independent means. Id. In other words, the inquiry is whether the existence of the item sought, or defendant s possession of it, was a foregone conclusion and the [defendant] adds little or nothing to thc sum total of the Government s information by conceding that he in fact has the [item]. Id. (quoting Fisher v. Unitedstates, 425 U.S. 391, 411 (1976)). [* 8] CVI, R e d Estate Holding Co. LLC v. Eli Weinstein Index No. 602868/07 Page No. 7 The existence of records detailing thc location and amount of Defendant s personal assets is not a foregonc conclusion. The production of those records would be a tacit concession of their existence and an admission that those records were in Defendant s possession or control. Production of Defendant s personal financial records would therefore be testimonial unless the FBI has already independently obtained those records. Finally, the court must determine whether the production of evidence is incriminating. In doing so, the court must look to whether either the fact of existence of the papers or of their possession by the [Defendant] poses any realistic threat of incrimination, Fisher, 425 U.S. at 412, or merely trifling or imaginary[] hazards of incrimination. Doe, 465 U.S. at 614, n. 13. Defendant has not shown that the existence of his personal bank records or the fact that he possessed them would incriminate him. The mere fact that he faces prosecution for a crime does not necessarily mean that the records Plaintiff seeks will be inculpatory. Although it is conceivable that the existence of Defendant s bank records could incriminate hiin in the unrelated criminal action, Defendant has not alleged this to be the case, let alone shown it to be so. Furthermore, Defcndant cannot inakc a blaiikct Fifth Amendment objection to the production of a11 of his financial records. He must assert the privilege on a docurnent-bydocument basis. See Rogers v. United States, 340 U.S. 367, 374 (1951) ( [als to each question to which a claim of privilege is directed, the court must determine whether the answer to that particular question would subject the witness to a real danger of , .. [* 9] CVL Real Estate Holding Co. LLC v. Eli Weinstein Index No. 602868/07 Page No. 8 incrimination. ) Defendant must demonstrate why the act of producing each requested record, not the contents of the record itself , would incriminate him in violation of his Fifth Amendment rights. Because Defendant made no such showing, nor even attempted to do so, Defendant s motion to vacate or stay the contempt order as to Defendant s personal bank records is denied. B. Records of LLCs Plaintiff also claims that Dcfendant pro iided Plaintiff ith an incomplete list ofthe LLCs in which Defendant holds an interest. Carlbach Affirm., Ex. T, p. 3. Plaintiff seeks the records for each LLC in which Defendant holds an interest, including financial statements and tax returns. Id. Defendant also asserts that coiiipelling the production of these documents violates his Fifth Amendment rights. The act of producing corporate records, unlike personal records, is not privileged. Braswell v. United States, 487 U.S. 99, 109- 10 (1988). [Tlhc Court has consistently recognized that the custodian of corporate or cntity records holds those documents in a representative rather than a personal capacity. Artificial entities such as corporations may act only through their agents, and a custodian s assiiinption of this representative capacity leads to certain obligations, including thc duly to produce corporate records on proper demand. . . . Under those circumstances, the custodian s act of production is not deemed a personal act, but rathcr an act of the corporation. Any claim of Fifth Amendment privilege asserted by the agent would be tantamount to a claim of privilege by the corporation - which of course possesses no such privilege. Id, at 109. Defendant must, therefore, produce the documents requested in the Subpoena Duces Tecum that pertain to the LLCs in which Defendant holds an [* 10] C V L Red Estate Holding Co. LLC v. Eli Weinstein Index No. 602868/07 Page No. 9 interest. Defendant s motion to stay or vacate the contempt order as to the documents related to his LLCs is thus denied. C. Impossibility Defendant claims that, even if some of the documents requested in the Subpoena Duces Tecum are not privileged, he cannot produce them because the FBI confiscated his records. Defendant s Memo, p. 15. [Wlhere a party alleges an excuse for disobedience to a judgment or order o f a court or alleges matters in mitigation, the burden of proof is upon him to establish the same. Such burden must be met by a factual showing. In re Hifdrsth, 28 A.D.2d 290, 294 (1st Dep t 1967). Defendant has conclusively shown that the FBI is in possession of some of his records. Defendant provides the FBI s list of the items it seized from Defendant s home and office (the FBI list ). See Carlbach A f h n . , Ex. W. However, Defendant has not demonstrated that the specific records requested by Plaintiff are now inacccssible. The FBI list is vague and provides little useful information. For example, the list includcs scveral references to computers or thumb drives, but it is unclear whether those devices contain the records Plaintiff seeks. Rather than a wholesale declaration that Defendant cannot possibly comply with thc Subpoena Duces Tecum, Defendant must make a factual showing of impossibility as to the specific documents Plaintiff seeks to obtain. Because Defendant makes no such showing, the motion to stay or vacate the order of contempt is denied. [* 11] CVL Real Estute Holding Co. I,LC v. Eli Weinsfein Index No. 602868/07 Page No. 10 D. The Subpoena Ad Testificandum Defendant asserts that the court cannot compel him to comply with the Subpoena Ad Testificandum bccause to do so would violate his Fifth Amendment rights. While the contents of business records are not privileged, oral testimony concerning the contents or location of those rccords inay be privileged under the Fifth Amendment. Curcio v. United States, 354 U.S. 118, 123-24 (1957). A custodian, by assuming the duties of his office, undertakes the obligation to produce the books of which he is custodian. , . . But he cannot lawfully be compelled, in the absence o f a grant of adequate immunity from prosecution, to condemn himself by his own oral testimony. Id. Consequently, Defendant may be able to claim privilege as to any of Plaintiff s deposition questions, whether they concern his personal rccords or the records of LLCs. Defendant cannot, however, assert a blanket claim of privilege. Defendant must instead show as to each question to which a claiin of privilege is directed . . . whether the answer to that particular question would subject [Defendant] to a real danger o f . . . incrimination. Rogers 340 U.S. at 374. If a defendant makes such a showing, then the court must grant a stay of the contempt order as to thosc questions that would violate the defendant s Fifth Amendment rights. Derendant made only a wholesale claim of privilege. He did not state which of Plaintiffs deposition question he finds objectionablc or why the answers to those questions would subject hiin to a danger of incrimination. The motion to stay OF vacate the order of contempt as it relates to the Subpoena Ad Testificandum is therefore denied. [* 12] CVL Real Estate Holding Co. LLC v. Eli Weinstein Index No. 602868/07 PageNo. 1 1 E. Defendant s Lawsuit against Michael Gandi Defendant s final argument is that the contempt order should be vacated because it impedes Defendant s lawsuit against his former business partner, Michael Gandi. Emergency Affirmation of David Carlbach, p. 2, The court considered and rejected this argument in its February 4, 2010 Order denying Defendant s second motion to vacate the contempt order. Order of February 4, 2010, p. 1. Defendant provides no reason why the court should depart from its prior decision. Deleendant s motion to vacate the contempt order and arrest warrant to hcilitate his lawsuit against his business partner is denied. 111. Conclusion Accordingly, it is hereby ORDERED that Defendant s motion to vacatc or stay the contempt order and arrest warrant is denied. This constitutes the decision and order of the court. FILED APR 1 1 2012 COUNTY CLERK S O m = Dated: New NFW YORK ENTER: n Hon. Eileen Branstcn, J.S.C.

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