Securities and Exchange Commission v. Pence, No. 1:2017mc23744 - Document 21 (S.D. Fla. 2017)

Court Description: ORDER DENYING MOTION TO QUASH SUBPOENA OR FOR THE ENTRY OF A PROTECTIVE ORDER. Stegawski's Motion to Quash Subpoena or for the Entry of a Protective Order (D.E. 1) is DENIED. All pending motions are DENIED as moot. The Clerk of Court shall m ark this case as CLOSED. Closing Case. Motions terminated: 14 MOTION to Amend/Correct 12 Response/Reply (Other) filed by Stephen B Pence. Signed by Judge Federico A. Moreno on 11/20/2017. (da00) NOTICE: If there are sealed documents in this case, they may be unsealed after 1 year or as directed by Court Order, unless they have been designated to be permanently sealed. See Local Rule 5.4 and Administrative Order 2014-69.
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Securities and Exchange Commission v. Pence Doc. 21 U N ITED STA TES D ISTRICT CO URT FOR THE SO U TH ERN D ISTR ICT OF FLO RIDA M iam iDivision Case N um ber:17-23744-M C -M 0 % N 0 SECU RITIES AN D EX CHA N GE CO M M ISSION , Plaintiff, VS. STEPH EN B .PEN CE, Defendant. / ORDER DENYING M OTION TO OUASH SUBPOENA O R FOR THE ENTRY OF A PR O TEC TIV E O R D ER 1. Introduction The Securities and Exchange Com m ission com m enced this action againstStephen Pence forhis allegedly fraudulentconductin connection with two entities:PSQ,LLC and General Employm entEnterprises.Pence hasasserted the çsadviceofcounsel''defense,contending thathe followed the instructions provided by his attorneys: Gregory Bartko and M ichael Andrew Stegaw ski. The SEC and Pence therefore seek to depose Stegaw ski. But Stegaw ski has no interest in being deposed,and asks this Courtto quash the Rule 45 subpoena compelling his deposition. He contends that his testim ony would provide lim ited- if any- value and w ould resultintheunauthorized disclosureofclientconfdencesand privileged communications. For the reasons discussed below , this Court finds Stegaw ski's argum ents unavailing. Accordingly,Stegawski'sMotion to Quash Subpoena orfortheEntry ofaProtectiveOrderis DEN IED . II. A nalvsis ln hismotion,Stegawskiasksthe courtto do each ofthe following:(i)invalidate the Rule45 subpoenabecauseitwasnotpersonally served on Stegawski;(ii)quash thesubpoena and enter a protective order preventing the Parties from deposing Stegawski' , (iii) grant Stegawskianaward ofattorney'sfees;and(iv)assesssanctionsjointly uponPenceandhislegal counsel.To the extentthese requestsm eritconsideration,the Courtaddressesthem in turn. A . Stegawski' s Requestz/ Invalidate theSubpoena Based on ImproperService Asan initialmatter,Stegawskicontendsthatthe subpoena isinvalid because itwas not personally served.To be sure,neither the Com m ission nor Pence personally served Stegawski with the subpoena- butnotforlack oftrying.The Comm ission ttm ade 14 unsuccessfulattempts to personally sel've Stegawskiwith a subpoena ad testscandum atfive differentlocations''in threecitiesandtwo states.SEC v.Pence,No.15-cv-7077-GBD-GW G,at*2(S.D.N.Y.Sep.28, 2017).And Pence'scounselcontacted Stegawskimultipletimesby emailandphoneto arrange for personal 4-5. U ltim ately,Judge G orenstein- after a thorough evaluation of pastand presentcaselaw- granted theParties'jointrequestto permitsubstituted serviceusing Stegaw ski's contact inform ation listed on his CM /ECF account and in the Georgia and Florida bar directories. See id. at 10-11. The Coul't accurately concluded ûûthat there is virtually no possibility thatStegawskiwillfailto beawareofa subpoena served by these means.''1d. lndeed,Stegawskiconcedes in his motion thathe ûtundeniably hasactualnotice ofthe subpoena''and ûtdoes not dispute either that service w as attem pted or that he is aware of the subpoena.''(StegawskiM ot.17.)Healsoadmitsthatcourtsin theEleventhand SecondCircuits have accepted substituted service of subpoenas.See,e.g.,ln re Falcon Air Express,Inc..Case No.0&-11877-BKC,2008 W L 2038799 (Bankr.S.D.Fla.May 8,2008)(holdingthatsubstitute service ofa subpoena is effective on a non-party witness under Rule 45);Med Diagnostic Imaging,PLLC v.Carecore Nat,LLC,NO.06-cv-13516-VM -THK,2008 W L 3833238,at*3 (S.D.N.Y. Aug. 2008) (pennitting substituted service of ûûa deposition subpoena, by delivering acopy ofthesubpoenato hisplace ofem ploym ent,m ailing a copy by firstclassmail, andattachingacopyofthisOrdertothesubpoena''). Yet, astonishingly, Stegawski still contends that this Court should overturn Judge Gorenstein'swell-reasoned Order,vitiate the priorservice,and com pelthe Partiesto startfrom scratch.He rootsthisconclusion in a pedantic policy argumentthatifcourtspermitsubstituted service on law yers using contact inform ation listed on CM /ECF and state bar directories, ûtthe result would be that an attorney's CM /ECF registration with a federal court or state bar registration would effectively function as a waiver of all service of process in judicial proceedings.''(StegawskiM ot.17.) W hile sym pathetic to Stegawski's bislippery slope''theory,the Courtis confident that judicialrestraintwilllimitthis method of substituted service to those rare and exceedingly burdensome situations where a nonparty-attorney-witness unexplainably cannot be locatedmuch lesspersonally served after 14 attempts. 'Requiring the Parties to reinitiate personal service efforts atthisjuncture would do nothing butwaste time and resources something Stegawski has already accomplished in spades. Accordingly,the Court denies Stegawski's requestto invalidate the subpoena forim properservice. B.Stegawski'sM otiontoQuashtheSubpoenaandEnteraProtectiveOrder Stegaw skiasks this Courtto quash the Rule 45 subpoena com pelling his deposition.H e contends that forcing him to testify w illresult in the disclosure of confidential and privileged attorney-clientinform ation. 1lndeed, thiscourtechoesthe sentim entJudgeGorenstein expressed in footnote six ofherOrder: The CourtwJ, Nsurprised and disappointed that Stegawskirefused to consentto alternative xcrvfcc orto suggestany manner in which he can be served.lndeed, itseems entirely inconsistent with his status as an tp f/iccroftheFlorida and Georgiacourtsand asantp /éccrofthefederal courts in Florida and Georgia where he is admitted.An attorney should understand thatthe ''JN/y to avoid unnecessary expenses ofserving''a summons as articulated in Fed.R.Civ.P.4(d)(1) should inform an attorney ' stpw/kconducteven whereRule4 doesnotappl y. Pence,N o.15-cv-7077-G BD-G W G,at*9 n.6. The FederalRules of CivilProcedure strongly favorfulldiscovery wheneverpossible. SeeFarnsworth v.ProcterdrGambleCo.,758F.2d 1545,1547 (11th Cir.1985).ThoseRules stipulate thata courtm ay issue a protective orderpreventing a deposition only for ttgood cause.'' Fed.R.Civ.P.26(c)(1).The federalcourts employ a demanding balancing-of-the-interests approach w hen deciding whetherthere is good cause to issue a protective order.See Farnsworth, 758 F.2d at 1547.Specifcally,dtthe Courtshould balance the non-moving party's interestin obtaining discovery and preparing fortrialagainstthe m oving party's proffer ofharm thatwould result.''Paxton v.GreatAm.Ins.Co.,2009W L 5064054 at*6(S.D.Fla.2009).ût-l-heburden is on the m oving party and w hen the relief sought is preclusion of a deposition altogether,it is a heavy one.''Ivax,LLC.v.Celgene Corp.,No.12-61917-ClV,2013 W L 12085477,at*3 (S.D. Fla.July 29,2013)(citing Dutford v.Rolly Marine Serv.Co.,233 F.R.D.635,637 (S.D.Fla. 2005)).Ultimately,tûlilt is very unusual for a courtto prohibit the taking of a deposition altogetherand absentextraordinary circum stances,such an orderwould likely be in error.''Salter v.Upjohn Co.,593F.2d649,651(5thCir.1979). Here,Pencehasraisedthe ttadviceofcounsel''defense,requiring him toprovethatçû(1) he fully disclosed to his attorney allm aterialfacts thatare relevantto the advice forwhich he consulted the attorney;and (2) thereafter,he relied in good faith on advice given by his attorney.'' United States v. Hill,643 F.3d 807,850 (11th Cir.2011).Pence stated in his deposition thatûthe could notrecallw hat specifically he told Bartko or Stegaw ski''buttûinsisted that...hetwouldhave'toldthem everythingthatheknew.''(P1.'sResp.3(citingPilgrim Decl. !4(quotingPenceDep.253:19-254:22, .314:14-315:2;319:20-320:24)).) To be sure, Stegaw ski asserts in his D eclaration that Pence failed to m ake a com plete disclosure of the relevant facts necessary to prevailon his itadvice of counsel''defense.Butas the Com mission notes.Stegawski'sDeclaration iûmay notbe admissible attrial.''(P1.'sResp.6. n.5.)Regardless,the Commission and Pence stillhavemuch to gain--orlose by questioning Stegawski, testing the veracity of certain statem ents, and developing a m ore fulsom e understanding ofthe allegedly fraudulentconductatissue.(See id.(arguing thatthere tlisno substitute foradeposition atwhich Stegawskiwillbe subjectto cross-examination by counsel forboth parties''l.)ln short,the Parties'interestin obtaining complete and detailed discovery would beirredeemably impaired by theissuance ofaprotectiveorder. A dditionally,Stegaw skihas failed to dem onstrate thatany realhann w ould result from the deposition.H is m otion provides little m ore than a sum m ary ofconfidentiality and privilege rules com bined with conclusory assertions thathis testim ony would violate those rules.The Courtdoes not m inim ize the profound responsibility of attonw ys to guard the attorney-client privilege and preserve clientconfidences.But in this case, Stegawski's testim ony pertains to such a lim ited universe of potential clients that his burden of identifying and preserving confidential inform ation and privileged com m unications is far outw eighed by the harm to both Partiesifthey cannotdepose Stegaw ski. lndeed,the Comm ission points outthatGeneralEmploym entEnterprises- stegawski's only relevant former client who has not already waived privilege and confidentiality affirmatively (Pence)2orby dissolution (Psol3- presented Stegawskiwith an opportunity to discuss his concerns about disclosing confidential inform ation or privileged com munications stem m ing from his representation of G eneralEm ploym entEnterprises,as w ellas the possibility thatGeneralEmploymentEnterprises mightwaive applicable privileges.(Pilgrim Decl.! 3.) G eneralEm ploym ent Enterprises agreed to further alleviate Stegaw ski's concerns by having its owncounselpresentatthedeposition.(1d.) Remarkably,Stegawskirespondsthatûûgwlhatthe(SecuritiesandExchangeCommissionj doesnotunderstand isthatneitherStegawskinorgGeneralEmploymentEnterpriseslhave any aftirmativedutytognegotiatel.''(StegawskiReply5.)Thismaybetrue- stegawskimay haveno 2 (See D.E.1-6 (Transcriptof Hearing, SEC v.Pence,No.15-cv-7077-GBD (S. D.N.Y.Aug.8. 2017)).) 3 Because PSQ is no longeractive,ithas no privilege to assert.See In re FundamentalLcwg Term CJrc,Inc.,No.8:1l-BK-22258-MGW ,2012 W L 48l532l,at*8 (Bankr.M .D.Fla.Oct.9,20l2) (holding,as othercourtshave held,ttthata dissolved corporation does nothave the rightto assertthe attorney-clientprivilege''l;seealso SEC v.Carrillo HuettelLLP,20l5 W L l610282,at*2-3 (S.D.N.Y. Apr.8,2015)(findingthatttgtlheweightoftheauthority ...holdsthatadissolved ordefunctcorporation retainsnoprivilege''and thatcasesholdingotherwisetûgenerallydoso onthebasisofstatelaw''). obligation to negotiate a waiver or engage in good faith efforts to m itigate the disclosure risk he belabors.But Stegaw ski's refusalto pursue an available solution--one that w ould seem ingly elim inate hisconfidentiality and privilege concerns givesthe Courtpause abouthis m otives for trying to avoid this deposition. M otives aside, Stegaw ski provides no legally sufficient justificationforquashingthesubpoenaorentering aprotectiveorder.TheCourtthereforedenies Stegaw ski'sm otion requesting such relief. C.Stegawski'sRequestforanAwardofAttorney% Fees Stegaw skiasks the Courtfor tûan aw ard of fees forthe expense incurred in bringing this motion ....''(StegawskiM ot.18.)However,thisCourtdoesnotsubsidizeself-induced harm. See Royale Green Condo.Ass'n,lnc.v.Aspen Specialty Ins.Co.,N o.07-CIV -21404,2008 W L 11333557,at*1(S.D.Fla.June 12,2008)(criticizing an individual'sétaudacity in requesting attorneys'feesfora situation''ofhisown making).Thus,the CourtdeniesStegawski'srequest forattolmey'sfees. D.Stegawski'sRequestforSanctions Upon PenceandTql' f:Counsel Also vexing is Stegaw ski's suggestion that the Court sanction Pence and his attorney for- in essence- m ounting a defense. Stegaw ski- w ho spends the bulk of his page lim it trum peting professional responsibility and the fundam ental principles of privilege and confidentiality--condem ns Pence's counselfor an equally fundam entalresponsibility:vigorous advocacy. The Court has trouble reconciling those tw o positions. A ccordingly, Stegaw ski's requestthatthe Courtassess sanctions upon Pence and his attorney isdenied. 111. C onclusion For the reasons discussed above,the CourtfindsthatStegaw skiis entitled to none ofthe relief he seeks.Specifically,Stegawskicannot recover on his motion:(i) to invalidate the subpoenaforimproperservice;(ii)to quash thesubpoenaorfortheentry ofaprotectiveorder; (iii)forattorney'sfees;or(iv)forsanctionsuponPenceandhisattorney.Accordingly,itis 6 ADJUDGED that Stegawski's M otion to Quash Subpoena or for the Entry of a ProtectiveOrder(D.E.1)isDENIED.Al1pending motionsareDENIED asmoot.TheClerk of Courtshallm ark thiscase asCLO SED . D ON E AN D O RD ERED in Cham bers at M iam i, Florida, this xe ) @ U& &ofN ovem ber W - .. * ' ( A' ' FED ERIC .M O REN O UN ITED STA TES D ISTRICT JUD G E Copies furnished to: CounselofRecord