Michael W. Dickinson, Inc. v. Martin Collins Surfaces & Footings, LLC, No. 5:2011cv00281 - Document 67 (E.D. Ky. 2012)

Court Description: MEMORANDUM OPINION & ORDER: 1) 44 Motion for Protective Order and Modification of Subpoenas and 45 Motion for Protective Order are GRANTED. 2) 52 MOTION to Compel for Production of Documents by Keeneland Ventures PT, LLC is DENIED. 3 ) 64 MOTION to Compel Production of Documents from Keeneland Association is DENIED. 4) 57 MOTION for Hearing is DENIED. 5) Pla's subpoenas are MODIFIED to exclude him from discovering info re the finances or assets of third parties oth er than the judgment creditor Martin Collins Surface & Footings, LLC. 6) Central Bank & Trust Company is directed with WITHHOLD from production any documents that relate to the finances of third parties or assets of third parties which were not previ ously held by Martin Collins Surfaces & Footings, LLC, which might otherwise be responsive to Michael W. Dickinson, Inc.'s subpoena (including but not limited to requests 2, 7, 8, 10, 11, 12, or 14). 7) Neither Keeneland Ventures PT, LLC, Keenel and Association, Inc., Martin Collins USA, LLC, nor Martin Collins Surfaces & Footings, LLC, shall be required to produce documents regarding the finances or assets of parties other than Martin Collins Surfaces & Footings, LLC. 8) This order is FINAL AND APPEALABLE and THERE IS NO JUST CAUSE FOR DELAY. Signed by Judge Joseph M. Hood on 11/20/2012.(SCD)cc: COR

Download PDF
UNITED STATES DISTRICT COURT EASTERN DIVISION OF KENTUCKY CENTRAL DIVISION at LEXINGTON MICHAEL W. DICKINSON, INC., ) ) ) ) ) ) ) ) ) ) Plaintiff, v. MARTIN COLLINS SURFACES & FOOTINGS, LLC, Defendant. Civil Case No. 5:11-cv-281-JMH MEMORANDUM OPINION & ORDER *** This matter is before the Court upon several motions. Defendant Martin Collins Surfaces & Footings, LLC, filed a Motion for a Protective Order and Modification of Subpoenas (D.E. 44), opposition to which (D.E. 46) Plaintiff and filed Defendant a Response replied (D.E. in 55). Third-party Martin Collins USA, LLC, filed a Motion for a Protective Order (D.E. 45), to which Plaintiff filed a Response in opposition (D.E. 49) and Martin Collins USA, LLC replied (D.E. 56). Plaintiff also filed a Motion to Compel Production of Documents from Keeneland Ventures PT, LLC (D.E. 52) and a Motion to Compel Production of Documents from Keeneland Association, Inc. (D.E. 64), to which Keeneland Ventures PT, LLC and Keeneland Association, Inc. responded in opposition (D.E. 59, 65) and Plaintiff replied (D.E. 60, 66). Finally, Motion for Hearing (D.E. 57). Plaintiff has filed a All pending motions are ripe for review. For the reasons stated below, Defendant Martin Collins Surfaces & Footings s Motion for a Protective Order and Modification of Subpoenas (D.E. 44) and third-party Martin Collins USA s Motion for a Protective Order (D.E. 45) will be granted, and Plaintiff s Motions to Compel Production of Documents from Keeneland Ventures PT, LLC and Keeneland Association, Inc. (D.E. 52, 64) will be denied. Further, because the Court has determined that all issues raised in the discovery motions can be resolved without the benefit of a hearing, Plaintiff s Motion for Hearing (D.E. 57) is denied. I. Facts & Procedural History Defendant, Martin Collins Surfaces & Footings, LLC ( MCSF ) was formerly a Kentucky limited liability company wholly owned by two members: Martin Collins International, Ltd. (MCI) Ventures ) and by Keeneland and through ( Keeneland Association ). on September Dissolution). 23, Upon Ventures PT, Keeneland LLC ( Keeneland Association, Inc. Defendant voluntarily dissolved 2011. (D.E. dissolution, 44-2, Central Articles Bank & of Trust Company ( Central Bank ) had a first priority lien on all 2 of Defendant s assets. (D.E. 44, MCSF Motion for Protective Order, at 2). Plaintiff filed a Complaint for breach of contract on May 11, 2011, naming MCSF as the sole Defendant. (D.E. 1, Complaint). This Court entered a Judgment in favor of Plaintiff November on 18, 2011. (D.E. 36, 37). The motions involved in this case all relate to Plaintiff s efforts to engage in post-judgment discovery to satisfy the judgment obtained against Defendant. Specifically, since Defendant failed to satisfy the judgment, Plaintiff issued post-judgment discovery subpoenas to not only Defendant, but also several third parties including Keeneland Ventures, Keeneland Association, MCI, Martin Collins USA, LLC (MCUSA) and Central Bank. Plaintiff s subpoenas seek to recover a host of information from these third parties which relates not only to tracing Defendant s assets and determining its connection to its members, but also to uncovering a substantial amount of information about the individual assets of the third parties themselves. II. Analysis Fed. R. Civ. P. 69(a)(2) provides, in relevant part, that, in aid of the judgment or execution, [Plaintiff] may obtain discovery from any person . . . as provided in these rules. However, the scope 3 of discovery that may be obtained from third parties by a judgment creditor is limited to that necessary for the purpose of discovering any concealed or fraudulently transferred assets of the judgment debtor. Magnaleasing, Inc. v. Staten Island Mall, 76 F.R.D. 559, 561 (S.D.N.Y. 1977). The party seeking such discovery must make a threshold showing of the necessity and relevance of the information sought. Trs. of N. Fla. Operating Eng rs Health & Welfare Fund v. Lane Crane Serv., Inc., 148 disclosure generally F.R.D. 662, 664 concerning the not (M.D. Fla. assets contemplated by 1993). of Rule a Further, non-party 69(a), and is such discovery should only be permitted when the relationship between the judgment debtor and the non-party is sufficient to raise a reasonable doubt about the bona fides of the transfer of assets between them. Magnaleasing, Inc., 76 F.R.D. at 562. Plaintiff instant case. has failed First, to meet Plaintiff s this burden attempt to in the discover information from MCUSA clearly exceeds the bounds of Rule 69(a)(2). that MCUSA Plaintiff theorizes without any factual support is the American subsidiary of MCI, although MCUSA vehemently denies that it is owned or operated by MCI or any subsidiary thereof. (D.E. 56, MCUSA Reply, at 3). Regardless of MCUSA s corporate structure, Plaintiff has 4 failed to articulate why discovery from MCUSA which was never a member of Defendant is relevant or necessary. For example, fraudulent place. failed Plaintiff transfers between has never Defendant alleged and MCUSA took Nor have there been any allegations that MCUSA to pay sufficient consideration for Defendant s assets purchased upon Defendant s dissolution. Defendant has already produced discovery Further, to Plaintiff detailing all of the asset transfers to MCUSA. MCUSA Motion for Protective Order, at 3). not that only include the consideration (D.E. 45, These documents MCUSA paid for Defendant s assets, but also reveal that all assets were sold either at public auction or at a private sale supervised by Central Bank, Defendant s primary creditor. (D.E. 45, MCUSA Motion for Protective Order, at 3). In sum, there is simply no evidence that MCUSA engaged in fraudulent transfers with Defendant and Plaintiff has thus failed to meet its burden to show otherwise. With regard Plaintiff to seeks all other third post-judgment parties discovery, from which Plaintiff s argument primarily rests on its conclusory assertion that Keeneland Ventures, Keeneland 5 Association, and MCI are partners and Defendant is their partnership.1 (D.E. 48, Plaintiff Response to MCSF Motion for Protective Order, at 2); (D.E. 66, Plaintiff Reply in Further Support of its Motion to Compel Association, at Production 3). of Documents Specifically, from Plaintiff Keeneland points out that on Defendant s tax returns, Keeneland Ventures and MCI are listed as partners; that on Defendant s website, Defendant is held out to the world as a partnership of MCI and Keeneland expressed an Association ; interest in and that quickly MCI and resolving Keeneland Plaintiff s claim against Defendant through a series of emails. (D.E. 48, Plaintiff Response to MCSF Motion for Protective Order, at 2). However, Defendant is it a is clear limited from liability the public company record under that Kentucky law, of which Keeneland Ventures by and through Keeneland Association and MCI were simply members. Operating Agreement). (D.E. 55-1, MCSF Defendant s tax returns were filed under the term partnership because the federal government does not recognize an LLC as a classification for federal tax purposes; rather, the IRS will treat an LLC either as 1 As alleged by Keeneland Association and to the best of this Court s knowledge, Keeneland Association, Inc. is the sole member of Keeneland Ventures, PT LLC. In turn, Keeneland Ventures PT, LLC was a fifty percent of Defendant MCSF while MCI owned the other fifty percent. 6 a corporation, partnership, or as part of the owner s tax return, and the LCC must file as one of these entities accordingly.2 Moreover, the Court sees nothing out of the ordinary with Defendant s website since it merely states that Defendant is backed by years of experience from two recognizable MCI. MCI industry leaders, Keeneland (D.E. 46-2, MCSF Website). owned Defendant, there is Association and Given that Keeneland and nothing misleading or unacceptable about this public statement. Finally, the fact that Keeneland Ventures, Keeneland Association and MCI wanted to quickly resolve Plaintiff s claim against Defendant is entirely consistent with their dual ownership of the company and neither implies that they were actually in wrongdoing afoot. a partnership nor that there was Frankly, Plaintiff presents absolutely no evidence from which the Court might conclude that there has been an inappropriate transfer of funds from the nowdefunct Defendant to these entities. Therefore, Plaintiff has failed to meet its burden to show that the information it seeks is necessary and relevant to its attempt collect a judgment. 2 http://www.irs.gov/Individuals/Self-Employed/LLC-Filingas-a-Corporation-or-Partnership 7 to Plaintiff judgment argues discovery that against it can broadly Keeneland pursue Ventures, post- Keeneland Association, and/or MCI under the theory that these parties breached the corporeal form, and thus it is appropriate for this Court to pierce the corporate veil. Plaintiff claims it is entitled to Specifically, obtain information, among other things, regarding the scope of the partnership between Keeneland or Keeneland Association, Inc. and MCI, the relationship of the parties to MCSF, and the assets available to satisfy the judgment entered against MCSF. (D.E. 54, Plaintiff s Motion to Compel, at 8-9). Although Plaintiff has not presented any facts suggesting that any breach of corporeal form has occurred, he argues, without providing any legal authority, that he need not set forth facts supporting veil piercing at this point. (D.E. 48, Plaintiff s Response to MCSF s Motion, at 12). Plaintiff s request reflects a misunderstanding of the breadth of Fed. R. Civ. P. 69(a). While it may be true that post-judgment discovery has a broad scope, it has its limits. See United States v. Conces, 507 F.3d 1028, 1040 (6th Cir. 2007). When the ground for the discovery is an alleged alter ego relationship with the judgment debtor, there must be facts before the Court to show the basis for the allegation. Trs. of N. Fla. Operating Eng rs Health & 8 Welfare Fund, 148 F.R.D. at 664 (citing Strick Corp. v. Thai Teak Prods. Co., Ltd., 493 F. Supp. 1210, 1218 (E.D. Pa. 1980)). This threshold showing is necessary because [t]he interest of third parties in their privacy must be balanced against the need of the judgment creditor to the documents in question. Inc., 130 F.R.D. Blaw Knox Corp. v. AMR Indus., 400, 403 (E.D. Wis. 1990). This is considered a factual determination which can only be made on a case by case basis. Id. In this case, veil piercing was not an issue in the underlying case, and Plaintiff provides no facts suggesting that veil piercing is appropriate now. Rather, Plaintiff s theory of discovery arises out of the idea that partners have liabilities extension an for alter partnership ego theory debts and that could let it by recover against these entities if they are in fact determined to be partners. The premise of Plaintiff s argument is fundamentally flawed since, as explained above, there is no evidence that there existed a partnership in lieu of a limited liability corporation. Moreover, there is simply no evidence that any third party was disregarding corporate formalities with Defendant. Therefore, what Plaintiff essentially asks this Court to do is to allow it to engage in a fishing expedition under the guise of post-judgment 9 discovery to determine if a basis exists to pierce the corporate veil, even though no facts currently suggest that piercing is appropriate. Rule 69(a)(2) does not permit post-judgment discovery to this extreme. In support of its argument to the contrary, Plaintiff cites United States v. Conces, 507 F.3d 1028 (6th Cir. 2007), for the proposition that post-judgment discovery has a broad scope. that is not Specifically, information relevant However, Conces was a very different case analogous there was sought and to no question during clearly Plaintiff s in Conces post-judgment articulated; situation. that discovery rather, the the was defendant refused to produce the United States discovery requests because he believed responding to them would violate his Fifth Amendment protection against self-incrimination. at 1040. noted in Id. Thus, while it is true that the Sixth Circuit Conces that post-judgment discovery under Rule 69(a)(2) has a broad scope, the inherent caveat is that the discovery sought is relevant and necessary. Id. This is a bar that Plaintiff s requests do not meet. Plaintiff also cites to Andrews v. Raphaelson, No. 5:09-cv-077-JBC, 2009 WL 1211136 (E.D. Ky. Apr. 30, 2009), for the proposition that a judgment creditor is entitled to utilize the full panoply of federal discovery measures 10 provided for under federal and state law to obtain information from parties and non-parties alike, including information about assets on which execution can issue or about assets that have been fraudulently transferred. at *3. Id. However, Andrews also fails to support Plaintiff s argument. In Andrews, the plaintiff brought fraud and conversion claims against two defendants, a husband and wife. *1. Id. at The jury found in favor of the plaintiff on her claim against the defendant husband and entered a judgment against him; however, the jury found against the plaintiff on her claims against the defendant wife, and the court dismissed all claims against her. Id. efforts to against husband, she collect sought a judgment post-judgment In the plaintiff s the discovery defendant against the wife which included joint income tax returns filed with her husband. non-party, Id. at *2. objected The wife, who was then considered a to this discovery confidential, and overly broad. Id. as irrelevant, However, the court correctly noted that it is beyond question that a judgment creditor is allowed to ask a judgment debtor for asset and financial information relating to the debtor s spouse or other family members, and allowed the plaintiff to discover the information from the wife despite her non11 party status. Id. at *3 (citing Nat l Union Fire Ins. Co. of v. Pittsburgh Van Waeyenberghe, 148 F.R.D. 256, 257 (N.D. Ind. 1993). Before us is an entirely different case. underlying claim claim the and in Andrews jury found was in a First, the fraudulent favor of conversion the plaintiff. Therefore, there was obviously some evidence of fraudulent transfers in Andrews allowing the plaintiff to meet her burden to financial show that information the was defendant s necessary and attempt to enforce the court s judgment. wife s private relevant to her To the contrary in this case, Plaintiff s underlying claim is a breach of contract dispute, and Plaintiff has not since presented any compelling evidence that fraudulent transfers Defendant and any third party occurred. between Therefore, unlike the Andrews plaintiff, Plaintiff here has failed to meet its burden. Second, whereas the Andrews plaintiff sought to discover clearly relevant information about the defendant which naturally included some about his Plaintiff has only about wife, Defendant s past confidential requested and information information present not financial situation, but also, for example, any and all documents accounting for any Keeneland 12 Ventures Asset or any Martin Collins Central Bank). relevant entity asset. (D.E. 44-8, Subpoena to Thus, whereas the Andrews plaintiff sought information primarily about the defendant that naturally involved some peripheral information about his wife, Plaintiff here seeks to uncover everything about Keeneland Ventures, Keeneland Association, MCI and MCUSA as if they were something also more information to defendants justify regarding the in its this case. requests, finances or Without discovery assets of of third parties other than the defendant judgment debtor is beyond the scope of post-judgment discovery, pursuant to Fed. R. Civ. P. 69(a)(2). Notably, Defendant has never disputed that Plaintiff can freely discover its own assets and financial status and can make reasonable inquiry into the disposition of assets it once held. Order, at (D.E. 44, Defendant s Motion for Protective 5). Indeed, Defendant has already produced documents relating to its own past and present financial status, returns, including documents its own financial regarding its records dissolution, and tax documents relating to its Central Bank loan, documents relating to the public auction of its assets, documents regarding the sale and transfer of its remaining assets in connection with its dissolution, and non-privileged 13 communications between Defendant and its members concerning the dispute with Plaintiff. (D.E. Protective Order, at 5). 44, Defendant s Motion for Thus, Defendant has, to the best of this Court s knowledge, been completely compliant with Plaintiff s requests to the extent that they are within the bounds of Fed. R. Civ. P. 69(a)(2). III. Conclusion Accordingly, IT IS ORDERED: (1) Footings, that Defendant LLC s Motion Martin for a Collins Surfaces Protective Order & and Modification of Subpoenas [D.E. 44] and third-party Martin Collins USA, LLC s Motion for a Protective Order [D.E. 45] are GRANTED; (2) that Plaintiff s Motion to Compel Production of Documents from Keeneland Ventures PT, LLC, is DENIED. (3) that Plaintiff s Motion to Compel Production of Documents from Keeneland Association, Inc., is DENIED. (4) that Plaintiff s Motion for Hearing [D.E. 57] is DENIED. (5) that Plaintiff s subpoenas are hereby MODIFIED to exclude him from discovering information regarding the finances or assets of third parties other than the judgment creditor Martin Collins Surfaces & Footings, LLC; 14 (6) that Central Bank & Trust Company is directed to WITHHOLD from production any documents that relate to the finances of third parties or assets of third parties which were not Footings, previously LLC, held which by might Martin Collins otherwise be Surfaces responsive & to Michael W. Dickinson, Inc. s subpoena (including but not limited to requests 2, 7, 8, 10, 11, 12, or 14); (7) that neither Keeneland Ventures PT, LLC, Keeneland Association, Inc., Martin Collins USA, LLC, nor Martin Collins Surfaces & Footings, LLC, shall be required to produce documents regarding the finances or assets of parties other than Martin Collins Surfaces & Footings, LLC as the judgment debtor in this case in response to the subpoenas and requests served upon them by Plaintiff, Michael W. Dickinson, Inc. (8) that this Order is FINAL AND APPEALABLE and THERE IS NO JUST CAUSE FOR DELAY. This the 20th day of November, 2012. 15

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.