Deutsche Bank AG v. Sebastian Holdings, Inc.
| Decision Date | 02 January 2019 |
| Docket Number | INDEX NO. 161079/2013,Index No. 161257/13 |
| Citation | 2019 NY Slip Op 30062 (U) |
| Parties | Deutsche Bank AG, Plaintiff, v. SEBASTIAN HOLDINGS, INC., Defendant. Deutsche Bank AG, Plaintiff, v. ALEXANDER VIK, CARRIE VIK, AS AN INDIVIDUAL AND AS TRUSTEE OF THE CSCSNE TRUST, IVAN GONELL SANTANA AS TRUSTEE OF THE CSCSNE TRUST, THE CSCSNE TRUST, C.M. BEATRICE, INC., AND SEBASTIAN HOLDINGS, INC., Defendants. |
| Court | New York Supreme Court |
Hon. James E. d'Auguste
Motion Sequence Nos. 005 and 006 filed under Index No. 161079/2013 (the first action) and Motion Sequence Nos. 008 and 009 filed under Index No. 161257/2013 (the second action) are hereby consolidated for disposition.
In both actions, plaintiff Deutsche Bank AG (Deutsche Bank) moves for an order: 1) directing defendants Sebastian Holdings, Inc. (SHI), the CSCSNE Trust (the Trust), and Alexander Vik (Vik) to produce documents responsive to Deutsche Bank's first request for the production of documents, dated December 19, 2013; 2) directing defendants C.M. Beatrice, Inc. (Beatrice) and the Trust to designate a suitable witness for a deposition concerning the topics noticed in the subpoena served upon Beatrice, dated November 8, 2016; 3) directing Per Johansson (Johansson), SHI's representative and not a party in his own capacity, to appear for a continuation of his deposition and to retract his privilege claims or to produce a detailed privilege log; 4) allowing Deutsche Bank to use discovery materials produced by Johansson in these two actions in related actions; and 5) appointing a special master to preside over the continued depositions of Beatrice, SHI, and Johansson, and other depositions as may arise (Mot. Seq. No. 006 in the first action and Mot. Seq. No. 008 in the second action).
In the first action, SHI moves for an order quashing Deutsche Bank's information subpoena, dated March 29, 2017, and for a protective order (Mot. Seq. No. 005).
In an action in the United Kingdom (the UK action),1 a UK court found that SHI incurred losses in the hundreds of millions in foreign exchange trading through accounts set up at Deutsche Bank and that, in order to prevent Deutsche Bank from recouping the trading losses, Vik caused approximately $1 billion in assets to be transferred from SHI in 2008. At that time, Vik was SHI's sole shareholder and director. Deutsche Bank alleges that the transferees of SHI's assets were companies owned or controlled by Vik or members of his family. In November 2013, the UK court awarded Deutsche Bank ajudgment of $243 million against SHI. Since then, Deutsche Bank has attempted to collect the judgment by bringing actions in New York, Connecticut, Delaware, Europe, and the Turks and Caicos Islands (TCI). SHI and Beatrice are TCI corporations.
Deutsche Bank brought the first action in November 2013 in the form of a motion for summary judgment in lieu of complaint seeking recognition and enforcement of the UKjudgment. Deutsche Bank's motion was granted, and the judgment was entered in May 2016. Deutsche Bank brought the second action in December 2013, seeking to hold Vik, his wife Carrie Vik, Beatrice, and the CSCSNE Trust (the Trust) liable for the judgment against SHI on the grounds of alter ego liability and fraudulent conveyance.
Deutsche Bank served a deposition subpoena and an information subpoena on SHI in September 2016. After SHI's motion to quash was denied in February 2017, SHI answered the information subpoena and Deutsche Bank served a follow-up information subpoena, dated March 29, 2017, on SHI. SHI moves to quash the follow-up subpoena on the grounds that it is overbroad, harassing, irrelevant, and intended to assist Deutsche Bank in the other related actions.
SHI alleges as follows. The March 29, 2017 subpoena contains 20 questions, the first 19 of which are substantive. Except for questions 9 and 14, each substantive question is based on, or gathered from, information and/or documents which Deutsche Bank has had in its possession since 2014/2015, and as to which Deutsche Bank has already questioned witnesses in depositions in the UK and Connecticut actions. SHI alleges that Deutsche Bank could have posed these questions long before serving the subpoena. The information sought is not relevant to the satisfaction of the judgment. The subpoena seeks a vast breadth of information about non-party assets and valid debts or transfers going back many years and would not lead to assets applicable in satisfaction of the judgment. The subpoena seeks detailed and obscure information that is difficult if not impossible to locate. The subpoena places an undue burden on SHI. Deutsche Bank aims to harass SHI to obtain material for the other actions.
Deutsche Bank responds as follows. Via subpoenas addressed to non-parties, Deutsche Bank discovered relevant information about SHI, including the existence of several SHI accounts and an October 2008 transfer from SHI to Alexander and Carrie Vik. SHI admits that this transfer was not disclosed during previous discovery. SHI's answers to the initial information subpoena consisted largely of references to information previously disclosed in other litigations between SHI and Deutsche Bank.
Listing each question from the first information subpoena, Deutsche Bank points out how SHI's answer did not discuss various transfers, amounts owned to SHI, and other information, some of which Deutsche Bank found out through other sources. Deutsche Bank states that, to the extent that the follow-up subpoena addresses subjects touched on by SHI's previous disclosures or in previous depositions, the reason is that SHI's answers, including the answers to the first information subpoena, were vague and incomplete. The follow-up subpoena asks about transfers to or from SHI, its investments and accounts, and sources who could provide more information in areas where SHI gave incomplete answers.
CPLR 3101 mandates that there shall be full disclosure of all material and necessary matters in an action. The words "material and necessary" must "be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity." Allen v. Crowell Collier Publ. Co., 21 N.Y.2d 403, 406 (1968). Parties are entitled to discover "information reasonably calculated to lead to relevant evidence." Cronin v. Gramercy Five Assocs., 233 A.D.2d 263, 264 (1st Dep't 1996) (internal quotation marks and citation omitted).
CPLR 5223 provides that a judgment creditor may compel disclosure of all matter relevant to the satisfaction of the judgment. Judgment creditors are entitled to broad disclosure in aid of judgment enforcement through the judgment debtor or any third person with knowledge of the debtor's property. ICD Group v. Israel Foreign Trade Co. (USA), 224 A.D.2d 293, 294 (1st Dep't 1996). All matters relevant to satisfying the judgment are discoverable and "the public policy is to put no obstacle in the path" of those seeking to enforce a judgment. Siemens & Halske GmbH. v. Gres, 77 Misc. 2d 745, 745 (Sup. Ct. N.Y. County 1973), aff'd 43 A.D.2d 1021 1st Dep't 1974) (internal quotation marks and citation omitted); see U.S. Bank N.A. v. APP Intl. Fin. Co., B.V., 100 A.D.3d 179, 183 (1st Dep't 2012). A judgment creditor may serve an information subpoena if it reasonably believes that the subpoena recipient possesses information that will assist the creditor in collecting its judgment. CPLR 5224(a)(3); Lupe Dev. Partners, LLC v. Pacific Flats I, LLC, 2013 NY Slip Op 31891(U), *4 (Sup. Ct. N.Y. County 2013), aff'd 118 A.D.3d 645 (1st Dep't 2014). At the same time, courts have discretion "under CPLR article 52, to control and regulate the enforcement of a money judgment in order to prevent unreasonable annoyance, expense, embarrassment, disadvantage or other prejudice." Gryphon Dom. VI, LLC v. APP Intl. Fin. Co., 58 A.D.3d 498, 498 (1st Dep't 2009).
Deutsche Bank shows that its investigations of third parties led Deutsche Bank to entertain a reasonable belief that SHI is in possession of undisclosed information relevant to the satisfaction of the judgment. Deutsche Bank shows that SHI did not fully answer the initial subpoena, which is why Deutsche Bank served the follow-up subpoena.
A motion to quash a subpoena should be granted when it is obvious that the discovery sought is totally irrelevant or that nothing will be discovered. Matter of Kapon v. Koch, 23 N.Y.3d 32, 38 (2014). The burden of making this showing rests on the movant. Id. As long the information sought is relevant to the prosecution or defense of an action, it should be provided.Id. SHI fails to show that the information sought is irrelevant or improper or that Deutsche Bank's request is unreasonable. SHI's motion to quash the follow-up subpoena dated March 29, 2017 is denied.
In addition, as discussed below, SHI agreed that the information that it produces may be used in related actions.
Deutsche Bank moves to compel Beatrice to provide an adequate witness for deposition and to reply properly to document requests.
Allegedly, until the end of October 2008, Vik was Beatrice's sole shareholder and director. In that month, Vik transferred $730 million from SHI to Beatrice, and then transferred Beatrice to the Trust. Now, the Trust is allegedly the sole owner of Beatrice. Members of Vik's family are the beneficiaries of the Trust and Carrie Vik used to be the trustee of the Trust.
In response to Deutsche Bank's request, Beatrice produced 13 pages of documents, most of which are publicly available, according to Deutsche Bank, and Beatrice stated that it did not have a practice of retaining documents. Deutsche Bank subpoenaed...
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