In re Genger

• Decision Date: 09 February 2021
• Docket Number: Case No. 19-13895(JLG)
• Parties: In re: Orly Genger, Debtor.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

In re: Orly Genger, Debtor.

Case No. 19-13895(JLG)

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

February 9, 2021

NOT FOR PUBLICATION

Chapter 7

MEMORANDUM DECISION AND ORDER GRANTING MOTION FOR PROTECTIVE ORDER

APPEARANCES:

Emmet, Marvin & Martin, LLP

Attorneys for Sagi Genger

120 Broadway, 32^nd Floor

New York, New York 10271

Kasowitz Benson Torres, LLP

Attorneys for Eric D. Herschmann

1633 Broadway

New York, New York 10019

HON. JAMES L. GARRITY, JR. U.S. BANKRUPTCY JUDGE

Introduction

Orly Genger ("Orly") is a chapter 7 debtor herein. Her brother, Sagi Genger ("Sagi"), is a creditor with a $3 million judgment against Orly. He has filed a motion to dismiss this case (the "Motion to Dismiss").¹ Orly's husband, Eric D. Herschmann, Esq. ("Mr. Herschmann"), asserts a $2.3 million secured claim against Orly (the "Herschmann Claim"). He, and others, oppose the Motion to Dismiss. As discussed below, the Court issued a Confidentiality Order (defined below) governing the litigation in this case. At that time, Mr. Herschmann contended that he was entitled to obtain a copy of a report produced by an Israeli private investigator for Sagi's benefit concerning matters personal to Mr. Herschmann (defined below as the "Herschmann Report"). Mr. Herschmann asks the Court to compel Sagi to turn-over the Herschmann Report to him. In opposing that request, Sagi principally contends that the attorney work product doctrine protects the disclosure of the report. Mr. Herschmann disputes that contention. For the reasons stated herein, the Court finds that the report is subject to the work product doctrine and that Sagi has not waived that privilege. Accordingly, the Court denies Mr. Herschmann's request that Sagi be compelled to turn-over the report to him.

Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157(a) and (b)(1) and the Amended Standing Order of Reference dated January 31, 2012 (Preska, C.J.). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2).

Background²

In 1985, Arie formed Trans-Resources, Inc. ("Trans-Resources"), a Delaware corporation that specializes in manufacturing fertilizer and producing chemicals for agricultural use. Trans-Resources was wholly owned by TPR Investment Associates, Inc. ("TPR"), an entity that in turn was wholly owned by Arie, his now ex-wife, Dalia, and his family trusts.³ Arie was TPR's majority shareholder and Dalia, and their two children, Orly and Sagi, held minority shareholder interests in TPR. Orly and Sagi held their shares in the Orly Genger 1993 Trust (the "Orly Trust") and Sagi Genger 1993 Trust (the "Sagi Trust"), respectively.⁴

On October 26, 2004, Arie and Dalia divorced.⁵ On October 29, 2004, in accordance with the divorce settlement, Arie transferred the TPR stock to Dalia, and Arie caused TPR to transfer its 52.85% stake in Trans-Resources as follows: approximately 13.9% to himself); 19.5% to the Sagi Trust; and 19.5% to the Orly Trust.⁶ As part of the divorce, Dalia agreed to convey her marital rights to 794.40 shares of Trans-Resources to the Sagi Trust and Orly Trust in exchange for a commitment by Sagi and Orly to support her financially.⁷ This arrangement was effectuated through the following three documents:

A stipulation of settlement among Dalia and Arie finalizing the terms of their divorce settlement (the "2004 Divorce Stipulation"), which was fully executed on October 30, 2004.

A letter dated October 30, 2004 and signed by Dalia and Sagi (the "2004 Promise") pursuant to which Sagi agreed to pay Dalia up to the value of the Trans-Resourcesstock she conveyed to the two trusts, upon Dalia's demand.

A letter dated November 10, 2004 and signed by Sagi and Orly (the "2004 Indemnity") pursuant to which, in substance, Orly agreed to indemnify Sagi "for and against one-half (1/2) of any and all payments, liabilities, damages, claims, actions, losses, settlements, penalties, judgments or obligations. . . . including reasonable counsel and other professional fees, expenses and costs, which arise from [Sagi's] undertakings in the [2004 Promise]."

Genger I at 492-493.

On or about January 22, 2014, Dalia demanded $200,000 from Sagi under the 2004 Promise, which Sagi paid. Genger I at 494. On January 23, 2014, Sagi informed Orly of Dalia's demand. Id. On February 17, 2014, Sagi demanded $100,000 from Orly under the 2004 Indemnity. Orly refused to pay. Id. Thereafter, Sagi sued Orly for breach of contract in the United States District Court for the Southern District of New York (the "New York District Court"). See id. at 488. The court granted summary judgment to Sagi. Id. at 503.⁸ On appeal,the Second Circuit affirmed that decision. See Genger v. Genger, 663 Fed.Appx. 44 (2d Cir. 2016) ("Genger II").⁹

On October 21, 2017, Dalia demanded $6 million from Sagi under the 2004 Promise, which Sagi refused to pay. On October 24, 2017, Dalia sued Sagi (the "2017 Lawsuit") in the New York District Court for breach of contract. See Genger v. Genger, No. 17-CV-8181 (KBF), 2018 WL 3632521, at *2 (S.D.N.Y. July 27, 2018) ("Genger III"). In answering the operative complaint, Sagi conceded that the 2004 Promise was valid and enforceable, but argued "the payment obligation was a joint obligation of his with Orly, who has recently indicated she will not honor that obligation, and thus it would be inequitable for Sagi to once again make a payment to Dalia without Orly's immediate reimbursement." Id. Sagi brought a third-party complaint against Orly for breach of the 2004 Indemnity. Id. Dalia moved for summary judgment against Sagi on her breach of contract claim. The Court granted the motion and entered a first-party judgment against Sagi in favor of Dalia for $6 million. Id. at *6-7.¹⁰ Sagimoved for partial summary judgment against Orly on: (1) his breach of contract claim; (2) his promissory estoppel claim; and (3) his declaratory judgment claim to the extent of the $3 million liability sought in the action. The New York District Court granted the motion and entered a $3 million third-party judgment in favor of Sagi and against Orly (the "Judgment"). Id. at *7-8.¹¹

The Second Circuit affirmed the Judgment on appeal. See Genger v. Genger, 771 Fed. Appx. 99 (2d Cir. 2019) ("Genger IV"). Orly has not paid any portion of the Judgment.

In the 2017 Lawsuit, Orly put the location of her residence into issue in two ways. First, she challenged service of process on the grounds that Sagi had not served her with the underlying complaint at her residence in Israel, since he had attempted to serve her at a residence in Jerusalem. See Sagi May 29, 2020 Letter at 3.¹² Ultimately, Sagi effected service of the complaint on Orly at her residence in Tel Aviv. Sagi learned of Orly's address in Tel Aviv from a licensed Israeli private investigator.¹³ Second, Orly moved to dismiss Sagi's third-party complaint for lack of subject matter jurisdiction, arguing, in part, that because she is a United States citizen then domiciled in Israel, she was a non-diverse party. See Genger III at *3. In support of the motion, Orly and Mr. Herschmann filed declarations in the New York District Court and the Second Circuit Court of Appeals in which they asserted, in substance, that they resided in Israel.¹⁴ The Court denied the motion, finding that it had supplemental jurisdiction over Sagi's third party claims. Id. at *5-6. The Second Circuit affirmed that determination on appeal. See Genger IV at 100-101.

Sagi's Post-Judgment Discovery

After Sagi obtained the Judgment he commenced discovery in an effort to identify Orly's assets. On March 13, 2019, Sagi served Mr. Herschmann with a subpoena issued out of the New York District Court, commanding his appearance at a deposition and the production of documents in Austin, Texas. See Sagi May 29, 2020 Letter, Ex. A at 1. Mr. Herschmann filed a motion to quash or modify the subpoena (the "Motion to Quash") in the United States District Court for the Western District of Texas (the "Texas District Court"). Sagi opposed the Motion to Quash, arguing, in part, that the motion should be transferred to the New York District Court because, as the issuing court, it was in the best position to rule on issues of post-judgment discovery related to the case. Id. at 2. In his reply to the objection, Mr. Herschmann argued, among other things, that the Texas District Court should resolve the motion because he resided in Austin, Texas. Id.¹⁵ In an April 15, 2019 ruling (the "Texas Discovery Order"),¹⁶ the TexasDistrict Court transferred the Motion to Quash to the New York District Court for resolution. In part, the Texas District Court (Austin, J.) stated, as follows:

[I]t is more than apparent that Mr. Herschmann will not face any burden, much less an "undue" one, by having the [M]otion to [Q]uash heard in New York City. From Mr. Herschmann's filings in this matter, it would appear that he would be dumbfounded that anyone would think he was anything other than an Austin resident. To put it mildly, however, the answer to the question of where Mr. Herschmann and Ms. Genger reside is a moving target. In a filing in the underlying lawsuit made less than a year ago, Orly Genger swore that she and her infant daughter (the child of Mr. Herschmann) are permanent, full-time residents of Tel Aviv, Israel. Dkt. No. 65 in 1:17-cv- 8181 VSB-DCF (S.D.N.Y., May 16, 2018). She details how she and Herschmann were engaged and married in Israel, states she moved from Austin to Tel Aviv in 2016 when she and Herschmann found a home there, which they purchased in 2016. Id. She relates how she spent several years overseeing the remodeling of that home, and swears under oath that she runs her art business from, and has her studio in, Tel Aviv, that her synagogue is there, and states unequivocally that when she moved to Israel she "intended at that time, and still intend[s], to live permanently in Israel, and have no intention to move from Israel." Id. Mr. Herschmann confirmed this in a

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