Kapon v. Koch

• Decision Date: 03 April 2014
• Citation: 11 N.E.3d 709,988 N.Y.S.2d 559,2014 N.Y. Slip Op. 02327,23 N.Y.3d 32
• Parties: In the Matter of John KAPON, et al., Appellants, v. William I. KOCH, Respondent.
• Court: New York Court of Appeals Court of Appeals

23 N.Y.3d 32

11 N.E.3d 709

988 N.Y.S.2d 559

2014 N.Y. Slip Op. 02327

In the Matter of John KAPON, et al., Appellants,

v.William I. KOCH, Respondent.

Court of Appeals of New York.

April 3, 2014.

Zuckerman Spaeder LLP, New York City (Paul Shechtman and Brian K. Mahanna of counsel), and The Weinstein Law Firm PLLC (Andrew J. Weinstein of counsel), for appellants.

Irell & Manella LLP, Los Angeles, California (Moez M. Kaba, John C. Hueston and Bruce A. Wessel of counsel), and Morvillo Abramowitz Grand Iason & Anello P.C., New York City (Edward M. Spiro and Adam L. Pollock of counsel), for respondent.

OPINION OF THE COURT

PIGOTT, J.

**711 This appeal involves the service of a subpoena by a party seeking discovery from a nonparty pursuant to CPLR 3101(a) (4), the subpoenaing party's notice obligation to a nonparty under that statutory provision, and the witness's burden when moving to quash the subpoena. We conclude that the subpoenaing party must first sufficiently state the “circumstances or reasons” underlying the subpoena (either on the face of the subpoena itself or in a notice accompanying it), and the witness, in moving to quash, must establish either that the discovery sought is “utterly irrelevant” to the action or that the “futility of the process to uncover anything legitimate is inevitable or obvious.” Should the witness meet this burden, the subpoenaing party must then establish that the discovery sought is “material and necessary” to the prosecution or defense of an action, i.e., that it is relevant.

I.

Petitioner John Kapon is a New York resident and Chief Executive Officer of Acker, Merrall & Condit Company (AMC), a New York corporation with a principal place of business in New York City. AMC is a retailer and auctioneer of fine and rare wines, and is the employer of petitioner Justin Christoph. In 2009, respondent William Koch, a wine collector, commenced a fraud action in California (California action) against Rudy Kurniawan alleging that Kurniawan had sold Koch 149 bottles of counterfeit wine through AMC's auctions and private sales. Neither AMC nor petitioners are parties to the California action. However, in 2008, Koch had commenced an action against AMC in Supreme Court, New York County (New York action) concerning five bottles of alleged counterfeit wine that Kurniawan had consigned to AMC and that AMC had sold to Koch.

In early 2012, Koch, purportedly seeking disclosure in the California action, served subpoenas on petitioners pursuant to CPLR 3119. That section, known as the “Uniform Interstate Depositions and Discovery Act,” provides a streamlined mechanism for disclosure in New York for use in an action that is pending in another state or territory within the United States ( seeCPLR 3119[a][3]; [b], [c] ).

Petitioners commenced this special proceeding to quash the subpoenas pursuant to CPLR 2304. The petition also alternatively sought, among other relief, the imposition of a protective order pursuant to CPLR 3103 staying the deposition until both parties in the California action had been deposed, limiting the scope of the deposition questioning to matters material and necessary to that action, and limiting the use of the deposition transcripts to the California action. Petitioners asserted that the subpoenas were defective because they were served before Koch had taken defendant Kurniawan's deposition, failed to state with particularity the reasons why disclosure was sought, and constituted an “end-run” around the discovery deadline in the New York action.¹ Koch countered that petitioners possessed information that was relevant to the California action.

Supreme Court denied the motions to quash and for a protective order; it did, however, permit petitioners to object to, and decline to answer, deposition questions to the extent that the answers would divulge AMC's confidential information and trade secrets (37 Misc.3d 1211[A], 2012 N.Y. Slip Op. 51992[U] [2012] ). The Appellate Division unanimously affirmed, holding that Supreme Court “providently exercised its discretion in denying petitioners' motion, since petitioners failed to show that the requested deposition testimony [was] irrelevant to the prosecution of the California action” (105 A.D.3d 650, 651, 963 N.Y.S.2d 578 [1st Dept.2013] [citations omitted] ). It also concluded that petitioners failed to meet their burden of articulating “a sufficient, non-speculative basis for postponing their depositions or imposing restrictions on the scope and use of their deposition testimony” ( id.). This Court granted petitioners leave to appeal (21 N.Y.3d 975, 970 N.Y.S.2d 744, 992 N.E.2d 1087 [2013] ) and we now affirm.

II.

Petitioners contend that CPLR 3101(a) contains distinctions between disclosure required of parties and nonparties, and claim that on a nonparty's motion to quash a subpoena, the subpoenaing party has the initial burden of demonstrating a need for the disclosure in order to prepare for trial. We reject both arguments.

CPLR 3101(a)(4) is one mechanism by which a party may obtain discovery from a nonparty ( accordCPLR 3101[a][3] ). It provides that “[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof, by: ... (4) any other person, upon notice stating the circumstances or reasons such disclosure is sought or required” (emphasis supplied).

Prior to its amendment in 1984, section 3101(a)(4) required a party seeking disclosure from a nonparty to first obtain a court order based on “adequate special circumstances” ( see former CPLR 3101[a][4] ). The 1984 amendment loosened that requirement by “allow[ing] for the discovery of any person who possesses material and necessary evidence,” and eliminating the requirement that a party seeking disclosure first obtain a court order; the intent underlying the amendment was to address case law that had interpreted former section 3101(a)(4) as prohibiting parties from seeking discovery from nonparty witness without first securing a court order, an interpretation the legislature deemed “contrary to the purpose of the disclosure statutes” (Sponsor's Mem. at 7, Bill Jacket, L. 1984, ch. 294).² Thus, while the typical mechanism of securing discovery from a nonparty pursuant to CPLR 3101(a)(4) is the issuance of a subpoena with notice, that is the only meaningful distinction between the mechanisms seeking disclosure from parties and nonparties. Because a nonparty is likely to be less cognizant of the issues in pending litigation than a party, section 3101(a)(4)'s notice provision mandates that the nonparty is apprised of the “circumstances or reasons” as to why the party seeks or requires the disclosure.

Petitioners, however, claim that section 3101(a)(4)'s notice requirement establishes that the subpoenaing party has the burden of establishing the “circumstances or reasons” for the discovery on a nonparty's motion to quash. The “circumstances or reasons” language replaced former CPLR 3101(a)(4)'s “adequate special circumstances” requirement. It is noteworthy, however, that the appellate departments, even before the 1984 amendment, liberally interpreted the “special circumstances” requirement as favoring disclosure so long as the party seeking it met the low threshold of demonstrating a need for the disclosure in order to prepare for trial ( see Villano v. Conde Nast Pubs., 46 A.D.2d 118, 120, 361 N.Y.S.2d 351 [1st Dept.1974]; Wiseman v. American Motors Sales Corp., 103 A.D.2d 230, 240, 479 N.Y.S.2d 528 [2d Dept.1984]; Matter of Catskill Ctr. for Conservation & Dev. v. Voss, 70 A.D.2d 753, 753, 416 N.Y.S.2d 881 [3d Dept.1979]; Kenford Co. v. County of Erie, 41 A.D.2d 586, 586, 340 N.Y.S.2d 300 [4th Dept.1973]; see alsoSiegel, N.Y. Prac. § 345 [5th ed. 2011] [explaining that courts “generously” read the “special circumstances” requirement to initially include a minimal demonstration that the nonparty was hostile, but gradually loosened that requirement so that a party needed to show only that there was a “need of the nonparty's deposition in order to prepare for trial”] ).

Since the 1984 amendment, however, there has been a split among the departmentsconcerning what “circumstances or reasons” are required before disclosure from a nonparty may be obtained pursuant to section 3101 (a)(4). The First and Fourth Departments have adopted a “material and necessary” standard, i.e., that the requested discovery is relevant to the prosecution or defense of an action ( see Velez v. Hunts Point Multi–Serv. Ctr., Inc., 29 A.D.3d 104, 111, 811 N.Y.S.2d 5 [1st Dept.2006]; Catalano v. Moreland, 299 A.D.2d 881, 882, 750 N.Y.S.2d 209 [4th Dept.2002] [in dicta, applying “material and necessary” standard to CPLR 3101(a)(4) ]; see also Hauzinger v. Hauzinger, 43 A.D.3d 1289, 1290, 842 N.Y.S.2d 646 [4th Dept.2007], aff'd10 N.Y.3d 923, 862 N.Y.S.2d 456, 892 N.E.2d 849 [2008];Schroder v. Consolidated Edison Co. of N.Y., 249 A.D.2d 69, 70, 670 N.Y.S.2d 856 [1st Dept.1998], but see Tannenbaum v. City of New York, 30 A.D.3d 357, 358–359, 819 N.Y.S.2d 4 [1st Dept.2006] [requiring a showing that information could not be obtained from another source] ).

The Second and Third Departments, while acknowledging that the “special circumstances” requirement no longer applies, nonetheless require the party seeking discovery to meet the “material and necessary” standard and more. Specifically, in those departments, a motion to quash a subpoena will be granted if “the party issuing the subpoena has failed to show that the disclosure sought cannot be obtained from sources other than the nonparty, and properly denied when the party has shown that the evidence cannot be obtained from other sources” ( Kooper v. Kooper, 74 A.D.3d 6, 16–17, 901 N.Y.S.2d 312 [2d Dept.2010] [citations omitted]; see American Heritage Realty LLC v. Strathmore Ins. Co., 101 A.D.3d 1522, 1524 [3d Dept.2012]; Cotton v. Cotton, 91 A.D.3d 697, 699, 938...