Perez v. Alegria
| Decision Date | 11 August 2015 |
| Docket Number | Case No. 15-mc-401-SAC |
| Parties | THOMAS E. PEREZ, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR, Plaintiff, v. DAVID O. ALEGRIA, Defendant. |
| Court | U.S. District Court — District of Kansas |
This is an action to enforce an administrative subpoena issued by the Department of Labor to "Custodian of the records, David Alegria, Cilantros Mexican Bar & Grill, LLC, d.b.a. Cilantro's Mexican Bar & Grill, 14440 F Street, Omaha NE 68137 AND Managua, LLC, d.b.a. Cilantro's Mexican Bar & Grill, 646 N 114th St, Omaha NE 68154." This matter is now before the court upon a report and recommendation issued by United States Magistrate Judge Sebelius. Doc. No. 9. The report and recommendation considers arguments respondent made in a document titled a "motion to quash subpoena, motion to dismiss and response to show cause order." Doc. No. 6. It is recommendedthat this motion be denied and that the petition to enforce the subpoena be granted.1
Respondent has filed objections to the report and recommendation. Doc. No. 11. The objections repeat the arguments respondent made in his motion to quash and make some new arguments. This court must engage in a de novo review of any part of the report and recommendation to which there has been a proper objection. FED.R.CIV.P. 72(b)(3).
The petition alleges that plaintiff seeks to enforce an administrative subpoena duces tecum issued by the Regional Administrator of the Midwest Region, Wage and Hour Division of the United States Department of Labor. The petition states that the subpoena was issued in the course of an investigation of two LLCs doing business as Cilantro's Mexican Bar & Grill in Omaha, Nebraska. Plaintiff is investigating for violations of the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq. According to the petition, respondent has a one-third ownership interest in each LLC. This is substantiated by an affidavit. Doc. No. 1-1 at pp. 1-2. Plaintiff alleges that respondent lives in Kansas and was served with the subpoena in Kansas. The subpoenaseeks deposition testimony and documents which, according to the petition, plaintiff has repeatedly requested and respondent has failed or refused to provide. Doc. No. 1 at p. 9.
Pursuant to 29 U.S.C. § 209, the Department of Labor has the same powers and duties relating to the testimony of witnesses and production of documents via administrative subpoenas as are possessed by the Federal Trade Commission under 15 U.S.C. § 49. See Oklahoma Press Pub. Co. v. Walling, 327 U.S. 186, 189 (1946). Under the broad provisions of § 49, the Commission "shall at all reasonable times have access to, for the purpose of examination, and the right to copy any documentary evidence of any person, partnership, or corporation being investigated or proceeded against; and the Commission shall have power to require by subpoena the attendance and testimony of witnesses and the production of all such documentary evidence relating to any matter under investigation."
The court has a limited role in considering a challenge to the enforcement of an administrative subpoena; the court considers whether the subpoena is for a lawful purpose, whether the documents requested are relevant to that purpose, and whether the demand is reasonable. See Linde Thomson Langworthy Kohn & Van Dyke, P.C. v. Resolution Trust Corp., 5 F.3d 1508,1513 (D.C.Cir. 1993); Resolution Trust Corp. v. Greif, 906 F.Supp. 1457, 1463-64 (D.Kan. 1995). The court may also consider whether the administrative prerequisites for the issuance of a subpoena have been satisfied. See Martin v. Gard, 811 F.Supp. 616, 620 (D.Kan. 1993)(citing SEC v. Blackfoot Bituminous, Inc., 622 F.2d 512, 514 (10th Cir. 1980)). Under FED.R.CIV.P. 81(a)(5), the Federal Rules of Civil Procedure apply to proceedings to compel testimony or the production of documents through an administrative subpoena issued by a federal agency except as provided otherwise by statute, local rule or court order.
The first argument from respondent which was considered by the Magistrate Judge is that the information sought pursuant to the subpoena is protected by attorney-client privilege. Respondent is counsel for the LLCs under investigation as well as part owner of the LLCs. The Magistrate Judge has recommended that this argument be overruled for the following reasons.
First, the Magistrate Judge stated that respondent's claim of attorney-client privilege appears to be limited to the subpoena's demand to depose respondent. Respondent's objections to the report and recommendation do not expressly deny this. Indeed, the objections often assert that respondent or the LLCshave offered the documents requested by the subpoena. E.g., Doc. No. 11 at p. 2.
Second, the Magistrate Judge stated that respondent has not described the nature of any documents withheld on privilege grounds and has failed to supply the court with a privilege log to better describe the documents which respondent alleges are privileged. Respondent's objections do not respond to this point.
Third, the Magistrate Judge held that as a member of the LLCs that operate the restaurants, respondent was reasonably likely to possess discoverable information and that his role as an attorney did not provide a blanket privilege against deposition or document discovery. In support of this point, the judge cited examples of where depositions were allowed of counsel of record as fact witnesses2 and noted that, in general, the Rules of Civil Procedure do not exempt attorneys from being the source of discoverable facts. Respondent's objections do not demonstrate an error in this analysis. Respondent merely cites the general purpose behind the privilege and the requirements for invoking the attorney-client privilege without demonstrating how those requirements are met here.
Respondent's motion to quash and objections to the report and recommendation present a blanket claim of attorney-client privilege which is inconsistent with FED.R.CIV.P. 26(b)(5). It is also disfavored under case law. In re Grand Jury Witness, 695 F.2d 359, 362 (9th Cir. 1982)(blanket assertions of attorney-client privilege in response to a subpoena duces tecum are "extremely disfavored"); Kemp v. Hudgins, 2013 WL 4857771 *2 (D.Kan. 9/10/2013)(blanket claims of attorney-client privilege do not satisfy the objecting party's burden of proof); Linnebur v. United Telephone Ass'n, 2012 WL 1183073 *3 (D.Kan. 4/9/2012)( blanket claim of attorney client privilege directed to production request for email documents); McBride v. Medicalodges, Inc., 250 F.R.D. 581, 587 (D.Kan. 2008)( blanket assertion of attorney-client privilege to general topic of deposition unless the topics on their face call for invasion of the privilege); Miller v. Union Pacific R. Co., 2008 WL 4724471 *6 (D.Kan. 10/242008)(same); Williams v. Sprint/United Management Co., 2006 WL 266599 *4 (D.Kan. 2/1/2006)( blanket claim to attorney-client privilege which fails to establish that documents are confidential substantive communications that involve requesting or providing legal advice). The court is not convinced from respondent's blanket arguments and record before it that the enforcement of the administrative subpoena should be denied on the basis ofattorney-client privilege or respondent's status as the businesses' counsel.
Another argument presented to the Magistrate Judge in respondent's motion to quash or dismiss is that the real parties in interest are the Nebraska LLCs and, therefore, respondent should not be the target of the subpoena. The Magistrate Judge rejected this argument finding that respondent, "as one of the members of the LLCs that own the restaurants subject to the investigation" was a reasonable target for a subpoena seeking information relevant to a wage-and-hour investigation of the restaurants. Doc. No. 9 at p. 10. Respondent asserts though that plaintiff has not sufficiently demonstrated that respondent has control over the documents sought through the subpoena.
Respondent does not deny that he is an owner of the LLCs under investigation. He asserts that he is an attorney for the LLCs and he further asserts that he has provided documents to plaintiff on behalf of the LLCs. Under these circumstances, the court finds there is sufficient proof that respondent has control over the requested documents and may provide relevant testimony.
As the Tenth Circuit has stated: "the moving party is charged with establishing possession, custody and control . . . [b]ut records which are normally kept in the business of theparty . . . are presumed to exist, absent a sworn denial, and a prima facie case of control is all that must be established to justify issuance of the order [enforcing the subpoena]." Norman v. Young, 422 F.2d 470, 472-73 (10th Cir. 1970). "'[C]ourts have universally held that documents are deemed to be within the possession, custody or control if the party has actual possession, custody or control or has the legal right to obtain documents on demand.'" Noaimi v. Zaid, 283 F.R.D. 639 (D.Kan. 2012)(quoting Ice Corporation v. Hamilton Sundstrand Corp., 245 F.R.D. 513, 516-17 (D.Kan. 2007)). "'Control'" comprehends not only possession of the documents, but also the right, authority, or ability to obtain them." Tank Connection, LLC v. Haight, 2015 WL 3514830 *6 (D.Kan. 6/4/2015). Under K.S.A. 17-7690(a)(6), a member of a LLC has the right, "subject to reasonable standards" to obtain information from the LLC "regarding the affairs of the limited liability company as is just and reasonable." The court finds that plaintiff has made a satisfactory showing that respondent, as one of the owners of the LLCs, has control of the documents in question and may provide relevant testimony. This is sufficient for respondent to be considered a "custodian" of LLC...
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