Insured Advocacy Group, LLC v. Spartan Services Corp.

Background

Insured Advocacy Group, LLC and Spartan Services Corp. are parties to a May 13, 2022 First Party Claims Non-Recourse Sale and Assignment Agreement. Under that agreement, Insured Advocacy Group agreed to purchase from Spartan property-damage-service accounts that Spartan had with its customers.

Insured Advocacy Group served subpoenas on Bank of America Corporation, JP Morgan Chase Bank, and TD Bank. The subpoenas sought documents concerning all accounts in the names of Spartan, Pablo Camilo Garcia, Gabriel Gil, and Francesca D’Orso. Garcia, Gil, and D’Orso had previously been named as individual defendants, but the court dismissed them from the case.

Arguments and legal standard

Spartan and the three non-parties sought a protective order or an order quashing the subpoenas. They argued that the subpoenas sought confidential personal and financial information and amounted to an effort to examine Spartan’s finances before any judgment. Insured Advocacy Group responded that the bank records could show payments Spartan received but failed to send to Insured Advocacy Group, whether Spartan breached the agreement’s exclusivity provision, and whether Spartan converted funds.

The court explained that subpoenas must seek information relevant to a properly pleaded claim or defense and cannot impose an undue burden. The party seeking discovery bears the initial burden of showing relevance. A person or company may also challenge a subpoena directed to someone else when the subpoena implicates that person’s privacy interest, including an interest in financial records.

Ruling

The court held that the subjects of the subpoenas had adequately alleged a privacy interest in the financial records and therefore could challenge the subpoenas.

The court granted in part and denied in part the motion for a protective order. It denied the motion to the extent Insured Advocacy Group sought JP Morgan Chase documents concerning the Spartan account established for Insured Advocacy Group’s benefit and used as a sweep account. The court found those documents relevant and determined that the burden and privacy concerns did not outweigh the need for discovery. The agreement required Spartan to open that account in Spartan’s name for Insured Advocacy Group’s benefit, with Insured Advocacy Group controlling and managing it.

The court granted the motion as to information about Spartan’s other bank accounts and the bank accounts of Garcia, Gil, and D’Orso. The court explained that the claims against the three non-parties had already been dismissed because the complaint did not allege that they acted outside the scope of their duties for Spartan. Those dismissed claims were therefore not proper subjects of discovery. The court also found that Insured Advocacy Group had not shown that broad requests for all of Spartan’s, its chief executive officer’s, and its shareholders’ banking information were more than a speculative and disproportionate search for evidence. The court directed the Clerk to close the motion at Docket No. 93.