Sound Around, Inc. v. Friedman

Background

Sound Around, Inc. sued Moises Friedman, Shulim Eliezer Ilowitz, and related entities. The complaint includes claims involving trademark infringement, breach of contract, misuse of confidential business information and business opportunities, breach of fiduciary duty and loyalty, and civil conspiracy under federal anti-racketeering law. Sound Around alleges that Friedman and Ilowitz were former employees or agents who competed with Sound Around, used its information and assets, diverted opportunities, received improper payments, and operated related businesses.

During discovery, Sound Around served document subpoenas on banks, online retailers, and freight-service companies. The bank subpoenas sought broad financial records from 2019 to the present concerning Friedman, Ilowitz, and several entities. The retail and freight subpoenas sought communications, contracts, product and brand information, sales records, payment information, and records concerning alleged misconduct and online sales.

The Friedman/Ilowitz Defendants and the Executive Laundry Defendants moved to quash the subpoenas. They argued that the subpoenas were overbroad and sought sensitive personal, financial, and business information unrelated to the case. Sound Around argued that the motions should be denied because the defendants had not properly met and conferred or followed the court’s pre-motion procedures. Sound Around also argued that the subpoenas sought information relevant to competition, alleged kickbacks, funding, revenues, profits, and damages.

Legal standard

Under Federal Rule of Civil Procedure 26(b)(1), discovery may concern nonprivileged information relevant to a claim or defense and proportional to the needs of the case. Rule 45 permits subpoenas to nonparties for documents, but the issuing party must avoid imposing undue burden or expense.

Generally, only the recipient of a subpoena may seek to quash or modify it. A nonrecipient may object if it has a privilege, privacy interest, or proprietary interest in the requested documents, but it generally may not object based only on relevance or undue burden. The party moving to quash bears the burden of persuasion, while the party issuing the subpoena must show that the requested information is relevant and material.

Court’s analysis

The court found that Sound Around served the subpoenas before obtaining discovery directly from the defendants, which prevented Sound Around from tailoring the subpoenas more narrowly. The court concluded that all of the subpoenas were overbroad because Sound Around had not identified particular products, contracts, or relationships and did not know whether the defendants used all of the subpoenaed banks or had relationships with all of the subpoenaed retailers.

The court also found that the defendants had not properly followed the court’s procedures for bringing discovery motions and had made objections for which they lacked standing. Because the defendants were not subpoena recipients, the court stated that their objections were generally limited to privacy or privilege grounds.

The court held that the Friedman/Ilowitz Defendants had not shown a sufficient privacy interest in the records sought by the retail and freight-service subpoenas. The court noted that these subpoenas covered a period when Friedman and Ilowitz primarily worked for Sound Around, and the defendants had not provided enough detail to show that the requested business information was protected from disclosure. The court also noted that a protective order could protect confidential or trade-secret information. The court therefore denied the motions to quash the retail and freight-service subpoenas, while stating that the subpoenaed entities could still object based on relevance, proportionality, and burden.

The court found that the bank subpoenas likely included personal financial information but also that some such information was relevant to the parties’ relationship and potential damages. Relevant information included payments between Sound Around, Friedman, Ilowitz, MDF Marketing, Inc., and Executive Laundry; tax forms reporting those payments; payments relating to the ScootKid trademark and allegedly infringing scooters; sales proceeds; and payments connected to online sales accounts.

However, the court concluded that Sound Around had not yet shown the relevance of all requested bank records, including signature cards, ledger cards, detailed account statements, loan records, credit-card records, and purchases of bank checks. The court therefore limited the initial bank production. For Ilowitz, relevant bank records did not extend beyond February 2024 based on the allegations and his January 2024 departure. For Friedman, records through the present could be relevant because his employment contract included a two-year post-termination noncompetition provision and he was terminated in February 2024.

Disposition

The court denied the motions to quash the Retail and Freight Service Subpoenas. It granted in part and denied in part the motions to quash the Bank Subpoenas. The initial bank production was to include account listings, information on 1099 forms, transactions among Sound Around, Friedman, Ilowitz, MDF Marketing, Inc., and Executive Laundry, transactions in four specified bank accounts, and transactions between the defendants and the subpoenaed retail and freight-service entities. The court stated that Sound Around could later seek additional bank information after receiving more discovery from the defendants.

Judge Katharine H. Parker directed the clerk to terminate the motions at ECF Nos. 78, 83, 86, and 90, and warned the parties that future discovery motions could be rejected if filed without a substantial meet-and-confer process or without following the court’s pre-motion-letter procedure.