ASI, Inc. v. Aquawood, LLC

Background

ASI, Inc., formerly known as Aviva Sports, Inc. (“Aviva”), brought the action to collect on an $8.5 million judgment against Manley Toys, Ltd. Aviva alleged that Aquawood, LLC, Brian Dubinsky, and other defendants worked together as a racketeering enterprise and made fraudulent transfers to prevent Aviva from collecting the judgment.

During discovery—the pretrial process for exchanging information—Aviva requested Aquawood’s bank statements and tax returns. It also requested documents showing all physical and mailing addresses used by Dubinsky. Aquawood objected to producing its financial records, and Dubinsky objected to producing his personal addresses. The magistrate judge ordered Aquawood to provide the bank statements and tax returns and ordered Dubinsky to provide his personal mailing and physical addresses. Both defendants objected to those orders.

Standard of Review

The district court explained that it reviews a magistrate judge’s dispositive decisions from the beginning, but reviews nondispositive decisions for clear error. Because the discovery orders did not resolve the underlying claims or defenses, the court reviewed them for clear error.

Aquawood’s Objection

Aquawood argued that the magistrate judge failed to decide whether the bank statements and tax returns were relevant and whether Aviva had a compelling need for them. Aquawood did not dispute their relevance, but argued that Aviva could obtain the same information from Aquawood’s general ledger and profit-and-loss statements.

The court rejected that argument. It found that Aquawood had not clearly shown that it had provided documents allowing Aviva to determine the nature and circumstances of Aquawood’s financial dealings. The court also noted that Aviva’s claims concerned those financial dealings directly, rather than seeking the records only to calculate damages. Aviva had argued that bank records and tax returns, some of which were controlled by third parties such as banks and the Internal Revenue Service, could provide a check on potentially manipulable internal financial documents.

The court held that the magistrate judge did not disregard the law by ordering Aquawood to produce its tax records and bank statements. It therefore overruled Aquawood’s objection.

Dubinsky’s Objection

Dubinsky argued that the magistrate judge had not identified why his personal address was relevant or what information Aviva could obtain from it. The court disagreed. The magistrate judge had explained that Dubinsky’s own descriptions of his conduct created uncertainty about when he acted personally and when he acted as an Aquawood employee. The court concluded that this made his personal addresses relevant to obtaining information that might not be available through his work address.

The court found that cases involving police officers’ home addresses, safety risks, or service of process did not require a different result. Those cases involved circumstances unlike Aviva’s request, which sought information related to its claims against Dubinsky rather than merely to serve him. The court held that the magistrate judge did not clearly err by ordering Dubinsky to provide the addresses.

Disposition

The court denied Dubinsky’s objection and denied Aquawood’s objection to the magistrate judge’s discovery order.