Phoenix Bulk Carriers LTD. v. Triorient LLC

Background

Phoenix and Triorient entered into a cargo-transportation charter contract. After an arbitration proceeding over an alleged breach, the arbitration panel issued an award for Phoenix on September 27, 2019. The court later confirmed the award and entered a $538,442.03 judgment against Triorient. The opinion states that Triorient had not paid the judgment.

To help collect the judgment, Phoenix served subpoenas on nonparties, including Triorient’s members, related companies, financial director, financial entities, and country clubs. The subpoenas sought information about Triorient’s accounts and assets, as well as transfers among Triorient, related companies, and individuals associated with those entities. The nonparties moved to quash, meaning to cancel or limit, the subpoenas. Phoenix cross-moved to compel compliance with subpoenas served on individuals.

Legal standard

Federal Rule of Civil Procedure 69 allows a judgment creditor to obtain discovery from any person to help enforce a judgment. The court explained that this discovery may be broad and may include nonparties when their relationship with the judgment debtor raises a reasonable doubt about the legitimacy of asset transfers. But discovery cannot be an unrestricted search for anything that might turn up; it must be calculated to help collect the judgment and is generally limited to finding the debtor’s hidden assets.

Court’s analysis

The court found evidence of transfers among Triorient, related companies, and individuals connected with those entities. It also found evidence raising questions about some payments and transfers, including payments for personal or affiliated expenses. The court concluded that the requested discovery was generally calculated to assist in collecting the judgment. It rejected the argument that Phoenix had to obtain all possible information from Triorient before seeking discovery from nonparties, noting that delay could further jeopardize collection.

The court also rejected objections based on the personal or confidential nature of some records, explaining that a protective order could limit the use and disclosure of produced materials. It ruled that the subpoenas could reach documents in the personal possession, custody, or control of the individuals served, even when the documents concerned related companies.

Specific limitations

The subpoenas were limited in time to documents from January 1, 2018, through production. The Citibank subpoena was generally enforceable, but correspondence with Winslow or Santucci did not have to be produced unless it concerned their role as Triorient agents. The Amex and Schwab subpoenas could be enforced as directed. The country-club subpoenas were limited to payment information and correspondence concerning payments made by, for, or on behalf of Winslow, Santucci, and Triorient.

For the individual subpoenas, requests for transfers to Winslow and Santucci were limited to transfers from Triorient or related companies. Requests for records of owner meetings were limited to official minutes from January 1, 2018, forward. Requests for capital records were limited to documents sufficient to show capital from that date forward. The court also stated that production of Triorient and related-company tax returns was appropriate because the returns could shed light on payments, business expenses, and possible depletion of assets.

Disposition

Subject to those limitations, Judge Robert W. Lehrburger denied Triorient’s motions to quash and granted Phoenix’s cross-motion to compel. The clerk was directed to terminate the motions listed at docket entries 22 through 39.