Benthos Master Fund, Ltd. v. Etra

Background

Benthos had obtained confirmation of an arbitration award exceeding $5 million against Aaron Etra. The award arose from Etra’s alleged release of escrowed funds in connection with a Bitcoin transaction. The court had entered judgment confirming the award and had allowed Benthos to begin enforcement proceedings.

For more than two years, Benthos pursued post-judgment discovery—information-gathering used to identify a judgment debtor’s assets. Benthos served Etra with subpoenas seeking financial records, information about his accounts and assets, and documents concerning his work as an escrow agent. The court repeatedly ordered Etra to provide the requested materials and previously found him in civil contempt for failing to comply with those orders.

The subpoenas at issue included an earlier subpoena seeking escrow agreements and two later subpoenas seeking additional escrow agreements and information about Etra’s legal, paymaster, escrow-related, and other services. Etra was proceeding without a lawyer. He moved to quash, or cancel, the subpoenas in whole or in part.

Attorney-Client Privilege

The court held that Etra had the burden of showing that the escrow agreements and related information were protected by the attorney-client privilege, which generally protects confidential communications made for the purpose of obtaining or providing legal advice.

The court concluded that Etra had not met that burden. It explained that, absent unusual circumstances, a client’s identity and fee information are not protected by the privilege. Etra argued that producing the information would reveal private business information and that the clients were not parties to the case. The court rejected those arguments, stating that Etra had not shown the exceptional circumstances that might protect client identities or fee information and that the fact that the clients were nonparties did not prevent disclosure.

The court also noted that the parties had been instructed to focus their briefing on whether the escrow agreements were privileged. It did not consider Etra’s late reply on the first motion, although it stated that considering the reply would not change the analysis.

Other Challenges to the Subpoenas

The court determined that Etra’s second and third motions to quash were filed sixteen days late and without permission. Even setting aside that procedural problem, the court found his objections meritless.

The court held that Federal Rule of Civil Procedure 69 allows a judgment creditor to obtain discovery from a judgment debtor or other person to help enforce a judgment. New York procedure likewise permits information subpoenas concerning a judgment debtor’s assets and other matters relevant to satisfying the judgment. The court explained that post-judgment discovery may be broad so that a creditor can investigate concealed or hidden assets.

The court rejected Etra’s objections that the subpoenas were improperly served while he was in a courthouse, that they sought information from a period beginning before Benthos and Etra’s business relationship, and that they repeated information Etra had already provided. It also rejected Etra’s argument that the subpoenas violated his human rights.

Ruling and Required Production

The court denied Etra’s first motion to quash and the portions of his second and third motions concerning the escrow agreements and related information. It denied the remaining portions of the second and third motions as well. The conclusion states that Etra’s motions to quash Benthos’s subpoenas were DENIED.

The court ordered Etra to produce all escrow agreements in force at any time from August 1, 2017, through the present to which he was or had been a party, including agreements previously withheld as privileged and agreements involving clients identified in the court’s August 2, 2022 order. That production was due by September 30, 2022. Etra also had to fully respond to the later subpoenas by October 7, 2022.

The court stated that, if Etra continued without a lawyer, he had to file submissions through the court’s electronic filing system. If he failed to produce the ordered documents and information, Benthos could seek an order requiring him to explain why he should not be held in contempt and jailed as a coercive sanction until he complied.