R.S. Silver Enterprises Co., Inc. v. Henry Pascarella et al. (2012)

Memorandum of Decision on Motion to Quash Subpoena Duces Tecum (No. 104)

This case is in the prejudgment remedy stage.   The plaintiff is seeking an attachment of real property in Greenwich owned by the defendant Riversedge Partners f/k/a SPD Associates and to attach personal property, bank accounts, and accounts receivable of both defendants in the amount of $1,833,000 and asks for the appointment of a receiver of rents while the action is pending.   The defendants oppose the application for prejudgment remedies and have requested an evidentiary hearing pursuant to Conn. Gen.Stat. § 52–278d.   The hearing has been continued on several occasions, and is presently scheduled to be held on May 16, 2012.

The proposed unsigned complaint in this matter (No. 100.32) alleges that R.S. Silver entered into a written agreement with SPD and defendant Pascarella dated as of March 3, 1997 entitled “Participation Agreement” whereby R.S. Silver acquired, for the sum of $1,250,000 an equity interest in SPD which is a general partnership whose principal asset is the real estate and improvements located at 200 Pemberwick Road, Greenwich, Connecticut.   The Participation Agreement, attached as Exhibit “A” to the complaint, assigns to R.S. Silver an “economic interest” in SPD which entitles R.S. Silver to receive annual operating reports of SPD, and to receive one-half of the distributions made by SPD after certain designated preferential payments had first been made to the defendant Henry Pascarella.   The complaint alleges breach of the Participation Agreement in that the defendants have not provided operating statements of SPD despite plaintiff's request, and “have failed despite their obligation to do so under the Participation Agreement, to pay to plaintiff one-half of the cash distributions resulting from the operations of SPD.” The complaint also alleges other actions of the defendants “inimical to the interests of the R.S. Silver,” and seeks damages, interest, an accounting, the appointment of a receiver pendente lite and other relief.

The application for prejudgment remedy (No. 100.30) is supported by the affidavit of December 5, 2011 (No. 100.36) signed by Robert S. Silver, the president of the plaintiff corporation R.S. Silver Enterprises Co., Inc. f/k/a R.S. Silver & Co., Inc. (“R.S.Silver”).  The affidavit states that R.S. Silver is also the plaintiff in a 2006 lawsuit against Pascarella and SPD encaptioned R.S. Silver Enterprises, Inc. v. Henry Pascarella and Riveredge Partners, CV06–5002499S (the “First Lawsuit”).  (As the court which tried the First Lawsuit, the court takes judicial notice that the First Lawsuit contains a count sounding in breach of contract against the same defendants as the defendants herein which makes allegations of breach of the Participation Agreement in language very similar to the allegations of the unsigned complaint in this case.)   The affidavit then recites that on July 14, 2010 the undersigned judge filed a memorandum of decision in the First Lawsuit which included the entry of judgment as to R.S. Silver as to liability only on Count One of the First Lawsuit (the foregoing breach of contract count) which included findings that the Participation Agreement was in full force and effect, that all Pascarella priority payments had been paid to defendant Pascarella as of mid–2003, and that defendants have never paid to R.S. Silver any part of the cashflow distributions owed to it, and have refused, failed, and neglected to provide either a financial accounting of the partnership's operations or any payment of cash distributions.   The Silver affidavit further recites evidence brought forth in the First Lawsuit of damages sustained through December 31, 2008,¹ and that, the plaintiff is bringing this lawsuit to recover the plaintiff's 50% of cash distributions of SPD due under the Participation Agreement during the years 2009 through 2011.   Based on the evidence in the First Lawsuit the affiant states that the defendants have paid themselves cash distributions averaging $611,000 during the years 2009 through 2011 and that plaintiff was not paid any distribution to which it was found to be entitled in the First Lawsuit, which Mr. Silver claims to be $1,833,000.²

Now before the court is Defendant Henry Pascarella's Motion to Quash Subpoena Duces Tecum seeking to quash a subpoena served upon him by the plaintiff, commanding Mr. Pascarella “․ to appear before this court on Monday March 26, 2012 at 9:30 AM ³ or to such day thereafter and within sixty (60) days hereof on which the action is legally to be tried, to testify what you know in a certain action pending in said [court] between:  ․” [this 2011 lawsuit] Mr. Pascarella is further commanded to bring with him the documents listed on Schedule “A” to the subpoena, consisting of:

1. All personal tax returns (state and federal) from the years 2006 to present.

2. All tax returns (state and federal) for Henry W. Pascarella, LLC and 200 Pemberwick Road, LLC for the years 2006 to the present.

3. Any and all financial statements for Henry W. Pascarella, LLC and 200 Pemberwick Road, LLC for the years 2006 to the present.

Defendant Pascarella asks the court to quash the subpoena on the grounds that 1) Plaintiff's request for documents is premature in that several post-trial motions remain outstanding in [the First Lawsuit] resolution of which may negate the necessity for obtaining discovery in [this 2011 lawsuit];  2) the request for documents contained within the subpoena is overly broad, unduly burdensome, and not likely to lead to the discovery of relevant evidence in these proceedings;  and 3) the subpoena improperly seeks discovery through the production of documents at a hearing instead of properly deposing defendant pursuant to the Connecticut Practice Book and rules of discovery set forth in the Connecticut General Statutes.   Defendant Riversedge Partners ⁴ filed a brief in support of defendant Pascarella's motion to quash in which if claims that the subpoena should be quashed because the doctrine of res adjudicata bars this action (because the claims for damages made herein could have been made in the First Lawsuit) and the corollary doctrine that a plaintiff “cannot sue for part of his claim in one action and sue for the balance in another action.”   The court will address each ground of objection.

Prematurity/Unnecessary Discovery

As the claim of prematurity the court notes that all motions in the First Lawsuit have been ruled on, and the court has entered final judgment on all counts.   As for obviating the need for obtaining discovery in this action, this subpoena is not seeking discovery.   It is a subpoena directing the attendance of a party-witness at the evidentiary hearing on plaintiff's application for prejudgment remedy in this case, and commanding him to bring with him certain documents which presumably may be offered into evidence by the plaintiff.   The subpoena does not command that any documents be produced in any way or time, other than to bring them to court on the day of the hearing.   If they are offered into evidence, either defendant will have the usual opportunity to object.   A party clearly has the right to compel an opponent to appear at a prejudgment remedy hearing by issuance of a subpoena.   Ronald Morris v. CEE Dee, LLC, 90 Conn.App. 403, 415–416 (2005) (“[W]e agree ․ that [the defendant] had no obligation to attend the hearing and that plaintiff's counsel should have subpoenaed him if she wanted to examine him”).

Overly Broad/Unduly Burdensome/Not Likely to Lead to Discovery of Relevant Facts

Once again, this subpoena is not a discovery device.   The subpoena commands that the documents be brought to the hearing.   If they are offered in evidence, issues of relevance or confidentiality can be interposed and ruled on.   The documents are not so unrelated to the issues in the case that the court would exclude them from the subpoena.   The primary damages claimed are cash flow distributions made by Riversedge Partners (formerly SPD) to its partners, without paying one-half of the distributed amount to the plaintiff in accordance with the provisions of the Participation Agreement.   It is undisputed that since 2009 the two partners of Riversedge have been Henry W. Pascarella, LLC and 200 Pemberwick Road, LLC, both limited liability companies consisting of Henry W. Pascarella and his family.   If cashflow distributions were made to either of those two companies as the general partners of Riversedge, the receipt of those distributions would very likely be reflected in the tax returns and/or financial statements of those two limited liability companies.   And Henry Pascarella's personal tax returns might contain information relative to the plaintiff's allegations of “actions inimical to the interests of R.S. Silver” which includes an allegation that “Attorney [Henry] Pascarella individually and on behalf of SPD has ․ charged excessive amounts for management fees and other expenses which should have been paid to the Plaintiff as distribution.”   Nor does it seem to the court that location and production of these few documents all relating to the finances of Mr. Pascarella himself or his two family companies would be unduly burdensome.

The court does agree, however, that the document request is unduly broad in terms of years covered.   In the trial of the First Lawsuit there was evidence of actual distributions made by SPD/Riversedge at various times from 1997 through 2007, and an expert witness gave opinion testimony relating to distributions made in 2008 because the tax returns for that year had not yet been filed.   The court awarded damages through December 31, 2008.   The plaintiff admits that the purpose of this 2011 action is to sue for damages accruing in 2009, 2010, and 2011.   The records for 2006 and 2007 therefore are not needed.   The court will allow the year 2008 for continuity purposes and because the actual numbers for 2008 were not available at the time of the earlier trial.   Records for the years 2006 and 2007 need not be produced.

Improper Discovery

This subpoena is for attendance of a witness at a contested evidentiary hearing and the production of certain documents as possible evidence at the hearing.   It is not a subpoena issued pursuant to Practice Book § 13–28 for the attendance and production of documents by a deponent for purposes of pretrial discovery.   There is no requirement that a witness be deposed prior to being subpoenaed to testify at and bring documents to a hearing.

Consideration of Res Judicata Defense

Both defendants expressed the intention of raising by motion to dismiss or otherwise a defense of res judicata because in their view the claims made in this lawsuit could have been raised and adjudicated under the pleadings in the First Lawsuit.  Conn. Gen.Stat. § 52–278d(a)(1) limits the issue at a hearing on application for a prejudgment remedy to “whether or not there is probable cause that a judgment in the amount of the prejudgment remedy sought, or in an amount greater than the amount of the prejudgment remedy sought, taking into account any defenses, counterclaims, or setoffs, will be rendered in the matter in favor of the plaintiff.”  (Emphasis added).   To the extent there is an issue of res judicata or its corollary rule against splitting causes of action, the validity and strength of that defense will have to be taken into account by the court at the prejudgment remedy hearing in reaching a decision whether or not probable cause of recovery of at least $1,833,000 has been established.   But it would be totally inappropriate to adjudicate the res judicata issue in the context of a motion to quash a subpoena.   Res judicata does not implicate the subject matter jurisdiction of the court which would have to be addressed as soon as it is raised before proceeding further with the case.  “Res Judicata does not provide the basis for a judgment of dismissal;  it is a special defense that is considered after any jurisdictional thresholds are passed.”  Labbe v. Pension Cmmission, 229 Conn. 801, 816 (1994) (Judgment of dismissal on the basis of res judicata defense set aside).   See Practice Book § 10–50 (Res judicata listed as a claim that must be pleaded by a defendant as a special defense.)   The suggestion of a res judicata defense, then, cannot support defendant's motion to quash the subpoena served on defendant Pascarella.

Order

For the foregoing reasons Defendant Henry Pascarella's Motion to Quash Subpoena Duces Tecum is denied, except that the court hereby limits the time period of the three categories of documents listed in Schedule “A” of the subpoena to the years 2008 through 2011 only.

Judge Trial Referee

Alfred J. Jennings, Jr.

FOOTNOTES

FN1. The trial of the First Lawsuit occurred before the undersigned in February and March of 2009..  FN1. The trial of the First Lawsuit occurred before the undersigned in February and March of 2009.

FN2. Since the application for prejudgment remedy was filed in this case, the court has entered in the First Lawsuit on April 25, 2012 a “Memorandum of Decision Re:  Count Two, Request for an Accounting;  and Count One, Request for Damages” which awards judgment in favor of R.S. Silver against defendants Pascarella and SPD on the breach of Participation Agreement count in the total amount of $2,602,323, accruing through 12/31/2008.   In the trial of that action no evidence of damages accruing after the year 2008 was submitted.   Both defendants have appealed that judgment to the Appellate Court..  FN2. Since the application for prejudgment remedy was filed in this case, the court has entered in the First Lawsuit on April 25, 2012 a “Memorandum of Decision Re:  Count Two, Request for an Accounting;  and Count One, Request for Damages” which awards judgment in favor of R.S. Silver against defendants Pascarella and SPD on the breach of Participation Agreement count in the total amount of $2,602,323, accruing through 12/31/2008.   In the trial of that action no evidence of damages accruing after the year 2008 was submitted.   Both defendants have appealed that judgment to the Appellate Court.

FN3. The application for prejudgment remedy in this case was assigned for a hearing on the Miscellaneous and Special Proceedings calendar of March 26, 2012 at 9:30 AM, where it was continued by agreement..  FN3. The application for prejudgment remedy in this case was assigned for a hearing on the Miscellaneous and Special Proceedings calendar of March 26, 2012 at 9:30 AM, where it was continued by agreement.

FN4. Defendant Riversedge Partners premised its standing to oppose this subpoena on the claim in its brief that the subpoena “seeks disclosure of the private returns of partners in Riversedge Partners without justification” which is based on the undisputed facts that Henry W. Pascarella, LLC and 200 Pemberwick Road, LLC (whose records have been subponaed) have been since 2009 the sole partners of Riversedge Partners..  FN4. Defendant Riversedge Partners premised its standing to oppose this subpoena on the claim in its brief that the subpoena “seeks disclosure of the private returns of partners in Riversedge Partners without justification” which is based on the undisputed facts that Henry W. Pascarella, LLC and 200 Pemberwick Road, LLC (whose records have been subponaed) have been since 2009 the sole partners of Riversedge Partners.

Jennings, Alfred J., J.T.R.