OLSON v. GLENCORE LTD (2021)

The following e-filed documents, listed by NYSCEF document number (Motion 001) 2 were read on this motion to/for DISCOVERY

The following e-filed documents, listed by NYSCEF document number (Motion 002) 18, 19, 20, 21, 22, 23, 24, 25 were read on this motion to/for DISMISS

Upon the foregoing documents, it is

ORDERED that Respondent Glencore, Ltd.’s motion to dismiss (Mot. Seq. No. 002) is granted; and it is further

ORDERED that Petitioner Jody Olson's petition to enforce a subpoena duces tecum issued pursuant to CPLR § 3119 (Mot. Seq. No. 001) is dismissed; and it is further

ORDERED that Respondent's counsel shall serve a copy of this order, along with notice of entry, on all parties within 20 days of entry.

MEMORANDUM DECISION

Petitioner Jody Olson, individually and on behalf of all others similarly situated, commenced this proceeding to enforce a subpoena duces tecum issued pursuant to CPLR § 3119 (the “New York Subpoena”) served on Respondent Glencore, Ltd. on April 14, 2020.

Respondent moves to dismiss the petition or, in the alternative, stay the proceedings and any obligations for Respondent to further respond to the New York Subpoena.

For the reasons below, this Court grants Respondent's motion to dismiss and this proceeding is hereby dismissed.

BACKGROUND FACTS

The Virgin Islands Action

Petitioner, individually and on behalf of all others similarly situated, sued the Virgin Islands Water and Power Authority (“WAPA”) before the Superior Court of the Virgin Islands Division of St. Thomas & St. John (Case No ST-19-cv-602; the “Virgin Islands Action”). In the Virgin Islands Action, Petitioner seeks a judgment declaring WAPA insolvent and in a “state of emergency” and that WAPA's billing practices violate the Virgin Islands Bill of Rights and therefore must be enjoined (see Complaint; NYSCEF doc No. 4). Petitioner has filed two motions in said action: (i) one seeking injunction to compel WAPA to “furnish service and facilities reasonably safe and adequate” (NYSCEF doc No. 5); and (ii) one seeking appointment of a receiver to run WAPA (NYSCEF doc No. 6).

Petitioner alleges that at a telephonic status conference held on February 26, 2020, the judge presiding over the Virgin Islands Action (the “VI Judge”) “indicated that [he] would conduct an evidentiary hearing on Petitioner's pending motions.” (NYSCEF doc No. 1, ¶ 7)

The Out-of-State Subpoena and the New York Subpoena

On March 10, 2020, Petitioner's counsel sent a “litigation hold” letter to Respondent, advising it of the Virgin Islands Action and putting Respondent on notice that it is now “under a legal duty to preserve all evidence, whether printed or electronic that might become relevant to the [said] litigation.” (NYSCEF doc No. 7)

On March 26, 2020, Petitioner's counsel issued a “Subpoena in Civil Case” (the “Out-of-State Subpoena”) pursuant to Rule 45 of the Virgin Islands Rules of Civil Procedure (the “VI Rules”), requiring Respondent to give testimony in relation to the Virgin Islands Action or, in lieu of personal appearance, to produce the documents listed thereon on or before April 27, 2020 (NYSCEF doc No. 8).

On the same day, Petitioner's counsel, who is also licensed to practice law in New York, issued the New York Subpoena pursuant to CPLR § 3119. The New York Subpoena demanded that Respondent produce the documents listed on the Out-of-State Subpoena on or before April 27, 2020. The New York Subpoena was served on Respondent on April 14, 2020 (see NYSCEF doc No. 10).

Discussions Between Counsel

On April 20, 2020, counsel for the parties had a telephonic conference, after which Petitioner's counsel provided Respondent's counsel with copies of the complaint and motions filed in the Virgin Islands Action (see NYSCEF doc No. 11).

On May 21, 2020, Respondent served responses and objections to the New York Subpoena. In its response, Respondent's objections were based on, among others, Petitioner's “fail[ure] to state the circumstances or reasons that [Petitioner] is seeking or requires disclosure”; the New York Subpoena “provided a response date of less than twenty days in violation of Rule 3120(2) of the CPLR”; and that it “seeks information that is unreasonably cumulative or duplicative of other testimony and/or documents that have been or can be provided by parties in the [Virgin Islands Action]” (NYSCEF doc No. 12, pp.2-3). Respondent's counsel also communicated by email its concern “that the[ ] documents [requested] should be available from [ ] WAPA, and therefore it is incumbent on [Petitioner] to try obtain them through party discovery before [Respondent] should be required to incur the cost and expense, etc., of responding to the[ ] discovery demands.” (NYSCEF doc No. 13)

On June 3, 2020, counsel for the parties had another telephonic conference to further discuss the New York Subpoena and explore the possibility of limiting the scope thereof. On June 15, 2020, Respondent's counsel advised Petitioner's counsel that it is “declin[ing] to provide the requested documents and information”. Respondent's counsel explained that “[f]rom [the] prior call, [it] underst[ood] that the parties have not yet conferred as required by Rule 26(f) of the VI Rules, and therefore the parties are not permitted to take discovery in [Petitioner's] case.” (NYSCEF doc No. 15)

This Proceeding

On June 17, 2020, Petitioner commenced this proceeding to seek enforcement of the New York Subpoena (Motion Seq. 001). Petitioner argues that Respondent's basis to decline production of documents has no merit as Rule 26(d)(1) of the VI Rules permits discovery against nonparties when there is a party stipulation or court order thus permitting. Petitioner maintains that both circumstances apply here. In any event, Petitioner avers that the issue of whether there was a violation of the VI Rules should be submitted to the Virgin Islands Superior Court and not to this Court (Id.).

Respondent is now moving to dismiss the petition (Motion Seq. 002). In support, Respondent advances three arguments (NYSCEF doc No. 19). First, CPLR 3119 authorizes the service of a subpoena only to compliment an out-of-state subpoena that has been validly issued. According to Respondent, the Out-of-State Subpoena here was not validly issued as it was made in violation of the Rule 26(f) and Rule 26(d)(1) of the VI Rules. Second, the New York Subpoena did not include a statement explaining the “circumstances or reasons” disclosure is sought from Respondent, as required under CPLR 3101(a)(4). Finally, the New York Subpoena was allegedly invalid at the time of service as it demanded that Respondent provide a response within thirteen (13) days, in violation of CPLR 3120 (2) which requires that response date be of no less than twenty days from the date of service.

DISCUSSION

The Adoption of the Uniform Interstate Depositions and Discovery Act

Effective January 1, 2011, New York State adopted the “Uniform Interstate Depositions and Discovery Act” by incorporating it into CPLR § 3119 ¹ . The section provides for a streamlined mechanism for obtaining disclosures in this state for use in an action pending in another state or territory within the United States (Matter of Kapon v Koch, 23 NY3d 32 [2014]).

To request issuance of a subpoena under CPLR § 3119, “a party must submit an out-of-state subpoena to the county clerk in the county in which discovery is sought to be conducted in [New York] state” (CPLR § 3119 (b)(1)). However, “if a party to an out-of-state proceeding retains an attorney licensed to practice in [New York] state, and that attorney receives the original or a true copy of an out-of-state subpoena, the attorney may issue a subpoena under this section” (CPLR § 3119 (b)(4)). Therefore, the issuance of a subpoena under CPLR § 3119, whether through the county clerk or through a New York-licensed attorney, requires submission of an “out-of-state subpoena.” An “out-of-state” subpoena is defined under CPLR § 3119 (a)(1) as “a subpoena issued under authority of a court of record of a state other than this state”.

Compliance of the Out-Of-State Subpoena with CPLR § 3119

Respondent argues that the Out-of-State Subpoena was issued in violation of Rules 26(f) and 26(d)(1) of the VI Rules which prohibit a party from seeking discovery from any source before parties have conferred amongst themselves (NYSCEF doc No. 19, pp. 5-7).

Petitioner disagrees and maintains that the discovery she seeks falls within the exceptions to Rule 26(f) of the VI Rules. According to Petitioner, Rule 26(d)(1) of the VI Rules provides that while a party may not seek discovery from any source before the parties have conferred as required by Rule 26(f), a party can do so when authorized by stipulation or by court order. Here, Petitioner maintains that: (i) WAPA's lack of objection to Petitioner's notice of intent to issue subpoena duces tecum to Respondent amounted to a “de facto” stipulation; and (ii) the VI Judge's decision to conduct an evidentiary hearing is “an implied order that the parties conduct discovery pertinent to the hearing” (NYSCEF doc No. 1). In any event, Petitioner insists that it is not for this Court to determine whether the Out-of-State Subpoena complied with Virgin Islands procedural rules (NYSCEF doc No. 22, p.2).

This Court finds that, contrary to Petitioner's contention, CPLR § 3119 requires that this Court determine whether the Out-of-State Subpoena was “issued under authority of a court of record” in Virgin Islands.

Just recently, the First Department, in the case of Matter of American Express Co. v United States Virgin Is. Dept. of Justice, 178 Ad3d 426 [1st Dept 2019], considered whether an out-of-state subpoena issued by the Attorney General and Commissioner of the Department of Licensing and Consumer Affairs of the United States Virgin Islands complied with the procedural requirements of CPLR § 3119. The First Department found that the out-of-state subpoena was not issued “under authority of a court of record” as it was not issued with “some court involvement, such as the issuance of a commission by a state court clerk or signature of the subpoena by a state court judge.”

The Second Department also considered the same issue in Hyatt v State of Cal. Franchise Tax Bd. (105 Ad3d 186 [2d Dept 2013]). There, the Hyatt court considered whether under the California Revenue and Tax Code, the California tax board had the authority to issue the out-of-state subpoena questioned in that case.

In In re Roche Molecular Sys. Inc., 60 Misc 3d 222 [Sup. Ct., 2018], the Supreme Court considered whether an out-of-state subpoena, issued pursuant to an arbitral tribunal's order directing depositions, met the requirement of CPLR § 3119.

The above cases show that New York courts, in a CPLR § 3119 proceeding, have the authority to determine first and foremost whether an out-of-state subpoena, which forms the basis for the issuance of a CPLR § 3119 subpoena in New York State, was “issued under authority of a court of record”. This Court accordingly turns to this issue.

The parties’ arguments here center on whether or not the Out-of-State Subpoena was issued in violation of Rules 26(f) and 26(d)(1) of the VI Rules. Rules 26(f) requires parties to “confer as soon as practicable” to establish a discovery plan. Under Rule 26(d)(1), a party “may not seek discovery from any source before the parties have conferred as required by Rule 26(f), except in a proceeding exempted from initial disclosure under Rule 26(a)(1)(B), or when authorized by these rules, by stipulation, or by court order.”

Petitioner does not contest that parties to the Virgin Islands Action have not yet participated in a discovery conference under Rule 26(f). Petitioner, however, argues that her case falls under the exceptions to Rule 26(f). This Court finds Petitioner's argument unmeritorious.

First, Petitioner submitted no authority to support her concept of a “de facto stipulation”. The fact that WAPA was silent after it was served by Petitioner with notice of its intention to subpoena Respondent cannot amount to a stipulation under Rule 26(d)(1). The Court agrees with Respondent that to constitute a “stipulation,” there must be some form of “voluntary agreement” between Petitioner and WAPA (see Black's Law Dictionary's [11th ed. 2019] definition of stipulation as a “voluntary agreement between opposing parties concerning some relevant point; see also CPLR § 2104 which provides that “[a]n agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered).

Second, this Court rejects Petitioner's argument that the VI Judge's order to conduct an evidentiary hearing is an implied order to conduct discovery. Respondent has cited to cases where Virgin Islands courts held that an evidentiary hearing does not constitute an “order” authorizing the parties to take discovery under Rule 26(d)(1). For instance, in Gourmet Gallery Crown Bay, Inc. (Case No. ST-2014-CV-513 [2015]), the motion for preliminary injunction filed by plaintiffs therein was scheduled for hearing. Concerned that “traditional avenues of obtaining discovery may prove untimely”, plaintiffs issued subpoenas prior to a Rule 26(f) conference. The Superior Court of the Virgin Islands quashed the subpoenas, holding that “[p]laintiffs’ issuance of the subpoenas was improper because the subpoenas were issued before the parties conducted a Rule 26(f) conference and Plaintiffs do not fall under an exception that permits preconference discovery.” In another case, VI Taxi Ass'n v. W. Indian Co. (Case No. ST-16-CV-551 [2016]), defendants issued subpoenas to gather information for use at a scheduled preliminary injunction hearing. Similar to what the Gourmet court did, the Superior Court of the Virgin Islands in VI Taxi quashed the subpoenas, holding that “the Court has not issued an order permitting the Parties to issue subpoenas.” If it is indeed the rule that a judge's order scheduling a motion hearing is tantamount to an order to conduct nonparty discovery even prior to a Rule 26(f) conference, the courts in Gourmet and VI Taxi would not have ruled as they did. Notably, Petitioner did not address Gourmet and VI Taxi in her papers. Petitioner merely insisted that this Court accept her allegations as true. While Petitioner is correct that on a motion to dismiss, courts must accept a petitioner's allegations as true and accord a petitioner every possible favorable inference, this Court can only go so far as accepting as true Petitioner's assertion that the VI Judge stated that he would “conduct an evidentiary hearing” as to Petitioner's pending motions. This Court, however, cannot draw an inference that such statement is an implied authority to conduct nonparty discovery prior to a Rule 26(f) conference in light of the uncontroverted Virgin Islands cases which are inconsistent to such an inference.

On this basis alone that the Out-of-State Subpoena here was not issued “under authority of a court of record”, this Court can already dismiss this petition. However, even if this Court considers the Out-of-State Subpoena compliant with CPLR § 3119, the petition is nevertheless dismissible as the New York Subpoena fails to state the “circumstances or reasons” disclosure is sought as required under CPLR § 3101 (a)(4).

Notice Requirement under CPLR § 3101 (a)(4)

CPLR § 3101 (a)(4) requires that a nonparty served with a subpoena be given notice “stating the circumstances or reasons such disclosure is sought or required.” “The subpoenaing party must include that information in the notice in the first instance [ ], lest it be subject to a challenge for facial insufficiency.” (Matter of Kapon v Koch, 23 NY3d 32 [2014])

Here, the New York Subpoena does not state on its face the circumstances or reasons disclosure is sought. Neither was it accompanied by a notice providing such information. While in Matter of Kapon v Koch, 23 NY3d 32 [2014], the Court of Appeals held that the notice requirement was met when the subpoenaing party “affixed copies of the [ ] complaint in the [out-of-state] action detailing the relationship between the [subpoenaed party] and the [defendant therein]”, there is no similar document in this case. The “litigation hold” letter from Petitioner merely states, without further explanation, that Petitioner understands that WAPA owes money to Respondent by reason of Respondent's services (see NYSCEF doc No. 7). On the other hand, the complaint and motions in the Virgin Islands Action belatedly provided to Petitioner's counsel do not even mention Respondent and its relationship with WAPA.

Petitioner's reliance on Velez v. Hunts Point Multi-Serv. Ctr., Inc., 29 AD3d 104 [1st Dept, 2006]) does not help her case. In Velez, the First Department admonished the parties for burdening the court with their disagreement, holding that “the simple and better solution would seemingly have been for the nonparties served or the parties objecting to the form of the subpoenas to notify the party issuing the subpoenas of the defect (lack of the requisite notice), in which event the party issuing the subpoena could have served new subpoenas with the requisite notice rather than burden their clients and the courts with the time and expense of litigating the issue of the form of the subpoenas.” Here, Respondent did just that. In its response to the New York Subpoena, Respondent objected on the ground that, among others, “it failed to state the circumstances or reasons that [Petitioner] is seeking or requires disclosure from [Respondent], in violation of CPLR § 3101(a)(4)” (NYSCEF doc No. 12, p. 2). Petitioner could have served new subpoenas with the requisite notice as the Velez court opined. Petitioner, however, chose to commence this proceeding.

CONCLUSION

Based on the foregoing, it is hereby

ORDERED that Respondent Glencore, Ltd.’s motion to dismiss (Mot. Seq. No. 002) is granted; and it is further

ORDERED that Petitioner Jody Olson's petition to enforce a subpoena duces tecum issued pursuant to CPLR § 3119 (Mot. Seq. No. 001) is dismissed; and it is further

ORDERED that Respondent's counsel shall serve a copy of this order, along with notice of entry, on all parties within 20 days of entry.

FOOTNOTES

1.   CPLR § 3119 (a) (3) defines “State” as “a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.” (emphasis added)

Carol R. Edmead, J.