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Supreme Court, Appellate Division, First Department, New York.



Decided: December 03, 2019

Acosta, P.J., Renwick, Mazzarelli, Kapnick, JJ. Wilmer Cutler Pickering Hale and Dorr LLP, New York (David S. Lesser of counsel), for appellant. Motley Rice LLC, New York (David I. Ackerman of counsel), for respondents.

Orders, Supreme Court, New York County (John J. Kelley, J.), entered August 30, 2018, which denied the petition to quash the subpoena and granted respondents' motion to dismiss the proceeding, unanimously reversed, on the law, without costs, the petition granted, the subpoena quashed and the motion to dismiss denied.

Petitioner seeks to quash a subpoena issued by the Attorney General and Commissioner of the Department of Licensing and Consumer Affairs of the United States Virgin Islands (USVI).

The motion court improvidently exercised its discretion in dismissing the instant action in favor of the related USVI action.

Although the USVI action was filed first, it was only first by a few hours (see L–3 Communications Corp. v. SafeNet, Inc., 45 A.D.3d 1, 9, 841 N.Y.S.2d 82 [1st Dept. 2007]; Seaboard Sur. Co. v. Gillette Co., 75 A.D.2d 525, 525, 426 N.Y.S.2d 762 [1st Dept. 1980]).  Moreover, respondents at least arguably induced petitioner to delay filing this action and filed the USVI action preemptively before the deadline to respond to the subpoena expired (see IRX Therapeutics, Inc. v. Landry, 150 A.D.3d 446, 447, 55 N.Y.S.3d 4 [1st Dept. 2017]; L–3, 45 A.D.3d at 8–9, 841 N.Y.S.2d 82; White Light Prods. v. On the Scene Prods., 231 A.D.2d 90, 100, 660 N.Y.S.2d 568 [1st Dept. 1997]).

While the USVI clearly has a significant interest in protecting its residents from unfair business practices, the more pressing concern at this stage—when all that is at issue is a subpoena seeking information, not an enforcement action—is the protection of the party from whom discovery is being sought from unreasonable or burdensome discovery requests (see Hyatt v. State of Cal. Franchise Tax Bd., 105 A.D.3d 186, 200–201, 962 N.Y.S.2d 282 [2d Dept. 2013]; see also CPLR 3119[e]).

The petition to quash should have been granted.

The subpoena is preempted by federal law insofar as it seeks documents from American Express Centurion Bank and American Express Bank, FSB, which entities have since merged into American Express National Bank, a federally chartered national bank (see 12 USC § 484[a]; Cuomo v. Clearing House Assn., L.L.C., 557 U.S. 519, 524–525, 535–536, 129 S.Ct. 2710, 174 L.Ed.2d 464 [2009]; Watters v. Wachovia Bank, N.A., 550 U.S. 1, 13, 127 S.Ct. 1559, 167 L.Ed.2d 389 [2007], superseded by statute on other grounds as stated in Gordon v. Kohl's Dept. Stores, Inc., 172 F. Supp. 3d 840, 863–864 [E.D. Pa. 2016]).  Even if respondents limited their investigation to conduct occurring prior to the merger, the result would be the same (see Capital One Bank (USA), N.A. v. McGraw, 563 F. Supp. 2d 613, 621–622 [S.D. W. Va. 2008]).

The subpoena also failed to meet the procedural requirements for out-of-state subpoenas because it was not issued “under authority of a court of record” (see generally CPLR 3119[a][1], [4]; Patrick M. Connors, Practice Commentaries, McKinney's Cons Laws of NY, C3119:2).  Although the subpoena need not have been issued in connection with a pending litigation, there must have been 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 (see e.g. Matter of Harris v. Seneca Promotions, Inc., 149 A.D.3d 1508, 1509–1510, 53 N.Y.S.3d 758 [4th Dept. 2017]; Hyatt, 105 A.D.3d at 191–192, 199–200, 962 N.Y.S.2d 282; see also CPLR 2308[a]; Connors at C3119:2).  We reject respondents' argument that administrative subpoenas are outside the scope of CPLR 3119 and not subject to any restrictions on issuance.

In light of our disposition of these issues, we need not reach petitioner's remaining arguments for reversal.