In the Matter of John Kapon, et al., Appellants,v.William I. Koch, Respondent.BriefN.Y.February 19, 2014To be Argued by: PAUL SHECHTMAN (Time Requested: 30 Minutes) APL-2013-00163 New York County Clerk’s Index No. 102660/12 Court of Appeals of the State of New York In the Matter of a Petition to Quash Subpoena Ad Testificandum and/or for a Protective Order JOHN KAPON and JUSTIN CHRISTOPH, Petitioners-Appellants, – against – WILLIAM I. KOCH, Respondent-Respondent, In Connection with an action pending in the Superior Court of the State of California entitled: William I. Koch v. Rudy Kurniawan, BC421581 BRIEF FOR PETITIONERS-APPELLANTS ZUCKERMAN SPAEDER LLP Attorneys for Petitioners-Appellants 1185 Avenue of the Americas, 31st Floor New York, New York 10036 Tel.: (212) 704-9600 Fax: (212) 704-4256 Dated: August 23, 2013 RELATED CASE STATEMENT A related case, Koch v. Acker Merrall & Condit Co. ("AMC")(Index No. 601220/2008), is pending before Justice Stallman in New York Supreme Court. That action involves five bottles of allegedly counterfeit wine that Koch purchased through AMC. In July 2013, Justice Stallman denied Koch's motion to amend his complaint and add additional bottles. Koch has appealed that ruling to the First Department. The deposition subpoenas that are the subject of this appeal were issued in Koch v. Kurniawan, BC 421581, a civil action pending in California state court. In addition to those subpoenas, Koch also issued document subpoenas to appellants and AMC, and AMC has produced voluminous documents. In June 2013, appellants and AMC petitioned the California court for a protective order limiting the use of those documents. That petition is still sub judice. TABLE OF CONTENTS PAGE TABLE OF AUTHORITIES ..................................................................................... ii QUESTION PRESENTED ....................................................................................... 1 INTR.ODUCTION ...................................................................................................... 1 PROCEDURAL IllS TORY ...................................................................................... 1 A. Backgro-und ........................................................................................... 1 B. The Supreme Court's Decision ............................................................. 6 C. The First Department's Decision .......................................................... 7 ARGUME.NT ............................................................................................................ 8 THE COURTS BELOW ERRED IN NOT LIMITING THE SUBPOENAS .......... 8 CONCLUSION ..................................................................................................................................... 19 . 1 TABLE OF AUTHORITIES PAGE CASES Catalano v. Moreland, 299 A.D.2d 881 (4th Dept. 2002) ....................................... 13 Cirale v. 80 Pine St. Corp., 35 N.Y.2d 113 (1974) ................................................. 10 Kooper v. Kooper, 74 A.D.3d 6 (2d Dept. 2010) ........................................ 10, 12, 13 Ledonne v. Orsid Realty Corp., 83 A.D.3d 598 (1st Dept. 2011) .......................... 14 Matter of Ayliffe & Cos., 166 A.D.2d 223 (1st Dept. 1990) .................................... 9 Matter ofRoberts, 214 A.D. 271 (1st Dept. 1925) ................................................... 9 Matter of Troy Sand & Gravel Co., Inc. v. Town ofNassau, 80 A.D.3d 199 (3d Dept. 201 0) ......................................................... 12-13, 14 Matter of Welch, 183 Misc.2d 890 (Sup. Ct. N.Y. Cty. 2000) ................................. 9 Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340 (1978) ..................................... 17 Sutka v. Conners, 73 N.Y.2d 395 (1989) ................................................................ 14 Tannenbaum v. City ofNew York, 30 A.D.3d 357 (1st Dept. 2006) ..................... 14 United States v. Stanchich, 550 F.2d 1294 (2d Cir. 1977) ...................................... 17 OTHER AUTHORITIES 1983 Report of the Advisory Committee on Civil Practice .................................... 11 1984 Report of the Advisory Committee on Civil Practice .................................... 11 1985 Report of the Advisory Committee on Civil Practice .................................... 12 CPLR § 31 0 1 (a)( 4) ............................................................................................ passim 11 CPLR §3119 ..................................................................................................... passim Introducer's Mem. in Support, 2010 N.Y. Senate Bill S4256, Bill Jacket, L 2009, Ch. 29 .......................................................................... 1, 8 Memorandum in Support of Legislation (1984) ............................................... 12, 15 N.Y. Gen. Bus. Law §§349 and 350 ......................................................................... 4 P. Connors, Supplementary Practice Commentaries 2012 C31 01.22 ..................... 13 Unif. Interstate Depositions and Discovery Act,§ 6 cmt. (2007) .................. 9, 15-16 111 QUESTION PRESENTED Whether the courts below erred when they failed to limit the out-of- state subpoenas issued to appellants. INTRODUCTION This appeal arises out of subpoenas issued by respondent William Koch to appellants John Kapon and Justin Christoph calling for their deposition testimony in a California action in which Koch is the plaintiff. Appellants are New York residents and are not parties to the California action. The subpoenas were issued pursuant to CPLR §3119, which was enacted in 2011 to revise the procedures for the issuance of out-of-state subpoenas. In enacting §3119, the Legislature recognized that New York has a "significant interest in protecting its residents who become non-party witnesses in an action pending in another jurisdiction from unreasonable or burdensome discovery requests." Introducer's Mem. in Support, 2010 N.Y. Senate Bill S4256, Bill Jacket, L 2009, Ch. 29. As discussed below, the subpoenas issued here were unreasonable, but the courts below failed to afford appellants appropriate protection. Appellants have therefore brought this appeal. PROCEDURAL HISTORY A. Background In early 2012, respondent William Koch issued subpoenas to appellants John Kapon and Justin Christoph, both New York residents. (R. 41-42, 1 51-52). The subpoenas, which were issued pursuant to CPLR §3119, called for appellants' depositions in Koch v. Kurniawan, a civil action pending in California state court ("the California action").1 Kapon is the CEO of Acker, Merrall & Condit Company ("AMC''), a leading retailer and auctioneer of fine and rare wines, and Christoph is an AMC employee. Neither is a party in the California action. Koch is a wealthy businessman who collects fine and rare wines. (R. 32). The gist of the California action is that Kurniawan sold Koch 149 bottles of counterfeit wine through AMC in 2005 and 2006. (R. 90-91 ). In May 2012, Kurniawan was indicted in federal court in Manhattan for selling counterfeit wines. SeeR. 184-86, Press Release of United States Attorney's Office, Southern District of New York ("Rudy Kurniawan held himself out to be a wine aficionado ... , but he was the counterfeit, pawning off prodigious quantities of fraudulent wine ... to unsuspecting auction houses and collectors"). The proof against Kurniawan in the federal criminal case is overwhelming. A search of his house revealed a small factory for making counterfeit wines: fake labels, corks, seals, stamps and scores of bottles in the preparatory stages of being put to fraudulent Consistent with §3119, the subpoenas were not reviewed by a California court (or indeed by any court) prior to their issuance. The subpoenas called for testimony and the production of documents relating to AMC's relationship with Kurniawan. The document component of the subpoenas is not at issue on this appeal. 2 use. (R. 180-83). The search has been upheld against a motion to suppress. United States v. Kurniawan, 12 Cr. 376-RMB (Docket Entry 35)(Jan. 17, 2013). Trial in the California action has been stayed pending the conclusion of Kurniawan's criminal case, but third-party discovery has been permitted to go forward. (R. 668). The two subpoenas at issue here are part of that discovery. On May 9, 2012, appellants moved in New York County Supreme Court for an order quashing the subpoenas or, at a minimum, granting appellants relief from the subpoenas' unreasonableness. (R. 28-40). If the subpoenas were not quashed, appellants requested (i) that they be stayed until the parties in the California action had been deposed; (ii) that their scope be limited to matters relevant to the California action; and (iii) that the use of their depositions be limited to the California action. (R. 29). The third of these requests -- that the use of the depositions be limited to the California action -- stems from the fact that Koch has also sued AMC in New York. See Koch v. AMC (Index No. 601220/2008)(''the New York action"). The New York action involves five bottles of wine that Kurniawan consigned to AMC and that Koch purchased in 2005 and 2006. Significantly, the discovery deadline in the New York action was March 12, 2010, and Koch did not take either appellant's deposition. (R. 34-35, 238-39). As appellants asserted below, it is their belief that Koch's real purpose in issuing the subpoenas in the California 3 action is to circumvent the discovery deadline in the New York action and gather information for use against AMC here? Appellants' belief that Koch is seeking to evade the discovery cut-off in the New York action is based on his past conduct. There are two prior events. First, in July 2009, in Koch v. Greenberg, 07 Civ. 9600 (S.D.N.Y.)("Greenberg"), another Koch action involving allegations of counterfeit wine, Koch sought to discover a broad array of documents from Christie's auction house relating to Hardy Rodenstock, another wine seller. In sharply limiting Koch's discovery request, Magistrate Judge Debra Freeman expressed her concern that Koch was using the subpoena to circumvent a discovery stay in Koch's separate action against Rodenstock, Koch v. Rodenstock, 06 Civ. 06586 (S.D.N.Y.) ("Rodenstock"). Greenberg, Magistrate Judge Freeman wrote, "should not provide a vehicle for [Koch] to evade th[e] discovery stay [in Rodenstock]." (R. 294). 2 The New York action in which Koch is suing AMC has a long procedural history. It began in April 2008, when Koch filed a complaint, claiming fraud, breach of a Florida consumer protection statute and violations of N.Y. Gen. Bus. Law §§349 and 350 (''the GBL claims"). In April 2009, the Supreme Court dismissed the fraud claim and the Florida claim, but not the GBL claims. In May 2010, the First Department dismissed the GBL claims. In March 2012, this Court reinstated the GBL claims. Koch v. Acker, Merrall & Condit Co., 18 N.Y.3d 940 (2012). Since then, there have been several developments: (i) Koch moved to amend his complaint to include 211 additional bottles of wine that Kurniawan allegedly sold to him through AMC; (ii) the motion to amend was denied, except that Koch was permitted to "add details of [AMC's] relationship with Kurniawan" and to take discovery "on that limited issue," Op. 7/9/13; and (iii) Koch has appealed the denial of his motion to amend to the First Department. 4 Second, in December 201 0, Koch served subpoenas on appellants, seeking their depositions in Greenberg. Appellants moved to quash, and Magistrate Judge Freeman once again took steps to limit discovery and prevent misuse. At oral argument, she said this: I am concerned about discovery in this case being used in other cases to the extent that it might circumvent orders of other courts . . . . I think there's been a sufficient showing ... of relevance of some testimony ... that's being sought of the non.;.parties. [But] [t]he only testimony that should be obtained in this case is testimony relevant to this case. (R. 260). On that basis, Magistrate Judge Freeman issued a protective order (i) limiting the depositions ''to inquiry regarding matters relevant to the particular claims and defenses asserted in [Greenberg]" and (ii) prohibiting use of the depositions "in any other action, unless such testimony is independently discoverable in the other action, within the scope of any discovery rulings, including deadlines, set by the court in which the other action is pending." (R. 244). Faced with that protective order, Koch chose to depose Christoph, but not Kapon. (R. 65). 3 3 Koch has also been sanctioned for violating a discovery-related protective order. In August 2011, the federal court in Greenberg found that Koch and his counsel had given confidential documents to his publicist, which were then given to the press. In imposing sanctions, the court described Koch's conduct as "outrageous." (R. 527). 5 B. The Supreme Court's Decision On October 15, 2012, Justice Michael Stallman denied appellants' motion to quash the subpoenas. The court found that Koch had demonstrated that the information he sought from appellants was "not reasonably available either from Kurniawan, or from any other source." (R. 15). As the court saw it, Kurniawan was likely to invoke his Fifth Amendment right against self- incrimination in the California action and therefore Koch "should not be required to depose Kurniawan before taking petitioners' non-party depositions." (R. 16). The court also denied, in large measure, appellants' request for a protective order. Specifically, it refused to limit the scope of the depositions to "Kurniawan's or Koch's conduct or statements concerning the 149 bottles of wine" at issue in the California action or to rule out inquiry into AMC's "historical internal practices or procedures." In doing so, it wrote this: There is no meaningful way for this Court to delineate, in advance, the matters which might be impermissible lines of inquiry at the non-party depositions, without a deeper understanding of the causes of action based on the California law, which petitioners have not given. Based on the pleadings given to this Court, this Court cannot say that questions regarding AMC's "historical internal practices or procedures" would be irrelevant or not be reasonably calculated to lead to admissible evidence as to the issues of the fraud allegations against Kurniawan in the California Action. 6 (R. 17 -18)( emphasis added). And the court declined to limit the use of the depositions to the California action, leaving that issue as well to the California court. (R. 18)("[ a] limitation on the use of the non-party depositions beyond their use in the California Action should be made to the California court"). The only relief that the court granted was to allow appellants to decline to answer any question where the answer would divulge confidential information or trade secrets and to "mark [such questions] for a ruling." (R. 21- 22). The depositions were ordered to occur within 60 days of service of a copy of the court's decision. On November 21, 2012, a judge of the First Department granted a temporary stay of the depositions, and the stay was later extended pending the resolution of the appeal. C. The First Department's Decision Appellants appealed to the First Department, which affirmed Justice Stallman's decision. That court concluded that Justice Stallman had "providently exercised [his] discretion in denying [appellants'] motion [to quash], since [appellants] [had] failed to show that the requested deposition testimony is irrelevant to the prosecution of the California action." (R. 752-53). The court also held that appellants had "failed to articulate a sufficient, nonspeculative basis for 7 ... imposing restrictions on the scope and use of their deposition testimony." (R. 753). On June 25, 2013, this Court granted leave to appeal and continued the stay of appellants' depositions. (R. 748). ARGUMENT THE COURTS BELOW ERRED IN NOT LIMITING THE SUBPQENAS CPLR §3119 was enacted in 2011 and adopts the Uniform Interstate Depositions and Discovery Act for New York. Promulgated by the National Conference of Commissioners on Uniform State Laws, the Act was intended to expedite the issuance of out-of-state subpoenas.4 Importantly, however,· in enacting the new provision, the Legislature emphasized New York's "significant interest in protecting its residents who become non-party witnesses in an action pending in another jurisdiction from unreasonable or burdensome discovery requests." Introducer's Mem. in Support, 2010 N.Y. Senate Bill S4256, Bill Jacket, L 2009, Ch. 29 (emphasis added). For that reason and because an out-of- state subpoena can now issue without any review in the trial state, the Legislature provided that motions "to quash... or modify a[ n] [out-of-state] subpoena . . . shall be brought in and governed by the rules [of New York]." Id.; see also CPLR 4 The Act permits a party to obtain an out-of-state subpoena by submitting it to the clerk in the county in which discovery is sought to be conducted and provides that the clerk shall promptly issue it. See CPLR §3119(b ). 8 §3119( e). That means that "[ e ]videntiary issues that may arise, such as objections based on grounds such as relevance or privilege, are [to be] decided in the discovery state, [not in the trial state]." Unif. Interstate Depositions and Discovery Act, § 6 cmt. (2007)( emphasis added). Plainly, the approach mandated by §3119 is far different from prior law. Under prior law, it was "appropriate for the sister State court which ha[d] the underlying case, and [was] therefore in a better position to determine the appropriate scope of disclosure, to make the threshold determination as whether to permit the discovery," and the role of the New York court was "necessarily more limited." Matter of Welch, 183 Misc.2d 890, 891 (Sup. Ct. N.Y. Cty. 2000). Thus, it was settled that a New York court would not "prejudge the materiality or the competency of the evidence in a cause pending in another jurisdiction and [would] afford the widest possible latitude in the conduct of such examinations." Matter of Ayliffe & Cos., 166 A.D.2d 223,224 (1st Dept. 1990), quoting Matter of Roberts, 214 A.D. 271, 275 (1st Dept. 1925). Now, under §3119, the New York court is the principal decision- maker. If the right of New Yorkers to be free from burdensome or harassing discovery is to be protected, it is the New York court that must provide the protection. As discussed below, in resolving appellants' motion to quash, the 9 courts below failed to give appellants -- non-party witnesses in an out-of-state action -- the protection that they deserve. 1. The courts below erred in placing the burden on appellants to show that the deposition testimony was irrelevant to the California action. As the Second Department has observed, "nonparties ordinarily should not be burdened with responding to subpoenas for lawsuits in which they have no stake or interest unless the particular circumstances of the case require their involvement." Kooper v. Kooper, 74 A.D.3d 6, 18 (2d Dept. 2010). It was therefore wrong for the courts below to put the burden on appellants to show that the information sought was irrelevant to the California action. At the outset, some history is helpful. Prior to 1984, CPLR §3101(a)(4) required a party seeking discovery from a non-party to persuade a court "on motion ... that there [were] adequate special circumstances" warranting disclosures. See Cirale v. 80 Pine St. Corp., 35 N.Y.2d 113, 116 (1974).5 In 1983, 5 At the time, §31 01 (a) read as follows: Section 3101. Scope of disclosure. (a) Generally. There shall be full disclosure of all evidence material and necessary in the prosecution or defense of an action, regardless of the burden of proof, by: ( 1) a party, or the officer, director, member, agent or employee of a party; 10 the Advisory Committee on Civil Practice recommended that "[t]he existing enumeration of persons subject to disclosure ... be eliminated [to permit] the disclosure of relevant matter by any person, without the need for showing 'adequate special circumstances."' See 1983 Report of the Advisory Committee on Civil Practice at 49. The next year, the Advisory Committee made a similar recommendation. See 1984 Report of the Advisory Committee on Civil Practice at 51. In 1984, the Legislature took a substantial step in the Advisory Committee's direction. It eliminated the need for a party to secure a court order before seeking discovery from a non-party witness. And it eliminated the need to show "special circumstances." Notably, however, the Legislature did not eliminate the "existing enumeration of persons," as the Advisory Committee had (2) a person who possessed a cause of action or defense asserted in the action; (3) a person about to depart from the state, or without the state, or residing at a greater distance from the place of trial than one hundred miles, or so sick or infirm as to afford reasonable grounds of belief that he will not be able to attend the trial, or a person authorized to practice medicine who has provided medical care or diagnosis to the party demanding disclosure, or who has been retained by him as an expert witness; and ( 4) any person where the court on motion determines that there are adequate special circumstances. 11 recommended. Instead, it modified §3101(a)(4) to permit discovery from a non- party "upon notice stating the circumstances or reasons such disclosure is sought or required." See Memorandum in Support of Legislation (1984)("the amendment would require the [party seeking the disclosure] to state the circumstances or reasons why disclosure of the non-party witness is necessary").6 Since 1984, the Appellate Divisions have struggled to interpret the 1984 amendment. The Second and Third Departments have noted that the "special circumstances" requirement is no longer applicable to disclosure from a nonparty. See Kooper v. Kooper, 74 A.D.3d 6 (2d Dept. 2010); Matter of Troy Sand & Gravel Co., Inc. v. Town of Nassau, 80 A.D.3d 199 (3d Dept. 2010). Both courts, however, have held that "[m]ore than mere relevance and materiality is necessary to warrant disclosure from a nonparty." Kooper, 74 A.D.3d at 18; Troy Sand, 6 The Amendment did not satisfy the Advisory Committee. In its Report, it wrote this: A new provision was enacted (CPLR 3101(a)(4)) to provide for a notice and subpoena procedure for nonparty witnesses, under which circumstances or reasons for the disclosure would have to be shown. The Committee had originally proposed abolition of any special circumstances requirement to justify the requested disclosure of nonparty witnesses. 1985 Report of the Advisory Committee on Civil Practice at 42. 12 1985 80 A.D.3d at 202.7 Indeed, both courts have imposed so heightened a standard of need that one commentator has quipped that the special circumstances rule has been jettisoned only to be brought back in a different guise. See P. Connors, Supplementary Practice Commentaries 2012 C3101.22 (recalling the last line of a 1970s rock song: "[ m ]eet the new boss, same as the old boss"). For its part, the Fourth Department has also disavowed the "special circumstances requirement" but puts the burden on the party issuing the subpoena ''to demonstrate that the [matters] sought [are] material and necessary." Catalano v. Moreland, 299 A.D.2d 881, 882 (4th Dept. 2002). The First Department's cases are harder to categorize. On some occasions, the First Department has adopted the approach of the Second and Third Departments and required a showing of 7 In Kooper, the Second Department wrote this: [T]his Court has deemed a party's inability to obtain the requested disclosure from his or her adversary or from independent sources to be a significant factor in determining the propriety of discovery from a nonparty. A motion to quash is, thus, properly granted where the party issuing the subpoena has failed to show that the disclosure sought cannot be obtained from sources other than the nonparty and properly denied when the party has shown that the evidence cannot be obtained from other sources. Our cases have not exclusively relied on this consideration, however, and have weighed other circumstances which may be relevant in the context of the particular case in determining whether discovery from a nonparty is warranted. 74 A.D.3d at 16-17 (citations omitted). 13 heightened relevance. See,~' Tannenbaum v. City of New York, 30 A.D.3d 357, 358-59 (1st Dept. 2006)(requiring a showing of"special circumstances or that the information [is] relevant and [can ]not be obtained from other sources"). On other occasions including this case, it has held that the burden is on the non-party to demonstrate that the information sought is ''utterly irrelevant." See, ~' Ledonne v. Orsid Realty Corp., 83 A.D.3d 598, 599 (1st Dept. 2011)(denying motion to quash because "nonparties had not shown that the ... materials sought are utterly irrelevant to plaintiffs' claims"). Central to this appeal is the proper interpretation of the 1984 amendment. See Connors, supra ("this issue cries out for resolution by the Court of Appeals"). We submit that the approach set forth below best comports with legislative intent. See Sutka v. Conners, 73 N.Y.2d 395, 403 (1989)("[i]n matters of statutory interpretation ... legislative intent is the great and controlling principle [and] inquiry must be made of the spirit and purpose of the legislation"). Plainly, in amending §3101(a)(4), the Legislature rejected the Advisory Committee's approach of eliminating the distinction between parties and non-parties. See Troy Sand, 80 A.D.3d at 202 (noting that the legislature clearly intended to maintain a "distinction ... between parties and nonparties"). Instead, it insisted that a party issuing a subpoena to a non-party give the non-party notice of the "circumstances or reasons such disclosure is sought or required." That 14 requirement should carry over when a non-party moves to quash the subpoena. See Memorandum in Support of Legislation (1984)("the amendment would require the moving party to state the circumstances or reasons why disclosure of the non- party witness is necessary"). Thus, on a motion to quash, it is for the party issuing the subpoena to show that he needs the deposition to prepare adequately for trial. If we are correct in this regard, then the courts below erred in putting the burden on appellants to show that the requested discovery was utterly irrelevant to the California action. Tellingly, that is a burden that a non-party can rarely meet, especially when the action, like this one, is out-of-state. Here, for example, the Supreme Court opined (i) that appellants had failed to provide the court with "a deeper understanding of the causes of action based on the California law," and (ii) that it was therefore impossible for the court ''to delineate ... the matters which might be impermissible lines of inquiry." (R. 17-18). But that asks too much. Koch brought the California action, and his lawyers are aware of the issues there. Surely, part of his burden of showing "circumstances or reasons" for the deposition should be educating a New York judge to the niceties of California law (if there are any) that might make an expansive deposition necessary. Nor was the problem solved by the advisement that appellants could apply to the California court to impose relevancy limits. Under §3119, issues of relevancy "are to be decided in the discovery state, [not in the trial state]." Unif. 15 Interstate Depositions and Discovery Act, §6 cmt. (2007)( emphasis added). That, after all, is the reason that §3119( e) was included in the Act. Simply stated, leaving the issue of relevancy to the California court is at odds with the structure of §3119 and its purpose of protecting New York residents from burdensome requests. In sum, if our interpretation of §310l(a)(4) is sound, then the burden should have been on Koch to show that open-ended depositions were needed for him to be prepared for trial in the California action. He should have been required to articulate the reasons why inquiry into issues beyond Kurniawan's or Koch's conduct and statements concerning the 149 bottles of wine was necessary. Likewise, he should have been required to explain why questioning concerning AMC's "historical internal practices and procedures" was needed. And he should have been required to delineate the provisions of California law that necessitate a wide-ranging deposition. By putting the burden on appellants to show that the requested testimony was irrelevant to the California action (or leaving the issue to the California court), the courts below got it wrong. 2. The courts below should have limited the use of appellants' depositions to the California action. Any fair reading of the record should raise a grave concern that Koch is improperly seeking open-ended depositions for use against AMC in the New York action in which discovery is essentially closed. See 16 Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 352 n.17 (1978)("when the purpose of a discovery request is to gather information for use in proceedings other than the pending suit, discovery properly is denied").8 As we argued below, the very notion that Koch needs appellants' testimony to prevail against Kurniawan in the California action is risible. We now know that Kurniawan was a consummate fraudster and his home was a counterfeiter's lair. Now that his motion to suppress has been denied, a guilty plea will surely follow. See United States v. Stanchich, 550 F.2d 1294, 1300 (2d Cir. 1977)(Friendly, J.)("[j]udges are not required to exhibit a naivete from which ordinary citizens are free"). When that occurs, the California action will be all but over. All of that supports appellants' belief that Koch's eagerness to depose them has little, if anything, to do with the California action against Kurniawan and everything to do with the New York action against AMC. Moreover, seeking to take discovery in one action to circumvent a discovery deadline in another has been Koch's pattern. Twice, a federal magistrate judge has voiced concern and issued protective orders to prevent such misuse from occurring. See, supra, at 3-5. The courts below declined to follow that same 8 As noted above, Justice Stallman recently reopened discovery for the limited purpose of allowing Koch to explore details of AMC's relationship with Kurniawan. See, supra, at 4 n.2. It is not clear if that discovery will include depositions. In any event, the open-ended depositions authorized by the courts below in connection with the California action extend well beyond the AMC- Kurniawan relationship. 17 course. Instead, they left the matter for the California court to resolve at some unspecified time in the future. That was plain error. It was for Justice Stallman to decide whether the depositions could be used against appellants in the New York action. That is the division of responsibility that §3119 contemplates, and one that makes sense. A California judge cannot be expected to care greatly about the misuse of a California deposition to obtain testimony in a New York proceeding. If one wants to protect New Yorkers from unreasonable discovery requests, then the issue of the use of the depositions, like that of their scope, must be resolved here. Notably, the procedure that we believe §3119 compels-- that the New York judge decide the issue of use -- is the very procedure that Magistrate Judge Freeman employed in addressing Koch's subpoenas to appellants in Greenberg. Magistrate Judge Freeman not only limited the scope of questioning to matters strictly relevant to Greenberg but limited the use of the depositions to that case. Suffice it to say, the concern that informed Magistrate Judge Freeman's ruling in Greenberg was not given proper weight below and indeed not even referenced in the courts' decisions. Perhaps recognizing that leaving the issue of use to the California court was error, Koch proposed an alternative in the First Department: that if appellants "believe that their inculpatory testimony is for some reason inadmissible 18 in the New York Action, they [should] move to exclude the testimony in [that] Action." (K. Br. 21)(emphasis added). But Koch's strategy in advancing that alternative is transparent. If he obtains broad depositions in the California action, he will argue that the depositions are matters of public record and therefore presumptively admissible here. See R. 18-19. Only if limits on use are imposed at the outset can appellants have any confidence that Koch's end run will not succeed.9 CONCLUSION Section 3119 requires a New York court to review an out-of-state subpoena to a non-party witness with solicitude to ensure that a New York resident is not unduly burdened in responding to a discovery demand in a lawsuit in which he has no stake. The courts below failed to treat appellants' motion to quash with that solicitude. They put the burden on appellants to show that the proposed depositions were utterly irrelevant to the California action. And they failed to limit the use of the depositions, even though the potential for misuse was evident. Any 9 A recent development in the California court shows that that court is unlikely to be interested in imposing a use limitation. Having produced documents to Koch, appellants and AMC requested the California court to preclude Koch from using the documents in the New York action. A referee in California has recommended that the California court deny that request, writing this: the question should be addressed to the court in the New York action, since "it raises an interest of the New York court, not this court." Referee's Report and Recommendation in Koch v. Kurniawan 8/20/13 at 2. Plainly, a request to the same tribunal for a use limitation on deposition testimony would meet the same fate. A copy of the Referee's report is available should this Court wish to see it. 19 limitation on relevance or use, they mistakenly concluded, was for the California court to impose. As a result, appellants are exposed to potentially long · and harassing depositions that may well be used against them in a New York action in which discovery is largely closed. That outcome, we submit, should not be upheld. Dated: New York, New York August 26, 2013 ZUCKE~JPAEDE~ By: e -1 1 k.::.-- Paul Sliechtman Brian Mahanna 1185 A venue of the Americas 31st Floor New York, NY 10036 (212) 704-9600 Attorneys for Petitioners-Appellants John Kapon and Justin Christoph Andrew J. Weinstein The Weinstein Law Firm PLLC 800 Third Avenue 18th Floor New York, NY 10022 (212) 582-8900 Attorney for Petitioner-Appellant John Kapon To: Morvillo, Abramowitz, Grand, Iason, & Anello, P.C. Edward M. Spiro 565 Fifth Avenue New York, NY 10017 Attorneys for Respondent 20
