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Holdings v. Gilbert

United States District Court, N.D. Texas, Dallas Division

March 2, 2018

EDGEFIELD HOLDINGS as successor in interest to Regions Bank, Plaintiff,
v.
KENNETH J. GILBERT, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          DAVID L. HORAN UNITED STATES MAGISTRATE JUDGE.

         Defendant Kenneth J. Gilbert and Non-Party Helen K. Gilbert (collectively, the “Gilberts”) have filed a Motion to Quash Subpoena and Objection to Document Requests in response to a subpoena (the “Subpoena” [Dkt. No. 15, Ex. 1]) issued to Non-Party Helen K. Gilbert by Plaintiff Edgefield Holdings as successor in interest to Regions Bank (“Edgefield” or “Plaintiff”). See Dkt. No. 2 (the “Motion to Quash”).

         United States District Judge David C. Godbey has referred the Motion to Quash to the undersigned United States magistrate judge for hearing, if necessary, and determination under 28 U.S.C. § 636(b). See Dkt. No. 5.

         Edgefield filed a response, see Dkt. No. 14, and the Gilberts filed a reply, see Dkt. No. 18.

         For the reasons and to the extent explained below, the Court GRANTS in part and DENIES in part the Gilberts' Motion to Quash Subpoena and Objection to Document Requests [Dkt. No. 2].

         Background

         As Edgefield explains the background to the Motion to Quash,

[o]n July 8, 2010, the United States District Court - Eastern District of Louisiana, in Civil Action No. 2:09-cv-03560, entered a judgment against Defendant KENNETH J. GILBERT in favor of Regions Bank in the amount of $1, 348, 099.00 plus interest, attorney's fees, and expenses (hereinafter the “Louisiana Federal Judgment”). The Louisiana Federal Judgment was subsequently assigned to Plaintiff.
In an unrelated case, on November 29, 2010, the 415th Judicial District Court, Parker County, Texas, in Cause Number CV-10-0929, entered a final judgment in favor of Regions Bank against Defendant KENNETH J. GILBERT in the amount of $1, 972, 645.58 plus interest, late charges, attorney's fees, and court costs (hereinafter the “Texas State Judgment”). The Texas State Judgment was subsequently assigned to Plaintiff.
On December 17, 2010, Regions Bank attempted to domesticate the Louisiana Federal Judgment in Parker County, Texas but did not pursue enforcement of the Louisiana Federal Judgment in Texas state court thereafter. Nevertheless, the domestication in state court of the Louisiana Federal Judgment is invalid because an exemplified copy of the Louisiana Federal Judgment was not filed as required by Texas law. Tex. Civ. Prac. & Rem Code § 35.003.
On April 19, 2016, Plaintiff commenced enforcement of the Texas State Judgment by serving Defendant KENNETH J. GILBERT with post-judgment discovery requests. Plaintiff further attempted to collect the Texas State Judgment by employing enforcement tools allowed by law, including gamishment and third-party discovery. Through postjudgment discovery in the Texas State Judgment matter, Plaintiff discovered that Defendant KENNETH J. GILBERT has been fraudulently transferring his community property income to his wife, HELEN K. GILBERT, and non-party entities owned and controlled by the GILBERTS.
On or about April 6, 2017, Plaintiff acquired Regions Bank's interest in the Louisiana Federal Judgment and filed its Motion to Substitute Parties-in-Interest in the Eastern District of Louisiana case. Thereafter, on May 12, 2017, the Eastern District of Louisiana Court entered an order allowing Plaintiff to substitute as judgment creditor in accordance with Federal Rule of Civil Procedure 25(c).
On September 29, 2017, Plaintiff registered the Louisiana Federal Judgment in this Court pursuant to 28 U.S.C. § 1963.
On November 13, 2017, after proper notice, Plaintiff issued its Subpoena to Non-Party HELEN K. GILBERT (hereinafter the “Subpoena”). A true and correct copy of the Subpoena is attached to Plaintiffs accompanying Appendix as Exhibit “1" [Appendix pgs.3-161 and incorporated herein by reference.
On December 5, 2017, counsel for the GILBERTS proposed producing certain documents responsive to the Subpoena in exchange for Plaintiff s agreement to enforce the Louisiana Federal Judgment in Parker County state court only. Plaintiff agreed regarding the production of certain documents but did not agree regarding venue.

Dkt. No. 14 at 2-4.

         But the Gilberts contend that

[t]his case was commenced for the sole purpose of compelling post-judgment discovery from a non-judgment debtor, Helen K. Gilbert (“Mrs. Gilbert”). However, such discovery should be undertaken through the lawsuits currently pending in Parker County, Texas, not in federal court in Dallas. Parker County is where (a) the [Gilberts] reside, (b) Edgefield's judgments were entered or are registered, (c) Edgefield has been conducting collection efforts since 2016, (d) Edgefield, and its predecessor in interest have taken extensive discovery from the judgment debtor, Kenneth J. Gilbert (“Mr. Gilbert”), and (e) Edgefield issued the very same post-judgment discovery request to Mrs. Gilbert the day before this action was commenced. Additionally, the documents requested in the Subpoena should be narrowed and specifically tailored to the facts of the matter to seek (a) information about assets that could be used to satisfy Edgefield's debt, rather than the carpet-bombing approach of sending 112 broad requests for information about Mrs. Gilbert's separate and solely managed property, and (b) information not already provided by Mr. Gilbert or available from, the judgment debtor.
Edgefield allegedly holds two judgments taken against Mr. Gilbert by Regions Bank. One was entered by the 4151 Judicial District Court of Parker County, Texas on November 29, 2010 in the amount of $1, 972, 645.58 (“Judgment One”). The other was entered by the United States District Court for the Eastern District of Louisiana on July 8, 2010 in the amount of $1, 348, 099.00 (“Judgment Two”). As discussed below, Regions Bank, Edgefield's alleged assignor, has already domesticated Judgment Two in Parker County.
Edgefield has no judgments against Mrs. Gilbert. Nevertheless, Edgefield has twice sent the same set of 112 document requests to Mrs. Gilbert, asking for a broad range of financial and personal information, including documents that pertain to her separate property and her solely managed community property. The document production Edgefield seeks to compel is, to a large extent, irrelevant and not discoverable, because Mrs. Gilbert's separate and solely managed community property are not subject to her husband's debts. The document production is also overly burdensome. Because the discovery sought is extremely broad, Mrs. Gilbert will incur substantial expense providing extensive information in furtherance of the collection of a debt she does not owe about assets that are not liable for her husband's debt or to protect herself from having to do so. The Subpoena is also unduly burdensome because it is unnecessary. Edgefield also seeks to compel production of documents and information that Edgefield has already received from Mr. Gilbert or that it was given the opportunity to inspect and chose not to.
The Court should order Edgefield to pay Mrs. Gilbert's expenses in moving to quash the Subpoena, because it did not take reasonable steps to avoid imposing undue burden or expense on Mrs. Gilbert; rather, the Subpoena is part of a pattern intended to harass the [Gilberts], especially Mrs. Gilbert. In addition to the Subpoena, Edgefield has taken extensive discovery from Mr. Gilbert and has made other extensive production demands on Mrs. Gilbert. Edgefield has demanded to inspect and video the [Gilberts'] home, including private areas, which the [Gilberts] agreed to, but Edgefield never did an inspection. Edgefield has unnecessarily used four different courts to assist in collection, which has increased costs and stress to the [Gilberts].
Edgefield has issued a notice of subpoena containing 112 document requests directed to Mrs. Gilbert in one of the Parker County actions, but decided not to serve the subpoena issued from the court in the place of her residence. Instead, the very next day, Edgefield registered Judgment Two in this Court and now seeks to compel production of the same 112 documents through this Court. This forum shopping and procedural maneuvering is intended to harass Mrs. Gilbert and to increase expense, and is therefore an abuse of the Federal Rules of Civil Procedure.

Dkt. No. 2 at 1-3. And the Gilberts offer their own procedural background to their Motion to Quash:

On November 29, 2010, Regions Bank obtained Judgment One against Kenneth J. Gilbert in Regions Bank v. Kemmerer BLM, L.L.C. and Kenneth J. Gilbert from the 4151 Judicial District Court of Parker County in Cause No. CV-10-0929, [Exhibit 1; App . 001 to 003). On March 10, 2016, Regions Bank is alleged to have assigned Judgment One to Edgefield.1 Edgefield as taken many actions to obtain post-judgment discovery and to collect Judgment One, and which are described below.
....
To collect Judgment One, in April 2017, Plaintiff filed in Parker County an Application and Affidavit for Writ of Garnishment (the “Garnishment Action”) against UBS AG and UBS Financial Services, Inc. (“UBS”) in the 4151 Judicial District of Parker County in Cause No. CV-17-0406. [Exhibit 2; App. 004 to 009]. One of the accounts at UBS was the [Gilberts'] joint checking account. [Exhibit 35; App.332]. Another of the accounts is Mr. Gilbert's Individual Retirement Account (the “IRA”). [Exhibit 35; App. 332]. The third account is held for the benefit of the [Gilberts] in an account in the name of the Gilbert Real Estate Brokers Defined Benefit Pension Plan (the “Pension Plan”). [Exhibit 35; App. 332]. The Garnishment Action was resolved with Edgefield agreeing not to collect any of the Pension Plan or IRA funds, but taking the funds in the [Gilberts'] joint checking account at UBS. [Exhibit 3; App. 010 to 011].
....
To collect Judgment One, on June 28, 2016, Plaintiff filed in Parker County Edgefield Holdings, LLC, as assignee of Regions Bank v. Kenneth J. Gilbert, Helen K. Gilbert, Chandler Estates, LTD., and Parker County Real Estate Investments, Inc. in Cause No. CV16- 0784 in the 43rd Judicial District Court of Parker County, Texas (the “Fraudulent Transfer Action”). [Exhibit 4; App. 012 to 021]. Edgefield asserted that transfers of funds into the Pension Plan for the benefit of the [Gilberts] constituted fraudulent transfers under Texas law. [Exhibit 4; App. 017 to 019].
[The Gilberts] made counterclaims in the Fraudulent Transfer Action, one of which was a counterclaim for declaratory judgment that the Pension Plan account at UBS is exempt from execution. [Exhibit 5; App. 022 to 026]. On August 3, 2017, [the Gilberts] sought summary judgment on the counterclaim for declaratory judgment that the Pension Plan is exempt from execution based on the Employee Retirement Income Security Act (29 U.S.C. §§1001-1461) (“ERISA”) . [Exhibit 6; App. 027 to 038].
On August 7, 2017, Edgefield filed a Notice of Removal in the United States District Court for the Northern District of Texas, Fort Worth Division, improperly casting itself as the defendant for purposes of 28 U.S.C. §§ 1441(a) based on the [Gilberts'] counterclaim. [Exhibit 7; App. 039 to 046]. After considerable and unnecessary expense to the [Gilberts], Edgefield conceded that a plaintiff who chose its own venue for a suit cannot later remove an action under 28 U.S.C. §1441(a). The parties filed an agreed motion to remand on August 21, 2017, which was granted by the Court. [Exhibits 8 and 9; App. 047 to 050].
Once the fraudulent transfer action was remanded to the 43rd Judicial District Court in Parker County and a hearing was set on the [Gilberts'] summary judgment motion, on September 14, 2017, Edgefield asked to transfer the case it filed in the 43rd Judicial District Court of Parker County to the 4151 Judicial District Court of Parker County. [Exhibit 10; App. 051 to 063]. The transfer request was denied. [Exhibit 11; App. 064]. Then, on September 18, 2017, Edgefield non-suited its claims in the Fraudulent Transfer Action in an attempt to get the 43rd Judicial District Court to dismiss the entire action, including [the Gilberts'] counterclaims. [Exhibit 12; App. 065 to 066]. That request was denied. [Exhibits 13 and 14; App. 067 to 069]. Finally, on September 28, 2017, the 43rd Judicial District Court of Parker County held a hearing on the [Gilberts'] summary judgment request, granting the motion on October 28, 2017 [Exhibit 15; App. 070 to 071], and entering a final judgment for the [Gilberts] on November 2, 2017. [Exhibit 16; App. 072 to 073].
As discussed below, Edgefield served a notice of subpoena on Mrs. Gilbert the same day as the hearing on the summary judgment motion.
....
In another attempt to collect Judgment One, on May 19, 2017, Edgefield filed a motion in the 4151 Judicial District Court of Parker County, Case No. CV-10-0929, to inspect the [Gilberts'] home in Aledo and to videotape the inspection, including the opening, videotaping and inventorying of all drawers and closets. [Exhibit 17; App. 074 to 075]. On June 22, 2017, Edgefield amended its inspection request. [Exhibit 18; App. 076 to 078]. The [Gilberts] responded and sought protection from that request on June 6, 2017. [Exhibit 19; App. 079 to 082]. By July 28, 2017, the parties negotiated a resolution by agreeing to less onerous terms for inspection and videotaping that would have more respect for the [Gilberts'] privacy. [Exhibit 20; App. 083 to 086]. After causing the [Gilberts] to incur significant expense and after creating a stressful situation for the [Gilberts], Edgefield never bothered to do the inspection. The only rational conclusion to draw from this is that Edgefield had no real interest in inspecting the [Gilberts'] residence and pursued the inspection solely as a means of harassing the [Gilberts], and in particular Mrs. Gilbert.
....
Aside from the home inspection request discussed above, Edgefield (and its predecessor, Regions Bank) have done extensive post-judgment discovery of Mr. Gilbert and related entities in the 415th Judicial District Court of Parker County, Texas in Case No. 10-0929.
On February 2, 2011, Mr. Gilbert responded to requests for production and interrogatories served on him by Regions Bank, answering 38 interrogatories about his income and assets and providing documents. [Exhibit 21; App. 087 to 107].
In the same Parker County case, on April 25, 2016, Edgefield served eighty-four (84) interrogatories on Mr. Gilbert about his income and assets, which he answered on May 23, 2016 . [Exhibit 22; App. 108 to 131].
In the same Parker County case, on July 12, 2016, Edgefield sent a notice of subpoena to Ray & Associates, PLLC (Mr. Gilbert's counsel and accountant) seeking seventy- six (76) document requests about Mr. Gilbert's assets, which Ray & Associates responded to on August 9, 2016. [Exhibit 23; App. 132 to 138].
In the same Parker County case, on September 29, 2016, Edgefield sent a notice of subpoena to third-party Morgan Stanley Smith Barney, LLC seeking eleven (11) categories of documents related to accounts in the name of Mr. Gilbert. [Exhibit 24; App. 139 to 157].
In the same Parker County case, on May 19, 2017, Edgefield sent a second post-judgment request for production to Mr. Gilbert requesting ten (10) categories of information about his Pension Plan, which Mr. ...

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