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SPV-LS, LLC v. Transamerica Life Insurance Co.

United States District Court, D. South Dakota, Southern Division

August 11, 2016

SPV-LS, LLC, Plaintiff,
v.
TRANSAMERICA LIFE INSURANCE COMPANY, Defendant and Third-Party Plaintiff,
v.
NACHMAN BERGMAN, as Trustee of The N Bergman Insurance Trust dated December 18, 2006; MALKA SILBERMAN, as Successor Trustee of The N Bergman Insurance Trust dated December 18, 2006; LIFE TRADING TRUST, dated August 8, 2007; T-LEG, LLC, a/k/a TLEG LLC; FINANCIAL LIFE SERVICES, LLC; SPV II LLC; and THE REPRESENTATIVE OF THE ESTATE OF NANCY BERGMAN, Third-Party Defendants.

          ORDER ON MOTION TO COMPEL BRIAN DONOHOE TO COMPLY WITH SUBPOENA DOCKET NO. 252

          VERONICA L. DUFFY, United States Magistrate Judge.

         INTRODUCTION

         This diversity matter is pending before the court on the complaint of plaintiff SPV-LS, LLC. See Docket No. 1. Plaintiff and third-party defendants Life Trading Trust, Financial Services, LLC, and SPV II LLC (collectively the Krasnerman Entities), served on Sioux Falls, South Dakota, attorney Brian Donahoe a subpoena duces tecum seeking the production of “all retainer agreements, invoices, proof of payments, and non-privileged client communications with respect to your representation of the N. Bergman Insurance Trust, Nachman Bergman, Malka Silberman, and/or the Estate of Nancy Bergman in any proceeding involving life insurance on the life of Nancy Bergman.” See Docket No. 254-1 at p. 3. Mr. Donahoe objected to the subpoena. Docket No. 254-6 at pp. 5-7. The Krasnerman Entities then filed a motion to compel Mr. Donahoe to comply with the subpoena. See Docket No. 252.

         The district court, the Honorable Lawrence L. Piersol, referred the motion to this magistrate judge for decision. See Docket No. 276. This court has authority to rule on the motions pursuant to the October 16, 2014, standing order of the Honorable Karen E. Schreier, district judge, and 28 U.S.C. § 636(b)(1)(A).

         FACTS

         A thumbnail sketch of the facts of this action, recited only to provide context for discussion of the discovery disputes, is as follows. Nancy Bergman, a school teacher of modest means, obtained a $10 million life insurance policy on herself from defendant Transamerica Life Insurance Company and placed that policy into the N. Bergman Insurance Trust dated December 18, 2006. Nancy’s grandson, third party defendant Nachman Bergman, was the beneficiary and trustee of the trust. Allegedly, Malka Silberman took over as trustee of the trust in 2008, though that is a disputed fact. Transamerica claims it was never notified of the change in the identity of the trustee until after Nancy’s death in 2014.

         Nancy also apparently obtained a $5 million insurance policy on her life from another insurer, Sun Life Assurance Company, and also placed that policy into a trust. That policy is not part of this District of South Dakota litigation. Separate litigation concerning the Sun Life policy is pending in the District of New Jersey. See Sun Life Assurance Co. of Canada v. Wells Fargo Bank, N.A. as Securities Intermediary, 3:14-CV-05789-PGS-LHG (D.N.J.).

         Regarding the Transamerica policy at issue in this litigation, in 2009, Nachman is alleged to have sold the insurance policy from the N. Bergman trust to FLS. After the sale, FLS discovered that the premiums on Nancy’s life insurance policy had not been paid. It also discovered that Nachman’s representations that Nancy was on death’s doorstep were inaccurate. Nachman, for his part, denies that he ever entered into these transactions with FLS, suggesting an imposter posing as Nachman dealt with FLS. He claims someone forged his signature to the pertinent sale documents involving FLS.

         FLS brought suit against the trust in federal district court for the Eastern District of New York. Default was entered against the trust because it never answered. Thereafter, an auction of Nancy’s life insurance policy was held in 2012. FLS bought the policy at the auction for $1.19 million. FLS then transferred the policy to the plaintiff herein, SPV-LS, LLC.

         On April 6, 2014, Nancy died. Thereafter, both SPV-LS, LLC and Malka Silberman on behalf of the trust, submitted claims to Transamerica for the policy proceeds. SPV-LS, LLC brought this suit against Transamerica in this court, alleging a claim of breach of contract. Transamerica interpleaded the policy proceeds and sued Nachman, Ms. Silberman, Nancy’s estate, and other third-party defendants, alleging that Transamerica was unable to determine which of the claimants was legitimately entitled to the proceeds of the policy.

         A series of lawyers in New York have allegedly represented the trust, though Ms. Silberman now claims she never hired these New York lawyers. In this litigation, a succession of lawyers have made appearances on behalf of Ms. Silberman. First attorneys Pamela Reiter and Ronald Parsons appeared. They withdrew after thirteen months. Then after a month’s lapse, Matthew Dorothy appeared. Mr. Dorothy withdrew less than five months later. Andrew Citron of New York purported to represent Ms. Silberman and communicated with counsel for other parties in that capacity (see Docket No. 198), but Mr. Citron never formally entered a notice of appearance in this case. On April 8, 2016, Aaron Twersky of New York City and James Moore, as local counsel, noticed their appearance on behalf of Ms. Silberman. The estate of Nancy Bergman has been represented from September 18, 2015, until the present by Mr. Donahoe and Mr. Gerald Kroll.

         A number of subpoenas duces tecum were issued to lawyers in connection with the litigation surrounding the life insurance policies on Nancy Bergman. In the New Jersey litigation, the attorneys for Sun Life served Sioux Falls attorney Pamela Reiter (fka Bollweg) with a subpoena duces tecum requesting documents relating to any life insurance policy on Nancy Bergman’s life. See Sun Life Assurance Co. of Canada v. Wells Fargo Bank N.A. as Securities Intermediary, 4:15-mc-00116-KES, Docket No. 1-1 (D.S.D.). Ms. Reiter moved to quash the subpoena and for a protective order, asserting the documents requested were protected by the attorney-client privilege or the work product doctrine. Id. at Docket No. 1. Judge Schreier denied the motion to quash and denied the request for a protective order, holding that Ms. Reiter had not demonstrated that the documents were protected.[1] Id. at Docket No. 7.

         In this litigation, the Krasnerman Entities served subpoenas duces tecum on three New York attorneys, Nelson Bloom, Stuart Davis, and Andrew Citron, who either had previously represented Malka Silberman or the N. Bergman Trust, or who were alleged to have done so. See In re: Rule 45 Subpoenas Issued to Nelson Bloom, Stuart Davis, and Andrew Citron, 1:16-mc-00156-P1 (S.D.N.Y.). Those attorneys resisted the subpoenas on grounds of attorney-client privilege and work product doctrine. The Krasnerman Entities moved to compel compliance with the subpoenas in federal district court for the Southern District of New York.[2] The Honorable Katherine B. Forrest, United States District Judge, found the documents requested were not protected and ordered the three attorneys to comply with the subpoenas. Id. at Docket No. 20.

         The Krasnerman Entities also served Sioux Falls attorneys Matthew Dorothy and Alan Peterson with subpoenas duces tecum. Those two attorneys voluntarily complied with the subpoenas, asserting attorney-client privilege and work product doctrine arguments as to only a portion of the documents requested in the subpoenas. The Krasnerman Entities filed motions to compel further compliance with those subpoenas. See Docket Nos. 258 & 261. The court ...


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