United States District Court, D. South Dakota, Southern Division
LARSON MANUFACTURING COMPANY OF SOUTH DAKOTA, INC., SUPERIOR HOMES, LLC, Plaintiffs,
v.
WESTERN SHOWCASE HOMES, INC., AMERICAN MODULAR HOUSING GROUP, LLC, AMERICAN MODULAR HOUSING GROUP, INC., PAUL THOMAS, Defendants.
MEMORANDUM OPINION AND ORDER DENYING MOTION TO QUASH
SUBPOENAS, OR FOR PROTECTIVE ORDER, DOCKET NO. 86
VERONICA L. DUFFY, UNITED STATES MAGISTRATE JUDGE
INTRODUCTION
This
matter is before the court on the basis of diversity
jurisdiction, 28 U.S.C. § 1332, after defendants removed
the matter from South Dakota state court. See Docket
No. 1, 1-1. The parties have consented to this magistrate
judge handling their case pursuant to 28 U.S.C. §
636(c). Now pending is Salvatore Torresco, Laura Riffel, and
Guardant Investment's (“the movants' ”)
motion to quash subpoenas or for a protective order.
See Docket No. 86. Plaintiffs oppose the motion.
See Docket No. 95.
FACTS
A.
Background Facts and Claims
The
court states the following facts from plaintiffs' second
amended complaint in order to evaluate movants' pending
motion. Plaintiff Larson Manufacturing Company of South
Dakota, Inc. (Larson) is the parent company of plaintiff
Superior Homes, LLC (Superior). See Docket No. 58 at
p. 1. Both are South Dakota business entities. Id.
Superior is in the business of manufacturing and selling
modular homes. Id. at p. 2.
Defendant
Western Showcase Homes, Inc. ("Western") is a
Nevada corporation in the business of purchasing, reselling,
and financing modular homes. Id. at p. 2. Defendant
Paul Thomas, a Nevada resident, is the sole member of
American Modular Housing Group, LLC (AMHG, LLC), a Nevada
company in the business of buying and reselling modular
homes. Id. American Modular Housing Group, Inc.
(AMHG, Inc.), is a Canadian corporation with its principal
place of business in Nevada that also buys and resells
modular homes. Id. Thomas is the principal agent and
owner of both AMHG entities. Id.
The
defendant entities purchased modular homes from Superior and
then re-sold those homes to customers, sometimes arranging
for delivery, set and completion of the home at the
customer's location. Id. at pp. 2-3. Larson and
Superior extended credit to the defendant entities for these
purchases; AMHG would then repay the loans when its customer
paid the defendant entities. Id. at p. 3.
The
second amended complaint recites that defendant entities
placed orders for fourteen modular homes with plaintiffs.
Plaintiffs constructed the homes. Of the homes that were
delivered to defendants, full payment was never made even
though the complaint alleges the ultimate customers who
received these homes paid defendants. Other modular homes
ordered by defendants were custom-built and never delivered
because defendants never paid for the homes. As to the homes
plaintiffs retain possession of, plaintiffs allege the custom
nature of the homes makes resale of the homes at a reasonable
value impracticable.
In
addition, Larson entered into a loan agreement with Western
which was guaranteed by AMHG, Inc. This loan agreement
ultimately encompassed $14 million in funds. Larson alleges
that Western defaulted on the loan and AMHG, Inc. refused to
pay pursuant to its guarantee. For all these matters,
plaintiffs assert three counts of breach of contract, two
counts of fraud, two counts of conversion, one count each of
debt and guarantee, and one count of piercing the corporate
veil.[1] Plaintiffs also allege defendant Thomas
converted money which was received from third parties and
intended for plaintiffs, but was instead used by Mr. Thomas
for his own personal use. See Docket No. 58 at
¶¶ 15, 20, 49- 51.
In
their answer to the second amended complaint, defendants
generally deny nearly all of plaintiffs' allegations.
See Docket No. 62. Defendants Western Showcase,
Inc., and American Modular Housing Group, Inc., assert five
counterclaims against Larson and Superior. Docket No. 57.
Those counterclaims include breach of contract (failure to
pay rebates, failure to repay personal loans from Thomas and
failure to provide future promised business); unjust
enrichment (rebates, warranty and service fees); tortious
interference with business expectancy (Aspen Links Country
Club and Aspen Village Properties); breach of contract
(manufacturing defects in modular homes); and fraud and
deceit (fraudulent inducement to sign a mortgage in
connection with Aspen Village and McKenzie Lane, assignment
of mortgage interest in Moose Ridge, fraudulent building
practices). See Docket No. 57 at pp. 7-9.
Defendants/counterclaim plaintiffs Western Showcase, Inc. and
AMHG, Inc. seek compensatory and punitive damages on their
counterclaims, pre- and post-judgment interest,
attorney's fees, and other remedies. Id. at 9.
The
dates of the business transactions alleged by plaintiffs in
their second amended complaint go back as far as April, 2012,
and extend into the year 2016. See Docket No. 58.
B.
Subpoenas Subject To The Motion to Quash
Counsel
for movants/defendants submitted a declaration (Docket No.
90) attaching copies of the subpoenas served by the
plaintiffs which are the subject of the motion to quash. They
are as follows:
(1) a subpoena to produce documents, information or objects
dated May 17, 2018, served upon Salvatore Torresco, Jr.
(Docket 90-4);
(2) a subpoena to produce documents, information or objects
dated May 17, 2018, served upon Laura Riffel, individually
(Docket 90-5);
(3) a subpoena to produce documents, information or objects
dated May 17, 2018, served upon Guardant Investments, Inc.,
Attn: Laura Riffel. (Docket 90-6).
The
subpoenas seek the following information:
• Correspondence, notes, documents, and memorandums,
including but not limited to, emails, letters, text messages,
checks, deposit slips, receipts, invoices and bank
statements, relating to any and all payments and transfers of
funds from Western Showcase Homes, Inc.
(including any of its officers, directors, employees, agents
and subsidiaries) to you (including any
business entities you operate, if any) from January 1, 2012
to the present;
• Correspondence, notes, documents, and memorandums,
including but not limited to, emails, letters, text messages,
checks, deposit slips, receipts, invoices and bank
statements, relating to any and all payments and transfers of
funds from you (including any business
entities you operate under, if any) to Western
Showcase Homes, Inc. (including any of its officers,
directors, employees, agents and subsidiaries) from January
1, 2012 to the present;
Id. For each of the of the movants (Salvatore
Torresco, Laura Riffel individually, and Laura Riffel on
behalf of Guardant Investments) the request as it is worded
above is also made as to items going to and coming from:
American Modular Housing Group, Inc.; American Modular
Housing Group, LLC; and Paul Thomas. Id.
The
subpoenas also request the following:
• bank statements, processed checks, deposit slips, and
receipts for each and every account into or from which any of
the funds involved in the transactions identified [above]
were deposited or withdrawn, from January 1, 2012, to
present;
• Bank statements, processed checks, deposit slips, and
receipts for each and every account with which you (including
any business entities you operate under, if any) transacted
business with Western Showcase Homes, Inc., American Modular
Housing Group, Inc., American Modular Housing Group, LLC,
and/or Paul Thomas, from January 1, 2012, to the present.
Counsel
for defendants, appearing on behalf of the movants (Salvatore
Torresco, Laura Riffel individually, and Laura Riffel on
behalf of Guardant Investments) moved to quash these
subpoenas on June 4, 2018. Docket 86. The movants, through
counsel, argue the subpoenas should be quashed because they
are duplicative and because they are overbroad and
burdensome.
The
plaintiffs counter that Mr. Torresco and Ms. Riffel are both
business associates of the named defendants-particularly Mr.
Thomas-and that Mr. Torresco and Ms. Riffel administered
funds and accounts for the defendants. The plaintiffs further
argue the bank records provided by the discovery so far
reveal “hundreds of thousands of dollars” worth
of unexplained payments to Salvatore Torresco. The plaintiffs
cite the following facts/evidence in support of their
argument that the newly issued ...