Court Opinion

ID: 4566954
Source: CourtListenerOpinion
Date Created: 2020-09-18 18:00:51.544812+00
Date Added: 2024-06-11T12:53:49.511104
License: Public Domain

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

 

 

 

JOHN L. RAY,
| Plaintiff, ;

Vv. Case No. 19-cv-2841-RCL
CLH NEW YORK AVE, LLC, et al.,
Defendants.
)
)
CLH NEW YORK AVE, LLC, et al., )
Counterclaim Plaintiffs,

v. Case No. 19-cv-2841-RCL
JOHN L. RAY,
Counterclaim Defendant. :

 

MEMORANDUM OPINION
This matter comes before the Court on the following motions: (1) Defendants’ Motion for
Leave to File an Amended Answer, Affirmative Defenses, and First Amended Counterclaim [ECF
No. 42]; (2) Plaintiff's Motion for Leave to file a Third Amended Complaint! [ECF Nos. 45 &
49]; (3) Plaintiff's Emergency Motion for an Extension of Time to Complete Discovery [ECF No.

47]; (4) Plaintiffs Motion to Compel and for a Status Hearing [ECF No. 50]; (5) Plaintiff's

 

' Plaintiff first moved for leave to file a Second Amended Complaint on July 7, 2020. ECF No. 45.
Approximately two weeks later, plaintiff filed a Notice “substitut[ing]” Exhibit 1 of his Motion for Leave
to File a Second Amended Complaint (which was the Second Amended Complaint) with a revised
complaint that added a count for breach of partnership loyalty. ECF No. 49. Because plaintiff’s Notice
[ECF No. 49] added a new claim, the Court will construe ECF Nos. 45 & 49 together as a Motion for
Leave to File a Third Amended Complaint.
Supplemental Motion to Compel [ECF No. 52]; (6) Defendants’ Motion for Summary Judgment
[ECF No. 59]; and (7) Defendants’ Motion to Quash Plaintiff's Subpoena to Paul H. Wilner, CPA
[ECF No. 60].

After considering the parties’ motions, supplemental filings, oppositions, and replies, the
Court will grant both parties leave to amend their pleadings. The Court will also order defendants
to produce (1) the Operating Agreement for CLH New York Ave, LLC and any corporate minutes
and electronic correspondence related thereto, and (2) redacted versions of CLH New York Ave,
LLC’s state and federal tax returns from 2014 and 2015. As plaintiff has withdrawn his subpoena
to Paul H. Wilner, defendants’ Motion to Quash the Subpoena [ECF No. 60] will be denied as
moot. Finally, because the Court will authorize additional discovery, defendants’ Motion for
Summary Judgment [ECF No. 59] will be denied as premature.

BACKGROUND
A. Factual Allegations”

The events leading up to this suit began in early 2012, when plaintiff John L. Ray allegedly
brought a lucrative real estate opportunity to defendant Wilton Lash’s attention. ECF No. 49-1 4
9-15. At the time, the property located at 1345 New York Ave, NE in Washington, D.C. (“the
Property”) collected $700,000 annually in rent from the D.C. Public School System, which used
the property to park its unused school buses. Jd. at J 10. After learning that the Property was on
the market, plaintiff conducted due diligence to determine whether the Property could be used as

a bus depot for tour buses. /d. at § 11. He learned that it could. Jd. at § 13.

 

* The following facts are taken from plaintiff's Third Amended Complaint [ECF No. 49-1]. As the Court
will grant plaintiff leave to file the document at ECF No. 49-1 as his Third Amended Complaint, see infra
Part I.B., the Third Amended Complaint is now the operative complaint.

L
Plaintiff then brought the opportunity to defendant Lash—a financially capable
businessperson and acquaintance of plaintiff's—and explained that the Property could be used as
a bus depot for tour buses. ECF No. 49-1 9 14. When the two visited the Property in February
2012, plaintiff claims that Lash offered him a “sweat equity” compensation of 10% “equity interest
in the property and any improvements thereon” for conducting due diligence and bringing Lash
the opportunity. Jd. at { 18.

After having several phone conversations about the Property, plaintiff and Lash met for
dinner in March 2012 to finalize their agreement. ECF No. 49-1 § 19. At dinner, plaintiff claims
that Lash confirmed that plaintiff would receive 10% “equity interest in the property and any
improvements thereon” subject to the D.C. Public School System maintaining its lease for five
years. Id. at 79 16-18. Plaintiff offered to memorialize the deal in writing, but Lash said he first
needed to speak with “someone.” Jd. at J 19.

That someone was defendant Richard Cohen. ECF No. 49-1 4 19. Around the time that
plaintiff and Lash met for dinner to finalize the agreement, Lash had been communicating with
Cohen about purchasing the Property. Jd. When plaintiff called Cohen to discuss his agreement
with Lash, Cohen responded that he was “100% on board.” Jd. at §] 22. Along with a third partner,
Donnie Hinton, Lash and Cohen then formed CLH New York Ave, LLC (“CLH”) for the purpose
of purchasing the Property. Jd. at § 23. In March 2013, CLH purchased the Property. Jd. at 24.

From the time the parties allegedly made the oral agreement in 2012 until plaintiff filed
this suit in 2019, plaintiff repeatedly asked defendants to memorialize the parties’ agreement in
writing. ECF No. 49-1 §§ 27-56. Though defendants twice sent plaintiff a proposed agreement,
once in 2015 and again in 2019, plaintiff rejected both documents as wholly inconsistent with the

terms of their original deal. Jd. at § 39-41, 56. No document was ever signed. See id.
Though the parties never signed a written agreement, CLH at one point advanced plaintiff
$90,000 on his share in the Property. ECF No. 49-1 § 63. And in 2016, CLH loaned plaintiff
$30,000, which was to be repaid upon the sale of the Property or by July 2018, whichever happened
first. Id | |

B. Procedural History

Seven years after the parties allegedly entered into an oral agreement, and with no signed
document in hand, plaintiff sued CLH, Lash, Cohen, and Hinton in the Superior Court of the
District of Columbia to enforce the deal. ECF No. 1-1. The Complaint brought counts for breach
of contract, fraud, unjust enrichment, and quantum meruit. /d. Plaintiff also filed a lis pendens on
the Property with the District of Columbia Recorder of Deeds. See ECF No. 9. at 13.

After removing the case to federal court based on diversity jurisdiction, ECF No. 1,
defendants answered the Complaint by denying that they ever agreed to give plaintiff a 10% equity
share in the Property. ECF No. 9 at 3. Defendants also counterclaimed, seeking a release of the /is
pendens. ECF No. 9 at 12-17. Both parties moved to dismiss the claims against them, ECF Nos.
4 & 19, and the Court denied both motions, ECF Nos. 10 & 34. In December 2019, the Court
issued a scheduling order setting the close of fact discovery for June 12, 2020. ECF No. 21.

Discovery has not gone smoothly. On June 29, 2020, the Court granted a consent motion
to extend the deadline for fact discovery to July 24, 2020. ECF No. 41. Shortly thereafter, both
parties moved for leave to amend their pleadings. First, on July 4, 2020, defendants sought to add
new information about the nature of the agreement to their Counterclaim. See ECF No. 42-3 at 14—
17. Rather than denying that they made an agreement with plaintiff, as defendants did in their first
Answer and Counterclaim, defendants’ Amended Counterclaim alleged that in 2012, Lash and

Cohen “were willing to provide [plaintiff] a 10% profits interest in the Property if [plaintiff]
delivered on [his] promises” to (1) secure legislation that would require tour buses to park at a
depot on the Property, (2) ensure that a street-car stop would be added at the Property, (3) get D.C.
to allow for additional floor-to-area ratio for the Property, and (4) secure “other value enhancing
aspects for the Property.” Jd. at 15. |

Plaintiff also sought leave to file a Second Amended Complaint with four new claims:
breach of the covenant of good faith and fair dealing, common law fraud, civil conspiracy, and
promissory estoppel. Compare ECF No. 6-1, with ECF No. 49-1. Plaintiff then filed a Notice that
“substitute[d]” Exhibit 1 of his Motion for Leave to File a Second Amended Complaint (which
was the Second Amended Complaint) with a Third Amended Complaint that added a count for
breach of partnership loyalty. ECF Nos. 49 & 49-1.

On July 20, 2020, four days before the scheduled close of discovery, plaintiff filed an
Emergency Motion for an Extension of Time to Complete Discovery. ECF No. 47. In his Motion,
plaintiff claimed that defendants’ “newly minted” “profits-interest theory” in their Amended
Counterclaim prejudiced him by “partially reshap[ing]” discovery. Jd. at 7. Plaintiff also claimed
that he was prejudiced by defendants’ late production of a document supporting their profits-
interest theory (CLH0001703) on July 7, 2020. Id. at 5. In light of defendants’ actions, plaintiff
asked the Court to enlarge discovery by twenty-one days. /d. at 16.

The next day, plaintiff filed a Motion to Compel, explaining that although the parties met
and conferred on July 17, 2020, defendants were unwilling to comply with his requests. ECF No.
50 at 2. Plaintiff's Motion to Compel requests answers or documents in response to the following:
(1) Interrogatory 4, (2) Request for Production of Documents Nos. 2, 5, 8, 17, 20, and (3) Request

for Admission Nos. 7 & 16(b)-(c). ECF No. 50 at 6. Ten days later, plaintiff filed a Supplemental
Motion to Compel, ECF No. 52, where he added Request for Production of Documents No. 9 to
that list.

Defendants opposed plaintiff's Motions to Compel, arguing that plaintiff's own dilatory
tactics prevented him from completing discovery on time. See generally ECF No. 53. Defendants
also moved for summary judgment, ECF No. 59, and filed a Motion to Quash Plaintiff's Subpoena
to Paul H. Wilner, defendants’ accountant. ECF No. 60. Plaintiff later withdrew the subpoena. See
ECF No. 65 at 10.

Each of these motions is now ripe and ready for the Court to consider.

DISCUSSION
I. The Court Will Grant Both Parties’ Motions to Amend their Pleadings
A. Defendants’ Motion

On July 4, 2020, defendants moved for leave to file an Amended Answer, Affirmative
Defenses, and First Amended Counterclaim. ECF No. 42. Plaintiff did not oppose the Motion.
Although defendants’ Amended Counterclaim introduces a new theory of the parties’ agreement
less than one month before the close of discovery, the Court finds that allowing this amendment
would not be unjust. See Fed. R. Civ. P. 15(a)(2). To even the playing field, and as explained
below, the Court will also grant plaintiff's Motion to File a Third Amended Complaint, ECF Nos.
45 & 49. Additionally, the Court will extend the deadline for fact discovery, which will give
plaintiff ample time to obtain information relevant to defendants’ new theory of the case.

B. Plaintiffs Motion

Three days after defendants moved to amend their pleadings, plaintiff also moved for leave

to file a Second Amended Complaint. ECF No. 45. He sought to add claims for breach of the

covenant of good faith and fair dealing, common law fraud, civil conspiracy, and promissory
estoppel. Compare ECF No. 6-1, with ECF No. 49-1. Plaintiff later supplemented his proposed
Second Amended Complaint with a Notice that added a claim for breach of partnership loyalty to
his Second Amended Complaint. See ECF Nos. 49 & 49-1.

Defendants opposed plaintiff’s Motion, arguing that the Court should not allow plaintiff to
add new claims at the eleventh hour before the close of fact discovery. ECF No. 57. Yet defendants
did just this when they moved to amend their Counterclaim three days earlier. See ECF No. 42.
Thus, in the interest of justice, the Court will grant plaintiff leave to file the document at ECF No.
49-1 as his Third Amended Complaint. Accordingly, the Court will deny plaintiff's Motion for
Leave to File a Second Amended Complaint [ECF No. 45] as moot.

II. . The Court Will Deny Defendants’ Motion to Quash Plaintiff's Subpoena to
Defendants’ Accountant

On July 28, 2020, plaintiff served a subpoena for documents on third-party Paul H. Wilner,
the accountant who provided tax services and advice to defendants related to the Property. See
ECF Nos. 60 & 60-1. Defendants moved to quash the subpoena as untimely. Jd. In plaintiffs
opposition to defendants’ Motion to Quash, plaintiff conceded that the Motion was untimely and
withdrew it. ECF No. 65 at 10. Instead, plaintiff asks the Court to allow him to take an “unrestricted
deposition” of Mr. Wilner. Jd.

Because plaintiff withdrew the subpoena, the Court will deny defendants’ Motion to Quash
as moot. Should plaintiff wish to re-depose Mr. Wilner, he must serve a new subpoena that seeks
deposition testimony. As his initial subpoena sought only documents, the Court will not permit

plaintiff to bypass the ordinary procedure for this new discovery request. See ECF No. 60-3.
II. The Court Will Grant in Part and Deny in Part Plaintiff's Motion to Compel
A. Legal Standard

Under Federal Rule of Civil Procedure 26(b)(1), a party may “obtain discovery regarding
any nonprivilegéd matter that is relevant to any party’s claim or defense and proportional to the
needs of the case.” In the context of discovery, relevance is construed broadly. Food Lion, Inc. v.
United Food & Commercial Workers Intern. Union, AFL-CIO-CLC, et al., 103 F.3d 1007, 1012
(D.C. Cir. 1997). The Court may limit discovery, however, if the information sought is
unreasonably duplicative, privileged, or can be obtained from a more convenient and less
burdensome source. Fed. R. Civ. P. 26(b)(2)(C).

If a party does not respond to a proper discovery request—and tries but fails to resolve the
dispute without judicial intervention—the party seeking discovery can file a motion to compel.
Fed. R. Civ. P. 37(a)(1). When evaluating a motion to compel, courts consider the parties’ efforts
to resolve the dispute, the relevance of the information sought, and whether the information sought
is unreasonably duplicative or can be obtained from some other, more convenient source. Barnes
v. District of Columbia, 289 F.R.D. 1, 5-6 (D.D.C. 2012). The party seeking discovery bears the
burden of proving that a discovery response is inadequate. /d. at 6.

In his Motion to Compel and Supplemental Motion to Compel, plaintiff lists nine discovery
requests that he believes defendants have not adequately answered. ECF Nos. 50 at 6 & 52 at 4.
The Court will address each in turn.

B. Interrogatory No. 4

Plaintiff first requests an answer to Interrogatory No. 4, which reads: “Identify any and all

formal and/or informal CLH meetings; conference calls, email exchanges and/or other forms of

communication that took place pertaining to, involving, referencing or discussing plaintiff's claims
herein.” ECF No. 50 at 6. Defendants objected to this Interrogatory as unduly burdensome, vague,
and requesting information protected by the attorney-client privilege. ECF No. 50-1 at 18. Plaintiff
then clarified the request as seeking to identify:
[A]ny and all meetings in which [plaintiff's] claimed equity was discussed prior to this
lawsuit’s filing, which means any face to face meetings and/or telephonic conference calls

of CLH principals, managers, members, or consultants which relate to the question of
CLH’s payments, advances, or loans to [plaintiff] in any respect.

ECF No. 50-1 at 84.

Defendants responded that “they are unaware of any CLH meetings pertaining to,
involving, referencing or discussing plaintiff's claims herein, as none were required.” ECF No.
50-1 at 19. Accordingly, defendants explained, “there are no minutes which were taken and
feennded in connection with any CLH meeting.” Jd.

As the party compelling discovery, plaintiff bears the burden of showing that defendants’
response is inadequate. Barnes, 289 F.R.D. at 6. In his Motion to Compel, plaintiff simply lists
Interrogatory No. 4 as not being fully answered yet provides no reason for the Court to believe
defendants are withholding relevant, non-privileged information. See ECF No. 50 at 6. Without
more, plaintiff's conclusory accusation is insufficient to support his Motion. The Court will thus
deny plaintiff's Motion to Compel with respect to Interrogatory No. 4.

C. Request for Production No. 2

Plaintiff also seeks to compel defendants to produce a “[c]opy of Defendants’ Operating
Agreement, and any and all corporate minutes and electronic correspondence related thereto.” ECF
No. 50 at 6. In response, defendants objected to the request as vague and ambiguous, overly broad,
and irrelevant. ECF No. 53-17 at 4. After plaintiff's counsel again requested this information,

defendants further explained that the request is irrelevant to plaintiffs suit because plaintiff does
not claim to have an ownership interest in CLH. ECF No. 53-18 at 6. Defendants thus refused to
produce any documents in response. See ECF No. 52-1 at 17.

Indeed, at that time, plaintiff did not claim to have an ownership interest in CLH. See ECF
No. 6. But when plaintiff moved for leave to file his Third Amended Complaint, he added an
allegation that he “contributed significant time and services to the partnership with Lash, Cohen,
and CLH with the intention of holding an interest in the partnership entity that would own the
Property.” ECF No. 49-1 at 16 (emphasis added). To be sure, plaintiff also repeatedly alleges that
defendants agreed to give him a 10% “equity interest in the property plus any improvements
thereon.” See, e.g., ECF No. 49-1 at 4, 13 & 14 (emphasis added).

Eventually, plaintiff will have to decide which theory. of the case to pursue. But at the
discovery stage, the allegation that he contributed his services to defendants with the understanding
that he would hold an “interest in the partnership entity that would own the Property” makes CLH’s
Operating Agreement relevant to plaintiff’s claims.? Thus, because CLH’s Operating Agreement
is relevant to Plaintiffs claims, and because the parties met and conferred before plaintiff filed his
Motion to Compel, ECF No. 50 at 2, the Court will grant plaintiff's Motion to Compel CLH’s
Operating Agreement and any corporate minutes and electronic correspondence related thereto
(Request for Production No. 2).

D. Request for Production No. 8

Next, plaintiff requests “[c]opies of any and all emails between Mr. Lash and Mr. Cohen

related to the purchase of the property, the formation of the LLC and Mr. Lash’s ownership interest .

in the LLC.” ECF No. 50 at 6. Plaintiff later narrowed this request to include only those emails

 

3 Although plaintiff’s Request for Production No. 2 does not define the term “Defendant,” plaintiffs
counsel later clarified in a letter to defendants’ counsel that the request asks for defendant CLH’s
Operating Agreement. ECF No. 50-1.

10
exchanged between February and April 2012. Jd. After objecting to this request as vague, not
proportional to the needs of the case, and irrelevant, defendants refused to produce any documents.
ECF No. 53-17 at 7. Plaintiff's counsel again asked for documents responding to Request for
Production No. 8, ECF No. 50-1 at 96, and defendants again objected barring further clarification.
ECF No. 53-18 at 7.

The Court will deny plaintiff's Motion to Compel with respect to Request for Production
No. 8, as this request is largely duplicative of two other requests that defendants fully responded
to: Requests for Production Nos. 1 and 4. First, Request for Production No. 1 seeks:

Copies of any and all documents, corporate records, tax returns, and correspondence in

your possession related to, pertaining to, referencing, or discussing Plaintiff in any way

including but not limited to his involvement with the identification, vetting, survey,

proposals, contracting, pitching, or presenting any other aspects of the acquisition and/or
development of the Property. ,

ECF No. 53-7 at 8.

Defendants turned over upwards of one hundred seventy emails in response to Request for
Production No. 1, ECF No. 52-1 at 12-16, and plaintiff does not claim that defendants’ response
was inadequate.

Similarly, Request for Production No. 4 asks for “[c]opies of any and all email and text
correspondence, including correspondence exchanged by any LLC member with any other LLC
member which expressly references the plaintiffs name or proposed compensation.” ECF No. 53-
7 at 9. Defendants produced more than one hundred thirty emails in response to this request. See
ECF No. 52-1 at 17-21. Again, plaintiff does not argue that this response was inadequate.

The relevant information sought in Request for Production No. 8 has thus already been
produced. Though relevance in the context of discovery is broad, Abt v. Jewell, 303 F.R.D. 166,
168 (D.D.C. 2014), the Court finds that any emails between defendants Lash and Cohen relating

to the purchase of the property, the formation of the LLC, or Lash’s ownership interest that do not

11
reference, discuss, or pertain to plaintiff in any way are not relevant to plaintiff's case. The Court
will thus deny plaintiff's Motion to Compel with respect to Request for Production No. 8.

E. Request for Production No. 17

 

Plaintiff also seeks to compel defendants to produce “[a]ll records, including electronic
calendars, cellphone records, telephone logs, corporate minutes, emails, and notes of telephone
calls or conversations about, or with Plaintiff related to (1) CLH’s purchase of the property, and
(2) any proposed compensation arrangement by CLH to [Plaintiff].” ECF No. 50 at 6. Plaintiff
later narrowed his request for phone records to include only the cellphone records of defendants
Lash and Cohen from March to April 2012. Jd. Although defendants initially objected to the
request as overbroad and unduly burdensome, ECF No..53-17 at 11, they eventually produced
thirteen documents that they identified as responsive and non-privileged. ECF Nos. 53-17 at 11 &
52-1 at 34.

In plaintiff's Motion to Compel, plaintiff simply asserts that defendants did not adequately
respond to Request for Production No. 17. See ECF No. 50 at 6. Without more, plaintiffs
conclusory assertion that defendants must have more information to turn over is not enough to
support his Motion to Compel.

Furthermore, like plaintiff's Request for Production No. 8, Request No. 17 is unreasonably
duplicative of plaintiff's Request for Production Nos. 1 and 4. Defendants have already produced
all documents, corporate records, and correspondence “related to, pertaining to, referencing, or
discussing Plaintiff in any way,” as well as “[c]Jopies of any and all email... correspondence...
which explicitly references the Plaintiff's . . . proposed compensation.” ECF No. 52-1 at 12 & 17.
Any documents, corporate records, or correspondence that do not involve plaintiff in any way are

not relevant to his claims.

12
Finally, though Requests for Productions Nos. | and 4 did not ask for defendants’ phone
records, the Court finds that the information sought from defendants’ phone records can be (and
has been) discovered in a less burdensome, more convenient way. See Fed. R. Civ. P.
26(b)(2)(C)(i). In their depositions and in response to written discovery requests, defendants Lash
and Cohen admitted that they spoke on the phone in 2012 about the Property. ECF No. 53 at 16.
With these admissions, defendants’ phone records will simply confirm what plaintiff already
knows. Accordingly, the Court will deny plaintiff's Motion to Compel with respect to Request for
Production No. 17.

F. Request for Production No. 20

 

Next, plaintiff moves to compel defendants to produce “[a]ny and all documents related to
the sale of any previous member’s interest, including Mr. Lash; all correspondence and written
agreements related to that prior sale [t]hereto, and all corresponding related transaction
documents.” ECF No. 50 at 6. As the Court will grant plaintiff's Motion to Compel with respect
to CLH’s Operating Agreement and any relating correspondences (Request for Production No. 2),
it finds Request for Production No. 20 to be unreasonably duplicative. See Fed. R. Civ. P.
26(b)(2)(C)i). Additionally, all CLH documents referencing plaintiff were produced in response
to Request for Production Nos. 1 and 4. See ECF No. 52-1 at 12-16 & 17-21. The Court will thus
deny plaintiff's Motion to Compel with respect to Request for Production No. 20.

G. Request for Production No, 9

 

i. Information Requested & Objections
Plaintiff's Supplemental Motion to Compel requests “[c]opies of any and all
correspondence (including emails) or documents transmitted by you to your accountant in which

you referenced in any respect whatsoever Plaintiff's name and/or any proposed compensation to

13
him; this includes loans and advances for [Plaintiff].”” ECF No. 52 at 4. Defendants initially

objected to this response as “vague, ambiguous, and potentially seek[ing] discovery of privileged

information.” ECF No. 53-17. Later, on July 22, 2020, defendants asserted the accountant-client

privilege under Maryland law, provided a privilege and redaction log, and produced three

documents in response to the request. ECF Nos. 70 at 6 & 52-1 at 23; see Fed. R. Civ. P. 26(b)(5).
ii. Relevance |

Defendants urge the Court not to address the question of whether defendants properly
invoked the accountant-client privilege under Maryland law. ECF No. 70 at 5. Even if the
communications were not privileged, they argue, the documents plaintiff seeks from Mr. Wilner
are irrelevant and not proportional to the needs of the case. Id.; see ECF No. 60-1 at 8-10.

The Court disagrees. Plaintiff claims that defendants agreed to give hima 10% “equity
interest in the Property and any improvements thereon.” ECF No. 49-1 at 4. Accountant Wilner
was the official tax return preparer for defendants and provided tax services and advice to
defendants related to the Property. ECF No. 60-5. If defendants did in fact intend to give plaintiff
a 10% equity interest in the Property, they likely communicated this plan to Mr. Wilner while
discussing the tax implications of the acquisition. Thus, because the information plaintiff seeks in
Request for Production No. 9 is relevant and proportional to the needs of his case, the Court must
decide whether defendants properly invoked Maryland’s accountant-client privilege.

iii. Accountant-Client Privilege

Because defendants removed this matter to federal court from the Superior Court for the
District of Columbia, see ECF No. 1-1, this Court must step into the shoes of the D.C. court to
decide whether defendants properly invoked Maryland’s accountant-client privilege. Erie R. Co.

v. Tompkins, 304 U.S. 64, 78 (1938). That question requires a choice of law analysis: would the

14
D.C. court have applied D.C. or Maryland privilege law? See In re Sealed Case (Medical Records),
381 F.3d 1205, 1212 (D.C. Cir. 2004) (holding that state privilege law governs in diversity suits).
Since D.C. was the forum, its choice-of-law rules govern that analysis. See Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487, 496 (1941). | | |

Under D.C.’s choice-of-law rules, the Court must first decide whether a true conflict exists
between the substantive laws of D.C. and Maryland. Jn re APA Assessment Fee Litig., 766 F.3d
39, 51-52 (D.C. Cir. 2014). Doing so requires the Court to characterize the nature of the dispute.
See In re Estate of Delaney, 819 A.2d 968, 988 (D.C. 2003). Although plaintiff sued for breach of
contract, and although this suit involves real property, the crux of the dispute in plaintiff's Request
for Production. No. 9 is whether defendants may invoke the accountant-client privilege. Thus, the
Court must decide whether there is a true conflict between D.C. and Maryland law on the
accountant-client privilege.

The answer to this question is a clear “yes”: Maryland recognizes an accountant-client
privilege, but D.C. does not. See Md. Ann. Code § 9-110; Kuhn & Kogan, Chtd. v. Jeffrey C.
Mensh & Assocs., 77 F. Supp. 2d 52, 54 (D.D.C. 1999); see also D.C. Ann. Code § 14-307. The
District of Columbia Court of Appeals has yet to decide a conflicts-of-law question involving an
evidentiary privilege. However, when faced with conflicts in other areas of substantive law, D.C.
courts have consistently applied a modified governmental interest analysis. See, e.g., Pietrangelo
v. Wilmer Cutler Pickering Hale & Dorr, LLP, 68 A.3d 697, 714 (D.C. 2013). To determine which
state has the “most significant relationship” to the dispute, id, D.C. courts often draw from
principles in the Restatement (Second) of Conflicts. See District of Columbia v. Coleman, 667
A.2d 811, 816 (D.C. 1995) (conflict involving tort law); Washkoviak v. Student Loan Marketing

Ass’n, 900 A.2d 168, 180 (D.C. 2006) (conflict involving common law fraud).

15
Given this approach in analogous cases, the Court predicts that D.C. courts would likewise
apply a modified governmental interest analysis—informed by the Restatement (Second) of
Conflicts—to resolve a choice-of-law question involving an evidentiary privilege. Under
Restatement (Second) of Conflicts § 139(2): |

Evidence that is privileged under the local law of the state which has the most significant

relationship with the communication but which is not privileged under local law of the

forum will be admitted unless there is some special reason why the forum policy favoring
admission should not be given effect.

Our first task, then, is to decide whether D.C. or Maryland has a more significant relationship with
the communications between Mr. Wilner (the accountant) and defendants (the clients).

Here, Maryland has the more significant relationship. D.C. has only one relevant contact
to the communications: defendants and Mr. Wilner’s correspondence involved property located in
D.C. ECF No. 1-1 4 7. But although the subject of the communications is property located in D.C.,
Maryland has a significant relationship to both parties to the communications. Mr. Wilner
practices at a Maryland-based accounting firm and advised defendants from his Maryland office.
ECF No. 60-1 at 11. Likewise, defendants CLH,* Cohen, and Hinton are all citizens of Maryland.
ECF No. 1 9 12-13.

Maryland’s relationship to the parties is especially important given the nature of the
privilege asserted. The purpose of the accountant-client privilege is to “encourage free and open
communication between the accountant and the client.” Sears, Roebuck & Co. v. Gussin, 714 A.2d

188, 193 (Md. 1998). When it applies, the privilege attaches to the client. Kuhn, 77 F. Supp. 2d at

 

* As an LLC, CLH’s citizenship is determined by the citizenship of its members. CostCommand, LLC v.
WH Adm'rs, Inc., 820 F.3d 19, 21 (D.C. Cir. 2016). According to defendants, CLH’s members are
citizens of Maryland, New York, Colorado, and California. ECF No. 1 J 15. In his Third Amended
Complaint, plaintiff alleges that CLH’s members are citizens of Maryland, New York, Colorado,
California, and Florida. ECF No. 49-1 4 7. The Court need not decide which account is correct, as the
parties agree that CLH has at least one Maryland-citizen member. CLH is thus a citizen of Maryland.
CostCommand, LLC, 820 F.3d at 21.

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54. Thus, the forum where the client resides “has a strong interest in having its law govern the
accountant-client relationship.” Jd. So although Mr. Wilner and defendants discussed property
located in D.C., Maryland’s relationship to the parties leads this Court to predict that a D.C. court
would find Maryland’s relationship to the communications more significant than D.C.’s.

Since Maryland has the more significant relationship with the communications, and since
Maryland recognizes an accountant-client privilege, Restatement (Second) of Conflicts § 139(2)
establishes a presumption in favor of admissibility. But this is not the end of the inquiry. D.C.
courts will admit evidence that is not privileged under its law but is privileged under the law of the
state with the most significant relationship with the communication “unless it finds that its local
policy favoring admission of the.evidence is outweighed: by countervailing considerations.”
Restatement (Second) of Conflicts § 139 cmt. d. These considerations include: (1) the number and
nature of contacts that the forum state has with the parties and with the transaction involved, (2) the
relative materiality of the evidence sought to be excluded, (3) the type of privilege involved, and
(4) fairness to the parties. Restatement (Second) of Conflicts § 139 cmt. d.

Here, a D.C. court would find that countervailing considerations outweigh D.C.’s local
policy favoring admissibility. First, the nature of D.C.’s contacts with the parties and transaction
are not relevant to this evidentiary privilege conflict. D.C. has two such contacts: (1) plaintiff is a
citizen of D.C., ECF No. 49-1 at 2, and (2) the Property discussed by accountant and clients is in
D.C., id. at 3. Though D.C. has an interest in applying its privilege law to its citizens, plaintiff was
neither the accountant nor client in this case. And though D.C. also has an interest in applying its
property law to local property, this dispute involves privilege law, not property law.

The type of privilege involved also suggests that D.C. courts would apply Maryland law.

A forum “will be more inclined to give effect to a foreign privilege that is well established and

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recognized in many states than to a privilege that is relatively novel and recognized in only a few
states.” Restatement (Second) of Conflicts § 139 cmt. d. The accountant-client privilege is hardly
“novel,” as roughly one-third of states recognize it. See Charles Alan Wright & Arthur Miller, Fed.
Prac. & Proc. Evid. § 5427 at nn.3 & 4 (1st ed.),

Additionally, fairness concerns indicate that a D.C. court would recognize Maryland’s
accountant-client privilege. When Mr. Wilner and defendants discussed tax implications regarding
the Property, they reasonably expected Maryland’s account-client privilege to apply. See
Restatement (Second) of Conflicts § 139 cmt. d (“The forum will be more inclined to give effect
to a privilege if it was probably relied upon by the parties.”). Indeed, Mr. Wilner advised
defendants from his Maryland-based tax practice, ECF No. 70 at 6, and CLH, the entity receiving
tax advice, is also a citizen of Maryland. ECF No. 1 §[ 15; see CostCommand, LLC, 820 F.3d at 21.

In addition to the parties’ reasonable expectation that their communications would be
privileged, forum-shopping concerns also weigh in favor of recognizing Maryland’s accountant-
client privilege. If the Court were to apply D.C. law, which does not recognize an accountant-client
privilege, this approach might incentivize future plaintiffs to sue in a forum that does not recognize
the privilege. Take, for example, an LLC with citizenship in five states. A plaintiff could sue in
one of those states that does not have an accountant-client privilege to get around the privilege
laws of the other forums.

On the other hand, the second factor—the materiality of the evidence sought to be
excluded—strongly weighs in favor of a D.C. court applying its forum law. As explained above,
defendants? correspondences with Mr. Wilner discussing plaintiff are relevant to the question of

whether defendants intended to give plaintiff 10% equity in the Property.

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Yet on balance, the Court predicts that a D.C. court would find D.C.’s minimal contacts
with the communications, the prevalence of the accountant-client privilege nationwide, and
fairness concerns sufficient to rebut the presumption of admissibility established by the
Restatement (Second) of Conflicts § 139(2). Thus, because Maryland law applies, and because
defendants properly invoked Maryland’s accountant-client privilege, the Court will deny
plaintiff's Motion to Compel with respect to Request for Production No. 9.°

H. Request for Production No. 5

Relatedly, plaintiff requests the production of “[c]opies of any and all prepared, drafted,
and or/filed state tax or federal income tax returns.” ECF No. 50 at 6. Defendants objected to this
request as overly vague, irrelevant, and overbroad as it failed to “specify any reasonable period for
the tax returns sought.” ECF No. 53-17 at 6. Plaintiffs counsel then sent a letter to defendants’
counsel clarifying that plaintiff requests state and local tax returns from 2015 to 2018. ECF No.
50-1 at 87. The letter explained that this information would be “highly relevant in determining
how CLH treated its payments to [plaintiff] for accounting and tax purposes, particularly given its
several payments to [plaintiff] during said period of time.” Jd. In response, defendants stood by
their objection and refused to produce any tax returns. See ECF No. 52-1 at 21. Plaintiff now
requests tax returns from only 2014 and 2015. ECF No. 50 at 6.

Plaintiff's request goes well beyond the scope of his case. Notably, plaintiff fails to specify
which defendants he seeks tax returns from. Plaintiff likely requests tax returns from CLH, as he

wishes to “determin[e] how CLH treated its payments” to him. ECF No. 50-1 at 87. This

 

> Even if a D.C. court would decline to apply Restatement (Second) of Conflicts § 139(2) and instead
apply an ordinary governmental interest analysis, the result would be the same. For the reasons explained
above, Maryland has a more significant relationship to this dispute.

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information is indeed relevant to plaintiff's claims, as it may indicate whether defendants intended
to give plaintiff a 10% equity interest in the Property.

Yet asking defendants to turn over CLH’s state and federal tax returns from 2014 and 2015
would be unduly burdensome, as CLH’s payments or loans to plaintiff will make up only a small
part of those returns. The Court will thus order defendants to produce redacted versions of CLH’s
state and federal tax returns from 2014 and 2015, leaving only the information pertaining to
plaintiff's claims unredacted. If information in any of the redacted tax returns indicates that the
entire return would be relevant to plaintiff's claims, plaintiff can move for the Court to review the

tax return in camera.

1. Requests for Admission Nos, 7 & 16(b)-(c) .

 

Finally, plaintiff seeks a response to Request for Admission Nos. 7 and 16(b)-(c). Request
for Admission No. 7 reads: “Admit that Lash represented to the LLC and defendant Cohen that he
discussed ‘compensation’ with [plaintiff] prior to the purchase of the Property.” ECF No. 47-1 at
20. Defendants objected on the grounds that plaintiff did not define the term “compensation,” but
admitted that “Mr. Lash communicated to Mr. Cohen [plaintiffs] desire to receive compensation
if certain circumstances were met and certain unaddressed terms were ultimately agreed upon.” Jd.
In his Motion to Compel, plaintiff does not explain why this response is inadequate. The fact that
plaintiff is not satisfied with the extent of the admission is not grounds for the Court to compel a
further answer. The Court will thus deny plaintiff's Motion to Compel with respect to Request for
Admission No. 7.

Finally, plaintiff also seeks a response to Request for Admission Nos. 16(b)-(c), which
read: “[a]dmit that Mr. Cohen exchanged emails regarding [plaintiffs] compensation with Wilton

Lash” and “[a]dmit that Mr. Cohen exchanged emails regarding [plaintiff's] compensation with

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Jason Goldblatt.” ECF No. 47-1 at 23. As defendants have already admitted both (b) and (c), id,
plaintiffs Motion to Compel with respect to Request for Admission Nos. 16(b)-(c) will be denied.
ok OK

Since the Court will authorize further fact discovery, it will deny defendants’ Motion for
Summary Judgment [ECF No. 59] as premature. It will also grant plaintiffs Motion for an
Extension of Time to Complete Discovery [ECF No. 47].

CONCLUSION

In sum, for the reasons explained above, the Court will order as follows:

Defendants” Motion for Leave to File an Amended Answer, Affirmative Defenses, and
First Amended Counterclaim [ECF No. 42] will be GRANTED. Plaintiff will also be GRANTED
leave to file the document at ECF No. 49-1 as his Third Amended Complaint. The document must
be filed and properly captioned as the Third Amended Complaint within five (5) days. Defendants
shall answer the Third Amended Complaint within ten (10) days of its filing. Accordingly,
Plaintiffs Motion for Leave to File a Second Amended Complaint [ECF No. 45] will be DENIED
as moot.

Plaintiff's Motion to Compel [ECF No. 50] and Supplemental Motion to Compel [ECF No.
52] will be GRANTED with respect to Request for Production No. 2, GRANTED IN PART with
respect to Request for Production No. 5, and DENIED with respect to Interrogatory No. 4, Request
for Production Nos. 8, 9, 17, 20, and Request for Admission Nos. 7 and 16(b)-(c).

Plaintiff's Motion for a Status Hearing [ECF No. 50] will be DENIED.

Defendants’ Motion to Quash Plaintiff's Subpoena to Paul H. Wilner, CPA [ECF No. 60]

will be DENIED as moot.

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Finally, since the Court will permit additional discovery, defendants’ Motion for Summary
Judgment [ECF No. 59] will be DENIED as premature and plaintiffs Motion for an Extension of
Time to Complete Discovery [ECF No. 47] will be GRANTED.

A separale Order and. Scheduling Order accompany this Memorandum Opinion.

Date: September /”/, 2020 “Core ce Lonlettm Ce Koel ae

Hon. Royce C. Lamberth
United States District Judge

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