McIntire v. China MediaExpress Holdings, Inc.
252 F. Supp. 3d 328
| S.D.N.Y. | 2017Background
- Loeb & Loeb LLP and former partner Eugene Licker represented China MediaExpress Holdings, Inc. (CCME) and withdrew in June 2013; a default judgment was entered against CCME in January 2014.
- In July 2016 the court appointed Charles La Bella as Special Receiver for CCME to investigate potential malpractice claims against CCME’s former counsel.
- On March 23, 2017 the Special Receiver served document and deposition subpoenas on Loeb and Licker; on March 29, 2017 he initiated arbitration against Loeb for professional negligence and breach of fiduciary duty.
- Loeb and Licker moved to quash the subpoenas, arguing they exceed CPLR §5224 creditor-discovery, improperly seek discovery for use in arbitration (which has limited pre-arbitration discovery), and are overbroad and unduly burdensome.
- The Special Receiver contended the subpoenas arose from the court order appointing him (not CPLR), that arbitration does not limit his investigatory powers, and that immediate discovery promotes efficiency.
- The Court construed the letters as a motion to quash and granted the motion, finding the Receiver sought discovery into the very claims in arbitration without showing extraordinary circumstances.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Special Receiver may subpoena discovery into matters that are the subject of a pending arbitration | Receiver: appointment order grants investigatory power to subpoena documents; subpoenas issued before arbitration start | Loeb: subpoenas seek arbitration-subject discovery, exceed receiver/corporation powers, and are overbroad | Court: Receiver stands in CCME’s shoes and may not obtain discovery into arbitration claims without extraordinary circumstances; quash granted |
| Whether the timing ( subpoenas issued before arbitration commenced) permits broader discovery | Receiver: issuance prior to arbitration means arbitrator’s discovery limits don’t apply | Loeb: purpose and timing show intent to obtain arbitration discovery early; limits should apply | Court: timing alone does not permit unrestrained discovery; substance shows subpoenas target arbitration subject matter, so limits apply |
| Whether extraordinary circumstances justify pre‑arbitration discovery | Receiver: collecting evidence now preserves efficiency and may avoid delay | Loeb: Receiver made no showing that discovery is necessary to prevent irreparable harm or preserve evidence | Court: No showing of extraordinary circumstances (necessity); preservation/efficiency arguments insufficient here |
| Whether the Receiver’s powers exceed those of the corporation/are coextensive with a bankruptcy trustee | Receiver: analogizes to trustee investigatory powers under bankruptcy law | Loeb: a receiver only has the rights the corporation would have; court appointment defines duties, not unlimited powers | Court: Receiver’s power is limited; he cannot exceed the corporation’s subpoena power or circumvent arbitrator’s primacy |
Key Cases Cited
- Eberhard v. Marcu, 530 F.3d 122 (2d Cir. 2008) (receiver stands in corporation’s shoes and can only assert its claims)
- Cobalt Multifamily Inv’rs I, LLC v. Arden, 46 F. Supp. 3d 357 (S.D.N.Y. 2014) (appointment order defines receiver’s duties and purpose rather than unlimited powers)
- Falcone Bros. P’ship v. Bear Stearns & Co., 699 F. Supp. 32 (S.D.N.Y. 1988) (pre‑arbitration discovery should be denied absent extraordinary circumstances)
- Oriental Commercial & Shipping Co. v. Rosseel, N.V., 126 F.R.D. 398 (S.D.N.Y. 1989) (test for extraordinary circumstances is necessity; pre‑arbitration discovery allowed only to prevent irreparable harm or preserve evidence)
- Cotter v. Shearson Lehman Hutton, Inc., 126 F.R.D. 19 (S.D.N.Y. 1989) (examples of exceptional circumstances justifying pre‑arbitration discovery)