State Farm Mutual Automobile Insurance Company v. Khait
1:21-cv-06690
E.D.N.YSep 26, 2023Background
- Plaintiffs State Farm sued several chiropractic providers alleging a long‑running no‑fault insurance fraud scheme involving inflated charges and kickbacks to non‑party referrers.
- Plaintiffs served a Rule 45 subpoena on TD Bank for nine years (Jan 1, 2014–present) of 2641 Group, Inc.’s bank records (transaction statements, checks, wire transfers, account opening docs, correspondence, etc.).
- Plaintiffs contend their discovery already shows payments from at least three defendant entities to 2641 Group in 2015–2016 (~$34,607.44) and note the alleged problematic history of 2641 Group’s owner, Vladimir Kutsyk.
- Non‑party 2641 Group moved to quash the subpoena, arguing the complaint does not name 2641 Group, the subpoena is irrelevant and overbroad, and it intrudes on privacy; it characterized Plaintiffs’ inquiry as a fishing expedition.
- The court stayed compliance pending resolution and evaluated Rule 45 standing, Rule 26 relevance/proportionality, and the privacy interest generally accorded to financial records.
- The court concluded some limited 2641 Group records might be relevant to identifying possible kickbacks, but the subpoena as written was grossly overbroad and unduly invasive; it quashed the subpoena without prejudice and permitted a narrowed re‑subpoena.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to object to subpoena served on non‑party bank | State Farm: recipient (TD Bank) should comply; 2641 Group lacks standing to dispute relevance | 2641 Group: has privacy/right interest in its bank records and thus can move to quash | Court: non‑recipient may object only on privilege/privacy grounds (standing exists for privacy claim); cannot object on relevance alone |
| Relevance of 2641 Group records to fraud/kickback claims | Payments from defendants to 2641 Group (2015–2016) suggest a relationship; records may show kickbacks or concealment | 2641 Group: not mentioned in complaint; Plaintiffs only speculate; subpoena is a fishing expedition | Court: some narrowly tailored records could be relevant, but Plaintiffs failed to show broader relevance beyond limited transactions |
| Privacy and sensitivity of financial records | State Farm: financial records discoverable when relevant and not otherwise available | 2641 Group: financial records are sensitive personal/business information; broad production is intrusive | Court: financial records implicate privacy; protection warranted absent compelling need and narrow tailoring |
| Scope/proportionality and remedy | State Farm: sought broad 2014–present production to capture alleged scheme period | 2641 Group: subpoena is overbroad (nine years; all account‑related docs; not limited to defendant‑related transactions) | Court: subpoena overbroad and invasive; quashed without prejudice and allowed Plaintiffs to issue a narrower subpoena limited to demonstrably relevant documents |
Key Cases Cited
- Langford v. Chrysler Motors Corp., 513 F.2d 1121 (2d Cir. 1975) (absent privilege, a non‑party usually lacks standing to object to a subpoena; a non‑recipient may object when it has a privacy or proprietary interest)
- Hughes v. Hartford Life & Accident Ins. Co., 507 F. Supp. 3d 384 (D. Conn. 2020) (court may exercise inherent authority to limit discovery even if a non‑recipient lacks standing to challenge relevance)