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Weddle v. Williams

United States District Court, D. Colorado

April 15, 2019



          Kristen L. Mix United States Magistrate Judge.

         This matter is before the Court on Respondents' Motion and Memorandum to Transfer Subpoena-Related Motion to Issuing Court [#11][1] (the “Motion”). Movant filed a Response [#18], and Respondents filed a Reply [#22]. Additionally, Respondents filed a Notice of Supplemental Authority [#14], Second Notice of Supplemental Authority [#15], and Third Notice of Supplemental Authority [#23]. The Court reviewed the Motion, Response, Reply, Respondents' supplemental authorities, case record, and applicable law. Accordingly, the Court is fully advised in the premises. For the reasons set forth below, the Motion [#11] is GRANTED.[2]

         I. BACKGROUND

         In June 2017, Respondents filed suit in the United States District Court for the Eastern District of Virginia, alleging that Defendant Matt Martorello (“Defendant Martorello”) and others (collectively “Defendants”) engaged in a “criminal enterprise established with the intent of evading state usury laws.” Compl. [E.D. Va. #1] at 1-2.[3] Specifically, Respondents allege that Defendants employed a “rent-a-tribe” business model, whereby a payday lending scheme associates with a Native American tribe “in an attempt to cloak itself in the privileges and immunities enjoyed by the tribe-or to at least create the illusion that it enjoys tribal immunity.” Id. at 2.

         According to Respondents, Defendant Martorello associated with the Lax Vieux Desert Band of Lake Superior Chippewa Indians (the “Tribe”), using the name Red Rock Tribal Lending, LLC (“Red Rock”) to make illegal, high-interest loans. Id. at 2, 5; Motion [#11] at 4. Although Red Rock “claim[ed] to be owned and operated by the Tribe, ” Respondents allege that, in reality, Defendant Martorello's company, Bellicose Capital, LLC (“Bellicose”), “funded the loans, controlled the underwriting, and handled the day-to-day operations.” Compl. [E.D. Va. #1] at 2.

         When suits accumulated against Defendant Martorello's “rent-a-tribe” payday loan competitors and regulation by the Consumer Financial Protection Bureau appeared imminent, Defendant Martorello sold Bellicose to the Tribe, rebranding as Ascension Technologies, LLC (“Ascension”) and “continu[ing] to operate with minimal tribal involvement.” Id. at 5-6. Simultaneously, Red Rock rebranded as Big Picture Loans, LLC (“Big Picture”). Motion [#11] at 5. Although Defendant Martorello formally sold Bellicose to the Tribe, Senior Judge Robert Payne found that Big Picture and Ascension did not qualify as “arm[s] of the Tribe” entitled to assert sovereign immunity. Memorandum Opinion [E.D. Va. #146] at 80. Indeed, Judge Payne found that “the impetus behind the formation of Big Picture and Ascension was [Defendant] Martorello and Bellicose's desire to avoid liability, more so than the Tribe's interest in starting its own business.” Id. at 53.

         As part of Defendant Martorello's Amended Initial Disclosures, Defendant Martorello identified Movant Jennifer Weddle-an attorney in Greenberg Traurig LLP's Denver office-as someone who “may have . . . discoverable information that [Defendant] Martorello may use to support his defenses.” Resp't Ex. 1, Am. Initial Disclosures [#11-2] at 3-4; Motion [#11] at 6. Specifically, Defendant Martorello indicated that Movant may have discoverable information regarding the “[r]elationship between [Defendant] Martorello, Bellicose, and Sourcepoint with [the Tribe] and Red Rocks . . . and related facts.” Resp't Ex. 1, Am. Initial Disclosures [#11-2] at 3-4. Thereafter, Respondents served Movant with a Subpoena to Produce Documents, Information, or Objects or To Permit Inspection of Premises in a Civil Action [#11-3] (the “Subpoena”), seeking discoverable information Defendant Martorello may use to support his defenses.

         In December 2018, Movant filed a Motion to Quash Subpoena [#1] (the “Motion to Quash”) in this Court, which District Judge Jackson referred to the undersigned. Order of Reference [#4]. In January 2019, Respondents filed the present Motion [#11], asking the Court to transfer this case to the Eastern District of Virginia for consideration of Movant's Motion to Quash [#1] in connection with the underlying litigation.

         The arguments raised in Movant's Motion to Quash [#1] relate to issues in the underlying litigation on which Defendant Martorello and Respondents disagree. See, e.g., Reply [#22] at 1. Movant's Motion to Quash, for example, argues that the Subpoena “seeks information that is protected by the attorney-client” privilege and confidentiality obligations. Motion to Quash [#1] at 6. Answering Respondent George Hengle's Second Set of Interrogatories in the underlying litigation, however, Defendant Martorello signaled intent to “assert good faith as a defense in this matter based, in part, on non-privileged information provided by attorney[] Jennifer Weddle . . . as well as others at their respective law firms . . . about the legality of the tribal business model and [the Tribe's] lending operations.” Resp't Ex. 3 [#11-4] at 7-8. With regard to Defendant Martorello's intended good faith defense, Respondents “disagree that [Defendant] Martorello can assert a defense based on advice of counsel without waiving the attorney-client privilege with respect to documents showing the nature of that advice.” Motion [#11] at 7. Judge Payne has yet to rule on Respondents' Motion to Compel Information Withheld on the Basis of Attorney-Client Privilege [E.D. Va. #340], which addresses the waiver issue.

         According to Respondents, Defendant “Martorello and [Movant's] attorney client [sic] relationship, or lack thereof, is [also] pending before Judge Payne.” Reply [#22] at 2. In the present case, Movant argues that Defendant Martorello cannot even waive the applicable attorney-client privilege, since Movant “did not represent [Defendant Martorello] individually.” Response [#18] at 12. As Respondents note, however, Defendant “Martorello seeks to intervene in this action to assert privilege, including privilege over documents generated during the course of [Movant's] representation of entities ‘with respect to which Martorello is or was a principal, including Bellicose, SourcePoint, and Eventide.'” Reply [#22] at 5 (quoting Motion to Intervene and Quash, in Part, Non-Party Subpoena to Jennifer Weddle [#19] at 4). As with the waiver issue, Judge Payne has yet to rule on the attorney-client relationship issue. See, e.g., Order [E.D. Va. #462].

         Finally, Respondents cite “potential spoliation of documents by Defendants, ” including “Greenberg Traurig delet[ing] its client files . . . consistent with the Tribe's direction and [Defendant] Martorello's confirmation.” Motion [#11] at 3, 8. As Respondents explain, the Subpoena seeks documents from Movant rather than Defendants since Defendant “Martorello's [personal] emails were apparently destroyed in connection with the sale of Bellicose to the Tribe.” Reply [#22] at 6. Acknowledging Respondents' reasoning, Movant counters that Greenberg Traurig “complied” with the Tribe's direction and also “deleted the Bellicose files and disposed of them by secure methods, ” reinforcing that the Tribe-not Defendant Martorello-holds the applicable attorney-client privilege. Response [#18] at 3. According to Respondents, “Judge Payne is very familiar with this issue and thus is in a better position to rule on whether Greenberg Traurig's backup systems should be searched to the recover the missing emails.” Reply [#22] at 2. As with the waiver and attorney-client privilege issues, Judge Payne has yet to rule on the spoliation issue. Minute Order [E.D. Va. #316] (ordering parties to “file agreed order to include spoliation and ESI discovery plan”); Order [E.D. Va. #460] (extending-until May 13, 2019-the deadline to complete the ESI discovery plan).

         II. ANALYSIS

         Federal Rule of Civil Procedure 45(f) provides that, “[w]hen the court where compliance is required did not issue the subpoena, it may transfer a [subpoena-related] motion . . . to the issuing court if the person subject to the subpoena consents or if the court finds exceptional circumstances.” In the present case, the Eastern District of Virginia issued the Subpoena, requiring Movant's compliance in the District of Colorado, given Movant's employment as an attorney in Greenberg Traurig LLP's Denver office. Movant filed a subpoena-related motion, the Motion to Quash [#1], and Respondents filed the Motion [#11], asking the Court to transfer the Motion to Quash to the Eastern District of Virginia for consideration in connection with the underlying litigation. Movant “does not consent to a transfer” and argues Rule 45(f)'s “exceptional circumstances” do not exist in the present case. Response [#18] at 6; Fed.R.Civ.P. 45(f).

         The “proponent of transfer bears the burden of showing that [exceptional] circumstances are present.” Fed.R.Civ.P. 45(f) advisory committee's note to 2013 ...

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