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LLC v. Warren Homes, LLC

United States District Court, Eastern District of Louisiana

January 14, 2015

AMTAX HOLDINGS 2001-VV, LLC
v.
WARREN HOMES, LLC

ORDER

SALLY SHUSHAN U.S. Magistrate Judge

DEFENDANTS’ MOTIONS TO QUASH SUBPOENAS (Rec. docs. 28, 29, 30 and 32).

DENIED

DEFENDANTS’ MOTIONS TO QUASH SUBPOENA TO MISSISSIPPI RIVER BANK (Rec. doc. 31)

DISMISSED AS MOOT

Defendants, Warren Homes, LLC, Victor S. Loraso, Jr., Rene C. Crescione, Sr., Canary Homes, LLC, Hnasko Holding Company, Inc., Robin Homes, LLC, Smith Square, LLC, V. Ray Rose, Summit Apartment Management Company, Inc., and Michael R. Peralta (collectively “Defendants”), filed motions to quash subpoenas duces tecum to: (1) Little & Associates, LLC (Rec. doc. 28); (2) Warren Construction Company, Inc. (Rec. doc. 29); (3) St. Louis Pointe Development, LLC (Rec. doc. 30); (4) Mississippi River Bank (Rec. doc. 31); and (5) St. Louis Pointe, LLC (Rec. doc. 32). Plaintiffs, AMTAX Holdings 2001-VV, LLC, AMTAX Holdings 248, LLC, AMTAX Holdings 2001-UU, LLC, AMTAX Holdings 249, LLC, and AMTAX Holdings 250, LLC (collectively “Plaintiffs”), caused the issuance of the subpoenas. They opposed the motions to quash. Rec. docs. 35-37.

BACKGROUND

On November 20, 2014, Plaintiffs filed a complaint for damages and injunctive relief. Rec. doc. 1. Plaintiffs allege that: (1) they owned 99.99% of the interests of certain limited real estate partnerships; (2) Defendants had nominal ownership interests and developed and managed the real estate partnerships; (3) audits of the partnerships revealed that Defendants commingled funds and made unauthorized advances in violation of the partnership agreements; (4) Plaintiffs sent Defendants Notices of Default; and (5) although Plaintiffs terminated Defendants’ management of the real estate partnerships, Defendants refused to cooperate. Rec. doc. 1. Plaintiffs sought a temporary restraining order which was granted in part. Rec. docs. 2 and 17. Defendants filed an answer and counterclaim. Rec. doc.26.

Plaintiffs issued the subpoenas to third parties. Defendants moved to quash them. Plaintiffs contend that Defendants cannot demonstrate a personal right or privilege in the documents sought in the subpoenas, so they cannot move to quash them. It is assumed that Defendants have standing to challenge the subpoenas. The subpoenas will be considered on their merits in three groups: (1) subpoena to Little & Associates, LLC (“Little”); (2) subpoenas to St. Louis Pointe, LLC, St. Louis Pointe Development, LLC, and Warren Construction; and (3) Mississippi River Bank.

SUBPOENA TO LITTLE

Little, an accounting firm, conducted annual audits of the real estate partnerships. The subpoena seeks financial records and communications pertaining to the partnerships. Defendants contend that Plaintiffs complaint turns on whether they were entitled to remove Defendants as general partners and terminate the management contracts. Defendants argue that the only relevant information is the information available to Plaintiffs at the time of Defendants’ removal. Discovery into information not known by Plaintiffs at the time of removal is not relevant and not likely to lead to discovery of admissible evidence. Defendants’ describe Plaintiffs’ subpoenas to Little and the others as “fishing expeditions.”

Plaintiffs contend that (1) in addition to the defaults on which Plaintiffs based the removal of Defendants, Plaintiffs learned of additional defaults by Defendant’s general partners after the initial default notices; (2) Defendants’ removal of the of partnerships’ books and records on November 18, 2014 constitutes a subsequent event of default; and (3) Defendants’ counterclaim alleges breach of fiduciary duty, bad faith breach of contract and detrimental reliance. Plaintiffs argue that the Little subpoena seeks documents relevant to the alleged subsequent defaults and Defendants’ counterclaims. Rec. doc. 35.

Plaintiffs’ allegations concerning Robin Homes are typical. Rec. doc. 1 at 23-28. Through an audit, AMTAX Holdings 249, LLC, one of the Plaintiffs, discovered violations of the partnership agreements in that Robin Homes, LLC, one of the Defendants, made unapproved loans or advances of the partnership’s funds. Para. 81. Robin Homes, LLC admitted it breached the partnership agreement. Para. 85. Employees of Summit, a Defendant, removed the records of the partnership and denied AMTAX Holdings 249 access to them. Para. 86. Plaintiffs make less specific allegations of additional defaults of commingled insurance risks and partnership assets, liens against partnership properties, use of partnership assets to pay non-partnership debts and transfers of money among the partnerships. Para. 105.

Defendants deny the allegations. For example, with respect to Robin Homes, Defendants deny that the allegation that Robin Homes, LLC admitted it breached the partnership agreement. Rec. doc. 26 at Para. 85. The allegations concerning loans or advances are denied except to admit that certain advances or loans may have been made for the benefit of the partnership in compliance with the custom and practice of the partnership. Id. at paras. 81 and 82. The allegations of subsequent defaults are ...


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