United States District Court, S.D. California
For 21st Century Financial Services, LLC, Plaintiff: Mary R Robberson, LEAD ATTORNEY, Higgs Fletcher and Mack LLP, San Diego, CA.
For Manchester Financial Bank, also known as Manchester Financial Bank (in organization), also known as Manchester Financial Bank (proposed), Defendant: Jennifer M. French, LEAD ATTORNEY, The Leventhal Law Firm, APC, San Diego, CA.
ORDER GRANTING MOTION FOR ORDER COMMANDING APPEARANCE FOR EXAMINATION OF RICHARD GIBBONS, PERSON MOST KNOWLEDGEABLE OF MANCHESTER FINANCIAL GROUP, L.P.
KAREN S. CRAWFORD, United States Magistrate Judge.
On October 30, 2014, Judgment Creditor 21st Century Financial Services, LLC, moved for an order commanding the appearance for examination of Richard V. Gibbons, person most knowledgeable of third-party Manchester Financial Group, L.P. [Doc. 20] Judgment Debtor Manchester Financial Bank requested an opportunity to respond and filed its Opposition on November 14, 2014. [Doc. 22] Before the Court are Judgment Creditor's Motion [Doc. 20], Judgment Debtor's Opposition [Doc. 22], Judgment Creditor's Reply [Doc. 24], and Judgment Debtor's Sur-Reply. [Doc. 26] After carefully reviewing the parties' extensive briefing, the exhibits, and the applicable law, for the reasons discussed below, this Court GRANTS Judgment Creditor's Motion.
I. STATEMENT OF FACTS
The following factual background is derived largely from the opinion of the United States Court of Appeals for the Fifth Circuit, which affirmed the arbitration tribunal award of approximately $532, 000 entered in favor of Judgment Creditor and against Judgment Debtor on February 2, 2010. 21st Century Fin. Servs., L.L.C., v. Manchester Fin. Bank, 747 F.3d 331 (5th Cir. 2014). The Fifth Circuit's opinion is filed in this case as Docket Number 24-4.
In 2008, a group of bank organizers -- including, among others, Frederick Mandelbaum and Richard Gibbons -- sought to charter a bank to be called Manchester Financial Bank, N.A. (hereinafter " Manchester Bank"). [Doc. 24-4, p. 3] In February 2008, Manchester Bank entered into an " Agreement for Computer Processing Services" with 21st Century. Id. The Agreement identified Frederick Mandelbaum as Manchester Bank's CEO, included an arbitration provision, and provided the bank's address as 7825 Fay Street, Suite 100, La Jolla, CA 92037. Id.
In connection with the Agreement, Manchester Financial Group, L.P. (" MFG") issued two checks to pay deposits to 21st Century for services to be provided to Manchester Bank. [Doc. 24-4, p. 3] However, on October 3, 2008, Frederick Mandelbaum emailed 21st Century that the bank's principal investor had " decided not to move forward based on the current economic turmoil." Id. In response, on a date not specified in the Fifth Circuit's written opinion, the president of 21st Century forwarded Mr. Mandelbaum two invoices for amounts due under the Agreement. Mr. Mandelbaum emailed 21st Century's president back, agreeing to pay one invoice but disputing liability on the second. Id.
The parties did not resolve the amount due under the Agreement. [Doc. 24-4, p. 4] Michael Levinson, attorney with the San Diego office of the Cooley Law Firm, copying bank organizer Richard Gibbons, contended in a letter on an unknown date that neither MFG nor Manchester Bank was liable for the disputed amounts. Id. In August and September 2009, 21st Century demanded arbitration. Id. The arbitration was held in Austin, Texas, on January 13, 2010. Id. p. 5. While Manchester Bank did not appear, 21st Century provided evidence in support of its claim. Id. On February 2, 2010, the arbitration tribunal issued an award in favor of 21st Century for $477, 070.29 in damages, $44, 274.00 in legal fees, $10, 760.00 in arbitration costs, and any post-judgment interest. Id. at 6.
21st Century thereafter sued in Texas state court under the Federal Arbitration Act to confirm the award, and Manchester Bank removed the matter to federal court. [Doc. 24-4, p. 6] Manchester Bank argued before the U.S. District Court for the Western District of Texas that 21st Century had failed to comply with the notice provision in the Agreement and had not attempted to negotiate in good faith with senior management prior to invoking arbitration as the Agreement required. Id. After a bench trial on an agreed record and stipulated facts, the District Court granted 21st Century's motion to confirm the award and rejected the bank's two theories opposing confirmation. Id. at 6. The Fifth Circuit affirmed on appeal on March 31, 2014. See id. at 13.
Judgment Creditor filed the judgment of the U.S. District Court for the Western District of Texas in this Court on April 25, 2014. [Doc. 24-10] On July 11, 2014, this Court granted Judgment Creditor's Motion for an order compelling Frederick Mandalbaum, CEO of Judgment Debtor Manchester Bank, to appear for an examination. [Doc. 3] The examination of Mr. Mandalbaum was vacated and rescheduled several times upon request of the parties, and finally went forward on September 24, 2014. See [Doc. 18].
Judgment Creditor's Motion followed on October 30, 2014, seeking an order to compel MFG to appear for examination through its person most knowledgeable, Richard Gibbons. [Doc. 20] Judgment Creditor states that the third-party examination is appropriate because MFG " has been inextricably linked to the Judgment Debtor's business affairs and finances from the inception of Judgment Debtor's existence" and possesses " information and documents regarding Judgment Debtor's finances and business affairs" that are not otherwise available. [Doc. 24, p. 6, 8] Judgment Debtor opposes the examination of MFG, arguing that Judgment Creditor's Motion is both procedurally defective and seeks relief that is not authorized by law. Judgment Debtor further contends that Judgment Creditor seeks to use the third-party examination procedure to improperly re-examine Judgment Debtor through a new representative simply because it is unhappy with the testimony provided by Mr. Mandelbaum. [Doc. 26, p. 9]
A. Applicable Law