USL SUNT DOCUMENT UNITED STATES DISTRICT COURT ELECTRONICALLY FILED SOUTHERN DISTRICT OF NEW YORK DOC □□□ □□ nn nn nn nn nn nnn nnn nnn nnn nnn nnn nnn nnn X DATE FILED:_ 1/3/2025 SOUND AROUND, INC., Plaintiff 24-CV-1986 (JHR) (KHP)
-against- ORDER ON MOTIONS TO QUASH MOISES FRIEDMAN, SHULIM ELIEZER ILOWITZ, ML IMPORTS, INC., CYRF, INC., LRI GROUP, LLC, EXECUTIVE SERVICES, EXECUTIVE LAUNDRY, LLC, MDF MARKETING, INC., WORLD GROUP IMPORT, LLC, HEFEl PAIDONG OUTDOOR PRODUCTS CO., LTD., Defendants. +--+ +--+ +--+ ----X KATHARINE H. PARKER, United States Magistrate Judge: Defendants have moved to quash several subpoenas served by Plaintiff Sound Around, Inc. on various non-party entities including banks, retail and freight companies. (See ECF Nos. 78, 83, 86 and 90.) The Court addresses each of the motions to quash below.
BACKGROUND This case arises out of a dispute between Sound Around, Inc. (“Sound Around”) and its former employees/agents and their related entities. Sound Around sells various products online on e-commerce platforms such as Amazon, Walmart, Yahoo and eBay. (Complaint (“Compl.”) at 24.) Sound Around identifies products it wishes to sell, locates manufacturers and vendors of the products who are located overseas, purchases the products and offers them for distribution and resale online within the United States. (/d. at 4] 22.) Examples of products include kitchen appliances and home products, health and fitness products and toys. (/d. at 4 25.)
Individual Defendants Moises Friedman and Shulim Eliezer Ilowitz are alleged to be former employees of Sound Around who worked as buyers and were paid salary and commissions. (Id. at ¶¶ 9-10, 37-38, 48.) Friedman is related by marriage to a founder of
Sound Around, Abraham Brach. (Id. at ¶ 28.) Ilowitz is the brother of Sound Around founder’s long-�me secretary. (Id. at ¶ 40.) Both Friedman and Ilowitz had discre�on to nego�ate with manufacturers as to pricing and to set prices and market strategy for the products’ online resale. (Id. at ¶¶ 31, 45.) Although Sound Around called Friedman and Ilowitz employees, it paid them at least in part
indirectly by sending their commission checks to companies alleged to be operated or controlled by Friedman and Ilowitz. (Id. at ¶¶ 37, 47.) Specifically, Friedman’s commission payments were made to Defendant MDF Marke�ng, Inc. and Ilowitz’s commission payments were made to Defendant Execu�ve Laundry, LLC. (Id.) Sound Around entered into a writen contract with Friedman in June 2018. (Id. at ¶ 32.) The contract set out Friedman’s work responsibili�es with respect to a Los Angeles warehouse
and as a buyer, required Friedman to give 2 months’ no�ce before resigning, provided for a salary of $1,000/week and a commission of 3% of certain net online sales, and addressed other aspects of employment. (Id. at Exhibit A.) The contract contained a two-year non-compete provision. (Id.) Ilowitz does not appear to have had a writen contract, but Sound Around has provided an acknowledgment signed by Ilowitz purpor�ng to have received and read a copy of Sound Around’s employee Policies & Prac�ces Guide, which contained certain provisions
regarding confiden�ality and obliga�ons toward the company. (Id. at ¶¶ 42, 44, Exhibits B and C.) Sound Around alleges that Friedman and Ilowitz set up a compe�ng business while employed at Sound Around and used Sound Around assets for personal or compe�ng business purposes. (Id. at ¶¶ 49-50.) It alleges that Friedman and Ilowitz began conspiring in or around
2020 and over �me defrauded Sound Around, diverted its assets and corporate opportuni�es for their personal gain and embezzled money. (Id.) For example, although they were tasked with developing new product ideas, Sound Around alleges Friedman and Ilowitz created brands and purchased products to compete with Sound Around in online marketplaces. (Id. at ¶ 52.) They allegedly used Sound Around’s proprietary informa�on about suppliers and pricing to
illegally compete, all the while collec�ng salary and ge�ng reimbursed for travel that was supposed to be on behalf of Sound Around. (Id. at ¶¶ 49, 53.) Sound Around also alleges that some of its vendors paid kickbacks to Friedman and Ilowitz, which caused them to charge overall higher prices for products sold to Sound Around, and that Friedman and Ilowitz used Sound Around funds to purchase goods and services for their own compe�ng business. (Id. at ¶¶ 55-56, 58.) The Complaint alleges that Ilowitz used his Sound Around email address to
contact Amazon to request a Vendor Central license for his and Friedman’s compe�ng business and then converted the license to be for Defendant LRI Group LLC—his own company. (Id. at ¶¶ 87-90, 95.) And, it alleges Friedman and Ilowitz created the Lifemaster USA brand to offer a series of children’s scooters iden�cal to ones being offered by Sound Around and marketed the scooters using Sound Around’s trademark, “ScootKid.” (Id. at 110-11, 115.) The Complaint contains mul�ple causes of ac�on including for trademark infringement, breach of contract,
misappropria�on of confiden�al business informa�on and opportuni�es, breach of fiduciary duty and loyalty, and civil conspiracy under federal an�-racketeering law. Sound Around terminated Friedman’s employment in February 2024. (Id. at ¶ 36.) Ilowitz resigned on January 30, 2024. (Id. at ¶ 46.)
Sound Around filed a mo�on for preliminary injunc�on to enforce its restric�ve covenants to stop Friedman and Ilowitz and their related en��es from compe�ng against it. (ECF No. 34.) That mo�on is pending before the Honorable Jennifer H. Reardan.
Defendants Execu�ve Laundry, LLC and Execu�ve Services (“Execu�ve Laundry Defendants”) have denied the material allega�ons in the complaint or denied knowledge and informa�on sufficient to form a belief as to the truth of the allega�ons in the complaint and filed a cross claim against the other Defendants for contribu�on and/or indemnifica�on. (See ECF No. 71.)
The other Defendants—Friedman and Ilowitz and their purportedly related en��es (the “Friedman/Ilowitz Defendants”) – have moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. (See ECF No. 52.) For their part, they contend that they were not employees of Sound Around and that Sound Around is trying to put them out of business to eliminate legi�mate compe�tors in the market. The mo�on to dismiss
is pending before Judge Reardan. DISCOVERY DISPUTE At the start of discovery, Sound Around served document subpoenas on various banks, including M&T Bank (in Amherst, New York), Northfield Bank (in Staten Island), JP Morgan Chase Bank (in New York City), Bank of America (in Newark, Delaware), TD Bank (in New York City), Capital One Bank (in McLean, Virginia), and Ci�bank (in New York City)(the “Bank Subpoenas”). Theses subpoenas all request essen�ally the same thing:
• All records for the period 2019 to the present pertaining to any of the following individuals and business en��es whether held jointly or severally or as trustee or fiduciary as well as custodian, executor or guardian as well as any other en�ty in which these individuals or en��es may have a financial interest: Moises Friedman, Shulim
Eliezer Ilowitz, ML Imports, Inc., Cyrf, Inc., LRI Group, LLC, Execu�ve Services, Execu�ve Laundry, LLC, MDF Marke�ng, Inc., and/or World Group Import, LLC. The subpoenas on Northfield Bank, TD Bank, Bank of America, and M&T Bank list specific account and rou�ng numbers for either MDF Marke�ng, Inc. or Execu�ve Services. Further,
Records are defined broadly to include savings and checking account records, loan records, credit card records, purchases of bank checks, and all other records. Sound Around also served document subpoenas on various online retailers including Target Corpora�on (in St. Paul, Minnesota), eBay Inc. (in New York City), Amazon Inc. (in
Wilmington, Delaware), Walmart Inc. (in Wilmington, Delaware), Wayfair Inc. (in Boston, Massachusets), and PayPal Inc. (in New York City) (the “Retail Subpoenas”). These subpoenas all request essen�ally the same things for the period 2019 to the present: • All communica�ons between you and any Defendant1 prior to the execu�on of any and
every agreement and/or contractual rela�onship between you and the given Defendant;
1 Defendants is defined to include Friedman, Ilowitz, ML Imports, Inc., Cyrf, Inc., LRI Group, LLC, World Group Import, LLC, Execu�ve Laundry, LLC, Execu�ve Services, MDF Marke�ng, Inc., Hefei Paidong Outdoor Products Co., Ltd., and their officers, directors, employees, partners, corporate parent, subsidiaries and affiliates. • All communica�ons between you and any Defendant concerning any and every agreement and/or contractual rela�onship between you and the given Defendant; • All contracts, licenses, agreements, and other documents that describe the rela�onship
between you and any Defendant. • All contracts, licenses, agreements, and other documents concerning any of the Brands;2 • All communica�ons concerning the Brands and Products;3 • Documents sufficient to show the iden�ty of all Products, the amount sold of each Product, and the amount paid (or to be paid) by you for each Product. These documents
should include all documents that show how much you paid for the Products, to whom and where the payments were made, and the financial ins�tu�ons that were used by the party receiving the payments from you to collect and receive the payments; • All reports concerning the Products, including sales sta�s�cs; • Documents sufficient to show the flow of cash between you and any Defendant,
including the iden�ty of all financial ins�tu�ons used by the given Defendant; • Intellectual property infringement reports, customer complaints, and similar documents and communica�ons you received from other people concerning suspected misconduct and issues regarding any Defendant, Brand or Product; • All communica�ons concerning the suspected misconduct and issues referenced above; and
2 Brands is defined as all trademarks and related means under which the Defendants sold or marketed, or offered to sell or market their goods or products, including, Bakken, Bakken-Swiss, BakkenMaster, LifeMaster, HighMaster, RunMaster, ProMaster, TopMaster, and ScootKid. 3 Products is defined broadly to include all goods and products sold or to be sold by you pursuant to any agreement between the subpoenaed en�ty and the Defendants. • A business records affidavit of all produced documents and communica�ons.
And it served document subpoenas on Shifl Inc. (in Spring Valley, New York) and Convenient Logis�cs LLC (in Santa Fe Springs, California) (the “Freight Service Subpoenas”).4 These two subpoenas request mostly the same things for the period 2019 to the present including:
• All communica�ons between you and any Defendant prior to the execu�on of any and every agreement between you and the given Defendant; • All communica�ons between you and any Defendant concerning any and every agreement and/or contractual rela�onship between you and a given Defendant; • All contracts, licenses, agreements, and other documents that describe the rela�onship
between you and any Defendant; • All communica�ons concerning the Products and Brands; • Documents sufficient to show the flow of cash between you and any Defendant, including for any Product or service you provided to the Defendant or invoices for any Product or 3PL service,5 including the iden�ty of financial ins�tu�ons used by the Defendant;
• Documents iden�fying the Amazon Vendor Central Account that any Defendant used; and
4 Products and Brands and Defendants are defined similarly to those in the Retail Subpoenas. 5 3PL is defined as third-party logis�cs and 3PL Services include warehousing, storing, inventory management, picking and packing, shipping and receiving, freight shipping and forwarding, ki�ng/assembling and reverse logis�cs. • A business records affidavit.
The subpoena on Convenient Logis�cs also requests: All reports concerning the Products, including any sta�s�cs concerning your 3PL services for these Products, Documents sufficient to show the iden�ty of all Products that you provided 3PL services for, including Products you stored or warehoused, and documents iden�fying the freight forwarder for the Products.
The subpoena on Shifl Inc. also requests: Documents sufficient to show the iden�ty of all Products that you provided services for, including Products you shipped, and Documents iden�fying from whom you received Products, and to whom you shipped Products.
All of the subpoenas seek informa�on that is also sought in Requests for Documents served on the Defendants. The Friedman/Ilowitz Defendants have moved to quash the subpoenas (ECF Nos. 78, 86). The Execu�ve Laundry Defendants have separately moved to quash the subpoenas (ECF Nos.
83, 90). None of the subpoenaed en��es have appeared or moved to quash. The Execu�ve Laundry Defendants state that they are a commercial laundry service and do not sell any products. They have submited an affidavit sta�ng that Friedman and Ilowitz did
not create, operate or control the Execu�ve Laundry Defendants, and the principals and employees of Execu�ve Laundry were never employed by Sound Around and are not alleged to have commited any of the acts atributed to Friedman and Ilowitz. (ECF No. 91-2.) As a result, the Execu�ve Laundry Defendants contend that the Bank Subpoenas are overbroad and seek personal and sensi�ve financial informa�on unrelated to this ac�on. They make essen�ally the same argument with regard to the other subpoenas.
The Friedman/Ilowitz Defendants argue that the Bank Subpoenas are overbroad and seek sensi�ve, individual financial informa�on regarding irrelevant maters such as credit history, family finances and home mortgages. They argue that the bank records for their related businesses are also overly broad and seek invasive informa�on about non-par�es and other en��es that have no rela�onship to the claims and defenses in this case. They argue that the
Freight Service Subpoenas are similarly overbroad and seek records that do not concern products at issue in this case and jeopardize their rela�onship with these providers. The Friedman/Ilowitz Defendants also argue that the Retail subpoenas are overbroad insofar as they are not tailored to include products specifically at issue in this ac�on and
threaten their business rela�onship with the retailers. Sound Around argues that the mo�ons to quash should be denied because Defendants failed to meet and confer regarding their scope and failed to follow court procedures requiring them to file a leter mo�on reques�ng a conference to discuss their objec�ons to the
subpoenas prior to filing mo�ons. Sound Around also asserts that Defendants lack standing to object to subpoenas on grounds of relevancy, propor�onality, ripeness and burden. It argues the Bank Subpoenas seek documents that will show when Defendants began compe�ng with Sound Around, the third par�es through which Defendants were opera�ng or using to carry out their allegedly unlawful ac�ons, and value of the kickbacks Defendants received, the source of
Defendants’ funding, and their revenues and profits necessary to calculate damages. It argues the Retail Subpoenas and Freight Service Subpoenas are necessary to show that Defendants were compe�ng and the scope of the compe��on and products involved, among other things. LEGAL STANDARD
Under Federal Rule of Civil Procedure 26(b)(1), “[p]ar�es may obtain discovery regarding any nonprivileged mater that is relevant to any party's claim or defense and propor�onal to the needs of the case.” Fed. R. Civ. P. 26(b)(1). “The party seeking discovery bears the ini�al burden of proving the discovery is relevant.” Sheindlin v. Brady, No. 21-CV-01124 (LJL) (SDA), 2021 WL 2075483, at *2 (S.D.N.Y. May 24, 2021) (ci�ng In re Subpoena to Loeb & Loeb LLP, No. 19-MC- 00241 (PAE), 2019 WL 2428704, at *4 (S.D.N.Y. June 11, 2019)), aff'd, 2021 WL 2689592 (S.D.N.Y.
June 30, 2021). Federal Rule of Civil Procedure 45(a) permits a party to request and serve on a non- party a subpoena seeking production of documents. See Fed. R. Civ. P. 45(a). A document subpoena may be served “at any place within the United States.” Fed. R. Civ. P. 45(b)(2). The party serving a subpoena must take steps to avoid imposing “undue burden or expense” on the
subpoenaed person. Fed. R. Civ. P. 45(d)(1). As a general matter, only recipients of a subpoena have standing to seek a protective order quashing or modifying the subpoena. See City of Almaty, Kazakhstan v. Ablyazov, No. 1:15-cv-05345 (KHP) (AJN), 2019 WL 275701, at *2 (S.D.N.Y. Jan. 22, 2019). A non-recipient has standing to challenge a subpoena “only if it has a privilege, privacy or proprietary interest in the documents sought.” Universitas Educ., LLC v. Nova Grp., Inc., No. 11 Civ. 1590 (LTS)(HBP), 2013
WL 57892, at *5 (S.D.N.Y. Jan. 4, 2013) (“A party lacks standing to challenge subpoenas issued to non-parties on grounds of relevancy or undue burden.”); Malibu Media, LLC v. Doe No. 4, No. 12 Civ. 2950(JPO), 2012 WL 5987854, at *2 (S.D.N.Y. Nov. 30, 2012) (“Even where a party has standing to quash a subpoena based on privilege or a personal right, he or she lacks standing to object on the basis of undue burden.” (internal quotation marks and citation omitted)).
The movant bears the burden of persuasion on a motion to quash. See Refco Grp. Ltd., LLC v. Cantor Fitzgerald, L.P., No. 13 Civ. 1654 (RA)(HBP), 2014 WL 5420225, at *4 (S.D.N.Y. Oct. 24, 2014). However, the party issuing the subpoena must demonstrate that “the information sought is relevant and material to the allegations and claims at issue in the proceedings.” Sheindlin, 2021 WL 2075483, at *2 (citing Loeb, 2019 WL 2428704, at *4). “Motions to quash under Rule 45 are entrusted to the sound discretion of the district court.” Id. at *2 (quoting
Universitas Educ., LLC v. Nova Grp., Inc., No. 11-CV-01590 (LTS) (HBP), 2013 WL 57892, at *2 (S.D.N.Y. Jan. 4, 2013)). DISCUSSION To start, none of the parties have conducted themselves properly with respect to discovery thus far. Sound Around served the subpoenas without the benefit of obtaining
discovery directly from Defendants, which would have allowed it to more narrowly tailor third- party subpoenas. As a result, all of the subpoenas are overbroad. Sound Around does not specify particular products, contracts or relationships and does not even know if Defendants banked at all the banking institutions subpoenaed or have relationships with all the retailers subpoenaed. Sound Around makes only very general arguments about the relevance of the information sought.
For their part, Defendants failed to comply with the Court’s rules regarding motions and filed these motions without first seeking a conference to discuss the subpoenas. Moreover, they make arguments for which they do not have standing. Because Defendants were not served with the subpoenas, the only basis for them to object are on privacy or privilege grounds.
The Court held a conference with the parties urging them to meet and confer and come to an agreement on the scope of the subpoenas. They have been unable to do that, requiring Court intervention. Defendants have failed to meet their burden that they have a privacy interest in the records sought by the Retail and Freight Service Subpoenas. While the records sought in these
subpoenas are likely to contain information about Defendants’ business activities, “a non- subpoenaed party has standing only if it has a privilege, privacy or proprietary interest in the documents sought.” Universitas Educ., LLC, 2013 WL 57892, at *5. Here, the Friedman/Ilowitz Defendants argue that such records will reveal the products they sell, and informa�on related to brands and flow of cash that they would not reveal to compe�tors. But the Retail and Freight Service Subpoenas seek records from 2019 to the present, which primarily covers a time period
in which Friedman and Ilowitz worked for Plain�ff and therefore were not compe�tors. To the extent Defendants are arguing that the Defendant en��es were compe�tors of Plain�ff, or that Friedman and Ilowitz were compe�tors of Plain�ff despite working for Plain�ff, Defendants have not provided enough detail or informa�on for the Court to assess that argument. See Refco Grp. Ltd., LLC, 2014 WL 5420225, at *4 (“In order for a party to have standing to challenge a subpoena served on a non-party, there must be more than ‘a conclusory asser�on that the
subpoenas seek documents that are private, confiden�al, and commercially sensi�ve.’”); Sky Med. Supply Inc. v. SCS Support Claim Servs., Inc., No. CV126383JFBAKT, 2017 WL 1133349, at *5 (E.D.N.Y. Mar. 24, 2017) (“[A] party's general desire to thwart disclosure of informa�on by a non- party is [ ] not an interest sufficient to create standing.”) (internal quota�ons and cita�ons omited). The Court further notes that it has issued a Protective Order in this case which can
protect confidentiality of any trade secret information. (ECF No. 116.) To avoid concerns about disclosure of competitively sensitive information, any such information produced pursuant to the Retail and Freight Service Subpoenas may be produced subject to the terms of the Protective Order. See In re Application of FB Foods, Inc., No. M8-85 (JFK), 2005 WL 2875366, at *1 (S.D.N.Y. Nov. 2, 2005) (concluding that even if there was a privacy interest, the documents
at issue were protected by a confidentiality agreement approved the by court). Therefore, the motions to quash the Retail and Freight Service Subpoenas are denied. This ruling, however, is without prejudice to the subpoenaed entities’ rights to object on grounds of relevance, proportionality and burden. The Bank Subpoenas are likely to contain personal financial information concerning Friedman and Ilowitz. Nonetheless, certain personal financial information necessarily will be
exchanged in this case because it is relevant to the parties’ relationship and damages. For example, bank records reflecting payments from Sound Around to Executive Laundry or MDF Marketing, Inc., and Executive Laundry or MDF Marketing, Inc. to Friedman and Ilowitz (and from Sound Around directly to Friedman and Ilowitz) are relevant to ascertaining what was paid to the individual defendants and how. Tax records including W-2, W-9, 1099 and other reporting of the payments will also be relevant to ascertaining the parties’ relationship to each
other. Similarly, payments made by Defendants in connection with any Trademark registration for the ScootKid and infringing scooter products are relevant, as would be gross sales information for sale of the allegedly infringing scooter product. Bank records may show deposits from scooter sales proceeds or deposits from online retailers for the infringing scooter products. Bank records also may show payments made to online retailers for setting up
accounts on behalf of Sound Around or Defendant businesses that are relevant for determining what accounts Friedman and Ilowitz set up for online sales of products. Insofar as Ilowitz left Sound Around in January 2024, the relevant bank records would not post-date February 2024. The actions in the Complaint concern the time period 2019-2024, and therefore records from this period are temporally relevant. For Friedman, however, bank records from 2019 to the
present would be relevant because Friedman is subject to a non-compete provision pursuant to his employment contract for two years post-termination, and Friedman was terminated in February 2024. At this time, Sound Around has not met its burden to show the relevance of all of the Bank records it seeks, such as signature cards, leger cards, detailed account statements, loan records, credit card records, or purchases of bank checks. See Fed. R. Civ. P. 26(b)(1) (“Par�es
may obtain discovery regarding any nonprivileged mater that is relevant to any party's claim or defense and propor�onal to the needs of the case.”) Accordingly, the motions to quash the Bank Subpoenas are granted in part and denied in part. See Insured Advoc. Grp., LLC v. Spartan Servs. Corp., No. 23-CV-07212 (LJL), 2024 WL 4893580, at *3-4 (S.D.N.Y. Nov. 26, 2024) (granting in part and denying in part a motion to quash subpoenas served on nonparty banks); MG Freesites Ltd. v. Scorpcast, LLC, No. 22 MISC. 361 (PAE), 2023 WL 2822272 (S.D.N.Y. Apr. 7,
2023) (modifying the scope of a document request contained in a nonparty subpoena). At this juncture in the litigation, the records produced shall include a listing of the accounts held by the entities listed on the subpoenas, information on 1099s issued, documents showing transactions between and among Sound Around, Friedman, llowitz, MDF Marketing, Inc., and Executive Laundry, documents showing all transactions in the 4 specific accounts/routing numbers identified in the Northfield Bank, TD Bank, Bank of America, and M&T Bank subpoenas, and documents showing transactions between Defendants and the Retail Entities and the Freight Service entities. This production will highlight at a macro level relevant transactions. Later in discovery Sound Around may apply to the Court to seek additional information from the Banks after it is better informed from discovery provided by Defendants. CONCLUSION For the reasons set forth above, the motions to quash are denied as to the Retail and Freight Service Subpoenas and granted in part and denied in part as to the Bank Subpoenas. The parties are warned that in the future the Court will not entertain motions that are filed prior to a robust meet and confer process or for failing to follow the court procedures requiring a pre-motion letter. The Clerk of Court is respectfully direct to terminate the motions at ECF Nos. 78, 83, 86 and 90.
SO ORDERED. DATED: New York, New York January 3, 2025 Kethauct He fe-ker KATHARINE H. PARKER United States Magistrate Judge