COA: No 5th Amendment protection for liquidator from order to produce unredacted documents

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A liquidating company cannot avoid a court order to produce unredacted documents using the argument that the Fifth Amendment protects them, the Court of Appeals of Indiana ruled Wednesday.

Indianapolis family-owned resale business Barton’s Discounts lost its director of reverse logistics to Indy Surplus Liquidators in July 2019. That employee, Christopher Duncan, was hired by ISL to fill a position similar to what he had held at Barton’s.

Barton’s soon discovered that shortly before Duncan’s resignation, its log system showed a discrepancy when no invoice was generated for a certain delivery of goods. It also found that throughout 2019, Duncan had possibly sent at least nine truckloads of merchandise to locations affiliated with ISL and Midwest Surplus Liquidators without generating an invoice or seeking payment.

Barton’s sued, alleging Duncan and ISL engaged in a conspiracy to steal the truckloads for its own gain, asserting claims for conversion, conspiracy to commit conversion, aiding and abetting conversion, unjust enrichment, tortious interference with contract and injunctive relief.

The Marion Superior Court granted Barton’s motions for preliminary injunction and for expedited discovery on Duncan and ISL, ordering responses to written to be completed on Nov. 8, 2019.

Duncan and ISL were asked to detail and produce all communications with Duncan since Jan. 1, 2019, but both Rupal Patel and Christopher Zorman of ISL and MSL invoked the Fifth Amendment privilege against self-incrimination in response to certain requests for production and refused to produce responsive documents.

The trial court found that the invocation of their Fifth Amendment rights was invalid because they were asserted “as a blanket privilege and not on a document-by-document or question-by-question basis.” It ordered them to produce all requested documents within 20 calendar days and for the parties to discuss which specific documents were Fifth Amendment-privileged.

As a result, the appellants produced heavily-redacted text messages between Duncan and ISL, as well as a privilege log identifying more than 100 text messages in the chain that were withheld on Fifth Amendment grounds.

Barton’s subsequently moved to compel the production of the unredacted text messages, which the trial court granted. The court then certified an order for interlocutory appeal but denied the appellants’ request for a stay pending the outcome of the appeal.

The appellate court affirmed, concluding there was no abuse of discretion in granting Barton’s motion to compel in part and in ordering the production of all responsive, unredacted documents requested by Barton’s discovery request.

“We agree with the trial court that the text messages are non-testimonial in nature and therefore are not protected under the Fifth Amendment,” Judge Patricia Riley wrote, noting that the text messages were voluntarily created prior to the issuance of the discovery requests.

Additionally, the COA found that Barton’s asked for the production of text messages that it already knew existed and that are currently in the possession of the appellants.

“The actual act of producing these text messages does not give Barton’s any new information,” Riley wrote.

The appellate panel also agreed that the Fifth Amendment did not apply to appellants’ communications with Duncan because it does not protect business records created by an owner, agent or employee of a business entity.

“Even though a personal phone might have been used to send the text messages, we agree with the trial court’s conclusion that if these messages ‘were clearly sent in Zorman’s and Patel’s representative capacities on behalf of ISL and or MSL, then those messages are not the personal communications of Zorman and Patel and therefore, the messages are not protected by the Fifth Amendment,’” it concluded.

The case is Christopher Allen Duncan; Patel’s Palace LLC, d/b/a Indy Surplus Liquidators, Midwest Surplus Liquidators, LLC, Rupal Patel, and Christopher Zorman v. Barton’s Discounts, LLC, 21A-PL-211.

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