No abuse of discretion in allowing third party discovery after judgment

Iowa appellate courts rarely issue opinions in cases addressing third party discovery post-judgment. Thus, counsel engaging in discovery post-judgment should carefully review Golden Enterprises, LLC v. Iowa District Court for Polk County, No. 15-0824 (May 11, 2016). In Golden, the Iowa Court of Appeals confirmed the trial court’s broad discretion in disputes regarding third party, post-judgment discovery.

Golden is the continuation of First American Bank v. Urbandale Laser Wash, LLC. After the judgment in First American Bank was affirmed on appeal, the bank obtained partial satisfaction. The bank then sought to recover the remaining $1.5 million in judgment debt, and initiated proceedings auxiliary to execution.

Golden then sought certiorari to the appellate court, arguing that the trial court abused its discretion in allowing broad discovery to proceed against the debtor’s wife and Golden Enterprises, a jointly owned limited liability company, neither of which was bound by the judgment. The bank served numerous subpoenas for depositions and documents from the debtor’s spouse and Golden, which appeared to have been restructured during the pendency of the foreclosure.

The Court of Appeals recognized that the district court “enjoys wide discretion in its rulings on discovery issues.” Iowa Code section 630.5 provides that witnesses may be required to appear and testify during post judgment proceedings. The Iowa Rules of Civil Procedure allow for a liberal construction of the rules for providing discovery; the court may grant a protective order to limit discovery only when good cause is shown; and reasonable steps must be taken to avoid imposing undue burden on subpoena recipients. However, a protective order will not issue simply because the recipient claims that compliance would result in undue burden or expense; burdensomeness must be shown.

In this context, the Court of Appeals ruled that the trial court had not abused his discretion. The information requested was relevant to the bank’s ability to determine what assets would be available for execution and which were not subject to execution because owned by the wife or the entity. In reaching this decision, the Court of Appeals specifically noted that Golden had been restructured during the foreclosure. Neither the spouse nor Golden had shown that good cause existed to issue a protective order; no specific evidence concerning the time or expense for compliance was offered, and no privacy interests of truly disinterested parties were implicated.

If the wife and Golden had offered evidence as to the time and expense required to comply, the result may have been different. Thus, Golden reminds creditors that their reasonable collection efforts will usually be allowed by the courts, and debtors and affiliated parties asserting burdensomeness will have to demonstrate a burden to succeed.

For questions regarding Golden Enterprises, LLC v. Iowa District Court for Polk County or commercial litigation, contact Mollie Pawlosky.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.