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Wells Fargo Bank NA v. Wyo Tech Investment Group LLC

United States District Court, D. Arizona

August 27, 2019

Wells Fargo Bank NA, Plaintiff,
v.
Wyo Tech Investment Group LLC, et al., Defendants.

          ORDER

          Dominic W. Lanza, United States District Judge

         A group of non-party subpoena recipients (“the Subpoenaed Individuals”) has filed a motion for recusal. (Doc. 204.) For the following reasons, the motion will be denied.

         BACKGROUND

         This is a civil interpleader action in which two sets of adversaries-(1) Wyo Tech Investment Group LLC (“Wyo Tech”) and (2) CWT Canada II Limited Partnership, Resource Recovery Corporation, and Jean Noelting (collectively, the “Judgment Creditors”)-are fighting over $546, 282.55. The procedural and factual background is summarized in earlier orders (Docs. 94, 119), so only a brief recap is necessary here.

         In 2016, the Judgment Creditors obtained a $7 million judgment against Dennis Danzik in New York state court.

         In October 2017, the Judgment Creditors attempted to collect on a portion of the outstanding judgment by freezing a bank account at Wells Fargo, which had a balance of $546, 282.55. Notably, this account wasn't held in Danzik's name. Instead, it was held in the name of Wyo Tech. To freeze the account, the Judgment Creditors' attorneys utilized an unusual procedural tool known as a “restraining notice, ” which is governed by section 5222 of the New York Civil Practice Law and Rules.

         Wyo Tech protested when it learned its account had been frozen, arguing that it had no connection with Danzik and that Wells Fargo should immediately release the frozen funds. In response, Wells Fargo filed an interpleader action in this court. Functionally, this meant that Wells Fargo deposited the disputed funds into the Court's bank account so the Court could referee the fight between Wyo Tech and the Judgment Creditors over who has the superior entitlement to the funds.

         The interpleader action was filed in November 2017 and initially assigned to a different judge. (Doc. 1.) In October 2018, it was reassigned to the undersigned judge. (Doc. 93.) This reassignment was part of the initial wave of case reassignments triggered by the undersigned judge's appointment to the bench.

         One of the key disputed issues in this case has been whether the Judgment Creditors should be entitled to conduct discovery concerning their theory that Danzik secretly controls Wyo Tech or otherwise has an interest in Wyo Tech's funds. In a lengthy order issued in April 2019, the Court concluded that the Judgment Creditors should be entitled to pursue such discovery. (Doc. 119.)

         The litigation since this discovery ruling has been quite contentious. For example:

▪ On May 15, 2019, the Judgment Creditors filed an amended motion to hold Wyo Tech's counsel in civil contempt for, inter alia, failing to respond to certain subpoenas. (Doc. 135.) On May 29, 2019, following a hearing, the Court declined to make a contempt finding. (Doc. 155.)
▪ On June 19, 2019, the Judgment Creditors filed another motion seeking civil contempt sanctions. (Doc. 159.) This motion was directed at a group of seven non-party subpoena recipients (different from the Subpoenaed Individuals) who had failed to respond to subpoenas requesting financial and other records. (Id.) On June 27, 2019, the Court held a hearing on this motion, which none of the subpoena recipients chose to attend. (Doc. 166.) Accordingly, the Court issued an order holding the seven non-parties in civil contempt and imposing daily fines until the documents were produced. (Doc. 167.)
▪ On August 2, 2019, the Judgment Creditors filed a motion in which they acknowledged that six of the seven non-parties had produced the subpoenaed documents following the issuance of the contempt order but nevertheless requested that the Court issue an order compelling those non-parties' immediate imprisonment. (Doc. 183.) On August 6, 2019, the Court denied this motion in relevant part and refused to order anybody's imprisonment. (Doc. 186.) The Court did, however, set a further show-cause hearing concerning one of the non-parties-a company called Danzik Applied Sciences, LLC (“DAS”), whose only member is Danzik's wife, Elizabeth Danzik-that had ...

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