The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
POWER BUYING DEALERS USA,
INC., a Delaware corporation,
Plaintiff, No. 21 C 3154
v. Jeffrey T. Gilbert
United States Magistrate Judge
JUUL LABS, INC., a Delaware
corporation, and HS WHOLESALE,
LIMITED, an Illinois corporation,
Defendants.
ORDER
This matter is before the Court on Plaintiff Power Buying Dealers USA, Inc.’s
(“PBD’s”) Motion for Protective Order Concerning Subpoena Issued to Plaintiff’s
CPA and the Application of the “Accounting Privilege” [199] (“Motion for Protective
Order”). For the reasons discussed below, the Motion for Protective Order is denied.
Defendant Juul Labs, Inc. (“JLI”) served a third-party subpoena on Ezzy &
Associates, PBD’s accountant, on October 6, 2023, seeking financial records and a
deposition. Mariam Ezzy is the principal of Ezzy & Associates (together referred to
as “Ezzy”), and she is a certified public accountant who has provided accounting
services for PBD. Ezzy retained PBD’s counsel to represent them for purposes of
responding to JLI’s subpoena. Ezzy has produced some financial records pursuant
to JLI’s subpoena, including PBD’s financial statements and federal tax returns for
the relevant years at issue in this case. Ezzy, however, has refused to produce other
records and documents and also seeks to limit the scope of Ms. Ezzy’s deposition
based on the assertion of an accountant-client privilege arising under the Illinois
Public Accounting Act, 225 ILCS 450/27.
In response, JLI argues the accountant-client privilege does not apply in this
case because federal law does not recognize an accountant-client privilege, and the
privilege PBD and Ezzy seek to assert arises only under state law and cannot be
asserted in a case arising under federal law. The parties met and conferred about
the applicability of the accountant-client privilege, and they are at an impasse. The
parties agreed to postpone Ms. Ezzy’s deposition and the production of additional
documents so that PBD and Ezzy could seek guidance from this Court regarding the
applicability of the accountant-client privilege in this case. PBD and Ezzy filed the
instant Motion for Protective Order [199]. It is fully briefed and ripe for decision.1
The accountant-client privilege that PBD and Ezzy seek to invoke is an
Illinois statutory privilege that applies to claims arising under Illinois state law.
PBD and Ezzy do not dispute this. Motion for Protective Order [199], at 4. It also is
not disputed that PBD only asserts claims in this case arising under federal law
(the Robinson Patman Act) and no claim based on Illinois state law. Id. at 6. The
law is clear, and the Seventh Circuit has continually re-affirmed as a longstanding
principle, that “[t]here is no accountant-client privilege” in a case where only federal
law applies substantively. See In re Grand Jury Proceedings, 220 F.3d 568, 571 (7th
Cir. 2000). PBD and Ezzy acknowledge that “when discovery is relevant to federal
claims, the Illinois accountant privilege will not be recognized.” Motion for
Protective Order [199], at 6. Because it is undisputed that PBD’s claims in this case
arise under federal law, the accountant-client privilege does not apply in this case.
Therefore, JLI can seek documents and elicit testimony from Ezzy, and Ezzy cannot
refuse to produce relevant and responsive documents or answer relevant questions
at her deposition, based on the assertion of an accountant-client privilege as no such
privilege exists under federal law.
PBD and Ezzy, however, assert an alternative argument that the accountant-
client privilege should be applied to narrow the scope of JLI’s subpoena for
documents and testimony. Specifically, PBD and Ezzy argue the Court has
discretion to “balance the equites to assure that the accounting privilege is
respected where circumstances warrant” and the accountant’s privilege “should be
preserved as it pertains to other confidential matters and communications that are
beyond the scope of the federal claims at issue.” PBD’s Reply [207], at 1-2, 6. The
Court is not persuaded by this alternative argument. PBD and Ezzy do not cite any
case that requires, let alone suggests, that a federal court should balance equities to
assure that a state law privilege not applicable in cases arising under federal law is
respected or preserved when evaluating whether discovery, in this case a third-
party subpoena, is overbroad or seeks information that is not relevant or
proportional to the claims and defenses in a federal case. It is unclear what equities
PBD and Ezzy want the Court to balance particularly when federal law does not
recognize any accountant-client privilege. Moreover, to the extent any of the
documents Ezzy will produce are confidential, the parties agreed to, and the Court
entered, a Confidentiality Order [41] in this case to guard against the public
disclosure of confidential information.
This Court is guided by Rules 26 and 45 of the Federal Rules of Civil
Procedure in determining the proper scope of third-party discovery sought in this
case. JLI says that it seeks the production of relevant financial records and
1 The Court notes, and PBD acknowledges, that the accountant-client privilege belongs to
Ezzy as PBD’s accountant and not to PBD. Motion for Protective Order [199], at 4.
documents, and it seeks to take the deposition of Ms. Ezzy, related to both liability
and damage issues relevant to PBD’s federal claims. JLI says that PBD has
produced a limited number of financial statements and that PBD’s principal and
Rule 30(b)(6) designee, Sam Odeh, was not able to testify completely about PBD’s
financial records. Rather, Mr. Odeh said that Ezzy prepared the financial
statements and tax returns and that questions about them should be directed to the
accountants. JLI’s Response Brief [203], at 8 (citing Mr. Odeh’s deposition
testimony). Neither PBD nor Ezzy dispute JLI’s characterization of Mr. Odeh’s
testimony, and as PBD and/or Ezzy state in the Motion for Protective Order, “There
is no objection to Ezzy testifying regarding the general accounting services provided
to PBD through the subject year, nor the financial statement or tax returns it
prepared, nor the facts concerning the freezing of Sam Odeh’s and PBD’s bank
accounts in or around 2018.” Motion for Protective Order [199], at 3.
Beyond the relevance of PBD’s accountant’s testimony on damages issues,
JLI also contends that Ezzy likely has relevant information on liability issues as
well. In its response to the Motion for Protective Order and based on discovery it
has received to date, JLI argues that PBD lost sales, among other reasons, due to its
significant financial problems — including over $10 million in debt that prevented
PBD from purchasing JLI products for four months, an alleged theft by a former
PBD employee/distributor that cost PBD more than $3.5 million, and the freezing of
PBD’s and Mr. Odeh’s bank accounts as a result of PBD conducting millions of
dollars in bank transactions in cash — and not because JLI allegedly employed
discriminatory rebate, return, and promotional practices that resulted in antitrust
injury as PBD alleges. JLI’s Response Brief [203], at 2. These factual issues
undoubtedly will be disputed on summary judgment and, if necessary, at trial. As
quoted above, PBD and Ezzy do not object to Ezzy testifying about at least some of
this information.
Finally, PBD and Ezzy raise but do not develop in their Motion for Protective
Order an argument that the scope of JLI’s subpoena is too broad even if the
accountant-client privilege does not apply in this case and despite their concession
that Ezzy may have some relevant information. For example, they appear to argue
that a request for “all communications” between identified individuals “that relate
to PBD and its affiliated businesses” in JLI’s subpoena rider is overbroad and
burdensome. JLI’s Subpoena and Rider [ECF No. 199-1]. PBD and Ezzy may be
correct that a request for “all communications” is overbroad if it is not tethered to
specific subject matters. But neither party develops this issue in their briefs.
Without more context from the parties, the Court will not delve into undeveloped
arguments about relevance, overbreadth, or burden, and it cannot decide the issue
on the record before it.
Further, it is not clear that the parties have completed the Local Rule 37.2
meet and confer process about the particulars of JLI’s subpoena and documents JLI
is seeking and what documents Ezzy will produce. In fact, it seems they have □□□□
If more discussions need to occur, the parties promptly should attend to those
discussions. If any disputes remain, PBD or JLI can, if necessary, seek appropriate
relief from the Court although the Court is confident the parties can resolve any
issues themselves with the guidance provided in this Order.
For the reasons discussed in this Order, Plaintiff's Motion for Protective
Order Concerning Subpoena Issued to Plaintiff's CPA and the Application of the
“Accounting Privilege” [199] is denied.
It is so ordered.
leffrey . Gilbert
United States Magistrate Judge
Dated: February 9, 2024
2 In its response, JLI noted that on December 18, 2023, it proposed search terms to PBD in
an effort to narrow the volume of Ezzy communications for review, but the parties did not
meet and confer regarding relevance or burden objections. JLI’s Response Brief [203], at 4
n. 5. PBD does not address this in its reply brief.