Colorado Supreme Court ditches debt collection case
The Colorado Supreme Court declined to rule on Friday in a case questioning the procedure a creditor may use to obtain records from entities related to a debtor, in which the court initially expressed its interest.
Joel Farkas is liable for a $41.2 million debt, and the creditor, VP Fruition Holdings LLC, issued a half-dozen subpoenas to organizations financially affiliated with Farkas.
Farkas moved to void those requests for information. He argued that, under the civil rules, VP Fruition Holdings first had to provide “proof to the satisfaction of the court, that any person has property of, or is indebted to” Farkas.
“Not only does VP Fruition indiscriminately shotgun subpoenas to Farkas’ banks, phone company, and landlord; it demands that these nonparties produce thousands of documents that contain private and proprietary information about the financials and business operations of an untold number of other nonparties that VP Fruition has no conceivable legal right to obtain,” his attorneys wrote.
Denver District Court Judge Ericka F.H. Englert agreed with Farkas, finding the subpoenas did not comply with the rule, which was the “exclusive procedure” for obtaining information from third parties about someone who has been found liable for a debt.
VP Fruition Holdings turned to the Supreme Court, arguing it was illogical to require proof of the financial relationship between a debtor and associated entities at the outset.
“Without access to documents uniquely within the possession of the nonparties Petitioner wishes to subpoena, Petitioner cannot uncover evidence of Debtor’s fraudulent transfers or use of alter egos or otherwise trace Debtor’s assets, and is therefore substantially hindered in its ability to enforce its judgment,” wrote attorney Patrick Gillette.
On March 12, the Supreme Court ordered Farkas to respond to VP Fruition Holdings’ petition. Farkas replied that VP Fruition Holdings never attempted to satisfy the requirements of the rule.
“If the documents Petitioner seeks are as integral to its recovery efforts as it claims, Petitioner should have no trouble explaining to the district court why it believes the nonparties at issue have possession of Respondent’s assets or are otherwise indebted to him,” wrote attorney Sarah L. Hartley.
She added that, with interest on the debt accruing even after the judgment, VP Fruition Holdings did not need the Supreme Court’s intervention. It would receive compensation after going through the regular appellate process, which weighs against immediate Supreme Court review.
In an unsigned May 22 order, the Supreme Court dismissed VP Fruition Holdings’ petition without elaboration and returned the case to Englert.
The case is VP Fruition Holdings LLC v. Farkas.

