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A financial technology company that allegedly possesses assets of another company it attempted to merge with must turn over wide-ranging merger-related documents to a creditor of the company it never acquired, a state appeals court has ruled.

Citing to and explaining state law on enforcement-of-money-judgment discovery, an Appellate Division, First Department panel has ruled that Urban FT Group and related entities must produce subpoenaed information to Cave Creek Investments, which in court records says it won a $236,353.71 judgment in Minnesota against Digiliti Money Technologies based on Digiliti allegedly defaulting on lease and financing agreements.

Urban FT and Digiliti had tried to merge, but the merger failed, and then New York-based Urban FT allegedly "appropriated" assets of Digiliti, according to Cave Creek's 2018 petition lodged in Manhattan Supreme Court against Urban FT and related entities.

Cave Creek appears to believe that Urban FT has information that will help it, or allow it, to collect on the money judgment it won in Minnesota against Digiliti, according to allegations and information in court records.

In deciding Urban FT must hand over subpoenaed information it may have that is related to Digiliti and the merger, the First Department panel wrote that Urban FT had misconstrued the relevant state law on disclosure related to enforcement of money judgments.

Urban FT's "argument that they should not have to produce documents unrelated to the subject matter of the underlying lawsuit misconstrues the law," the panel wrote, referring to the relevant law as Civil Practice Law & Rules 5223, titled "Disclosure," found under Article 52 of "Enforcement of Money Judgments."

"CPLR 5223 … speaks to the production of documents and materials relevant to the enforcement of the judgment," the panel said. "There is no requirement thereunder that the produced documents be relevant to the subject of the underlying lawsuit."

But Alan Fraade of The Mintz Fraade Law Firm in Manhattan, which represents Urban FT and related entities in the matter, said in an email that he and his clients disagree with the panel's decision.

"Our client had a security interest in the former assets of Digiliti and exercised its rights pursuant to a security agreement and the UCC," he said. "To give Cave Creek,  an unsecured judgment creditor, the right to the documents which the court is permitting, without any legal determination that it may have any rights to such assets, is inconsistent with applicable law and reason."

Asked whether he and his clients will seek leave to appeal the panel's decision, he said that they are considering their options.

In its opinion, the panel wrote that requests for information by Cave Creek Investments and Cave Creek owner James Leroy Davis, "as redrafted, narrowed, and defined on page 6 of their memorandum of law in support of the [petition] and adopted by the motion court, are relevant to petitioners' enforcement of the judgment," citing Gryphon Domestic VI v. GBR Information Services and U.S. Bank N.A. v. APP International Finance Co. B.V.

The opinion by panel Justices David Friedman, Barbara Kapnick, Cynthia Kern and Anil Singh affirms a February 2019 decision by Manhattan Supreme Court Justice Carol Edmead. Edmead had granted the Cave Creek petitioners' application for post-judgment disclosure to the extent of directing Urban FT and related entities to produce subpoena-responsive documents, as clarified and narrowed by the four categories of documents on page 6 of the memorandum of law.

Among the requested information listed on page 6 of the memo of law, according to the panel's Oct. 22 opinion, are: "Urban FT's communications with Digiliti during the merger period, communications with third-parties relating to the Digiliti merger, and documents and public statements relating to the merger that are relevant to how the merger failed to be consummated, why Urban FT nevertheless retained Digiliti's assets, or where those assets might now be located."

According to information listed in its petition, Cave Creek is based in Minnesota.

According to its website and other online information, Urban FT, based in Manhattan, is a core financial technology, or fintech, provider.

Online information indicates that Digiliti Money Technologies, which is not a party to the current case, has been a provider of financial technology solutions.

Michael Tsang, of the The Tsang Law Firm in Manhattan, represents Cave Creek Investments and a related party or parties, according to the decision. He could not be reached for comment.