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holding that § 1782 motions are procedural and "rulings on § 1782 applications are not dispositive . . . ."
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18 Misc. 435 (GBD) (GWG)
09-05-2019
IN RE: Application of HULLEY ENTERPRISES LTD., Yukos Universal Ltd., and Veteran Petroleum Ltd., for an Order Pursuant to 28 U.S.C. § 1782 to Conduct Discovery for Use in a Foreign Proceeding
Steven M. Shepard, Susman Godfrey LLP, New York, NY, Stephanie Nicole Spies, Susman Godfrey LLP, New York, NY, for Application of Hulley Enterprises Ltd., Yukos Universal Ltd., and Veteran Petroleum Ltd., for an Order Pursuant to 28 U.S.C. § 1782 to Conduct Discovery for Use in a Foreign Proceeding
Steven M. Shepard, Susman Godfrey LLP, New York, NY, Stephanie Nicole Spies, Susman Godfrey LLP, New York, NY, for Application of Hulley Enterprises Ltd., Yukos Universal Ltd., and Veteran Petroleum Ltd., for an Order Pursuant to 28 U.S.C. § 1782 to Conduct Discovery for Use in a Foreign Proceeding
MEMORANDUM DECISION AND ORDER
GEORGE B. DANIELS, United States District Judge
Petitioners Hulley Enterprises Ltd., Yukos Universal Ltd., and Veteran Petroleum Ltd. apply for leave to serve subpoenas on Respondents White & Case, LLP ("White & Case") and its Chairman, Hugh Verrier, pursuant to 28 U.S.C. § 1782. (First Am. Appl. By Hulley Enterprises Ltd., Yukos Universal Ltd., and Veteran Petroleum Ltd. for an Order Pursuant to 28 U.S.C. § 1782 to Conduct Disc. for Use in a Foreign Proceeding and Statement in Supp. Thereof, ECF No. 7.) Through these subpoenas, Petitioners seek evidence to use in their litigation against the Russian Federation that is currently pending in the Netherlands (the "Dutch Appellate Proceeding"). (Id. )
Petitioners' application was referred to Chief Magistrate Judge Gabriel W. Gorenstein. (Order of Reference to a Magistrate Judge, ECF No. 28.) On February 19, 2019, Chief Magistrate Judge Gorenstein issued an Opinion and Order (the "Opinion") denying the application. (Opinion, ECF No. 48.) Petitioners filed objections to the Opinion on March 12, 2019. (Pet'rs' Objs. to Judge Gorenstein's Op. and Order ("Pet'rs' Objs."), ECF No. 51.) Subsequently, on April 2, 2019, Respondents filed a response to Petitioners' objections. (Resp'ts' Resp. to Pet'rs' Objs. to Judge Gorenstein's Op. and Order ("Resp'ts' Resp."), ECF No. 52.) Petitioners' objections are overruled, and Chief Magistrate Judge Gorenstein's Opinion is AFFIRMED.
The relevant factual and procedural background is set forth in greater detail in the Opinion and is incorporated by reference herein.
This Court denies Petitioners' request for leave to file a reply brief in support of their objections or, in the alternative, to strike in part Respondents' response to the objections, (Mot. for Leave to File Reply Br. in Supp. of Objs. to Judge Gorenstein's Op. and Order or, in the Alternative, to Strike in Part Resp'ts' Resp. to Pet'rs' Objs., ECF No. 53).
I. FACTUAL BACKGROUND
A. The Parties.
Petitioners are former shareholders of OAO Yukos Oil Company ("Yukos"), a Russian oil and gas company that was privatized in the mid-1990s. (Mem. of Law in Supp. of Ex Parte Appl. By Hulley Enterprises Ltd., Yukos Universal Ltd., and Veteran Petroleum Ltd. for an Order Pursuant to 28 U.S.C. § 1782 to Conduct Disc. for Use in a Foreign Proceeding ("Pet'rs' Mem."), ECF No. 2, at 1; Mem. of Law in Opp'n to Pet'rs' Appl. For an Order Pursuant to 28 U.S.C. § 1782 to Conduct Disc. for Use in a Foreign Proceeding ("Resp'ts' Opp'n"), ECF No. 19, at 5.) From approximately 1998 through 2004, the law firm of White & Case represented Yukos and certain subsidiaries of GML Ltd. ("GML"), the holding company that controlled the majority ownership of Yukos at the time. (Pet'rs' Mem. at 3–4.)
Petitioners allege that during this representation, White & Case conducted several projects that are "relevant" to refuting certain allegations that the Russian Federation makes in the Dutch Appellate Proceeding. (Id. at 4.) First, White & Case allegedly conducted a due diligence review of Yukos and its subsidiaries (the "Due Diligence Project"), (id. ), which involved "review[ing] copious documentation related, inter alia , to the privatization of Yukos" (id. at 5 (quoting Decl. of David Godfrey ("Godfrey Decl."), ECF No. 2-21, ¶ 7)). Second, in March 2002, White & Case allegedly advised the director of GML on the first of two so-called "Tempo Agreements," under which GML agreed to pay certain fees to a company called Tempo Finance Ltd. and to certain individuals. (Id. ) Third, Petitioners claim that White & Case provided "extensive due diligence and other services" to GML subsidiary Menatep Ltd., including "investigat[ing] the chain of title and ownership of Yukos shares." (Id. (quoting Godfrey Decl. ¶ 8).) Finally, Petitioners allege that White & Case provided legal advice to GML subsidiary MFO Menatep in connection with a settlement agreement entered into with the Russian Federation's Federal Property Fund regarding the privatization of shares in another Russian company. (Id. at 7.)
B. The Arbitration in the Netherlands.
According to Petitioners, beginning in 2003, the Russian Federation unlawfully expropriated Petitioners' investments in Yukos. (Id. at 7.) Among other tactics, the Russian Federation allegedly "claimed that Yukos owed back taxes of approximately $27 billion; froze Yukos's bank accounts; seized Yukos's assets; forced the company into bankruptcy; and transferred its assets to [certain] Russian state-owned oil and gas companies." (Id. )
In February 2005, each of the three Petitioners commenced a separate arbitration against the Russian Federation in the Hague, seeking compensation under the Energy Charter Treaty for the alleged expropriation. (Id. at 1, 7.) The Russian Federation raised several objections in these arbitrations, including that Petitioners engaged in "illegal and bad faith conduct" from the privatization of Yukos in the mid-1990s to its liquidation in November 2007, and that Petitioners' "unclean hands" therefore deprived them of protection under the Energy Charter Treaty. (Decl. of Marnix Leijten ("Leijten Decl."), Ex. 2a (Hulley Enterprises Ltd. Arbitral Award), ECF No. 2-2, ¶¶ 1273, 1281.)
On July 18, 2014, the arbitral tribunal (the "Arbitral Tribunal" or "Tribunal") entered three awards in Petitioners' favor (the "Arbitral Awards" or "Awards"). (Leijten Decl., Ex. 2a (Hulley Enterprises Ltd. Arbitral Award); Leijten Decl., Ex. 2b (Yukos Universal Ltd. Arbitral Award), ECF No. 2-2; Leijten Decl., Ex. 2c (Veteran Petroleum Ltd. Arbitral Award), ECF No. 2-2.) The Tribunal found that while the Russian Federation "ha[d] not explicitly expropriated Yukos or the holdings of its shareholders, ... the measures that [the Russian Federation] has taken in respect of Yukos ... have had an effect ‘equivalent to nationalization or expropriation.’ " (Leijten Decl., Ex. 2a (Hulley Enterprises Ltd. Arbitral Award), ¶ 1580.) Accordingly, the Tribunal concluded that the Russian Federation had breached its obligations under Article 13 of the Energy Charter Treaty, (id. ¶ 1585), and ordered the Russian Federation to pay Petitioners over $50 billion in damages, (see id. ¶ 1888(f) (awarding approximately $39.97 million to Hulley Enterprises Ltd.); Leijten Decl., Ex. 2b (Yukos Universal Ltd. Arbitral Award), ¶ 1888(f) (awarding approximately $1.85 million to Yukos Universal Ltd.); Leijten Decl., Ex. 2c (Veteran Petroleum Ltd. Arbitral Award), ¶ 1888(f) (awarding approximately $8.20 million to Veteran Petroleum Ltd.)).
C. The Enforcement Proceedings.
Petitioners subsequently commenced proceedings, including in the United States and in the United Kingdom, to recognize and enforce the Arbitral Awards. (Pet'rs' Mem. at 3.) White & Case, which ceased representing Yukos and the GML subsidiaries in approximately 2004, (id. at 4), currently represents the Russian Federation in these enforcement proceedings, (id. at 3).
According to Petitioners, White & Case gained access to certain documents relating to the Due Diligence Project through its current representation of the Russian Federation. Specifically, in May 2007, while the arbitrations were pending, Russian prosecutors requested documents from White & Case relating, inter alia , to the Due Diligence Project (the "May 2007 Search"). (Pet'rs' Mem. at 9.) Petitioners allege that White & Case "surrendered" these documents to the prosecutors "voluntarily," (id. ), and that these documents are now part of a Russian criminal investigative file that the Russian Federation is using to challenge the Arbitral Awards in the enforcement proceedings, (Pet'rs' Reply Mem. of Law in Supp. of Appl. for an Order Pursuant to 28 U.S.C. § 1782 to Conduct Disc. for Use in a Foreign Proceeding, ECF No. 30, at 1). Petitioners allege that they do not have access to any documents in the criminal investigative file, but that White & Case has access—including to the documents relating to the Due Diligence Project—as counsel for the Russian Federation in the enforcement proceedings. (Id. at 1, 11, 14.)
D. The Litigation in the Netherlands.
In November 2014, the Russian Federation filed an action in the District Court of the Hague (the "Dutch District Court") seeking to set aside the Arbitral Awards. (Id. at 11.) On April 20, 2016, the Dutch District Court set aside the Awards, finding that the Russian Federation was not bound by the Energy Charter Treaty and that the Arbitral Tribunal therefore lacked jurisdiction over the Russian Federation. (Leijten Decl., Ex. 3 (Dutch District Court Judgment), ECF No. 2-2.) Because the Dutch District Court vacated the Awards on this jurisdictional ground, it did not reach the issue of Petitioners' alleged unclean hands. (See Decl. of Rob S. Meijer ("Meijer Decl."), Ex. 16 (Dutch Appellate Court Ruling), ECF No. 22-16, ¶ 4.4.8.)
On July 18, 2016, Petitioners appealed the Dutch District Court's ruling to the Court of Appeal of the Hague (the "Dutch Appellate Court"). In its Statement of Defense filed on November 28, 2017, the Russian Federation raised several grounds for affirming the annulment of the Arbitral Awards. (Leijten Decl., Ex. 4 (Statement of Defense), ECF Nos. 2-2–2-19.) One of these grounds, "Public Policy Ground 6," was that enforcing the Awards would violate public policy by "legitimizing and upholding [Petitioners'] fraudulent, corrupt and illegal activities." (Leijten Decl., Ex. 4 (Statement of Defense), ECF No. 2-16, ¶ 1201.) Petitioners argued that Public Policy Ground 6 was improperly raised as a defense, claiming, among other things, that "the assertions were not put forward in the arbitration in due time" and that "the Russian Federation ha[d] waived its right to base its claim on the unclean hands argument, or has forfeited this right." (Meijer Decl., Ex. 16 (Dutch Appellate Court Ruling), ¶¶ 4.1.5(a), 4.1.5(d).)
In a ruling dated September 25, 2018, however, the Dutch Appellate Court found that the unclean hands argument was not new, and that it had been previously advanced by the Russian Federation as an argument for the inadmissibility of Petitioners' claims under the Energy Charter Treaty. (Id. ¶ 4.2.2.) It therefore found that the Russian Federation was not precluded from invoking the unclean hands argument in the context of the Arbitral Tribunal's alleged lack of jurisdiction. (Id. ¶ 4.2.5.) The Dutch Appellate Court further found that Petitioners had no basis for assuming that the Russian Federation had abandoned its unclean hands argument. (Id. ¶ 4.2.3.) Finally, the Dutch Appellate Court permitted the Russian Federation to introduce additional evidence in support of this argument, and provided time for Petitioners to respond to such evidence. (Id. ¶¶ 4.4.7, 7.2.)
Subsequently, the Dutch Appellate Court issued an interim judgment on December 18, 2018, noting that "in the defen[s]e on appeal[,] the Russian Federation put forward the unclean hands argument for the first time in support of its [public policy defense]." (Pet'rs' Notice of Suppl. Authority, Ex. A (Dutch Appellate Court Interim Judgment), ECF No. 44-1, ¶ 2.6.) The Dutch Appellate Court observed that, in support of this argument, "the Russian Federation submitted a large number of exhibits and brought and argued its case considerably more broadly than in the first instance." (Id. ) It therefore held that Petitioners would "not only be allowed to respond ... to these exhibits but also to these arguments" and that they "may submit new exhibits." (Id. ) E. Petitioners' 28 U.S.C. § 1782 App lication for Discovery.
Petitioners filed the instant application pursuant to 28 U.S.C. § 1782 on September 17, 2018, seeking evidence from Respondents to refute the Russian Federation's unclean hands allegations in the Dutch Appellate Proceeding. (Pet'rs' Mem. at 1.) Petitioners allege that this evidence will "confirm the legitimacy of the Yukos privatization, the subsequent transfers of Yukos shares, and the Tempo Agreements." (Id. at 14.) They insist that they do not seek documents or information generated during White & Case's current representation of the Russian Federation in the enforcement proceedings, (id. at 16), and that they instead only seek "historical documents ... i.e., documents received or generated by White & Case between 1998 and 2004," (id. at 16 n. 9).
With respect to documents, Petitioners seek materials from eight of White & Case's case files, including those of Yukos and seven related entities. (Id. at 14.) Specifically, Petitioners seek, inter alia , (1) documents relating to the Due Diligence Project that White & Case conducted of Yukos; (2) documents that White & Case provided to the Russian Federation relating to Petitioners or Yukos; (3) communications between White & Case and Petitioners or its representatives; (4) documents relating to any investigation of the title to Yukos shares; and (5) documents relating to the Tempo Agreements. (Id. at 15; Decl. of Steven Shepard ("Shepard Decl."), Ex. 2 (Attach. to Doc. Subpoena to White & Case), ECF No. 2-1, at 7–8.) Petitioners note that the documents requested "may be stored in the firm's overseas offices, including most particularly in its Moscow office." (Pet'rs' Mem. at 19.)
Petitioners also seek to depose White & Case and Chairman Verrier, who Petitioners allege "was the overall leader of White & Case's representation of Yukos and GML's subsidiaries" and "has personal knowledge of the ... Due Diligence Project and its conclusions." (Id. at 15.) They seek testimony from both White & Case and Verrier relating, inter alia , to (1) the Due Diligence Project, including communications with Yukos and Petitioners about the project; (2) the circumstances of White & Case's disclosure of documents to the Russian Federation; and (3) the documents responsive to the document subpoena, including the location of such documents. (Id. at 15; Shepard Decl, Ex. 3 (Attach. to Rule 30(B)(6) Dep. Subpoena to White & Case), ECF No. 2-1, at 5–7; Shepard Decl., Ex. 4 (Attach. to Rule 30(B)(1) Dep. Subpoena to Hugh Verrier), ECF No. 2-1, at 5–7.)
II. LEGAL STANDARDS
A. Review of Magistrate Judges' Rulings.
"Although a magistrate may hear dispositive pretrial motions, he may only submit proposed findings of fact and recommendations for disposition of the matter." Thomas E. Hoar, Inc. v. Sara Lee Corp. , 900 F.2d 522, 525 (2d Cir. 1990). The court must review de novo the portions of a magistrate judge's report and recommendation to which a party properly objects. 28 U.S.C. § 636(b)(1)(C). The court need not conduct a de novo hearing on the matter. See United States v. Raddatz , 447 U.S. 667, 675–76, 100 S.Ct. 2406, 65 L.Ed.2d 424 (1980). Instead, it is sufficient that the court "arrive at its own, independent conclusion" regarding those portions of the report to which objections are made. Nelson v. Smith , 618 F. Supp. 1186, 1189–90 (S.D.N.Y. 1985) (citation omitted).
For "nondispositive pretrial matters," however, the "magistrate ... may issue orders." Thomas E. Hoar , 900 F.2d at 525. "The district court reviews such orders under the ‘clearly erroneous or contrary to law’ standard." Id. (citing § 636(b)(1)(A) ; Fed. R. Civ. P. 72(a) ). Clear error is present when, "upon review of the entire record, [the court is] ‘left with the definite and firm conviction that a mistake has been committed.’ " United States v. Snow , 462 F.3d 55, 72 (2d Cir. 2006) (citation omitted). "A magistrate's ruling is contrary to law if it ‘fail[s] to apply or misapplies relevant statutes, case law, or rules of procedure[.]’ " Thai Lao Lignite (Thailand) Co. v. Gov't of Lao People's Democratic Republic , 924 F. Supp. 2d 508, 512 (S.D.N.Y. 2013) (first alteration in original) (citation omitted). "[M]agistrate judges are afforded broad discretion in resolving nondispositive disputes and reversal is appropriate only if their discretion is abused." Winfield v. City of New York , No. 15 Civ. 5236 (LTS), 2017 WL 5054727, at *2 (S.D.N.Y. Nov. 2, 2017) (alteration in original) (citation and internal quotation marks omitted). "[A] party seeking to overturn a magistrate judge's decision thus carries a heavy burden." U2 Home Entm't, Inc. v. Hong Wei Int'l Trading Inc. , No. 04 Civ. 6189 (JFK), 2007 WL 2327068, at *1 (S.D.N.Y. Aug. 13, 2007).
B. Application for Discovery Pursuant to 28 U.S.C. § 1782.
Pursuant to 28 U.S.C. § 1782, "[t]he district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal ...." 28 U.S.C. § 1782(a). Such an order may be made "upon the application of any interested person." Id. "To the extent that the order does not prescribe otherwise, the testimony or statement shall be taken, and the document or other thing produced, in accordance with the Federal Rules of Civil Procedure." Id. Nevertheless, "[a] person may not be compelled to give his testimony or statement or to produce a document or other thing in violation of any legally applicable privilege." Id.
In ruling on a § 1782 application, a district court must first determine whether three statutory requirements are met: (1) the person from whom discovery is sought must "reside" or be "found" in the district, (2) the discovery must be "for use in a proceeding before a foreign tribunal," and (3) the application must be "made by a foreign or international tribunal or any interested person." Kiobel by Samkalden v. Cravath, Swaine & Moore LLP , 895 F.3d 238, 243 (2d Cir. 2018), cert. denied sub nom. Kiobel ex rel. Samkalden v. Cravath, Swaine & Moore LLP , ––– U.S. ––––, 139 S. Ct. 852, 202 L.Ed.2d 582 (2019).
"[A] district court is not required to grant a § 1782(a) discovery application simply because it has the authority to do so." Intel Corp. v. Advanced Micro Devices, Inc. , 542 U.S. 241, 264, 124 S.Ct. 2466, 159 L.Ed.2d 355 (2004). Rather, after determining that the statutory requirements are met, the court should then exercise its discretion, considering four factors identified by the Supreme Court in Intel :
(1) whether "the person from whom discovery is sought is a participant in the foreign proceeding," in which event "the need for § 1782(a) aid generally is not as apparent as it ordinarily is when evidence is sought from a nonparticipant in the matter arising abroad";
(2) "the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance";
(3) "whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States"; and
(4) whether the request is "unduly intrusive or burdensome."
Kiobel , 895 F.3d at 244 (citing Intel , 542 U.S. at 264–265, 124 S.Ct. 2466 ). "The Intel factors are not to be applied mechanically," id. at 245, as they are simply "guides for the exercise of district-court discretion," Intel , 542 U.S. at 263 n.15, 124 S.Ct. 2466. Moreover, these four factors are "non-exclusive," id. at 244, and the district court "should also take into account any other pertinent issues arising from the facts of the particular dispute," id. at 245.
The court "must [also] exercise [its] discretion under § 1782 in light of the twin aims of the statute: providing efficient means of assistance to participants in international litigation in our federal courts and encouraging foreign countries by example to provide similar means of assistance to our courts." Schmitz v. Bernstein Liebhard & Lifshitz, LLP , 376 F.3d 79, 84 (2d Cir. 2004) (citation and internal quotation marks omitted).
III. THE RULING ON PETITIONERS' § 1782 APPLICATION WAS NOT DISPOSITIVE
As an initial matter, this Court must determine whether rulings on § 1782 applications, such as Chief Magistrate Judge Gorenstein's Opinion here, are considered dispositive or not. Neither the Supreme Court nor any circuit court appears to have squarely addressed this issue. Most lower courts, however, have found that such rulings are not dispositive and are therefore subject to review only for clear error. See, e.g. , In re Application of Quadre Investments, L.P. , No. 18 Misc. 118 (AB), 2019 WL 1075274, at *1 (C.D. Cal. Jan. 7, 2019) (noting that the "majority" of courts to address the issue have concluded that "a § 1782 application is a non-dispositive matter subject to review for clear error" (citation and internal quotation marks omitted)); JSC MCC EuroChem v. Chauhan , No. 17 Misc. 5 (AAT), 2018 WL 3872197, at *1, *14 (M.D. Tenn. Aug. 15, 2018) (collecting cases concluding that § 1782 motions are not dispositive, and therefore reviewing magistrate judge's ruling only for clear error); In re Sergeeva , No. 13 Civ. 3437 (LMM), 2015 WL 12866970, at *1–2 (N.D. Ga. Feb. 6, 2015) (same).
This Court agrees with the majority of courts finding that rulings on § 1782 applications are not dispositive. "A ruling is ‘dispositive’ if it resolves substantive claims for relief rather than mere issues in the litigation." Am. Stock Exch., LLC v. Mopex, Inc. , 215 F.R.D. 87, 92 (S.D.N.Y. 2002) (citation omitted). A § 1782 motion, however, is ancillary by nature, and a ruling on such a motion "is procedural and fails to address any substantive issues." In re Duizendstraal , No. 95 Misc. 150 (JK), 1997 WL 195443, at *1 (N.D. Tex. Apr. 16, 1997). Indeed, although a ruling on a § 1782 motion may terminate a matter before a U.S. court, it does not dispose of the underlying claims or defenses pending in the foreign or international tribunal. Id. ; see also In re Pola Mar. Ltd. for Order Pursuant to 28 U.S.C. § 1782 to Conduct Discovery for Use in Foreign Proceedings , No. 16 Civ. 333 (WTM), 2018 WL 1787181, at *1 (S.D. Ga. Apr. 13, 2018) (finding that the magistrate judge's § 1782 order was not dispositive "because it does not address the ultimate merits of Applicant's claims for relief in the [underlying arbitration]"); Matter of a Petition for Judicial Assistance Pursuant to 28 U.S.C. § 1782 by Macquarie Bank Ltd. , No. 14 Civ. 797 (GMN), 2015 WL 7258483, at *3 (D. Nev. Nov. 17, 2015) ("Although [the magistrate judge's] order did dispose of the Petitioner's matter before this Court, it did not dispose of Petitioner's underlying claims or defenses currently pending in the Dutch Courts. Accordingly, ... Petitioner's matter before the Court was not dispositive and, at bottom, was a discovery dispute, which was procedural in nature and within [the magistrate judge's] authority to hear and determine.").
Petitioners try to argue that "[a]mple Second Circuit precedent, on closely related questions, demonstrates that a Section 1782 application should be considered as ‘dispositive.’ " (Pet'rs' Objs. at 9.) They point, in particular, to Vera v. Republic of Cuba , 802 F.3d 242 (2d Cir. 2015), and In re Accent Delight International Ltd. , 869 F.3d 121 (2d Cir. 2017), in which the Second Circuit held that orders granting or denying discovery under § 1782 are considered "final" and "immediately appealable." (Pet'rs' Objs. at 9 (citing Vera , 802 F.3d at 247 ; Accent Delight , 869 F.3d at 128 ).) Petitioners' argument is without merit because whether an order is "final" or "immediately appealable" under 28 U.S.C. § 1291 is not the same as whether an order is dispositive for purposes of a magistrate judge's authority under 28 U.S.C. § 636 or Federal Rule of Civil Procedure 72. See Application Pursuant to 28 U.S.C. § 1782 by Nikon Corp. v. GlobalFoundries U.S., Inc. , No. 17 Misc. 80071 (BLF), 2017 WL 4647753, at *3 (N.D. Cal. Oct. 16, 2017).
Accordingly, because § 1782 applications are not dispositive, Chief Magistrate Judge Gorenstein properly decided Petitioners' application in an order rather than in a report and recommendation, and the appropriate standard of review of his Order is for clear error.
IV. THE OPINION IS AFFIRMED
In the Opinion, Chief Magistrate Judge Gorenstein distinguished between two types of potential documents sought by Petitioners. The first type of documents, which he referred to as the "Type 1" documents, are those that were generated during White & Case's previous representation of Yukos and the GML subsidiaries and that have remained in White & Case's "continual custody." (Opinion at 22.) The second type of documents, which he referred to as the "Type 2" documents, are those that are in White & Case's possession solely because of its current representation of the Russian Federation. (Id. )
Chief Magistrate Judge Gorenstein denied Petitioners' request for both the Type 1 and the Type 2 documents in part because of Petitioners' delay in filing their § 1782 application. (Id. at 26–32). He additionally denied their request for the Type 1 documents because of a lack of clarity in Russian privilege and confidentiality laws, (id. at 33–37), and their request for the Type 2 documents because the real party from whom these documents are sought is the Russian Federation, (id. at 21–24).
Petitioners object to Chief Magistrate Judge Gorenstein's denial of their application on three grounds: (1) that it incorrectly found that Petitioners unreasonably delayed in bringing their § 1782 application; (2) that it improperly denied production of the Type 1 documents on the basis of lack of clarity in Russian law; and (3) that it misconstrued the scope of their requests and appellate precedent by holding that § 1782 cannot be used to obtain documents from a law firm if those documents were provided to the firm by its client. (Pet'rs' Objs. at 2–3; 11–25.)
Chief Magistrate Judge Gorenstein, in a proper exercise of discretion, correctly denied Petitioners' application.
This Court's conclusion remains the same even upon de novo review. In fact, reviewed de novo , this Court finds additional compelling reasons to deny Petitioners' § 1782 application, including that (1) the broad scope of Petitioners' discovery requests raises concerns as to the relevance of the documents and information sought in rebutting the Russian Federation's unclean hands argument; (2) during a hearing before the Dutch Appellate Court on January 16, 2017, Petitioners expressly declined to make any "motions" regarding the unclean hands argument, (Meijer Decl., Ex. 15 (Record of Dutch Appellate Court Hearing), ECF No. 22-15, at 5); and (3) the Dutch Appellate Court did not request the discovery that Petitioners seek, and instead merely permitted Petitioners to submit additional exhibits, (Pet'rs' Notice of Suppl. Authority, Ex. A (Dutch Appellate Court Interim Judgment), ¶ 2.6).
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A. Petitioners' Delay in Bringing Their Application Was Properly Considered.
Chief Magistrate Judge Gorenstein viewed "the timing of [Petitioners'] section 1782 application"—which was filed in September 2018—"to be a significant consideration." (Opinion at 26). He concluded that Petitioners delayed in bringing their application and that such delay weighed against granting their request for either the Type 1 or Type 2 documents. (Id. at 32.) He noted that Petitioners' alleged delay "does not fit precisely within any of the Intel factors" but that it "implicate[d] the fourth factor"—that is, whether the discovery request is unduly intrusive or burdensome. (Id. at 26.) Specifically, he found that "[t]he longer the delay in seeking documents, the greater burden is imposed on parties expected to respond to the document requests, who now must attempt to reconstruct events from the distant past." (Id. at 32.)
Petitioners object to Chief Magistrate Judge Gorenstein's finding, arguing that it is "an error of fact and of law." (Pet'rs' Objs. at 11.) They argue that there was no delay because Public Policy Ground 6 "is a new legal claim," and Petitioners filed their § 1782 application less than one year after the Russian Federation first submitted this claim to the Dutch Appellate Court in November 2017. (Id. at 12.) Petitioners insist that they did not need to seek § 1782 discovery before this date because "[a]lthough a small subset of the extensive factual allegations supporting this legal claim had been made earlier, during the arbitrations, the legal and factual context of those allegations was entirely different back then." (Id. at 2 (emphasis omitted).) In particular, they claim that the Russian Federation is making for the first time a "bribery allegation": that Petitioners themselves allegedly paid bribes to Russian public officials in order to acquire their investments in Yukos. (Id. at 3–4.) With respect to the law, Plaintiffs argue that delay is not one of the four Intel factors and that the cases denying relief on the basis of delay can be "easily distinguished." (Id. at 11.)
Although the precise legal argument or the context in which the unclean hands and bribery allegations are now being raised may be different than that in which they were previously raised during the arbitrations, the record shows that the Russian Federation made its unclean hands argument as early as 2005, (Meijer Decl., Ex. 16 (Dutch Appellate Court Ruling), ¶¶ 4.2.2, 4.2.5), and the bribery allegations as early as 2011 (Meijer Decl. ¶ 12(iii); Meijer Decl., Ex. 9 (Russian Federation Counter-Memorial), ECF No. 22-9, ¶ 36). Indeed, the Dutch Appellate Court expressly stated in its September 25, 2018 ruling that the Russian Federation's unclean hands argument was not new, and that Petitioners had no valid basis for assuming that the Russian Federation had abandoned this argument. (Meijer Decl., Ex. 16 (Dutch Appellate Court Ruling), ¶¶ 4.2.2, 4.2.3.) Moreover, although the Russian Federation may have submitted new evidence in support of its Public Policy Ground 6, (id. ¶ 4.4.4), that does not change the fact that Petitioners were already generally aware of the Russian Federation's unclean hands and bribery allegations and could have sought evidence at a much earlier date to dispute these allegations. Finally, given that the Intel factors are "non-exclusive" and that courts are permitted to "take into account any other pertinent issues arising from the facts of the particular dispute," Kiobel , 895 F.3d at 244, 245, Chief Magistrate Judge Gorenstein's decision to consider delay here was neither clearly erroneous nor contrary to law.
B. Denying Petitioners' Request for the Type 1 Documents Due to Potential Conflicts with Russian Law Was Not an Abuse of Discretion.
In the Opinion, Chief Magistrate Judge Gorenstein found that another basis for denying Petitioners' request for the Type 1 documents was a lack of clarity in Russian privilege and confidentiality laws. (Opinion at 34.) He found that it would be "unduly intrusive or burdensome" under the fourth Intel factor "to require an American law firm with an office in a foreign country to potentially be directed to act in contravention of that foreign country's law." (Id. ) He further noted that he was "trouble[d] by the prospect of issuing an order that potentially results in treating an American law firm with a presence in a foreign country differently from how a law firm in that country with no American office would have been treated by a Russian court." (Id. )
Chief Magistrate Judge Gorenstein acted well within his "broad discretion" in finding that this lack of clarity in Russian law counseled against granting Petitioners' application. Winfield , 2017 WL 5054727, at *2. Petitioners argue that Russian law "is clear enough" and that it is Respondents' burden, under Second Circuit precedent, to demonstrate "authoritative proof" that the documents sought would be inadmissible in the Dutch litigation. (Pet'rs' Objs. at 3.) However, as Chief Magistrate Judge Gorenstein correctly observed, this requirement of "authoritative proof" pertains to "proof that ‘a foreign tribunal would reject evidence obtained with the aid of section 1782.’ " (Opinion at 35 (quoting Euromepa S.A. v. R. Esmerian, Inc. , 51 F.3d 1095, 1100 (2d Cir. 1995) ).) This is a separate issue from the burden imposed on Respondents due to potential conflicts with foreign privilege and confidentiality law. Moreover, Chief Magistrate Judge Gorenstein carefully considered the "twin aims" of § 1782 —that is, "providing efficient means of assistance to participants in international litigation and encouraging foreign countries by example to provide similar assistance to our courts"—and he did not abuse his discretion in finding that "granting the instant application would do little to further these purposes." (Opinion at 35 (quoting Intel , 542 U.S. at 252, 124 S.Ct. 2466 ).)
C. Petitioners' Request for the Type 2 Documents from the Russian Federation Was Properly Denied.
Finally, Chief Magistrate Judge Gorenstein found that another reason to deny Petitioners' request for the Type 2 documents was that the request "is in essence an effort to obtain the documents from Russia" since these documents "were given to White & Case by Russia after Russia became its client and are currently in White & Case's hands because of the attorney-client relationship between Russia and White & Case." (Id. at 23.) Chief Magistrate Judge Gorenstein recognized that the mere transfer of these documents from Russia to White & Case in connection with the enforcement proceedings does not, in itself, make the documents privileged. (Id. ) Nonetheless, he found that "policy considerations articulated in Kiobel apply to this situation to the extent that attorneys located in the United States should not have to fear that section 1782 will be used to require them to produce materials belonging to their foreign client." Accordingly, Chief Magistrate Judge Gorenstein concluded that the first Intel factor—whether "the [party] from whom discovery is sought is a participant in the foreign proceeding," Intel , 542 U.S. at 264, 124 S.Ct. 2466 —"strongly disfavor[s]" requiring production of any Type 2 documents. (Id. at 23–24.)
Petitioners object to Chief Magistrate Judge Gorenstein's finding, arguing that it "misconstrues Petitioners' narrow document requests and misreads both the first Intel factor and Kiobel ." (Pet'rs' Objs. at 23.) Specifically, they claim that the only Type 2 documents they are seeking are those that were originally created or received by White & Case during its representation of Yukos and the GML subsidiaries, but were then given to Russian prosecutors by White & Case during the May 2007 Search and then returned to White & Case as a result of its representation of the Russian Federation in the enforcement proceedings. (Id. at 7, 23.) Petitioners argue that the cases cited in the Opinion regarding the "real party" from whom discovery is sought are therefore "inapposite" since the documents at issue there were those "that the firm obtained solely from the law firm's representation of the party in the foreign proceeding." (Id. ) Petitioners further argue that the policy considerations in Kiobel do not apply in this case since the "unique" consideration in Kiobel was that the documents sought were subject to a protective order forbidding the law firm from disclosing its client's documents, and no such order exists here. (Id. at 24.)
Chief Magistrate Judge Gorenstein did not abuse his discretion or commit clear error by denying any request for documents that are in White & Case's possession solely because of its representation of the Russian Federation. First, even assuming that the only Type 2 documents Petitioners are seeking are those that were originally created during White & Case's representation of Yukos and the GML subsidiaries and were then returned to White & Case during its representation of the Russian Federation, this does not change the fact that these documents are currently in the firm's possession because the Russian Federation gave them to the firm in connection with the enforcement proceedings. Accordingly, the "real" party from whom Petitioners are seeking these documents is the Russian Federation. The Second Circuit has made clear that "when the real party from whom documents are sought ... is involved in foreign proceedings, the first Intel factor counsels against granting a Section 1782 petition seeking documents from U.S. counsel for the foreign company." Kiobel , 895 F.3d at 245. Second, contrary to Petitioners' assertions otherwise, the policy considerations in Kiobel pertained not only to "the respect owed to confidentiality orders," but also to "the concerns for lawyer-client relations" more generally, which are relevant here. Kiobel , 895 F.3d at 248. Accordingly, Petitioners have not shown that Chief Magistrate Judge Gorenstein's findings were clearly erroneous or contrary to law.
V. CONCLUSION
Petitioners' objections are OVERRULED. Chief Magistrate Judge Gorenstein's Opinion, (ECF No. 48), is AFFIRMED.
SO ORDERED.