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noting that “[t]he great majority of courts to address the issue” have determined that a magistrate judge may dispose of “Section 1782 discovery motions” by order rather than by report and recommendation and collecting cases
Summary of this case from In re Miya Water Projects Neth. B.V.Opinion
CASE NO. 19-23236-MC-LENARD
2020-04-13
IN RE: Application of Maria Fernanda Rigail PONS, Applicant Pursuant to 28 U.S.C. § 1782 for Judicial Assistance in Obtaining Evidence for Use in Foreign and International Proceedings.
Craig P. Kalil, Grant Stanton Smith, Aballi Milne Kalil P.A., Daniel Tramel Stabile, Shutts & Bowen LLP, Miami, FL, for Respondents Arnoldo B. Lacayo, Cristina Vicens Beard, Sequor Law, PA, Miami, FL, for Maria Fernanda Rigail
Craig P. Kalil, Grant Stanton Smith, Aballi Milne Kalil P.A., Daniel Tramel Stabile, Shutts & Bowen LLP, Miami, FL, for Respondents
Arnoldo B. Lacayo, Cristina Vicens Beard, Sequor Law, PA, Miami, FL, for Maria Fernanda Rigail
ORDER AFFIRMING ORDER OF THE MAGISTRATE JUDGE DENYING RESPONDENT AMKE REGISTERED AGENTS, LLC'S MOTION TO VACATE AND QUASH (D.E. 35), AND CLOSING CASE
JOAN A. LENARD, UNITED STATES DISTRICT JUDGE
THIS CAUSE is before the Court on AMKE Registered Agents, LLC's ("AMKE") Objection to Court Order, filed February 7, 2020. ("Objection," D.E. 42.) AMKE objects to Magistrate Judge John J. O'Sullivan's Order Denying AMKE's Motion to Vacate the Order Granting Ex Parte Application for Judicial Assistance Pursuant to 28 U.S.C. § 1782, Quash the Subpoena for Production of Documents and Deposition, or in the Alternative Motion for Stay. ("Judge O'Sullivan's Order," D.E. 35.) Applicant Maria Fernanda Rigail Pons ("Applicant") filed a Response on March 6, 2020, ("Response," D.E. 46), to which AMKE filed a Reply on March 20, 2020, ("Reply," D.E. 49). Upon review of the Objections, Response, Reply, and the record, the Court finds as follows.
I. Background
On August 2, 2019, Applicant filed in this Court an Ex Parte Application for Judicial Assistance Pursuant to 28 U.S.C. § 1782, seeking assistance to obtain evidence regarding foreign marital assets that she claims her ex-husband, Carlos Alberto Avellan Areta ("Mr. Avellan"), concealed and did not disclose in the Foreign Proceeding. (D.E. 1.) The Application sought to obtain evidence from, among others, AMKE, UBS Financial Services Inc., and UBS AG. (Id. at 2-3.) As Judge O'Sullivan explained:
The Foreign Proceeding refers to Case No. 17203-2016-06477, which stems from the Applicant's dissolution of marriage to Mr. Avellan that is pending before the Court of Families, Women, Children and Adolescents of the Mariscal Sucre Parish of the Metropolitan District of Quito, Provence of Pichincha, Republic of Ecuador (the "Ecuador Family Court").
The Applicant believes that at least some of the marital assets are being held by a Delaware company, Singletary Holdings, LLC. The Applicant claims that AMKE appears to be the sole director of Singletary Holdings, LLC and may have additional information about assets owned or controlled by Mr. Avellan that should have been, but were not, disclosed to the Ecuador Family Court in the Foreign Proceeding. The Applicant seeks asset disclosure in subsequent marital property distribution proceedings in Ecuador, which is locally known as inventory proceedings.
(Judge O'Sullivan's Order at 2.) On August 13, 2019, the Court entered an Order Granting the Ex Parte Application. ("Ex Parte Order," D.E. 5.) The Court subsequently referred this case to Judge O'Sullivan for all pre-trial, non-dispositive matters, and for a report and recommendation on any dispositive matters. ("Order of Referral," D.E. 7.)
On September 20, 2019, AMKE filed a Motion to Vacate the Court's Ex Parte Order, Quash the Subpoena for Production of Documents and Deposition, or in the Alternative, Motion for Stay. ("Motion to Vacate and Quash," D.E. 9.) As Judge O'Sullivan summarized:
AMKE seeks to vacate the Order of production under Section 1782 on several grounds. AMKE argues that the Applicant failed to discharge her duty of candor to the Court when she filed her application because: she failed to advise the Court that the ten-day time period to present evidence had closed in the Foreign Proceeding; she failed to disclose her three failed attempts to re-open the time period to gather evidence in the Foreign Proceeding; and she affirmatively swore to this Court that her counsel told her that "such evidence will likely be admissible before the Ecuador Family Court, and that [her] Application does not circumvent any proof-gathering restriction under Ecuadorian law." Motion at 2 (quoting Application (DE# 1, ¶¶ 5). Additionally, AMKE argues that the evidence the Applicant seeks is not capable of being injected into the Foreign Proceeding and that the foreign court is unreceptive to receive additional evidence. AMKE also challenges the discovery on the ground that it is over broad as to scope and duration (1999 through the present). Alternatively, AMKE asks this Court to stay the discovery until the conclusion of the pending appeal in the Foreign Proceeding.
(Judge O'Sullivan's Order at 2-3.) After considering the Parties' briefs, evidence presented, supplemental filings, and oral arguments, Judge O'Sullivan issued an Order denying AMKE's Motion to Vacate and Quash. (D.E. 35.)
Judge O'Sullivan considered the following supplemental filings: AMKE's Notice of Supplement Authority and Ecuadorian Proceedings (D.E. 21); the Applicant's Motion to Supplement the Record (D.E. 23) with Composite Exhibit A that contains a six-page, single sample of documents received from UBS Financial Services and UBS AG from approximately 4,000 documents produced in response to the Applicant's subpoena; and AMKE's Notice of Filing Additional Authority (D.E. 29) (Spanish court order) of an appellate order in the pending appellate proceeding in Ecuador regarding Mr. Avellan's daughters' request to exclude Inversiones Alabamas from the marital assets; and AMKE's Notice of Filing Translation of Additional Authority (D.E. 33) (English translation of appellate court order). (See Judge O' Sullivan's Order at 2 n.1.)
On February 7, 2020, AMKE filed Objections to Judge O'Sullivan's Order. (D.E. 42.) AMKE objects to Judge O'Sullivan's findings and conclusions, but not to his authority to issue an Order (as opposed to a Report and Recommendation) on its Motion. (See id. )
II. Legal Standards
a. Section 1782 App lications
Title 28, United States Code, section 1782(a) permits a federal district court to grant assistance to a foreign or international tribunal in obtaining evidence for use in a foreign proceeding. To establish prima facie entitlement to judicial assistance under Section 1782 :
(1) the request must be made "by a foreign or international tribunal," or by "any interested person"; (2) the request must seek evidence, whether it be the "testimony or statement" of a person or the production of "a document or other thing"; (3) the evidence must be "for use in a proceeding in a foreign or international tribunal"; and (4) the person from whom discovery is sought must reside or be found in the district of the district court ruling on the application for assistance.
In re Clerici, 481 F.3d 1324, 1331-32 (11th Cir. 2007). "If these requirements are met, then § 1782 ‘authorizes, but does not require, a federal district court to provide assistance....’ " Id. at 1332 (quoting Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 255, 124 S.Ct. 2466, 159 L.Ed.2d 355 (2004) ).
Once the prima facie requirements are satisfied, the Supreme Court in Intel noted these factors to be considered in exercising the discretion granted under § 1782(a) : (1) whether "the person from whom discovery is sought is a participant in the foreign proceeding," because "the need for § 1782(a) aid generally is not as apparent as it ordinarily is when evidence is sought from a nonparticipant"; (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 otherwise "unduly intrusive or burdensome."
Id. (quoting Intel, 542 U.S. at 264-65, 124 S.Ct. 2466 ).
b. Review of Magistrate Judge's Order
Neither Party identifies which standard of review this Court applies to Judge O'Sullivan's Order.
A magistrate judge's powers and jurisdiction are prescribed by 28 U.S.C. § 636. Pursuant to 28 U.S.C. § 636(b)(1)(A), the Court may designate a magistrate judge to hear and determine certain nondispositive, pretrial matters, and thereafter reconsider or review the pretrial matter if "shown that the magistrate judge's order is clearly erroneous or contrary to law." See also Fed. R. Civ. P. 72.
Additionally, "[a] magistrate judge may be assigned such additional duties as are not inconsistent with the Constitution and laws of the United States." 28 U.S.C. § 636(b)(3).
However, a magistrate judge may not issue an order on a pretrial matter dispositive of a party's claim or defense. Fed. R. Civ. P. 72(b). Rather, a magistrate judge may only issue a report recommending a disposition, to which the parties may object. Id. Those portions of a magistrate judge's report and recommendation that are properly objected to are reviewed de novo. 28 U.S.C. § 636(b)(1) ; accord Fed. R. Civ. P. 72(b)(3). Those portions of a report and recommendation to which no objection has been made are reviewed for clear error. See Lombardo v. United States, 222 F. Supp. 2d 1367, 1369 (S.D. Fla. 2002) ; see also Macort v. Prem, Inc., 208 F. App'x 781, 784 (11th Cir. 2006) ("Most circuits agree that [i]n the absence of a timely filed objection, a district court need not conduct a de novo review, but instead must only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.") (internal quotation marks and citations omitted).
The great majority of courts to address the issue have found that a magistrate judge has jurisdiction to issue an order on a motion to quash a Section 1782 subpoena (and other Section 1782 discovery motions). See In re Pola Mar. Ltd., CASE NO. CV416-333, 2018 WL 1787181, at *1-2 (S.D. Ga. Apr. 13, 2018) (noting that "the majority of persuasive authority" has concluded that an order on a motion to quash a Section 1782 subpoena is nondispositive because it does not address the ultimate merits of the underlying claims) (citing In re Sergeeva, No. 1:13-CV-3437, 2015 WL 12866970, at *2 (N.D. Ga. Feb. 6, 2015) (applying clearly erroneous or contrary to law standard to the magistrate judge's order denying motion to quash discovery sought under § 1782 ); Republic of Ecuador v. For Issuance of a Subpoena Under 28 U.S.C. Sec. 1782(a) , 735 F.3d 1179, 1182 (10th Cir. 2013) (noting that in § 1782 proceeding "there is nothing to be done ‘on the merits’ " because only issue before district court is discovery); Siemens AG v. W. Dig. Corp., No. 2:13-CV-01407, 2014 WL 1569605, at *2 (C.D. Cal. Apr. 17, 2014) (finding that magistrate judge's ruling on § 1782 application for judicial assistance is non-dispositive); In re Application of Consellior SAS, No. 13mc34 (WWE), 2014 WL 111110, at *3 (D. Conn. Jan. 10, 2014) (same); Republic of Ecuador v. Bjorkman, No. 11-cv-01470, 2011 WL 5439681, at *1 (D. Colo. Nov. 9, 2011) (same); In re Chevron Corp., No. 1:10-MI-0076, 2010 WL 8767265, at *2 (N.D. Ga. Mar. 2, 2010) (same); Weber v. Finker, No. 307-MC-27-J-32MCR, 2008 WL 2157034, at *1 (M.D. Fla. May 20, 2008), aff'd, 554 F.3d 1379 (11th Cir. 2009) ("[T]he Court holds that the United States Magistrate Judge had the authority to enter an Order, as opposed to a Report and Recommendation, on the motion to compel, filed pursuant to 28 U.S.C. § 1782."); In re Oxus Gold PLC, NO. MISC 06-82, 2007 WL 1037387, at *2 (D.N.J. Apr. 2, 2007) ; In re Duizendstraal, No. 3:95-MC-150-X, 1997 WL 195443, at *1 (N.D. Tex. Apr. 16, 1997) ("The non-dispositive nature of Applicants' discovery request pursuant to 28 U.S.C. § 1782 dictates that the ‘clearly erroneous’ standard be applied in the present matter. The Order at issue is procedural and fails to address any substantive issues. The Order terminates the current proceeding only because of the procedural posture inherent in the application of § 1782.")). See also In re Judicial Assistance Pursuant to 28 U.S.C. 1782 by Macquarie Bank Ltd., No. 2:14-cv-00797-GMN-NJK, 2015 WL 3439103, at *3 (D. Nev. May 28, 2015) ("[M]ost courts have found that ruling on a § 1782 motion is a non-dispositive matter within the province of a magistrate judge's authority under § 636(b)(1)(A).") (citing Interbrew Central European Holding BV v. Molson Coors Brewing Co., Civil Action No. 13-cv-02096-MSK-KLM, 2013 WL 5567504, *1 (D. Colo. Oct. 9, 2013) ; Chevron Corp. v. Camp, Nos. 1:10mc 27, 1:10mc28, 2010 WL 3418394, *3 (W.D.N.C. Aug. 30, 2010) ; In re O'Keeffe, No. 2:14-cv-01518-RFB-CWH, 2015 WL 1308546 (D. Nev. Mar. 24, 2015) ); In re Application of Compania Anonima de Seguros la Occidental, Civil Case No. 1:15-MI-0012-CAP-LTW, 2015 WL 12862922, at *4 n.1 (N.D. Ga. May 13, 2015) (citing In re Qwest Commc'n Int'l Inc., No. 3:08MC93, 2008 WL 2741111, at *3 (W.D.N.C. July 10, 2008) ); In re Application of Francisco Luis Diez Bernal, Case No. 18-21951-MC-WILLIAMS/TORRES, 2018 WL 6620085 (S.D. Fla. Dec. 18, 2018) (magistrate judge entering order on motion to quash Section 1782 subpoenas, or, alternatively, for a protective order).
The Eleventh Circuit has not explicitly decided whether a magistrate judge may issue an order on a motion to quash a Section 1782 subpoena (or other Section 1782 discovery motions). The issue was presented to the Eleventh Circuit in Weber v. Finker, 554 F.3d 1379, 1385 (11th Cir. 2009), but the court declined to resolve the issue. In that case, pursuant to a district court judge's referral order, a magistrate judge issued an order granting a motion to compel discovery filed pursuant to Section 1782. 554 F.3d at 1382. The district court subsequently affirmed, finding that the magistrate judge's order was not clearly erroneous or contrary to law. Weber, 2008 WL 2157034, at *1. The individuals who were ordered to produce discovery ("the Florida shareholders") appealed to the Eleventh Circuit, arguing that a motion to compel under Section 1782 "is a final, dispositive order because, although there is an ongoing action in a foreign tribunal, the Motion to Compel is the final order to be issued by the United States court." Weber, 554 F.3d at 1385. As such, they argued that the district court improperly determined that the motion to compel could be referred to a magistrate judge for an order. Id. The Eleventh Circuit found that the Florida shareholders had waived any challenge to the district court's referral order:
The Florida shareholders did not object to the referral until after the Magistrate Judge entered his Order. "[A] party who objects to a reference to a magistrate must make his objections known either at the time of reference or soon thereafter." Hill v. Duriron Co., Inc., 656 F.2d 1208, 1213 (6th Cir. 1981). "A party waives his objection when he participates in a proceeding before a magistrate and fails to make known his lack of consent or fails to object to any other procedural defect in the order referring the matter to the magistrate until after the magistrate has" ruled. McLeod, Alexander, Powel & Apffel, P.C. v. Quarles, 925 F.2d 853, 857 (5th Cir. 1991). The Florida shareholders waived this challenge to the referral by failing to timely object.
Id. Thus, the Eleventh Circuit affirmed the district court's order affirming the magistrate judge's order on the motion to compel. Id.
Here, AMKE has asserted no objection to the Court's September 18, 2019 Order of Referral or to Judge O'Sullivan's authority to enter an order on its Motion.
Upon review of the relevant authority, the Court finds that AMKE's Motion to Vacate the Court's Ex Parte Order and to Quash the Subpoena for Production of Documents and Deposition, or in the Alternative Motion for Stay is a nondispositive, pretrial matter which may be referred to a magistrate judge for an order pursuant to 28 U.S.C. § 636(b)(1)(A). In re Pola Maritime Ltd., 2018 WL 1787181, at *2. As the Tenth Circuit has explained:
[I]n a § 1782 proceeding, there is nothing to be done "on the merits." Section 1782 empowers a district court to order a person residing within its district 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. The only issue before the district court is discovery; the underlying litigation rests before a foreign tribunal.
Republic of Ecuador, 735 F.3d at 1182 (citing Bayer AG v. Betachem, Inc., 173 F.3d 188, 189 n.1 (3d Cir. 1999) ). Here, Judge O'Sullivan's ruling on AMKE's Motion was nondispositive of any claims or defenses because the Parties' claims and defenses are solely before the Ecuador Family Court. See id. Accordingly, the Court finds that Judge O'Sullivan had jurisdiction under Section 636(b)(1)(A) to issue an order on the Motion. A district court must set aside a magistrate judge's order on a nondispositive pretrial matter "where it has been shown that the magistrate judge's order is clearly erroneous or contrary to law." 28 U.S.C. § 636(b)(1)(A). See also Fed. R. Civ. P. 72(a) ("The district judge in the case must consider timely objections and modify or set aside any part of the order that is clearly erroneous or is contrary to law.") A "factual finding is clearly erroneous when, ‘although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.’ " Univ. of Ga. Athletic Ass'n v. Laite, 756 F.2d 1535, 1543 (11th Cir. 1985) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948) ). "An order is contrary to law when it fails to apply or misapplies relevant statutes, case law or rules of procedure." Matter of Application of O'Keefe, 184 F. Supp. 3d 1362, 1366 (S.D. Fla. 2016) (citation omitted).
Alternatively, the Court finds that AMKE waived any challenge to Judge O'Sullivan's authority to issue an Order on the Motion by failing to timely object to the Court's Order of Referral. Weber, 554 F.3d at 1385 (holding that the respondents in a Section 1782 proceeding waived their challenge to the district court's referral to the magistrate judge by failing to make their "objections known either at the time of reference or soon thereafter") (quoting Hill, 656 F.2d at 1213 ). As mentioned in Note 4, supra, AMKE has asserted no objection to the Court's September 18, 2019 Order of Referral or to Judge O'Sullivan's authority to enter an order on its Motion.
III. Discussion
Judge O'Sullivan denied AMKE's Motion to Vacate and Quash based on four primary findings. First, Judge O'Sullivan found that Applicant satisfied the "for use in a foreign proceeding" requirement of Section 1782(a) —the only statutory requirement AMKE challenged. (Id. at 9.) Second, he found that the second Intel factor—which analyzes, inter alia, whether the foreign court will be receptive to judicial assistance from a U.S. Court—weighs in favor of Applicant "because AMKE has not offered authoritative proof that evidence of new marital assets would be rejected by the Ecuador Family Court." (Id. at 12.) Third, Judge O'Sullivan found that the third Intel factor—which analyzes whether the 1782 request conceals an attempt to circumvent foreign proof-gathering limits—weighs in Applicant's favor "because there is no evidence that the Applicant is attempting to obtain evidence from AMKE in contravention of restrictions in place in the Foreign Proceeding." (Id. at 13.) Fourth, Judge O'Sullivan found that the fourth Intel factor—which analyzes whether the 1782 application contains unduly intrusive or burdensome requests—weighs in Applicant's favor because the subpoena is not overbroad, as it "covers the duration of the marriage and the period during which the divorce was becoming final, and the discovery requests are tailored to obtain evidence of marital assets from specific entities and individuals." (Id. at 15.)
AMKE asserts the following objections to Judge O'Sullivan's Order:
1. It "[a]pplied the incorrect standard for the burden of proof when it relied on In re Gyptec S.A. for an Order to Take Discovery Under 28 U.S.C. § 1782 , 2017 WL 6559792 (S.D. Fla. Oct. 19, 2017)";
2. It "[f]ailed to adequately consider the Applicant's lack of candor as a basis for the Court to exercise its discretion in granting the Respondent's Motion to Vacate [D.E. 9]";
3. It "[i]ncorrectly found that the Applicant had met the ‘for use in foreign proceedings’ statutory requirement in 28 U.S.C. § 1782"; and
4. It "[i]ncorrectly found that the Applicant had satisfied three of the four Intel factors: (2) the nature of the foreign tribunal, the character of the proceedings abroad, and the receptivity of the foreign tribunal to
assistance from a U.S. federal court; (3) whether the discovery application 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 intrusive or burdensome."
(Obj. at 1-2.) AMKE's burden of proof argument pertains only to the Intel factors, and more specifically, to the second Intel factor. (See id. at 7.) Because the Court only reaches the discretionary Intel factors if the statutory requirements are met, see In re Clerici, 481 F.3d at 1332, the Court will first discuss the arguments relevant to the statutory criteria before turning to the Intel factors, and finally, Applicant's alleged lack of candor.
a. Statutory requirement that evidence be for use in foreign proceedings
In its Motion to Vacate and Quash, AMKE argued that Applicant could not satisfy the statutory requirement that the evidence be "for use in a proceeding in a foreign or international tribunal," 28 U.S.C. § 1782(a), because pursuant to a December 14, 2018 order by the Ecuador Family Court, "[t]he time period for gathering and submitting evidence in that Foreign Proceeding has expired and will not be re-opened[,]" and therefore Applicant "has no ability to use any evidence received through her pending 1782 Application in the Foreign Proceeding[.]" (D.E. 9 at 9.)
Judge O'Sullivan found that evidence of undisclosed marital assets may be used in the Foreign Proceeding pursuant to Article 408 of the Ecuadorian Civil Code, which provides:
If after the inventory is conducted there are assets found that were not known while the inventory was ongoing, or, by any means, the inventories estate gains new assets, a formal inventory [of the new assets] must be carried out and added to the previous one.
(Id. at 7-8 (citing Molina Decl. ¶¶ 29-30; Moran Decl. ¶¶ 13-16).) Judge O'Sullivan observed that both Parties' experts acknowledge that Article 408 permits either spouse to present new evidence of additional assets or property that is not part of the first inventory, (id. at 7), and that the Parties merely disagree as to whether the new evidence will be admissible, (id. at 8). Judge O'Sullivan agreed with Applicant that "the Ecuador Family Court rather than this Court should decide the issue of admissibility and will be in a better position to do so if this Court allows the Applicant to conduct Section 1782 discovery first." (Id. at 8 (citing D.E. 11 at 8 (citing In re Bernal, No. 18-21951, 2018 WL 6620085, *5 (S.D. Fla. Dec. 18, 2018) ; In re Pimenta, 942 F. Supp. 2d 1282, 1298 (S.D. Fla. 2013) (citing In re Request for Judicial Assistance from Seoul Dist. Criminal Ct., Seoul, Korea, 555 F.2d 720, 723-24 (9th Cir. 1977) ); In re Application ot N. Am. Potash, CASE NO: 12-20637-CV-WILLIAMS/Turnoff, 2012 WL 12877816, at *8 (S.D. Fla. November 19, 2012) )).) Ultimately, Judge O'Sullivan concluded that
Applicant satisfied the "for use in a foreign proceeding" requirement because the Applicant has the ability "to inject the requested information into a foreign proceeding" and the "requested discovery is ‘something that will be employed with some advantage or serve some use in the proceeding.’ " See In re Accent Delight Int'l Ltd., 869 F.3d 121, 132 (2d Cir. 2017) (quoting Mees v. Buiter, 793 F.3d 291, 298 (2d Cir. 2015) (citation omitted)). The inventory proceedings are pending in Ecuador. The discovery sought in this Section 1782 proceeding is intended to locate evidence of new assets that the
Applicant believes should have been included, but were not disclosed, in the inventory proceedings regarding marital assets.
The Applicant filed a Motion to Supplement the Record (DE# 23, 12/19/2019) with Composite Exhibit A (DE# 23-1, 12/19/2019), which is granted by a separate order. The supplement, Composite Exhibit A, consists of a six-page, single sample of the UBS AG and UBS Financial Services, Inc.'s production ("UBS Production") of more than 4,000 documents that the Applicant received between December 9 and 16, 2019 in response to the Applicant's subpoena. The supplement exemplifies and supports the Applicant's position that Mr. Avellan secreted marital assets from the Applicant and that the Applicant did not have knowledge of most of the UBS accounts during the discovery period in the Foreign Proceeding. The Applicant maintains that the supplement of the six-page sample of the UBS Production reveals that Mr. Avellan disclosed to UBS, at the time of the Foreign Proceeding in 2016, that his total wealth composition amounted to $50 million in contravention to what he disclosed in the Foreign Proceeding. Motion to Supplement at 3 (DE# 23, 12/19/2019).
(Id. at 9 (footnote in original).)
AMKE objects, asserting that Applicant's Ecuadorian Attorney (and expert witness on Ecuadorian law in this Court) has conceded that any evidence gathered after July 30, 2018 would not be admissible at trial, that Applicant has requested the Ecuador Family Court to reopen discovery three times, and that the Ecuador Family Court has denied all three requests. (Obj. at 11.) It further argues that Article 408 would not help Applicant because she knew of the existence of some of the companies she now seeks discovery on before the initial inventory proceedings closed (AMKE refers to these companies as the "Previously Identified Companies"); and, in fact, one of those companies, Inversiones Alabamas Corporation Ltd., was included in the original inventory. (Id. at 11-12.) AMKE argues that "Applicant cannot use evidence obtained here in the Pending Ecuadorian Inventory Proceeding and the Applicant also cannot use evidence on the Previously Identified Companies in a new inventory proceeding because that was not the basis for her 1782 Application and it would be prohibited under Article 408." (Id. at 13.)
Applicant argues that Article 408 is available to her because although she knew of the existence of the offshore companies prior to the close of the original inventory proceedings, "Article 408 applies to evidence of assets that were not known and not included in the first inventory[,]" and "Applicant had no knowledge of who owned the shares of each company or of the full extent of assets owned by said companies." (Resp. at 12.) In support of this argument, Applicant cites her Reply in Support of Motion to Supplement the Record, in which she summarizes the evidence obtained from UBS pursuant to the Court's Ex Parte Order:
[T]he only UBS statement in Applicant's possession (attached to the Application) relates to an account in the name of Eldine Trading Limited—not Honaker Corporation. [D.E. 1-1, at 93-106]. The UBS Production reveals that, in addition to that one Eldine Trading account, Avellán has or had at least seven (7) other accounts at UBS in his personal name or in the name of Eldine Trading or Honaker. Indeed, the document with which Applicant seeks to supplement the record specifically references two additional account numbers and lists Avellán as the ultimate beneficial owner of Honaker, among other things. [D.E. 23 at 10]. Therefore, regardless of whether Applicant "was aware of the existence of Honaker prior to and at the time of her Ecuadorian trial," the fact remains
that Applicant was completely unaware of the number of accounts at UBS, the identity of the account holders or beneficial owners, or the value of said accounts at UBS, until now. Simply stated, having knowledge of the existence of a company is not tantamount to having knowledge of that company's assets, or the identity of the beneficial owner of such assets.
(D.E. 27 at 3-4.) Applicant also asserts that "the UBS Production shows that at the time of the Foreign Proceeding, Avellan disclosed to UBS that his total wealth composition amounted to US$50 million (including US$20 million of liquid assets in U.S. financial institutions), which he did not disclose to the Ecuador Family Court." (Resp. at 12 n.11 (citing D.E. 23, 23-1).) Applicant argues that although discovery in the foreign proceeding is closed "regarding the assets included in the first inventory, the parties may still present evidence of additional assets that were not known while the inventory was ongoing, such as evidence of Avellan's statement to UBS that he had a total wealth composition of $50 million at the time during the Foreign Proceeding." (Resp. at 13.)
In its Reply, AMKE maintains that "Applicant cannot use any evidence produced from her 1782 Application in the Foreign Proceeding because (1) the evidentiary period has closed and (2) since the Applicant had knowledge of the Previously Identified Companies when she presented her proposed inventory, Article 408 precludes opening a new inventory to introduce evidence regarding the Previously Identified Companies." (Reply at 8.)
Judge O'Sullivan's finding that Applicant has satisfied the "for use in a proceeding in a foreign or international tribunal" requirement of a Section 1782 application is not clearly erroneous or contrary to law. The Parties agree that Article 408 of the Ecuadorian Civil Code requires the Ecuador Family Court to conduct an inventory when new assets are found that were not known while the original inventory was ongoing. (See Molina Decl. (D.E. 11) at 24 ¶¶ 29-31; Moran Decl. (D.E. 11) at 38 ¶ 13; Santos Decl. (D.E. 16-1) ¶ 26.) Although AMKE argues that Article 408 is inapplicable here because Applicant knew during the pendency of the inventory proceedings that Mr. Avellan had an interest in certain offshore companies, (Obj. at 11-12), Applicant argues that he did not know of the assets of those companies because Mr. Avellan was concealing them, (D.E. 23 at 3). In support of her argument, she has provided the Court with documents produced by UBS in response to the Section 1782 subpoenas that show Mr. Avellan as beneficial owner of UBS accounts, (see, e.g., id. at 10), and which report Mr. Avellan's "Total Net Worth" as $50 million, with $20 million in liquid assets in foreign financial institutions, (id. at 13). Applicant avers that she "did not have knowledge of most of these accounts during the discovery period in the Foreign Proceeding[,]" (D.E. 23 at 3), and his $50 million net worth is "in direct contravention to what was disclosed in the Foreign Proceeding" where he disclosed ownership of less than $2.8 million in foreign investments, (id. ). (Compare D.E. 19 ¶ 1; D.E. 19-1 (declaration of $2,797,475.80 in foreign investments) with D.E. 23 at 13 (reflecting a Total Net Worth of $50,000,000.00, including $20,000,000.00 in liquid assets in Credit Agricole, JP Morgan, ad Goldman Sachs).) Significantly, the documents produced by UBS show that Mr. Avellan is the beneficial owner of an account held by Honaker Corporation, (D.E. 23 at 9), and Applicant has presented evidence that Mr. Avellan disavowed any ownership in Honaker Corporation in a sworn declaration to the Ecuador Family Court, (D.E. 19-4 at 5).
AMKE's arguments go to the admissibility of the evidence, which is an issue for the Ecuador Family Court to decide. See In re Bernal, 2018 WL 6620085, at *5 ("[T]he Florida LLCs concede that there are some circumstances where new evidence may be presented. It is therefore the Spanish Court, rather this this Court, that should decide whether additional evidence is admissible and it will be in a better position to do so if Mr. Bernal is permitted to conduct the requested discovery first."); In re Application of N. Am. Potash, 2012 WL 12877816, at *8 ("[F]or purposes of § 1782, district courts should consider neither discoverability or admissibility in the foreign proceeding. Instead, courts should err on the side o[f] ordering discovery, since foreign courts can easily disregard any material that they do not wish to consider.") (internal citation omitted); In re Application of Gushlak, No. 11-MC-218 (NGG), 2011 WL 3651268 (E.D.N.Y. 2011) (same); In re Application of Grupo Qumma, No. M 8-85, 2005 WL 937486, at *3 (S.D.N.Y. April 22, 2005) ("The Mexican court, rather than this Court, should decide whether the additional evidence is admissible, and it will be in a better position to do so if Qumma is permitted to conduct the requested discovery first."); see also In re Request for Judicial Assistance from Seoul Dist. Criminal Ct., Seoul, Korea, 555 F.2d at 723-24 ("Our federal courts, in responding to requests, should not feel obliged to involve themselves in technical questions of foreign law relating to ... the admissibility before such tribunals of the testimony or materials sought."). The cases AMKE cites in its Motion— In re Sargeant, 278 F. Supp. 3d 814, 822 (S.D.N.Y. 2017) and Leutheuesser-Schnarrenberger v. Kogan, Case No.18-mc-80171-JSC, 2018 WL 5095133, at *3 (N.D. Cal. Oct. 17, 2018) —are distinguishable and inapposite for the reasons stated in Judge O'Sullivan's Order. (D.E. 35 at 6.)
Because Applicant has presented evidence that the information she seeks in her 1782 Application concerns assets that were not known to her while the inventory proceedings were ongoing, and Article 408 requires the Ecuador Family Court to carry out an inventory of any newly found assets, Judge O'Sullivan's finding that Applicant has satisfied the "for use in a proceeding in a foreign or international tribunal" requirement of Section 1782(a) is not clearly erroneous or contrary to law.
b. Intel factors
Where, as here, the statutory requirements are met, district courts look to the four Intel factors when considering whether to exercise discretion to grant a Section 1782 application. In re Clerici, 481 F.3d at 1334. Specifically, the Court considers:
(1) whether "the person from whom discovery is sought is a participant in the foreign proceeding," because "the need for § 1782(a) aid generally is not as apparent as it ordinarily is when evidence is sought from a nonparticipant"; (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 otherwise "unduly intrusive or burdensome."
Id. In its Motion, AMKE argued that the second and third Intel factors weighed against granting the 1782 Application. (D.E. 10-11.) AMKE did not argue in its Motion or Reply brief that the discovery is "unduly intrusive or burdensome" under the fourth Intel factor, (see D.E. 16 at 9-10); however, it argued that the request is "overbroad," (D.E. 9 at 11-12; D.E. 16 at 9-10).
As an initial matter, AMKE argues that Judge O'Sullivan applied an incorrect standard for the burden of proof to his analysis of the Intel factors. (Obj. at 6-7.) The "Burden of Proof" section of Judge O'Sullivan's Order states: "Where, as here, the Court has ordered discovery under Section 1782, the burden shifts to the opposing litigant to demonstrate, by more than angry rhetoric, that allowing the discovery sought (or a truncated version of it) would disserve the statutory objectives." (Judge O'Sullivan's Order at 5 (quoting In re Gyptec S.A., 2017 WL 6559792, at *1 ).)
AMKE argues that this is the incorrect standard for the burden of proof. (Obj. at 6-7.) It argues that the Gyptec court cited to Heraeus Kulzer, GmbH v. Biomet, Inc., 633 F.3d 591, 597 (7th Cir. 2011) for the burden-shifting framework, and the Eleventh Circuit recently declined to adopt that framework for purposes of analyzing the second Intel factor. (Obj. at 7 (citing Dep't of Caldas v. Diageo PLC, 925 F.3d 1218, 1223 (11th Cir. 2019) ).)
Applicant argues that Judge O'Sullivan applied the correct standard, as "a movant normally carries the burden of proof with respect to its own motion." (Resp. at 5 (citing In re Gyptec, S.A., 2017 WL 6559792, at *1 ; In re Chevron Corp., No. 11-cv-24599, 2012 WL 3636925, at *6 (S.D. Fla. June 12, 2012) (noting that "the burden is on the party opposing the discovery").) Applicant further argues that the Eleventh Circuit's recent decision in Diageo "stands for the narrow proposition that, specifically as to the second discretionary Intel factor, ‘district courts need not apply the rigid burden-shifting framework to properly weigh the discretionary factor of receptivity in a § 1782 case.’ " (Id. at 6 (emphasis in original) (quoting Diageo, 925 F.3d at 1223 ).)
In its Reply, AMKE maintains that pursuant to Diageo, "there is no steadfast rule that the burden of proof for analyzing the Intel factors automatically shifts to a respondent challenging an ex parte order granting discovery under 28 U.S.C. § 1782." (Reply at 4.) It argues that although only the second Intel factor was at issue in Diageo, "it logically follows that the Eleventh Circuit would have declined to apply the rigid burden shifting standard of proof to the remaining discretionary Intel factors." (Id. ) It further argues that under the proper standard, Judge O'Sullivan should have given more weight to the Ecuador Family Court's December 14, 2018 Order "since it provides the most comprehensive summary of the evidentiary period and the Applicant's failed attempts to reopen the evidentiary period." (Id. )
In Diageo, four departments of the Colombian government (the "Departments") filed an amended application under Section 1782 seeking to depose employees of Diageo PLC. 925 F.3d at 1220. Diageo opposed the application. See id. A magistrate judge issued a report recommending the amended application be denied because, inter alia, three of the four Intel factors weighed against granting the discovery request. See id. Upon the Departments' objections to the magistrate judge's report, the district court found that the discretionary Intel factors weighed in favor of granting discovery to two of the Departments. Id. at 1220-21. Specifically, "the district court disagreed with the magistrate judge and, placing the burden of proving or disproving receptivity on both sides, concluded that the factors weighed in favor of partially granting the application." Id. at 1220. Diageo appealed. Id. at 1221.
On appeal, the Eleventh Circuit observed that neither the Supreme Court nor the Eleventh Circuit had "decided who bears the burden of proof with respect to the discretionary Intel factors in a § 1782 case." Id. at 1222. Diageo argued that the burden as to the second Intel factor—the receptivity factor—should be on the applicant because it is the party seeking discovery. Id. The Departments argued that the district court should consider both parties' evidence on the matter of receptivity. Id. The Eleventh Circuit rejected the approach advocated by Diageo and applied by some courts, which requires the objecting party to provide affirmative proof that the foreign tribunal would not accept the evidence obtained through the Section 1782 proceeding. Id. at 1222-23. Instead, it adopted the approach taken by the First Circuit in In re Schlich, 893 F.3d 40 (1st Cir. 2018). Id. at 1223. In Schlich, the First Circuit concluded that the Supreme Court in Intel "intended for both parties to make their arguments as to all of the [discretionary] factors, and for the district court to then determine whom those factors favor." 893 F.3d at 50. "In this sense," the First Circuit opined, "we do not see the factors as creating a burden for either party to meet, but rather as considerations to guide the district court's decision." Id. (quotation marks omitted). The Eleventh Circuit adopted this approach as to the receptivity factor—which, the Court noted, was "the only Intel factor before us today"—and held "that district courts need not apply a rigid burden-shifting framework to properly weigh the discretionary factor of receptivity in a § 1782 case." Diageo, 925 F.3d at 1223. The Court reasoned:
The discretionary factors come into play after the statutory requirements have been satisfied, and they are guideposts which help a district court decide how to best exercise its discretion. In that context, it is not necessary (or helpful) to put the burden on one side or the other with respect to receptivity.
Id. Thus, the Eleventh Circuit affirmed the district court's order granting in part the Departments' amended application under Section 1782. Id. at 1224.
In discussing the second Intel factor, Judge O'Sullivan identified the Eleventh Circuit's opinion in Diageo and recited the correct analytical framework. (D.E. 35 at 11 (" In Dept. of Caldas v. Diageo PLC, 925 F.3d 1218 (11th Cir. 2019), the Eleventh Circuit rejected a ‘rigid burden-shifting framework to properly weigh the discretionary factor of receptivity in a § 1782 case’ because it is neither necessary nor helpful ‘to put the burden on one side or the other with respect to receptivity.’ Id. at 1223. Instead, the Eleventh Circuit agreed with the district court's inclination ‘to look to both sides to offer support regarding their respective positions on the receptivity issue.’ Id. (citations omitted).").) However, Judge O'Sullivan failed to properly apply the correct standard, concluding that "the receptivity factor weighs in favor of the Applicant and against AMKE because AMKE has not offered authoritative proof that evidence of new marital assets would be rejected by the Ecuador Family Court." (Id. at 12.) The Eleventh Circuit explicitly rejected this standard in Diageo. 925 F.3d at 1222 ("Some courts suggest or hold that, in order to justify denial, the responding/objecting party must provide affirmative proof that the foreign tribunal would not accept the evidence obtained through the § 1782 proceeding.... We decline to adopt this approach[.]"). Accordingly, the Court finds that Judge O'Sullivan's Order is contrary to law insofar as it applied the incorrect standard when analyzing the second Intel factor. See TemPay, Inc. v. Biltres Staffing of Tampa Bay, LLC, 929 F. Supp. 2d 1255, 1260 (M.D. Fla. 2013) (" ‘An order is contrary to law ‘when it fails to apply or misapplies relevant statutes, case law or rules of procedure." ") (quoting S.E.C. v. Kramer, 778 F. Supp. 2d 1320, 1326-27 (M.D. Fla. 2011) (quoting Tompkins v. RJ Reynolds Tobacco Co., 92 F. Supp. 2d 70, 74 (N.D.N.Y. 2000) )). However, for the reasons discussed in Section III(b)(2), infra, the Court finds that the second Intel factor weighs in favor of granting the requested discovery when applying the proper standard.
Furthermore, even assuming arguendo that the Diageo standard applies to all Intel factors, the Court finds that Judge O'Sullivan only applied the incorrect standard to his analysis of the second Intel factor, (see Judge O'Sullivan's Order at 12), and all of the Intel factors favor granting the requested discovery under the standard announced in Diageo.
1. First Intel Factor
Although neither Party discusses the first Intel factor, the Court will briefly address it for the sake of completeness. The first Intel factor addresses whether "the person from whom discovery is sought is a participant in the foreign proceeding," because "the need for § 1782(a) aid generally is not as apparent as it ordinarily is when evidence is sought from a nonparticipant[.]" 542 U.S. at 264, 124 S.Ct. 2466.
Judge O'Sullivan noted that "AMKE concedes that it is not a participant in the foreign proceeding and is located in this District." (Judge O'Sullivan Order at 10.) Because AMKE is not a participant in the foreign proceeding and is located in this District, it appears that AMKE is outside the jurisdictional reach of the Ecuador Family Court, and the evidence sought is likely unobtainable absent Section 1782 aid. Consequently, the Court finds that this factor weighs in favor of granting the discovery requests.
2. Second Intel factor
Under the second Intel factor, the Court considers "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." Intel, 542 U.S. at 264, 124 S.Ct. 2466.
In its Motion, AMKE argued that the Ecuador Family Court is not receptive to considering new evidence. (D.E. 9 at 10.) In support, AMKE cited the Declaration of Diego Roberto Jaramillo Teran, an Ecuadorian attorney and law professor who represented Mr. Avellan in the divorce proceedings. ("Jaramillo Decl.," D.E. 9-1 ¶¶ 4-7.) Relevant here, Mr. Jaramillo states:
10. "[T]he time period for gathering evidence in the Inventory Proceeding expired on July 27, 2018.... Applicant has repeatedly requested the Ecuadorian court to reopen the time period for gathering evidence and her request has been effectively denied three times ....
17. On July 30, 2018, the Ecuadorian judge in the Inventory Proceeding entered an order that closed the time period for gathering evidence.
18. Subsequently, on August 2, 2018, the Applicant requested that the Ecuadorian court reopen the time period for gathering evidence. The Ecuadorian court denied this request on August 7, 2018.
19. The next day, on August 8, 2018, the Applicant appealed that denial to reopen the time period for gathering evidence. The same Ecuadorian court denied this appeal on August 9, 2018.
20. On December 12, 2018, the Applicant again requested that the Ecuadorian court, in the Inventory Proceeding, reopen the time period for gathering evidence.
21. On December 14, 2018, the Ecuadorian court entered an order ...
(the "December Order") yet again denying her request....
(Jaramillo Decl. ¶¶ 10, 17-21.) AMKE argues that "if the Ecuadorian court was interested in reviewing additional evidence then it would have either granted one of the Applicant's two requests to reopen the evidence period or granted her appeal." (D.E. 9 at 10.)
In her Response to AMKE's Motion, Applicant argues that its requests to reopen the evidence-gathering period "were not for the purpose of introducing additional evidence of Avellán's undisclosed foreign assets, but to ensure the reliability of the orders rendered by the Ecuador Family Court in respect of distinct evidence already in the inventory." (D.E. at 8 (citing Molina Decl. ¶ 25).) Applicant argues that AMKE's position is "entirely undercut by Article 408 of the Civil Code, which is not disclosed by AMKE to this Court and which requires the Ecuador Family Court to prepare a new inventory when evidence of additional assets is presented." (Id. (emphasis in original) (citing Molina Decl. ¶¶ 29-30).)
AMKE does not specifically address receptivity in its Reply, but broadly argues that the statutory "for use" requirement and the Intel factors are not satisfied because Applicant knew of the off-shore companies during the inventory proceedings but did not introduce evidence of those companies, and the evidence-gathering period in the Foreign Proceeding is closed and will not be reopened. (D.E. 16 at 2-6.) AMKE argues that Article 408 is unhelpful to Applicant because it only applies to evidence that was "not known" while the inventory was ongoing, and she knew of the off-shore companies. (Id. at 6 (citing Santos Decl. ¶ 26).)
The Court has considered both Parties' arguments and evidence on the second Intel factor and finds that it counsels in favor of permitting discovery. As discussed in Section III(a), supra, the Parties agree that Article 408 of the Ecuadorian Civil Code requires the Ecuador Family Court to conduct an inventory when new assets are found that were not known while the original inventory was ongoing. (See Molina Decl. (D.E. 11) at 24 ¶¶ 29-31; Moran Decl. (D.E. 11) at 38 ¶ 13; Santos Decl. (D.E. 16-1) ¶ 26.) Applicant is seeking to discover assets that Mr. Avellan did not disclose in the original inventory. (See Application ¶¶ 3-4.) In fact, she purports to have discovered new, previously-undisclosed assets pursuant to UBS's response to the Court's Order granting her Application. (See D.E. 23 at 3.) Although AMKE argues that Article 408 is inapplicable here because Applicant knew about the offshore companies during the pendency of the inventory proceedings, (Obj. at 11-12), AMKE does not assert that Applicant knew of Mr. Avellan's ownership interest in these companies, or of the assets owned by those companies. Indeed, the 1782 Application asserts that Mr. Avellan "took active steps to hide said assets from Applicant." (D.E. 1 ¶ 3.) The documents produced by UBS reflect that Mr. Avellan has a net worth of $50 million, including $20 million in liquid assets in foreign financial institutions, (see D.E. 23 at 13); however, Mr. Avellan reported to the Ecuador Family Court less than $2.8 million in foreign investments. (Compare D.E. 19 ¶ 1; D.E. 19-1 (declaration of $2,797,475.80 in foreign investments) with D.E. 23 at 13 (reflecting a Total Net Worth of $50,000,000.00, including $20,000,000.00 in liquid assets in Credit Agricole, JP Morgan, ad Goldman Sachs).) The documents produced by UBS further show that Mr. Avellan is the beneficial owner of an account held by Honaker Corporation, (D.E. 23 at 9), and Applicant has presented evidence that Mr. Avellan disavowed any ownership in Honaker Corporation in a sworn declaration to the Ecuador Family Court, (D.E. 19-4 at 5). Finally, Applicant submitted evidence that concealing assets would subject Mr. Avellan to a penalty under Article 193 of the Ecuador Civil Code, which provides: "The spouse or heir that willfully hides or removes an item from the partnership, shall lose its portion in that same item, and shall be obligated to reimburse it by double its value." (Moran Decl. (D.E. 11 at 38) ¶ 13.) In light of Articles 193 and 408, the Court finds that the Ecuador Family Court would likely be receptive to evidence of newly-discovered, concealed assets produced in response to this Court's Orders. Therefore, this factor favors permitting discovery.
3. Third Intel Factor
Under the third Intel factor, the Court considers "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." 542 U.S. at 265, 124 S.Ct. 2466.
Judge O'Sullivan found that this factor "favors the Applicant because there is no evidence that the Applicant is attempting to obtain evidence from AMKE in contravention of restrictions in place in the Foreign Proceeding. The evidence sought in the subject 1782 proceeding involves potential marital assets that were not disclosed and are not part of the current pending inventory proceedings." (Judge O'Sullivan's Order at 13.)
In its Objections, AMKE argues that Judge O'Sullivan "misapplied the law when analyzing the third Intel factor[.]" (Obj. at 18.) It argues that Judge O'Sullivan "mistakenly relied upon Applicant's factual description of the Pending Ecuadorian Inventory Proceeding." (Id. ) Specifically, AMKE asserts that Judge O'Sullivan improperly credited Applicant's argument that the Ecuador Family Court's denial of her request to reopen discovery applies only to discovery of assets in the current inventory, and not to discovery of newly-found assets. (See id. at 19.) It argues that discovery in the Foreign Proceeding is "closed for all purposes[,]" and by denying Applicant's three previous requests to reopen discovery, the Ecuador Family Court signaled that "she should be prohibited from seeking any discovery anywhere in the world." (Id. at 18 (citing In re Kurbatova, Case No. 18-mc-81554-BLOOM/Valle, 2019 WL 2180704, at *4 (S.D. Fla. May 20, 2019) ).) It argues that even under Applicant's logic, she should be prohibited from seeking discovery regarding Inversiones Alabama, because that company was part of the original inventory. (Id. )
In her Response, Applicant argues that AMKE's argument regarding discovery being "closed for all purposes" is belied by Article 408, which allows a party to introduce evidence of newly-found assets after the original inventory is concluded. (Resp. at 17-18.) In this regard, Applicant asserts that she has presented evidence that the information sought through her Application is not related to the assets in the first inventory, "but to assets that Avellan failed to disclose in the Foreign Proceeding." (Id. at 18.) She cites a sworn declaration filed by Mr. Avellan in the Foreign Proceedings in which he disavows any ownership in—or, indeed, any "relation to"—Eldine Trading Limited, Honaker Corporation, or Kona Marketing Limited. (See D.E. 19-4 at 5.) However, the documents produced by UBS in response to this Court's Ex Parte Order show that Mr. Avellan is the beneficial owner of an account held by Honaker Corporation. (D.E. 23 at 9, D.E. 27 at 3-4.) Applicant further argues that she should be permitted to seek evidence related to Inversiones Alabamas even though certain assets of that company were included in the first inventory. (Resp. at 18 n.14.) Specifically, she argues that because Mr. Avellan's daughters have commenced proceedings putting the ownership of Inversiones Alabamas assets at issue, she should be permitted to seek discovery establishing that Mr. Avellan owns Inversiones Alabamas, and that it was properly included in the first inventory. (Id. (citing December 17, 2019 Order of Ecuadorian Appellate Court (D.E. 33-1 at 8) (holding that the third-party exclusion action filed by Avellan's daughters must be conducted as a related action to the Foreign Proceeding, but under separate case number, and that the daughters' objection to the property being included in the inventory shall be subject to an ordinary trial).) She further argues that "although Avellan's daughters are contesting the inclusion of Inversiones Alabamas and one if its real properties in the initial inventory, any additional assets of Inversiones Alabamas discovered through this 1782 action would be for use in preparing a new inventory and, therefore, would be for use in the Foreign Proceeding." (Id. (citing D.E. 11 at 12).)
Applicant asserts that the documents produced by UBS show that Mr. Avellan is the beneficial owner of additional accounts held by Honaker Corporation and Eldine Trading Limited, but it is unclear whether those documents have been made a part of the Court record.
In its Reply, AMKE argues that Judge O'Sullivan incorrectly analyzed the third Intel factor "because the Court did not adequately understand the procedural posture of the Foreign Proceeding." (Reply at 6.) According to AMKE:
In Ecuador, evidence is gathered before a lawsuit is filed and then submitted contemporaneously with the complaint, this has been acknowledged in another 28 U.S.C. § 1782 matter relating to Ecuador. In an inventory proceeding in Ecuador, the evidence should be gathered beforehand and if there is a disagreement on the proposed inventory, the Court opens a ten day evidentiary period where the parties can submit evidence of all marital assets, from anywhere in the world, and the Ecuadorian judge will determine whether the assets are marital or not. This ten day evidentiary period took place in July 2018. The Applicant attempted three time[s] to reopen the evidentiary period and was denied every time. The Applicant's attempt to seek U.S. discovery through a 1782 Application is the epitome of circumvention of the foreign proof gathering restriction.
"[U]nder Ecuadorian law, it must submit its evidence with the pleading at the time it commences the civil action." Application of Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 747 F.3d 1262, 1271 (11th Cir. 2014) (The court granted a 1782 application to seek evidence in aid of reasonably contemplated Ecuadorian foreign proceeding because Ecuadorian litigants must gather evidence before filing a lawsuit and submit the evidence contemporaneously with their complaint).
(Id. (footnote in original).) AMKE does not address Applicant's arguments regarding Inversiones Alabamas. (See id. )
Judge O'Sullivan's finding that this factor weighs in favor of permitting discovery is not clearly erroneous or contrary to law. This Court has already found that: (1) although the Ecuador Family Court denied Applicant's requests to reopen discovery, Article 408 requires the Ecuador Family Court to conduct an inventory when new assets are found that were not known while the original inventory was ongoing, (see Molina Decl. (D.E. 11) at 24 ¶¶ 29-31; Moran Decl. (D.E. 11) at 38 ¶ 13; Santos Decl. (D.E. 16-1) ¶ 26); and (2) Applicant is seeking to discover assets that Mr. Avellan did not disclose in the original inventory, (see Application ¶¶ 3-4). Moreover, Article 193 provides for a penalty when a spouse willfully conceals assets. (Moran Decl. (D.E. 11 at 38) ¶ 13.) Such a penalty would be illusory if the other spouse was not able to discover willfully concealed assets after the close of the inventory proceedings. In this regard, AMKE has failed to rebut Applicant's argument that evidence of Mr. Avellan's ownership interest in Inversiones Alabamas, or evidence that he otherwise concealed assets of Inversiones Alabamas, would not be prohibited by the Ecuador Family Court's December Order. Such evidence may be relevant for purposes of Article 408 and Article 193. As such, Judge O'Sullivan's finding that Applicant's request is not a concealed attempt to circumvent the Ecuador Family Court's Orders is not clearly erroneous or contrary to law.
AMKE's reliance on Kurbatova is unavailing. In that case, the applicant's "submissions to th[e] Court [were] replete with admissions that she has ‘tried repeatedly and unsuccessfully to obtain much of the discovery sought here.’ " 2019 WL 2180704, at *4. The court was "hesitant to utilize its broad discretion afforded to it by § 1782, where it appears that the Applicant [wa]s attempting to obtain discovery that she was already denied by the foreign tribunal." Id. Here, however, there is no evidence that Applicant is attempting to obtain discovery that the Ecuador Family Court denied her. Rather, for reasons already explained, it appears that the Ecuador Family Court's Orders denying her requests to reopen discovery did not pertain to evidence of newly-discovered assets that were not disclosed in the first inventory.
Because Article 408 requires the Ecuador Family Court to carry out an inventory when new assets are found, Article 193 provides for a penalty when a spouse willfully conceals assets, and Applicant's 1782 Application seeks to discover assets that Mr. Avellan failed to disclose in the Foreign Proceeding and has taken "active steps to hide ... from Applicant[,]" (D.E. 1 ¶ 3), Judge O'Sullivan's finding that this factor weighs in favor of permitting discovery is not clearly erroneous or contrary to law.
4. Fourth Intel factor
Under the fourth Intel factor, "unduly intrusive or burdensome requests may be rejected or trimmed." 542 U.S. at 265, 124 S.Ct. 2466.
Judge O'Sullivan observed that although AMKE argued that the subpoena was overbroad, it did "not argue that the discovery sought is unduly intrusive or burdensome and has made no showing that the production of any responsive documents would be unduly intrusive or burdensome." (Judge O'Sullivan Order at 14.) Judge O'Sullivan found that the fourth Intel factor weighs in favor of granting discovery because the subpoena is not overbroad, as it "covers the duration of the marriage and the period during which the divorce was becoming final, and the discovery requests are tailored to obtain evidence of marital assets from specific entities and individuals." (Id. at 15.)
In its Objections, AMKE argues that Judge O'Sullivan "misapplied the law by not holding that the subpoena to [AMKE] was overly broad, unduly burdensome and intrusive." (Obj. at 19.) It argues that the subpoena is overbroad because it requests documents for an open-ended time period—i.e., from "December 1, 1999 through and including the date of complete production of the documents responsive to this Subpoena[.]" (Id. at 19-20.) It argues that the Parties were divorced on March 21, 2016, but Applicant is seeking discovery about events that occurred after that date. (Id. ) AMKE cites to the Transcript of Judge O'Sullivan's hearing on AMKE's Motion to Vacate and Quash in which Applicant's counsel appears to seek discovery of events that occurred after the dissolution of marriage to the extent they involve a transfer of concealed assets:
MR. LACAYO: ... Post dissolution, Your Honor, lots of things could have happened and lots of things, unfortunately, do happen in these cases where people know that they need to act to alienate assets away from themselves when they are interested in not having those assets be part of the marital estate.
THE COURT: But you agree that the point that the Court has to determine what the assets were, is it on the day of the dissolution of the marriage in 2016?
MR. LACAYO: Yes, Your Honor.
THE COURT: Okay.
MR. LACAYO: That's my understanding.
THE COURT: Okay. Go ahead.
MR. LACAYO: So what we are saying, Your Honor, there are things that could be relevant to his ownership of these assets that happened after that date.
So, for example, he could alienate that property. It could be -- and in fact, we have some evidence of the fact in the form of the representation by the brother saying after the divorce that the company Inversiones Alabama did not, in fact, belong to the brother who declared that he was the shareholder of it for six years in a row.
(D.E. 21-1 at 44:9 – 45:4.) AMKE labels this a "fishing expedition." (Obj. at 20.)
In her Response, Applicant notes that AMKE's explicitly represented to Judge O'Sullivan that it is not arguing that complying with the subpoena would be unduly burdensome, and only argued that the subpoena is overbroad. (Resp. at 19 (citing D.E. 16 at 10).) She further argues that even if the Court permits AMKE to raise the argument now, it has not shown how complying with the subpoena would be unduly burdensome. (Id. (citing In re Application of Mesa Power Grp., LLC, 878 F. Supp. 2d 1296, 1306 (S.D. Fla. 2012) ).) She further argues that AMKE's overbreadth argument fails because it has not shown how the subpoena should have been narrowed. (Id. at 20.) She argues that "the subpoena is narrowly tailored to discover assets owned by Avellan, either directly or indirectly (through shell companies or family members), that should have been—but were not—disclosed in the Foreign Proceeding." (Id. ) In this regard, she argues that Judge O'Sullivan correctly found that "the discovery requests are tailored to obtain evidence of marital assets from specific entities and individuals." (Id. (quoting Judge O'Sullivan Order at 15).) Finally, Applicant asserts that although AMKE framed its argument in terms of Judge O'Sullivan "misappl[ying] the law," it is really just arguing that it disagrees with Judge O'Sullivan's interpretation of the facts. (Id. )
In its Reply, AMKE argues that "the evidence sought is unduly intrusive and burdensome, in violation of the fourth Intel factor, because it goes beyond the period of divorce which is the last date on which marital assets are valued." (D.E. 49 at 6.) It asserts that "[t]his is not discovery in aid of execution or to search for a possible fraudulent transfer and the Ecuadorian court is only interested in reviewing evidence during the term of the marriage." (Id. )
The Court rejects AMKE's argument that Judge O'Sullivan "misapplied the law by not holding that the subpoena to [AMKE] was overly broad, unduly burdensome and intrusive." (Obj. at 19.) First, AMKE did not argue to Judge O'Sullivan that complying with the subpoena would be unduly intrusive or burdensome under the fourth Intel factor. (See D.E. 9.) Rather, it argued only that the subpoena was overly broad. (See id. at 11.) Tellingly, the overbreadth argument did not appear in the subsection of AMKE's Motion that addresses the Intel factors, (id. at 9-11), but instead appeared in its own subsection, (id. at 11). In fact, in its Reply brief to Judge O'Sullivan, AMKE explicitly stated that it did not raise an "unduly intrusive or burdensome" argument under the fourth Intel factor. (D.E. 16 at 9-10 ("The Respondent did not argue that complying with the subpoena would be unduly burdensome. Rather, it argued that the subpoena was overly broad because it requests documents since December 1, 1999.").) Because AMKE did not argue that complying with the subpoena would be unduly intrusive or burdensome under the fourth Intel factor in its submissions to Judge O'Sullivan, the Court exercises its discretion to decline to consider it here. See Williams v. McNeil, 557 F.3d 1287, 1292 (11th Cir. 2009) (holding that "a district court has discretion to decline to consider a party's argument when that argument was not first presented to the magistrate judge"). Regardless, the Court notes that AMKE still has not identified how complying with the subpoena would be unduly intrusive or burdensome.
The Court further rejects AMKE's objection to Judge O'Sullivan's finding that the subpoena is not overbroad. AMKE merely argues that the time period covered by the subpoena extends beyond the time period that Applicant was married to Mr. Avellan. (See Obj. at 19-20.) However, Applicant's counsel argued at the hearing before Judge O'Sullivan that Applicant is entitled to discover evidence regarding transfers of ownership or alienation of these undisclosed assets that occurred after the dissolution of marriage. (D.E. 42-1 at 44:9 – 45:4.) AMKE has failed to rebut that argument. Evidence that Mr. Avellan alienated assets after the dissolution of marriage could identify assets Mr. Avellan owned during the marriage, but that he failed to disclose in the Foreign Proceeding. Therefore, Judge O'Sullivan's finding that the subpoena is not overbroad and that "the discovery requests are tailored to obtain evidence of marital assets from specific entities and individuals" is not clearly erroneous or contrary to law.
c. Lack of candor
In its Motion to Vacate and Quash, AMKE argued that the Court's Ex Parte Order should be vacated because Applicant knowingly failed to disclose adverse facts—specifically, that "the time period for gathering evidence in the Foreign Proceeding had long ago closed and the Applicant had three times tried and failed to re-open it." (D.E. 9 at 6-7.) In his Order, Judge O'Sullivan noted the argument:
AMKE argues that the Applicant failed to discharge her duty of candor to the Court when she filed her application because: she failed to advise the Court that the ten-day time period to present evidence had closed in the Foreign Proceeding; she failed to disclose her three failed attempts to re-open the time period to gather evidence in the Foreign Proceeding; and she affirmatively swore to this Court that her counsel told her that "such evidence will likely be admissible before the Ecuador Family Court, and that [her] Application does not circumvent any proof-gathering restriction under Ecuadorian law."
(D.E. 35 at 3 (quoting Application ¶ 5).) However, Judge O'Sullivan made no explicit finding as to whether Applicant failed to discharge her duty of candor. In its Objections, AMKE argues that Judge O'Sullivan failed to adequately consider Applicant's lack of candor as a basis for exercising discretion to grant AMKE's Motion to Vacate. (Obj. at 7-11.) Applicant argues that Judge O'Sullivan implicitly rejected the argument by denying the Motion to Vacate. (Resp. at 6.) She argues that "there was absolutely no misrepresentation, material omission, or lack of candor in the Application or in any of Applicant's subsequent filings." (Id. at 7.) She argues that because Article 408 requires the Ecuador Family Court to conduct an inventory proceeding if evidence of additional, undisclosed assets is discovered, its denial of her requests to reopen discovery are not "critical, or even relevant," to her 1782 Application:
Independent of the Ecuador Family Court's willingness (or lack of willingness) to reopen the discovery period in the Foreign Proceeding on prior occasions, the fact remains that the evidence sought by Applicant is for use in the same Foreign Proceeding, because it concerns evidence of marital assets that were not disclosed by Avellan and, hence, not included in the initial inventory.
(Id. at 7-8.) Applicant argues that because evidence of additional marital assets would be presented in the same Foreign Proceeding, "there was no misrepresentation when Applicant requested judicial assistance to discover information and documents relating to assets that her ex-husband hid from her and the Ecuador Family Court." (Id. at 8.)
In its Reply, AMKE maintains that Judge O'Sullivan did not give the lack of candor argument proper consideration. (D.E. 49 at 7.) It asserts that "[i]t is inconceivable that a denied request to reopen the evidentiary period in a foreign proceeding does not merit full disclosure in a 28 U.S.C. § 1782 application seeking evidence specifically for use in that same foreign proceeding." (Id. ) It argues that Article 408 is inapplicable because the original inventory has not concluded, and in any event, the evidence sought would be prohibited because Applicant "knew of the existence of the companies that she currently seeks evidence on in her 1782 Application." (Id. at 8.)
The Court finds that Judge O'Sullivan's implicit finding that Applicant's alleged lack of candor does not warrant vacatur of the Court's Ex Parte Order is not clearly erroneous or contrary to law. Article 408 requires the Ecuador Family Court to carry out an inventory of any newly found assets. (See Molina Decl. (D.E. 11) at 24 ¶¶ 29-31; Moran Decl. (D.E. 11) at 38 ¶ 13; Santos Decl. (D.E. 16-1) ¶ 26.) Although AMKE argues that Article 408 is unhelpful to Applicant because she knew of the companies that she seeks evidence on, the Court has accepted Applicant's argument that Mr. Avellan may have concealed his interest in those companies and the assets owned by those companies during the first inventory proceeding. (See Section III(a), (b)(2), & (b)(3).) As such, the evidence Applicant seeks to discover would (or could) qualify as "assets found that were not known while the inventory was ongoing" requiring a formal inquiry under Article 408. Consequently, as the Court has already found, the fact that the Ecuador Family Court previously denied Applicant's requests to reopen discovery is inconsequential to these 1782 proceedings, and the fact that Applicant failed to disclose that information is immaterial, if not wholly irrelevant.
Therefore, Judge O'Sullivan's implicit finding that Applicant's alleged lack of candor does not warrant vacatur of the Court's Ex Parte Order is not clearly erroneous or contrary to law.
IV. Conclusion
In sum, the Court finds that Applicant has satisfied the statutory factors establishing prima facie entitlement to judicial assistance under Section 1782, and after considering both Parties' evidence and arguments regarding the Intel factors, the Court finds that those factors favor permitting the requested discovery. Accordingly, it is ORDERED AND ADJUDGED that:
1. Judge O'Sullivan's Order on Respondent's Motion to Quash and Vacate (D.E. 35) is AFFIRMED consistent with this Order;
2. All other pending motions are DENIED AS MOOT ; and
3. This case is now CLOSED .
DONE AND ORDERED in Chambers at Miami, Florida this 13th day of April, 2020.