Opinion
M19-117 (RJH).
April 19, 2007
MEMORANDUM OPINION AND ORDER
Ernst Young (a Hong Kong partnership) ("EY Hong Kong") moves for leave to intervene in this proceeding pursuant to Rule 24(a)(2) or (b)(2) of the Federal Rules of Civil Procedure and an order pursuant to 28 U.S.C. § 1782 appointing Joel C. Haims as a Commissioner of the Court for the purpose of issuing subpoenas duces tecum. For the reasons set forth below, Ernst Young Hong Kong's motion to intervene is granted.
BACKGROUND
This proceeding arises out of the largest corporate insolvency in the history of Hong Kong. In 2001 Akai Holdings Limited ("Akai") and Kong Wah Holdings Limited ("Kong Wah") became subject to a liquidation proceeding under the coordinated supervision of the High Court of Hong Kong Special Administrative Region ("High Court of Hong Kong") and the Supreme Court of Bermuda. Pursuant to that proceeding, the High Court of Hong Kong designated Nicholas T.C. Hill, Fan Wai Kuen, and Craig Christensen (collectively, "the Liquidators") as court-appointed officers charged with responsibility for locating and distributing the assets of the companies to their creditors.
The Liquidators brought this miscellaneous action seeking a court order, pursuant to 28 U.S.C. § 1782, permitting the Liquidators to take discovery from Ernst Young LLP, a Delaware partnership ("EY United States"), Ernst Young International, Ltd. ("EY International"), and certain partners and officers of these entities. As detailed in this Court's previous opinion in this matter, Ernst Young audited the bankrupt companies and related corporations during the 1990s. See In re Application of Hill, Misc. No. M19-117 (RJH), 2005 U.S. Dist. LEXIS 10838, 2005 WL 1330769 (S.D.N.Y. June 3, 2005). On December 15, 2004, this Court granted the Liquidators' request. On June 3, 2005, having concluded that the requested discovery would assist in liquidation proceedings in Hong Kong, the Court denied EY United States' motion to quash the subpoenas issued by the Liquidators. See id.
In addition, on March 8, 2006, the Court denied the motion to intervene filed by Ernst Young LLP (an Ontario Limited Liability Partnership) ("EY Canada").
In response to the Liquidators' subpoenas, EY United States and EY International produced some relevant documents, but they did not review for production a compilation of documents received and selected by them during discovery in Semi-Tech Litigation, LLC v. Ting, Index No. 604644/02 (J. Moskowitz), and Semi-Tech Litigation, LLC v. Bankers Trust Co., No. 02 Civ. 0711 (LAK) (collectively, "Semi-Tech Litigation"), on the ground that the compiled documents are attorney work product protected from discovery by Federal Rule of Civil Procedure 26(b)(3). At a hearing held on November 8, 2006, the Court found that the Ernst Young parties' work product claim for the Semi-Tech documents is weak, but because the Liquidators failed to demonstrate that they were "unable without undue hardship to obtain the substantial equivalent of the materials by other means," Fed.R.Civ.P. 26(b)(3); see In re Grand Jury Subpoenas, 959 F.2d 1158, 1166 (2d Cir. 1992), the Court ordered the Liquidators to attempt first to obtain the Semi-Tech documents from other parties. On December 29, 2006, the Liquidators served subpoenas for the Semi-Tech documents on various counsel in the Semi-Tech Litigation and non-parties responsible for producing documents in the Semi-Tech Litigation ("Semi-Tech subpoenas").
For relevant periods of time, Akai was part of the Semi-Tech Corporation group of companies, headquartered in Canada. See Application for Judicial Assistance Pursuant to 28 U.S.C. § 1782, at 2 (Nov. 8, 2004). Creditors of the bankrupt Semi-Tech Corporation filed suit in New York Supreme Court against EY Hong Kong, EY Canada, EY United States, EY International, and various officers and directors of Semi-Tech Corporation.
Meanwhile, the Liquidators filed suit in the High Court of Hong Kong against EY Hong Kong, former auditors of Akai and Kong Wah ("Hong Kong Litigation"). The Liquidators are using documents produced in the instant proceeding in the Hong Kong Litigation (Letter from Eric C. Lewis, Commissioner of the Court and Counsel for the Liquidators (June 20, 2006)), and both the Liquidators and EY Hong Kong anticipate that at least some of the documents produced in response to the Semi-Tech subpoenas will be used in the Hong Kong Litigation. Because EY Hong Kong was a defendant in the Semi-Tech Litigation, it already possesses copies of the Semi-Tech documents. Nevertheless, EY Hong Kong claims that protective orders entered in the Semi-Tech Litigation limit the use of Semi-Tech documents designated as "Confidential" or "Confidential — Attorneys Eyes Only" to the Semi-Tech Litigation and restrict access to those documents to counsel in that case. Accordingly, EY Hong Kong seeks leave to intervene in this proceeding so that it may serve subpoenas for the Semi-Tech documents on the same parties served by the Liquidators.
DISCUSSION
EY Hong Kong argues that it should be permitted to intervene in this proceeding under Rule 24(a)(2) of the Federal Rules of Civil Procedure, which governs intervention as of right, or, in the alternative, under Rule 24(b)(2), which governs permissive intervention. Under either provision, a district court engages in essentially the same analysis. See "R" Best Produce, Inc. v. Shulman-Rabin Mktg., Corp., 467 F.3d 238, 240 (2d Cir. 2006). Intervention as of right depends upon whether the intervenor (1) timely files an application, (2) shows an interest in the action, (3) demonstrates that the interest may be impaired, and (4) shows that the interest is not adequately protected by the parties to the action. See New York News, Inc. v. Kheel, 972 F.2d 482, 485 (2d Cir. 1992). A motion for permissive intervention "may be granted if the application is timely and if the `applicant's claim or defense and the main action have a question of law or fact in common.' The court must consider whether granting permissive intervention `will unduly delay or prejudice the adjudication of the rights' of the existing parties." Weisshaus v. Swiss Bankers Ass `n (In re Holocaust Victim Assets Litig.), 225 F.3d 191, 202 (2d Cir. 2000) (quoting Fed.R.Civ.Proc. 24(b)(2)). In either case, a district court has considerable discretion in reviewing the intervenor's application. See United States v. Pitney Bowes, Inc., 25 F.3d 66, 73 (2d Cir. 1994) ("Reversal of a district court's denial of permissive intervention is a very rare bird indeed, so seldom seen as to be considered unique.").
Here, the Liquidators do not dispute EY Hong Kong's assertion that its application is timely and that its request for discovery has a question of law or fact in common with the main proceeding. The Court agrees with EY Hong Kong that these factors are satisfied. The application is timely because the parties on whom the Liquidators have served the Semi-Tech subpoenas have not yet produced any documents, partly because they have requested a written order from this Court authorizing the subpoenas, which the Court is issuing by separate order. In addition, EY Hong Kong has a direct interest in this proceeding because, like the Liquidators, it has an interest in obtaining documents produced in the Semi-Tech Litigation for use in the Hong Kong Litigation.
The Liquidators, however, oppose EY Hong Kong's request for intervention as "overbroad," arguing that EY Hong Kong is not entitled to all of the documents that the Liquidators expect to receive in response to the Semi-Tech subpoenas because their requests for production "are for production of documents for use in the liquidation proceeding generally" and go "well beyond documents relevant to the Hong Kong proceeding." (Opp'n 2, 6.) The Liquidators add that EY Hong Kong is already entitled to receive relevant documents through the discovery process underway in the Hong Kong court, and they have offered to produce to EY Hong Kong on an expedited basis documents received in response to the Semi-Tech subpoenas. This concession addresses to some extent EY Hong Kong's concern that it will be prejudiced in the Hong Kong Litigation if it must rely on the Liquidators to turn over the Semi-Tech documents rather than subpoenaing them directly from the Semi-Tech litigants itself, as the Liquidators are doing. The Liquidators have not explained adequately, however, why EY Hong Kong's request is "overbroad" or why EY Hong Kong is not entitled to obtain the same discovery in this proceeding that the Court has granted the Liquidators. The Liquidators have not identified any particular request among the subpoenas they have issued that seeks documents irrelevant to the Hong Kong proceeding, nor have they identified any category of documents that might be produced in response to those subpoenas that would be irrelevant to the Hong Kong action. The Court therefore accepts EY Hong Kong's assertion that "[g]iven the high degree of commonality between the Hong Kong proceeding and the Semi-Tech litigation, documents produced in response to those subpoenas are unquestionably relevant to the Hong Kong proceeding." (Reply 3 n. 4.)
The Liquidators only remaining argument is that EY Hong Kong is seeking documents "outside the rules and supervision of the Hong Kong court." (Id. at 6.) They contend that "EY Hong Kong, through this motion to intervene, seeks to circumvent" the discovery process in the Hong Kong Litigation, in which the Liquidators get to decide which documents are relevant and EY Hong Kong's role is limited to challenging that production by motion to the Hong Kong court. (Opp'n 7.) The Liquidators have thus tacitly invoked the discretionary analysis used by district courts to decide whether to grant a request for discovery under 28 U.S.C. § 1782, specifically "whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country." Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264-65 (2004). However, EY Hong Kong's attempt to short-circuit the Hong Kong discovery process by obtaining the Semi-Tech documents directly in this proceeding does not "circumvent foreign proof-gathering restrictions." The Liquidators have pointed to no such proof-gathering restriction under Hong Kong law. Cf. In re Microsoft Corp., 428 F. Supp. 2d 188, 195 (S.D.N.Y. 2006) (finding that granting Microsoft's § 1782 request "would render the [European] Commission's proceedings meaningless and undermine the Commission's rules on confidentiality," where the Commission wrote a letter to respondent's counsel strongly opposing Microsoft's request); In re Gemeinshcaftspraxis Dr. Med. Schottdorf, No. Civ. M19-88 (BSJ), 2006 U.S. Dist. LEXIS 94161, 2006 WL 3844464, *6-*7 (S.D.N.Y. Dec. 29, 2006) (finding § 1782 request did not circumvent foreign discovery process because, if the German court "opposes United States assistance, that court may simply choose to exclude the discovered material from evidence"). For instance, they have not alleged that the Hong Kong court will prevent EY Hong Kong from introducing Semi-Tech documents because it has obtained them in this proceeding rather than from the Liquidators in the Hong Kong Litigation. Moreover, it appears that EY Hong Kong is seeking this discovery because it has a good faith basis for believing that it will be able to use the Semi-Tech documents in the Hong Kong Litigation. See In re Gemeinshcaftspraxis Dr. Med. Schottdorf, 2006 U.S. Dist. LEXIS 94161, 2006 WL 3844464, *7 (citing In re Grupo Qumma, S.A., No. M8-85 (DC), 2005 U.S. Dist. LEXIS 6898, 2005 WL 937486, at *3 (S.D.N.Y. Apr. 22, 2005)). Absent any indication of bad faith on EY Hong Kong's part, the Court is "simply unwilling to weigh the request for § 1782 assistance itself as a negative discretionary factor." Id.
Finally, the Liquidators have given no reason why EY Hong Kong's intervention in this proceeding would "unduly delay or prejudice the adjudication" of the Liquidators' rights. See Fed.R.Civ.Proc. 24(b)(3). Requiring respondents to produce documents to the intervenor will not delay the production of documents to the Liquidators but will merely assure that EY Hong Kong receives equal and timely access to those same documents. The Court also concludes that respondents will suffer no prejudice from granting EY Hong Kong access to materials that they are already required to produce to the Liquidators. See In re Linerboard Antitrust Litig., 333 F. Supp. 2d 333, 342 (E.D. Pa. 2004) (citing Wilk v. American Medical Ass'n, 635 F.2d 1295, 1301 (7th Cir. 1980) (there is "no reason to erect gratuitous roadblocks in the path of a litigant who finds a trail blazed by another")). EY Hong Kong's motion to intervene is therefore granted.
CONCLUSION
For the reasons stated above, EY Hong Kong's motion to intervene is granted. The Court appoints Joel C. Haims, Esq., a member of the firm of Morrison Foerster, counsel to EY Hong Kong, as a Commissioner of the Court, with authority to issue subpoenas to Gilbride, Tusa, Last Spellane LLC, Blank Rome LLP, Mintz Levin Cohn Ferris Glovsky and Popeo, P.C., Stroock Stroock Lavan LLP, Morrison Foerster, and Deloitte Touche, LLP.SO ORDERED.