Opinion
2:23-mc-00576-RMG
2024-01-19
IN RE TRAVESSIA SECURITIZADORA DE CREDITOS FINANCEIROS X S.A.
Ashley Nicole Hawkins, Nelson Mullins Riley and Scarborough, Charleston, SC, Edward M. Mullins, Pro Hac Vice, Hillary M. Sharp Dimitri, Pro Hac Vice, Reed Smith LLP, Miami, FL, for Travessia Securitizadora de Credititos Financeiros X S.A. Mary McFarland Caskey, Haynsworth Sinkler Boyd, Columbia, SC, for Zimpel Properties, LLC.
Ashley Nicole Hawkins, Nelson Mullins Riley and Scarborough, Charleston, SC, Edward M. Mullins, Pro Hac Vice, Hillary M. Sharp Dimitri, Pro Hac Vice, Reed Smith LLP, Miami, FL, for Travessia Securitizadora de Credititos Financeiros X S.A.
Mary McFarland Caskey, Haynsworth Sinkler Boyd, Columbia, SC, for Zimpel Properties, LLC.
ORDER AND OPINION
Richard Mark Gergel, United States District Judge
Before the Court is Zimpel Properties, LLC ("ZP") and Zimpel Investment Group, LLC ("ZIG") (collectively "Zimpel")'s motion to vacate an order granting applicant Travessia Securitizadora de Creditos Financeiros X S.A. ("TSCF" or "Applicant")'s request to issue subpoenas to ZP and ZIG under 28 U.S.C. § 1782. (Dkt. Nos. 14, 15, 16, 18). Alternatively, Zimpel asks that the Court quash or stay the subpoenas issued pursuant to said order. TSCF opposes. (Dkt. Nos. 17, 19). For the reasons stated below, Zimpel's motion is denied.
Travessia moved, with Zimpel's consent, to file a sur-reply addressing issued raised by Zimpel for the first time in its reply. The Court hereby GRANTS Travessia's motion for leave to file sur-reply. (Dkt. No. 19).
I. Background
On August 10, 2023, under 28 U.S.C. § 1782, Applicant moved for this Court to issue subpoenas to ZP and ZIG. (Dkt. No. 1).
The Court granted the ex parte request on September 5, 2023. (Dkt. No. 4) ("Prior Order").
After being served said subpoenas, Zimpel brought the instant motion to vacate. (Dkt. Nos. 14, 15, 16, 18). TSCF opposes. (Dkt. Nos. 18, 19).
By way of background, TSCF purchased debt that is the subject of 13 separate legal proceedings pending in Brazil. (Dkt. No. 1 at 2-3). Airton Francisco Zimpel ("Airton") and his wife, Indira Santos de Araujo Zimpel ("Indira"), do not dispute they entered into the loan agreements described above, (Dkt. No. 14-1 at 4), or otherwise guaranteed said debt. The debts which Airton and Indira guaranteed allegedly total over $45.5 million. (Dkt. No. 17-1 at 13). Airton and Indira also do not dispute that they are part owners of both ZP and ZIG—South Carolina limited liability corporations. (Dkt. No. 14-1 at 4).
TSCF contends the information it seeks from ZP and ZIG in its subpoenas, (Dkt. No. 1-3), will be used to gather evidence on Airton and Indira's assets and bank accounts in the United States, which may be used by TSCF in Brazil to identify assets against which to collect. See (Dkt. No. 17-1 at 8). TSCF argues this information is "key for uncovering potential fraudulent transfers or other efforts undertaken by [Airton and Indira] to avoid paying the significant debts owed to TSCF by hiding assets outside of the jurisdiction of the Brazilian courts." (Id. at 23-24).
Zimpel's motion is fully briefed and ripe for disposition.
II. Legal Standard
The Court confronts a motion to quash a subpoena issued pursuant to 28 U.S.C. § 1782, a statute that "represents nearly 150 years of efforts by Congress to encourage collaboration with foreign tribunals." In re Newbrook Shipping Corp., 31 F.4th 889, 894 (4th Cir. 2022). "Section 1782 affords the district courts wide discretion
in responding to requests for assistance in proceedings before foreign tribunals." In re Naranjo, 768 F.3d 332, 347 (4th Cir. 2014) (quoting Al Fayed v. United States, 210 F.3d 421, 424 (4th Cir. 2000)). Section 1782(a) imposes three mandatory requirements that a federal court must conclude are met before granting a subpoena pursuant to § 1782(a): (1) the person from whom the discovery is sought resides or is found in the district of the district court to which application is made; (2) the discovery is for use in a proceeding before a foreign tribunal; and (3) the application is made by a foreign or international tribunal or "any interested person." 28 U.S.C. § 1782(a); Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 246, 124 S.Ct. 2466, 159 L.Ed.2d 355 (2004).
If the Court finds that the party requesting the subpoena satisfies these statutory requirements, then the Court "retains discretion in granting or denying these orders" based on an equity-like balancing test. In re Newbrook, 31 F.4th at 896. This test requires that the Court pay "particular attention to the four factors identified in Intel":
(1) the involvement of "the person from whom discovery is sought" in the foreign proceeding, (2) "the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government, court or agency 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" in which case it "may be rejected or trimmed."
Id. (quoting Intel, 524 U.S. at 264-65, 118 S.Ct. 1969). "The ultimate balance" of the Intel factors "remains well within the district court's broad discretion and addresses common discovery concerns." In re Newbrook, 31 F.4th at 896. Indeed, "Intel does not mandate that every factor support a court's exercise of discretion or that all factors need even be considered." See In re Eli Lilly & Co., 37 F.4th 160, 168 (4th Cir. 2022) (holding that a district court did not abuse its discretion in heavily weighing two of the four Intel factors when it denied a § 1782(a) discovery application) (emphasis added). Instead, Intel "provided the factors to illuminate considerations relevant to the decision of whether to authorize assistance for use in proceedings before a foreign tribunal." Id.
III. Analysis
As to § 1782's mandatory factors, Zimpel only challenges factor two, that the evidence sought is "for use" in a foreign proceeding. See (Dkt. No. 14-1 at 11). Zimpel argues that the debts sought by TSCF in the Brazilian proceedings are time-barred under Brazilian law. (Id. at 11-15). Zimpel also contends that evidence of fraudulent transfers cannot not be used in TSCF's Brazilian debt proceedings absent a finding Zimpel committed a crime. (Id. at 14). To support its arguments, Zimpel submits the affidavit of Brazilian attorney Matheus Kliemaschewsk de Araujo. (Dkt. No. 15). At bottom, Zimpel asks this Court to interpret Brazilian law and conclude TSCF's Brazilian debt actions are time-barred and/or that the subpoenaed information would be irrelevant or otherwise inadmissible in a Brazilian court.
Zimpel does not dispute that TSCF has satisfied factors 1 and 3. (Dkt. No. 14-1 at 11).
In opposition, TSCF challenges Zimpel's factual assertions and argues its representations of Brazilian law are incorrect or misleading. TSCF submits two declarations
from Brazilian attorney Fabio Alem to this effect. (Dkt. Nos. 17-1, 19-1).
To meet the "for use" factor, the Court "must find that there is a reasonable possibility that the evidence sought 'will be employed with some advantage or serve some use in the proceeding.'" In re Newbrook, 31 F.4th at 895; In re Application of Sadeq, No. 1:21mc6, 2021 WL 4844754, at *17 (M.D.N.C. Oct. 18, 2021) ("[T]he 'for use' factor imposes only a 'de minimis' burden upon a Section 1782 applicant.").
In support of the argument the debts are time barred, Araujo contends that Airton and Indira were "not timely summoned" in some of the Brazilian proceedings. (Dkt. No. 15 at 7). Araujo also argues that certain actions are time barred because TSCF did not present to the Brazilian courts "evidence of assets to be seized and attached or sold to satisfy the judgment within a required time." (Id.). Araujo presents no translated case law or other similar proof "authoritatively" showing his assertions are true. In re Application of Banco Mercantil De Norte, S.A., No. 3:23:mc08, 2023 WL 6690708, at *8 (E.D. Va. Oct. 12, 2023).
TSCF presents evidence from Alem which disputes both the law and facts Araujo presents. Alem asserts that Airton and Indira were served. (Dkt. No. 17-1 at 5) (further noting that under Brazilian law, completion of service of process on "joint and liable defendants" interrupts the statute of limitations with respect to all co-defendants). Alem also contends that under "Brazilian law, a statute of limitations defense must be expressly requested by a party" and that Airton and Indira have never raised such a defense in the Brazilian actions. (Id. at 6). Further, as to the argument that TSCF is attempting to circumvent Brazilian proof-gathering restrictions, Alem notes that the bank secrecy law cited by Araujo does not apply to banking information located outside of Brazil such as that which ZP and ZIG, both South Carolina LLCs, hold. Compare (Dkt. No. 15 at 11) (arguing that under Brazilian law a "debtor is not obligated to reveal an [sic] information concerning his or her assets unless and until the creditor submits evidence to the Brazilian court that the debtor has committed a crime") with (Dkt. No 17-1 at 8) ("[T]he law relied upon by the Zimpels is a Brazilian statute that applies in connection with the release of banking information occurring exclusively in Brazil. It does not apply to discovery requests made under this Section 1782 or is enforceable extraterritorially or outside of Brazil.").
The Court finds that the evidence TSCF requests easily meets § 1782's "for use" factor. The information sought is relevant to assisting TSCF and the Brazilian courts in locating potential assets of Airton and Indira in the United States. See (Dkt. No. 17-1 at 8) (arguing that under Brazilian law, "the Debtors, including the Zimpels, are liable and respond to the claims made and debts owed with all their present and future assets until their obligations are satisfied"); Banco Mercantil De Norte, S.A., 2023 WL 6690708, at *4. In sum, the requested information could provide "some advantage or serve some use" to TSCF in prosecuting their claims in Brazil. As to Zimpel's arguments regarding statutes of limitations and admissibility—topics the Court revisits while analyzing Intel factor two—in contravention of established case law Zimpel asks the Court to "delv[e] into the [ ] technical question of discoverability under foreign laws in considering a § 1782 request for judicial assistance," something which the Court refuses to do. In re Request for Jud. Assistance from the Dist. Ct. in Svitavy, Czech Republic, 748 F. Supp. 2d 522, 527 (E.D. Va. 2010) (citing Intel, 542 U.S. at 263, 124 S.Ct. 2466);
Euromepa S.A. v. R. Esmerian, Inc., 51 F.3d 1095, 1099-1100 (2d Cir. 1995) ("[W] we do not read the statute to condone speculative forays into legal territories unfamiliar to federal judges. Such a costly, time-consuming, and inherently unreliable method of deciding section 1782 requests cannot possibly promote the 'twin aims' of the statute."). To the extent such an inquiry is ever appropriate, Zimpel has failed to "present a clear directive or authoritative proof" that the foreign tribunals would reject the information obtained in the United States. Banco Mercantil De Norte, S.A., 2023 WL 6690708, at *8; In re Chevron Corp., No. 7:10-MC-00067, 2010 WL 4883111, at *3 (W.D. Va. Nov. 24, 2010); Euromepa S.A., 51 F.3d at 1100 ("Such proof, as embodied in a forum country's judicial, executive or legislative declarations that specifically address the use of evidence gathered under foreign procedures, would provide helpful and appropriate guidance to a district court in the exercise of its discretion.").
Accordingly, the Court finds that TSCF meets all required factors under § 1782 and the Court proceeds to the discretionary factors the Supreme Court outlined in Intel. It bears repeating that "Intel does not mandate that every factor support a court's exercise of discretion or that all factors need even be considered." See In re Eli Lilly & Co., 37 F.4th at 168 (holding that a district court did not abuse its discretion in heavily weighing two of the four Intel factors when it denied a § 1782(a) discovery application). Instead, Intel "provided the factors to illuminate considerations relevant to the decision of whether to authorize assistance for use in proceedings before a foreign tribunal." Id.
I. Participation in a Foreign Proceeding
If a party qualifies as a nonparticipant, this factor generally weighs in favor of granting the requested discovery, whereas a party's status as a participant in a foreign proceeding "would militate against granting the requested assistance, because '[a] foreign tribunal has jurisdiction over those appearing before it, and can itself order [the respondent] to produce evidence.'" In re Request for Jud. Assistance from the Dist. Ct. in Svitavy, Czech Republic, 748 F. Supp. 2d at 526 (quoting Intel, 524 U.S. at 264, 118 S.Ct. 1969). Here, though TSCF is a party to the Brazilian proceedings, the entities from which TSCF seeks discovery do not appear to be subject to the personal jurisdiction of the Brazilian courts as they are both South Carolina LLCs. Zimpel does not address this factor in its briefing. See (Dkt. No. 14-1). The Court finds this factor is either neutral or weighs slightly in favor of TSCF because of the lack of jurisdiction the Brazilian courts likely have over Zimpel.
II. Receptivity to U.S. Judicial Assistance and Circumvention of Proof-Gathering Restrictions
Zimpel bases its motion to vacate on discretionary factors (2) and (3), arguing—as already described above—that TSCF's claims against it are time barred and the evidence sought here is not admissible under Brazilian law.
Absent a clear directive or authoritative proof that the foreign tribunal would reject the evidence obtained, courts generally conclude that the second Intel factor counsels in favor of granting a § 1782 application. Banco Mercantil De Norte, S.A., 2023 WL 6690708, at *7.
Courts in this District have held that when a requesting party has already asked for the same information before a foreign tribunal, the third Intel factor weighs against granting the § 1782(a) application.
In re Eli Lilly & Co., 580 F. Supp. 3d 334, 342 (E.D. Va. 2022), affd, 37 F.4th 160 (4th Cir. 2022) (holding that the discovery request could be an attempt to circumvent foreign discovery procedures); see also In re Newbrook Shipping Corp., 620 F. Supp. 3d 298, 311 (D.Md. 2022) (concluding that a foreign court's rejection of a discovery request on the same issue counsels against a U.S. court "granting of a similarly grounded request"). At the same time, this circumvention factor "entails neither a discoverability requirement nor a quasi-exhaustion requirement ... that would force litigants to seek information through the foreign or international tribunal before requesting discovery from the district court." In re Newbrook Shipping Corp., 498 F.Supp.3d 807, 819 (D. Md. 2020), overruled on other grounds by In re Newbrook, 31 F.4th 889, 894 (4th Cir. 2022).
The Court finds the third and fourth Intel factors weigh in favor of TSCF. Zimpel has not come close to presenting authoritative proof that Brazilian tribunals would reject the information sought here. In support of the argument the debts are time barred, Araujo argues that Airton and Indira were "not timely summoned" and that, otherwise, TSCF did not present to the Brazilian courts "evidence of assets to be seized and attached or sold to satisfy the judgment within a required time." (Id. at 7). Araujo presents no translated case law or other similar proof "authoritatively" showing his assertions are true, much less that TSCF's claims are time barred. Complicating Zimpel's argument is Alem's affidavit submitted on behalf of TSCF, wherein Alem affirms that under "Brazilian law, a statute of limitations defense must be expressly requested by a party" and that the Zimpels have never raised such a defense in the Brazilian actions. (Dkt. No. 17-1 at 6). Further, as to the allegation that TSCF is attempting to circumvent Brazilian proof-gathering restriction, Alem notes that the bank secrecy law cited by Araujo, (Dkt. No. 15 at 11), does not apply to banking information outside of Brazil, (Dkt. No 17-1 at 8) ("[T]he law relied upon by the Zimpels is a Brazilian statute that applies in connection with the release of banking information occurring exclusively in Brazil. It does not apply to discovery requests made under this Section 1782 or is enforceable extraterritorially or outside of Brazil.").
Accordingly, the Court finds factors (2) and (3) weigh in favor of TSCF.
III. Unduly Burdensome or Intrusive Discovery
As to the fourth Intel factor, "[r]equests are unduly intrusive and burdensome where they are not narrowly tailored, request confidential information and appear to be a broad fishing expedition for irrelevant information." Banco Mercantil De Norte, S.A., 2023 WL 6690708, at *12. For example, if a "substantial volume of data and materials" requested lies outside the federal court's district or the United States, the fourth Intel factor counsels against discovery, as bringing these materials "into the United States for subsequent use in proceedings abroad" would constitute "a nonsensical result." In re Eli Lilly, 37 F.4th at 168. Indeed, "§ 1782 discovery should be denied where an applicant 'can obtain the information from other sources without imposing a burden' on a non-party to the foreign action." In re Elliott Assocs. L.P., 2022 WL 1159692, at *4 (W.D.N.C. Apr. 19, 2022). However, a party's showing that the requested documents qualify as necessary to support its claims in the foreign proceeding weighs in favor of granting a § 1782(a) application. In re Catalyst Managerial Servs., DMCC, 680 F. App'x 37, 39 (2d Cir. 2017). The Court finds this last factor weighs in favor of TSCF. TSCF's proposed subpoenas are tailored to obtaining information relevant to the Brazilian proceedings, especially given Airton and Indira are guarantors on the over $45.5 million of debt TSCF is pursuing in the Brazilian courts. See, e.g., (Dkt. No. 1-3 at 10-11) (seeking documents from ZP and ZIG related to source of income, property owned/sold, and documents/communications between Zimpel and certain defendants in the foreign proceedings).
In sum, for the reasons stated above, the Court finds § 1782's mandatory and discretionary factors weigh in favor of TSCF and the Court denies Zimpel's motion to vacate.
In the Alternative, Zimpel Moves to Quash or Stay the Subpoena
"[T]he scope of discovery allowed under a subpoena is the same as the scope of discovery allowed under Rule 26. Thus, regardless of whether the Court considers [Zimpel]'s Motion under Rule 45 or Rule 26, the Court must review [TSCF]'s subpoena[ ] under the relevancy standards set forth in Rule 26(b)." Singletary v. Sterling Transport Co., Inc., 289 F.R.D. 237, 240-41 (E.D. Va. 2012) (citations omitted) (citing Cook v. Howard, 484 Fed.Appx. 805, 812 (4th Cir. 2012) (per curiam)). Pursuant to Fed.R.Civ.P. 26(b)(1):
Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.
Fed.R.Civ.P. 45(d)(3)(A)(iv), however, requires the court to quash or modify a subpoena that "subjects a person to undue burden." "Whether a subpoena subjects a witness to undue burden within the meaning of Rule 45(c)(3)(A)(iv) usually raises a question of the reasonableness of the subpoena," an analysis that requires "weighing a subpoena's benefits and burdens" and "consider[ing] whether the information is necessary and whether it is available from any other source." Charles Alan Wright & Arthur R. Miller et al., 9A Fed. Prac. & Proc. Civ. § 2463.1 (3d ed. 2018). This inquiry is "highly case specific" and involves "an exercise of judicial discretion." Id. "The burden of proving that a subpoena is oppressive is on the party moving to quash." Fleet Bus. Credit, LLC v. Solarcom, LLC, No. Civ. AMD 05-901, 2005 WL 1025799, at *1 (D. Md. May 2, 2005) (internal quotation marks omitted).
Zimpel argues the subpoenas must be quashed because: (1) the requested information is not relevant as TSCF's Brazilian cases are time-barred and uncollectable; (2) the subpoenas seek information from ZP and ZIG though "no debt has been adjudicated as owed by" Zimpel; and (3) the requests are "unduly burdensome" because some of the requests "have no time limitation," request "private customer information," or "confidential and private banking information." (Dkt. No. 14-1 at 19-21); (Dkt. No. 16 at 5) (claiming the subpoenas seek confidential information because "we derive [income] from our customers of our granite and marble business" and "[w]e want to protect our customers' privacy and not unnecessarily disclose information about their identities, accounts, or other personal information"). The Court denies Zimpel's request to quash the subpoenas. For the reasons discussed at length above, Zimpel has not authoritatively established TSCF's actions in Brazil are uncollectable. Further, Zimpel's argument that no debt has been adjudicated against ZP and ZIG is irrelevant—Airton and Indira guaranteed the $45.5 million at issue in the Brazilian proceedings and TSCF has persuasively argued that the information it seeks from ZP and ZIG in its subpoenas, (Dkt. No. 1-3), will be used to gather evidence on Airton and Indira's assets and bank accounts in the United States, which may be used by TSCF in Brazil to identify assets against which to collect. See (Dkt. No. 17-1 at 8). Last, contrary to Zimpel's assertion otherwise, a review of the subpoenas themselves reveal they do not target "customer" information, but instead concern information, inter alia, related to ZP and ZIG's sources of asserts, funding, and real property holdings. See, e.g., (Dkt. No. 1-3 at 10-11, 13) (requesting documents "relating to [ZP's] source of income" and "funding" and indicating deposition areas of examination such as "sources of funding" and "all assets and properties You own").
Last, as an alternative to quashing the subpoenas, Zimpel asks that this Court stay the subpoenas while Airton and Indira move to dismiss the Brazilian proceedings. (Dkt. No. 14-1 at 21).
The Court denies the Zimpel's motion on this final point. In its reply, Zimpel contends that it filed motions to dismiss the actions pending in Brazil on December 15 and December 27, 2023—during the pendency of the instant motion. While Zimpel claims rulings "are expected in the next 60 days," Zimpel provides no proof that the actions will be disposed of in 60 days. Further, in its sur-reply, TSCF demonstrates that in one of the actions Zimpel implied was "extinguished," the ordered issued therein actually granted TSCF a credit certificate to be used for collecting outstanding debt, supporting the assertion that TSCF is not in fact time-barred from seeking enforcement of its loans. (Dkt. No. 19-1 at 2-3) (noting that in Case Number 0007770-70.2010.8.0015 the proceedings were closed due to judgment creditor's unsuccessful attempts to locate any assets in Brazil on which to levy); (Id. at 30-31) ("I rule as extinct the case, within the limits and terms above stated. As a result, I order issuing the certificate of credit in the name of the creditor as provided above[.]").
IV. Conclusion
For the foregoing reasons, the Court DENIES Zimpel's motion to quash (Dkt. No. 14). Zimpel is directed to provide the requested discovery within the following 60 days.
AND IT IS SO ORDERED.