Opinion
MISCELLANEOUS NO: 01-3791 and consolidated case, Section: "J"(1)
August 8, 2002
HEARING ON MOTION
MINUTE ENTRY
APPEARANCES: Submitted on briefs
MOTION: OTTO CANDIES' MOTION FOR A PROTECTIVE ORDER (Rec. doc 4)
GRANTED
Before the undersigned is the motion of the non-party, Otto Candies, L.L.C. ("Otto Candies"), for a protective order quashing subpoenas directed to it and its bank, Hibernia National Bank ("Hibernia"). The subpoenas were issued by the plaintiffs, Seabulk Towing, Inc. and Seabulk Offshore, Ltd. (collectively referred to as "Seabulk"). Otto Candies contends that the sole purpose of Seabulk's discovery is to locate assets belonging to the defendant, Oceanografia S.A. de C.V. ("Oceanografia"), that can be seized. Otto Candies argues that such discovery is inappropriate under Fed.R.Civ.P. 69 prior to Seabulk obtaining a judgment against Oceanografia.
This is the second time that relief in this Court has been sought on a discovery matter even though the action is pending in federal district court in Brownsville, Texas. Previously Seabulk filed a motion to compel production of documents by Otto Candies. See Rec. doc. 1 in "Seabulk Towing, et al v. Oceanografia S.A. de C.V., et al," Misc. No. 01-3791 "J"(1) ("Seabulk I"). The undersigned granted in part and denied in part that motion to compel. See Rec. doc. 18 in Seabulk I. The District Court overruled the objections of Otto Candies and affirmed the undersigned's order. See Rec. doc. 23 in Seabulk I. Even though the trial court in the Brownsville action is better suited to resolving issues affecting the scope of discovery, Otto Candies has filed its motion for a protective order in this Court.
Seabulk Towing, Inc., f/k/a Hvide Marine Towing, Inc., et al v. Oceanografia S.A. de C.V., et al, CA No. B-01-094 (S.D. Tx.) (the "Brownsville action").
See In re: Sealed Case, 141 F.3d 337, 343 (D.C. Cir. 1998), where the court held that: "if the nonparty deponent fails . . . to move for a protective order in the trial court, the issuing court must make the decision whether discovery may be had, and its scope, since it is the only court with the power to order enforcement."
The factual background in the Brownsville action is described in the rulings by the District Court and the undersigned in Seabulk I. See Rec. docs. 18 and 23 in Seabulk I. Seabulk describes its Brownsville complaint against Oceanografia and its principal, Amado Yanez Osuna ("Osuna"), as a corporate accountancy action. Rec. doc. 8 at p. 9. Seabulk acknowledges that the purpose of the current discovery sought from Otto Candies and its bank is to find assets belonging to Oceanografia that can be seized. Seabulk contends that the Brownsville action also involves claims of divestiture of assets from Oceanografia and that any information regarding the assets of Oceanografia and their relation to Otto Candies is relevant. It argues that the current discovery is needed to provide it with the opportunity to obtain security for its claims against Oceanografia, before it completes its alleged plan to divest itself of its assets. Id. at 7. This issue was not resolved in Seabulk I.
Generally facts about the financial status of a party are not discoverable prior to obtaining a judgment against the party. See Fed. Rule Civ. P. 26(b)(2) Advisory Committee's Note, 1970 amendments; and 8 Wright, Miller and Marcus, Federal Practice and Procedure § 2010 (2d ed. 1994). Seabulk argues that in an admiralty action pre-judgment discovery of a defendant's assets, including those in the possession of a third party, is permissible pursuant to Rules B and C of the Supplemental Rules for Certain Admiralty and Maritime Claims.
Rules B and C only apply to the seizure of assets within the district in which the action is filed. Pursuant to Rule B the plaintiff attaches or garnishes a vessel or other property belonging to the defendant which is located within the judicial district where action is to be commenced. 29 James Wm. Moore, et al., Moore's Federal Practice ¶ 705.04[1] (3d ed. 1997). Pursuant to Rule C the plaintiffs complaint must "in an admiralty and maritime proceeding state that the property is within the district or will be within the district while the action is pending. . . ." Fed.R.Civ.P. Supplemental Rule C. Seabulk filed its action in Brownsville, but it seeks assets in the Eastern District of Louisiana. Assuming for the moment that Rules B and C permitted pre-judgment discovery of a defendant's assets, they do not provide authority for a search for assets outside of the district where the action is pending.
Seabulk argues that the Eleventh Circuit's decision inSchiffahartsgesellschaft Leonhardt Co. v. A. Bottachi S.A. de Navegacion, 773 F.2d 1528 (11th Cir. 1985), shows it is entitled to discovery regarding Oceanografia's assets. The Eleventh Circuit said a "[m]aritime attachment is designed to assure a defendant's appearance and to secure satisfaction if the suit is successful." 773 F.2d at 1535. At issue was whether the maritime attachment procedures employed by the district court complied with the constitutional procedural due process requirements. The Eleventh Circuit found that an immediate postattachment hearing before a judge provided the maritime debtor with the process he was due. Id. at 1539. It does not follow from this decision that a plaintiff in an admiralty proceeding is entitled to pre-judgment discovery of a defendant's assets. In Nehring v. Steamship M/V Point Vail, 901 F.2d 1044 (11th Cir. 1990), the Eleventh Circuit said:
There are two reasons for the procedure authorized in Supplemental Rule B: to assure respondent's appearance, and to assure satisfaction in case the suit is successful. Supplemental Rule B, however, cannot be used purely for the purpose of obtaining security: The two purposes may not be separated, however, for security cannot be obtained except as an adjunct to obtaining jurisdiction.
Id. at 1051 (citations, quotation marks and brackets omitted). Seabulk does not argue that the discovery is needed in order to maintain jurisdiction over Oceanografia in Brownsville. Seabulk has not shown a basis for departing from the general rule that discovery of a defendant's assets prior to judgment is not permitted.
Seabulk also contends that such discovery is relevant to its claim that the defendants mishandled the finances of Oceanografia. Fed.R.Civ.P. 26(b)(1). It argues that the full disclosure of accounts, assets and transfers is necessary to support its action against the defendants. Rec. doc. 8. Seabulk has made no showing that the trial court has ordered Oceanografia to provide such discovery.
The parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party. Fed R. Civ. P. 26(b)(1). Under the revised Fed.R.Civ.P. 26(b)(1) the court must focus on the claims and defenses involved in the action. Fed. Rule Civ. P. 26(b)(1) Advisory Committee's Note, 2000 amendments. "(T)he determination whether such information is discoverable because it is relevant to the claims or defenses depends on the circumstances of the pending action." Id. In this action Seabulk describes its claim as a corporate accountancy action. It has not submitted copies of its complaint and the defendants' answer in the Brownsville action in order to permit an analysis of the claims pending in that action. Seabulk has not provided a sufficient basis to show that the information sought is relevant to its claims. The mere conclusory statement that such discovery is relevant is insufficient. Even if the information sought is not relevant, the undersigned may order discovery of any matter relevant to the subject matter involved in the action for good cause shown. Id.
In further support of its request for the discovery Seabulk submitted a response to Otto Candies' reply memorandum. Rec. doc. 25. Seabulk's supplemental response is silent on its contention that Rules B and C of the Supplemental Rules for Certain Admiralty and Maritime Claims gave it the right to seek pre-judgment discovery of Oceanografia's assets. Instead Seabulk argues that the discovery it now seeks from Otto Candies and its bank was actually discovery the undersigned ordered Otto Candies to produce in Seabulk I but which it failed to produce. Seabulk, however, adds that to the extent the discovery it now seeks may be interpreted as going beyond the scope of the Seabulk I order, the new discovery is "modified to seek documents co-extensive with this Court's prior order." Rec. doc. 25 at p. 3. Seabulk's belated attempt to recast its current discovery as an effort to force Otto Candies to comply with the Seabulk I order is without merit. If Otto Candies did not comply with the order in Seabulk I, Seabulk should have filed a motion to compel and for sanctions. As previously conceded by Seabulk, its new discovery of Otto Candies and its bank is aimed at finding Oceanografia assets it can seize. Seabulk has not shown any basis for pre-judgment discovery of Oceanografia's assets.
Seabulk also presents a term loan agreement that was not implemented. It provided that Otto Candies would guarantee a $15 million loan to an entity that Seabulk contends was going to purchase or charter Oceanografia vessels. Seabulk also reports that Yanez testified that the Otto Candies/Oceanografia joint venture was placed on hold because of Seabulk's suit against Oceanografia. Rec. doc. 25 at p. 4. Seabulk has not shown that the new discovery is relevant to its claim in its corporate accountancy action. It also has not made any showing of good cause.
IT IS ORDERED that Otto Candies' motion for a protective order (Rec. doc. 4) is GRANTED and the subpoenas issued by Seabulk to Otto Candies and Hibernia are quashed.