Opinion
Civil Action 22 Misc. 228 (JGK) (SLC)
02-29-2024
AGUILA ENERGIA E PARTICIPAÇÕES LTDA., Petitioner, v. JPMORGAN CHASE & CO., Respondent.
REPORT & RECOMMENDATION
SARAH L. CAVE, UNITED STATES MAGISTRATE JUDGE.
TO THE HONORABLE JOHN G. KOELTL, United States District Judge:
I. INTRODUCTION
On August 22, 2022, Aguila Energia e Participações Ltda. (“Aguila”), a Brazilian company, filed an ex parte application for an order pursuant to 28 U.S.C. § 1782 to serve a subpoena on JPMorgan Chase & Co. (“JPMorgan USA”), an American company, to obtain discovery for use in three contemplated legal proceedings in Brazil: (i) a civil lawsuit brought by Aguila against Banco J.P. Morgan S.A. (“JPMorgan Brazil”), a Brazilian subsidiary of JPMorgan USA; (ii) an administrative complaint filed by Aguila with the Brazilian General Accounting Office (also known as the Tribunal de Contas da Uniao (“TCU”)) seeking an investigation of JPMorgan Brazil and Petroleo Brasileiro S.A. (“Petrobras”); and (iii) a criminal complaint filed by Aguila with the Brazilian Federal Prosecutor's Office (also known as the Ministerio Publico Federal (“MPF”)) seeking an investigation of JPMorgan Brazil and Petrobras (together, the “Contemplated Proceedings”). (ECF No. 1 (the “Application”); see ECF No. 4-1 (the “Subpoena”)). The Subpoena seeks documents relating to Aguila's claim that JPMorgan Brazil engaged in fraud in failing to complete sales of assets (the “Assets”) to Aguila in connection with an auction of oil and gas concessions (i.e., land from which oil and natural gas can be obtained) and facilities in the Brazilian state of Bahia (the “Auction”). (See ECF No. 1 at 4-9). On September 25, 2023, JPMorgan USA appeared in the case (ECF No. 12), and after a conference held on September 28, 2023 (ECF No. 14), the Honorable John G. Koeltl issued an Order permitting Aguila to serve the Subpoena on JPMorgan USA without prejudice to JPMorgan USA's ability to move to quash the Subpoena. (ECF No. 15).
Now before the Court is JPMorgan USA's motion to quash the Subpoena (ECF No. 19 (the “Motion”)), which Aguila opposes (ECF Nos. 24-26 (the “Opposition”)) and which Judge Koeltl has referred for a report and recommendation. (ECF No. 28). For the reasons set forth below, the Court respectfully recommends that the Motion be GRANTED, the Subpoena be QUASHED, and the Application be DENIED.
II. BACKGROUND
A. Factual Background
Aguila is a Brazilian company that provides services and develops projects related to oil and natural gas. (ECF No. 1 at 11; ECF No. 5). Petrobras is a Brazilian company that, inter alia, produces and refines oil and natural gas. (ECF No. 1 at 10). Aguila alleges that, in November 2020, Petrobras publicly announced that it would auction certain of its assets in Bahia to a private company, with JPMorgan Brazil acting as its financial advisor. (Id. at 15-16). Aguila claims that, in August 2021, it made the highest bid at the Auction and JPMorgan Brazil selected Aguila as the winner. (Id. at 5). Aguila alleges that in the months that followed during negotiations, however, JPMorgan Brazil issued a series of requests for financial documents and information from Aguila designed to disrupt the transaction. (Id. at 6). According to Aguila, JPMorgan Brazil's requests became more and more unreasonable, culminating in JPMorgan Brazil's request for an “irrevocable debt and equity commitment letter,” which Aguila claims Petrobras has never required of a bidder “so early in the process.” (Id.) In February 2022, when Aguila failed to comply with that request, JPMorgan Brazil and Petrobras disqualified Aguila's bid. (d)
After disqualifying Aguila's bid, Petrobras reopened the Auction. (ECF No. 1 at 6). Aguila bid on the Assets a second time, and again made the highest bid. (Id. at 16). Aguila alleges that, during a videoconference in March 2022 (the “Videoconference”), “Petrobras and JPMorgan Brazil agreed that Aguila offered the best price” for the Assets. (Id.) At the same meeting, Aguila agreed to produce within five business days additional financial documents to JPMorgan Brazil in connection with the transaction. (Id. at 17).
Aguila claims that, following the Videoconference, Petrobras and JPMorgan Brazil again acted in concert to disrupt the transaction so that they could sell the Assets to another party. (ECF No. 1 at 17-20). Specifically, Aguila claims that JPMorgan Brazil, acting on behalf of Petrobras, unilaterally imposed a stricter deadline of one business day for production of the requested financial documents, and then did not respond to Aguila's multiple attempts to contact them. (Id. at 17). In April 2022, Aguila commenced a proceeding (the “Brazil Proceeding”) in Rio de Janeiro State Court (the “Brazilian Court”) to compel Petrobras to produce a copy of its recording of the Videoconference and to refrain from continuing negotiations with other bidders for the Assets. (Id. at 18). Although the Brazilian Court issued orders partially in Aguila's favor in April 2022 and June 2022 (id. at 18-20; ECF Nos. 1-12; 1-14), Aguila alleges that, in the Brazilian Proceeding, Petrobras informed Aguila that it had again been disqualified as a bidder for the Assets. (ECF No. 1 at 18). Overall, Aguila claims that it was “twice used as bait” by Petrobras and JPMorgan Brazil, and that its two winning bids were unlawfully disqualified. (Id. at 20).
JPMorgan USA notes that, on November 8, 2022 the “Twentieth Civil Chamber of the Judiciary Branch of the State of Rio de Janeiro (the ‘Brazilian Appellate Court') reversed both the April 2022 [] and June 2022” orders, finding that the dispute between Aguila and Petrobras was subject to a binding arbitration agreement. (ECF No. 22 ¶ 6).
For its part, JPMorgan USA contends that Aguila “submitted offers but was ultimately not selected” as the winning bidder of the Assets. (ECF No. 20 at 8). JPMorgan USA notes that, in September 2023, Petrobras terminated its plan to sell the Assets. (Id.; see ECF Nos. 20 ¶ 9; 22-3).
B. Procedural History
1. The Application
On August 22, 2022, Aguila filed the ex parte Application seeking an order permitting it to serve the Subpoena on JPMorgan USA for documents relating to its claims against Petrobras and JPMorgan Brazil. (ECF No. 1; see ECF Nos. 4; 4-1). Aguila argued that JPMorgan USA-although not an anticipated party to the Contemplated Proceedings-possesses discovery that would “provide key elements” to the anticipated TCU and MPF investigations and that would be “essential” to Aguila's civil claims against Petrobras and JPMorgan Brazil, its subsidiary. (ECF No. 1 at 13). Aguila sought documents and communications between individuals from Aguila, Petrobras, and JPMorgan Brazil involving the Auction and subsequent negotiations, for the period February 25, 2021 to the present. (ECF No. 4-1 at 13-14). To support its claim that JPMorgan USA had “possession, custody, or control” over relevant documents, Aguila cited emails from JPMorgan Brazil with the domains “@jpmorgan.com” and “@j[pm]chase.com,” asserting that disclaimers in those emails “link to the jpmorgan.com website” and “official letters and emails were signed as ‘J.P. Morgan' or ‘J.P. Morgan Team.'” (ECF No. 1 at 8-9, 12). Therefore, Aguila argued, “it is reasonable to assume JPMorgan USA has custody in or control from this District over the requested communications, documents and a recording of the March 30, 2022 [Videoconference],” and “Aguila has strong indications that JPMorgan USA is in possession of the evidence it seeks.” (Id. at 9-10, 12-13).
On August 22, 2023, the Court issued a Report & Recommendation recommending that the Application be denied because, in substance, Aguila had failed to establish that JPMorgan USA had possession, custody, or control over the requested documents. (ECF No. 9 at 8-9 and passim (the “R&R”)). In re Aguila Energia e Participações Ltda., No. 22 Misc. 228 (RA) (SLC), 2023 WL 7001445 (S.D.N.Y. Aug. 22, 2023). The Court concluded that, even without the benefit of JPMorgan USA appearing in the case to brief this issue, the Application failed to establish Aguila's entitlement to discovery under § 1782 and the Federal Rules of Civil Procedure. (Id.) On September 5, 2023, Aguila filed objections to the R&R. (ECF No. 10). On September 21, 2023, the Honorable Ronnie Abrams-then assigned to the case-issued an Order permitting that, “[i]f JPMorgan USA wishes to respond to Aguila's objections, it shall submit a response no later than September 28, 2023. Otherwise, the Court will consider the objections unopposed.” (ECF No. 11). On September 25, 2023, JPMorgan USA appeared in the case (ECF No. 12), and filed a letter urging the Court to decide the Application without JPMorgan USA joining the case but reserving its right to move to quash the Subpoena in the event that the Application was granted. (ECF No. 13). JPMorgan USA noted that, “[o]f course, if the Court prefers to hear from [JPMorgan USA] now, [JPMorgan USA] can make an appearance and file a brief setting forth its response to the applicant's objection to the R&R in further detail.” (Id. at 1).
On September 27, 2023, after the case was reassigned, Judge Koeltl ordered that Aguila and JPMorgan USA appear for a conference. (ECF No. 14). At the conference, Judge Koeltl expressed to the parties that “the most reasonable way to proceed” would be for Aguila to serve the Subpoena on JPMorgan USA and for JPMorgan USA to “either respond to the [S]ubpoena or move to quash . . . without prejudice to any arguments that either JP[]Morgan [USA] or [Aguila] can make with respect to the validity of the [S]ubpoena or the permissibility of the [S]ubpoena under [§] 1782 or the Federal Rules of Civil Procedure.” (ECF No. 30 at 2-3). Both parties consented to this approach. (Id. at 3). Accordingly, Judge Koeltl “dismissed as moot” the R&R and Aguila's objections (id. at 5), and set a briefing schedule for JPMorgan USA's Motion. (Id. at 4-5; see ECF No. 15).
2. The Motion
On October 20, 2023, JPMorgan USA filed the Motion (ECF No. 19), a memorandum of law in support (ECF No. 20), and the declarations of Abby Rudzin, counsel to JPMorgan USA in this action (ECF No. 21), and Lucas de Moraes Cassiano Sant'Anna, counsel to JPMorgan Brazil in the Brazil Proceeding (ECF No. 22). JPMorgan USA argues that the Subpoena should be quashed because, inter alia: (i) the Contemplated Proceedings are not qualifying proceedings under § 1782; (ii) Aguila cannot establish that JPMorgan USA has possession, custody, or control of the documents Aguila seeks; and (iii) the discretionary Intel factors (the “Intel Factors”) applicable to § 1782 applications weigh against Aguila. (ECF No. 20).
Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004).
On October 30, 2023, Aguila opposed the Motion, arguing that the Application and Subpoena satisfy the statutory requirements of § 1782 and the Intel Factors. (ECF No. 24). Aguila submitted declarations of Rafael Pimenta, counsel to Aguila in the Brazil Proceeding (ECF No. 25), and Raphael Carlos dos Santos Machado (“Mr. Machado”), a Brazilian computer engineer specializing in information security (ECF No. 26; see ECF No. 26-1 (Mr. Machado's resume)). Mr. Machado prepared a forensic report analyzing certain emails in Aguila's possession that employees of JPMorgan Brazil sent to Aguila in connection with Aguila's bids for the Assets. (ECF No. 26-2 (the “Machado Report”)). The Machado Report analyzed seven such email messages (the “Emails”) to determine their “origin IP and trajectory” and analyze Aguila's “hypothesis that [the E]mails received by Aguila [] were sent from the United States[.]” (Id. at 3; see id. at 5). The Machado Report found that the Emails were transmitted through the domain “jpmchase.net,” which “belongs to the organization JPMorgan Chase Bank, National Association,” headquartered in Wilmington, Delaware. (Id. 7). Ultimately, Mr. Machado concluded that:
[u]sing rigorous digital forensics methodologies, our analysis revealed evidence providing that the emails in question were transmitted from servers owned by JPM Chase, with the domain (jpmchase.net). Further examination revealed that these servers are geographically situated in New York City, New York, USA. This geographic and proprietary information affirms the transmission of emails from the United States to a company in Brazil, supporting the claims made in this case.(Id. at 17-18). Thus, Aguila argued, it met its burden to “set forth specific facts and evidence showing that JPMorgan USA has or is likely to have in its actual possession, custody, or control documents related to Aguila” and its bids for the Assets. (ECF No. 24 at 7).
On November 6, 2023, JPMorgan USA filed a reply, responding that the Machado Report is not competent evidence and does not establish JPMorgan USA's possession of the requested discovery. (ECF No. 27 at 6-8). Specifically, JPMorgan USA argues that Mr. Machado concluded only that the Emails were transmitted from servers belonging to “JPMorgan Chase Bank, National Association” (“JPMorgan Chase, N.A.”), but did not offer evidentiary support for the contention that JPMorgan USA owns or controls servers belonging to JPMorgan Chase, N.A. (Id. at 10). JPMorgan USA notes that, as a matter of corporate structure, it is a separate and distinct entity from JPMorgan Chase, N.A., i.e., JPMorgan USA holds the stock of JPMorgan Chase, N.A., which, in turn, holds the stock of JPMorgan USA's subsidiaries. (Id.; see ECF No. 20 at 8). Therefore, argues JPMorgan USA, Aguila still fails to demonstrate that JPMorgan USA has possession, custody, or control over the documents Aguila seeks. (ECF No. 27 at 9-11).
III. DISCUSSION
A. Legal Standard
Under 28 U.S.C. § 1782(a), a federal district court may order any person or entity who “resides or is found” in the district “to produce a document or other thing for use in a proceeding in a foreign international tribunal . . . upon the application of any interested person.” The party making the application must demonstrate the following statutory requirements: “(1) the person from whom discovery is sought resides (or is found) in the district of the district court to which the application is made, (2) the discovery is for use in a foreign proceeding before a foreign or international tribunal, and (3) the application is made by a foreign or international tribunal or any interested person.” Guo v. Deutsche Bank Sec., 965 F.3d 96, 102 (2d Cir. 2020).
Internal citations and quotation marks are omitted from case citations unless otherwise indicated.
Unless the court prescribes otherwise, “the testimony or statement shall be taken, and the document or other thing produced, in accordance with the Federal Rules of Civil Procedure. 28 U.S.C. § 1782(a). This includes the requirement that the requested discovery be in the responding party's “possession, custody, or control.” Fed.R.Civ.P. 26(a)(1)(A)(ii); see In re Mun, No. 22 Misc. 163 (DLC), 2022 WL 17718815, at *2 (S.D.N.Y. Dec. 15, 2022). With respect to related corporate entities, a parent has control over a subsidiary for discovery purposes when, for example, “the parent is ‘responsible for the compliance, risk management, governance, and financial reporting operations' of the subsidiary, and there was ‘substantial overlap between the management executives of the parent and the subsidiary.'” In re Liverpool Ltd. P'ship, No. 21 Misc. 392 (AJN), 2021 WL 5605044, at *3 (S.D.N.Y. Nov. 4, 2021) (quoting Motorola Credit Corp. v. Uzan, 02 Civ. 666 (JSR), 2013 WL 6098388, at *3 (S.D.N.Y. Nov. 20, 2013)). A parent may also have control over a subsidiary “if they share employees, facilities, office space, and utilize common practices and forums.” Id. (quoting In re Vivendi, S.A. Sec. Litig., 02 Civ. 5571 (RJH) (HBP), 2009 WL 8588405, at *4 (S.D.N.Y. July 10, 2009)). The § 1782 applicant bears the burden of establishing control. Id.
Provided that the statutory requirements are met, the court is “free to grant discovery in is discretion.” Optimal Invs. Servs., S.A. v. Berlamont, 773 F.3d 456, 460 (2d Cir. 2014). Although the district court's discretion is broad, it must be exercised “in light of the twin aims of the statute: providing efficient means of assistance to participants in international litigation in our federal courts and encouraging foreign countries by example to provide similar means of assistance to our courts.” Mangouras v. Boggs, 980 F.3d 88, 97 (2d Cir. 2020). The Supreme Court has identified four discretionary factors-the Intel Factors-that a court considers when ruling on a § 1782 application: “(1) whether the person from whom discovery is sought is a participant in the foreign proceeding, in which case the need for Section 1782(a) aid generally is not as apparent; (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 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.” Id. at 97-98 (citing Intel Corp., 542 U.S. at 264-65).
As relevant here, § 1782 applications may be granted where the foreign proceeding has not yet been commenced. The contemplated foreign proceeding need not be “pending” or “imminent”; “rather, a § 1782 applicant ‘must present to the district court some concrete basis from which it can determine that the contemplated proceeding is more than just a twinkle in counsel's eye.'” In re Hornbeam Corp., 722 Fed.Appx. 7, 9 (2d Cir. 2018) (summary order) (quoting Certain Funds, Accts. and/or Inv. Vehicles v. KPMG, L.L.P., 798 F.3d 113, 123-24 (2d Cir. 2015)). To do so, the applicant must provide “reliable indications of the likelihood that proceedings will be instituted in a reasonable time.” IJK Palm LLC v. Anholt Servs. USA, Inc., 33 F.4th 669, 677 (2d Cir. 2022).
B. Application
1. The Statutory Requirements
a. JPMorgan USA is found in this District.
The first statutory requirement is that “the person from whom discovery is sought resides (or is found) in the district of the district court to which the application is made.” 28 U.S.C. § 1782(a). JPMorgan USA argues that Aguila fails to meet this requirement because, although JPMorgan USA is found in this District, the true “target” of the Application is JPMorgan Brazil, which is not found in this District. (ECF No. 20 at 22). Aguila argues that it is neither seeking discovery from JPMorgan Brazil nor requesting that JPMorgan USA retrieve discovery from JPMorgan Brazil; rather, Aguila is only seeking “information that is in the actual possession, custody, or control of JPMorgan USA.” (ECF No. 24 at 6-7).
Aguila is correct. JPMorgan USA is the Respondent in this case, Aguila is seeking discovery from JPMorgan USA only, and JPMorgan USA is headquartered and thus “is found” in this District. (ECF No. 20 at 22). That is all that is required under the first requirement of § 1782, and thus this requirement is satisfied.
b. The requested discovery is “for use” in a foreign proceeding.
The second statutory requirement is that “the discovery is for use in a foreign proceeding before a foreign or international tribunal.” 28 U.S.C. § 1782(a). As noted, the movant need not show that the foreign proceeding is pending, but must present a concrete basis from which the Court can determine that the contemplated proceeding will be instituted in a reasonable time. (See § III.A, supra). JPMorgan USA argues that, inter alia, the contemplated TCU and MPF investigations do not qualify as “foreign proceeding[s] before a foreign or international tribunal” under § 1782, and that any civil suit against JPMorgan Brazil is not within Aguila's reasonable contemplation because it has not taken diligent steps to commence suit. (ECF No. 20 at 13-16). Aguila argues that the TCU and MPF investigations are qualifying foreign proceedings because § 1782's use of “tribunal” encompasses “administrative and quasi-judicial proceedings,” such as the two Aguila contemplates. (ECF No. 24 at 10-11). Aguila also argues that it has taken diligent steps to prepare to commence the Contemplated Proceedings, including obtaining a copy of the winning proposal for the sale of the Assets, and that it intends to commence the proceedings once it obtains the documents requested in this Application. (Id. at 11-12).
Aguila has satisfied this second statutory requirement. Aguila's contemplated civil lawsuit against JPMorgan Brazil in Brazil, if commenced, would qualify as a “foreign proceeding before a foreign or international tribunal.” 28 U.S.C. § 1782(a). The Court disagrees with JPMorgan USA's assertion that Aguila's “failure to act” in the time since the Application was filed renders the lawsuit speculative. (ECF No. 20 at 13). To the contrary, Aguila alleges that it was improperly disqualified as a bidder for the Assets in late March 2022, and commenced this proceeding in August 2022, five months later. (ECF No. 1 at 1, 7). Aguila asserted in the Application and reasserts in opposition to the Motion that it fully intends to sue JPMorgan Brazil and Petrobras in Brazil, and that the reason it has not done so yet is because the requested discovery is essential to its potential claims in the civil action. (See ECF Nos. 1 at 26-28; 3 ¶¶ 31-37; 24 at 11-12; 25 ¶¶ 55-58). Aguila also articulates the legal theories on which it intends to rely to establish a claim for relief under Brazilian law. (See ECF Nos. 1 at 21-22; 3 ¶¶ 27-30, 32-35; 24 at 9-10; 25 ¶ 48). This is sufficient to establish that the civil lawsuit is within Aguila's reasonable contemplation. See Hornbeam, 722 Fed.Appx. at 9-10 (affirming conclusion that foreign proceeding was reasonably contemplated where applicant “represented that it intended to initiate further litigation once it obtained additional information” and “articulated a theory on which it intended to litigate”); In re SPS I Fundo de Investimento de Acoes-Investimento no Exterior, No. 22 Misc. 118 (LAK), 2022 WL 17553067, at *10-11 (S.D.N.Y. Dec. 9, 2022) (holding that a contemplated proceeding was “more than just a twinkle in counsel's eye” where the applicant “provided a sworn statement from its Brazilian lawyer attesting to [the applicant's] intent to initiate the contemplated proceeding and outlining its legal theories therein”); In re Bouka, 637 F.Supp.3d 74, 90 (S.D.N.Y. 2022) (holding that, “[b]ecause [the applicant] had retained local counsel, laid out a basis for liability, and identified the factual basis of his claims, we find that the [contemplated] [p]roceedings are ‘reasonably contemplated,' and thus the requested discovery would be ‘for use' in a foreign proceeding”); In re Furstenberg Fin. SAS, No. 18 Misc. 44 (JGK), 2018 WL 3392882, at *4 (S.D.N.Y. July 12, 2018) (holding that proceeding was reasonably contemplated where “petitioners have sworn th[ey] intend to file a criminal complaint in . . . Luxembourg . . . and have articulated a specifical legal theory on which they intend to rely”), aff'd, 785 Fed.Appx. 882 (2d Cir. 2019) (summary order).
The Court is unpersuaded by JPMorgan USA's alternative argument that the contemplated civil lawsuit does not satisfy § 1782 because it would be “quickly dismissed” as moot due to Petrobras' decision not to sell the Assets. (See ECF No. 20 at 13-14). JPMorgan USA has not provided authority for the proposition that, under Brazilian law, Aguila's claims against JPMorgan Brazil in connection with Aguila's bids for the Assets would be mooted by Petrobras' later decision not to sell the Assets. Indeed, JPMorgan USA only argues that the contemplated civil suit would “likely” be dismissed on mootness grounds (see id. at 14), implicitly conceding that Aguila might state a viable claim for relief under Brazilian law. This Court is not in a position to rule definitively that a Brazilian court would dismiss Aguila's claims, the merits of which are a matter for the Brazilian court. See In re Pidwell, No. 21 Misc. 166 (ALC) (KHP), 2022 WL 192987, at *5 (S.D.N.Y. Jan. 21, 2022) (rejecting argument that § 1782 application should be denied because contemplated proceeding would be unsuccessful because court was “not in a position to prognosticate on the outcome of a foreign proceeding,” which involved questions of foreign law); Furstenberg, 2018 WL 3392882, at *5 (rejecting argument “to consider the merits of the foreign proceeding and determine whether the petitioners are likely to prove their damages”); see also Euromepa S.A. v. R. Esmerian, Inc., 51 F.3d 1095, 1099 (2d Cir. 1995) (explaining that “it is unwise-as well as in tension with the aims of section 1782-for district judges to try to glean the accepted practices and attitudes of other nations from what are likely to be conflicting and, perhaps, biased interpretations of foreign law”); In re Children's Inv. Fund. Found., 363 F.Supp.3d 361, 377 (S.D.N.Y. 2019) (stating that “[the Court] will follow other courts in this district and decline to engage in speculation about how any of the Foreign Proceedings may be resolved”), abrogated in part on other grounds by, Guo, 965 F.3d at 104-09.
Accordingly, Aguila has satisfied the second statutory requirement.
c. Aguila is an interested party.
The third statutory requirement is that “the application is made by a foreign or international tribunal or interested person.” 28 U.S.C. § 1782(a). Aguila's contemplated civil suit against JPMorgan Brazil satisfies this requirement. Aguila would be the plaintiff in that civil case, and would therefore qualify as an interested party. See, e.g., In re Pishevar, 439 F.Supp.3d 290, 303 (S.D.N.Y. 2020) (holding that “[p]etitioner will be the plaintiff in the contemplated civil lawsuit and, as such, is an ‘interested person'”). JPMorgan USA does not contend otherwise, instead arguing only that Aguila would not be an interested party to the contemplated TCU and MBF proceedings. (ECF No. 20 at 14-17). Because the Court finds that the contemplated civil suit is within Aguila's reasonable contemplation and that the discovery sought here would be “for use” in that suit (see § III.B.1.b, supra), the Court need not determine whether Aguila would also be an interested party to the contemplated TCU and MBF proceedings.
Accordingly, Aguila has satisfied the three statutory requirements under § 1782, and the Court proceeds to analyze whether Aguila has demonstrated that JPMorgan USA possesses relevant documents and, if so, whether the Intel Factors militate in Aguila's favor.
2. Aguila has not demonstrated that JPMorgan USA possesses relevant documents.
As noted, for Aguila to establish entitlement to a grant of discovery under § 1782, it must establish that JPMorgan USA has possession, custody, or control of the requested documents. (See § III.A, supra). Aguila has not met this burden.
Aguila has not shown that JPMorgan USA participated in the Auction or the decisions to deny Aguila's bids for the Assets; rather, Aguila seeks documents from JPMorgan USA solely relating to the alleged activities and communications of individuals operating on behalf of its subsidiary, JPMorgan Brazil, and Petrobras. (See ECF No. 4-1 at 13-14; see generally ECF No. 1). A parent-subsidiary relationship, however, is not dispositive of control over documents. Indeed, other courts in this District have denied similar § 1782 applications seeking from JPMorgan USA discovery in the possession of its foreign subsidiaries. See Mun, 2022 WL 17718815, at *2-3 (denying § 1782 application seeking from JPMorgan USA discovery in the possession of its English subsidiary, which acted as financial advisor for a Bermuda transaction, and holding that, “[b]ecause JPMorgan [USA]'s subsidiary controls and possesses the documents and not JPMorgan [USA] itself, the Petitioners' request to obtain this discovery from JPMorgan [USA] fails under the Federal Rules of Civil Procedure”); Liverpool, 2021 WL 5605044, at *3 (denying § 1782 application seeking from JPMorgan USA discovery in the possession of its Japanese subsidiary, and holding that, “[b]ecause Petitioner has not shown that JP[Morgan USA] ‘exercises operational control' over [its Japanese subsidiary] or that the two ‘operate as one entity,' the Court cannot conclude that JP[Morgan USA] has control, possession, or custody over the requested discovery”); see also In re FourWorld Event Opportunities Fund, L.P., No. 22 Misc. 330 (JPO), 2023 WL 3375140, at *3 (S.D.N.Y. May 11, 2023) (granting JPMorgan USA's motion to quash subpoenas under § 1782 because “Respondent does not have possession, custody, or control of the discovery in question”).
Aguila theorizes that JPMorgan USA is likely to be in possession of documents relevant to the Contemplated Proceedings because certain “communications were sent under JPMorgan US[A]'s domains . . .” (ECF No. 3 ¶ 48; see ECF Nos. 1 at 8-9 (“Aguila has strong reason to believe that JPMorgan USA has possession, custody, or control over the evidence relevant to the[ Contemplated Proceedings] because all communications Aguila has received from JPMorgan Brazil have been exchanged with @jpmorgan.com and @j[pm]chase.com domains and with signature disclaimers that link to the jpmorgan.com website . . .”); 25 ¶ 56 (“Aguila know[s] that JPMorgan US[A] is in possession of the documents Aguila can [] use[] in the contemplated proceedings because communications about the [Auction] were sent under JPMorgan US[A]'s domains . . .”). Aguila relies on the Machado Report, which analyzed the Emails to determine the locations of the domains from which they were sent. (See ECF No. 26-2). The Machado Report contains a trace analysis of one of the Emails, concluding that the “source server” is “SEGEX092.exchad.jpmchase.net”. (Id. at 6). Mr. Machado then opines that “[t]he domain jpmchase.net belongs to the organization JPMorgan Chase, [N.A.].” (Id. at 7). Although Mr. Machado appears to associate the “ISP” for various “origin server IPs” with JPMorgan USA, he does not state what conclusions can be drawn from that association. (See id. at 8, 10-11, 1314, 16-17).
The Machado Report does not establish that JPMorgan USA has possession, custody, or control over the Emails, much less permit the inference that JPMorgan USA has possession, custody, or control over other communications that would be responsive to the Subpoena or relevant to the Contemplated Proceedings. First, although the Machado Report represents that one or more of the Emails were transmitted under the domain “jpmchase.net,” which supposedly “belongs” to JPMorgan Chase, N.A. (ECF No. 26-2 at 5-6), the record shows that JPMorgan Chase, N.A. is a separate and distinct corporate entity from JPMorgan USA, i.e., JPMorgan USA is a “financial holding company” that “holds the stock of JPMorgan Chase[,] N.A.” (ECF Nos. 20 at 8; 27 at 10). As set forth above, a corporation is not automatically deemed to be in possession, custody, or control of documents possessed by its subsidiaries, or vice-versa. (See § III.A, supra).
Second, simply because JPMorgan USA is associated with the underlying “ISP” for the Emails does not compel the conclusion that JPMorgan USA exercises control over the servers that house the Emails or other responsive documents. The issue here is whether Aguila has presented facts sufficient for the Court to draw the inference that JPMorgan USA possesses responsive discovery, not whether Aguila has demonstrated some ancillary connection between JPMorgan USA and the Emails. In the absence of any such facts, Aguila has not met its burden.
Third, Aguila's statement in opposition to the Motion that the Machado Report “determined that the emails Aguila attached to and referenced in its Application were transmitted from JPMorgan USA's servers located in New York, New York” misrepresents what the Machado Report actually states. (ECF No. 24 at 5). The Machado Report does not conclude that JPMorgan USA maintains servers in New York that house the Emails. Instead, the Machado Report states that “[t]he geographic location of the IPs of the email origination servers” is in New York, and that the servers are “owned by [‘]JPM Chase[']”-an undefined entity. (ECF No. 26-2 at 18). The Court cannot discern from the Machado Report to which corporate entity Mr. Machado is referring by “JPM Chase,” and, even if he meant to refer to JPMorgan USA, the Court would not accept that conclusion because it is not supported by any facts or analysis. Nowhere does Mr. Machado analyze which corporate entity owns the servers containing the Emails (see ECF No. 26-2), and on review of Mr. Machado's resume and credentials, the Court cannot conclude that he would be qualified to opine on that topic. (See ECF No. 26-1).
Ultimately, Aguila has failed to demonstrate that JPMorgan USA has possession, custody, or control over the Emails or other documents that would be responsive to the Subpoena. Courts in this District routinely deny § 1782 applications-and grant parallel motions to quash-where applicants fail to demonstrate the requisite degree of control. See In re Boustany, No. 23 Misc. 203 (LGS), 2024 WL 473569, at *2 (S.D.N.Y. Feb. 7, 2024) (denying § 1782 application seeking documents from JPMorgan USA relating to the activities of its foreign subsidiaries because “[u]ltimately, [] it is Petitioner's burden to show that those documents are in the Banks' control[,]” and “Petitioner's arguments for the Banks' control of the sought-after materials are based almost entirely on conjecture”); FourWorld, 2023 WL 3375140, at *3 (granting motion to quash § 1782 subpoena seeking documents from JPMorgan USA relating to the activities of its foreign subsidiary because “there is no evidence supporting a conclusion that [the subsidiary] and [the parent corporation] operate as one . . ."); Mun, 2022 WL 17718815, at *2-3 (denying § 1782 application seeking documents from JPMorgan USA relating to the activities of its foreign subsidiary because “JPMorgan [USA's] subsidiary controls and possesses the documents and not JPMorgan [USA] itself,” and holding that “[a] parent company's limited involvement with its subsidiary's operations, as described in the [r]eport, is insufficient to establish the necessary control”); Liverpool, 2021 WL 231449, at *3 (same, finding that JPMorgan USA could not be ordered to produce information in the possession of a foreign subsidiary based solely on allegations that it “[held] itself out to the public as significantly intertwined” with the foreign subsidiary, “provide[d] financial services” in the foreign jurisdiction through the subsidiary, and shared an officer”). The same result is warranted here.
Accordingly, because Aguila has not met its burden of establishing that JPMorgan USA has possession, custody, or control over the documents responsive to the Subpoena, I respectfully recommend that the Motion be GRANTED, the Subpoena be QUASHED, and the Application be DENIED.
3. Only two of the discretionary factors favor granting the Application.
Because Aguila has not established possession, custody, or control, “[t]he Court's analysis need not venture further.” FourWorld, 2023 WL 3375140, at *3. If the Court were to proceed, however, only two discretionary Intel factors weigh in Aguila's favor.
a. The first Intel factor
The first Intel factor contemplates whether “the person [or entity] from whom discovery is sough is a participant in the foreign proceeding, in which case the need for Section 1782(a) aid generally is not as apparent.” Mangouras, 980 F.3d 88 at 97. Aguila alleges that JPMorgan USA will not be a party to the Contemplated Proceedings, which solely concern the alleged conduct of JPMorgan Brazil and Petrobras. (ECF No. 1 at 30-31). Although JPMorgan USA is the alleged parent company of JPMorgan Brazil, this does not alter the analysis because “[p]arent companies of non-U.S. participants in foreign proceedings are separate legal entities for purposes of Section 1782 applications.” In re Pidwell, No. 21 Misc. 166 (ALC) (KHP), 2022 WL 192987, at *5 (S.D.N.Y. Jan. 21, 2022) (citing In re Top Matrix Holdings Ltd., No. 18 Misc. 465 (ER), 2020 WL 248716, at *5 (S.D.N.Y. Jan. 16, 2020)); see In re Evenstar Master Fund SPC, No. 20 Misc. 418 (CS) (JCM), 2021 WL 3829991, at *11 (S.D.N.Y. Aug. 27, 2021) (“entities who are participants in foreign proceedings are separate legal entities from their subsidiaries and affiliates for the purpose of Section 1782 motions”), aff'd, 2021 WL 5498283 (S.D.N.Y. Nov. 23, 2021). The Court rejects JPMorgan USA's argument that, because the “real party” from whom the documents are sought is JPMorgan Brazil, this factor weighs against Aguila. (ECF No. 20 at 24). Aguila has made clear that it is not seeking documents from JPMorgan Brazil-undoubtedly a participant to the contemplated civil suit-and that it is only seeking production of documents from JPMorgan USA. (See § III.B.1.a, supra).
For the same reason, the Court also rejects JPMorgan USA's argument that this factor weighs against Aguila because Aguila could seek the same documents in Brazil, and that the Application is merely an attempt to make JPMorgan USA “somehow compel its foreign subsidiary in Brazil to send that subsidiary's records out of Brazil to the U.S. so that [JPMorgan USA] can produce them to” Aguila. (ECF No. 20 at 23-24). Again, the Application only seeks documents from JPMorgan USA, not JPMorgan Brazil, and even if the discovery requested here from JPMorgan USA may be in JPMorgan Brazil's possession in Brazil, this is not relevant to the first Intel factor. See Top Matrix, 2020 WL 248716, at *5 (holding “[t]hat [the] information possessed by Credit Suisse USA is also likely possessed by Credit Suisse in Switzerland is not relevant”); see also In re Safra, No. 21 Misc. 640 (GHW) (JLC), 2022 WL 3584541, at *4 (S.D.N.Y. Aug. 22, 2022) (rejecting argument that the first Intel factor weighed against applicant because discovery could be compelled in foreign jurisdiction, noting the Second Circuit's rejection of a “quasi-exhaustion” requirement for § 1782 applications).
Thus, because JPMorgan USA would not be a “participant” in the Contemplated Proceedings, the first Intel factor weighs in Aguila's favor.
b. The second Intel factor
The second Intel factor concerns “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.” Mangouras, 980 F.3d at 97-98. “Absent specific directions to the contrary from a foreign forum, the statute's underlying policy should generally prompt district courts to provide some form of discovery assistance,” and a court “should deny discovery on the basis of lack of receptiveness only where it is provided with ‘authoritative proof that the foreign tribunal would reject evidence obtained with the aid of section 1782.'” In re Atvos Agroindustrial Investimentos S.A., 481 F.Supp.3d 166, 176-77 (S.D.N.Y. 2020) (quoting Euromepa, 51 F.3d at 1100-02).
This factor weighs in Aguila's favor because “[t]here is no evidence before this Court suggesting that Brazil or Brazilian Courts are unreceptive to requests by U.S. persons for judicial assistance [and] Courts in this district recently have granted requests for section 1782 discovery for use in Brazilian proceedings.” Ex parte Abdalla, No. 20 Misc. 727 (PKC), 2021 WL 168469, at *5 (S.D.N.Y. Jan. 19, 2021) (collecting cases). Further, Aguila has submitted declarations from its Brazilian counsel stating that “there is no indication that a Brazilian court or authority would not be receptive to the documentary and testimonial evidence sought by Aguila through its Application. Such evidence is likely admissible in the [] Contemplated Proceedings.” (ECF Nos. 3 ¶ 51; ECF No. 25 ¶ 59). Thus, the second Intel factor weighs in Aguila's favor. See Associacao dos Profissionais dos Correios v. Bank of N.Y. Melon Corp., No. 22 Misc. 132 (RA) (KHP), 2022 WL 4955312, at *7 (S.D.N.Y. Oct. 4, 2022) (holding that the second Intel factor weighed in the applicant's favor where the applicant “submitted an affidavit from Brazil counsel explaining that the Brazilian Court would be receptive to discovery obtained through [the] Section 1782 process”), remanded on other grounds by, 2023 WL 3166357, at *1 (2d Cir. Mar. 28, 2023); Matter of Degens, No. 20 Misc. 237 (JGK) (RWL), 2020 WL 4252725, at *4 (S.D.N.Y. July 24, 2020) (same, citing to Brazilian counsel's declaration to support that “[t]here is no reason to believe the Brazilian Court would not be receptive to evidence gathered under § 1782, and no Brazilian rule, policy, or law prohibits or discourages the Brazilian Court from considering such evidence”).
c. The third Intel factor
The third Intel factor asks “whether the request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States.” Mangouras, 980 F.3d at 98. Circumvention exists if the application is an attempt to evade discovery procedures in the foreign jurisdiction or where the record indicates that the application is otherwise a “bad faith endeavor to misuse Section 1782.” Bouka, 637 F.Supp.3d at 90; see In re Hansainvestment Hanseatische Inv.-GmbH, 364 F.Supp.3d 243, 251 (S.D.N.Y. 2018) (holding that the third Intel factor weighed in the applicant's favor absent showing of “any improper or bad faith evasion of German procedures”).
JPMorgan USA's argument that this factor weighs against Aguila because Aguila “has already sought discovery from Petrobras in civil court, and the Brazilian appellate court has rejected the request” (ECF No. 20 at 26), is without merit. Aguila's request for discovery in Brazil was made to Petrobras, not JPMorgan USA, and appears to have only sought production of a recording of the Videoconference, as opposed to the more expansive discovery sought here. (See ECF Nos. 22-2; 24 at 16). Aguila's unsuccessful attempt to obtain one piece of discovery from a different entity in Brazil does not establish that this § 1782 application seeking different discovery is an attempt to circumvent Brazilian proof-gathering restrictions.
That being said, Aguila's request for discovery concerning the involvement of JPMorgan Brazil and Petrobras in a Brazilian transaction without demonstrating that JPMorgan USA has a connection to the transaction or has possession, custody, or control over documents responsive to the Subpoena suggests that Aguila is on a fishing expedition and may be misusing the § 1782 device. Thus, the third Intel factor weighs against Aguila.
d. The fourth Intel factor
Finally, the fourth Intel factor considers “whether the request is unduly intrusive or burdensome.” Mangouras, 980 F.3d at 98. This factor is measured by the standards of Federal Rule of Civil Procedure 26. See In re XPO Logistics, Inc., No. 15 Misc. 205 (LGS), 2017 WL 6343689, at *4 (S.D.N.Y. Dec. 11, 2017) (citing Mees v. Buiter, 793 F.3d 291, 302 (2d Cir. 2015)). As applied to § 1782 applications, Rule 26 “contemplates that discovery requests be tailored to seek information relevant to the parties' claims and defenses and proportional to the needs of the case.” Associacao, 2022 WL 4955312, at *8. The “proportionality analysis depends on the relevance of the information sought-and, in the case of a § 1782 petition, relevance is assessed with regard to the foreign proceeding.” Catalyst Managerial Servs., DMCC v. Libya Africa Inv. Portfolio, 680 Fed.Appx. 37, 39 (2d Cir. 2017) (summary order).
Here, although the Court agrees with Aguila (and disagrees with JPMorgan USA's arguments to the contrary (see ECF No. 20 at 27)) that the Subpoena seeks discrete categories of documents narrowly tailored to the relevant timeframe-February 2021 to the present-that are relevant to its allegations against JPMorgan Brazil and Petrobras (ECF No. 4 at 5, 13-14), for the reasons discussed above, Aguila has not shown that JPMorgan USA has possession, custody, or control of these documents. Therefore, Aguila's requests are unduly burdensome and intrusive, and this factor also weighs against Aguila. See In re Lloreda, 323 F.Supp.3d 552, 560 (S.D.N.Y. 2018) (denying § 1782 application where request was unduly burdensome and applicant had not shown possession, custody, and control).
IV. CONCLUSION
Accordingly, for the reasons sets forth above, I respectfully recommend that the Motion be GRANTED, the Subpoena be QUASHED, and the Application be DENIED.
* * *
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed.R.Civ.P. 6(a), (d) (adding three additional days when service is made under Fed.R.Civ.P. 5(b)(2)(C), (D) or (F)). A party may respond to another party's objections within fourteen (14) days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Koeltl.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).