Summary
finding proceeding speculative where petitioner sought discovery of bank records to find a country where it could bring a claim
Summary of this case from Ex parte Iraq Telecom Ltd.Opinion
15-MC-127
06-29-2015
In re Harbour Victoria Investment Holdings Ltd. § 1782 Petitions
MEMORANDUM & ORDER
:
In October 2014, Petitioner Harbour Victoria Investment Holdings Ltd. obtained a favorable award from an arbitration panel in London, England. It then commenced a proceeding in India to confirm and enforce the English arbitral award there. Two months later, Petitioner commenced a proceeding in New York to confirm and enforce that same English arbitral award here. As part of the U.S. confirmation proceeding, Petitioner sought, but was denied, discovery relating to an apartment located in New York. Petitioner then filed ex parte petitions with this Court's Part 1 Judge seeking the same discovery, but repackaged as petitions pursuant to 28 U.S.C. § 1782 for subpoenas in aid of foreign proceedings, i.e., the Indian confirmation proceeding and other "contemplated" confirmation proceedings in Singapore and the United Kingdom. The Court doubts that these petitions are actually in aid of foreign proceedings, as opposed to the ongoing U.S. proceeding. Regardless, because it appears that the petitions are an attempt to evade an adverse discovery ruling or are being sought for other improper purposes, the Court exercises its discretion and DENIES the petitions.
I. BACKGROUND
Petitioner Harbour Victoria Investment Holdings Ltd., a wholly owned subsidiary of J.P. Morgan Chase Bank, N.A., is a property investment company established under the laws of and headquartered in Mauritius. Declaration of Charlene C. Sun dated June 4, 2015 ("First Sun Decl.") Ex. B. at 1. In 2008, Petitioner invested in BPTP Ltd., an Indian real estate developer, and, in connection with that investment, entered into a series of agreements with Kabul Chawla, the chairman and majority shareholder of BPTP, and a number of individuals and companies associated with him (together with BPTP and Chawla, the "Arbitral Respondents"). First Sun Decl. Ex. B. at 5. These agreements contained an arbitration provision requiring that any dispute arising under the agreements be submitted to arbitration in London, England. First Sun Decl. Ex. B. at 6-7. Following a significant downturn in the Indian real estate industry, which led to a dispute regarding the agreements, Petitioner and the Arbitral Respondents commenced arbitration in London in April 2012. First Sun Decl. Ex. B. at 7-8. On October 27, 2014, an arbitral panel seated in London issued an award to Petitioner requiring the Arbitral Respondents to make various payments to Petitioner. First Sun Decl. ¶ 2. The Arbitral Respondents have allegedly failed to make any payments to Petitioner to date. First Sun Decl. ¶ 6.
Dkt.No. 18 in 15-MC-127.
On January 16, 2015, Petitioner commenced a proceeding against the Arbitral Respondents in India to confirm and enforce the English Award in that country. First Sun Decl. ¶ 7. The Arbitral Respondents contend, and Petitioner appears to concede, that the parties have reached a settlement in India and have identified assets in India to satisfy the amount of the settlement. Declaration of Charlene C. Sun dated June 15, 2015 ("Second Sun Decl.") Ex. B. at 2. Petitioner, however, states that it is concerned that those identified Indian assets may not be sufficient to satisfy the amount owed because other creditors have allegedly intervened in the Indian proceeding and have asserted claims to at least some of those assets. Second Sun Decl. Ex. B. at 2-3.
Dkt. No. 22 in 15-MC-127.
On March 31, 2015, Petitioner commenced a proceeding against the Arbitral Respondents in New York State court to confirm and enforce the same English Award here. First Sun Decl. ¶ 8. As part of the New York confirmation proceeding, Petitioner argued that a New York court could exercise personal jurisdiction over at least some of the Arbitral Respondents because certain Arbitral Respondents "own, through an alter-ego corporation that is authorized to do business in New York (the 'Nominal Owner'), a condominium unit in New York City worth approximately $20 million (the 'Apartment')." First Sun Decl. Ex. B. at 4. The "Nominal Owner," NYC Real Estate Opportunities, Inc. ("NYCREO"), is a Delaware corporation that purchased the Apartment on February 6, 2012. First Sun Decl. ¶ 14, Exs. E, F. Some of the Arbitral Respondents allegedly rent the apartment for $56,000 a month. First Sun Decl. ¶ 16, Ex. H. Petitioner also moved in New York State court for an order of attachment, prior to confirmation of the English Award, restraining the Apartment and also moved for discovery in aid of that attachment motion. Declaration of Tai-Heng Cheng dated June 11, 2015 ("Cheng Decl.") Ex. 3 (Transcript of May 15, 2015 conference in 15-CV-3212 at Tr. 2:22-3:6). In New York State court, Petitioner also moved for and received a temporary restraining order restraining the Apartment pending decision on the attachment motion. 05/15/2015 Tr. 3:2-6.
Dkt. No. 20 in 15-MC-127.
On April 23, 2015, just before their opposition papers were due, the Arbitral Respondents removed the confirmation proceeding to the Southern District of New York where the case was assigned to Judge Swain under the caption Harbour Victoria Investment Holdings Ltd. v. Chawla, 15-CV-3212 (LTS) (S.D.N.Y.). First Sun Decl. ¶ 8. The Arbitral Respondents then moved to vacate the temporary restraining order and, shortly thereafter, filed their opposition to the pre-confirmation attachment, arguing, among other things, that the federal court lacked personal jurisdiction over some or all of the Arbitral Respondents. Dkt. No. 4, 26 in 15-CV-3212.
On May 15, 2015, Judge Swain orally rendered a ruling on the motion for attachment and the competing motion to vacate the temporary restraining order that the state court had issued prior to removal. 05/15/2015 Tr. 2:4-11. Judge Swain ruled that because "[P]etitioner has failed to make a factual showing sufficient to warrant the grant of any order of attachment or continuation of the TRO, [P]etitioner's attachment and discovery motions are denied and respondents' motion to vacate the TRO is granted." 05/15/2015 Tr. 3.T6-20. More specifically, she noted that
Petitioner's attempt to justify quasi in rem attachment of the [Apartment] fails for the further reason that it has tendered no proof that the apartment or any other identifiable property located in New York even belongs to any of the respondents.05/15/2015 Tr. 8:1-13. Judge Swain did not resolve the contested issue of personal jurisdiction. 05/15/2015 Tr. 9:10-13. At the end of the conference, the Arbitral Respondents once again noted their intention to move to dismiss the confirmation proceeding based on lack of jurisdiction and forum non conveniens. 05/15/2015 Tr. 12:2-6.
While [P]etitioner and the New York Times have raised potentially intriguing questions about the Chawlas' relationship to the entity that holds title to the [A]partment, they have not offered proof of ownership or control, and [P]etitioner has identified no legal basis for litigating its ownership and alter ego allegations in the absence of personal jurisdiction.
On May 7, 2015, the day before the attachment and related discovery motion was fully briefed before Judge Swain, see Dkt. No. 32 in 15-CV-3212, Petitioner filed an ex parte petition for a subpoena in aid of foreign proceedings pursuant to 28 U.S.C. § 1782 before the then-presiding Part 1 Judge of the Southern District of New York, Judge Batts, Dkt. No. 1 in 15-MC-127. The subpoena was directed to NYCREO, the same entity that Petitioner alleged was the "Nominal Owner" of the Apartment. Dkt. No. 3 in 15-MC-127. Judge Batts granted the petition on May 8, 2015 (she later vacated her order on May 27, 2015). Dkt. No. 7 in 15-MC-127.
On May 15, 2015, just several hours after Judge Swain rendered her ruling denying the attachment motion, vacating the temporary restraining order, reserving on the issue of personal jurisdiction, and informing the parties that they would need to submit proposals for briefing a motion to dismiss that the Arbitral Respondents indicated would largely turn on the issue of personal jurisdiction, Petitioner filed a second ex parte petition pursuant to § 1782. Dkt. No. 1 in 15-MC-136. This second petition was directed to NRT New York LLC (d/b/a/ Citi Habitats), the alleged broker of the Apartment. Id. Although filed on May 15, 2015, the petition was routed to the undersigned, who was the Part 1 Judge on duty from May 18, 2015 through May 31, 2015. The undersigned refused to grant the petition ex parte, and instead ordered Petitioner to proceed on notice to Citi Habitats.
Petitioner and the Award Respondents then flooded the undersigned, Judge Swain, and Judge Batts with a flurry of letters, some of which were addressed to all three Judges. The respondents in 15-CV-3212 also requested transferring the two pending § 1782 petitions (15- MC-127 and 15-MC-136) to Judge Swain as related to 15-CV-3212, a request that Judge Swain declined. Dkt. No. 9, 13 in 15-MC-127. As explained in the Court's May 29, 2015 Order, the Court believed that the most sensible course for the two § 1782 petitions, which remained unassigned as Part 1 matters, was to proceed before a single judge. Dkt. No. 9 in 15-MC-127. The Court also believed that the flurry of breathless cross-filings addressed to multiple judges had created confusion. Dkt. No. 9 in 15-MC-127. Therefore, to move forward on a clean slate, the Court struck all previous filings in the § 1782 matters (15-MC-127 and 15-MC-136), consolidated the two § 1782 matters, and set a consolidated briefing schedule for the two § 1782 petitions. Dkt. No. 9 in 15-MC-127. Judge Swain continues to preside over the confirmation proceeding (15-CV-3212). Dkt. No. 13 in 15-MC-127.
In accordance with this scheduling order, Petitioner filed a new petition pursuant to § 1782 once again seeking two subpoenas directed to NYCREO and Citi Habitats. Dkt. No. 16 in 15-MC-127. On June 11, 2015, attorneys for the Arbitral Respondents (i.e., the respondents in 15-CV-3212), who also represent NYCREO, filed an opposition to the Petition. Dkt. No. 19 in 15-MC-127. On June 15, 2015, Petitioner filed a reply. Dkt. No. 20 in 15-MC-127. Citi Habitats did not submit an opposition and apparently has indicated that it does not "contest" the application and will instead "wait until the court rules and be guided accordingly." Second Sun Decl. Ex. A at 2.
II. LEGAL STANDARD
"The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation." 28 U.S.C. § 1782(a). "The goals of the law are to provide 'equitable and efficacious' discovery procedures in American courts 'for the benefit of tribunals and litigants involved with international aspects' while 'encourag[ing] foreign countries by example to provide similar means of assistance to our courts.'" Optimal Inv. Servs., S.A. v. Berlamont, 773 F.3d 456, 460 (2d Cir. 2014) (quoting Lancaster Factoring Co. v. Mangone, 90 F.3d 38, 41 (2d Cir. 1996)).
The Supreme Court has made clear that "§ 1782(a) authorizes, but does not require, a federal district court to provide judicial assistance to foreign or international tribunals or to 'interested person[s]' in proceedings abroad." Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247 (2004) (quoting § 1782(a)). In deciding whether to grant a petition pursuant to § 1782, the district court looks first to statutory requirements that must be satisfied before a court is authorized to grant the petition and then to other considerations that are purely discretionary.
Beginning with the statutory requirements,
[a] district court is authorized to grant a § 1782 request [if]: (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 proceeding before a foreign or international tribunal, and (3) the application is made by a foreign or international tribunal or any interested person.Berlamont, 773 F.3d at 460 (citing Schmitz v. Bernstein Liebhard & Lifshitz LLP, 376 F.3d 79, 83 (2d Cir. 2004)).
Once the statutory requirements are satisfied, the district court looks to the following factors to guide its exercise of discretion:
(1) whether "the person from whom discovery is sought is [not] a participant in the foreign proceeding," which militates in favor of granting the request; (2) "the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance;" (3) "whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States;" and (4) whether the request is "unduly intrusive or burdensome."Mare Shipping Inc. v. Squire Sanders (US) LLP, 574 F. App'x 6, 8 (2d Cir. 2014) (quoting Intel, 542 U.S. at 264-65).
III. DISCUSSION
The Court doubts that the discovery Petitioner seeks is actually for use in a foreign proceeding, rather than for use in the ongoing U.S. proceeding. But even if the statutory requirements were satisfied, which would mean that this Court has the authority to grant Petitioner's request, the Court would still exercise its discretion to deny the request because it appears to be an attempt to evade an unfavorable discovery ruling by another Judge of this Court or to engage in a fishing expedition to identify other foreign venues in which to bring suit.
A. Statutory Requirements
One of the primary statutory requirements for granting a § 1782 petition is that "the discovery [be] for use in a proceeding before a foreign or international tribunal." Berlamont, 773 F.3d at 460. As described in greater detail below under the discretionary considerations, the timing and nature of Petitioner's requests strongly suggest that Petitioner is trying to evade the denial of its discovery request in the U.S. confirmation proceeding and that, if granted, Petitioner would in fact use the discovery in the ongoing U.S. proceeding. Nonetheless, Petitioner advances at least a plausible theory for how the discovery sought could be used in a foreign proceeding.
The primary basis for Petitioner's argument that the discovery its seeks will be used in the Indian proceeding as opposed to the U.S. proceeding is its concern that it may not be able to recover the full amount of the settlement agreed to in India because another entity has laid claim to some of the assets that would satisfy the settlement. Petitioner argues that obtaining discovery from NYCREO and Citi Habitats will help it identify the source of funds used to pay for the Apartment and certain Award Debtors' rental payments to lease the Apartment, and that it has reason to believe that these funds may be coming from, among other places, India. (Whether the "contemplated" proceedings in Singapore and the United Kingdom satisfy the statutory requirements is also doubtful; a matter that is discussed in greater detail below.) In short, if Petitioner is unable to recover the full amount of the settlement it obtained in India because the assets identified to satisfy that settlement have become encumbered by other creditors (an outcome that is possible, but not certain), Petitioner contends that it could use the information obtained from NYCREO and Citi Habitats to identify additional Indian assets to satisfy the settlement it obtained in the Indian proceeding.
As discussed in greater detail below, the Court has a hard time crediting this explanation, particularly given that the possible encumbrance of the Arbitral Respondents' Indian assets was initially presented to Judge Swain as a basis to grant the attachment and related discovery motion before her:
Judge Swain: Assets in India have been identified, some of them selected by Harbour Victoria I am told have even been restrained, so what's your ultimate risk of being able to collect on a judgment once confirmed?05/13/2015 Tr. 15:1-8. That is, because it might not recover its settlement in India, Petitioner needed discovery to identify U.S. assets. Following an extensive exchange with Petitioner's counsel, Judge Swain summarized the Petitioner's position as follows:
Mr. Berger: Well, a couple of things, your Honor. First of all, the assets that have been attached in India are subjected to a competing claim.
Come on, your client made a contract focused on transactions in India. There was consensual arbitration in London. You decided to come to New York and file this confirmation lawsuit because you think maybe if you can look through 1700 layers you can find a piece of property in New York. And then you say because in your chosen forum there's no clearly identifiable assets today of Chawla, there's a risk of collection, and therefore you should be able to do extensive investigation into all his financial affairs.05/13/2015 Tr. 18:22-5. Petitioner's current § 1782 Petition recasts its earlier argument: because it might not recover its settlement in India, it needs U.S. discovery to identify Indian assets. Even if that were true, there is little dispute that the discovery Petitioner now seeks, while theoretically usable in India, would also help Petitioner "look through 1700 layers [so that it] can find a piece of property in New York," the apparent purpose of its U.S. proceeding. This is at least one reason why the Court finds it hard to believe that the discovery Petitioner now seeks is actually intended for use in the Indian proceeding as opposed to the U.S. proceeding.
In any event, because Petitioner has made a plausible showing that the intended discovery could be of some relevance in the ongoing Indian proceeding, the Court will assume without deciding that the discovery sought is for use in a foreign proceeding based on the ongoing Indian proceeding.
B. Discretionary Considerations
To reiterate, "§ 1782(a) authorizes, but does not require, a federal district court to provide judicial assistance to foreign or international tribunals or to 'interested person[s]' in proceedings abroad.'" Intel, 542 U.S. at 247. In exercising this discretion, "a district court [can] consider 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." Id. at 265 (emphasis added). Based on the procedural history described above, it appears more likely than not that Petitioner is attempting to circumvent Judge Swain's denial of discovery for purposes of an attachment motion in the ongoing confirmation proceeding and that the primary purpose of the present Petition is to obtain evidence for use in that U.S. proceeding. Furthermore, it appears that a secondary purpose of the Petition is to fish for evidence to identify additional foreign venues for confirmation proceedings.
Petitioner emphasizes that cases relying on the "circumvention" factor are inapposite "as they involve findings that the discovery sought to circumvent foreign proof-gathering restrictions, which is not even alleged here." Pet'r. Reply Br. 4 (emphasis in original). This is an accurate point of distinction; indeed the Court was unable to find a comparable case in which a party attempted to use § 1782 to circumvent a U.S. court's ruling. Nonetheless, the quoted passage from Intel indicates that the Supreme Court contemplated that a party might use § 1782(a) as an attempt to circumvent U.S. proof-gathering restrictions, just as much as those of a foreign country. The ostensible foreign proceeding at issue in this case is a mirror image of an ongoing U.S. proceeding: both are proceedings to confirm and enforce the same arbitral award. Under such circumstances, one can imagine that a discovery request in the U.S. proceeding will often be relevant to the foreign proceeding and vice versa. If the judge overseeing the U.S. proceeding denies a given discovery request, the losing party could simply turn around and file a § 1782 petition for the same information, but repackaged as aiding the foreign proceeding. Indeed, that appears to be what occurred here.
Dkt. No. 21 in 15-MC-127.
Most obviously, the timing of Petitioner's various motions and petitions is highly suspect. Petitioner did not file the first § 1782 petition until the day before the attachment and related discovery motion before Judge Swain was fully briefed and after Judge Swain had indicated at a conference with the parties on April 28, 2015 that there were "serious legal issues about the personal jurisdiction question." Cheng Decl. Ex. 2 (Transcript of April 28, 2015 conference in 15-CV-3212 at Tr. 4:22). Hours after Judge Swain denied the attachment motion and related discovery request, Petitioner filed the second § 1782 petition seeking effectively the same discovery that was just denied.
Noticeably absent from Petitioner's briefs is any explanation as to what prompted it to file the § 1782 petitions when it did. The Indian proceeding was commenced on January 16, 2015. The third party in India that is allegedly trying to encumber some of the identified Indian assets intervened in that proceeding on January 27, 2015. Second Sun Decl. Ex. 3 of Ex. B. The U.S. proceeding began over two months later on March 31, 2015. But it was not until after Judge Swain orally expressed skepticism about proof of personal jurisdiction that the first petition was filed on May 11, 2015 and it was only after Judge Swain denied the attachment and related discovery request that the second petition was filed on May 15, 2015. It is hard to believe that this timing was coincidental.
Furthermore, the Court is also concerned that Petitioner is using the § 1782 petitions as a fishing expedition to determine if it should file additional confirmation and enforcement proceedings in Singapore or the United Kingdom. Courts typically analyze such "fishing expeditions" under § 1782's statutory requirements to determine whether discovery is sought for "use" in a foreign proceeding. As noted, the Court assumes that the statutory requirements are satisfied based on the existing Indian proceeding. But the Court concludes that concern for abuse of the § 1782 petition, as in the form of a fishing expedition to determine what other proceedings might be brought, is equally relevant to the exercise of its discretion.
Petitioner states that it "anticipates that it will soon commence judicial proceedings against [Arbitral Respondents] in Singapore and the United Kingdom to enforce the Award pursuant to the New York Convention and the arbitration laws in those jurisdictions." Pet'r. Br. 5. In support of its argument that such "contemplated" proceedings meet the requirements of § 1782, Petitioner relies on language in Intel stating that "Section 1782(a) does not limit the provision of judicial assistance to 'pending' adjudicative proceedings." Intel, 542 U.S. at 258. It also selectively quotes a portion of the following sentence from Intel: "Instead, we hold that § 1782(a) requires only that a dispositive ruling by the Commission, reviewable by the European courts, be within reasonable contemplation." Id. at 259. But it is not at all clear that the Supreme Court had in mind the type of hypothetical proceedings presented here when it said that § 1782 only requires "a dispositive ruling . . . be within reasonable contemplation." Rather, as Judge Buchwald found, this quotation from Intel does not appear to sanction the use of nonexistent, purely hypothetical proceedings to satisfy § 1782's requirements. In re Certain Funds, Accounts, and/or Inv. Vehicles Managed by Affiliates of Fortress Inv. Grp., LLC, No. 14 Civ. 1801 (NRB), 2014 U.S. Dist. LEXIS 95578, at *17-20 (S.D.N.Y. July 4, 2014).
Dkt. No. 17 in 15-MC-127. --------
Even if such purely hypothetical proceedings could satisfy § 1782's requirements, in exercising its discretion, the Court agrees with Judge Buchwald's additional observation that
courts must guard against efforts by parties to engage in fishing expeditions before actually launching litigation. "The district court judge should satisfy [herself] that a proceeding is very likely to occur. If the judge doubts that a proceeding is forthcoming, or suspects that the request is a 'fishing expedition,' the district court should deny the request."Id. at * 18 (quoting In re Request for Assistance for Ministry of Legal Affairs of Trinidad and Tobago, 848 F.2d 1151, 1156 (11th Cir. 1988)). Elaborating on this point, Judge Buchwald counseled that
[c]ourts must embrace Congress's desire that broad discovery be available for parties involved in international litigation while also guarding against the potential that parties may use § 1782 to investigate whether litigation is possible in the first place, putting the cart before the horse. The latter situation is not an appropriate one for a court to compel discovery.Id. at * 18-19.
Petitioner indicates that it suspects the Arbitral Respondents may have bank accounts in Singapore or the United Kingdom that were used to pay for the Apartment or are the source of monthly rental payments for some of the Arbitral Respondents. If the discovery Petitioner seeks confirms the existence of these bank accounts, it appears that Petitioner will then commence confirmation proceedings in those countries to enforce the arbitral award against the Arbitral Respondents' assets there. If the discovery does not confirm the existence of these bank accounts, it appears that Petitioner will not commence such proceedings. In short, this is a fishing expedition. As in Fortress, "the concerns about misuse of the discovery process are particularly pronounced in this case, since petitioner[ has] had an opportunity to initiate judicial proceedings abroad but [has] failed to do so. Had petitioner[] filed a lawsuit before submitting this application for discovery, this concern would be mitigated." Id. at *19; see also Jiangsu S.S. Co. v. Success Superior Ltd., No. 14 Civ. 9997 (CM), 2015 U.S. Dist. LEXIS 18388, at *15 (S.D.N.Y. Jan 5, 2015) ("The only thing that the contemplated § 1782 discovery would assuredly be 'in aid' of is Jiangsu's decision-making, and the statute is not designed to provide potential litigants with information that will help them decide whether and where to commence proceedings.").
IV. CONCLUSION
Because it appears that Petitioner is seeking to evade an adverse discovery ruling in its ongoing U.S. proceeding and because it appears that Petitioner is engaging in a fishing expedition to identify other foreign venues in which to bring suit, the Court exercises its discretion to deny the § 1782 Petition. This resolves Dkt. No. 16 and the Clerk of Court is directed to close this matter.
SO ORDERED. Dated: June 29, 2015
New York, New York
/s/_________
ALISON J. NATHAN
United States District Judge