MEMORANDUM OPINION Signed by Chief Judge Karon O Bowdre on 11/6/15. (SAC )
2015 Nov-06 PM 04:32
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
IN RE APPLICATION OF
REQUEST FOR DISCOVERY
PURSUANT TO 28 U.S.C. § 1782
This matter is before the court on “Movants’ Renewed Motion for Stay
Pending Appeal” (doc. 55), filed in conjunction with the “Notice of Appeal” (doc.
54) from this court’s “Order Denying Motion to Vacate, Quashing the Subpoena to
Regions Bank, and Amending the Order Granting Application for Discovery Pursuant
to 28 U.S.C. § 1782" (doc. 47), as well as all related orders and rulings. Bracha and
Hornbeam responded to this motion. (Doc. 50). For the reasons stated in this
Memorandum Opinion, the court will DENY the motion for stay.
The one matter on which all parties agree is the list of four factors that the court
considers in determining whether to issue a stay pending appeal. Those factors are:
(1) whether the stay applicant has made a strong showing that he is
likely to succeed on the merits; (2) whether the applicant will be
irreparably injured absent a stay; (3) whether issuance of the stay
will substantially injure the other parties interested in the
proceeding; and (4) where the public interest lies.
Nken v. Holder, 556 U.S. 418, 432 (2009) (quoting Hilton v. Braunskill, 481 U.S.
770, 776 (1987)).
A. Likelihood of Success on the Merits
The first factor that the court must weigh is whether the applicants have
made a strong showing that they are likely to succeed on the merits. The Eleventh
Circuit Court of Appeals has explained that “[o]rdinarily the first factor is the most
important.” Garcia-Mir v. Meese, 781 F.2d 1450, 1453 (11th Cir. 1986). Of
course, when the trial court making the ruling that is appealed is evaluating this
factor, that court is not likely to find that likely success awaits in the appeal of its
well-reasoned ruling. In any event, “the movant may also have his motion granted
upon a lesser showing of a ‘substantial case on the merits’ when ‘the balance of
the equities [identified in factors 2,3, and 4] weighs heavily in favor of granting
the stay.’”Id. (quoting Ruiz v. Estelle, 650 F.2d 555, 565 (5th Cir. 1981) (per
curiam), cert. denied, 460 U.S. 1042 (1983)).
Preliminary to its determination regarding success on appeal, the court notes
the standard of review on appeal. To the extent that the review of the district
court’s decision is based on interpretation of the law, the review is de novo.
However, if the court properly applied the law, then the appellate court’s review of
the district court’s analysis at the discretionary stage regarding whether to grant
discovery and the scope of that grant “is extremely limited and highly deferential”
and may be overturned “only for abuse of discretion.” United Kingdom v. United
States, 238 F.3d 1312, 1319 (11th Cir. 2001).
The court sees nothing in the motion that supports a strong or substantial
case that it incorrectly interpreted or incorrectly applied the law as to § 1782's four
statutory requirements1. The movants only challenged two of those requirements
in its motion to vacate and challenge those same requirements here. One of their
challenges—that Bracha was not an interested person entitled to make the § 1782
request—no longer applies with the intervention of Hornbeam and its addition as a
§ 1782 applicant; the movants do not challenge Hornbeam’s status as an interested
person. The other challenge to statutory requirements argued in the motion to
stay—that the discovery was not for use in a foreign proceeding because the future
BVI proceedings were not within “reasonable contemplation”—is focused
primarily on matters that occurred in Ohio state court after this court’s previous
Those statutory requirements list as follows: (1) the request must be made “by a
foreign or international tribunal,” or by “any interested person”; (2) the request must seek
evidence, whether it be the “testimony or statement” of a person or the production of “a
document or other thing”; (3) the evidence must be “for use in a proceeding in a foreign or
international tribunal”; and (4) the person from whom discovery is sought must reside or be
found in the district of the district court ruling on the application for assistance. Application of
Consorcio Ecuatoriano de Telecomunicaciones S.A v. JAS Forwarding (USA), Inc., 747 F.3d
1262, 1269 (11th Cir. 2014) (quoting 28 U.S.C. § 1782(a)).
rulings. The court fails to see how those matters support this court’s
misapplication or misinterpretation of the law.
The court acknowledges the movants’ argument that foreign proceedings
are no longer reasonably contemplated after the Ohio action’s dismissal, focused
on a letter Hornbeam submitted in the New York § 1782 proceedings before that
dismissal. That letter stated in part that “[i]f the Ohio Action fails to preserve
Warren Steel, then there will likely no longer be assets in the BVI to justify the
contemplated BVI proceedings.” (Doc. 16-39). This new argument does not
affect the correctness of the court’s finding in October that Hornbeam and Bracha
had demonstrated that they reasonably contemplated the BVI suit. Futher, it does
not compel a conclusion that Hornbeam and Bracha no longer contemplate suit in
the BVI. Indeed, a reasonable argument exists that the dismissal of the Ohio
action filed to prevent the sale of Warren Steel to insiders would increase the
urgency of filing a shareholder oppression suit in the BVI before the sale actually
occurs and while Warren Steel remains an asset of Halliwel. In any event, the
prospect of selling Warren Steel does not undermine the court’s finding that
Hornbeam and Bracha had demonstrated that they reasonably contemplated the
BVI suit. The movants have failed to present a strong or substantial case that this
court incorrectly interpreted or incorrectly applied the law as to § 1782's four
Having established that failure, the court notes that the only way movants
will have success on the merits is to show that this court abused the “broad
discretion” that Congress gave it to rule on § 1782 applications. See United
Kingdom, 238 F. 3d at 1318-19. The movants do not dispute that the court, in its
discretion, applied the four discretionary factors2—set out in Intel Corp. v.
Advanced Micro Devices, Inc., 542 U.S. 241, 264-65 (2004) and quoted by the
Eleventh Circuit in In re Clerici, 481 F.3d 1324, 1334 (11th Cir. 2007)—in reassessing the application under § 1782. Although movants disagree with the result
of that assessment, they fail to provide a strong or substantial case that the court
abused its broad discretion in so ruling after weighing the appropriate factors.
Because most of the movants’ arguments merely reiterate their arguments in the
motion to vacate and supporting briefs, the court will not reiterate its analysis and
rejection of those same arguments.
Those discretionary factors list as follows: 1) whether the person from whom discovery
is sought is not a participant in the foreign proceeding and is therefore outside the foreign
tribunal’s jurisdictional reach; (2) the nature of the foreign tribunal and its receptivity to judicial
assistance by U.S. federal courts; (3) whether the request conceals an attempt to circumvent
foreign evidence-gathering rules; and (4) whether the request is unduly intrusive or burdensome.
See Intel, 542 U.S. at 264-65.
However, the court has not yet addressed one argument that movants
present because it relates to the breadth of the discovery ultimately authorized in
the court’s October 2015 order. In their brief on the renewed motion for stay
pending appeal, the movants argue: “There is at least a substantial case that § 1782
does not permit broad pre-filing document discovery—all of Warren Steel’s
Regions Bank records from 2007 to date. . . .” (Doc. 55, at 8). To the extent that
this argument objects to pre-filing document discovery, the court has previously
addressed and rejected that argument as the Supreme Court has clearly stated that
foreign litigation referenced in § 1782 does not have to be pending or even
“imminent.” See Intel Corp., 542 U.S. at 259; see also Memo Op. Doc. 46, at 6.
However, the objection to the scope of the discovery authorized in its October 19,
2015 Order is a new one. The court recognizes that the movants would prefer that
the court had rejected entirely the application for discovery pursuant to § 1782.
However, given that the court, in its discretion, granted that application, the court
finds curious and unpersuasive the movants’ current position that the scope of the
discovery is overly broad: that scope is precisely what the movants suggested in
their supplemental brief and during the hearing. In their supplemental brief,
movants argued that, at a minimum, if the court were inclined to grant discovery, it
should narrow the original discovery grant to documents related to Warren Steel,
which would be sections a-h of the original subpoena. (Doc. 40, at 14). Counsel
for Halliwel stated at the hearing:
So, if Your Honor is going to allow this subpoena to go forward,
what we would ask is that you strike request ... I, J, K. They’ll
get the bank records [requests A-H] related to Warren Steel
....And it seems to me that the core of what they should be asking
for is the bank records of Warren Steel. That is what we would
ask Your Honor to limit it for now.
(Tr. Doc. 51, at 48-50). The scope of the discovery that this court authorized in
October and that movants now characterize as impermissibly broad is identical to
the scope that they previously suggested above. The court finds that the movants
have failed to present even a substantial showing of likelihood of success on this
new argument that the scope of the October discovery authorization is overly
In sum, given the “extremely limited and highly deferential” review of a
district court’s decision on a § 1782 application (see United Kingdom, 238 F.3d at
1318-1319), this court FINDS that the movants have not made a strong or even
substantial showing that they are likely to succeed on the merits of this appeal.
B. & C. Irreparable Injury of the Movant and Opponents
The court acknowledges that, without a stay either from this court or from
the Eleventh Circuit Court of Appeals, Hornbeam and Bracha would be able to
proceed with discovery before the Eleventh Circuit would have time to address
this appeal. And, once Hornbeam and Bracha obtain this evidence, the proverbial
bell cannot be unrung. The court notes, however, that a protective order (doc. 48)
is in place that will limit how Hornbeam and Bracha can use the evidence and who
will have access to it, limiting their use to specific “Permitted Litigations” and
“Permitted Uses”; requiring filings of certain evidence to be sealed; providing for
the designation of certain materials as “Attorneys’-Eyes-Only”; and providing for
the destruction and returning of documents if no foreign proceedings are filed.
Further, the court notes that the discovery ordered is, at the present time,
limited to records related to Warren Steel. Hornbeam and Bracha persuasively
question whether providing those two entities access to Warren Steel records
would indeed cause irreparable harm and raise legitimate confidentiality concerns
given their close relationship to Warren Steel. Because Hornbeam owns one-third
of the stock in Halliwel, whose only asset is Warren Steel, giving Hornbeam
access to Regions Bank records limited to Warren Steel and subject to a Protective
Order hardly appears to represent dire harm. The court notes as well that both
Hornbeam and Bracha share the same ultimate beneficial owner.
On the other hand, granting the stay runs a great risk of harming Hornbeam
and Bracha as the clock is ticking on their ability to effectively use that discovery.
The Ohio court’s TRO enjoining the sale of Warren Steel to related parties is no
longer in place. (Doc. 52-1). Further, the movants acknowledge that they are
currently attempting to execute on Hornbeam’s Halliwel shares to satisfy a cost
judgment against Hornbeam in the BVI, which they hope will result in Hornbeam
no longer having shares in Halliwell, and will moot future litigation. (Doc. 55, at 7
n. 3). This court has already granted one stay of a subpoena directed at Regions
Bank pursuant to the § 1782 discovery while it addressed the motion to vacate. A
further delay pending appeal threatens to prevent that discovery until after the
Warren Steel sale and after the execution on Hornbeam’s Halliwel shares, when
Hornbeam and Bracha may not be able to use the discovery effectively. Thus, the
court FINDS that the balance of irreparable harm weighs against granting the stay.
D. Public Interest
Finally, the court FINDS that the public interest favors allowing the discovery,
as it supports the truth in foreign actions and encourages open disclosure among
shareholders, investors, and corporations where allegations of misconduct are raised.
Although movants argue that denying the stay would fail to extend deference to the
internal affairs doctrine and principles of comity, the court has already addressed and
rejected those arguments in its previous rulings. See Memo Op. Doc. 46, at 9-10.
The court reiterates that this court’s granting of the § 1782 application did not
litigate a dispute about Halliwel’s internal affairs here in the Northern District of
Alabama. Rather, the application is merely a discovery device to obtain evidence
here in the jurisdiction where it exists, for use in foreign litigation in the BVI. That
discovery does not circumvent the policies of the United States, the BVI, or any
other foreign country. The court has previously addressed movants’ objections
regarding pre-filing document production and also meaningful appeal rights, which
the court acknowledged in the context of possible harm to the individual movants
and acknowledges now in the context of public interest. However, the balance of the
public interest nevertheless favors discovery and disfavors the stay.
In sum, the court declines to stay its order pending appeal. The movants’ low
likelihood of success on the merits, combined with the irreparable harm that
Hornbeam and Bracha will likely suffer if discovery is stayed, together weigh against
a stay. Further, the public interest favors allowing discovery. Accordingly, the court
WILL DENY the request of Halliwel and Symeou to stay Regions Bank’s production
Dated this 6th day of November, 2015.
KARON OWEN BOWDRE
CHIEF UNITED STATES DISTRICT JUDGE
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