Kiskadee Communications (Bermuda), Ltd. v. Father et al
Filing
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ORDER GRANTING MOTION TO ENFORCE STAY ORDER, DENYING MOTION FOR SANCTIONS, VACATING HEARING, AND POSTPONING CASE MANAGEMENT CONFERENCE by Judge Alsup granting 33 Motion to Enforece Stay Order; denying 35 Motion for Sanctions (whalc1, COURT STAFF) (Filed on 10/26/2011)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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For the Northern District of California
United States District Court
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KISKADEE COMMUNICATIONS
(BERMUDA), LTD.,
Plaintiff,
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No. C 10-05277 WHA
ORDER GRANTING
MOTION TO ENFORCE
STAY ORDER, DENYING
MOTION FOR SANCTIONS,
VACATING HEARING,
AND POSTPONING CASE
MANAGEMENT CONFERENCE
v.
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PHILIP R. FATHER and
EUGENE CACCIAMANI,
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Defendants.
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INTRODUCTION
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In this stayed action, plaintiff has issued a discovery subpoena. Defendants move to
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enforce the stay order by compelling withdrawal of the subpoena. Defendants also request
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sanctions. For the reasons stated below, defendants’ motion to enforce the stay order is
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GRANTED, and their motion for sanctions is DENIED.
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STATEMENT
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In March 2011, this action was stayed pending arbitration. The stay order stated:
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“Pending arbitration, the proceedings herein are STAYED.” (Dkt. No. 28 at 9). A ten-day
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arbitration hearing is set to be held in Bermuda — the location of the transactions underlying the
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parties’ dispute — beginning on December 5, 2011 (Donovan Exh. A).
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On September 15, 2011, plaintiff issued a subpoena for production of documents to
third-party John B. Higginbotham. The subpoena was issued from the United States District
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Court for the Eastern District of Virginia. It purported to be issued pursuant to FRCP 45 in the
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instant action (Donnovan Exh. D).
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Defendants assert that plaintiff’s issuance of the subpoena violated the order staying this
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action. Defendants move to enforce the stay order and request sanctions for its violation.
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Plaintiff opposes. This order follows full briefing on both motions.
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ANALYSIS
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1.
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The March 2011 order stayed all proceedings in this district court action, including
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discovery. Because the subpoena was issued in this stayed action, it was improper.
Plaintiff argues that “Bermuda law and the procedural rules agreed to by the arbitration
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For the Northern District of California
United States District Court
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MOTION TO ENFORCE STAY ORDER.
parties allow for document discovery from third-party witnesses in this international arbitration”
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(Opp. 4). The subpoena, however, was not issued pursuant to Bermuda law or the arbitration
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rules. It was issued pursuant to the Federal Rules of Civil Procedure in this United States district
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court action. As such, it was improper. This order need not determine whether other modes of
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obtaining third-party discovery pursuant to Bermuda law or the arbitration rules would have
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been proper.
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Plaintiff stresses that the Federal Arbitration Act does not explicitly disallow the use of
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subpoenas in support of an arbitration compelled by a district court (Opp. 5). On this point the
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only binding authority plaintiff cites is one footnote in a Supreme Court decision. It stated that
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the arbitration laws “provide for limited discovery” and “the ability to subpoena witnesses,” but
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that “by arbitrating their disputes, investors lose the wide choice of venue and the extensive
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discovery provided by the courts.” Shearson/American Express, Inc. v. McMahon,
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482 U.S. 220, 259 n.18 (1987). True, subpoenas may be used in arbitration, but they must be
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procedurally proper. The subpoena at hand was not.
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Plaintiff also argues that defendants lack standing to challenge the subpoena, because it
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burdens only its third-party target, who has not yet challenged it in the Eastern District of Virginia
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(Opp. 6). Defendants, however, are challenging plaintiff’s issuance of the subpoena in violation
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of the stay order, not the terms of the subpoena itself. As a remedy, defendants seek an order
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requiring plaintiff to withdraw the subpoena, not an order quashing the subpoena. Plaintiff has
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not shown that this court lacks jurisdiction to enforce its own stay order in this manner.
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Defendants’ motion to enforce the stay order is GRANTED. Plaintiff shall withdraw its
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improper subpoena by NOVEMBER 1, 2011. If plaintiff seeks third-party discovery as part of the
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arbitration, it must do so by way of the procedural mechanisms of the arbitration. Plaintiff may
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not pursue civil discovery in this stayed district court action.
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2.
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Defendants assert that plaintiff and its counsel should be held in contempt for violating the
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stay order and should be required “to pay defendants their attorneys’ fees incurred in stopping this
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For the Northern District of California
United States District Court
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MOTION FOR SANCTIONS.
flagrant violation.” Defendants cite 28 U.S.C. 1927 as the authority for their request (Br. 3).
Imposition of sanctions under Section 1927 requires a showing that counsel acted
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recklessly or in bad faith. R.P. ex rel. C.P. v. Prescott Unified Sch. Dist., 631 F.3d 1117, 1128
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(9th Cir. 2011). Here, defendants have made no such showing. Plaintiff’s decision to issue the
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subpoena, although misguided, was based upon consideration of the “advice of Bermuda
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counsel,” who appear to have believed that the case was “unprecedented as a matter of Bermuda
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law” and therefore warranted unprecedented procedural maneuvers (Opp. 3). Sanctions are not
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warranted on this record. Defendants’ motion for sanctions is DENIED.
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3.
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The case management conference currently set for November 17, 2011, was scheduled as
CASE MANAGEMENT CONFERENCE.
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a control date to make sure that arbitration was proceeding apace. Because the parties’
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submissions with the instant motions confirm that the arbitration panel has been selected and
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arbitration will take place in early December, a case management conference is no longer
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necessary at this time. The November 17 case management conference is therefore POSTPONED
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to 11:00 A.M. ON FEBRUARY 16, 2012.
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CONCLUSION
Defendants’ motion to enforce the stay order is GRANTED. Plaintiff shall withdraw its
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improper subpoena by NOVEMBER 1, 2011. Defendants’ motion for sanctions is DENIED. The
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motion hearing previously set for November 17, 2011, is VACATED. The case management
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conference previously set for November 17, 2011, is POSTPONED to 11:00 A.M. ON
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FEBRUARY 16, 2012.
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If plaintiff seeks third-party discovery as part of the arbitration, it must do so by way of
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the procedural mechanisms of the arbitration. Plaintiff may not pursue civil discovery in this
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stayed district court action.
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IT IS SO ORDERED.
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Dated: October 26, 2011.
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE
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For the Northern District of California
United States District Court
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