v. Astro Digital US, Inc et al

Filing 9

ORDER by Judge Kandis A. Westmore granting 1 Ex Parte Application for an Order to Obtain Discovery for Use in Foreign Proceeding. (kawlc2, COURT STAFF) (Filed on 6/11/2018)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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Case No. 18-mc-80074-KAW

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IN RE EX PARTE APPLICATION OF
AMBERCROFT TRADING LIMITED

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ORDER GRANTING EX PARTE
APPLICATION FOR AN ORDER TO
OBTAIN DISCOVERY FOR USE IN
FOREIGN PROCEEDING

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Re: Dkt. No. 1

United States District Court
Northern District of California

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On April 27, 2018, Petitioner Ambercroft Trading Limited filed an ex parte application for

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an order to obtain discovery for use in a foreign proceeding, pursuant to 28 U.S.C. § 1782(a).

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(Dkt. No. 1.) Petitioners seek discovery from Astro Digital US, Inc. ("Astro Digital") and Damir

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Begishev, who reside in this district. (Id. at 2.) Upon consideration of the motion, the Court

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GRANTS Petitioner's request.1

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I.

BACKGROUND

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Petitioner is a minority shareholder in Dauria Holding International Limited ("DHIL"), a

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company organized and registered under the laws of the British Virgin Islands. (Clifton Decl. ¶

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9.) DHIL, in turn, was the majority shareholder in Dauria Aerospace Holding Limited ("DASH"),

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a company incorporated under the laws of the Republic of Cyprus. (Clifton Decl. ¶¶ 6-7.) DASH

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is a holding company that develops and manufactures satellites through its subsidiaries; one of its

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subsidiaries, Canopus, owned DASH's Perseus-M satellites. (Clifton Decl. ¶ 6.)

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On June 1, 2018, Mr. Mikhail Kokorich filed a letter requesting that the Court refrain from ruling
on the instant application to allow Mr. Kokorich to file a motion to intervene and motion to quash.
The Court does not find good cause to delay ruling on the instant application. A motion to quash
challenging the discovery after it is authorized may be filed by any party having standing to do so.
As such, Mr. Kokorich's request for a stay to allow him to file a motion to quash at this juncture is
premature.

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Mr. Mikhail Kokorich had a controlling interest in DHIL, and served as the CEO of DASH

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starting in June 2014 through the relevant time period. (Clifton Decl. ¶ 8.) Mr. Kokorich was also

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responsible for the day-to-day operations of Canopus and DASH's other American subsidiaries.

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Petitioner asserts that Mr. Kokorich abused his control of DHIL and DASH to transfer

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assets from Canopus to Aquila, an unrelated company owned and/or controlled by Mr. Kokorich.

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(Clifton Decl. ¶ 10; Dkt. No. 2 at 4.) Specifically, on May 29, 2014, Mr. Dmitri Kushaev was

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terminated as managing director in charge of finance strategy and mergers and acquisitions for

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DASH and its subsidiaries, after Mr. Kushaev questioned financial improprieties. (Clifton Decl. ¶

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11.) Around the same time, Mr. Kokorich also fired CFO Dmitry Sokolsky and Group Treasurer
and Controller Maria Pershina. (Clifton Decl. ¶ 12.) Mr. Sokolsky and Ms. Pershina were

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United States District Court
Northern District of California

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terminated after they requested documentation and explanations for the expenditures previously

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questioned by Mr. Kushaev.

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Between March and April 2015, Canopus entered into agreements to transfer two Perseus-

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M satellites to Aquila, a company formed by Mr. Kokorich a few months prior. (Clifton Decl. ¶¶

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13-15.) The Perseus-M satellites were worth over $5 million, but DASH only received around $2

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million. (Clifton Decl. ¶ 15.) After the transfer of the satellites, Mr. Kokorich and Aquila began

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to compete with DASH, and employees and management from Canopus moved over to Aquila.

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(Clifton Decl. ¶ 18; Dkt. No. 2 at 5.) Mr. Kokorich also advertised Aquila (now known as Astro

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Digital) as being the operator of two Perseus-M satellites, and entered into agreements with

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companies with which DASH had previously been negotiating. (Clifton Decl. ¶ 19.) Aqulia/Astro

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Digital also secured funds from sources that could otherwise have invested in DASH, obtaining

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over $10 million from investors between 2016 and early 2017. These events occurred while Mr.

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Kokorich was still DASH's CEO. (Clifton Decl. ¶ 19.)

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To ratify the sale of the satellites, Mr. Kokorich convened a procedurally improper meeting

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of the DHIL shareholders. (Clifton Decl. ¶ 20.) Per the articles of incorporation, DHIL has

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authority to appoint DASH's board of directors, although such decisions require the approval of

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90% of the shares with the right to vote. (Clifton Decl. ¶ 21.) On August 4, 2015, however, Mr.

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Kokorich convened a meeting of the DHIL members for August 10, 2015, for the purpose of
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changing DASH's board of directors. Petitioner asserts that inadequate notice was given to

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Petitioner and other DHIL members. (Clifton Decl. ¶ 21.) Mr. Kokorich was advised that the

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notice for the August 10, 2015 meeting was improper, and that the director appointed by and

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representing Petitioner (Mr. Kushaev) could not attend. (Clifton Decl. ¶ 22.) Nevertheless, Mr.

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Kokorich convened the shareholder meeting and made changes to DASH's board of directors, with

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the approval of less than 90% of the DHIL shares with the right to vote. (Clifton Decl. ¶¶ 22-23.)
On October 29, 2015, Petitioner sent Mr. Kokorich, DHIL, and DASH (collectively,

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"proposed Defendants") a demand letter, requiring that they remedy Mr. Kokorich's actions.

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(Clifton Decl. ¶ 24.) The subsequent negotiations were unsuccessful. On December 7, 2017,

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Petitioner sent another demand letter, stating that it intended to file a legal action in the British

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United States District Court
Northern District of California

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Virgin Islands if its issues were not resolved. (Clifton Decl. ¶ 25, Exh. 5.) In January 2018, the

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proposed Defendants responded that they had retained legal counsel to represent them in the

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contemplated legal proceeding and rejected Petitioner's settlement proposal. (Clifton Decl. ¶ 26.)

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In light of this response, Petitioner intends to file a foreign proceeding against the proposed

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Defendants in the "near future." (Clifton Decl. ¶ 27.)
On April 27, 2018, Petitioner filed the instant ex parte motion for discovery under 28

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U.S.C. § 1782. Petitioner seeks discovery from Astro Digital, as well as Mr. Damir Begishev,

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who was the CFO at Canopus at the time of the asset transfers to Aquila and was also the CFO at

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Aquila/Astro Digital. (Dkt. No. 2 at 13.)

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II.

LEGAL STANDARD

28 U.S.C. § 1782 "is the product of congressional efforts, over the span of nearly 150

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years, to provide federal-court assistance in gathering evidence for use in foreign tribunals." Intel

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Corp. v. Advanced micro Devices, Inc., 542 U.S. 241, 247 (2004). In relevant part, § 1782(a)

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states:

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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 . . . . The order may be made . . . upon the
application of any interested person and may direct that the
testimony or statement be given, or the document or other thing be
produced, before a person appointed by the court.
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Thus, discovery under § 1782(a) is permitted where the following three requirements are met: "(1)

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the discovery sought is from a person residing in the district of the district court to which the

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application is made; (2) the discovery is for use in a proceeding before a foreign tribunal; and (3)

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the applicant is a foreign or international tribunal or an interested person." In re Ex Parte Apple

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Inc., Case No. 12-mc-80013-JW, 2012 WL 1570043, at *1 (N.D. Cal. May 2, 2012).

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Even if these three factors are met, the court is not required to grant the application. In re

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Ex Parte Apple Inc., 2012 WL 1570043, at *1; see also In re Application of Joint Stock Co.

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Raiffeinsenbank ("In re Raiffeinsenbank"), Case No. 16-mc-80203-MEJ, 2016 WL 6474224, at *3

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(N.D. Cal. Nov. 2, 2016). Instead, the court considers the following non-exhaustive factors:

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(1) whether the "person from whom discovery is sought is a
participant in the foreign proceeding"; (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 discovery
request is an "attempt to circumvent proof-gathering restrictions or
other policies of a foreign country or the United States"; and (4)
whether the discovery requested is "unduly intrusive or
burdensome."

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In re Ex Parte Apple Inc., 2012 WL 1570043, at *1 (quoting Intel Corp., 542 U.S. at 264-65.) The

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court must exercise its "discretion with the 'twin aims' of § 1782 in mind: (1) 'providing efficient

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assistance to participants in international litigation' and (2) 'encouraging foreign countries by

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example to provide similar assistance to our courts.'" In re Raiffeinsenbank, 2016 WL 6474224, at

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*3 (quoting Intel Corp., 542 U.S. at 252).

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III.

United States District Court
Northern District of California

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DISCUSSION

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A.

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As an initial matter, the Court notes that "[i]n general, ex parte requests are disfavored and

Ex Parte Application

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mostly limited to emergency situations because such requests disrupt and undermine the

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adversarial system on which the Court generally operates." In re: Ex Parte Application Varian

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Med. Sys. Int'l AG ("In re Varian"), Case No. 16-mc-80048-MEJ, 2016 WL 1161568, at *2 (N.D.

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Cal. Mar. 24, 2016). Section 1782 petitions, however, have "regularly [been] reviewed on an ex

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parte basis." Id.; see also In re Raiffeinsenbank, 2016 WL 6474224, at *3; In re the Republic of

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Ecuador, Case No. 10-mc-80225-CRB (EMC), 2010 WL 3702427, at *2 (N.D. Cal. Sept. 15,
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2010). "'Such ex pate applications are typically justified by the fact that the parties will be given

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adequate notice of any discovery taken pursuant to the request and will then have the opportunity

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to move to quash the discovery or to participate in it.'" In re the Republic of Ecuador, 2010 WL

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3702427, at *2 (quoting In re Letters Rogatory from Tokyo Dist., 539 F.2d 1216, 1219 (9th Cir.

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1976)). Thus, "orders granting § 1782 applications typically only provide that discovery is

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'authorized,' and thus the opposing party may still raise objections and exercise its due process

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rights by challenging the discovery after it is issued via a motion to quash, which mitigates

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concerns regarding any unfairness of granting the application ex parte." In re Varian, 2016 WL

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1161568, at *2; see also IPCom GmbH & Co. KG v. Apple Inc., 61 F. Supp. 3d 919, 922 (N.D.

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Cal. 2014).

United States District Court
Northern District of California

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B.

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The Court finds that Petitioner satisfies § 1782's threshold requirements. First, the

42 U.S.C. § 1782 Threshold Requirements

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discovery is sought from residents in this district. Specifically, Astro Digital's statement of

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information, as filed with the California Secretary of State, lists its principal executive office as

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being in Moffett Field, California, while Mr. Begishev resides in Mountain View, California.

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(Stolyar Decl., Exh. 3.)

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Second, Petitioner seeks the discovery for use in a contemplated foreign proceeding in the

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British Virgin Islands. (Clifton Decl. ¶¶ 27, 30.) While Petitioner has not yet filed suit, the

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Supreme Court has explained that "Section 1782(a) does not limit the provision of judicial

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assistance to 'pending' adjudicative proceedings," or even imminent proceedings. Intel Corp., 542

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U.S. at 258, 259. Instead, the proceeding must simply "be within reasonable contemplation." Id.

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at 259. This requirement is satisfied on a showing that the proceeding is not merely speculative; at

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a minimum, the contemplated proceeding must be "more than just a twinkle in counsel's eye."

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Certain Funds, Accounts And/Or Inv. Vehicles Managed by Affiliates of Fortress Inv. Grp. LLC v.

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KPMG, LLP, 798 F.3d 113, 124 (2d Cir. 2015). Here, Petitioner sent one demand letter, followed

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by negotiations with the proposed Defendants. After negotiations failed, Petitioner sent a second

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demand letter, stating that it intended to file legal action in the British Virgin Islands. This letter

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outlined what relief Petitioners believed it was entitled to before the Commercial Division of the
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High Court of the British Virgin Island, including its legal theories and relevant statutory

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authority. (Clifton Decl., Exh. 5 at 4-5.) The proposed Defendants responded by stating they had

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retained legal counsel to represent them in the contemplated proceedings. Petitioner also states

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that it intends to file suit in the near future. (Clifton Decl. ¶ 27.) The Court finds that these facts

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are sufficient to show that the contemplated foreign proceeding is not merely speculative.

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Compare with LEG Q LLC v. RSR Corp., No. 3:17-cv-1559-N-BN, 2017 WL 3780213, at *6

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(N.D. Tex. Aug. 31, 2017) (finding second requirement satisfied where the petitioner had served a

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letter before action on the intended defendants, was in the midst of the pre-action correspondence

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process that typically preceded the filing of a shareholder derivative action, and stated that it
intended to commence the action after obtaining the requested discovery); Bravo Express Corp. v.

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United States District Court
Northern District of California

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Total Petrochemicals & Refining U.S., 613 Fed. Appx. 319, 323 (5th Cir. 2015) (finding second

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requirement satisfied where the petitioner's counsel provided a sworn affidavit stating that the

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action would be "imminently filed," explained the facts giving rise to the suit, and stated that the

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petitioner had already prepared its "claim of particulars").
Finally, Petitioner is an "interested person" because it would be the plaintiff in the

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contemplated foreign proceedings.
Because all three requirements are satisfied, the Court may authorize discovery under §

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1782.

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C.

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The Court finds that the four discretionary factors support authorizing discovery under §

Discretionary Factors

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1782. The first factor considers whether "the person from whom discovery is sought is a

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participant in the foreign proceeding." Intel Corp., 542 U.S. at 264. When the person from whom

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discovery sought is a participant, "the need for § 1782(a) aid generally is not as apparent as it

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ordinarily is when evidence is sought from a nonparticipant in the matter arising abroad" because

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the foreign tribunal would have jurisdiction over participants, and could order discovery. Id. "In

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contrast, nonparticipants in the foreign proceeding may be outside the foreign tribunal's

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jurisdictional reach; hence, their evidence, available in the United States, may be unobtainable

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absent § 1782(a) aid. Id. Here, Petitioner asserts that Astro Digital and Mr. Begishev will not be
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parties or participants in the contemplated foreign proceeding. (Clifton Decl. ¶ 31.) Thus, this

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factor weighs in favor of § 1782 discovery.

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The second factor considers "the nature of the foreign tribunal, the character of the

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proceedings underway abroad, and the receptivity of the foreign . . . court . . . to U.S. federal-court

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judicial assistance." Intel Corp., 542 U.S. at 264. "This factor considers whether the foreign

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tribunal is willing to consider the information sought." In re Raiffeinsenbank, 2016 WL 6474224,

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at *5 (internal quotation omitted). In reviewing this factor, the district court looks at whether

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"there is reliable evidence that the foreign tribunal would not make any use of the requested

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material," in which case "it may be irresponsible for the district court to order discovery,
especially where it involves substantial costs to the parties involved." In re Varian, 2016 WL

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United States District Court
Northern District of California

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1161568, at *4 (internal quotation omitted). Here, Petitioner's counsel, who is admitted to practice

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law in the British Virgin Islands, states that he is "not aware of any reason a [British Virgin

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Islands] court would not accept judicial assistance from a U.S. court," and that British Virgin

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Islands "law does not prohibit a party from seeking evidence abroad by whatever legal means are

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available to it." (Clifton Decl. ¶ 29.) Other courts have found similarly. In re Application of

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Bracha Found. Request for Discovery Pursuant to 28 U.S.C. § 1782, Case No.: 2:15-mc-748-

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KOB, 2015 WL 6123204, at *4 (N.D. Ala. Oct. 19, 2015) ("this court has no reason to believe that

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the [British Virgin Islands] tribunal would not be receptive to judicial assistance by U.S. federal

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courts"), affirmed in relevant part by In re: Application of Bracha Found., 663 Fed. Appx. 755,

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765 (11th Cir. 2016) ("we discern no abuse in the district court's decision to permit discovery

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based on the Intel discretionary factors"). In re Hornbeam Corp., -- Fed. Appx. --, 2018 WL

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416486, at *2 (2d Cir. Jan. 16, 2018) (affirming the district court's finding that the second factor

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favored § 1782 discovery as to proceedings contemplated in the British Virgin Islands). This

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factor weighs in favor of authorizing § 1782 discovery.

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The third factor looks at "whether the § 1782(a) request conceals an attempt to circumvent

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foreign proof-gathering limits or other policies of a foreign country or the United States." Intel

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Corp., 542 U.S. at 265. "Although courts need not determine if an applicant has exhausted its

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discovery attempts abroad, a perception that an applicant has side-stepped less-than-favorable
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discovery rules by resorting immediately to §1782 can be a factor in a court's analysis." In re

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Raiffeinsenbank, 2016 WL 6474224, at *6 (internal quotation omitted). Here, the Court has no

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reason to believe that the instant application is an attempt to circumvent foreign proof-gathering

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restrictions or policies of the British Virgin Islands. Again, Petitioner's counsel avers that he is not

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aware of any reason that "seeking documentary evidence in the U.S. via a subpoena would

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circumvent any BVI proof-gathering restrictions or policies." (Clifton Decl. ¶ 29.) This factor

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also weighs in favor of authorizing § 1782 discovery.
Finally, the fourth factor reviews whether the requested discovery is "unduly intrusive or

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burdensome." Intel Corp., 542 U.S. at 265. "The proper scope of discovery arising out of a §
1782 application is generally determined by the Federal Rules of Civil Procedure." In re

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United States District Court
Northern District of California

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Raiffeinsenbank, 2016 WL 6474224, at *6.
Here, Petitioner "seeks to obtain documents and testimony relating to the transactions in

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which Canopus'[s] assets were transferred to [Astro Digital] for inadequate consideration, as well

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as the corporate structure and ultimate ownership of Aquila/[Astro Digital], to establish its links to

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Kokorich." (Dkt. No. 2 at 12.) Petitioner asserts that this information will help establish: "(i) Mr.

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Kokorich's ownership and/or control of Aquila/[Astro Digital]; (ii) the lack of any legitimate

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business purpose for the asset transfers at issue between Canopus and Aquila; and (iii) the

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methods of transfer, use, and ultimate destination of the funds and assets diverted to Aquila (now

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[Astro Digital]) as the result of the above-described fraudulent scheme." (Clifton Decl. ¶ 30.) The

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Court agrees that the discovery appears to seek information that is relevant to the contemplated

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proceeding. The discovery seeks information related to the formation of Aquila and its transition

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to Astro Digital; the shareholders, beneficiaries, officers, and employees; agreements between

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Canopus and Aquila; correspondence between Aquila/Astro Digital and the proposed Defendants;

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bank statements, financial statements, and tax returns from Aquila's incorporation to the present,

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and agreements between Aquila/Astro Digital and former Canopus customers. (Dkt. No. 1, Exh.

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A.)

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Further, if Astro Digital or Mr. Begishev seeks to challenge the relevance, breadth, or
burdensomeness of Petitioner's discovery requests, this order does not preclude them from
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bringing a motion to quash or modify the discovery sought. See In re Raiffeinsenbank, 2016 WL

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6474224, at *7; In re Republic of Ecuador, 2010 WL 3702427, at *5 ("the Court's ruling here does

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not preclude Mr. Borja . . . from contesting the subpoena based on undue intrusion or burden or

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based on other grounds (e.g., overbreadth)"). Therefore, this factor, along with the other

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discretionary factors, favors authorizing § 1782 discovery.

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IV.

CONCLUSION

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For the reasons stated above, the Court finds that Petitioner has met § 1782's three

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requirements, and that the discretionary factors weigh in favor of granting Petitioner's application.

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Accordingly, Petitioner's application is GRANTED, and Petitioner may serve the subpoenas on
Astro Digital and Mr. Begishev. Again, this order does not preclude Astro Digital and Mr.

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United States District Court
Northern District of California

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Begishev from filing a motion to quash or any other relevant discovery motion.

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IT IS SO ORDERED.
Dated: June 11, 2018
__________________________________
KANDIS A. WESTMORE
United States Magistrate Judge

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