MSC Mediterranean Shipping Co. SA, Geneva v. Metal Worldwide, Inc et al

Filing 99

OMNIBUS ORDER on evidentiary and discovery matters; granting 69 Appeal/Objection of Magistrate Judge Order to District Court; denying 70 Motion in Limine; granting 71 Motion in Limine; denying 72 Motion in Limine; denying 73 Motion to Take Deposition from Sachin Chhabra. Signed by Judge Robert N. Scola, Jr. on 8/10/2012. (rss)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 11-61634-Civ-SCOLA
MSC MEDITERRANEAN SHIPPING CO.
SA, GENEVA,
Plaintiff,
vs.
METAL WORLDWIDE, INC., et al.,
Defendants.
_____________________________________/
OMNIBUS ORDER ON EVIDENTIARY AND DISCOVERY MATTERS
THIS MATTER is before the Court on the Plaintiff’s Appeal of the Magistrate Judge’s
June 11, 2012 Order (ECF No. 69), Plaintiff’s Motion In Limine to Preclude Evidence Related to
MSC’s Alleged Knowledge of the Weight Discrepancy (ECF No. 70), Plaintiff’s Motion In
Limine For Admission of Mahazars (ECF No. 71), Plaintiff’s Motion In Limine For Admission of
Statements Taken From India (ECF No. 72), and Plaintiff’s Motion For Leave To Re-Depose
Sachin Chhabra Outside of Discovery Period (ECF No. 73).
I. Plaintiff’s Appeal of the Magistrate Judge’s June 11, 2012 Order is granted
The Magistrate Judge’s ruling quashing MSC’s subpoena to TCC must be reversed
because it relied on an impermissibly narrow reading of MSC’s allegations. A district court may
reconsider a magistrate judge’s ruling on a non-dispositive matter “where it has been shown that
the magistrate judge’s order is clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A)
(2006); see also Rule 4 of the Local Magistrate Judge Rules.
Plaintiff, MSC, argues that the Magistrate Judge erred in granting Defendant Sachin
Chhabra’s motion to quash a subpoena issued to TCC Impex USA. The subpoena sought various
types of documents, including TCC’s client list, credits issued by Chhabra (as President of
Defendant Metal Worldwide) to TCC’s clients, Chhabra’s personnel file, and other documents
relating to TCC’s managers, directors, and shareholders. The Magistrate Judge found that these
materials were not discoverable based on a close reading of MSC’s pleadings. (Order Granting
Mot. Quash 10-11, ECF No. 59.) Although the justifications for obtaining the records from TCC
are not readily apparent from the face of the complaint, the Court has recently had an opportunity
to review more closely MSC’s theories of liability in ruling on MSC’s summary judgment

motion. The Court now recognizes the connection between the requested TCC records and
MSC’s theory of liability against Chhabra. The summary judgment motion was not fully briefed
when the Magistrate Judge ruled on this discovery issue.
“Parties may obtain discovery regarding any nonprivileged matter that is relevant to the
claim or defense of any party.” Fed. R. Civ. P. 26(b)(1). “Evidence is relevant if it has any
tendency to make a fact more or less probable than it would be without the evidence; and the fact
is of consequence in determining the action.” Fed. R. Evid. 401. “Relevant Information need not
be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of
admissible evidence.” Fed. R. Civ. P. 26(b)(1). “[A]lthough district courts have broad discretion
in fashioning discovery rulings, they are bound to adhere to the liberal spirit of the Federal
Rules.” Adkins v. Christie, 488 F.3d 1324, 1331 (11th Cir. 2007) (internal quotation marks
omitted).
In this case, MSC argues that Chhabra used Metal Worldwide for a fraudulent purpose
and therefore Metal Worldwide’s corporate veil should be pierced. MSC contends that Chhabra
fraudulently transferred Metal Worldwide assets in order to evade Metal Worldwide’s liabilities
to MSC. Under federal maritime law, the imposition of liability on a principal for the debts of
the corporation (i.e., piercing the corporate veil) is available only where the principal has used
the corporate entity to perpetrate a fraud, or where the individual has so dominated and
disregarded the corporate form that the corporation primarily transacted the principal’s personal
business rather than its own. Williamson v. Recovery Ltd. P’ship, 542 F.3d 43, 53 (2d Cir. 2008).
A fraudulent transfer of funds generally involves (1) the transfer of money or other assets, (2)
without receiving a reasonably equivalent value in exchange, (3) made for the purpose of
avoiding a pre-existing debt. See, e.g., In re Advanced Telecomm. Network, Inc., 490 F.3d 1325,
1336 (11th Cir. 2007).
MSC’s subpoena to TCC seeks to discover details about the relationship between
Chhabra, Metal Worldwide, and TCC.

These details will, in all likelihood, make it more

probable (or less probable) that Chhabra fraudulently transferred Metal Worldwide assets in
order to evade Metal Worldwide’s liabilities to MSC. If it can be established that Chhabra has a
position of high status at TCC, then the improper transfer of assets to TCC could be viewed as
benefiting Chhabra personally, even if somewhat indirectly. Also, if MSC is able to show that
TCC is essentially operating as a mirror of Metal Worldwide, it could bolster MSC’s argument

that Chhabra fraudulently transferred assets away from Metal Worldwide for the improper
purpose of avoiding the debt owed to MSC.
It is, of course, possible that the records from TCC do not reveal any close ties with Metal
Worldwide or Chhabra, in which case the records would bolster Chhabra’s arguments against
piercing the corporate veil. In either case, the records would seemingly be relevant to facts that
are of consequence in determining the case, and at the very least appear reasonably calculated to
lead to the discovery of admissible evidence. Having considered the parties’ arguments, the
records, and the relevant legal authorities, MSC’s Appeal of the Magistrate Judge’s June 11,
2012 Order will be granted.
II. Plaintiff’s Motion In Limine to Preclude Evidence Related to MSC’s Alleged
Knowledge of the Weight Discrepancy is denied
MSC asks the Court for an order precluding the Defendants from introducing evidence or
testimony related to MSC’s alleged knowledge of the weight discrepancy between the actual
weight of the subject containers and the weight declared by Metal Worldwide. For the reasons
explained in subsection III(C) of the Summary Judgment Order (ECF No. 97), MSC’s alleged
knowledge of the weight discrepancy is relevant to a fact of consequence. Accordingly, MSC’s
motion in limine to preclude evidence on this issue must be denied.
III. Plaintiff’s Motion In Limine For Admission of Statements Taken From India is
denied; Plaintiff’s Motion In Limine For Admission of Mahazars is granted
MSC moves in limine for the admission of certain sworn statements taken of MSC
employees in India as part of the Indian Government’s investigation into the events leading up to
the discovery of the mis-declaration of the weight and contents of the containers at issue in this
case. MSC seeks to admit these statements through the residual hearsay exception.
Under Federal Rule of Evidence 807, “a hearsay statement is not excluded by the rule
against hearsay even if the statement is not specifically covered by a hearsay exception in Rule
803 or 804 [where]: (1) the statement has equivalent circumstantial guarantees of trustworthiness;
(2) it is offered as evidence of a material fact; (3) it is more probative on the point for which it is
offered than any other evidence that the proponent can obtain through reasonable efforts; and (4)
admitting it will best serve the purposes of these rules and the interests of justice.”
Defendant, Metal Worldwide, argues that the statements do not have circumstantial
guarantees of trustworthiness because they were given by MSC employees as a part of a
governmental investigation and under those circumstances the MSC employees would have an

incentive to shade their testimony to avoid possible fines and penalties and to place the blame
away from MSC. Metal Worldwide also argues that because MSC employees in this jurisdiction
can provide substantially the same testimony, or at the least testify regarding the same set of
facts, the hearsay statements are not more probative on the point for which they are offered than
any other evidence that MSC can obtain through reasonable efforts. In reply, MSC essentially
concedes that its corporate representative, deposed in this matter, can corroborate the statements
taken by MSC’s employees in India.
Based on the facts and arguments presented by the parties, MSC’s motion in limine to
admit the statements of MSC’s employees in India regarding the mis-declaration of the weight
and contents of the containers at issue in this case will be denied.
MSC next moves for an order in limine to admit reports from the Indian Customs
Department (“Mahazars”) detailing the investigation into the actual contents of the containers at
issue in this case. MSC is seeking to have the reports admitted under the public records
exception to the hearsay rule, or alternatively, through the residual hearsay exception.
A record or statement of a public office is not excluded by the rule against hearsay if it
sets out: (1) the office’s activities; (2) a matter observed while under a legal duty to report; or (3)
factual findings from a legally authorized investigation; so long as neither the source of
information nor other circumstances indicate a lack of trustworthiness. Fed. R. Evid. 803(8).
This is known as the public records exception. For the public records exception to apply, the
report must contain factual findings that are based upon the knowledge or observations of the
preparer of the report, as opposed to a mere collection of statements from a witness. Entries in a
police report which result from an officer’s own observations and knowledge may be admitted
but statements made by third persons under no business duty to report may not. In other words,
otherwise inadmissible hearsay statements by third-parties in an official report does not make the
statements admissible. United Tech. Corp. v. Mazer, 556 F.3d 1260, 1278 (11th Cir. 2009).
Metal Worldwide argues that the reports of the Indian Customs Department – the
Mahazars – do not contain the factual findings of the Customs Department, but rather the
inadmissible hearsay of witnesses at the scene. A review of the reports reveals that they consist
of detailed observations of witnesses who were present at the scene when the containers were
opened. It is apparent from the reports that the Indian Customs agents were also present.
However, the reports are written, for whatever reason, from the voice and perspective of the

witnesses and not the Customs agents. Based on a plain reading of the reports and the case law,
these records do not fall into the public records exception to the hearsay rule because they consist
of a collection of statements from a witness as opposed to the agent’s own observations and
knowledge.
Despite being inadmissible under the public records exception, the Mahazars may be
admitted under the residual hearsay exception. It is clear from the reports that the witnesses were
observing the containers being opened with the Indian Customs’ agents present alongside them.
For some reason, due to the manner the reports were written, they only contain the descriptions
of the witnesses and not of the Indian Customs agents. Based on the narratives, the witnesses
understood they were taking part in an official and formal investigation, and clearly understood
the seriousness of the situation. Additionally, the records are the most direct evidence of the
actual contents of the containers.
Under the circumstances, the Mahazars have circumstantial guarantees of trustworthiness,
equivalent to other hearsay exceptions. The reports are being offered as evidence of the actual
contents of the containers, a material fact at issue in this case. The reports are more probative on
this point than any other evidence that MSC can obtain through reasonable efforts. The Court
finds that permitting the Mahazars to be offered into evidence will best serve the purposes of
these rules and the interests of justice. MSC’s motion in limine, allowing the Indian Customs
Reports to be admitted under the residual hearsay exception is granted. The Mahazars may be
admitted into evidence, provided that MSC can authenticate them at trial. See United States v.
Siddiqui, 235 F.3d 1318, 1322 (11th Cir. 2000) (“Under Fed. R. Evid. 901(a), documents must be
properly authenticated as a condition precedent to their admissibility ‘by evidence sufficient to
support a finding that the matter in question is what its proponent claims.’”).
IV. Plaintiff’s Motion For Leave To Re-Depose Sachin Chhabra Outside of Discovery
Period is denied
MSC seeks to re-depose Chhabra, after the close of all discovery, having “determined that
it is necessary . . . in order to ascertain whether the transfers [of funds from Metal Worldwide to
TCC] are legitimate or are part of a fraudulent scheme to evade Metal Worldwide’s liabilities to
MSC.” (Pl.’s Mot. Re-Depose Chhabra 3, ECF No. 73.) As noted by the Court in the Summary
Judgment Order (ECF No. 97), a fraudulent transfer of assets generally involves (1) the transfer
of money or other assets, (2) without receiving a reasonably equivalent value in exchange, (3)

made for the purpose of avoiding a pre-existing debt. See, e.g., In re Advanced Telecomm.
Network, Inc., 490 F.3d 1325, 1336 (11th Cir. 2007).
The records subpoenaed from TCC, in conjunction with the discovery MSC has already
obtained regarding the transfer of assets, and Chhabra’s initial deposition are sufficient to give
MSC the opportunity formulate its claims of fraudulent transfers. If MSC has additional specific
questions for Chhabra it may call him as a witness at the upcoming trial and elicit testimonial
evidence at that time. Accordingly, MSC’s motion to re-depose Chhabra following the close of
discovery will be denied.
V. Conclusion
For the reasons explained above, it is ORDERED as follows:
A) Plaintiff’s Appeal of the Magistrate Judge’s June 11, 2012 Order (ECF No. 69) is
GRANTED. The subpoena served on TCC Impex USA is REVALIDATED and shall
have full force and effect. TCC Impex shall respond to the subpoena deuces tecum,
providing the requested records, on or before August 23, 2012. MSC shall immediately
deliver a duplicate copy of the subpoena deuces tecum, along with a copy of this Order, to
TCC Impex.
B) Plaintiff’s Motion In Limine to Preclude Evidence Related to MSC’s Alleged Knowledge
of the Weight Discrepancy (ECF No. 70) is DENIED.
C) Plaintiff’s Motion In Limine For Admission of Mahazars (ECF No. 71) is GRANTED.
D) Plaintiff’s Motion In Limine For Admission of Statements Taken From India (ECF No.
72) is DENIED.
E) Plaintiff’s Motion For Leave To Re-Depose Sachin Chhabra Outside of Discovery Period
(ECF No. 73) is DENIED.
DONE and ORDERED in chambers, at Miami, Florida, on August 10, 2012.

___________________________________
ROBERT N. SCOLA, JR.
UNITED STATES DISTRICT JUDGE
Copies to:
Counsel of record