IN RE: THE APPLICATION OF: ELI SABAG, FOR AN ORDER PURSUANT TO 28 U.S.C.§ 1782 TO CONDUCT DISCOVERY FOR USE IN FOREIGN PROCEEDINGS
ORDER SUSTAINING OBJECTION - Mr. Sabag's objection to Magistrate Judge Baker's order, dkt. 69, is SUSTAINED, dkt. 70 ; Mr. Sabag's application is returned to Magistrate Judge Baker for further consideration. Mr. Sabag's motion for leave to file is GRANTED to the extent that the Court considered his proposed reply brief, dkt. 79-1. Dkt. 79 (SEE ORDER FOR ADDITIONAL INFORMATION). Signed by Judge James Patrick Hanlon on 4/26/2021. (DWH)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
APPLICATION OF ELI SABAG, FOR AN
ORDER PURSUANT TO 28 U.S.C. § 1782 )
TO CONDUCT DISCOVERY FOR USE IN )
ORDER SUSTAINING OBJECTION
In December 2019, Eli Sabag applied for an order granting leave to
obtain discovery for use in a foreign proceeding. Dkt. 1. After the Magistrate
Judge initially granted the application, dkt. 13, Lars Windhorst intervened and
asked the Court to vacate that order, dkt. 24. The Magistrate Judge granted
Mr. Windhorst's motion, vacated the order granting the application, and denied
Mr. Sabag's application, dkt. 54; dkt. 69. Mr. Sabag has objected to that ruling
under Federal Rule of Civil Procedure 72. Dkt. . For the reasons below,
that objection is SUSTAINED.
Facts and Background
In March 2014, Track Group, Inc. acquired Mr. Sabag's company, GPS
Global, which manufactured GPS prison tracking devices. Dkt. 6-1 at 4–6. At
the time, Mr. Windhorst owned Track Group's largest shareholder, Sapinda
Asia Limited. Id. Mr. Windhorst was the primary negotiator of the acquisition
of GPS Global. Dkt. 6-41 at 1.
The acquisition agreement "provided that Mr. Sabag would receive total
consideration with a value of $7,811,404 for the sale of his 100% holding of
shares in GPS Global, made up of cash consideration of $311,404 with the
remainder in Track Group stock." Dkt. 6-1 at 6. The Track Group stock was
split between "initial buyer shares," "Restricted Shares," and additional shares
to be issued "on an 'earn-out' basis." Id. The "earn-out" shares depended on
the number of devices that Track Group sold or leased in the 36 months after
the sale closed. Id. Mr. Sabag had a separate agreement with Sapinda and Mr.
Windhorst that allowed him to "put" all his restricted shares and any "earnout" shares "to Sapinda at $20 per share on or after the third anniversary of
Closing." Id. at 8.
In early 2016, Marion County Community Corrections ("MCCC") sought
bids from GPS tracking service providers for a six-month "gap" contract. See
dkt. 6-36; dkt. 6-38. Track Group responded with a bid, but requested "a
minimum 2 year agreement," dkt. 6-36; they eventually agreed to an 18-month
agreement, see dkt. 6-38.
Mr. Sabag alleges that when Track Group pursued a longer contract with
MCCC, it was not acting in "'good faith' to allow Mr. Sabag to reach his earnout milestones." Dkt. 9 at 47. Mr. Sabag intends to pursue criminal charges
against Mr. Windhorst in the United Kingdom for his alleged role in interfering
with the "earn-out" shares. Dkt. 6-41. Mr. Sabag therefore filed this
application under 28 U.S.C. § 1782, seeking discovery from MCCC for use in a
foreign or international proceeding. Dkt. 1.
Magistrate Judge Baker initially granted Mr. Sabag's application. Dkt.
13. Mr. Windhorst and Track Group intervened, and Mr. Windhorst filed a
motion to vacate the order granting the application. Dkt. 24; dkt. 54. The
Magistrate Judge granted Mr. Windhorst's motion and denied Mr. Sabag's
application, finding that it did not meet § 1782's requirement that foreign or
international proceedings be "within reasonable contemplation." Dkt. 69 at 6,
9. Mr. Sabag objected, asking the district judge to reverse Judge Baker's
ruling. Dkt. 70.
Federal Rule of Civil Procedure 72 allows parties to object to a magistrate
judge's ruling or recommended disposition. See also 28 U.S.C. § 636(b). When
the objection is to a ruling on "a pretrial matter not dispositive of a party's
claim or defense," the district judge will "modify or set aside any part of the
order that is clearly erroneous or is contrary to law." Fed. R. Civ. P. 72(a). But
if the objection is to a dispositive order, the district judge's review is de novo.
Fed. R. Civ. P. 72(b).
Mr. Sabag argues that Magistrate Judge Baker's order ruled on the entire
§ 1782 proceeding, so it is a dispositive order that must be reviewed de novo.
Dkt. 77 at 5–7. Mr. Windhorst and Track Group argue that the issue is
ancillary rather than dispositive, so the review is whether the order is clearly
erroneous or contrary to law. Dkt. 74 at 2–3; dkt. 78 at 9–11.
Discovery issues are not dispositive, and "the district judge reviews
magistrate-judge discovery decisions for clear error." Domanus v. Lewicki, 742
F.3d 290, 295 (7th Cir. 2014). Section 1782 is a discovery statute; it allows
courts to order discovery in the district "for use in a proceeding in a foreign or
international tribunal, including criminal investigations conducted before
formal accusation." 28 U.S.C. § 1782(a); see Intel Corp. v. Advances Micro
Devices, Inc., 542 U.S. 241 (2004). However, unlike most discovery orders,
rulings on § 1782 discovery applications conclude the matter before the district
court. See Heraeus Kulzer, GmbH v. Biomet, Inc., 633 F.3d 591, 593 (7th Cir.
2011) ("Heraeus I"). Some district courts have therefore conducted a de novo
review. E.g., In re Application of LPKF Laser & Electronics AG, No. 14-cv-1616,
2015 WL 228063 at *2 (N.D. Ill. Jan. 14. 2015).
But "dispos[ing] of all issues in the proceeding," Kestrel Coal Pty. Ltd. v.
Joy Global, Inc., 362 F.3d 401, 403 (7th Cir. 2004), is not the same as
"dispositive" under Rule 72. "[I]t is the type of matter . . . that controls" the
Rule 72 classification. Ret. Chi. Police Ass'n v. City of Chicago, 76 F.3d 856,
869 (7th Cir. 1996). Section 1782 applications are merely a preliminary part of
"litigation on the merits [that] occurs in a foreign tribunal." Heraeus Kulzer,
GmbH v. Biomet, Inc., 881 F.3d 550, 560 (7th Cir. 2011) ("Heraeus II"). So they
"do not make any step toward final disposition of the merits of the case," id. at
563 (quoting Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949)),
and therefore are not dispositive under Rule 72, see Sims v. EGA Prods., Inc.,
475 F.3d 865, 869 (7th Cir. 2007) (addressing Rule 72 review based on whether
the order "concludes the merits").
This Court therefore reviews Magistrate Judge Baker's opinion under
Rule 72(a)'s "clearly erroneous or . . . contrary to law" standard. See In re
Application of Heraeus Kulzer, No. 3:09-cv-183 RM, 2009 WL 2058718 at *1
(N.D. Ind. July 9, 2009) (rev'd on other grounds); In re Hulley Enters. Ltd., 400
F.Supp.3d 62, 71 (S.D.N.Y. 2019) ("Most lower courts, however, have found
that [rulings on § 1782 applications] are not dispositive and are therefore
subject to review only for clear error.").
Under the relevant statute, a federal district court may order a person
residing or found in the district to give testimony or produce documents “for
use in a proceeding in a foreign or international tribunal, including criminal
investigations conducted before formal accusation." 28 U.S.C. § 1782. District
courts may grant applications under 28 U.S.C. § 1782 if several statutory
requirements are satisfied and the weighing of discretionary factors supports
the application. See Intel Corp., 542 U.S. at 256–66. For this objection, only
one statutory requirement is at issue—that the requested discovery be for use
in a foreign or international proceeding, 28 U.S.C. § 1782(a); see Certain Funds,
Accounts and/or Investment Vehicles v. KPMG, L.L.P., 798 F.3d 113, 117 (2d Cir
2015). The "proceeding" does not have to be "pending" or "imminent," but only
"within reasonable contemplation." Intel Corp., 542 U.S. at 259. Reasonable
contemplation requires "more than a subjective intent to undertake some legal
action"; the applicant "must provide some objective indicium that the action is
being contemplated." Certain Funds, 798 F.3d at 123.
In his objection, Mr. Sabag argues that the Magistrate Judge erred when
he vacated the previous order and denied Mr. Sabag's application. Dkt. 70 at
2. Specifically, Mr. Sabag contends that the Magistrate Judge erroneously
concluded that the Application "fell short of demonstrating that an actual
foreign criminal investigation or proceeding was within reasonable
contemplation at the time [Mr. Sabag] filed his application." Id.; see dkt. 71 at
11–16. Mr. Windhorst responds that Mr. Sabag's subjective intent to pursue
criminal action is not enough to show that proceedings are reasonably
contemplated. Dkt. 78 at 15. 1
To show that a foreign criminal action is "within reasonable
contemplation," Mr. Sabag relies on his own affidavit, dkt. 6-41, and the
affidavit of Peter Bibby, an attorney based in London, dkt. 6-1. See dkt. 71 at
25–33. In his affidavit, Mr. Sabag testified: "I intend to file criminal complaints
against Mr. Windhorst in the United Kingdom. The specific government
agencies to which I intend to direct my complaints (and the facts which
support my complaints) are described in my Application." Dkt. 6-41 at 1-2.
Mr. Bibby's 40-page affidavit summarizes Mr. Bibby's education and
experience, including that he is a partner in the white-collar defense practice of
a law firm in London and formerly worked as a department head in the
Enforcement Division of the Financial Services Authority, which had "criminal
powers to deal with financial impropriety." Dkt. 6-1 at 1. He further testifies
that he was "asked to advise Mr. Sabag in connection with the criminal
While Track Group did not previously address the merits of Mr. Sabag's application,
it argues that his objection should be overruled for "abuse of the Section 1782
process" "under the guise of a speculative, if not specious, criminal action which
hasn't even been initiated." Dkt. 74 at 9.
complaint that he intends to bring in the United Kingdom" and that the
"requested discovery is for evidence for use in Mr. Sabag's intended criminal
complaint in the UK" against Mr. Windhorst. Id. at 2.
Mr. Bibby's affidavit then sets forth relevant facts linking the evidence
that Mr. Sabag seeks to obtain through his § 1782 application to five potential
violations of UK criminal law that Mr. Sabag alleges that Mr. Windhorst
committed. Id. at 2–14. The affidavit explains that any discovery "would form
part of Mr. Sabag's report" to several law-enforcement agencies in the United
Kingdom. Id. at 16–23, 33. It also explains that an agency could decide to
prosecute Mr. Windhorst, or Mr. Sabag could pursue a private prosecution with
his own legal team. Id. at 33–34.
The evidence therefore shows that Mr. Sabag intends to bring criminal
complaints against Mr. Windhorst, dkt. 6-41 at 1–2, and has taken the specific
action of having Mr. Bibby—a lawyer with specialized experience about UK
financial crime—conduct factual investigation and legal analysis on his behalf,
dkt. 6-1. That is enough to show that a foreign or international proceeding is
reasonably contemplated. See Application of Consorcio Ecuatoriano de
Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 747 F.3d 1262, 1270
(11th Cir. 2014).
In Consorcio, the § 1782 applicant intended to bring a civil action in
Ecuador to recover damages from former employees. Id. at 1270–71. It
provided a "detailed explanation of its intent to pursue civil and possibly
subsequent criminal proceedings," which was enough to show that the
proceedings were in reasonable contemplation. Id. Similarly, in In re
Furstenberg Finance SAS, the Second Circuit held that a criminal proceeding
was reasonably contemplated when applicants and their counsel supported the
application with "well-documented assertions . . . outlining the basis of their
intended criminal complaint pending receipt of the evidence sought." 785 Fed.
App'x 882, 884–85 (2d Cir. 2019).
The same is true here. Mr. Sabag's application and supporting exhibits
are robust: Mr. Bibby's affidavit provides a detailed analysis of the contractual
agreements between Mr. Sabag, Track Group, and Mr. Windhorst. Dkt. 6-1 at
4–14. It then explains Mr. Sabag's allegations and identifies five specific
criminal offenses that he believes Mr. Windhorst committed. Id. at 14–23.
That affidavit's detailed legal analysis and Mr. Sabag's sworn statement that he
intends to pursue criminal charges are "objective indicium that the action is
being contemplated" and that criminal proceedings in the United Kingdom are
not "merely speculative" or "just a twinkle in counsel's eye." Certain Funds,
798 F.3d at 123–24. 2 And while Mr. Sabag had not yet brought a criminal
complaint in the UK when he filed the application, he was allowed to wait until
he had gathered evidence through § 1782 to bring the contemplated foreign
proceedings. See Consorcio, 747 F.3d at 1271.
As explained, Mr. Bibby's detailed analysis does more than "summarize[ ] the
procedural background" of investigations in the UK. Dkt. 78 at 22. Moreover, Mr.
Sabag needed to show only that the proceedings were in "reasonable contemplation"—
it is not this Court's role under § 1782 to address the merits of any foreign criminal
proceedings. See id. (citing Consorcio, 747 F.3d at 1268).
Mr. Windhorst relies on Certain Funds to argue that the proceedings are
not reasonably contemplated, but Mr. Sabag has provided substantially more
evidence than was provided there. In Certain Funds, the applicants "retained
counsel and were discussing the possibility of initiating litigation," but "had
done little to make an objective showing" despite having five years to do so.
798 F.3d at 124. Here, in contrast, Mr. Sabag has sworn that he intends to
pursue criminal action, obtained a detailed legal analysis of potential charges
from counsel in the United Kingdom, and filed this § 1782 action, all within
three years after the alleged criminal activity.
Similarly, Mr. Sabag's related action in the Indiana state courts does not
affect the "reasonable contemplation" analysis. Mr. Windhorst alleges that Mr.
Sabag "has unsuccessfully sought to pursue claims against Mr. Windhorst in
Marion Superior Court" instead of bringing criminal proceedings, but he has
not argued or shown that the proceedings are mutually exclusive. And as
explained above, Mr. Sabag has presented evidence that he has been pursuing
criminal charges within a reasonable amount of time. See Consorcio, 747 F.3d
Mr. Sabag's objection is therefore SUSTAINED. This case is returned to
Magistrate Judge Baker to consider the remaining requirements for § 1782
applications, including discretionary factors and, if necessary, potential limits
on the scope or use of discovery. See Mees v. Buiter, 793 F.3d 291, 302 (2d
Cir. 2015) (describing the discretionary factors and § 1782 discovery may be
limited "by applying the familiar standards of Rule 26 of the Federal Rules of
Civil Procedure"); cf. Victoria, LLC v. Likhtenfeld, 791 Fed. App'x 810, 816 (11th
Cir. 2019) (explaining limits on proceedings in which § 1782 discovery could be
Mr. Sabag's objection to Magistrate Judge Baker's order, dkt. 69, is
SUSTAINED, dkt. ; Mr. Sabag's application is returned to Magistrate Judge
Baker for further consideration. Mr. Sabag's motion for leave to file is
GRANTED to the extent that the Court considered his proposed reply brief,
dkt. 79-1. Dkt. .
CAPRIO LAW, P.A.
HOOVER HULL TURNER LLP
SIDLEY AUSTIN LLP
Sean Tyler Dewey
ICE MILLER LLP
Andrew W. Hull
HOOVER HULL TURNER LLP
Martin B. Jackson
SIDLEY AUSTIN LLP
KATZ KORIN CUNNINGHAM, P.C.
KATZ KORIN CUNNINGHAM, P.C.
Gaelle E. Tribie
SIDLEY AUSTIN LLP
ICE MILLER, LLP
Michael A. Wukmer
ICE MILLER LLP (Indianapolis)
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