Sargeant

Filing 4

OPINION & ORDER re: 2 MISCELLANEOUS CASE INITIATING DOCUMENT - MOTION for Discovery Ex Parte Application for an Order Under 28 U.S.C. § 1782 to Issue a Subpoena for the Production of Documents for Use in a Foreign Proceeding: Harr y Sargeant III ("Sargeant") brings this application ex parte under 28 U.S.C. § 1782 for an order granting him leave to serve a subpoena on Burford Capital, LLC ("Burford") to produce documents for use in a Panamanian attachm ent proceeding. In addition, Sargeant claims that the requested discovery will inform him of his rights with respect to a pending lawsuit in the United Kingdom that he contemplates joining, as well as his rights with respect to potential lawsuits in the United Kingdom and the Isle of Man that he contemplates initiating. While Sargeant apparently seeks to serve multiple subpoenas, he attaches only one to his application. Accordingly, this Court treats this proceeding as addressed solely to the attached subpoena. For the foregoing reasons, Sargeant's application is denied. The Clerk of Court is directed to mark this miscellaneous case as closed. (Signed by Judge William H. Pauley, III on 10/10/2017) (jwh)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

IN RE APPLICATION OF
HARRY SARGEANT, III
TO ISSUE A SUBPOENA FOR THE
TAKING OF DISCOVERY FOR USE IN
A FOREIGN PROCEEDING

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17mc374
OPINION & ORDER

WILLIAM H. PAULEY III, District Judge:
Harry Sargeant III (“Sargeant”) brings this application ex parte1 under 28 U.S.C.
§ 1782 for an order granting him leave to serve a subpoena on Burford Capital, LLC (“Burford”)
to produce documents for use in a Panamanian attachment proceeding. In addition, Sargeant
claims that the requested discovery will inform him of his rights with respect to a pending
lawsuit in the United Kingdom that he contemplates joining, as well as his rights with respect to
potential lawsuits in the United Kingdom and the Isle of Man that he contemplates initiating.
While Sargeant apparently seeks to serve multiple subpoenas, he attaches only one to his
application. Accordingly, this Court treats this proceeding as addressed solely to the attached
subpoena. For the reasons that follow, Sargeant’s application is denied.
BACKGROUND
I.

Facts Underlying the Panamanian and London Proceedings
Latin America Investments, Ltd. (“LAIL”) is an Isle of Man company that

operates oil shipping platforms. (Ex Parte Application for an Order under 28 U.S.C. § 1782 To

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It is “neither uncommon nor improper for district courts to grant applications made pursuant to § 1782 ex
parte.” Gushlak v. Gushlak, 486 F. App’x 215, 217 (2d Cir. 2012).

Issue a Subpoena for the Production of Documents for Use in a Foreign Proceeding, ECF No. 2
(“Section 1782 Application”), ¶ 3.) It was 25% owned by Sargeant and 75% owned by his two
brothers and father during the events described below. (Section 1782 Application ¶ 3.) In
relevant part, LAIL and the Panamanian Defendants—Maroil Trading Inc. (“Maroil”), Sea
Pioneer Shipping Corporation (“Sea Pioneer”), and Wilmer Ruperti—entered into “joint
shipping contracts” with PDVSA Petroleo, S.A (“PDVSA”), a Venezuelan company. (Section
1782 Application ¶ 5.)
Disputes arose “with PDVSA over the shipping contracts” and PDVSA’s “failure
to nominate or perform the minimum number of shipments required under contracts of
affreightment.” (Section 1782 Application ¶ 6.) In December 2014, PDVSA and the
Panamanian Defendants purportedly held settlement talks to resolve those disputes. (Section
1782 Application ¶ 9.) On January 30, 2015, PDVSA paid $30 million to Commerzbank
Aktiengesellschaft, an assignee of some of the shipping contracts. (Section 1782 Application
¶ 10.) Commerzbank subsequently paid $10 million of that sum to the Panamanian Defendants,
allegedly in settlement of LAIL’s claims. (Section 1782 Application ¶ 10.) As part of the
settlement, PDVSA also paid $167 million to Maroil and another $62 million to a separate
company controlled by Ruperti, who had purportedly assigned some of LAIL’s claims against
PDVSA to that entity. (Section 1782 Application ¶ 11.) By these actions, Sargeant claims that
the Panamanian Defendants fraudulently concealed and misappropriated at least $177 million in
settlement proceeds. (Section 1782 Application ¶ 12.)
The twist in this yarn is that Ruperti had repeatedly asserted to LAIL that
settlement with PDVSA was not possible because of his pending litigation with Novoship (UK)
Ltd. and outstanding judgments against him in connection with the Novoship lawsuits. (Section

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1782 Application ¶ 14.) The Novoship actions concerned losses sustained by Novoship arising
from ship chartering bribery engineered by Ruperti and others between 2002 and 2005. (Section
1782 Application, Exs. 5-6.) LAIL only learned of the settlement between the Panamanian
Defendants and PDVSA after LAIL exchanged documents with Burford, Novoship’s litigation
funder. (Section 1782 Application ¶ 17.)
II.

The Proceedings
In March 2017, LAIL sued Maroil and Sea Pioneer in the United Kingdom to

recover the funds that were allegedly misappropriated and fraudulently concealed by the
Panamanian Defendants. (See Section 1782 Application, Ex. 4.) Importantly, at the time LAIL
commenced the London proceeding, Sargeant had already agreed to surrender his 25% stake in
LAIL as part of a separation agreement with his father and two brothers, the 75% shareholders.
(Section 1782 Application ¶ 19.)
In July 2017, Sargeant commenced a proceeding in Panama against the
Panamanian Defendants to attach up to $50,000 of the Panamanian Defendants’ assets, given his
status as a 25% owner of LAIL at the time the fraud was perpetrated. (See Section 1782
Application, Ex. 2.) According to Sargeant, as Novoship’s litigation funder, Burford “has access
to much of the discovery obtained from or relating to Ruperti and the other Panamanian
Defendants in the Novoship Actions.” (Section 1782 Application ¶ 22.) Sargeant seeks to use
this discovery to assist his prosecution of the Panamanian attachment proceeding and to assess
whether he should join the pending London proceeding or initiate additional proceedings of his
own in the United Kingdom or the Isle of Man.

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LEGAL STANDARD
A discovery application under 28 U.S.C. § 1782 “presents two inquiries: first,
whether the district court is authorized to grant the request; and second, if so, whether the district
court should exercise its discretion to do so.” In re Application of Grupo Qumma, 2005 WL
937486, at *1 (S.D.N.Y. Apr. 22, 2005). “A district court has authority to grant a § 1782
application where: (1) the person from whom discovery is sought resides (or is found) in the
district of the district court to which the application is made, (2) the discovery is for use in a
foreign proceeding before a foreign [or international] tribunal, and (3) the application is made by
a foreign or international tribunal or any interested person.” Mees v. Buiter, 793 F.3d 291, 297
(2d Cir. 2015) (internal quotations omitted).
Once the statutory prerequisites are met, the Court must then decide whether to
exercise its discretion to grant the application “in light of the twin aims of the statute: providing
efficient means of assistance to participants in international litigation in our federal courts and
encouraging foreign countries by example to provide similar means of assistance to our courts.”
Schmitz v. Bernstein Liebhard & Lifshitz, LLP, 376 F.3d 79, 84 (2d Cir. 2004). The Supreme
Court has enumerated four factors that bear consideration: (1) whether “the person from whom
discovery is sought is a participant in the foreign proceeding,” in which case, “the need for
§ 1782(a) is generally not as apparent”; (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 § 1782 request
“conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a
foreign country or the United States”; and (4) whether the request is “unduly intrusive or
burdensome.” Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264-65 (2004).

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DISCUSSION
Sargeant seeks to obtain “documents relevant to the Panamanian Defendants, the
PDVSA Settlement, and LAIL’s role and interaction with the Panamanian Defendants and
knowledge of the PDVSA Settlement” from Burford for use in the Panamanian proceeding, the
London proceeding, and potential proceedings in the United Kingdom or the Isle of Man that he
contemplates initiating. (Section 1782 Application at 8-9.) Because Sargeant has not satisfied
the statutory prerequisites as to any of these pending or potential proceedings, his application is
denied, and this Court need not proceed to an analysis of the Intel factors.
I.

Panamanian Proceeding
Turning to the first statutory prerequisite, Sargeant’s failure to demonstrate that

Burford “resides” or “is found” in the Southern District of New York sinks his application. As a
threshold matter, Section 1782 does not define what it means for an entity to reside or be found
in a district. Hans Smit, a leading academic commentator and drafter of § 1782, has commented
that the language “defining [§ 1782’s] in personam reach must . . . be given a liberal construction
commensurate with” the purpose “to liberalize the assistance given to foreign and international
tribunals.” Hans Smit, “American Assistance to Litigation in Foreign and International
Tribunals: Section 1782 of Title 28 of the U.S.C. Revisited,” 25 Syracuse J. Int’l L. & Com. 1, 9
(1998). According to Professor Smit, a discovery target “should be regarded as ‘resident’” if
“the relationship of the person addressed to the district is such as to warrant the exercise of in
personam authority under the due process clause.” Smit, 25 Syracuse J. Int’l L. & Com. at 10
(“Insofar as the term [‘found’] applies to legal rather than natural persons, it may safely be
regarded as referring to judicial precedents that equate systematic and continuous local activities
with presence.”).

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It is unclear whether § 1782’s statutory prerequisite that a person or entity reside
or be found in a district is coextensive with whether a court has personal jurisdiction over that
person or entity.2 At minimum, however, compelling an entity to provide discovery under
§ 1782 must comport with constitutional due process. Cf. Australia & New Zealand Banking
Grp. Ltd. v. APR Energy Holding Ltd., 2017 WL 3841874, at *4 (S.D.N.Y. Sept. 1, 2017)
(analogizing to Second Circuit precedent requiring that a court have personal jurisdiction to
order a non-party to comply with a discovery request under Rule 45); accord Smit, 25 Syracuse
J. Int’l L. & Com. at 9-10 (couching the “resides or is found” requirement in constitutional due
process language). Due process constrains the exercise of general personal jurisdiction over
“foreign (sister-state or foreign country) corporations to hear any and all claims against them
when their affiliations with the State are so ‘continuous and systematic’ as to render them
essentially at home in the forum State.”3 BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549, 1558 (2017)
(quoting Daimler AG v. Bauman, 134 S. Ct. 746, 761 (2014)) (quotation marks omitted). While
“[t]he ‘paradigm’ forums in which a corporate defendant is ‘at home’ . . . are the corporation’s
place of incorporation and its principal place of business,” in “an ‘exceptional case,’ a corporate
defendant’s operations in another forum ‘may be so substantial and of such a nature as to render
the corporation at home in that State.’” BNSF Ry. Co., 137 S. Ct. at 1558.
In a pre-Daimler decision interpreting § 1782’s “resides or is found” requirement,
the Second Circuit expressed its view that “the Supreme Court authorized the exercise of

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To lawfully exercise personal jurisdiction: “First, the plaintiff’s service of process upon the defendant must
have been procedurally proper. Second, there must be a statutory basis for personal jurisdiction that renders such
service of process effective . . . . Third, the exercise of personal jurisdiction must comport with constitutional due
process principles.” Waldman v. Palestinian Liberation Org., 835 F.3d 317, 327 (2d Cir. 2016) (quotation marks
omitted).
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There is no discernable reason why the Supreme Court’s recent jurisprudence on this issue should not also
apply to other types of corporate entities. Indeed, Daimler itself analyzed whether Mercedes-Benz USA, a limited
liability company, was subject to general jurisdiction in California.

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personal jurisdiction based on nothing more than physical presence.” In re Edelman, 295 F.3d
171, 179 (2d Cir. 2002) (citing Burnham v. Superior Court of Cal., 495 U.S. 604 (1990)
(plurality opinion)). The Edelman court reasoned that because this “so-called tag jurisdiction is
consistent with due process,” the statute—“which is simply a discovery mechanism and does not
subject a person to liability”—did not require more. In re Edelman, 295 F.3d at 179. Thus, it
concluded that the phrase “or is found” in § 1782 should be “endow[ed] . . . with the same
breadth as that accorded” it in Burnham. In re Edelman, 295 F.3d at 179. But Edelman does not
control the outcome here because Burnham’s holding applied only to individuals, not corporate
entities. Accord Wenche Siemer v. Learjet Acquisition Corp., 966 F.2d 179, 182 (5th Cir. 1992)
(explaining that Burnham “did not decide any jurisdictional issue pertaining to corporations”).
Moreover, if a business entity could be subject to personal jurisdiction anywhere
it maintains a physical presence—i.e., an office—then Daimler’s holding would be rendered
meaningless. See Daimler, 134 S. Ct. at 761 n.18 (observing that cases that “upheld the exercise
of general jurisdiction based on the presence of a local office, which signaled that the corporation
was ‘doing business’ in the forum,” were “decided in the era dominated by Pennoyer’s territorial
thinking . . . [and] should not attract heavy reliance today”); cf. Brown v. Lockheed Martin
Corp., 814 F.3d 619, 629 (2d Cir. 2016) (explaining that Daimler “considerably altered the
analytical landscape for general jurisdiction and left little room for arguments” that “contacts of
substance, deliberately undertaken and of some duration, could place a corporation ‘at home’ in
many locations”). Thus, to “reside” or be “found” in a district for purposes of § 1782, a
corporate entity must at the very least be subject to the court’s general jurisdiction under
Daimler.
Here, Sargeant alleges that Burford conducts business in New York, New York.

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(Section 1782 Application at 9.) At most, the papers supporting the application indicate that
Burford, a foreign limited liability company, maintains one of its “primary business offices” at
292 Madison Avenue, New York, NY 10017. (Section 1782 Application, Ex. 3.) On the current
record before this Court, Sargeant has not established the first statutory prerequisite. Burford is
clearly not incorporated or formed under the laws of New York, and the mere fact that it
maintains an office in New York City—even a “primary” office, whatever that may mean—from
which it conducts business does not establish that its principal place of business is its midtown
Manhattan location. Nor is the bare allegation that Burford conducts business in New York
sufficient to establish that its operations in that office are “so substantial and of such a nature” as
to render Burford at home in New York. See Gucci Am., Inc. v. Li, 768 F.3d 122, 135-36 (2d
Cir. 2014) (concluding that the mere fact that a bank conducted business through branch offices
in New York was insufficient to satisfy constitutional due process); see also Daimler AG, 134 S.
Ct. at 762 n.20 (“General jurisdiction . . . calls for an appraisal of a corporation’s activities in
their entirety, nationwide and worldwide. A corporation that operates in many places can
scarcely be deemed at home in all of them.”).
While Sargeant’s failure to satisfy the first statutory prerequisite dooms his
application, this Court nevertheless addresses the second and third prerequisites under § 1782 in
the event that Sargeant is able to show that Burford resides or may be found in the Southern
District of New York. Under the second statutory prerequisite, the discovery must be “for use”
in a foreign proceeding before a foreign or international tribunal. The Panamanian judicial
proceeding undoubtedly qualifies as a foreign proceeding, and Sargeant has argued that the
discovery he seeks will be used to “piec[e] together the sequence of Ruperti’s fraud” and to

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“trac[e] Ruperti’s assets to aid in the attachment proceeding.” (Section 1782 Application ¶ 23.)4
As for the third statutory prerequisite, Sargeant—the plaintiff in the Panamanian proceeding—is
certainly an interested person within the meaning of the statute. Intel Corp., 542 U.S. at 256
(“No doubt litigants are included among, and may be the most common example of, the
‘interested person[s]’ who may invoke § 1782 . . . .”).
II.

London Proceeding
Although Sargeant’s failure to satisfy the first statutory prerequisite that Burford

resides or is found in the Southern District of New York is fatal to his application, this Court
proceeds to the other statutory requirements in an excess of caution. As an initial matter, the
London proceeding that is pending in the London Commercial Court is also a foreign
proceeding. However, Sargeant fails to show that the requested discovery is “for use” in that
proceeding or that he is an “interested person” with respect to that proceeding.
The phrase “‘for use in a proceeding’ indicates something that will be employed
with some advantage or serve some use in the proceeding—not necessarily something without
which the applicant could not prevail.” Mees, 793 F.3d at 298. Thus, an applicant can use
§ 1782 to “seek discovery of any materials that can be made use of in the foreign proceeding to
increase [the] chances of success.” In re Grynberg, 223 F. Supp. 3d 197, 200-01 (S.D.N.Y.
2017). But this requirement focuses on the “practical ability of an applicant to place a beneficial

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The application elsewhere seeks “non-privileged documents related to Ruperti and the Panamanian
Defendants and Novoship’s role in the PDVSA Settlement” in Burford’s custody or control. (Section 1782
Application at 11.) However, Sargeant has not shown that the Novoship lawsuits, which concern ship chartering
bribery orchestrated by Ruperti and Russian businessmen between 2002 and 2005 (see Section 1782 Application,
Exs. 5-6), are remotely relevant to the conduct underlying the Panamanian proceeding—the alleged concealment
and misappropriation of proceeds arising from a settlement of an affreightment dispute among PDVSA, LAIL, and
the Panamanian Defendants. (See Section 1782 Application ¶ 6.) Given the facial irrelevance of the merits
underlying the Novoship actions, it is unlikely that they can be “for use” in the Panamanian proceeding. KPMG,
798 F.3d at 120 n.7 (“[I]t is difficult to conceive how information that is plainly irrelevant to the foreign proceeding
could be said to be ‘for use’ in that proceeding.”).

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document—or the information it contains—before a foreign tribunal.” In re Accent Delight Int’l
Ltd., 869 F.3d 121, 131 (2d Cir. 2017) (emphasis in original). Indeed, as the Second Circuit has
recently reaffirmed, an applicant must be in a “position to have the [tribunal] consider that
evidence” or have some “means of injecting the evidence into the proceeding” to “use” the
evidence. In re Accent Delight Int’l Ltd., 869 F.3d at 131 (emphasis and alteration in original)
(citation and quotation marks omitted). Even if discovery is “useful” to an applicant, “that does
not imply that there is any way for [the applicant] to introduce that information as evidence” in a
foreign proceeding. See Certain Funds, Accounts, and/or Inv. Vehicles v. KPMG, L.L.P., 798
F.3d 113, 122 (2d Cir. 2015). Here, Sargeant fails to show that he has any procedural right or
mechanism to inject the requested evidence in the London proceeding, given that he is not a
party to that proceeding. Nor does Sargeant own a controlling stake—much less any stake—in
LAIL that would allow him to direct the use or consideration of such evidence.
Section 1782 does not limit an “interested person” to a litigant or someone
holding a formal party status in litigation. This requirement “considerabl[y] overlaps” with the
“for use in a proceeding” requirement. KPMG, 798 F.3d at 118. Without some “mechanism by
which [an applicant] could use any information obtained through a [Section 1782] order” in the
foreign proceeding, the applicant cannot have the “participation rights” sufficient to satisfy the
“interested person” prong. KPMG, 798 F.3d at 121. The fact that Sargeant may have a financial
interest in the outcome of that litigation is also insufficient “to confer ‘interested person’ status
under the statute.” KPMG, 798 F.3d at 119 (listing examples of “[v]arious entities [that] may
have a financial stake in litigation to which they have no direct connection,” including
“[s]hareholders in a company facing a products liability suit [that] are likely to have a financial
interest in the outcome of that suit”). Moreover, the mere fact that Sargeant is able “simply to

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pass on information” to LAIL does not alone confer “interested person” status. KPMG, 798 F.3d
at 120. Finally, an “established right to provide evidence and have the party consider it . . . or a
recognized relationship, such as that of an agent and principal” may be sufficient to make an
“otherwise stranger to the proceeding an ‘interested person.’” KPMG, 798 F.3d at 120
(emphasis in original). However, Sargeant has not shown any such right to direct LAIL’s
consideration of this evidence or any recognized relationship between LAIL and him that would
permit him to do so.
III.

Contemplated Proceedings
Sargeant contends that “depending on the documents disclosed in this application,

Applicant may have causes of action in Isle of Man or separately in the United Kingdom.”
(Section 1782 Application, at 1.) But Sargeant’s application as to these inchoate proceedings
should also be denied because § 1782 aid is premature.
At the outset, the Supreme Court has rejected the view “that § 1782 comes into
play only when adjudicative proceedings are ‘pending’ or ‘imminent.’” Intel Corp., 542 U.S. at
259. Instead, § 1782 requires only that the proceeding be “within reasonable contemplation.”
Intel Corp., 542 U.S. at 259 (citing Hans Smit, “International Litigation Under the United States
Code,” 65 Colum. L. Rev. 1015, 1026 (“It is not necessary . . . for the [adjudicative] proceeding
to be pending at the time the evidence is sought, but only that the evidence is eventually to be
used in such a proceeding.”)).
Nonetheless, the potential proceedings that Sargeant may (or may not) bring
depending on what the discovery reveals are not “within reasonable contemplation.” See
KPMG, 798 F.3d 113, 123 (2d Cir. 2015) (emphasis in original). Indeed, the Section 1782
Application is bereft of even the broadest contours of what the possible proceeding(s) in the

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United Kingdom or the Isle of Man may entail—they are entirely embryonic. The “applicant
must have more than a subjective intent to undertake some legal action, and instead must provide
some objective indicium that the action is being contemplated.” KPMG, 798 F.3d at 123. The
assertion that Sargeant plans to use the evidence he seeks to assess whether to initiate actions in
the United Kingdom and the Isle of Man underscores the “mere[] speculative[ness]” of the
contemplated proceedings, and is plainly insufficient to provide this Court with “some concrete
basis from which it can determine that the contemplated proceeding is more than just a twinkle in
counsel’s eye.” KPMG, 798 F.3d at 124. Courts must guard against the specter that parties may
use § 1782 to investigate whether litigation is possible before launching it. In re Certain Funds,
Accounts, and/or Inv. Vehicles Managed by Affiliates of Fortress Inv. Grp. LLC, 2014 WL
3404955, at *6 (S.D.N.Y. July 9, 2014). This is exactly what Sargeant seeks to do here. Accord
In re Request for Assistance for Ministry of Legal Affairs of Trinidad & Tobago, 848 F.2d 1151,
1156 (11th Cir. 1998), abrogated on other grounds by Intel Corp., 542 U.S. 241 (2004) (“If the
judge doubts that a proceeding is forthcoming, or suspects that the request is a ‘fishing
expedition,’ the district court should deny the request.”).
Finally, while this Court does not reach consideration of the Intel factors, Rule
26(b) circumscribes the scope of discovery to that which is “proportional to the needs of the
case.” Fed. R. Civ. P. 26(b)(1). This Court observes that the sweeping discovery requests
here—which require Burford to, inter alia, produce the entire record in the Novoship lawsuits—
would likely not be proportional to the needs of the Panamanian attachment proceeding, a
dispute involving no more than $50,000. In any event, no court could intelligently cabin the
scope of this subpoena on the gossamer record in support of Sargeant’s application.

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CONCLUSION
For the foregoing reasons, Sargeant’s application is denied. The Clerk of Court is
directed to mark this miscellaneous case as closed.
Dated: October 10, 2017
New York, New York

SO ORDERED:

_______________________________
WILLIAM H. PAULEY III
U.S.D.J.

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