Applicant ARIDA, LLC
Filing
65
OPINION AND ORDER re: 13 MOTION to Vacate Ex Parte Order: The motion to vacate is DENIED, but the applicants' subpoenas are modified, as set forth above. The Clerk is directed to terminate the motion. (Docket # 13.) (Signed by Judge P. Kevin Castel on 12/21/2020) (jwh)
Case 1:19-mc-00522-PKC Document 65 Filed 12/21/20 Page 1 of 25
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------x
IN RE APPLICATION OF ARIDA, LLC, EARL
MANAGEMENT LTD., FINERGOINVEST, LLC
and ALEXY GRACHEV
19-mc-522 (PKC)
OPINION AND ORDER
-----------------------------------------------------------x
CASTEL, U.S.D.J.
This Court granted an ex parte application of Arida, LLC (“Arida”), Earl
Management LTD (“Earl”), Finenergoinvest, LLC (“FEI”) and Alexey Grachev (collectively,
“Arida” or the “applicants”) to take discovery in aid of foreign proceedings in the Russian
Federation. 28 U.S.C. § 1782. Arida sought the issuance of subpoenas for documents and/or
testimony from Daniel Mishin, June Homes US, Inc., June NY, LLC and June NY 1, LLC
(collectively, the “movants”), among others. 1
The movants filed a motion to vacate the Order. (Docket # 13.) Extensive
briefing followed, through the filing of the movants’ sur-sur reply papers and supplemental
letter-briefs. Movants argue that Arida has not satisfied the mandatory criteria of section 1782
because the material sought is not “for use” in a foreign proceeding, and, separately, that the
Court should exercise its discretion to deny the application under the four factors set forth by
Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264-65 (2004).
For the reasons that will be explained, the Court finds that Arida has satisfied the
mandatory criteria of section 1782 and the discretionary criteria support the issuance of the
The application also sought discovery from Vladislav Mishin, Boris Korol and certain U.S.-based financial
institutions, none of whom have moved to vacate the Order.
1
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subpoenas, but that certain subpoenas are overbroad, intrusive and unduly burdensome. The
motion to vacate the Order will therefore be denied, but the subpoenas will be modified.
BACKGROUND.
The applicants are located in Russia and describe themselves as victims of a
“multimillion-dollar Ponzi scheme” orchestrated by Vladislav Mishin. The applicants have been
parties to proceedings in Russia against Vladislav Mishin and entities that he owned, including
civil lawsuits that resulted in the entry of default judgments in their favor and subsequent
creditor claims in bankruptcy proceedings. 2 The applicants’ creditor claims in Russian
bankruptcy proceedings remain pending. The applicants state that they are contemplating
bringing additional fraud-related claims in Russia. (Docket # 2 at 15.)
The applicants assert that Vladislav Mishin fraudulently solicited investors,
including the applicants, for the purpose of maintaining a Ponzi scheme. (See, e.g., Grachev
Dec. ¶¶ 6-15.) As described by Arida, in Russia, participants in auctions for large procurement
contracts are required to deposit funds as a precondition to submitting bids. (1st Navasardyan
Dec. ¶ 37.) Vladislav Mishin owned companies named Brio Invest and Microcredit Company
Brio Finance, LLC, which held themselves out to investors as intermediary financers of shortterm loans to contract bidders. (Id. ¶¶ 30-50.) Brio told investors that their payments would be
placed into auction participants’ accounts and released after the bidding period, during which
time investors would earn high interest with a low risk of loss. (Id. ¶¶ 42-44.)
Those proceedings are identified as Bankruptcy of Brio Finance, Case No. А40-141847/2019-184-156, Moscow
Commercial Court, Russia; Bankruptcy of Brio Invest, Case No. А40-161382/2019, Moscow Commercial Court,
Russia; Bankruptcy of Vladislav Mishin, Case No. А41-49412/2019, Moscow Commercial Court, Russia; Earl
Management LTD v. Brio Finance, Case No. А40-51699/19-182-452, Moscow Commercial Court, Russia; Arida v.
Brio Finance, Case No. 2-2630/19, Khoroshevsky District Court, Russia; Grachev v. Brio Invest, Case No. 021896/2019, Khoroshevsky District Court, Russia; Finenergoinvest, LLC v. Brio Finance, Case No. 2-2710/19,
Khoroshevsky District Court, Russia; and Russian Federation v. Vladislav Mishin, Moscow Regional Department of
the Ministry of Internal Affairs Criminal Case No. 119014225000156.
2
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According to Arida, Vladislav Mishin and the Brio entities accepted investors’
payments solely in order to pay interest on existing loans, and did not, in fact, provide financing
to auction participants. (Id. ¶¶ 45-47.) The applicants assert that they invested in Brio from
2016 through 2018 and were victims of the purported fraud. They assert that Vladislav Mishin
went into hiding over the New Year’s holidays of 2019, after having stolen approximately $6
million. (Docket # 2 at 8.)
The subpoenas sought in Arida’s application are directed to documents and
deposition testimony from Vladislav Mishin’s brother, Daniel, and from the June Homes entities
that Daniel purportedly owns. Arida asserts that discovery in the Russian proceedings produced
some evidence that Daniel Mishin has had a business relationship with Vladislav, including
apparent efforts to sell jointly-owned Russian properties at below-market prices. Based on
public information, Arida also asserts that Daniel Mishin is the founder of the New York-based
June Homes businesses. (Docket # 2 at 8-9.) June Homes appears to be in the business of
renting high-end, dorm-type rooms to young professionals in New York City. (Id.)
Arida relies on a declaration submitted by Arsen Navasardyan, who is an attorney
in Russia, and asserts upon information and belief that Daniel Mishin moved from Russia to the
United States in 2014 or 2015. (1st Navasardyan Dec. ¶ 51.) Navasardyan asserts that discovery
in the Russian proceedings shows “significant business ties” between Daniel and Vladislav
Mishin. (Id. ¶¶ 54-57.) He asserts that the brothers jointly owned three hostel companies in
Russia; that Daniel searched for a buyer or lessee of real property that was part of Vladislav’s
purported Ponzi scheme; and that Daniel communicated with Vladislav about the marketing of
June Homes to Russian investors. (Id. ¶¶ 54-57.) Navasardyan states that discovery is “expected
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to reveal” money transfers through the accounts of Daniel Mishin and June Homes in connection
with Vladislav Mishin. (Id. ¶ 59.)
Certain of Arida’s discovery requests are extremely broad. For example, they
seek “[a]ll banking records” of Daniel Mishin and the two June Homes entities, including
records of debit and credit card transactions on Daniel’s personal accounts. (Docket # 3-2 ¶¶ 14; # 3-4 ¶ 1; # 3-5 ¶ 1; # 3-6 ¶ 1.) They also seek the tax returns of Daniel Mishin and the June
Homes entities. (Docket # 3-2 ¶ 18; 3-4 ¶ 9; 3-5 ¶ 9; 3-6 ¶ 9.)
DISCUSSION.
I.
The Mandatory and Discretionary Factors of 28 U.S.C. § 1782.
A district court may, “upon the application of any interested person,” order a
person within its jurisdiction 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 . . . .” 28 U.S.C.
§ 1782(a). A section 1782 applicant must satisfy three mandatory factors by demonstrating that
“‘(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)
(quoting Brandi-Dohrn v. IKB Deutsche Industriebank AG, 673 F.3d 76, 80 (2d Cir.
2012)); accord In re Accent Delight Int’l Ltd., 869 F.3d 121, 128 (2d Cir. 2017).
If the applicant satisfies the mandatory factors, the district court then weighs four
discretionary factors listed in Intel, 542 U.S. at 264-65. “These are: (1) whether ‘the person from
whom discovery is sought is a participant in the foreign proceeding,’ in which case ‘the need for
§ 1782(a) aid generally is not as apparent’; (2) ‘the nature of the foreign tribunal, the character of
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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(a) 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.’” Mees, 793 F.3d at 298 (quoting Intel, 542 U.S. at 264-65).
The Court’s exercise of discretion “‘is not boundless,’” and must be guided by the
goals of “‘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.’” Mees, 793 F.3d at 297-98 (quoting Schmitz v. Bernstein Liebhard &
Lifshitz, LLP, 376 F.3d 79, 84 (2d Cir. 2004)).
II.
The Applicants Have Satisfied the Mandatory Factors of Section 1782.
A. Standard for Determining whether Materials Are “For Use” in a
Foreign Proceeding.
The only mandatory factor in dispute is whether the materials sought by Arida are
“for use” in a foreign proceeding. “The availability of Section 1782 discovery . . . is quite broad
and only has broadened through successive amendments over the years.” In re Accent Delight,
869 F.3d at 134. “[D]iscovery sought pursuant to § 1782 need not be necessary for the party to
prevail in the foreign proceeding in order to satisfy the statute’s ‘for use’ requirement. The plain
meaning of 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. An applicant satisfies the “for use”
requirements when the materials sought “are to be used at some stage of a foreign proceeding
that was within reasonable contemplation at the time of the proceedings below.” Id. at 301;
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accord In re Accent Delight, 869 F.3d at 132-33 (materials are “for use” if they “tend[ ] to prove”
the applicant’s fraud claim).
Applicants have a burden to demonstrate “that they are in a position to use the
evidence they seek through their § 1782 application” in the ongoing foreign proceeding. Certain
Funds, Accounts &/or Inv. Vehicles v. KPMG, L.L.P., 798 F.3d 113, 120 (2d Cir. 2015); see
also Euromepa, S.A. v. R. Esmerian, Inc., 154 F.3d 24, 29 (2d Cir. 1998) (materials cannot be for
use when “there [are] no foreign proceedings, within the meaning of the statute, in which the
discovery could be used.”). To be “for use,” an applicant need not demonstrate that the materials
sought are ultimately admissible or discoverable in the foreign proceeding. Brandi-Dohrn v.
IKB Deutsche Industriebank AG, 673 F.3d 76, 82 (2d Cir. 2012). “[T]he ultimate admissibility
of the evidence is determined by the foreign tribunal.” Id. “[R]equiring a district court to apply
the admissibility laws of the foreign jurisdiction would require interpretation and analysis of
foreign law and such ‘[c]omparisons of that order can be fraught with danger.’” Id. (quoting
Intel, 542 U.S. at 263). However, it “may be necessary” for courts to consider the relevance of
the materials sought “insofar as it is difficult to conceive how information that is plainly
irrelevant to the foreign proceeding could be said to be ‘for use’ in that proceeding.” Certain
Funds, 798 F.3d at 120 n.7.
Where materials are sought for use in a future proceeding, the applicant must
come forward with “an objective showing that the planned proceedings [are] within reasonable
contemplation.” Id. at 124. An applicant should “provide the legal theory supporting such a
proceeding,” “lay out either the content of his claims” or “a sufficiently concrete basis for”
liability, and “provide sufficiently reliable indications of the likelihood that proceedings will be
instituted within a reasonable time.” Mangouras v. Squire Patton Boggs, 980 F.3d 88, 101 (2d
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Cir. 2020) (quotation marks omitted). In weighing whether the planned proceedings are within
reasonable contemplation, “[c]ourts must guard against the specter that parties may use § 1782 to
investigate whether litigation is possible before launching it.” In re Sargeant, 278 F. Supp. 3d
814, 823 (S.D.N.Y. 2017) (Pauley, J.).
B. The Applicants Have Demonstrated that They Seek Discovery “For Use” in
the Pending Russian Bankruptcy Proceedings.
The movants urge that the applicants cannot demonstrate that the materials it
seeks are “for use” in a Russian proceeding because they have “fail[ed] to present a coherent
picture” of the Russian proceedings and how discovery would be used in them. (Docket # 14 at
7.) In response, the applicants urge that they are participants in pending legal proceedings and
have the practical ability to introduce evidence in those proceedings.
In deciding whether the discovery sought is for use in a foreign proceeding, courts
look to “(1) whether a foreign proceeding is adjudicative in nature; and (2) when there is actually
a foreign proceeding.” Euromepa, 154 F.3d at 27. In Euromepa, a French trial court entered a
judgment of approximately $10 million, after which the losing party filed a section 1782
application seeking discovery into the prevailing party’s ownership of the disputed property,
explaining that this discovery would be for use in its appeal of the trial court’s judgment. Id. at
25-26. By the time the Euromepa decision issued, the judgment had been affirmed on appeal,
and the remaining proceedings were limited to the enforcement of judgment in a French
bankruptcy proceeding and a potential motion to a French appellate court to reopen judgment.
Id. at 28.
The Second Circuit concluded that the French bankruptcy proceeding was not
adjudicative in nature because the disputed merits had already been adjudicated and were not to
be revisited. Id. (“Thus, in the French Bankruptcy Proceeding, nothing is being adjudicated; the
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already extant judgment is merely being enforced (to the extent permitted by the assets of the
bankruptcy estate).”) Id. As to the possible motion to reopen judgment, the applicants
themselves acknowledged that such a motion would turn on newly discovered evidence. Id. at
29. The Second Circuit concluded that this did not constitute evidence for use in and
adjudicative proceeding because “Section 1782 is designed to provide discovery in aid of foreign
litigation, not to provide discovery to justify the reopening of already completed foreign
litigation.” Id.
Subsequent to Euromepa, courts in this District have concluded that section 1782
relief may properly be granted to take discovery of assets in order to enforce an existing
judgment, provided that the applicant has adequately identified the proceeding and demonstrated
that the materials sought could be employed to some advantage in the proceeding. See, e.g., In
re Gorsoan Ltd., 435 F. Supp. 3d 589, 597-99 (S.D.N.Y. 2020) (Abrams, J.) (discovery was “for
use” when it went toward compliance with asset freeze and disclosure order in a Cyprus
proceeding); Union Fenosa Gas, S.A. v. Depository Tr. Co., 2020 WL 2793055, at *3-5
(S.D.N.Y. May 29, 2020) (English post-judgment attachment proceeding brought by judgment
creditor was adjudicatory in nature because the tribunal required an evidentiary showing from
the applicant) (Engelmayer, J.). Other decisions applying Euromepa have concluded that section
1782 relief should be denied where the applicant seeks asset discovery for the purpose of
collecting or enforcing judgment in a contemplated, yet-to-be commenced proceeding. See
Jiangsu Steamship Co. v. Success Superior Ltd., 2015 WL 3439220, at *4 (S.D.N.Y. Feb. 5,
2015) (McMahon, J.) (denying section 1782 discovery of assets where proceedings had not yet
commenced and applicant sought to “easily obtain advance security for such a judgment
(assuming that there is a foreign jurisdiction that, like the United States of America, has a pre-
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judgment attachment procedure) or enforce whatever judgment it might obtain in the as-yet-tobe-brought London arbitration.”); In re MT Baltic Soul Produktentankschiff-Ahrtsgesellschaft
mgH & Co. KG, 2015 WL 5824505, at *2 (S.D.N.Y. Oct. 6, 2015) (Swain, J.) (denying
application where petitioners had not commenced enforcement action after obtaining judgment).
Subsequent to Euromepa, the Second Circuit has affirmed the use of section 1782 for discovery
relevant to a foreign bankruptcy proceeding, where the materials may aid in the reconstruction of
financial records and identifying the debtors’ assets. In re Application of Gissin, 649 Fed. App’x
27, 28 (2d Cir. 2016) (“a foreign bankruptcy proceeding is within the intended scope of §
1782.”) (summary order; quotation marks omitted); see also Euromepa, 154 F.3d at 28 (“it is
clear that a bankruptcy proceeding may, in some instances, be an adjudicatory proceeding within
the meaning of the statute . . . .”).
Arida has identified several proceedings in Russia in which the applicants are
either a party or claim to have an interest in the outcome. The applicants have obtained a default
judgment against the movants in the following civil cases: ARIDA, LLC v. Brio Finance, et al.,
Case No. 2-2630/19, Grachev v. Brio Invest, et al., Case No. 02-1896/2019, and Finenergoinvest,
LLC v. Brio Finance, et al., Case No. 2-2710/19. (See, e.g., 3rd Navasardyan Dec. at p. 2 n.1.)
The applicants then filed creditor claims in the bankruptcy proceedings of the
Brio entities and Vladislav Mishin. On September 30, 2019, ARIDA filed a creditor claim in
Bankruptcy of Brio Finance, Case No. A40-141847/2019-184-156 (Moscow Commercial Court).
(1st Navasardyan Dec. ¶ 25 & Ex. 9.) On June 5, 2019, Alexey Grachev filed a petition for the
involuntary bankruptcy of Vladislav Mishin in the Commercial Court of Moscow, Bankruptcy of
Vladislav Mishin, Case No. A41-49412/2019 (Moscow Commercial Court). (1st Navasardyan
Dec. ¶ 27 & Ex. 13.) On July 1, 2019, Alexey Grachev filed a petition for involuntary
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bankruptcy against Brio Invest, Bankruptcy of Brio Invest, Case No. A40-161382/2019
(Moscow Commercial Court). (1st Navasardyan Dec. ¶ 28 & Ex. 14.) Grachev’s claim against
Brio Invest is listed in a registry of creditors’ claims in that proceeding. (Id. ¶ 28.) On February
1, 2020, Finenergoinvest filed a creditor application in Bankruptcy of Brio Finance, Case No.
A40-141847/2019-184-156 (Moscow Commercial Court). (2nd Navasardyan Dec. ¶ 11.)
Separately, the Moscow Commercial Court dismissed the complaint in a civil
proceeding brought by Earl Management, Earl Management LTD v. Brio Finance, Case No.
A40-51699/19-182-452. (2nd Navasardyan Dec. ¶ 12.) Earl Management appealed the
dismissal, and on June 10, 2020, its “cassation appeal was rejected” by the Arbitrazh Court of the
Moscow Circuit. (3d Nikitenko Dec. ¶ 6.)
A separate criminal case is being pursued by the Moscow Regional Department of
the Ministry of Internal Affairs, Russian Federation v. Vladislav Mishin, Case No.
119014225000156, and is in its investigative stage. (2nd Navasardyan Dec. ¶ 13.) Arida states
that Vladislav Mishin’s whereabouts remain unknown. (Id.)
Thus, applicants maintain that the discovery is sought “for use” in the three
Russian bankruptcy proceedings in which they are creditors, and a criminal investigation of
Vladislav Mishin.
Russian bankruptcy proceedings are administered by Russian commercial courts
known as “arbitrazh courts.” (1st Navasardyan Dec. ¶ 16 & n.6.) A creditor may initiate an
involuntary bankruptcy proceeding, and bankruptcy proceedings may take place if the debtor’s
whereabouts are unknown. (Id. ¶ 19.) The arbitrazh court appoints a trustee or manager to
administer the debtor’s estate, with the goal of maximizing the value of the debtor’s assets and
their distribution among the creditors. (Id. ¶ 20.)
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Arida has submitted declarations from the court-appointed bankruptcy managers
in the bankruptcy proceedings involving Vladislav Mishin, Brio Invest and Brio Finance.
(Docket # 52-1, 2, 3.) Each declarant states that they were appointed by the Moscow court
overseeing the underlying bankruptcy proceeding. (Egorin Dec. ¶ 3; Sytdykov Dec. ¶ 3;
Bikmetova Dec. ¶ 3.) Each states that he or she has access to all documents filed in their
respective case and that they “fully support” the applicants’ discovery request. (Egorin Dec. ¶ 6;
Sytdykov Dec. ¶ 6; Bikmetova Dec. ¶ 6.) Each similarly states that he or she has reviewed a
certified translation of the applicants’ subpoenas, and that the materials sought are relevant and
will be accepted in the bankruptcy proceeding. (Egorin Dec. ¶¶ 7-8; Sytdykov Dec. ¶¶ 7, 9;
Bikmetova Dec. ¶¶ 7-8.) In the case of the Brio Finance proceeding, the bankruptcy manager
states that Brio Finance is not participating in the proceeding and has provided no information or
documents concerning its property or assets. (Sytdykov Dec. ¶ 8.) The applicants also note that
under Article 41 of the Code of Arbitration Procedure of the Russian Federation, 3 participants in
a bankruptcy proceeding “are entitled . . . to present evidence and to access the evidence
presented by other persons participating in the case prior to the beginning of the judicial
proceeding . . . .” (2nd Navasardyan Dec. ¶ 18 & Ex. 5.)
The Court concludes that the applicants have adequately demonstrated that the
discovery they seek is “for use” in the bankruptcy proceedings of Vladislav Mishin, Brio Finance
and Brio Invest. The court-appointed bankruptcy managers all state that the information sought
is relevant and would be accepted in the proceedings. This is sufficient to demonstrate that the
discovery sought is “for use.” See, e.g., In re Noguer, 2019 WL 1034190, at *3 (S.D.N.Y. Mar.
5, 2019) (“the ‘for use’ requirement requires a Section 1782 applicant to show that the foreign
Under Russian law, the term “Arbitration” is used in reference to commercial courts, and not to the alternativedispute mechanisms associated with the term under U.S. law. (2nd Navasardyan Dec. ¶ 14 n.2.)
3
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tribunal at issue will ‘take and hear new evidence’ in at least some respect . . . .”) (Furman, J.)
(citing Euromepa, 154 F.3d at 29). Because the Court concludes that discovery would be “for
use” in the bankruptcy proceedings, it need not address the parties’ arguments concerning the
ongoing criminal investigation in Russia.
C. Arida Has Demonstrated that Discovery of the Movants Is Not “Plainly
Irrelevant.”
The movants also assert that the materials are not “for use” because Arida has
failed to demonstrate that they have materials or information relevant to the Russian proceedings.
Movants note that the conduct of June Homes is not at issue in the Russian proceedings, and that
the categories of information sought by Arida are not limited to the improper transfer of funds by
Vladislav Mishin or the Brio entities. (Docket # 36 at 4.) As noted, it “may be necessary” for
courts to weigh relevance as part of the “for use” analysis if the information sought is “plainly
irrelevant” to the foreign proceeding. Certain Funds, 798 F.3d at 120 n.7.
Arida has made some showing that Daniel Mishin may possess relevant
information or materials about Vladislav Mishin and the Brio entities, based on the following emails:
•
An e-mail from Daniel Mishin to Vladislav Mishin is dated November 27, 2018,
with the subject line, “the list of Russians with whom I spoke when I was
raising.” (1st Navasardyan Dec. Ex. 18.) The body of the e-mail states, “Here is
the list of Russians with whom I spoke when I was raising,” followed by a series
of redacted names. (Id.)
•
A second e-mail from Daniel Mishin is also dated November 27, 2018, and was
sent to Vladislav Mishin and a person named Stanislav, with the subject line,
“Cherepnanovykh drive, 1875 sq.m.” (1st Navasardyan Dec. Ex. 19.) It states in
relevant part, “Hello, Stanislav, Thank you for your interest in this. As I told you
over the phone this property was given to us . . . . We are considering either
selling it quickly with a good discount, or leasing it as a long-term rent for a
dormitory. I will be grateful if you return to me on this and introduce me to
someone who may be interested, copied in this message in [sic] my brother
Vladislav who owns Brio Finance.” (Id.)
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•
In a third e-mail of November 27, 2018, Daniel Mishin introduces his brother
Vladislav to a person named Elena and identifies Vladislav as the founder of Brio
Finance. (1st Navasardyan Dec. Ex. 20.) It says in part, “Vlad, Elena is helping
to bring investments to the company and we discussed joint investment in
Residenz, Elena has a great network and it is very positive and nice to work with
her. Please forward info on opportunity.” (Id.)
•
In an e-mail of December 10, 2018, Daniel Mishin writes to Vladislav Mishin and
a recipient whose name is redacted, with the subject line, “Hostel, 1 minute from
Likhobory metro station.” (1st Navasardyan Dec. Ex. 21.) The e-mail greets the
redacted recipient and states in part: “As I told you over the phone as repayment
of a debt we were given a building at below market price located within 1 minute
from Likhobory metro station, it is ideal for a hostel or dormitory. . . . Its market
value is about 90 million, we are giving it away for 70 million +/- if it is
purchased or for a long-term lease for a steady tenant for an adequate price. . . .
If I were in Russia, I would start a hostel there myself, but for my brother (copied
in this message) it is not a core business, that is why we are looking for a right
partner for lease or sale.” (Id.)
These communications indicate that, in late 2018, Daniel Mishin worked with
Vladislav to sell Russian real-estate holdings at what were purported to be below-market prices.
The e-mails are some evidence that Daniel and Vladislav Mishin had business dealings together
in 2018, as demonstrated by Daniel’s e-mail to “Stanislav” referring a property as being “given
to us” and the second e-mail stating that “we were given a building” “as repayment of a debt . . .
.” (emphasis added.) It further appears that Daniel Mishin facilitated introductions to his brother
for prospective business relationships, and that he coordinated with him to identify prospective
investors for some type of business.
Further, while June Homes is not referenced in these communications, its
business of renting dormitory-type rooms appears similar to Daniel Mishin’s dealings with his
brother, which included the proposed sale or lease of a building in Russia for dormitory-type
facilities.
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These communications indicate that the movants may be in possession of
evidence concerning the transfer and location of assets belonging Vladislav Mishin and the Brio
entities. Any such information would be relevant to the administration of the bankruptcy
proceedings and identifying property in the debtors’ estates. Arida has therefore adequately
demonstrated that discovery of Daniel Mishin and June Homes would not be “plainly irrelevant”
to the Russian proceedings.
D. The Movants’ “Fishing Expedition” Argument Is without Merit.
The movants also urge that Arida does not actually seek discovery for use in the
Russian proceedings, and will instead use any evidence obtained through the subpoenas to
commence new proceedings against Daniel Mishin and June Homes.
In its application, Arida states that, in addition to seeking discovery for use in the
Russian proceedings, “the evidence is also sought for use in contemplated actions in Russia and
other foreign jurisdictions for fraud, civil money laundering, conversion and other claims by
Applicants against Vlad Mishin and Brio and their employees and co-conspirators.” (Docket # 2
at 15.) Based on Arida’s statements about contemplated litigation, the movants characterize the
application as “subterfuge,” “bad faith” and “abuse.” (Docket # 14 at 14.) The movants also
point to comments purportedly made by Vasily Sidorov, the sole shareholder of Arida and a
“prominent businessman in Moscow” who, at a birthday party, expressed a desire to pursue
litigation against June Homes in the United States, and separately sent social media messages to
Daniel Mishin that accused him of collaborating with his brother. (Docket # 20-22.)
In considering both the mandatory and discretionary factors, courts have denied
section 1782 applications when the discovery sought is a “fishing expedition” for anticipated use
in “nonexistent, purely hypothetical proceedings . . . .” In re Harbour Victoria Inv. Holdings Ltd.
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Section 1782 Petitions, 2015 WL 4040420, at *8 (S.D.N.Y. June 29, 2015) (Nathan, J.); see also
In re Certain Funds, Accounts, &/or Inv. Vehicles Managed by Affiliates of Fortress Inv. Grp.
LLC, 2014 WL 3404955, at *6 (S.D.N.Y. July 9, 2014) (denying application where the
applicants had not commenced foreign proceedings and appeared to seek materials in order to
“investigate whether litigation is possible in the first place, putting the cart before the horse.”)
(Buchwald, J.); In re Sargeant, 278 F. Supp. 3d at 823 (denying application as premature where
no foreign proceedings were underway and the application was “bereft of even the broadest
contours of what the possible proceeding(s) . . . may entail . . . .”).
If there is an identifiable and avoidable risk that evidence sought in a section 1782
application may be used for improper purposes, a district court may enter a protective order to
limit its use. Accent Delight, 869 F.3d at 135 (“Section 1782 does not prevent an applicant who
lawfully has obtained discovery under the statute with respect to one foreign proceeding from
using the discovery elsewhere unless the district court orders otherwise.”). Here, the movants do
not seek a protective order, and instead seem to assert that no protective order would be
sufficient to safeguard their privacy interests. (See, e.g., Docket # 14 at 18; Docket # 36 at 9
(“no confidentiality order from this Court would suitably protect June Homes’s confidential
information.”).) 4
The Court concludes that the movants have not demonstrated that the application
is a bad-faith “fishing expedition.” The applicants obtained favorable judgments in civil
proceedings against the movants and currently have creditor claims pending in the Moscow
4
The movants also state: “There is a significant risk that this commercially sensitive and private personal
information will be disclosed to the public because the Russian justice system lacks procedures to protect the
confidentiality of sensitive information. Russian courts, for example, do not employ protective orders. . . . In
addition, a protective order would be insufficient to prevent prejudice to June Homes in defending domestic
litigation.” (Docket # 14 at 18.)
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bankruptcy proceedings. This distinguishes their circumstances from those where applicants
failed to demonstrate that litigation was within reasonable contemplation or could be useful in a
pending proceeding.
The Court concludes that the movants’ assertion that Arida’s application is
brought in bad faith as part of a fishing expedition does not weigh against the application, on
either the mandatory or discretionary factors.
III.
Arida Has Satisfied the Discretionary Factors of Section 1782, but Its
Requests Will Be Modified.
A. The Movants Are Not Participants in the Russian Proceedings.
The first Intel factor considers “whether ‘the person from whom discovery is
sought is a participant in the foreign proceeding,’ in which case ‘the need for § 1782(a) aid
generally is not as apparent’ . . . .” Mees, 793 F.3d at 298 (quoting Intel, 542 U.S. at 264).
David Mishin and June Homes are not participants in the Russian proceedings.
This factor weighs in favor of Arida.
B. The Nature and Character of the Russian Proceedings.
The second Intel factor considers “‘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’ . . . .” Mees, 793 F.3d at 298 (quoting
Intel, 542 U.S. at 264).
The movants urge that Russian courts would not be receptive to the categories of
evidence that the applicants seek, and that the applicants are attempting to circumvent Russia’s
discovery limitations. These arguments are more appropriately considered on the third
discretionary factor, and do not go toward the character of the proceedings or Russia’s
receptivity to discovery procured in the United States. The consensus view among U.S. courts is
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that Russian tribunals are generally receptive to discovery obtained through section 1782. See,
e.g., Deposit Ins. Agency v. Leontiev, 2018 WL 3536083, at *4 (S.D.N.Y. July 23, 2018)
(“Indeed, courts have continued to enforce subpoenas pursuant to § 1782 intended for use in
Russian courts.”) (Netburn, M.J.) (collecting cases). Moreover, as noted, the court-appointed
bankruptcy managers in the Russian bankruptcy proceedings have submitted declarations in
support of the application.
The factor weighs in favor of Arida.
C. Whether the Request Circumvents Russian Discovery Restrictions.
The third Intel factor weighs “(3) ‘whether the § 1782(a) request conceals an
attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country
or the United States’ . . . .” Mees, 793 F.3d at 298 (quoting Intel, 542 U.S. at 264-65).
In reviewing this factor, “there is a difference between a § 1782(a) request that
seeks documents that cannot be obtained in a foreign proceeding because the foreign jurisdiction
does not provide a mechanism for such discovery, and one that seeks documents that cannot be
obtained because the foreign jurisdiction prohibits the discovery of those documents.” In re
Accent Delight Int’l Ltd., 791 F. App’x 247, 251 (2d Cir. 2019) (summary order; emphasis in
original). The factor weighs against the application only if permitting discovery would violate
“the clearly established procedures of a foreign tribunal,” as set forth in “authoritative proof . . .
as embodied in a forum country’s judicial, executive or legislative declarations that specifically
address the use of evidence gathered under foreign procedures . . . .” Euromepa S.A. v. R.
Esmerian, Inc., 51 F.3d 1095, 1099-1100 (2d Cir. 1995) (Euromepa I) (emphasis in original;
quotation marks omitted). The Second Circuit has observed that “[f]ew if any foreign
jurisdictions permit the scope of discovery available in [U.S.] courts,” and that “‘[i]f district
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courts were free to refuse discovery based upon its unavailability in a foreign court . . . § 1782
would be irrelevant to much international litigation, frustrating its underlying purposes.” Mees,
793 F.3d at 302 (quoting Metallgesellschaft AG v. Hodapp, 121 F.3d 77, 80 (2d Cir. 1997)).
The movants have not identified authoritative statements from a Russian authority
that Arida’s requests are prohibited under Russian law. The third Intel factor therefore weighs in
favor of Arida.
1. Bank Secrecy Laws.
The movants have submitted three declarations from Denis Yurievich Nikitenko,
an attorney who has practiced law in the Russian Federation since 2002. (Docket # 15, 39, 57.)
Nikitenko states that Russian statutes require banks to guarantee the secrecy of accounts and
client information, and that such information is inaccessible based on the requests of private
litigants. (1st Nikitenko Dec. ¶¶ 15-19.) However, Russian litigants may obtain such records in
discovery if they obtain the approval of a Russian judge. (Id. ¶ 18.)
In opposition, Arida has submitted a supplemental declaration of Navasardyan.
(Docket # 25.) He states that Russian bank secrecy laws apply only to financial institutions
located in Russia and that the present application is directed to persons and institutions located in
the United States. (2nd Navasardyan Dec. ¶¶ 51-58.)
The movants’ reply papers do not revisit the issue of Russia’s bank secrecy laws.
Moreover, the movants do not identify which specific aspects of Arida’s subpoenas run afoul of
Russia’s laws governing bank secrecy, nor do they point to any definitive statement from
Russian authorities that bank secrecy laws would forbid Arida’s application.
Russia’s bank secrecy laws therefore do not weigh against Arida’s application.
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2. The Familial Privilege Codified in Article 51 of the Russian Constitution Is
not an Impediment to the Section 1782 Application.
Much of the parties’ submissions go toward a provision of the Russian
constitution that establishes a safeguard against compelling a person to testify against one’s
family members. Article 51 of the Russian constitution states: “No one shall be obligated to
testify against oneself, one’s spouse and close relatives the circle of which is determined by
federal law.” (Kleymenov Dec. ¶ 31.) There appears to be no dispute that this privilege would
generally apply to certain testimony about one’s siblings.
The parties have submitted numerous expert declarations about the boundaries
and applicability of Article 51, including whether Daniel Mishin may make a “blanket”
invocation of its protections and whether the privilege applies to documents. The movants rely
on a declaration from Anatoly Kleymenov, a Russian lawyer with a Ph.D in jurisprudence, as
well as the declaration of Nikitenko. (Docket # 15, 43.) According to the movants, Article 51
shields Daniel Mishin from Arida’s subpoenas, and permitting discovery under section 1782
would violate the safeguards established by the Russian constitution. Arida relies on
declarations from William Partlett, an associate professor of comparative constitutional law at
the University of Melbourne in Australia, and from Navasardyan. (Docket # 24, 25.) Arida
advances a very different understanding of Article 51, urging that the privilege has been
construed “narrowly” by Russian courts, and does not provide for “blanket immunity” or extend
to documents or business records. (Partlett Dec. ¶¶ 17-29.)
A section 1782 application should not become “a battle-by-affidavit of
international legal experts” and result in a “superficial” ruling on foreign law. Euromepa I, 51
F.3d at 1099. The drafters of section 1782 “‘definitely did not want to have a request for
cooperation turn into an unduly expensive and time-consuming fight about foreign law. That
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would be quite contrary to what they sought to be achieved.’” Id. (quoting Hans Smit, Recent
Developments in International Litigation,35 S. Tex. L. J. 215, 235 (1994)). A section 1782
application circumvents foreign proof-gathering restrictions only when it would violate “the
clearly established procedures of a foreign tribunal,” as set forth in “authoritative proof . . . as
embodied in a forum country’s judicial, executive or legislative declarations that specifically
address the use of evidence gathered under foreign procedures.” Euromepa I, 51 F.3d at 10991100 (emphasis in original; quotation marks omitted); see also id. at 1100 n. 3 (citing example of
such a statement issued by the House of Lords in the United Kingdom).
“Absent this type of clear directive, however, a district court’s ruling should be
informed by section 1782’s overarching interest in ‘providing equitable and efficacious
procedures for the benefit of tribunals and litigants involved in litigation with international
aspects.’” Id. at 1100 (quoting S. Rep. No. 1580, 88th Cong., 2d Sess. (1964), reprinted in 1964
U.S.C.C.A.N. 3782, 3783). The Second Circuit explained:
Provided that a district court reasonably attempts to accommodate
the evidence-gathering practices of other nations, it need not err on
the side of completely withholding discovery assistance from
international litigants. After all, a foreign tribunal’s corrective
response to a well-intentioned but unwelcome grant of discovery
could bar the evidence gathered in the given case, and it could also
constitute the kind of authoritative declaration mentioned earlier that
would provide helpful instruction to American courts in handling
future cases. Since section 1782 contemplates international
cooperation, and such cooperation presupposes an on-going
dialogue between the adjudicative bodies of the world community,
such a result would be far from undesirable.
Id. at 1101 (internal citation omitted).
The Second Circuit has warned about the perils of deciding issues of privilege
when the authorities cited by the parties are “far from clear.” In re Application for an Order
Permitting Metallgesellschaft AG to take Discovery, 121 F.3d 77, 79 (2d Cir. 1997). “[A]
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district court should not refrain from granting the assistance afforded under the Act based simply
on allegations” that the materials sought fall within a privilege. Id. at 80. If a request appears to
be contrary to a foreign jurisdiction’s privilege laws, a district court should exercise its discretion
to tailor the requests accordingly, rather than deny the application outright. Id.; see also Mees,
793 F.3d at 303 (foreign restrictions may be a “useful tool” to the district court’s exercise of
discretion in tailoring discovery).
The parties’ expert submissions seek to have this Court rule on the protections of
Article 51 based on the summaries and short excerpts of Russian judicial decisions and not
authoritative proof or official statements. Euromepa I, 51 F.3d at 1099-1100. One authority
cited by the movants apparently relates to questioning from authorities at the scene of a traffic
accident. (Kleymenov Dec. Ex. 12.) Another references protections of “samples of human
biological tissues” and “data connected with their traumatic changes.” (Id. Ex. 17.) The Partlett
Declaration quotes sentence fragments of decisions in Russian regional courts, with footnoted
citations in the Cyrillic alphabet. (See, e.g., Partlett Dec. ¶¶ 24-26.)
This is the sort of exercise that the Second Circuit warned against in Euromepa I.
Neither party has directed the Court to a “clear directive” from a Russian governmental authority
about the application of familial privilege, and particularly its application in foreign discovery
proceedings. The Court is limited in its ability to tailor any requests around the privilege
because movants urge that they are entitled to a blanket shield against Arida’s requests. But “a
district court should not refrain” from granting a section 1782 application “based simply on
allegations” that materials are privileged. Metallgesellschaft, 121 F.3d at 79. The movants’
broad and absolute reliance on the privilege constrains the Court’s ability to tailor the privilege
to Arida’s requests.
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The movants have failed to cite a “clear directive” from a Russian authority as to
the application of Article 51, or to tailor the privilege’s application in a way that provides the
Court with a “useful tool” to exercising its discretion. See generally Mees, 793 F.3d at 303. The
Court concludes that the privilege does not weigh against the Court’s exercise of discretion in
granting Arida’s application.
3. Bankruptcy Discovery Limitations.
The movants assert that under Russian bankruptcy law, a neutral receiver must
approve and initiate non-party discovery, and that creditors like Arida are unable to seek
discovery without judicial intervention. (1st Nikitenko Dec. ¶¶ 28-33.) Arida states that it seeks
discovery for use in bankruptcy proceedings, including to identify improper transfers of property
and to locate undisclosed assets. (2nd Navasardyan Dec. ¶ 34.) It urges that Russian bankruptcy
law does not preclude creditors from seeking discovery. (Docket # 23 at 16.) Further, as has
been discussed, the court-appointed bankruptcy managers in the Russian proceedings have
submitted declarations stating that they would accept the information sought by Arida.
The Court concludes that the existence of any restrictions against creditors
initiating discovery in Russian bankruptcy proceedings does not weigh against the Court’s
exercise of discretion to grant Arida’s section 1782 application.
4. The Use of U.S. Deposition Testimony in Russian Proceedings.
The movants assert that Russian law does not allow for witnesses to be subject to
out-of-court questioning, and that witness testimony in Russia is provided under judicial
supervision. (Nikitenko Dec. ¶¶ 34-36; Third Nikitenko Dec. ¶ 23.) In response, Arida agrees
that in Russia, oral questioning of witnesses is conducted at a hearing in open court, but asserts
that Russian courts are receptive to deposition testimony taken in the United States, and that
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Russia does not restrict the taking of depositions in the United States. (Docket # 23 at 17; 2nd
Navasardyan Dec. ¶¶ 100-05.)
As Arida points out, courts have concluded that the absence of a deposition-type
procedure in Russia does not mean that Russian tribunals would reject evidence obtained in U.S.
depositions. See Deposit Ins. Agency, 2018 WL 3536083, at *9 (“Absent definitive proof that
the Russian courts would reject the discovery materials obtained from this proceeding . . . the
Court must assume that the Russian courts would accept that evidence.”); In re Imanagement
Servs., Ltd., 2005 WL 1959702, at *4 (E.D.N.Y. Aug. 16, 2005) (“There is no indication, let
alone any authoritative proof, that the Russian court would reject as evidence any documents
gathered with the aid of the witnesses’ deposition testimony, nor that it would reject such
testimony if offered in support of a request . . . for a Russian court order for the production of
particular documents or other evidence.”) (Block, J.).
Again, the movants have at most demonstrated that United States law provides for
a discovery mechanism not available in Russia, as opposed to an authoritative statement that
Russia would reject evidence obtained through deposition testimony. See, e.g., In re Accent
Delight, 791 Fed. App’x at 251. That Russia does not have a procedure for taking deposition
testimony does not weigh against the Court’s exercise of discretion to grant Arida’s section 1782
application.
D. The Subpoenas Will Be Modified.
The fourth Intel factor weighs “whether the request is ‘unduly intrusive or
burdensome.’” Mees, 793 F.3d at 298 (quoting Intel, 542 U.S. at 264-65). “[A] district court
evaluating a § 1782 discovery request should assess whether the discovery sought is overbroad
or unduly burdensome by applying the familiar standards of Rule 26 of the Federal Rules of
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Civil Procedure.” Id. at 302. The text of Rule 26(b)(1) provides that “[p]arties may obtain
discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and
proportional to the needs of the case . . . .” “[T]o the extent a district court finds that a discovery
request is overbroad, before denying the application it should ordinarily consider whether that
defect could be cured through a limited grant of discovery.” Mees, 793 F.3d at 302.
The subpoenas seek the financial, banking and business records of Daniel Mishin
and June Homes, as well as communications and business records relating to Vladislav Mishin,
the Brio entities, and certain Russian businesses identified as the “Relevant Entities.” 5 Certain of
the document subpoenas are unduly broad, intrusive and burdensome, such as the request for
“[a]ll banking records” of Daniel Mishin, including all credit and debit card activity on his
personal accounts. Each of the subpoenas is modified to exclude from its scope any transaction,
transfer, payment, charge, obligation, debit, credit or loan with any person or entity which, in any
thirty-day period, totaled less than $5,000. Excepted from this modification is the applicants’
subpoena requesting materials related to monetary transactions with June Homes exceeding
$10,000. Each of the subpoenas is also modified to exclude tax returns of any person or entity.
CONCLUSION.
The motion to vacate is DENIED, but the applicants’ subpoenas are modified, as
set forth above. The Clerk is directed to terminate the motion. (Docket # 13.)
The “Relevant Entities” are 26 Russian businesses who are identified in the Cyrillic alphabet with their
accompanying “Russian company identification numbers.” They are described as legal entities in which Vladislav
Mishin has some sort of ownership or beneficial interest. (See, e.g., Docket # 3-2, Definition 3.)
5
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SO ORDERED.
Dated: New York, New York
December 21, 2020
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