Al-Attabi v. JPMorgan Chase Bank, N.A. et al
Filing
34
DECISION AND ORDER: MOTION TO QUASH denying 18 Motion to Quash. For the foregoing reasons, Bank Audi's motion to quash is DENIED; the alternative request for relief is GRANTED; and the Correspondent Banks need not respond to Request No. 4, which is deemed stricken. SO ORDERED. (Signed by Magistrate Judge Robert W. Lehrburger on 1/26/2022) (mml)
Case 1:21-mc-00207-VSB-RWL Document 34 Filed 01/26/22 Page 1 of 21
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------X
In re Application of
:
:
MAJED AMIR AL-ATTABI,
:
:
For an order pursuant to 28 U.S.C. § 1782 to :
take discovery for use in foreign proceedings :
pending in the Republic of Lebanon.
:
:
---------------------------------------------------------------X
1/26/2022
21-MC-207 (VSB) (RWL)
DECISION AND ORDER:
MOTION TO QUASH
ROBERT W. LEHRBURGER, United States Magistrate Judge.
Petitioner Majed Amir Al-Attabi (“Petitioner”), moving ex parte, obtained an order
granting issuance of subpoenas to four U.S. banks to obtain discovery for a legal action
in Lebanon. Bank Audi S.A.L. (“Bank Audi”), the respondent in the Lebanese proceeding,
now moves to quash the subpoenas on the basis that Petitioner has not satisfied the
statutory requirements to obtain a subpoena for use in foreign proceedings pursuant to
28 U.S.C. § 1782 and because discretionary factors favor quashing the subpoenas. In
the alternative, Bank Audi requests that the subpoenas be modified to eliminate one of
the document categories requested. For the reasons set forth below, Bank Audi’s motion
to quash is DENIED and its request to modify is GRANTED.
Legal Standard
In order to place the facts and proceedings in context, the Court first sets out the
basic legal principles governing applications to obtain discovery for use in foreign actions
pursuant to 28 U.S.C. § 1782. In ruling on such an application, “a district court must first
consider the statutory requirements and then use its discretion in balancing a number of
factors.” Brandi-Dohrn v. IKB Deutsche Industriebank AG, 673 F.3d 76, 80 (2d Cir. 2012).
Accordingly, the court must consider both statutory and discretionary elements.
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There are three statutory requirements for granting an application pursuant to
§ 1782. Granting a request is authorized when: “(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 tribunal, and
(3) the application is made by a foreign or international tribunal or any interested person.”
Id.; see also Mangouras v. Squire Patton Boggs, 980 F.3d 88, 97 (2d Cir. 2020) (stating
same requirements). All three statutory factors must be met in order for a district court to
have the authority to grant a § 1782 request.
If an application satisfies the statutory factors, a court must exercise its discretion,
guided by the “twin aims of the statute,” namely “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) (quotation marks and
citations omitted); accord Brandi-Dohrn, 673 F.3d at 81. “[C]ourts have wide discretion
to determine whether to grant discovery, and can tailor any requested discovery ‘to avoid
attendant problems.’” In re Postalis, No. 18-MC-497, 2018 WL 6725406, at *2 (S.D.N.Y.
Dec. 20, 2018) (quoting Application of Esses, 101 F.3d 873, 876 (2d Cir. 1996)). To aid
the court in determining whether to exercise its discretion to grant discovery pursuant to
Section 1782, the Supreme Court has prescribed four factors to consider. See Intel Corp.
v. Advanced Micro Devices, Inc., 542 U.S. 241, 264-65, 124 S. Ct. 2466, 2483-84 (2004).
The four “Intel factors” are: (1) whether the person from whom discovery is sought
is a participant in the foreign proceeding, in which event the need for § 1782(a) aid
generally is not as apparent as it ordinarily is when evidence is sought from a
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nonparticipant in the matter arising abroad; (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 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. Kiobel by Samkalden v. Cravath, Swaine &
Moore LLP, 895 F.3d 238, 244 (2d Cir. 2018) (citing Intel, 542 U.S. at 264–65, 124 S. Ct.
2483-84). If a Section 1782 petition satisfies both the statutory requirements and the
discretionary Intel factors, a district court may grant the petition.
The burden of establishing entitlement to discovery pursuant to Section 1782 falls
on the applicant. See In re Gorsoan Limited, 843 F. App’x 352, 354 (2d Cir. 2021) (party
seeking to invoke § 1782 must show the three statutory factors are met); In re Postalis,
2018 WL 6725406, at *3 (applicant must show the basic statutory requirements).
Factual And Procedural Background 1
A.
The Lebanese Action
Petitioner, a Saudi national, deposited $4,050,000 with Bank Audi, a Lebanese
The background is drawn from the parties’ submissions. For Bank Audi, those include
the Memorandum Of Law In Support of its motion (Dkt. 19) (“Audi Mem.”); the Reply
Memorandum Of Law In Support of its motion (Dkt. 30) (“Reply Mem.”); the Declaration
of Linda C. Goldstein dated Oct. 12, 2021 (Dkt. 20) (“Goldstein Decl.”); the Declaration of
Chakib Cortbaoui dated Oct. 11, 2021 (Dkt. 21) (“Cortbaoui Decl.”); the Declaration of
Chakib Cortbaoui dated Dec. 21, 2021 (Dkt. 31) (“Second Corbaoui Decl.”); the
Declaration of Ghaleb Ghanem dated Oct. 11, 2021 (Dkt. 22) (“Ghanem Decl.”); and the
Declaration of Ghaleb Ghanem dated Dec. 22, 2021 (Dkt. 32) (“Second Ghanem Decl.”).
Al-Attabi’s submissions include his Memorandum Or Law In Opposition (Dkt. 29) (“Opp.
Mem.”); the Declaration of James P. Bonner dated Feb. 26, 2021 (Dkt. 4) (“Bonner Decl.”);
the Declaration of Aref El-Aref dated Feb. 26, 2021 (Dkt. 5) (“El-Aref Decl.”); the
Declaration of Aref El-Aref dated Nov. 15, 2021 (Dkt. 28) (“Second El-Aref Decl.”); and
1
3
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bank. When Petitioner provided instructions to Bank Audi to transfer all funds, plus
interest, to his account at a bank in the United Arab Emirates (“UAE”), Bank Audi refused.
Bank Audi does not deny that it owes Petitioner the funds at issue. Rather, Bank Audi
objects to transferring those funds outside of Lebanon.
In 2019 Lebanon fell into a financial crisis precipitated by its default on over a billion
dollars of Eurobonds. The crisis has affected Lebanese banks’ access to U.S. dollars in
Lebanon. In response, Petitioner alleges, Lebanese banks have implemented unlawful
capital control measures at the direction of a private bank association, the Association of
Banks on Lebanon (the “ABL”). One of those measures is a directive that Lebanese
banks not transfer U.S. dollars out of Lebanon. 2 According to Petitioner, that directive is
both unlawful and discriminatorily applied as Lebanese banks have permitted certain
clients, such as bank executives and politically connected depositors, to transfer their
U.S. funds outside of Lebanon.
On September 4, 2020, Petitioner commenced an action against Bank Audi in
Lebanese court for an order requiring Bank Audi to transfer his funds as directed (the
“Lebanese Action”). Petitioner states two claims in the Lebanese Action. The first claim
asserts that, under Lebanese law, Bank Audi is required to transfer Petitioner’s funds to
his account in the UAE. The second claim asserts that transfer is required by certain
treaties between Lebanon and the Kingdom of Saudi Arabia. In response, Bank Audi has
the Declaration of Abdo Jhamil Ghossoub dated Nov. 12, 2021 (Dkt. 28-1) (“Ghossoub
Decl.”). The Court also draws upon the prior proceedings in this action.
The directive purportedly issued by the ABL does not apply to U.S. dollars received from
outside Lebanon since October 17, 2019, or what Petitioner refers to as “fresh” U.S.
dollars. (El-Aref Decl. ¶ 19.) The parties’ dispute does not appear to implicate fresh U.S.
dollars.
2
4
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asserted three defenses. The first posits that Bank Audi has the discretion to transfer the
funds overseas but is not required to do so by Lebanese law. The second asserts that
the ongoing financial crisis in Lebanon constitutes a force majeure, relieving Bank Audi
of any obligation to transfer funds overseas. The third defense asserts that the treaties
cited by Petitioner cannot be enforced by individuals but rather only by signatory states.
Petitioner also filed a separate ex parte proceeding in the Lebanese Court of
Judicial Enforcement to obtain pre-judgment attachment of Bank Audi shares of
ownership in various Lebanese companies (the “Attachment Proceeding”). In response,
Bank Audi submitted, for attachment, a check drawn from Bank Audi’s U.S. dollar
currency holdings at Lebanon’s Central Bank for the full amount of the amount owed to
Petitioner. The check, however, is payable only in Lebanon. Petitioner has challenged
the sufficiency of the check in the Attachment Proceeding.
B.
The U.S. Discovery Sought
In support of his case in the Lebanese Action and the Attachment Proceeding,
Petitioner seeks discovery from four U.S. banks that are not parties to the Lebanese
Action or Attachment Proceeding. The four banks are J.P. Morgan Chase Bank, N.A.,
The Bank Of New York Mellon Corporation, Citibank, N.A., and Standard Chartered Bank
(the “Correspondent Banks”). Each of the Correspondent Banks has purportedly received
wire transfers from Bank Audi on behalf of Bank Audi customers.
Petitioner believes that discovery from the Correspondent Banks is likely to yield
evidence that is relevant to Bank Audi’s defenses in the Lebanese Action and its inability
or refusal to transfer Petitioner’s funds out of Lebanon.
Specifically, the discovery
Petitioner seeks is aimed at determining whether Bank Audi transferred U.S. dollars for
5
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itself or for customers to accounts outside of Lebanon and whether Bank Audi has
sufficient U.S. dollars that would allow it to transfer the full amount owed to Petitioner’s
UAE account.
Petitioner also seeks communications between Bank Audi and the
Correspondent Banks about the subpoenas and the application Petitioner made to obtain
them.
C.
The Instant Proceeding
Petitioner filed his ex parte application for the subpoenas on February 26, 2021. 3
On September 3, 2021, Judge Broderick issued an Opinion and Order granting
Petitioner’s application. (Dkt. 10.) The Court found that Petitioner satisfied the three
statutory requirements to obtain discovery pursuant to 28 U.S.C. § 1782. First, the
Correspondent Banks are “found” in this District as they or their parent corporations have
headquarters here. Second, the discovery sought is “for use” in the Lebanese Action
because Petitioner, as a party to the foreign proceeding, “seeks to introduce evidence
showing that Bank Audi has sufficient liquidity to pay Petitioner’s claims against it” and
also intends to use the discovery in the Attachment Proceeding. 4 (Dkt. 10 at 4.) Third,
Petitioner is an interested person with respect to the Lebanese Action.
Judge Broderick also found that all four of the Intel factors favored granting the
application. Addressing the first factor, he noted that none of the Correspondent Banks
“It is neither uncommon nor improper for district courts to grant applications made
pursuant to § 1782 ex parte. The respondent’s due process rights are not violated
because he can later challenge any discovery request by moving to quash pursuant to
Federal Rule of Civil Procedure 45(c)(3).” Gushlak v. Gushlak, 486 Fed. App’x 215, 217
(2d Cir. 2012) (citing cases).
3
The Court acknowledged that the Attachment Proceeding alone likely would not suffice
to satisfy the use element because it is not “adjudicative” in nature. (Dkt. 10 at 4.)
4
6
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are parties to the Lebanese Action. With respect to the second factor, the Court observed
that “there is no indication that a Lebanese court would be unreceptive to federal-court
judicial assistance.” (Dkt. 10 at 5.) “To the contrary,” the Court explained, “Petitioner
submits a declaration from a Lebanese litigator stating that Articles 139 and 140 of the
Lebanese Code Of Civil Procedure provide for the admissibility of evidence obtained in
accordance with the law of other jurisdictions.” (Dkt. 10 at 5.) For the same reason, the
Court found that that third factor supports the application and that Petitioner “does not
seek to circumvent the rules and procedures of the Lebanese tribunal.” (Dkt. 10 at 5.)
Additionally, the Court noted that although Lebanon has a secrecy law guarding certain
bank records, the law does not apply to the Correspondent Banks. As to the fourth factor,
the Court found that the subpoenas’ requests for documents are narrowly tailored and not
unduly burdensome or intrusive.
On October 12, 2021, Bank Audi moved to quash the subpoenas. The motion was
fully briefed as of December 23, 2021, and was referred to me for decision and order on
a non-dispositive motion.
The Issues In Dispute
The issues in dispute on this motion are discrete. Bank Audi does not dispute
either that the subpoenaed banks are found in this district, thus satisfying the first
statutory element for obtaining discovery pursuant to 28 U.S.C. § 1782, or that the
application is made by Petitioner as an “interested person,” thus satisfying the third
requirement. 5 (See Audi Mem. at 8-9.)
Although Bank Audi does not contest the “interested party” requirement, the Court notes
that “there is considerable overlap” between that factor and the “for use” factor. Certain
Funds, Accounts And/Or Investment Vehicles v. KPMG, L.L.P., 798 F.3d 113, 118 (2d
5
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Instead, Bank Audi argues that the second element – “for use in a foreign
proceeding” – is not satisfied for two separate reasons. First, contrary to what Petitioner
presented in his application, the discovery he seeks cannot be used in the Lebanese
Action because the Lebanese court has not requested that evidence. Bank Audi bases
its argument on the declaration of a former Lebanese judge, Ghaleb Ghanem, and his
interpretation and explanation of the Lebanese Code of Civil Procedure. In response,
Petitioner presents the declaration from a Lebanese professor, Abdo Jhamil Ghossoub,
who gives his interpretation and explanation of the same authority.
Second, Bank Audi asserts that the discovery sought cannot be used in the
Lebanese Action because it is irrelevant to the issues in dispute there. According to
Bank Audi, the entire basis for Petitioner’s application was to test Bank Audi’s
anticipated “illiquidity” defense that it did not have sufficient access to U.S. dollars. But,
Bank Audi explains, it is not asserting an illiquidity defense, as demonstrated by its
having provided a check in the full amount in the Attachment Proceeding. Petitioner
responds that the discovery sought is relevant regardless of whether Bank Audi asserts
an illiquidity defense because the Correspondent Banks’ records will show whether
Bank Audi can transfer, and has transferred, U.S. dollars outside Lebanon for its
customers. If so, such evidence potentially would undermine Bank Audi’s force majeure
defense.
Similar to its focus on only one of the statutory factors, Bank Audi does not
advance any argument that either the first or fourth Intel factors weigh against granting
Cir. 2015) (analyzing the Supreme Court’s Intel decision). That is because a person
arguably does not qualify as “interested” if they do not have the “ability” to use the
discovery material in the foreign proceeding. Id.
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the requested discovery. Rather, Bank Audi trains its sights on the second and third
factors, arguing that Lebanese Courts will not be receptive to the requested evidence
and that Petitioner is circumventing Lebanese law by not having sought and obtained
permission from the Lebanese Action court to pursue the discovery. Additionally, Bank
Audi contends that Petitioner and his counsel misled the Court in two respects: first, by
failing to apprise the Court that Bank Audi did not assert the anticipated illiquidity
defense in the Lebanese Action, and, second, by mischaracterizing Lebanese law
regarding evidence obtained in foreign jurisdictions. 6 As with the second statutory
factor, the parties’ arguments about the second and third discretionary factor mostly rest
on dueling interpretations and explanations of Lebanese law by Lebanese legal experts
and practitioners.
Discussion
A.
Petitioner Satisfies The “For Use” Statutory Requirement
As noted, the pivotal dispute is whether the discovery sought by Petitioner meets
Section 1782’s “for use” in a foreign proceeding requirement. The Court concludes, as
did Judge Broderick, that it does.
1. Procedural Mechanism For Using The Discovery
The “for use” inquiry focuses “on the practical ability of an applicant to place a
beneficial document – or the information it contains – before a foreign tribunal.” In re
Accent Delight International Ltd., 869 F.3d 121, 131 (2d Cir. 2017) (emphasis in
original). “[T]he term ‘for use’ in Section 1782 has only its ordinary meaning – that the
As explained below, the Court does not agree that Petitioner or his counsel misled the
Court.
6
9
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requested discovery is ‘something that will be employed with some advantage or serve
some use in the proceeding.’” Id. at 132. (quoting Mees v. Buiter, 793 F.3d 291, 298
(2d Cir. 2015)). Petitioner, as a party to the Lebanese Action, seeks to do exactly that
with the discovery it obtains from the Correspondent Banks (assuming, of course, that
the information proves helpful to Petitioner). That is, Petitioner will place beneficial
material obtained through the subpoenas before the Lebanese Court for its
consideration.
According to Bank Audi, however, Petitioner cannot possibly use the discovery
in the Lebanese Action because Lebanese law does not authorize obtaining discovery
absent a request from the Lebanese court. Petitioner has not presented any evidence
of a Lebanese court request to that effect or any indication that Petitioner has even
applied for such an order. As support for its argument, Bank Audi invokes Lebanese
law and civil procedure, particularly Articles 139 and 140 of the Lebanese Code Of Civil
Procedure. To make its point, however, Bank Audi relies on two declarations (both
opening and reply) from former Lebanese judge Ghanem essentially serving in the role
of an expert in Lebanese law.
For instance, Ghanem opines: “[U]nder Lebanese law, the judge is the only
authority who has the ability to request the production of evidence (for example, witness
testimony, documents) from a third party. A judge may do so sua sponte (d’office) or at
the request of one of the parties to the dispute.
In other words, no party may
independently from the judge overseeing the dispute seek evidence from a third party.
Any evidence obtained in a manner that does not conform with these procedures is
inadmissible.” (Ghanem Decl. at 5.) Ghanem asserts that Petitioner’s lawyer who
10
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submitted a declaration attesting to Lebanese law, and on which Judge Broderick relied,
“misinterpreted” Articles 139 and 140 of the Lebanese procedural code. (Ghanem Decl.
at 4.) Ghanem characterizes Petitioner’s Section 1782 application as “illegal,” and goes
so far as to accuse Petitioner’s Lebanese lawyer as having submitted “a false
declaration regarding the interpretation” of those articles. (Ghanem Decl. at 3, 5.)
Unsurprisingly, Petitioner has submitted an opinion from its own expert Lebanese
lawyer (Professor Ghossoub) as well as further explanation of Lebanese law from the
lawyer representing Petitioner in the Lebanese Action (Mr. El-Aref). Ghossoub opines
that Articles 139 and 140 “are directed towards acceptance of Discovery’s application
in Lebanon, not rejection of the same” and characterizes as “fictitious” the “problem
raised about the permissibility of accepting the results of the Discovery procedure’s
application in Lebanon.” 7
(Ghossoub Decl. at 10, 11.)
Just as Ghanem faults
Petitioner’s “interpretation” of the Lebanese procedural rules, El-Aref contends that
Ghanem’s “interpretation” of the rules “is not correct.” (Second El-Aref Decl. ¶ 8.)
Indeed, El-Aref pointedly asserts that Article 140 “does not prevent Lebanese litigants
from gathering evidence in foreign countries without an order from a Lebanese court.”
(Id.)
In the end, however, both parties offer indefinite predictions as to how the
discovery sought will be treated in the Lebanese Action. Petitioner’s Lebanese counsel
Ghossoub’s declaration is less than a paragon of clarity, at times incomprehensible, and
advances what appear to be a number of rhetorical questions without answering them.
Whether his opinion, or that of Bank Audi’s Lebanese legal expert, would be admissible
at trial in a U.S. court of law is open to question. What matters here, however, is that the
opinions conflict and, taken together, demonstrate that the ultimate question of to what
extent the discovery Petitioner seeks may be admitted in the Lebanese Action cannot and
should not be determined by this Court based on the record before it.
7
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opines that the Lebanese court “will most likely welcome this Court’s assistance under
Section 1782” (Second El-Aref Decl. ¶6), while Bank Audi’s Lebanese counsel opines
that it is “unlikely” that the Lebanese court will “admit that evidence.” (Cortbaoui Decl.
¶ 7.) In other words, the parties disagree about the relative likelihood that the Lebanese
court ultimately will admit the discovery sought.
That is precisely the type of dispute that should not enter the Court’s
determination of whether the “for use” requirement is met. As the Second Circuit has
admonished, “a district court … should not consider the admissibility of evidence in
the foreign proceeding in ruling on a section 1782 application.” Brandi-Dohrn, 673 F.3d
at 82 (emphasis in original). In Brandi-Dohrn, the Court explained that Section 1782’s
test provides no support for a “foreign admissibility” requirement, which would “serve
‘only to thwart § 1782(a)’s objective to assist foreign tribunals in obtaining relevant
information that the tribunals may find useful ….’” Id. at 82 (quoting Intel, 542 U.S. at
262, 124 S. Ct. at 2482).
The Court Of Appeals also rejected an admissibility requirement in part because
“requiring a district court to apply the admissibility laws of the foreign jurisdiction would
require interpretation and analysis of foreign laws and such ‘[c]omparisons of that order
can be fraught with danger.’” Id. (quoting Intel, 542 U.S. at 263, 124 S. Ct. at 2482).
Attempting to determine whether the Lebanese court is “most likely” to consider the
discovery at issue, as Petitioner contends, or “unlikely” to do so, as Bank Audi contends,
presents exactly that danger. In words directly applicable here, the Brandi-Dohrn court
noted that “attempts by U.S. courts to construe foreign evidentiary codes and rules
result in a gross waste of judicial resources, particularly where even experts on the
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foreign law in question often disagree on the potential admissibility of the evidence
sought.” Id. at 82 n.1 (internal quotation marks omitted). The Court agrees with
Petitioner’s observation that the opposing opinions of Drs. Ghalem and Ghossoub
“perfectly illustrate why district courts must avoid inquiry into the admissibility of
discovery before foreign tribunals.” (Opp. Mem. at 11.)
To be sure, there is a distinction between admissibility and the availability of a
procedural mechanism for getting material before a foreign court for consideration of
admissibility. See Certain Funds, 793 F.3d at 122 n. 11 (“Whether an applicant [under
Section 1782] will be able to furnish the material sought to the foreign tribunal, so that
material may be ‘employed with some advantage or serve some use in the proceeding,’
is a separate question from whether the discovered material will be admissible in the
foreign proceeding”) (quoting Mees, 793 F.3d at 298) (emphasis in original). In this
instance, that distinction, at least as advanced by Bank Audi, is one without a
meaningful difference. 8 Petitioner is a party to the Lebanese Action. 9 His attorney will
Bank Audi’s own expert repeatedly frames the issue as the extent to which the discovery
sought by Petitioner is or is not admissible. See Ghanem Decl. at 5 (“any evidence
obtained in a manner that does not conform with these procedures is inadmissible”); 7
(referencing the “admissibility of evidence”); 9 (referencing the judge’s role “to determine
the acceptable evidence and the procedures for submitting such evidence”); 11 (Articles
139 and 140 “negate[] any possibility of accepting Discovery by the Lebanese court”).
8
The fact that Petitioner is a party to the Lebanese Action materially distinguishes this
case from those on which Bank Audi relies that examined whether a non-party had a
mechanism for submitting U.S. discovery material in a foreign proceeding to which they
were not a party. See, e.g., Certain Funds, 798 F.3d at 121 (non-parties sought discovery
with intention to furnish the information to a party “in the hope that it might be used”);
SIMO Holdings Inc. v. Hong Kong uCloudlink Network Technologies Ltd., No. 18-CV5427, 2020 WL 2133173, at *3-4 (S.D.N.Y. May 5, 2020) (non-party to Chinese lawsuit
failed to identify any means of submitting evidence to the Chinese court); In re Sargent,
278 F. Supp.3d 814, 822 (S.D.N.Y. 2017) (non-party failed to show any procedural right
or mechanism to inject requested evidence into London proceeding). That is not to say
that merely being a party to a foreign proceeding is sufficient to satisfy the “for use”
9
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attempt to introduce favorable material obtained through investigation and the foreign
discovery sought here. Whether the Lebanese court will refuse to even consider the
material is not for this Court to say.
2. Relevance
The discovery sought is relevant to Bank Audi’s force majeure defense. Bank
Audi claims that because of the Lebanese financial crisis, it cannot send Petitioner’s
U.S. dollars overseas. Petitioner seeks to test that assertion by obtaining discovery
showing that Bank Audi has in various instances transferred U.S. dollars overseas and
that it could do the same for Petitioner.
Ignoring that potential use, Bank Audi contends that the discovery sought is
irrelevant because Petitioner based his application on a different relevance ground, the
rationale for which has now been mooted. Specifically, Bank Audi emphasizes that
Petitioner initially professed needing the discovery to respond to what Petitioner
anticipated would be Bank Audi’s defense that it did not have access to enough liquid
U.S. dollars to pay the funds owed to Petitioner. Indeed, Judge Broderick expressly
invoked that rationale in his opinion granting Petitioner’s ex parte application. (Dkt. 10
at 4.)
Bank Audi contends it never did advance an “illiquidity” defense, and, in any
event, any concern about liquidity was mooted when it submitted a check for the funds
requirement; nonetheless, the petitioner’s status as a non-party in the cases cited by Bank
Audi was a significant factor in the outcomes. Another case cited by Bank Audi is
materially distinguishable because, even though petitioner was a party, the foreign
proceeding had terminated such that there was no proceeding in which to use the
discovery sought. See Euromepa, S.A. v. R. Esmerian Inc., 154 F.3d 24, 26, 28-29 (2d
Cir. 1998).
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due in the Attachment Proceeding. As Bank Audi would have it, Petitioner’s failure to
bring those facts to the Court’s attention was misleading and violated principles of
candor with the Court.
Bank Audi doth protest too much. The force majeure and illiquidity defenses are
not mutually exclusive. To the contrary, the gravamen of Petitioner’s complaint in the
Lebanese Action is that Bank Audi illegally has refused to transfer his U.S. dollar funds
overseas, using the Lebanese financial crisis as an excuse. Bank Audi’s argument is
premised on mischaracterizing as purely a liquidity issue the defense Petitioner actually
anticipated. In his application, Petitioner expressly links liquidity to transferability: “Bank
Audi will claim that it does not have access to sufficient freely convertible and
transferable USD liquidity (“USD liquidity”) to transfer Petitioner’s $4.3 million out of
Lebanon.” (Dkt. 3 at 3 (emphasis added).)
The anticipated defense thus was not whether Bank Audi has sufficient funds to
pay Petitioner, but rather whether it has access to sufficient U.S. dollars that it could be
transferred out of Lebanon. Bank Audi’s force majeure defense can be readily framed
as Bank Audi’s not having access to sufficient U.S. dollars that it can send overseas
due to the financial crisis. The check that Bank Audi submitted in the Attachment
Proceeding does not moot that issue because the check is payable only in Lebanon.
Even Bank Audi framed its force majeure defense in terms of liquidity in its responsive
pleading submitted in the Lebanese Action. There, Bank Audi claimed no longer to be
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bound to its contractual obligations to Petitioner “in light of the force majeure that led to
the non-availability of banknotes in U.S. dollars.” (Dkt. 21-2 at 13.)
In trying to portray the discovery sought as irrelevant, Bank Audi even questions
the merits of its own defense. Its Lebanese Attorney thus avers “that to the best of my
knowledge, no court has yet accepted the assertion of force majeure as a defense to
these depositor lawsuits, whether asserted by Bank Audi or by another bank, but rather,
they have uniformly rejected it.” (Second Cortbaoui Decl. ¶ 5; see also Reply Mem. at
8.)
It is perhaps ironic, but certainly not persuasive, for Bank Audi to argue the
weakness of its own defense as a reason to deny Petitioner the opportunity to obtain
documents that could further undermine that defense.
“[B]ecause the substantive issues presented in the foreign litigation are to be
decided by a foreign court applying unfamiliar foreign law, the district court should be
permissive when assessing relevance” for purposes of Section 1782. In re Tiberius
Group AG, No. 19-MC-467, 2020 WL 1140784, at *7 (S.D.N.Y. March 6, 2020)
(Broderick, J.) (citation omitted); see also In re China Petrochemical Development
Corp., No. 3:17-CV-02138, 2018 WL 1320665, at *4 (D. Conn. March 14, 2018) (“Even
where relevance is in doubt in a Section 1782 case, the district court should be
permissive”) (internal quotation marks omitted); cf. In re Schlich, No.16-MC-319, 2017
WL 4155405, at *6 (S.D.N.Y. Sept. 18, 2017) (Broderick, J.) (finding “for use”
requirement not met where information sought was “plainly irrelevant”). Courts thus
have “described the ‘for use’ element [of Section 1782] as requiring only a ‘de minimis’
showing that the information sought would be relevant to the foreign proceeding.” In re
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CBRE Global Investors (NL) B.V., No. 20-MC-315, 2021 WL 2894721, at *7 (S.D.N.Y.
July 9, 2021). Petitioner well exceeds that threshold.
In sum, Petitioner has satisfied the requirement that the discovery he seeks from
the Correspondent Banks is “for use” in the Lebanese Action.
B.
The Discretionary Factors Favor Issuing The Subpoenas
As noted, there is no dispute that the first and fourth Intel factors weigh in favor
of the discovery sought. And for the same reasons that the statutory “for use” element
is satisfied, the second and third Intel factors also weigh in favor of the discovery sought.
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.” Intel, 542 U.S. at
264, 124 S. Ct. at 2483. To show that a foreign tribunal would not be receptive to
evidence obtained through § 1782 requires “authoritative proof” that provides a “clear
directive.” Euromepa, S.A. v. R. Esmerian, Inc., 51 F.3d 1095, 1100 (2d Cir. 1995).
Such authoritative proof may only be found “in a forum country's judicial, executive or
legislative declarations that specifically address the use of evidence gathered under
foreign procedures.” Id.; see also In re Polygon Global Partners LLP, No. 21-MC-364,
2021 WL 2117397, at *8 (S.D.N.Y. May 25, 2021) (“In this Circuit, this factor requires
consideration of ‘only authoritative proof that a foreign tribunal would reject evidence
obtained with the aid of [S]ection 1782 ... as embodied in a forum country's judicial,
executive or legislative declarations’”) (quoting Euromepa, 51 F.3d at 1100).
Moreover, “Second Circuit case law places the burden on the party opposing
discovery [under Section 1782] to show that a foreign court would not be receptive to
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this assistance.” In re Auto-Guadaloupe Investissement S.A. No. 12-MC-221, 2012 WL
4841945, at *6 (S.D.N.Y. Oct. 10, 2012) (citing Euromepa, 51 F.3d at 1099) (emphasis
in original); see also In re Gorsoan Limited, No. 13-MC-397, 2014 WL 7232262, at *7
(S.D.N.Y. Dec. 10, 2014) (“the party opposing the Section 1782 application bears the
burden of proving the non-receptivity of the foreign tribunal”) (citations omitted), aff’d
sub nom.,Gorsoan Limited v. Bullock, 652 F. App’x 7 (2d Cir. 2016).
Here, the parties engage in the same dispute in evaluating the second factor as
they do in arguing whether the “for use” requirement is met. Bank Audi contends that
the Lebanese court would not at all be receptive to judicial assistance from this Court in
permitting issuance of subpoenas both because of Lebanese civil procedure law and
because of “(at best) attenuated” relevance. (Reply Mem. at 9.) As discussed above,
contrasting legal interpretations of Lebanese law have been provided by the parties that
leave this Court with a less then “clear” or “authoritative” understanding that the court in
the Lebanese Action would not permit any use of the subpoenaed information. See In
re Tiberius Group, 2020 WL 1140784 at *6 (declining to “adjudicate [a] battle-by-affidavit
of international law experts” as to whether foreign court would reject the discovery
sought). And, as also discussed above, the information sought is relevant to Petitioner’s
attempt to parry Bank Audi’s force majeure defense. The second Intel factor thus
weighs in favor of granting the application.
The third Intel factor looks to whether the § 1782 application “conceals an attempt
to circumvent foreign evidence-gathering restrictions.” Intel, 542 U.S. at 264-65, 124
S. Ct. at 2483. Bank Audi argues that Petitioner is trying to do exactly that and pursuing
discovery in contravention of Lebanese law. The Court is not persuaded that that is so
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given the competing interpretations of, and opinions offered about, Lebanese law, as
well as the potential relevance of the discovery sought to the Lebanese Action.
Bank Audi suggests that Petitioner’s real objective is to obtain material to use in
the Attachment Proceeding, which is not the type of proceeding that can support a
Section 1782 order.
(Opp. Mem. at 12.)
As Judge Broderick observed, if the
Attachment Proceeding were the only proceeding at issue, the Court may have declined
to grant the application. (Dkt. 10 at 4.) Having found that the material sought is being
sought for use in the Lebanese Action, however, the Court need not consider that
hypothetical scenario. Moreover, provided the statutory and discretionary criteria are
satisfied, as they are here, a Section 1782 application should not be denied merely
because the discovery material may have potential other uses by the petitioner. See In
re 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”).
Bank Audi also argues that Petitioner’s subpoenas are an attempt to thwart
Lebanese bank secrecy law. As Judge Broderick determined, those laws do not apply
to the Correspondent Banks (being non-Lebanon entities). (Dkt. 10 at 5-6.) See In re
Iraq Telecom Ltd., 18-MC-458, 2020 WL 1047036, at *2 (S.D.N.Y. March 4, 2020)
(Section 1782 application was not an attempt to circumvent Lebanon’s bank secrecy
law because it “applies only to banks established in Lebanon and banks that are
Lebanese branches of foreign banks”).
Bank Audi nonetheless argues that the Lebanese court will not be receptive to
discovery obtained about Lebanese bank customers to be used in a Lebanese action.
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That too is not at all clear, particularly as the subpoenas instruct the Correspondent
Banks not to disclose customer names or personally identifying information. Finally,
Bank Audi argues that the secrecy law will put it at a disadvantage because even if
Petitioner obtains records of Bank Audi transfers to its customers’ non-Lebanese
accounts, Bank Audi could not openly address the material without violating the
Lebanese secrecy law. Again, that is not at all clear, and if the Lebanese court was
otherwise receptive to the subpoenaed material, it potentially could fashion a means to
address any potential inequities posed to the parties.
As an additional discretionary consideration, Bank Audi charges Petitioner and
his lawyers with lack of candor to the Court about Lebanese law and Bank Audi’s force
majeure defense. For reasons explained above, the Court does not find that Petitioner
or his lawyers misled the Court.
Considering all the Intel factors together, the Court finds, in its discretion,
sufficient basis to support Petitioner’s application and to deny Bank Audi’s motion to
quash the subpoenas.
C.
Request Number 4 Should Be Stricken From The Subpoenas
Bank Audi asks that even if the Court does not quash the subpoenas, it modify
them to remove the request for documents concerning communications between the
Correspondent Banks and Bank Audi about the subpoenas, responses to them, or
Judge Broderick’s order granting the ex parte application. Bank Audi challenges the
relevance of such material. Petitioner explains the relevance as potentially revealing
interference with his discovery efforts, which is prohibited conduct under Lebanese law
and treaties.
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The Court agrees that the request at issue should be stricken from each
subpoena. The relevance of that particular request is, as Bank Audi would say, far too
attenuated. It also is speculative and the type of fishing expedition that U.S. discovery
rules do not condone.
Conclusion
For the foregoing reasons, Bank Audi’s motion to quash is DENIED; the alternative
request for relief is GRANTED; and the Correspondent Banks need not respond to
Request No. 4, which is deemed stricken.
SO ORDERED,
_________________________________
ROBERT W. LEHRBURGER
UNITED STATES MAGISTRATE JUDGE
Dated: January 26, 2022
New York, New York
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