In the Matter of the Ex Parte Application of the Upper Brook Companies for an Order Directing Discovery in Aid of a Foreign Proceeding Pursuant to 28 U.S.C. §1782
Filing
43
CORRECTED OPINION AND ORDER: For the reasons explained, PIAM's motion to vacate the April 11 Order and to quash the subpoena issued to JPMorgan is DENIED, except that the Court narrows the temporal scope of the subpoena to the period after Janua ry 1, 2013. The parties shall meet and confer on a proposed protective order limiting use of the Discovery to the proceedings described in the Upper Brook Companies' opposition to the motion and otherwise maintain confidentiality over the documents. If no agreement is reached, each side may submit a proposed order by January 13, 2023. The Clerk is directed to terminate the motion. (Doc 24.). SO ORDERED. (Signed by Judge P. Kevin Castel on 12/29/2022) (ama)
Case 1:22-mc-00097-PKC Document 43 Filed 12/29/22 Page 1 of 23
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------x
IN THE MATTER OF THE EX PARTE
APPLICATION OF THE UPPER BROOK
COMPANIES FOR AN ORDER DIRECTING
DISCOVERY IN AID OF A FOREIGN
PROCEEDING PURSUANT TO 28 U.S.C. § 1782
22-mc-97 (PKC)
CORRECTED
OPINION AND ORDER
-----------------------------------------------------------x
CASTEL, U.S.D.J.
On April 11, 2022, this Court granted an ex parte application brought by the
Upper Brook Companies to take discovery in aid of a foreign proceeding (the “April 11 Order”).
28 U.S.C. § 1782. The Upper Brook Companies seek documents from JPMorgan Chase Bank,
N.A. (“JPMorgan”), pertaining to an account held by Palladyne International Asset Management
(“PIAM”).
PIAM moves to vacate the April 11 Order and to quash the subpoena issued to
JPMorgan. It argues that the Upper Brook Companies have not satisfied the mandatory criteria
of section 1782 because the discovery sought is not “for use” in a foreign proceeding. It further
urges the Court to exercise its discretion to deny the Upper Brook Companies’ application. In
the event the Court denies the motion to vacate and quash, PIAM requests that the Court narrow
the scope of discovery and issue a protective order.
As will be explained, the Upper Brook Companies have satisfied the mandatory
factors of section 1782, and the discretionary factors set forth in Intel Corp. v. Advanced Micro
Devices, Inc., 542 U.S. 241, 264-65 (2004), weigh in favor of the application. PIAM’s motion to
vacate and quash will therefore be denied. However, the Court will modify the scope of
discovery and enter a protective order.
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BACKGROUND
The Upper Brook Companies are three funds that were incorporated by PIAM, a
Dutch investment management firm, under the laws of the Cayman Islands. 1 (Doc 1 at 1.)
PIAM served as the sole executive director of each fund’s Board of Directors. (Id.; Doc 3 at 8.)
In 2006 and 2007, three entities associated with the Libyan government – the Libyan Investment
Authority, Libyan African Investment Portfolio, and Libyan Foreign Bank (collectively, the
“LIA”) – invested a total of $700 million with the Upper Brook Companies (“the Upper Brook
Assets”). (Doc 1 at 2; Doc 3 at 8; Doc 27 at 5.) The Libyan Investment Authority is the Libyan
state’s sovereign wealth fund, and it “owns or controls all three of the Upper Brook Companies.”
(Doc 3 at 8 n.8.) In connection with these investments, the Upper Brook Companies entered into
written investment management agreements with PIAM. Pursuant to those agreements, PIAM,
as investment manager, was entitled withraw fees totaling approximately 2.5% annually of the
value of the assets under management. (Doc 27 at 5.)
After the overthrow of the Muammar Gaddafi government in Libya in 2011, “the
Upper Brook Assets were frozen by international sanctions.” (Doc 3 at 8; see also Doc 27 at 5.)
According to the Upper Brook Companies, in 2012, PIAM formed a Dutch foundation (Palint)
and then transferred “98.5% of the Upper Brook Assets to Palint.” (Doc 3 at 8-9; Doc 4, Ex. 10
¶ 2.3.1.) Palint then moved the funds into “new accounts in Palint’s own name at Deutsche
Bank” but gave PIAM full control. (Doc 3 at 9.)
In 2013, law enforcement agencies in the Netherlands and Switzerland and
prosecutors in Libya began investigating allegations that PIAM and its founder “had engaged in
The three entities were initially incorporated under the following names: Palladyne Global Balanced Portfolio
Fund, Palladyne Global Advanced Portfolio Fund, and Palladyne Global Diversified Portfolio Fund Limited. The
entities were later renamed and are now known (and will be referred to here) as Upper Brook (A), Upper Brook (F),
and Upper Brook (I), respectively. (See Doc 1 at 1 n.1; Doc 3 at 7-8.)
1
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money laundering and other financial crimes in connection with the management of the Upper
Brook Companies.” 2 (Id.) As a result, in July 2014, the LIA removed PIAM from the board of
directors of each of the Upper Brook Companies and appointed new board members. (Id.)
PIAM describes that two individuals, “Messrs Baruni and Jehani,” took control of
the Upper Brook Companies in 2014. (Doc 27 at 6.) According to PIAM, Baruni and Jehani
“belong to one of two factions that have sought to gain control over Libyan sovereign assets held
outside Libya” and have been “engaged in a campaign seeking to oust [PIAM] and take control
of the assets [PIAM] holds for the Libyan state and its people.” (Id.) PIAM maintains that the
“usurpation of control” by Baruni and Jehani violated international sanctions. (Id.) On the other
hand, the Upper Brook Companies claim that “PIAM had strong ties to a senior member of the
Gaddafi regime in Libya.” (Doc 1 at 2; Doc 3 at 8).
The Upper Brook Companies state that they terminated their investment
agreements with PIAM in 2014, after which point PIAM was no longer entitled to withdraw
funds from the accounts. 3 (Doc 3 at 9.) They assert that, despite termination of the agreements,
PIAM and Palint (together, the “PIAM Entities”) unlawfully diverted tens of millions of dollars
in “management fees” from the Upper Brook Assets to PIAM. (Id.)
The Upper Brook Companies later commenced legal proceedings in the
Netherlands to recover the allegedly diverted funds (“the Netherlands Proceedings”). (Doc 1 at
2; Doc 3 at 9, 9 n.11.) The Upper Brook Companies have also commenced related proceedings
“seeking to replace the Board of Directors of Palint, and to obtain [the Upper Brook Companies’]
PIAM notes that no charges have ever been brought against it. (Doc 27 at 6 n.2.)
In PIAM’s view, the Upper Brook Companies “purported to terminate” the agreements once Baruni and Jehani
gained control. (Doc 27 at 6.)
2
3
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books and records which are in the possession of the PIAM Entities,” (“the Related
Proceedings”). (Doc 1 at 2; Doc 3 at 9 n.11.)
There are three “Netherlands Proceedings.” In 2016, one of the Upper Brook
Companies, Upper Brook (I), sued the PIAM Entities seeking to recover the “management fees”
that the PIAM Entities allegedly wrongfully withdrew after Upper Brook (I) terminated its
agreement with PIAM. (Doc 3 at 10; Doc 27 at 8-9.) The Amsterdam District Court held in
February 2021 that the PIAM Entities’ withdrawals of management fees after the termination
date were made without any legal basis. (Doc 3 at 10-11.) The court ordered the PIAM Entities
to repay these sums to Upper Brook (I). (Id. at 11; Doc 27 at 9.) PIAM appealed the decision,
but the Amsterdam Court of Appeals has not yet rendered a decision on the merits. 4 (Doc 3 at
12; Doc 27 at 9.) The amount sought remains unpaid.
In April 2021, the two other Upper Brook Companies, Upper Brook (A) and
Upper Brook (F), filed similar actions seeking the amount that the PIAM Entities withdrew from
those accounts since July 2014. (Doc 3 at 13; Doc 27 at 9.) The Upper Brook Companies
estimate the allegedly diverted funds “exceed sixty-two million dollars” but claim “the PIAM
Entities have not provided documents to [them] which would permit them to confirm these
figures.” (Doc 3 at 14.)
In support of the Upper Brook Companies’ present application, Ernst & Young
LLP (“EY”) analyzed available financial documents and confirmed that PIAM caused tens of
millions of dollars to be transferred from the Upper Brook Companies to PIAM between 2007
and the time of the application, and that the PIAM bank account that received these payments
was maintained at Rabobank in the Netherlands (the “Rabobank Account”). (Id.; see also Doc
On March 29, 2022, the Amsterdam Court of Appeals “deferred a final decision on the merits” and “maintained the
status quo for Upper Brook (I) and PIAM.” (Doc 3 at 12.)
4
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5.) EY also reviewed a report prepared by Dutch law enforcement describing agreements PIAM
entered into with entities linked to the Gaddafi government to provide those entities with twothirds of the management fees that PIAM obtained from the Upper Brook Companies. (Doc 3 at
14; Doc 5 ¶¶ 24-27.) It also confirmed that JPMorgan was the Correspondent Bank for
Rabobank during the relevant time period and that JPMorgan “should have documents reflecting
the US dollar transactions flowing into and out of the [Rabobank Account].” (Doc 3 at 14-15;
Doc 5 ¶¶ 32-33.)
On March 30, 2022, the Upper Brook Companies filed an ex parte application
pursuant to 28 U.S.C. § 1782 seeking all documents in JPMorgan’s possession, custody or
control regarding U.S. dollar transactions, since 2007, into and out of the Rabobank Account (the
“Discovery”). (Doc 1 at 2-3; Doc 3 at 6.)
The Court granted the Upper Brook Companies’ application in its April 11 Order
and issued a subpoena to JPMorgan. (Doc 13.) On May 10, 2022, PIAM filed a motion to
vacate the April 11 Order and to quash the subpoena issued to JPMorgan. (Doc 24.) Notably,
JPMorgan, the entity to whom the subpoena is addressed, has not moved to vacate.
DISCUSSION
I.
The Mandatory and Discretionary Factors of 28 U.S.C. § 1782.
The Upper Brook Companies assert that PIAM’s motion should be denied
because PIAM did not move to intervene in this action and therefore has not established that it
has standing to challenge the subpoena. (Doc 28 at 25 n.8.) However, “standing to oppose
subpoenas issued under § 1782 is [not] limited to the subpoenaed witness.” Application of
Sarrio, S.A., 119 F.3d 143, 148 (2d Cir. 1997). “[P]arties against whom the requested
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information will be used may have standing to challenge the lawfulness of discovery orders
directed to third parties.” Id. (citing cases); see also In re Hornbeam Corp., 14-mc-424, 2015 WL
13647606, at *2 (S.D.N.Y. Sept. 17, 2015) (concluding that the party against whom the
requested discovery would be used had standing to challenge the issuance of section 1782
subpoenas and that it was therefore unnecessary for the court to determine whether the party
satisfied the requirements for intervention under Rule 24, Fed R. Civ. P.); In re Tiberius Grp.
AG, 19-mc-467, 2020 WL 1140784, at *9 (S.D.N.Y. Mar. 6, 2020) (deciding motion to quash on
the merits where parties to a foreign proceeding objected to the issuance of section 1782
subpoenas to non-party banks but did not file a motion to intervene).
Turning to the merits, 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). In order for a court to grant a section 1782 application, three mandatory
factors must be satisfied: “(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)).
Once those statutory requirements are met, the court may grant or deny discovery
in its discretion. Mees, 793 F.3d at 297, 301. The court’s “discretion, however, is not
boundless” – it must be guided by the twin goals of “providing efficient means of assistance to
participants in international litigation in our federal courts and encouraging foreign countries by
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example to provide similar means of assistance to our courts.” Id. at 297-98 (quoting Schmitz v.
Bernstein Liebhard & Lifshitz, LLP, 376 F.3d 79, 83-84 (2d Cir. 2004)).
In Intel, the Supreme Court identified four factors for a court to consider in
exercising its discretion: “(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 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 proofgathering restrictions or other policies of a foreign country or the United States; and (4) whether
the request is unduly intrusive or burdensome.” Id. at 298 (quoting Intel, 542 U.S. at 264-65
(internal quotations omitted)). These factors are “guides for the exercise of” discretion and “are
not to be applied mechanically.” Intel, 542 U.S. at 263 n.15; Kiobel by Samkalden v. Cravath,
Swaine & Moore LLP, 895 F.3d 238, 245 (2d Cir. 2018). The Second Circuit has clarified that
the four factors are “non-exclusive” and the district court “should also take into account any
other pertinent issues arising from the facts of the particular dispute.” Kiobel, 895 F.3d at 24445.
II.
The Upper Brook Companies Have Satisfied the Mandatory Factors.
PIAM does not dispute that JPMorgan resides in this District or that the Upper
Brook Companies are an “interested person” relative to the ongoing foreign proceedings. The
only mandatory factor at issue is whether the Discovery sought is “for use” in a foreign
proceeding.
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In order to show that materials requested in a section 1782 application are “for
use” in a foreign proceeding, an applicant must demonstrate that the discovery “will be
employed with some advantage or serve some use in the proceeding.” Mees, 793 F.3d at 298.
The Second Circuit instructs that the “key question . . . is not simply whether the information
sought is relevant” to the foreign proceeding, “but whether the [applicant] will actually be able to
use the information in the proceeding.” Certain Funds, Accounts &/or Inv. Vehicles v. KPMG,
L.L.P., 798 F.3d 113, 120 (2d Cir. 2015) (emphasis in original). The focus is “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 Int’l Ltd., 869 F.3d 121, 131 (2d Cir. 2017). Though
relevance alone is not sufficient to authorize the district court to order discovery, it “may be
necessary” for the court to consider the relevance of the information 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.” KPMG, 798 F.3d at 120, 120 n.7.
There is no requirement that the materials sought be necessary to the applicant’s
ability to prevail in the foreign proceeding. Mees, 793 F.3d at 298. The materials also need not
be discoverable or admissible in the foreign proceeding – the foreign court is “free to exclude the
evidence or place conditions on its admission.” Brandi-Dohrn, 673 F.3d at 77, 82.
The Upper Brook Companies assert that the Discovery will be used in three
categories of foreign proceedings: (1) the ongoing Netherlands Proceedings and Related
Proceedings, (2) additional litigation the Upper Brook Companies “reasonably contemplate”
bringing against the PIAM Entities and others, and (3) investigations by foreign law enforcement
agencies into the conduct of the PIAM Entities. (Doc 1 at 3-4.) Because the Court concludes
that the Upper Brook Companies have demonstrated the Discovery is “for use” in the ongoing
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Netherlands Proceedings and Related Proceedings, it need not address the parties’ arguments
regarding the reasonably contemplated future litigation and law enforcement investigations.
The Upper Brook Companies offer five ways in which they plan to use the
Discovery in the ongoing Netherlands Proceedings and Related Proceedings. First, they intend
to use the Discovery to “confirm[] and/or identify[] each of the schemes employed by the PIAM
Entites to divert funds from the Upper Brook Companies.” (Doc 1 at 3; Doc 3 at 21-22.) By
contrast, PIAM argues that the requested records “will shed no further light” on any alleged
diversions because the “only ‘scheme’ at issue in the Dutch proceedings is the undisputed fact”
that PIAM continued to charge management fees after 2014 and the Dutch court already
determined that this “scheme” took place. (Doc 27 at 10.)
PIAM’s argument misses the mark. The relevant issue is not whether the Upper
Brook Companies need the Discovery to confirm or identify the wrongful withdrawals. See
Mees, 793 F.3d at 298 (materials sought need not be necessary to applicant’s ability to prevail in
the foreign proceeding). The question is whether the Upper Brook Companies “will actually be
able to use the information in the proceeding.” See KPMG, L.L.P., 798 F.3d at 120. The Court
is satisfied that the Upper Brook Companies have demonstrated a “practical ability” to place the
“beneficial” bank records and the information they contain before the Dutch courts. See In re
Accent Delight Int’l, 869 F.3d at 130. PIAM makes no argument that the Upper Brook
Companies are “not in a position” to have the Dutch courts consider evidence of the “schemes
employed” or that they have no “means of injecting the evidence into the proceedings.” See
KPMG, 798 F.3d at 120-21. Moreover, the records are not “plainly irrelevant” to demonstrating
that the wrongful withdrawals took place. See KPMG, 798 F.3d at 120, 120 n.7. Accordingly,
this asserted purpose of the Discovery satisfies the “for use” requirement.
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Second, the Upper Brook Companies intend to use the Discovery “to calculate the
precise dollar amount” of the withdrawn management fees. (Doc 28 at 13.) This calculation
would inform the damages calculation in each of the three Netherlands Proceedings. (Id. at 1314.) With respect to the Upper Brook (I) proceeding that is on appeal, the Upper Brook
Companies explain that the Discovery will still be useful because the Dutch court “was only able
to estimate that the sum diverted by PIAM totaled $15.6 million.” (Id. at 13.) They state, “[t]he
Discovery will help Upper Brook (I) to confirm the accuracy of this estimate and, if warranted,
seek an amendement to the claim against the PIAM Entities to correct the damages calculation
while the case is on appeal (as it is now) or after the appeal has concluded.” (Id. at 13-14.)
Here too, PIAM claims that the Discovery is not necessary to achieve the Upper
Brook Companies’ aim. PIAM asserts that the Upper Brook Companies already have access to a
variety of documents that reflect the amount of the management fees. (Doc 25 ¶¶ 2-4; Doc 27 at
10; Doc 31 at 5.) Regardless of whether or not those documents are in fact sufficient, 5 the
Discovery need not be necessary to the Upper Brook Companies’ ability to prove the precise
amount of the fees. See Mees, 793 F.3d at 298. The Upper Brook Companies have shown that
the JPMorgan records would “be employed with some advantage or serve some use” with respect
to determining the amount of fees. See id.
The Court is similarly unpersuaded by PIAM’s claim that the Discovery will not
be useful to the fee calculation because the “account records from J.P. Morgan, acting as the
correspondent bank for [PIAM’s] corporate bank account in the Netherlands,” will not show the
As will be discussed further under the fourth Intel factor, the Upper Brook Companies argue that the documents to
which they have been granted access suffer from “gaps” and “shortcomings” and rely on the integrity of PIAM’s
own bookkeeping and document recovery practices. (Doc 28 at 22; Doc 30 ¶¶ 5-11; see also Doc 3 at 14 (“[T]he
PIAM Entities have not provided documents to [the Upper Brook Companies] which would permit them to confirm
these figures.”).)
5
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amount of management fees deducted from Upper Brook (I)’s own account. (See Doc 32 ¶ 2.)
Presumably, the records would show the amounts as inbound transfers to PIAM’s account.
PIAM is free to argue before the Dutch courts that JPMorgan’s records are not a “particularly
appropriate way to seek confirmation of the sums deducted as fees.” (See Doc 31 at 5; see also
Doc 27 at 10.)
Third, the Upper Brook Companies plan to use the Discovery to identify “the
destination and/or location” of the allegedly diverted fees. (Doc 1 at 3.) PIAM argues that
outbound transfers by PIAM to third parties are not relevant to the Upper Brook Companies’
claims that the fees were improperly collected. (Doc 27 at 10-11; Doc 32 ¶ 2.) However, the
Upper Brook Companies explain that the Discovery would allow them to identify third parties
from whom they will seek to recover the funds as well as those “with evidence relevant to the
Netherlands Proceedings and Related Proceedings, including third parties who participated in
and benefited from the scheme.” (Doc 28 at 14-15.) The Court finds this to be a plausible use of
the Discovery – whether the Upper Brook Companies’ efforts will be fruitful or ultimately
accepted by the Dutch courts is not for this Court to say.
Fourth, the Upper Brook Companies assert that the Discovery will help them
refute a counterclaim that PIAM has asserted in the Netherlands Proceedings, namely, that PIAM
has “continued to fulfil its role as manager of the Funds” since 2014 and has “taken on a
caretaker role” and is “protecting the assets of the State Investors” and the Libyan people. (Id. at
15.) They explain that the “Discovery is expected to confirm Dutch law enforcement findings
that PIAM has been corruptly sharing its ‘management fees’ with third parties connected to the
Gaddafi regime.” (Id.) The Upper Brook Companies plan to use this evidence to show that
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PIAM has not been serving as a “caretaker” and is therefore not entitled to recover on its
counterclaim. PIAM has not responded to this anticipated use of the Discovery.
Fifth, the Upper Brook Companies state that the Discovery will be used in the
Related Proceedings to support their “claims that the Board of Directors of Palint, through their
involvement in the diversion of the Petitioners’ funds (while these funds were in the custody of
Palint), engaged in and/or ignored misconduct, and should therefore be removed from their
positions.” (Doc 28 at 16.) PIAM has not refuted this anticipated use either.
Based on the foregoing, the Court concludes that the Upper Brook Companies
have satisfied the “for use” requirement. They have shown that the records sought are relevant
to the pending foreign proceedings and that they have the ability and intention to use the
Discovery in the Netherlands Proceedings and Related Proceedings.
III.
The Discretionary Intel Factors Weigh in Favor of Discovery.
Having concluded that the Upper Brook Companies’ application satisfies the
mandatory factors of section 1782, the Court must next exercise its discretion to determine
whether the application should be granted or denied. The Court concludes that the Intel factors
and the twin goals of section 1782 support granting the requested Discovery.
1. Factor One: Whether JPMorgan Is a Participant in the Foreign 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) (internal
quotations omitted). JPMorgan is not a party to the ongoing Netherlands Proceedings or Related
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Proceedings. 6 (See Doc 1 at 4.) PIAM does not dispute these facts. (See Doc 27; Doc 31.). As
such, the first factor weighs in favor of the Upper Brook Companies’ application.
2. Factor Two: Nature of the Foreign Tribunal, Character of Foreign
Proceedings, and Receptivity to Assistance from United States Federal Courts.
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) (internal quotations omitted).
According to the Upper Brook Companies, “courts in the Netherlands are
receptive to discovery obtained through Section 1782.” (Doc 1 at 4; Doc 7 ¶ 11; Doc 3 at 2526.) They have provided a declaration from their counsel in the Netherlands stating that “[t]he
Dutch Supreme Court held that evidence obtained using Section 1782 discovery may be used in
proceedings before their national courts in Alfred Mol v. Kinetics Technology International
B.V., Supreme Court [Hoge Raad], February 6, 1998).” (Doc 7 ¶ 11; Doc 3 at 25.)
PIAM does not refute these statements, but it nevertheless asserts that this factor
“weighs heavily against granting” disclosure because the Dutch courts already denied the Upper
Brook Companies’ request for broad access to PIAM’s business records. (Doc 31 at 11.) This
denial, it claims, “undermines” the notion that the Dutch courts will be receptive to the
Discovery sought here. (Id.)
However, the Upper Brook Companies explain that the Dutch court’s decision
merely denied their “request to obtain the access codes and password for PIAM and Palint’s
online banking systems at Deutsche Bank.” (Doc 28 at 23.) The court denied the request
Since the Court has not addressed the parties’ arguments regarding the reasonably anticipated future litigation and
law enforcement investigations, it will similarly limit its analysis of the discretionary factors to the ongoing
Netherlands Proceedings and Related Proceedings.
6
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because the “digital infrastructure Deutsche Bank created for PIAM as investment manager . . . .
is only intended to be used for the investment manager and PIAM’s clients do not have access
thereto.” (Doc 7 ¶ 9.) The Upper Brook Companies state that the court’s decision was designed
to avoid disclosure of the “relationships between the PIAM Entities and any other clients they
might have.” (Doc 7 ¶ 10.) In light of these details, the decision suggests nothing about the
Dutch courts’ receptivity to disclosure obtained through the present application.
Accordingly, the Court concludes that the second factor weighs in favor of the
Upper Brook Companies’ application. See In re Hulley Enters., Ltd., 358 F. Supp. 3d 331, 347
(S.D.N.Y. 2019) (concluding that the second Intel factor favored production of documents based
on petitioners’ showing that “Dutch law permits the submission of evidence collected through
section 1782”), aff’d sub. nom. In re Hulley Enters., Ltd., 400 F. Supp. 3d 62 (S.D.N.Y. 2019).
3. Factor Three: Whether the Application Conceals an Attempt to Circumvent
Dutch Proof-Gathering Restrictions or Policies.
The third Intel factor considers whether the application “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) (internal quotations
omitted).
The Second Circuit has instructed that “proof-gathering restrictions” “are best
understood as rules akin to privileges that prohibit the acquisition or use of certain materials.”
Mees, 793 F.3d at 303 n.20 (emphasis in original). As such, “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
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those documents.” In re Accent Delight Int’l Ltd., 791 F. App’x 247, 251 (2d Cir. 2019)
(summary order) (emphasis in original).
The fact “[t]hat a country does not enable broad discovery within a litigation does
not mean that it has a policy that restricts parties from obtaining evidence through other lawful
means.” Mees, 793 F.3d at 303 n.20. 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
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)).
In considering whether discovery would be prohibited in the foreign proceeding,
the district court should not “try to glean the accepted practices and attitudes of other nations
from what are likely to be conflicting and, perhaps, biased interpretations of foreign law.”
Euromepa S.A. v. R. Esmerian, Inc., 51 F.3d 1095, 1099 (2d Cir. 1995). Rather, the district
court “should consider only authoritative proof” – based on the “forum country’s judicial,
executive or legislative declarations that specifically address the use of evidence gathered under
foreign procedures” – “that a foreign tribunal would reject evidence obtained with the aid of
section 1782.” Id. at 1100; see also In re Tiberius Grp. AG, 19-mc-467, 2020 WL 1140784, at
*4 (S.D.N.Y. Mar. 6, 2020) (“Only where the materials being sought are privileged or otherwise
prohibited from being discovered or used is the third Intel factor implicated.”). In keeping with
these principles, “courts routinely grant § 1782 applications where the discovery sought might
not be available in the foreign legal system, but is not explicitly prohibited from being acquired
by way of a § 1782 application.” In re Tiberius Grp., 2020 WL 1140784, at *5 (citing Gorsoan
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Ltd. v. Bullock, 652 F. App’x 7, 9 (2d Cir. 2016) (summary order); In re O’Keeffe, 650 F. App’x
83, 85 (2d Cir. 2016) (summary order)).
PIAM asserts that “the Upper Brook Companies are seeking to circumvent the
policies of the Dutch courts.” (Doc 27 at 7, 16-17.) However, it has not identified any
“authoritative proof” that the Dutch courts “would reject evidence obtained with the aid of
section 1782” or any evidence that the materials sought are privileged in the Netherlands.
Euromepa, 51 F.3d at 1100; Mees, 793 F.3d at 303 n.20; In re Tiberius Grp., 2020 WL 1140784,
at *4. It instead points to the Dutch court’s denial of the Upper Brook Companies’ request for
“comparable corporate records” and the fact that the Upper Brook Companies did not first seek
the Discovery in the foreign proceedings. 7 (Doc 27 at 7, 16-17.) For the reasons that follow,
both of these arguments fail and the Court concludes that the third factor weighs in favor of
granting disclosure.
As already explained, the Dutch court denied the Upper Brook Companies’
request for the access codes and password for the PIAM Entities’ Deutsche Bank account
because the bank’s “digital infrastructure” was intended only for PIAM and not its clients. (Doc
28 at 23; Doc 7 ¶ 9.) The decision did not address disclosure of the JPMorgan records sought
here, let alone provide authoritative proof that such documents are prohibited from discovery or
use in the proceedings. The Court therefore disagrees that the present application is an attempt
to circumvent the Dutch court’s prior ruling.
In addition, the Upper Brook Companies correctly note that they had no
obligation to seek the Discovery from the Dutch courts before filing their section 1782
Specifically, PIAM argues that the Court should deny discovery because the Upper Brook Companies could
“readily” obtain “[t]he evidence sought from J.P. Morgan here” in the Netherlands from Rabobank, PIAM’s Dutch
bank. (Doc 27 at 16.) The fact that the Upper Brook Companies have not done so, PIAM claims, is “basis for
denying their application.” (Id.)
7
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application. (Doc 28 at 22-23.) Section 1782 does not contain an “exhaustion” requirement
requiring an applicant to seek discovery through the foreign courts before filing a section 1782
request. Application of Malev Hungarian Airlines, 964 F.2d 97, 100 (2d Cir. 1992) (concluding
that a district court abused its discretion “to the extent [it] rested its decision to deny discovery”
on the applicants’ failure to first request discovery from the foreign court). 8 As the Second
Circuit has explained, such a requirement would be “at odds with the twin purposes” of section
1782 because it would impose “an additional burden on persons seeking assistance from our
federal courts.” Id. “Accordingly, failure to exhaust all remedies does not demonstrate an
attempt to circumvent foreign restrictions.” In re Top Matrix Holdings Ltd., 18-mc-465, 2020
WL 248716, at *6 (S.D.N.Y. Jan. 16, 2020).
Although the Second Circuit has rejected applications in cases where the
applicant had not first sought production in the foreign proceeding, those cases involve
applicants that “have already exhausted available remedies in foreign tribunals and seek another
‘bite at the apple’ after having already been denied recourse.” In re Top Matrix Holdings Ltd.,
18-mc-465, 2020 WL 248716, at *6 (S.D.N.Y. Jan. 16, 2020). 9 The Upper Brook Companies
See also In re BNP Paribas Jersey Tr. Corp. Ltd., 18-mc-47, 2018 WL 895675, at *3 (S.D.N.Y. Feb. 14, 2018)
(“Courts may grant § 1782 applications even where the applicant did not first seek discovery in the foreign
tribunal . . . .”); In re Application of CBRE Global Investors (NL) B.V., 20-mc-315, 2021 WL 2894721, at *11 n.15
(S.D.N.Y. July 9, 2021) (applicant “was not required to attempt to obtain the materials through the foreign courts
before filing a section 1782 discovery request”); In re Aso, 19-mc-190, 2019 WL 2345443, at *7 (S.D.N.Y. June 3,
2019) (Ҥ 1782 does not contain an exhaustion requirement that would impose upon an applicant a duty to first seek
the requested discovery from the foreign court”).
9
See also In re Escallón, 323 F. Supp. 3d 552, 560 (S.D.N.Y. 2018) (concluding that applicant’s request to order
depositions of individuals who already testified in the foreign proceedings was an attempt to circumvent foreign law
that “does not permit a second examination on the same topic”); In re WinNet R CJSC, 16-mc-484, 2017 WL
1373918, at *8 (S.D.N.Y. Apr. 13, 2017) (concluding that applicant was attempting to circumvent foreign court
rulings by seeking evidence on an issue that had already been decided, on the merits, against the applicant); In re
Mare Shipping Inc., 13-mc-238, 2013 WL 5761104, at *5 (S.D.N.Y. Oct. 23, 2013), aff’d sub nom. Mare Shipping
Inc. v. Squire Sanders (US) LLP, 574 F. App’x 6 (2d Cir. 2014) (rejecting request to compel discovery after
applicants failed to seek the evidence in the foreign proceeding during the evidence-gathering period or trial);
Aventis Pharma v. Wyeth, M-19-70, 2009 WL 3754191, at *1 (S.D.N.Y. Nov. 9, 2009) (rejecting request to compel
discovery “on the eve of an appeal” where applicant could have requested the documents in the same U.S. court
“over five years ago” and the timing of the application “place[d] a burden on [the subpoenaed party] so great that
they [could] not produce the requested documents in time for the French appeal”).
8
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are not impermissibly seeking a second bite at the apple after being “denied recourse” by the
Dutch courts. Accordingly, this factor weighs in the Upper Brook Companies’ favor.
4. Factor Four: Whether the Request Is Unduly Intrusive or Burdensome.
The fourth Intel factor considers “whether the request is unduly intrusive or
burdensome.” Mees, 793 F.3d at 298 (quoting Intel, 542 U.S. at 264-65) (internal quotations
omitted). “[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 Civil Procedure.” Id. at 302. The text of Rule 26(b)(1), Fed. R. Civ.
P., 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. However, a court may deny a section
1782 application in its entirerty if “is made in bad faith, for the purpose of harassment, or
unreasonably seeks cumulative or irrelevant materials.” Id. at 302 n.18 (citing Euromepa S.A. v.
R. Esmerian, Inc., 51 F.3d 1095, 1101 n.6 (2d Cir. 1995)); see also Fed R. Civ. P. 26(b)(2)(C)
(“[T]he court must limit the frequency or extent of discovery otherwise allowed by these rules or
by local rule if it determines that . . . the discovery sought is unreasonably cumulative or
duplicative . . . .”).
PIAM argues that the Upper Brook Companies’ application is “cumulative and
duplicative” because the Upper Brook Companies have “already received information that has
allowed them to quantify and verify the amount of fees.” (Doc 27 at 15-16; Doc 31 at 10.) But
PIAM overlooks the Upper Brook Companies’ arguments that the Discovery will serve
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additional purposes beyond calculating the amount of fees, such as identifying third parties with
relevant evidence, refuting PIAM’s counterclaim that it has been serving as a “caretaker” in
protecting the assets, and supporting the Upper Brook Companies’ claims against the board of
directors of Palint in the Related Proceedings.
The Upper Brook Companies also note that the documents they “have already
received from PIAM and third parties are based in large part on information obtained in the first
instance from PIAM and rely, for their utility, on the integrity of PIAM’s data input,
bookkeeping and document recovery and retention.” (Doc 28 at 22 (citing Doc 30 ¶ 10).)
Therefore, despite any potential redundancy, “the Discovery would still be of significant value”
because it would provide “reliable, independent, third party proof of PIAM’s receipt and use of
funds that it diverted from the [Upper Brook Companies].” (Doc 28 at 21-22.) Moreover, given
the “shortcomings” and “gaps” the Upper Brook Companies have identified, it is not clear that
the documents they have already received are sufficient to determine the precise amount of the
fees. (Doc 30 ¶¶ 5-11; see also Doc 3 at 14 (“[T]he PIAM Entities have not provided documents
to [the Upper Brook Companies] which would permit them to confirm these figures.”).) The
Court therefore concludes that the Upper Brook Companies’ request is not cumulative or
duplicative.
PIAM also argues, for the first time in its reply, that the Upper Brook Companies’
application was not made in good faith. (Doc 31 at 12.) It claims that the “application is the
latest chapter in a campaign by a certain Libyan faction—Messrs. Baruni and Jehani—that has
sought to take control of assets belonging to the Libyan Investment Authority and the Libyan
people. Messrs. Baruni and Jehani have no authority to act for the Libyan Investment Authority
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or the Libyan people.” (Id.) It urges the Court to decline to “exercise its discretion to assist this
faction in its wrongful campaign to take control of Libyan assets.” (Id.)
Notwithstanding PIAM’s broad accusations, the record does not suggest any
improper motive underlying the application. Any dispute regarding the authority of Baruni and
Jehani to “act for the Libyan Investment Authority or the Libyan people” is not a matter for
resolution by this Court. Additionally, given that the Dutch court has already held that PIAM
wrongfully withdrew fees from the Upper Brook Companies, the Court sees no basis to conclude
that the present application was brought in bad faith.
IV.
The Upper Brook Companies Did Not Unreasonably Delay in Filing Their Application.
Although delay in filing a section 1782 application is “not specifically listed as an
Intel factor,” a district court may exercise its discretion to deny a section 1782 request on the
basis of delay. In re Hulley Enters., 358 F. Supp. 3d at 351, aff’d sub nom. In re Hulley Enters.,
400 F. Supp. 3d 62 (S.D.N.Y. 2019); see also Nascimento v. Faria, 600 F. App’x 811, 812 (2d
Cir. 2015) (summary order); Aventis Pharma v. Wyeth, M-19-70, 2009 WL 3754191, at *1
(S.D.N.Y. Nov. 9, 2009).
PIAM argues that the Upper Brook Companies’ application should be denied
because they “unreasonably delayed seeking U.S. disclosure.” (Doc 27 at 7, 17; see also Doc 31
at 11-12.) The Court disagrees, and finds this case distinct from those in which courts have
denied section 1782 discovery on the basis of delay. PIAM emphasizes that the Upper Brook
Companies have known about the Rabobank Account since at least 2014, but they do not assert
that the Upper Brook Companies were “first made aware that a subpoena was needed” at that
time. (Doc 27 at 18); Nascimento, 600 F. App’x at 812. It was on that basis – that the applicant
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had been aware of the need for a subpoena for over thirteen years – that the Second Circuit
concluded the application in Nascimento was “inexcusably untimely.” 600 F. App’x at 812.
PIAM also points to the fact that the first of the Netherlands Proceedings was
commenced in 2016 and is currently on appeal from a judgment in the Upper Brook Companies’
favor. (Doc 27 at 18.) As detailed above, however, the Upper Brook Companies have shown (1)
that the Discovery can be used to correct the damages calculation while the Upper Brook (I) case
is on appeal, (2) that the other ongoing proceedings are in their “early stages,” (Doc 28 at 25-26),
and (3) that they intend to use the Discovery in future litigation and to assist ongoing criminal
investigations, (id. at 26). This case therefore differs from Aventis Pharma, where the applicant
“rush[ed] to a U.S. Court on the eve of [its own] appeal” of a foreign ruling against it and the
district court concluded that allowing discovery would frustrate the goal of providing “efficient
means of assistance” to participants in international litigation. 2009 WL 3754191, at *1.
Finally, there is also no evidence, nor does PIAM claim, that the timing of the
Upper Brook Companies’ application will unduly burden JPMorgan or PIAM. See In re Hulley
Enters., 358 F. Supp. 3d at 351-52. The Court therefore concludes that the Upper Brook
Companies have not unreasonably delayed in bringing their section 1782 application.
In summary, the Court concludes (1) the Upper Brook Companies have satisfied
the mandatory factors of section 1782, (2) the discretionary Intel factors favor disclosure, and (3)
the Upper Brook Companies did not unreasonably delay in bringing their application. Therefore,
PIAM’s motion to vacate the April 11 Order and quash the subpoena issued to JPMorgan is
denied.
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V.
Scope of Discovery and Protective Order.
The Court must next address PIAM’s request that in the event its motion to vacate
and quash is denied, “(1) the scope of the request be narrowed, and (2) the Court enter a
protective order directing that the disclosed materials be maintained as confidential and used
only for the pending Dutch proceedings.” (Doc 27 at 18.)
1. Scope of Discovery.
If a district court concludes that a section 1782 application is overbroad, it should
consider “whether that defect could be cured through a limited grant of discovery” before
denying the request in its entirety. Mees, 793 F.3d at 302.
The Upper Brook Companies’ application seeks “production of all documents in
[JPMorgan’s] possession, custody or control, concerning or relating to United States dollar
transactions, occurring from 2007 to the present, into and out of” the Rabobank Account. (Doc 1
at 2-3.) PIAM seeks to modify the scope of the Discovery “to call only for documents from
2014 forward” because the Upper Brook Companies’ claims against PIAM “are based on their
allegation that [PIAM] was not entitled to collect its fees starting from 2014.” (Doc 27 at 18-19;
Doc 31 at 12.) PIAM argues that the request “for account records from 2007 to 2014 is based
only on [the desire of the Upper Brook Companies] to investigate the possible existence of other
‘schemes’ to ‘divert funds’ from their investment accounts.” (Doc 31 at 12.) The Upper Brook
Companies oppose the requested modification and urge that “all of the U.S. dollar transactions”
from 2007 to 2014 are relevant to the foreign proceedings. (Doc 28 at 8, 27.)
The Court will modify the subpoena so that JPMorgan need not produce
documents pertaining entirely to transactions and occurrences prior to January 1, 2013. The oneyear period preceding the otherwise relevant period appears most ample.
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2. Protective Order.
PIAM also seeks a protective order “providing that (1) the documents are to be
kept confidential and only used in the pending Dutch proceedings, and (2) at the conclusion of
the proceedings, the documents should be destroyed.” (Doc 27 at 19.) PIAM argues a protective
order is warranted because the records sought “constitute confidential business and financial
records.” (Id.); Fed. R. Civ. P. 45(d)(3)(B)(i) (allowing modification of a subpoena if it requires
“disclosing a trade secret or other confidential . . . commercial information”).
The Upper Brook Companies “object to this proposed protective order to the
extent that it seeks to prevent the [their] use of the Discovery in any of the foreign proceedings
set forth in the Application.” (Doc 28 at 27.)
CONCLUSION
For the reasons explained, PIAM’s motion to vacate the April 11 Order and to
quash the subpoena issued to JPMorgan is DENIED, except that the Court narrows the temporal
scope of the subpoena to the period after January 1, 2013. The parties shall meet and confer on a
proposed protective order limiting use of the Discovery to the proceedings described in the
Upper Brook Companies’ opposition to the motion and otherwise maintain confidentiality over
the documents. If no agreement is reached, each side may submit a proposed order by January
13, 2023. The Clerk is directed to terminate the motion. (Doc 24.)
SO ORDERED.
Dated: New York, New York
December 29, 2022
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