Matthew Stein et al v. Skatteforvaltningen

Filing 105

MEMORANDUM AND ORDER denying 100 Letter Motion for Discovery. In sum, McGee does not come remotely close to justifying his broad requests on a foreign prosecuting authority that has brought criminal charges against him and the named plaintiffs . Given their myriad flaws, the Court denies McGee's requests in full and respectfully requests the Clerk of Court to terminate the motion pending at ECF No. 100. SO ORDERED. (Signed by Judge Naomi Reice Buchwald on 3/27/2024) (va) (Main Document 105 replaced on 3/27/2024) (va).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------X
MATTHEW STEIN AND JEROME LHOTE,
Plaintiffs/CounterclaimDefendants,
- against –
SKATTEFORVALTNINGEN,

MEMORANDUM AND ORDER
23 Civ. 2508 (NRB)

Defendant/CounterclaimPlaintiff,
- against –
LUKE MCGEE
Counterclaim-Defendant.
------------------------------X
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
On

March

18,

2024,

counterclaim-defendant

Luke

McGee

(“McGee”) filed a letter motion requesting that the Court issue a
letter of request (the “Letter of Request”) pursuant to the Hague
Convention on the Taking of Evidence Abroad in Civil or Commercial
Matters (the “Hague Convention”) 1 as if it were a plain vanilla
request.

It is anything but.

The proposed Letter of Request seeks

a substantial number of documents from the Danish Public Prosecutor
for Serious Economic and International Crime (“SØIK”) 2 who has

23 U.S.T. 2555, T.I.A.S. No. 7444.
As McGee explains, SØIK has been renamed and is now known as National eched
for Særlig Kriminalitet (“NSK”), but for purposes of simplicity, the Court
refers to that entity as SØIK.

1
2

commenced

criminal

plaintiffs

herein,

proceedings
which,

to

against

this

McGee

Court’s

and

the

knowledge,

two

remain

pending.
Before addressing the viability of McGee’s Letter of Request,
some brief background is necessary for context.

The criminal

charges SØIK brought against McGee and the two plaintiffs -Matthew Stein (“Stein”) and Jerome Lhote (“Lhote”) -- have their
origins in a sprawling fraudulent scheme to deceive the Danish tax
authority Skatteforvaltningen (“SKAT”) into paying millions of
dollars in tax refunds that were in fact never owed.

In May 2019,

Stein, Lhote, and McGee entered into a settlement agreement with
SKAT (the “Agreement” or “Settlement Agreement”) to resolve SKAT’s
claims against them and others arising from the fraudulent tax
refund scheme.

Of particular relevance here, Section 8(f) of the

Agreement requires SKAT, “promptly upon the execution” of the
Agreement, to make a number of written representations about Stein,
Lhote, and McGee to SØIK.
In March 2023, Stein and Lhote (but not McGee, for reasons
that remain unclear) filed this action against SKAT, asserting a
single breach of the Settlement Agreement: namely, that SKAT failed
to comply with the requirements of Section 8(f) of the Settlement
Agreement.

Thereafter, SKAT filed counterclaims against Stein,
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Lhote, and McGee for failure to pay the amount owed under the
Settlement Agreement.
On January 11, 2024, Stein, Lhote, and McGee jointly filed
three separate letter motions asking the Court to compel SKAT to
comply with the thirty-plus document requests they had made.
ECF Nos. 73-75.

See

In a Memorandum and Order dated February 1, 2024,

the Court denied those motions, explaining that Stein, Lhote, and
McGee’s document demands “far exceed, in scope and substance,
temporally and otherwise, plaintiffs’ pled claim.”

ECF No. 88

(“Discovery M&O”) at 2.
On March 18, 2024, as mentioned above, McGee (alone) filed a
motion

asking

the

Court

to

authorize

far-reaching

discovery

demands on SØIK, the Danish prosecuting authority that instituted
ongoing criminal proceedings against Stein, Lhote, and McGee.
Specifically, McGee seeks:
[(1)] [a]ll written communications, for the period of March
2019 to June 2021, between SKAT and SØIK . . . concerning the
Settlement Agreement, including but not limited to: SKAT’s
obligations related to confidentiality under the Settlement
Agreement [and] SKAT’s obligations under Section 8(f) of the
Settlement Agreement[; (2)] [a]ll written communications,
from the period of March 2019 to June 2021, between SKAT and
SØIK concerning the obligations of [Stein, Lhote, or McGee]
under the Settlement Agreement, including, but not limited
to, the alleged performance or non-performance of such
obligations[; and (3)] [a]ll written communications, from the
period of March 2019 to June 2021, between SKAT and SØIK
concerning the negotiation of the Settlement Agreement.
-3-

ECF No. 100-1 (“Requests”) at 12-13.

McGee also seeks 58 specific

documents that have previously “been made available” (presumably
by SØIK) “for use in the criminal case in Denmark.” 3
(“Mot.”) at 2.

ECF No. 100

McGee further requests that SØIK authenticate

numerous documents that were “previously made available by SØIK to
Plaintiffs Stein and Lhote” in connection with their criminal case
in

Denmark,

as

well

as

any

response to the requests.

additional

documents

produced

in

Id. at 4.

The proposed Letter of Request raises serious issues which
counsel against authorization by this Court.

The first issue with

respect to the proposed Letter of Request arises from this Court’s
earlier rejection of McGee, Stein, and Lhote’s motions to compel
discovery from SKAT.

Despite the explicit and detailed rulings in

this Court’s Discovery M&O, McGee’s letter motion did not even
acknowledge

the

existence

of

that

prior

decision.

This

is

surprising in light of the well-established principle that “a court
should not authorize the service of letters rogatory if it would
not

approve

context.”

of

the

discovery

requests

in

a

purely

domestic

Bisnews AFE (Thailand) Ltd. v. Aspen Rsch. Grp. Ltd.,

No. 11 Civ. 3108 (NRB), 2012 WL 4784632, at *3 (S.D.N.Y. Oct. 4,
2012); see also Lantheus Med. Imaging, Inc. v. Zurich Am. Ins.
McGee does not explain whether these 58 documents were made available to him
or only to Stein and Lhote.
3

-4-

Co., 841 F. Supp. 2d 769, 776 (S.D.N.Y. 2012) (citing cases).

The

rationale of this principle is obvious: if it is not appropriate
to require an entity, and in this case a party, to respond to a
discovery demand under domestic rules, it would be problematic to
require a foreign entity, and in this case a non-party, to do so
through the Hague Convention.
McGee’s statement in his reply that he “is in no way seeking
to circumvent the Court’s prior order” rings hollow.
(“Reply”) at 2.
request

for

ECF No. 103

For example, in our earlier opinion, we denied a

documents

concerning

SKAT’s

compliance

with

the

Settlement Agreement’s confidentiality provision on the basis that
the confidentiality provision is not at issue in this case and
thus any reliance on it for purposes of obtaining discovery would
be “plainly misplaced.”

Discovery M&O at 4.

Yet, seemingly

undeterred by this ruling, McGee now seeks from SØIK any written
communications

concerning

“SKAT’s

obligations

related

to

confidentiality under the Settlement Agreement,” the very category
of

documents

we

already

deemed

irrelevant.

Requests

at

12.

Seeking letters rogatory is not a substitute for re-argument.
The second issue with respect to the proposed Letter of
Request was foreshadowed in the Court’s Discovery M&O as well, and
yet, once again, McGee’s letter motion failed to acknowledge the
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issue. This Court was explicit: “[S]ince [McGee, Stein, and Lhote]
are criminal defendants in proceedings commenced by SØIK, [they]
may not use this case to obtain discovery for use in the criminal
case which may not be available to them in that proceeding.”
Discovery M&O at 5.

Given the breadth of documents requested from

SØIK, the Court is justifiably concerned that the requests are
being advanced either with an ulterior motive or in violation of
Danish criminal procedure.
speaks

volumes.

Without

McGee’s failure to address the issue
question,

McGee’s

requests

raise

international comity concerns which McGee neither acknowledges nor
grapples with.

Cf. Wultz v. Bank of China Ltd., 910 F. Supp. 2d

548, 556 (S.D.N.Y. 2012) (“Ordering the production of the nonpublic regulatory documents of a foreign government may infringe
the sovereignty of the foreign state and violate principles of
international comity to a far greater extent than the ordered
production of private account information in contravention of
foreign bank secrecy laws[.]”).
Apart from the fundamental issues just discussed, the Court
has additional concerns as well.

To start, there has been no

showing as to why it is necessary to obtain discovery from SØIK
given that the fulfillment of SKAT’s obligations under Section
8(f) of the Settlement Agreement can -- and indeed, must -- be
proven entirely by SKAT’s own communications with SØIK.
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As the

parties are well aware, Section 8(f) requires SKAT to: promptly
upon the execution of the Agreement, (1) bring, in writing, the
Agreement

and

its

terms

to

the

attention

of

SØIK;

and

(2)

represent, in writing, that (a) the Agreement reflects [Stein,
Lhote, and McGee’s] good-faith negotiation, (b) their cooperation
may result in SKAT’s recovery of additional funds, and (c) the
Agreement is in SKAT’s best interests.

Thus, it is clear that

SKAT’s compliance with Section 8(f) -- the central issue of this
case -- rises and falls with SKAT’s own communications with SØIK,
not SØIK’s communications with other governmental agencies.

While

SØIK’s records could assist in proving a negative, that possibility
in no way vitiates the affirmative burden SKAT alone must bear.
Again, McGee has not shown that it is “necessary and appropriate”
to obtain expansive discovery from a foreign prosecuting authority
given that such discovery is plainly not essential to the merits
of the case.

Skyline Steel, L.L.C. v. PilePro, L.L.C., No. 13

Civ. 8171 (JMF), 2015 WL 13832108, at *1 (S.D.N.Y. Jan. 28, 2015). 4
In addition, given the breadth and substance of these requests
and the role of the requested entity, the delay that would result
if the Court granted them is “close to certain.”

Id. at *2; see

4 To be clear, SKAT must recognize that its opposition to McGee’s requests will,
in all likelihood, preclude it from relying on any documents McGee is seeking
here to aid in its own defense.

-7-

also In re Air Cargo Chipping Servs. Antitrust Litig., 278 F.R.D.
51, 53 (E.D.N.Y. 2010) (“[T]he outcome of a request pursuant to
the [Hague] Convention is by no means certain, and making the
request will undeniably result in delays of unknown, and perhaps
considerable, duration.”).
case.

Delay is not an abstract issue in this

There is a fact discovery cutoff of May 1, 2024, ECF No.

98, and, at least presently, a drop-dead date of December 10, 2024
-- the date by which Stein, Lhote, and McGee agreed SKAT must file
the 2021 Affidavit of Confession of Judgment, ECF No. 71.

Indeed,

McGee asks for a response to the Letter of Request from SØIK within
21 days given the fact discovery deadline.

Requests at 3.

At

this point, the Court is unwilling to jeopardize the looming
deadlines -- particularly the drop-dead date that Stein, Lhote,
and

McGee

discovery

insisted
that

be

McGee

imposed
has

--

not

for

shown

purposes
to

be

of

obtaining

necessary

and

appropriate. 5

5 McGee’s suggestion that his request was timely is disingenuous.
In their
proposed scheduling order, the parties had agreed that any Hague Convention
requests would be filed by March 13, 2024. ECF No. 91. However, counsel for
Stein and Lhote (but not McGee) waited to seek an extension of that deadline
until March 14, 2024 -- the day after the parties’ agreed-upon deadline. ECF
No. 96.
And, although the Court had failed to realize that the proposed
scheduling order was a unique document and accordingly had not timely signed
it, the Court’s failure to sign it is quite irrelevant to the agreement the
parties had previously reached, namely to file any Hague Convention request by
March 13, 2024.

-8-

Finally, there are other aspects of the proposed Letter of
Request that raise concerns and questions.

For example, McGee

requests authentication of numerous documents already produced by
SØIK to Stein and Lhote, Mot. at 4, but does not explain why these
documents were only produced to Stein and Lhote but not to McGee,
or why it is that McGee is carrying the laboring oar on those
authentication

requests.

In

a

similar

vein,

there

is

no

explanation as to why the actual plaintiffs -- Stein and Lhote -are

not

the

ones

seeking

to

authenticate

documents

if

those

documents were in fact only produced to them. McGee likewise fails
to explain the nature of these documents or why they are relevant
to this case.

In the absence of any such demonstration of

relevance, the Court refuses to burden a foreign governmental
For these

entity with these numerous authentication issues. 6
additional reasons, the Court denies McGee’s requests.

In sum, McGee does not come remotely close to justifying his
broad requests on a foreign prosecuting authority that has brought
criminal charges against him and the named plaintiffs. Given their
myriad

flaws,

the

Court

denies

McGee’s

requests

in

full

and

6
Additionally, McGee fails to explain why these documents need to be
authenticated in the first place if they were produced in the context of the
criminal prosecution in Denmark.
Of course, there may be an obvious
explanation, but McGee certainly does not provide one.

-9-

respectfully requests the Clerk of Court to terminate the motion
pending at ECF No. 100.

SO ORDERED.
Dated:

New York, New York
March 27, 2024

____________________________
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE

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