3:23-mc-00006
W.D. Wis.Sep 14, 2023Background
- B&;C KB Holding GmbH (Vienna) alleges it was defrauded in its €258.4 million purchase of an 80% interest in the Schur Flexibles Group; Austrian prosecutors opened a criminal investigation.
- B&;C sought discovery under 28 U.S.C. § 1782 from LG and an LG managing partner in SDNY; that application was granted and is on appeal.
- B&;C then filed parallel § 1782 applications seeking discovery from passive investors in the LG Fund, including the State of Wisconsin Investment Board (SWIB), which holds a very small (<0.05%) commitment to the fund.
- B&;C requested documents and a deposition on seven topic areas (2016–present), including communications about Schur, Schur financial statements, due diligence, roles of four individuals under investigation, and SWIB’s profit/loss tracing.
- SWIB opposed, arguing delay, overbreadth, burden, duplicative discovery (given SDNY), and irrelevance of tracing downstream investor proceeds. It also asked the court to stay proceedings pending the SDNY appeal.
- The magistrate judge denied SWIB’s stay request and granted B&;C’s § 1782 application in part: SWIB must produce documents responsive to Requests 1–3 (communications about Schur, Schur financials, documents concerning the four investigated individuals), but need not produce profit/loss or tracing documents (Requests 4–6) nor provide a deposition designee.
Issues
| Issue | Plaintiff's Argument (B&;C) | Defendant's Argument (SWIB) | Held |
|---|---|---|---|
| Statutory §1782 elements — is discovery “for use” in a foreign proceeding? | B&;C: as an alleged victim may submit evidence to Austrian prosecutor and will use materials there. | SWIB: challenges "for use" showing; alleges fishing, delay, and lack of prosecutor interest. | Court: statutory elements met; de minimis showing satisfied. |
| Intel factor — participant in foreign proceeding (need for §1782 aid) | B&;C: SWIB is a nonparticipant and unlikely to provide voluntarily; SDNY respondents stonewalling. | SWIB: information obtainable from Austria’s investigation targets or SDNY respondents. | Court: favors B&;C; SWIB’s passive, remote role means §1782 aid is appropriate. |
| Intel factor — receptivity / circumvention of foreign procedures | B&;C: Austrian law allows victims to submit evidence; no exhaustion required; prosecutor must consider submissions. | SWIB: Austrian prosecutor hasn’t requested this info; discovery should be sought by prosecutor or Austria. | Court: no proof Austria would oppose U.S. assistance; factor favors granting discovery; not an attempt to circumvent. |
| Intel factor — unduly intrusive/overbroad/burdensome (scope & tracing downstream proceeds) | B&;C: needs communications, financials, and may trace proceeds because fraud proceeds could be forfeitable under Austrian law. | SWIB: passive investor; tracing profit/loss is speculative, disproportionate, duplicative, and unduly burdensome; deposition imposes excessive burden. | Court: narrowed relief — grant Requests 1–3; deny Requests 4–6 (profit tracing) and deny deposition; deny stay. |
Key Cases Cited
- Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (U.S. 2004) (establishing §1782 statutory framework and discretionary Intel factors)
- Heraeus Kulzer, GmbH v. Biomet, Inc., 633 F.3d 591 (7th Cir. 2011) (§1782 permits discovery comparable to U.S. litigation subject to district court discretion)
- In re Veiga, 746 F. Supp. 2d 8 (D.D.C. 2010) (applicant’s burden to show discovery is "for use" is minimal)
- Certain Funds, Accounts &/or Investment Vehicles v. KPMG, L.L.P., 798 F.3d 113 (2d Cir. 2015) (need for a means to inject evidence into foreign proceeding under §1782)
- Mees v. Buiter, 793 F.3d 291 (2d Cir. 2015) (limitations on §1782 where requested materials are plainly irrelevant)
- In re Schlich, 893 F.3d 40 (1st Cir. 2018) (relevance threshold for §1782 applications)
- Euromepa S.A. v. R. Esmerian, Inc., 51 F.3d 1095 (2d Cir. 1995) (foreign receptivity factor — need authoritative proof of foreign opposition to U.S. assistance to deny relief)
- In re Application of Procter & Gamble Co., 334 F. Supp. 2d 1112 (E.D. Wis. 2004) (declining §1782 relief where it would undermine foreign nondiscoverability policy)
- Ecuadorian Plaintiffs v. Chevron Corp., 619 F.3d 373 (5th Cir. 2010) (absence of a clear directive from foreign tribunal that it would reject evidence produced in U.S. weighs in favor of assistance)