1:18-mc-00497
S.D.N.Y.Dec 20, 2018Background
- Postalis, a Brazilian pension fund, seeks discovery under 28 U.S.C. § 1782 from parent company The Bank of New York Mellon (BNY Mellon) in S.D.N.Y. for use in six pending lawsuits in Brazil against three BNY Mellon subsidiaries (DTVM, Ativos, Patrimônio) alleging negligent fund administration and management.
- Postalis invested in multiple BNY Mellon‑administered funds (notably the Sovereign Fund) and alleges fraud/mismanagement discovered beginning in 2011; Brazilian regulators and prosecutors investigated and Postalis was later placed under intervention.
- BNY Mellon is headquartered in the Southern District of New York; it is not a party in the Brazilian suits and Postalis concedes it seeks documents about BNY Mellon’s knowledge and internal communications.
- Postalis publicly stated the § 1782 application would help it decide and prepare a potential U.S. lawsuit against BNY Mellon, i.e., the discovery could be used to plead a U.S. action.
- The subpoena sought broad document production (all documents 2005–2016 concerning the Brazil funds) and a Rule 30(b)(6) deposition of BNY Mellon; Postalis proposed a protective order to limit use to the Brazilian proceedings.
- District court denied the § 1782 application: found Postalis failed to carry its burden that the discovery was "for use" in the foreign proceedings, and the Intel discretionary factors weighed against relief (non‑party/parent status, attempt to circumvent U.S. pre‑litigation discovery rules, and overbroad/burdensome requests).
Issues
| Issue | Postalis' Argument | BNY Mellon’s Argument | Held |
|---|---|---|---|
| Whether § 1782 requirements satisfied (esp. discovery "for use" in foreign proceeding) | Evidence will aid Postalis in proving negligence/fiduciary breaches by subsidiaries in Brazilian suits | Postalis publicly said it seeks discovery to prepare a U.S. lawsuit; thus not genuinely "for use" in Brazil | Denied — Postalis did not show requested discovery was for use in foreign proceedings |
| Whether Intel discretionary factors favor § 1782 relief | Brazilian courts receptive; protective order can limit use to Brazil | Parent is non‑party; subsidiaries are parties and within Brazil’s reach; applicant seeks pre‑litigation discovery to sue in U.S. | Denied — factors weigh against relief (non‑party parent, attempt to circumvent rules, overbroad) |
| Whether request attempts to circumvent U.S. discovery rules (pre‑action fishing) | Protective order would prevent misuse; documents could still be relevant to Brazil | Public statements and scope indicate pre‑litigation fishing to build U.S. suit; Rule 27 does not authorize discovery to gather a claim | Denied — court found attempt to obtain pre‑litigation discovery and circumvent Federal Rules |
| Whether subpoena is unduly burdensome/overbroad | Will produce relevant communications, compliance reports, emails if ordered/narrowed | Subpoena seeks all documents about nine funds over a decade, regardless of relevance | Denied — subpoena is overbroad and not shown relevant/proportional to Brazilian claims |
Key Cases Cited
- Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) (establishes § 1782 statutory framework and discretionary Intel factors)
- Certain Funds, Accounts &/or Inv. Vehicles v. KPMG, L.L.P., 798 F.3d 113 (2d Cir. 2015) ("for use" requires that requested discovery will be employed with some advantage in the foreign proceeding)
- In re Accent Delight Int'l Ltd., 869 F.3d 121 (2d Cir. 2017) (§ 1782 does not bar subsequent use of obtained evidence in other proceedings)
- In re Esses, 101 F.3d 873 (2d Cir. 1996) (§ 1782 assists international litigation and encourages reciprocal assistance)
- Brandi-Dohrn v. IKB Deutsche Industriebank AG, 673 F.3d 76 (2d Cir. 2012) (interpretation of "for use" and admissibility considerations under § 1782)
- In re Application for an Order Permitting Metallgesellschaft AG to Take Discovery, 121 F.3d 77 (2d Cir. 1997) (applicant is an "interested person" under § 1782)