In re Application of MONIKA NIEDBALSKI, Applicant, For an Order Pursuant to 28 U.S.C. § 1782 Granting Leave to Obtain Discovery for Use in a Foreign Proceeding.
21-MC-00747 (JGK) (BCM)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
May 8, 2023
BARBARA MOSES, United States Magistrate Judge.
REPORT AND RECOMMENDATION TO THE HON. JOHN G. KOELTL
By Order dated October 15, 2021 (the Order) (Dkt. 7), I granted Monika Niedbalski‘s application, made pursuant to
I. BACKGROUND
Niedbalski is one of many plaintiffs in the Alberta Proceeding, brought against the Walton Group for fraud and related torts. In their Statement of Claim, filed in the Alberta Court on May 27, 2021, plaintiffs alleged that they invested and lost over $13 million (CAD) in syndicated land development projects promoted by the Walton Group by means of false representations and material omissions. See Declaration of Jonathan P. Rossall, Q.C. (Rossall Decl.) (Dkt. 2), Ex. 1 (Dkt. 2-1) (St. of Claim) ¶¶ 99(f), 102, 142-44. The Alberta plaintiffs further allege that the Walton Group “diverted” the funds they invested to purchase different properties, “while syphoning of management and commission fees . . . to pay for the extravagant lifestyles” of various individual defendants. St. of Claim ¶ 108.
In this Court, Niedbalski filed an ex parte application (the Application) (Dkt. 1) on September 10, 2021, to obtain documents pursuant to
On October 15, 2021, I granted the Application and issued the Order, permitting Niedbalski to serve subpoenas on the Respondents. Order ¶ 3. Although I did not require Niedbalski to serve the Application upon WIGI before acting on it, I noted that the subpoenas themselves were “governed by . . .
Two weeks later, on October 28, 2021, WIGI filed a letter seeking leave to move for reconsideration, an extension of time within which to do so, and a stay of the Order pending its reconsideration motion. WIGI Ltr. (Dkt. 8) at 1. WIGI asserted, among other things, that although the Statement of Claim in the Alberta Proceeding was filed on May 27, 2021, “neither [WIGI] nor any of the other Defendants [in the Alberta Proceeding] were served with the Statement of Claim or were even aware that there was an Alberta Proceeding.” Id. On October 29, 2021, the parties stipulated (and I so-ordered) that Niedbalski “will not oppose any motion to intervene [WIGI] may file,” that WIGI‘s deadline to move for reconsideration would be extended to November 9, 2021, and that Niedbalski “will not serve any subpoenas issued pursuant to the Order pending a decision on Walton‘s motion for reconsideration.” See Stip. & Order (Dkt. 11) ¶¶ 1-2, 4.
On September 9, 2022, at my request (see Dkt. 25), Niedbalski submitted a copy of the docket in the Alberta Proceeding (Dkt. 26), showing that WIGI and its co-defendants filed their Statement of Defence on December 21, 2021, along with a Counterclaim. (Dkt. 26-1 at ECF pp. 30-98.) On October 6, 2022, WIGI updated the record with a copy of an order issued by the Alberta Court on September 9, 2022, directing plaintiffs to serve their “individual Affidavits of Records no later than November 1, 2022,” or risk having their claim “struck without further notice.” (Dkt. 27-1.) As of that date, it appears that Niedbalski and her co-plaintiffs in the Albert Proceeding had made no effort to take party or non-party discovery in Canada.
II. THE MOTION TO INTERVENE
WIGI moves to intervene pursuant to
A. Legal Standards
B. Discussion
The Second Circuit has repeatedly recognized that, in § 1782 actions, “the ultimate targets of a § 1782 discovery order issued to third parties have standing to challenge the district court‘s power to issue a subpoena under the terms of an authorizing statute.” In re Application of Sarrio, S.A., 119 F.3d 143, 148 (2d Cir. 1997). Thus, courts routinely grant timely intervention motions by those “ultimate targets.” See, e.g., In re Costa Pinto, 2022 WL 4088012, at *3-4 (S.D.N.Y. Sept. 6, 2022) (granting motion for intervention as of right pursuant to Rule 24(a)(2)); In re Hornbeam Corp., 2015 WL 13647606, at *2-3 (S.D.N.Y. Sept. 17, 2015) (granting motion for permissive intervention pursuant to Rule 24(b)(2)), aff‘d, 722 F. App‘x 7 (2d Cir. 2018).4
As for the remaining intervention elements, WIGI asserts that it has an interest in this action, which may be impaired by its disposition and is not adequately protected by Niedbalski or the Respondents, because WIGI “has very substantial ongoing business with the discovery targets [i.e., the Respondents], and is concerned that service of the subpoenas might interfere with that business.” WIGI Mem. at 4.
Standing alone, this vague and conclusory assertion might not satisfy the second prong of the intervention test. See United Parcel Serv. of Am., Inc. v. Net, Inc., 225 F.R.D. 416, 421 (E.D.N.Y. 2005) (“In considering a motion to intervene, the court must accept as true [the] non-conclusory allegations of the motion.“) (emphasis added); accord Costa Pinto, 2022 WL 4088012, at *3. It is well-settled, however, that intervention is appropriate where the § 1782 applicant seeks banking records to use against the proposed intervenor – as Niedbalski clearly does here – from third-party financial institutions that are unaffiliated with the intervenor and thus are unlikely to adequately protect its interests. See Costa Pinto, 2022 WL 4088012, at *4 (granting motion by targets of § 1782 discovery order to intervene as of right where the wire transfer records sought by the applicant would be “use[d] against them in Brazilian legal proceedings“); Hornbeam, 2015 WL 13647606, at *3 (granting motion by Symeou to intervene for the purpose of moving to vacate ex parte order permitting Hornbeam to subpoena Symeou‘s wire transfer records because “neither Symeou nor I am required to accept at face value Hornbeam‘s assertion that it ‘is not going to use the requested information against Symeou‘“). Moreover, as in Hornbeam, no party to this action has “identified any prejudice it would suffer from permitting [WIGI] to intervene.” Id.
III. THE MOTION FOR RECONSIDERATION AND VACATUR
A. Legal Standards
Once the statutory factors are satisfied, the district court “is free to grant discovery in its discretion.” Schmitz, 376 F.3d at 83-84 (quoting In re Metallgesellschaft AG, 121 F.3d 77, 78 (2d Cir. 1997)). Although the district court‘s discretion is broad, it must be exercised “in light of the twin aims of the statute: ‘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.‘” In re Metallgesellschaft, 121 F.3d at 79 (quoting In re Malev, 964 F.2d 97, 100 (2d Cir. 1992)). In particular, the district court should consider the factors articulated in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004):
(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 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 assistance“; (3) “whether the § 1782(a)
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.”
In re del Valle Ruiz, 939 F.3d 520, 533-34 (2d Cir. 2019) (quoting Intel, 542 U.S. at 264-65).
B. The Parties’ Contentions
WIGI concedes by its silence that the Application satisfies the statutory requirements, and it makes no effort to challenge this Court‘s findings as to two of the four Intel factors: that “the Respondents are not expected to become parties to the Alberta Proceeding, thus, the need for this discovery is more apparent,” and that “the Application seeks discovery that is not unduly intrusive or burdensome, as the Application requests evidence of the type normally produced by financial institutions as third parties in litigation.” Order ¶ F. Instead, WIGI focuses on the second and third Intel factors, arguing that this Court should vacate the Order because “the Alberta Court would not be receptive to an ex parte application or U.S. federal-court judicial assistance by way of an ex parte application,” WIGI Mem. at 5, and the Application seeks to “circumvent discovery restrictions and procedures under Alberta law.” Id. at 7.
Relying primarily on the Wittmann Declaration,5 WIGI explains that, although Rule 5.13 of the Alberta Rules of Court “permits parties to obtain records from non-parties,” the rule “has a narrow purpose” and “can only be used if the relevance and materiality of the records at issue is shown.” WIGI Mem. at 7; see also Wittmann Decl. ¶¶ 32 (Rule 5.13 “must be used carefully, and the applying party must show the Court evidence that the non-party actually possesses (or controls) the records, and that they are probably relevant to specific matters pleaded in the action“). In
Moreover, WIGI asserts, “the standard is even higher for ex parte discovery applications.” Wittmann Decl. ¶ 26. Before an Alberta court will grant an application for ex parte discovery, there must be “convincing evidence the documents demanded will contain incriminating evidence, and that there is a real possibility that any such evidence may be destroyed before the discovery process can do its work.” Id. ¶ 41; see also WIGI Mem. at 6 (“To obtain such ex parte relief [in Alberta], the applicant would have to demonstrate the ‘emergency’ basis of the application to the Alberta Court, and to demonstrate with some reasonable and credible evidence that the records in question were likely to be destroyed if the affected parties received notice of the application.“) Moreover, “an Alberta lawyer” seeking an ex parte order must “outline the potential defences to such an application,” Wittmann Decl., ¶ 58, which attorney Rossall failed to do when the Application was presented to this Court. WIGI Mem. at 9.6 In short, WIGI contends that the Alberta Court “would have rejected the [A]pplication,” had it been filed in that forum, and on that basis urges this Court to “exercise its discretion to do the same.” Id. at 6.
In response, Niedbalski argues that “procedural requirements under Canadian law are irrelevant to this Court‘s determination of
C. Discussion
Niedbalski has the better end of the dispute. At bottom, WIGI‘s argument rests on (i) its contention that the Alberta Court “likely” would not have granted the Application, had it been presented in that forum, WIGI Mem. at 2; see also id. at 6 (WIGI “believes the Alberta Court would have rejected the [A]pplication“); and (ii) its assumption that this is grounds for denial of the Application by this Court under
[T]hrough § 1782 Congress has seen fit to authorize discovery which, in some cases, would not be available in foreign jurisdictions, as a means of improving assistance by our courts to participants in international litigation and encouraging foreign countries by example to provide similar means of assistance to our courts. If 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.
Similarly, as Niedbalski points out, see Opp. Mem. at 9, the courts have declined to read any “‘quasi-exhaustion’ requirement” into § 1782. Mees, 793 F.3d at 303; Metallgesellschaft, 121 F.3d at 79 (such a requirement “is not supported by the statute‘s text and “runs counter to its express purposes“). Since an applicant need not “tr[y] and fail[] to obtain the discovery” in the foreign tribunal before filing a § 1782 application in the United States, id. (citing Metallgesellschaft, 121 F.3d at 79), WIGI‘s request that this Court require Niedbalski to first seek any necessary discovery “through appropriate procedures in the Alberta [Proceeding],” WIGI Mem. at 11, misapprehends the function of § 1782.
1. Second Factor
To be sure, Canadian law is relevant to the second and third Intel factors. See Mees, 793 F.3d at 303. However, under the second factor (the “receptivity of the . . . court or agency abroad to U.S. federal-court assistance,” Intel, 542 U.S. at 265), the applicant need not produce an “overt expression from the foreign court that it wants or needs” the specific information sought under § 1782. Mees, 793 F.3d at 303-04. Rather, the party objecting to the application must present “proof that [the] tribunal would reject evidence obtained with the aid of § 1782.” In re Accent Delight Int‘l Ltd., 2018 WL 2849724, at *4 (S.D.N.Y. June 11, 2018) (quoting Mees, 793 F.3d at 303 n.20) (emphasis added), aff‘d, 791 F. App‘x 247 (2d Cir. 2019). Moreover, that proof must be “authoritative.” See Application of Esses, 101 F.3d 873, 876 (2d Cir. 1996) (affirming grant of § 1782 application where party resisting discovery offered no “authoritative evidence that the Hong Kong court . . . would reject the evidence” obtained in the United States); Euromepa S.A. v. R. Esmerian, Inc., 51 F.3d 1095, 1100 (2d Cir. 1995) (“[A] district court‘s inquiry into the
Here, as in Esses and Abdalla, WIGI provides no proof (much less “authoritative proof“) that the Alberta Court would reject evidence because it was obtained in the United States pursuant to § 1782. In fact, WIGI acknowledges that Alberta law permits parties to seek – and permits the Alberta Court to issue – “letters rogatory seeking the assistance of [a] foreign court to compel production from third parties as contemplated by
It is true, of course, that Niedebalski applied directly to this Court, rather that ask the Alberta Court to order the discovery and then issue letters rogatory to enforce its orders. In WIGI‘s view, this was an “effort to bypass the ordinary discovery procedures applicable in the Alberta Court, which “raises a red flag,” because “[t]his Court, unlike the Alberta Court, is in no position to evaluate Applicant‘s allegations of misconduct – which are inaccurate and disputed by WIGI.” WIGI Reply Mem. at 3-4. But Niedbalski is concededly an “interested party,” and therefore had
Moreover, the propriety of an application under § 1782 does not turn on “the merits of the proposed claim” in the foreign court. IJK Palm LLC v. Anholt Servs. USA, Inc., 33 F.4th 669, 680 (2d Cir. 2022); see also In re Zouzar Bouka; Vision Indian Ocean S.A., 2022 WL 15527657, at *4 (S.D.N.Y. Oct. 28, 2022) (rejecting respondents’ “numerous arguments as to why the [foreign] proceeding is flawed on the merits,” because “[w]hat matters is whether the proceeding was in fact instituted and whether it is in fact receptive to evidence“), modified on reconsideration, on other grounds, sub nom. In re Bouka, 2023 WL 1490378 (S.D.N.Y. Feb. 3, 2023). Thus, the fact that this Court is in a poor position to evaluate the merits of the Alberta Proceeding neither distinguishes this case from other § 1782 proceedings nor furnishes discretionary grounds for denying the Application.
The third Intel factor asks “whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States.” Intel, 542 U.S. at 265. In WIGI‘s view, that question should be answered in the affirmative, because the Application likely would not satisfy the requirements of Alberta law for obtaining third-party discovery – particularly on an ex parte basis. See WIGI Mem. at 7-9.7 The Second Circuit has made it clear, however, that “there is no requirement under § 1782 that the type of discovery sought be available in the relevant foreign jurisdiction[.]” Schmitz, 376 F.3d at 84. “[T]here 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 those documents.” In re Accent Delight Int‘l Ltd., 791 F. App‘x 247, 251 (2d Cir. 2019) (summary order); see also Mees, 793 F.3d at 303 n.20 (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“).
Here, as in Accent Delight, WIGI has shown, at best, that the discovery sought pursuant to § 1782 might not be available from the foreign court. It has not provided “any showing that the policy or restrictions of [the] relevant foreign jurisdiction prohibit the discovery sought by [Niedbalski].” 791 Fed. App‘x at 251 (emphasis in original). Consequently, the third Intel factor furnishes no basis upon which to deny the Application.
Nothing in WIGI‘s motion papers undermines the findings made in the Order: that the requirements of
Consequently, I recommend, respectfully, that WIGI‘s motion to intervene be GRANTED, but that its motion to reconsider and vacate the October 15, 2021 Order be DENIED. I further recommend, in light of Associacao dos Profissionais dos Correios, that the Application once again be GRANTED.
Dated: New York, New York
May 8, 2023
BARBARA MOSES
United States Magistrate Judge
NOTICE OF PROCEDURE FOR FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have 14 days from this date to file written objections to this Report and Recommendation pursuant to