In re Application of REFINERÍA DE CARTAGENA S.A.S. for an Order Directing Discovery from MASON CAPITAL MANAGEMENT, LLC Pursuant to 28 U.S.C. § 1782
23 Misc. 455 (JPC)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
01/08/24
JOHN P. CRONAN, United States District Judge
JOHN P. CRONAN, United States District Judge:
On November 28, 2023, Applicant Refinería de Cartagena S.A.S. (“Reficar“) filed an ex parte application pursuant to
I. Factual Background1
A. The Arbitral Award, the Post-Award Proceeding, and the Chapter 15 Proceeding
As mentioned, the instant application involves the CB&I Entities’ restructuring proceedings in England and the Netherlands. Reficar‘s interest in these proceedings arises out of an award (the “Arbitration Award“) issued by an international arbitral tribunal on June 2, 2023, under the Arbitration Rules of the International Chamber of Commerce, following arbitration proceedings that lasted seven years. Stenglein Decl. ¶¶ 2, 3, 4. Pursuant to the Arbitration Award, the CB&I Entities jointly owe Reficar approximately 937.5 million United States dollars—plus interest on that amount accruing from December 31, 2015, and legal and arbitration costs of
On October 10, 2023, the CB&I Entities petitioned the United States Bankruptcy Court for the Southern District of Texas for relief under Chapter 15 of the Bankruptcy Code. Stenglein Decl. ¶ 7; see In re CB&I UK Ltd., No. 23-90795 (CML) (Bankr. S.D. Tex.) (“Chapter 15 Proceeding“), Dkt. 46. That same day, the Honorable David R. Jones, United States Bankruptcy Judge, who was covering for the judge presiding over the Chapter 15 Proceeding, see Bivens Decl., Exh. B at 2:8-10, the Honorable Christopher M. Lopez, granted the requested relief and entered an order pursuant to which the proceedings before Judge Woods were stayed. Stenglein Decl. ¶ 7; Chapter 15 Proceeding, Dkt. 46; see also Chicago Bridge & Iron Company N.V., No. 23 Civ. 4825 (GHW), Dkt. 73 (“In light of the stay order entered on October 10, 2023 by the U.S. Bankruptcy Court for the Southern District of Texas, this case is stayed pending further order of the Bankruptcy Court.“). On October 16, 2023, Reficar moved the bankruptcy court to lift its stay order “only to allow the” proceeding before Judge Woods “to conclude.” Chapter 15 Proceeding, Dkt. 99 ¶¶ 3, 9; Stenglein Decl. ¶ 8. Judge Lopez denied Reficar‘s request on November 29, 2023. See Bivens Decl. ¶ 4; see also id., Exh. B at 47:10-54:16 (transcript of November 29, 2023 hearing).
B. The Foreign Restructuring Proceedings
Meanwhile, in September 2023, CB&I UK initiated restructuring proceedings in England, and CB&I N.V. initiated restructuring proceedings in the Netherlands. Stenglein Decl. ¶ 6; Schumann Decl. ¶ 3; Vroom Decl. ¶ 12. These proceedings were commenced pursuant to a transaction support agreement (the “Transaction Support Agreement“), into which McDermott and the CB&I Entities (together, the “McDermott Group“) and “more than 75%, in aggregate, of [McDermott‘s] secured letter of credit [] providers, funded debt creditors and equity holders” entered on September 8, 2023. Schumann Decl., Exh. 1 (“McDermott Sept. 8, 2023 Press Release“) at 1; see also id. (“To implement the [Transaction Support] Agreement, McDermott International Holdings B.V. . . . will initiate procedures in the Netherlands under the Dutch Act on Confirmation of Extrajudicial Plans . . . . CB&I UK Limited will initiate a Restructuring Plan under Part 26A of the Companies Act 2006 (UK) in England.“). Among the signatories of the Transaction Support Agreement is a group of fifteen secured creditors and equity holders of the McDermott Group (the “Ad Hoc Group“); Mason, a hedge fund manager, is a member of the Ad Hoc Group. Devaney Decl. ¶ 6; Martino Decl. ¶ 2; Schumann Decl. ¶ 10. The Ad Hoc Group engaged Davis Polk & Wardwell as counsel in early 2023 to advise on “restructuring and extension of McDermott‘s secured indebtedness“—this included, starting in early May 2023, advice regarding the English and Dutch restructuring proceedings. Martino Decl. ¶¶ 3, 5.
Unlike Mason and the other members of the Ad Hoc Group, Reficar is an unsecured creditor of the CB&I Entities; in fact, Reficar is the CB&I Entities’ largest unsecured creditor. Stenglein Decl. ¶ 9. Under the CB&I Entities’ proposed restructuring plans in the two proceedings, Reficar will receive a maximum, contingent payment of four million United States dollars over two years, which Reficar will share with the Contraloría General de la República. Id. The CB&I
1. Proceedings in England
On September 24, 2023, CB&I UK applied to the English High Court for directions to convene meetings, at which certain of its creditors (the “Plan Creditors“), including both Mason and Reficar, could evaluate CB&I UK‘s proposed restructuring plan and then vote on a resolution for the plan‘s approval. Devaney Decl. ¶ 7; id., Exh. 1 at 13 (defining the Plan Creditors). The English court scheduled an initial “Convening Hearing” for September 28, 2023. Id. ¶ 7. Before that hearing, on September 26 and 27, 2023, CB&I UK submitted evidence in support of its proposed restructuring plan. Id. ¶ 7(a). Also on September 27, 2023, the Ad Hoc Group and other supporting creditors (i.e., senior lenders and issuers that are also parties to the Transaction Support Agreement) submitted their respective skeleton arguments, which outlined their anticipated submissions in support of the plan, as did Reficar and other objecting creditors in opposition to the plan. Id. ¶¶ 6, 7(b), 7(c). After it held the Convening Hearing, the English High Court ordered seven separate meetings for each class of the Plan Creditors to consider the restructuring plan. Id. ¶ 8. Under Part 26A of the UK Companies Act 2006, creditors must be grouped into classes “with other creditors whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.” Id. Accordingly, Reficar, as an unsecured creditor, is in a different group from members of the Ad Hoc Group, which hold secured debt, and thus the two will attend separate plan meetings. Id.
Pursuant to the scheduling order for the English proceedings, Reficar filed and served its evidence in response to CB&I UK‘s evidence on November 23, 2023. Id. ¶ 14. The deadline for CB&I UK and the supporting creditors to serve their evidence in reply was December 21, 2023. Id. ¶ 13(b). Several procedural steps remain in the English proceedings. First, the seven meetings for each class of Plan Creditors must be held. Id. ¶ 17.3 Moreover, a meeting of experts will be held before January 12, 2024. Id. ¶ 13(c). And finally, the Sanction Hearing, at which the English High Court will consider whether to approve the restructuring plan, is scheduled to commence on February 8, 2024. Schumann Decl. ¶ 9; see Devaney Decl. ¶ 13(e) (“[T]he Sanction Hearing was re-listed with a time estimate of six days, plus two additional days of pre-reading, commencing on 6 February 2024.“).
Before the English High Court may exercise its discretion to approve the restructuring plan notwithstanding Reficar‘s opposition, it must find that certain prerequisites have been satisfied. Devaney Decl. ¶ 18 (citing Section 901G(4) of the Companies Act 2006); Schumann Decl. ¶ 6. First, no member of a dissenting class may be any worse off than they would be under the “relevant alternative” to the restructuring plan—that is, the most likely alternate outcome for CB&I UK, failing the court‘s approval of the plan. Devaney Decl. ¶ 18(a); Schumann Decl. ¶ 6(a). Second, a number representing at least 75% in value of a class of creditors or shareholders with a “genuine economic interest” in CB&I UK in the event of the “relevant alternative” must have approved the
2. Proceedings in the Netherlands
Also in September 2023, CB&I N.V. initiated restructuring proceedings in the Netherlands. Vroom Decl. ¶¶ 2, 12. On October 10, 2023, the Dutch court appointed, at Reficar‘s request, a restructuring expert for these proceedings. Id. ¶ 13; see also id., Exh A.
As background, under the Dutch Act on Confirmation of Extrajudicial Restructuring Plans (in Dutch: Wet Homologatie Onderhands Akkoord, and thus the “WHOA“), a debtor may offer a restructuring plan to its creditors and shareholders if it is reasonably likely that it will not be able to continue to pay debts imminently due. Vroom Decl. ¶ 4. Alternatively, certain stakeholders may request that the Dutch court instead appoint a restructuring expert with exclusive authority to offer a WHOA plan to the debtor‘s stakeholders on the debtor‘s behalf. Id. ¶ 5. Once a certain amount of support for the plan has been obtained, the offeror of the WHOA plan (either the debtor or the court-appointed restructuring expert) may ask the Dutch court to schedule a hearing and ratify the plan. Id. ¶ 7. But the Dutch court can refuse to ratify the WHOA plan if certain criteria are not met. Id. ¶ 8; van den Berg Decl. ¶ 6. For instance, a dissenting creditor that forms part of a dissenting class of creditors may not receive less value under the WHOA plan than it would receive according to its legal ranking or preference, unless there are reasonable grounds for such
In the Dutch proceedings, the parties are presently engaged in a valuation protocol that was prepared by the restructuring expert, with Reficar‘s participation, and submitted to the Dutch court on November 14, 2023. van den Berg Decl. ¶ 9; see Vroom Decl. ¶¶ 22-26. Under this protocol, CB&I N.V. is required to share data that the restructuring expert deems necessary to determine the liquidated and reorganization value of the McDermott Group. Vroom Decl. ¶¶ 22-24. It appears that a hearing on the restructuring expert‘s request for the Dutch court to enter an interim judgment on certain aspects of CB&I N.V.‘s WHOA plan, including valuation assumptions underlying the plan, may be scheduled soon. Id. ¶ 32.
II. Procedural History
On November 28, 2023, Reficar filed an ex parte application pursuant to
On December 4, 2023, Mason requested leave to file an opposition to Reficar‘s application by December 18, 2023. Dkt. 11. The Court granted the request and further set a December 26, 2023 deadline for Reficar to submit any reply. Dkt. 12. That same day, Reficar urged the Court to require Mason to include in its opposition any objections to the scope of Reficar‘s proposed subpoenas, explaining the need for an expedited timeline in light of the Sanction Hearing scheduled to begin on February 8, 2024 in the English proceedings. Dkt. 14. Reficar also requested a hearing on its application no later than January 5, 2024, and further asked the Court, should it grant Reficar‘s application, to order Mason to comply with Reficar‘s document subpoena by January 12, 2024 and its deposition subpoena by January 17, 2024. Id. Mason agreed to those terms, Dkt. 16, and so the Court set the requested briefing schedule and scheduled a hearing on the application for January 5, 2024. Dkt. 17.
On December 18, 2023, Mason submitted its opposition brief, in which it primarily argued that Reficar‘s discovery requests are unduly burdensome. Dkt. 24 (“Opposition“). Specifically, Mason contended that Reficar‘s discovery requests encompass a substantial number of privileged documents and are only minimally relevant to the restructuring proceedings. See id. at 13-24.
In its December 26, 2023 reply brief, Reficar—“in the spirit of good faith and cooperation, and taking into account certain arguments made by Mason in its opposition brief“—withdrew five of its requests (Requests 4, 8, 9, 11, and 12) and modified its first request (with modifications shown in the underlined text below), leaving the following requests:
- Request 1 (“Reply Request 1“): All documents related to any valuation placed on McDermott, CB&I UK and/or CB&I N.V. by Mason or its advisors or consultants if Mason or the Ad Hoc Group shared such valuation with McDermott, CB&I UK, or CB&I N.V. (including any officer or director of any of those companies).5
- Request 2 (“Reply Request 2“): All documents concerning the valuation placed on CB&I UK and/or CB&I N.V. by McDermott or its advisors or consultants, including Grant Thornton.6
- Request 3 (“Reply Request 3“): All documents concerning the Transaction Support Agreement entered into on September 8, 2023 between the Group,7 the Ad Hoc Group, the Steering Committee,8 and the other relevant stakeholders.
Request 5 (“Reply Request 4“): All documents concerning CB&I UK‘s proposed Relevant Alternative and the conclusion that returns to the creditors in the Relevant Alternative would be materially worse than the return available to plan creditors through the restructuring. - Request 6 (“Reply Request 5“): All documents concerning the impact of the Arbitration Award on Mason and the funds it advises.
- Request 7 (“Reply Request 6“): All correspondence within Mason (internally) or between Mason and a member of the Ad Hoc Group (or their advisors) relating to Reficar and/or the Arbitration Award.
- Request 10 (“Reply Request 7“): All documents evidencing any plan for McDermott to pursue an Initial Public Offering.9
Reply at 1-2; see also id., Appendix A at 10. Reficar also made the corresponding changes to the twelve “Areas of Designation and Inquiry” in its deposition subpoena. Reply at 2; see also id., Appendix A at 75. In response to Mason‘s broader objections, Reficar delineated categories of documents that purportedly fall outside of the attorney-client and work product privileges, and it reemphasized the relevance of its requested discovery. Reply at 2-8.
On January 3, 2024, the Court granted Mason‘s request for to file a sur-reply, which Mason filed the same day. See Dkts. 28, 29, 30 (“Sur-Reply“). In its Sur-Reply, Mason maintained that Reficar‘s application should be denied in full because Reficar‘s modifications to its subpoenas fail to cure the previously identified defects. See generally Sur-Reply.
On January 5, 2024, the Court heard arguments on Reficar‘s application. Dkt. 34 (“Jan. 5, 2024 Hr‘g Tr.“). At the conclusion of the arguments, the parties agreed to meet and confer to facilities.” See Reply, Appendix A at 5 (referring to paragraph 5.7 of the Practice Statement Letter issued by CB&I UK on September 8, 2023, for definition of “Steering Committee“), 93 (including paragraph 5.7 of the Practice Statement Letter).
III. Legal Standard
Section 1782 provides that:
The district court of the district in which a person resides or is found may order him 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. . . . The order may be made . . . upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court. . . . A person may not be compelled to give his testimony or statement or to produce a document or other thing in violation of any legally applicable privilege.
If these statutory requirements are met, a court then assesses whether it should exercise its discretion to grant the requested assistance in light of the following factors set out by the Supreme Court in Intel Corp. v. Advanced Micro Devices: (1) whether “the person from whom discovery is sought is a participant in the foreign proceeding“; (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 proof-gathering restrictions or other policies of a foreign country or the United States“; and (4) whether the request is “unduly intrusive or
For purposes of the instant decision, the Court considers Reficar‘s Reply Requests in assessing whether Reficar has met the statutory requirements under Section 1782. The Court discusses the parties’ post-argument proposals only in assessing the document requests’ breadth and scope under the fourth Intel factor.
IV. Discussion
A. Statutory Requirements Under Section 1782
The first and third statutory requirements are plainly satisfied here. First, Mason maintains its principal place of business in this District, Stenglein Decl. ¶ 13; see id., Exh. 1, and is thus “found” in this District. See In re Del Valle Ruiz, 342 F. Supp. 3d 448, 459 (S.D.N.Y. 2018), aff‘d sub nom. In re del Valle Ruiz, 939 F.3d 520 (2d Cir. 2019). And Reficar, which has actively participated in the English and Dutch proceedings to challenge the proposed restructuring plans under which the CB&I Entities would be discharged from potentially over $1 billion owed to Reficar under the Arbitration Award, undoubtedly qualifies as an “interested person” in those proceedings. See Intel, 542 U.S. at 256-57 (explaining that an “interested person” under Section 1782 includes someone with “participation” or procedural rights, who “possess[es] a reasonable interest in obtaining [judicial] assistance” (alterations in original, citation omitted)). Mason does, however, argue that Reficar has failed to demonstrate the relevance of its requested discovery
The “for use” requirement of Section 1782 mandates that the discovery sought “be employed with some advantage or serve some use in the [foreign] proceeding.” Mees v. Buiter, 793 F.3d 291, 298 (2d Cir. 2015). The term “for use” is afforded a “broad interpretation,” and the “sought-after evidence need not be admissible or even discoverable under the rules of the foreign jurisdiction.” Deposit Ins. Agency v. Leontiev, No. 17 Misc. 414 (GBD) (SN), 2018 WL 3536083, at *3 (S.D.N.Y. July 23, 2018) (internal citations omitted). Nor does the applicant need to demonstrate that the requested discovery is “something without which the applicant could not prevail” in the foreign proceeding. Mees, 793 F.3d at 298. Indeed, such a “necessity requirement” would “entail a painstaking analysis not only of the evidence already available to the applicant, but also of the amount of evidence required to prevail in the foreign proceeding“—an inquiry “fraught with danger” to the extent it requires the analysis and interpretation of foreign law. Id. at 298-99 (“We have previously rejected similarly speculative forays into legal territories unfamiliar to federal judges, because such a costly, time-consuming, and inherently unreliable method of deciding section 1782 requests cannot possibly promote the twin aims of the statute.” (internal quotation marks and alterations omitted)).
Still, it may be necessary for a court to determine the threshold relevance of the materials “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.” Certain Funds, Accounts &/or Inv. Vehicles v. KPMG, L.L.P., 798 F.3d 113, 120 n.7 (2d Cir. 2015). An applicant otherwise need only show that the requested materials “can be made use of in the foreign proceeding to increase [the applicant‘s] chances of success.” Mees, 793 F.3d at 299. The burden imposed on the applicant
The Court finds that Reficar has sustained its burden under the statute‘s “for use” requirement. Reficar‘s seven document requests (and corresponding areas of designation and inquiry in its deposition requests), as described in its Reply, fall into three categories: (1) information related to Mason‘s reasons for supporting the proposed restructuring plans; (2) information related to the McDermott Group‘s enterprise value; and (3) information related to Mason‘s position that the “relevant alternative” would be a “free-fall” bankruptcy of the McDermott Group. Opposition 18-24; Reply 5-8. Reficar represents that it intends to use these materials to challenge the restructuring plans and underlying valuation analyses submitted by the CB&I Entities in the English and Dutch proceedings. Brief at 6-7, 9-10. Indeed, Reficar‘s request for an expedited briefing scheduled was premised expressly on its “need to obtain the requested from Mason not later than January 18, 2024, in order to be able to use it in the English proceedings.” See Dkt. 14 at 1. Moreover, Reficar has provided supporting affidavits from Patrick Schumann (an English solicitor with more than fourteen years of experience in restructuring and insolvency) and Sebastian van den Berg (a Dutch attorney-at-law with over thirteen years of experience in corporate restructuring and insolvency in the Netherlands), who each declare, under the penalty of perjury, that the requested materials are relevant to key issues in the English and Dutch restructuring proceedings. See Brief at 7; Schumann Decl. ¶¶ 1, 13; van den Berg Decl. ¶¶ 1, 11.
As to the first category of requests, Reficar seeks “all documents concerning the Transaction Support Agreement” (Reply Request 3), “all documents concerning the impact of the Arbitration Award on Mason and the funds it advises” (Reply Request 5), and all internal correspondence and correspondence between Mason and a member of the Ad Hoc Group related to Reficar and/or the Arbitration Award (Reply Request 6). Reply at 6-7. According to Mr. Schumann, this information, which concerns Mason‘s motives for supporting the proposed restructuring plans, may allow Reficar to challenge the composition of one or more of the creditor classes in the English proceedings. Schumann Suppl. Decl. ¶ 7. And if the English High Court finds that one or more classes were not properly constituted, it may then refuse to approve the restructuring plan. Id.
As to the second category of requests, Reficar seeks documents concerning Mason‘s and the Ad Hoc Group‘s assessments of the McDermott Group‘s enterprise value that were shared with the McDermott Group (Reply Request 1), as well as documents concerning the valuation placed on the CB&I Entities by McDermott or its advisors or consultants (Reply Request 2). Reply at 5-6. According to Messrs. Schumann and van den Berg, this information may assist Reficar in cross-examining CB&I UK‘s valuation expert in the English proceedings and in challenging CB&I‘s valuation analysis at the upcoming Valuation Hearing in the Dutch proceedings. Schumann Suppl. Decl. ¶ 9; van den Berg Suppl. Decl. ¶ 11.
Finally, as to the third category, Reficar seeks all documents concerning CB&I UK‘s proposed “relevant alternative” (Reply Request 4) and all documents evidencing any plan for McDermott to pursue an Initial Public Offering (Reply Request 7). According to Mr. Schumann, these materials may assist Reficar in challenging the Ad Hoc Group‘s position that a “free-fall” bankruptcy is the most likely outcome if CB&I UK‘s proposed restructuring plan is not approved,
In light of the above showing, the Court finds unpersuasive Mason‘s suggestion that Reficar‘s requested discovery is “plainly irrelevant to the foreign proceeding[s].” See Opposition at 17 (citation omitted). Otherwise, Mason‘s substantive arguments are aimed almost exclusively at the proportionality of Reficar‘s requests: Mason argues throughout its Opposition that Reficar “has not demonstrated a need” for its requested discovery, that the requested information encompasses privileged documents of minimal probative value, and that Reficar‘s requests are needlessly cumulative and unduly burdensome. See Opposition at 13-24. Mason‘s Sur-Reply, which responds directly to Reficar‘s updated request, reiterates these concerns. See Sur-Reply at 2-4. But these arguments are more appropriately considered under the fourth Intel factor. See In re Caterpillar Creditor, Sociedad Anonima de Capital Variable, Sociedad Financiera de Objeto Multiple, Entidad Regulada, No. 22 Misc. 273 (JGK), 2023 WL 6938264, at *3 (S.D.N.Y. Oct. 20, 2023) (explaining that the “for use” requirement does not “demand a showing of proportionality“).
The Court thus finds that each of the statutory requirements has been met, and so proceeds to consider the four Intel factors.
B. Discretionary Intel Factors
1. Whether the Requested Discovery is Available in the Foreign Proceedings
The first Intel factor provides that “when the person from whom discovery is sought is a participant... 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.” Intel, 542 U.S. at 264. Here, Reficar acknowledges that Mason is actively involved in the foreign proceedings, and Mason
In support of Reficar‘s position, Mr. Schumann asserts that the requested discovery “is probably not within the jurisdictional reach of the English court” because Mason is not a standalone party in those proceedings, but rather participates in those proceedings as a member of the Ad Hoc Group. Schumann Decl. ¶ 16. He further explains that the available procedures in the proceedings currently allow Reficar to seek information only from the CB&I Entities. Id. According to Mr. Schumann, Reficar would need to initiate a separate disclosure application against Mason, and likely would not be able to secure the requested documents in time for the Sanction Hearing. Id. Finally, he states that, in any event, court-ordered disclosure in England is likely to be narrower than in the United States, Schumann Suppl. Decl. ¶ 4, and that English law lacks a procedural mechanism for taking oral evidence before hearings, Schumann Decl. ¶ 16. Mr. van den Berg similarly opines that he does “not believe that Reficar‘s requested discovery from Mason is within the jurisdictional reach of the Dutch court” because the procedures in those proceedings provide for the court-appointed restructuring expert to collect information only from
In support of Mason‘s position, Mr. Devaney, an English solicitor and partner at Weil, Gotshal & Manges (London) with over nineteen years of experience in insolvency and restructuring, counters that the English court could “make a disclosure order against Mason on the basis that Mason is, or is to be treated, as a party to the English Proceedings.” Devaney Decl. ¶¶ 1, 38. Mr. Devaney further explains that, even if Mason were not formally joined as a party in those proceedings, English procedural rules provide for disclosure by nonparties where: “(a) the documents of which disclosure is sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings and (b) disclosure is necessary in order to dispose fairly of the claim or to save costs.” Id. ¶ 38. Mr. Vroom, an attorney-at-law and partner at Loyens & Loeff N.V. with over twenty years of experience in insolvency and restructuring, explains that Reficar has available to it procedural mechanisms outside of the WHOA proceedings that could allow a Dutch court to order discovery from a third party and that such request would “not be determined solely based on the location of the party to whom the request is directed.” Vroom Decl. ¶¶ 1, 36, 37.
Mason‘s and Reficar‘s positions are not irreconcilable. The experts appear to agree that in both actions, Reficar can conceivably request documents through available procedural mechanisms for requesting production of evidence from third parties. Mason‘s experts emphasize that whether the foreign court grants such a request turns on the relevant jurisdiction‘s procedural
Where, as here, the Section 1782 respondent is not a direct party in the foreign proceeding, courts in this District have found insufficient bare representations that the Section 1782 applicant could hypothetically obtain the requested materials through third-party disclosure mechanisms. For instance, in In re Polygon Global Partner LLP, the Court explained that “the mere possibility that [the respondent] could, at some point, be subject to a third-party discovery provision in Spain” was “too attenuated a connection to the Spanish proceedings to significantly weigh in its favor under this factor.” No. 21 Misc. 364 (ER), 2021 WL 2117397, *8 (S.D.N.Y. May 25, 2021) (citing Intel, 542 U.S. at 264). There, the court declined to “assess how the [Spanish] High Court might hypothetically apply its third-party discovery rules” and concluded that the first Intel factor weighed in favor of the applicant. Id. Similarly, in In re Porsche Automobil Holding SE, the court found unpersuasive the respondent‘s argument that the applicant “may be able to obtain” the requested materials “at some point in the German action because Germany requires some disclosure,” given that the respondent offered “no evidence concerning how long this process takes” and because there was “no indication that the disclosures would be sufficiently broad to give [the applicant]” the information sought in its Section 1782 application. No. 15 Misc. 417 (LAK), 2016 WL 702327, at *8 (S.D.N.Y. Feb. 18, 2016).
Here, although Mason has identified procedures through which Reficar could request the documents it seeks in its instant application, it has not countered Reficar‘s position that Reficar is unlikely to succeed in obtaining the requested discovery through those mechanisms. In fact, Mason appears to recognize that the requested discovery requests would likely be denied in the
Accordingly, the Court finds that the first Intel factor favors Reficar.
2. Whether the English and Dutch Courts Are Receptive to Section 1782 Discovery
The second Intel factor provides that a district court ruling on a
Here, Mason does not challenge Reficar‘s contention that Dutch and English courts are generally receptive to assistance under
The third Intel factor seeks to curtail “attempt[s] to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States.” Intel, 542 U.S. at 265.
Here, Reficar asserts that neither the English nor Dutch courts have “proof-gathering restrictions” prohibiting the discovery it seeks from Mason. Schumann Decl. ¶ 17; van den Berg Decl. ¶ 14. And Mason does not argue otherwise. Nor does Mason contend that Reficar has made its
The Court thus finds that this favor also weighs in favor of Reficar.
4. Whether the Request is Unduly Intrusive or Burdensome
The parties’ dispute centers on the final Intel factor, which directs courts to be mindful of overly intrusive or burdensome discovery requests. Intel, 542 U.S. at 265. “[A] district court evaluating a [Section] 1782 discovery request should assess whether the discovery sought is overbroad or unduly burdensome by applying the familiar standards of
In the
Turning to the instant matter, the Court finds that any doubt as to the relevance or probative value of the requested discovery, as weighed against the burden it poses, is insufficient to deny Reficar‘s application outright. See supra IV.A. In balancing the probative value of the requested materials against the privilege- and burden-related concerns raised by Mason, the Court instead exercises its broad discretion to narrow the breadth and scope of Reficar‘s requests. See Malev Hungarian Airlines v. United Techs. Int‘l Inc., 964 F.2d 97, 102 (2d Cir. 1992) (noting that
As indicated at supra II, Reficar has modified its discovery requests since it filed its original petition, and the parties have offered arguments tailored to each version of Reficar‘s requests. Given the many developments that have arisen during the brief lifespan of this litigation, for
To start, in opposing Reficar‘s initial requests, Mason argued that the materials sought are of minimal relevance to the restructuring proceedings, that substantially all the materials encompassed by the requests are privileged, and that Reficar seeks needlessly cumulative materials, considering the “extensive discovery” Reficar already obtained from McDermott in the foreign proceedings. Opposition at 13-25. In response, Reficar modified its subpoenas by withdrawing five requests (and corresponding areas of inquiry and designation) altogether and qualifying its first request. Reply at 1-2. Reficar retained the start date for the requested information as June 30, 2020. See id., Appendix A at 7. Once again, the Reply Requests are:
- Reply Request 1: All documents related to any valuation placed on McDermott, CB&I UK and/or CB&I N.V. by Mason or its advisors or consultants if Mason or the Ad Hoc Group shared such valuation with McDermott, CB&I UK, or CB&I N.V. (including any officer or director of any of those companies).
- Reply Request 2: All documents concerning the valuation placed on CB&I UK and/or CB&I N.V. by McDermott or its advisors or consultants, including Grant Thornton.
- Reply Request 3: All documents concerning the Transaction Support Agreement entered into on September 8, 2023 between the Group, the Ad Hoc Group, the Steering Committee, and the other relevant stakeholders.
- Reply Request 4: All documents concerning CB&I UK‘s proposed Relevant Alternative and the conclusion that returns to the creditors in the Relevant Alternative would be materially worse than the return available to plan creditors through the restructuring.
- Reply Request 5: All documents concerning the impact of the Arbitration Award on Mason and the funds it advises.
- Reply Request 6: All correspondence within Mason (internally) or between Mason and a member of the Ad Hoc Group (or their advisors) relating to Reficar and/or the Arbitration Award.
Reply Request 7: All documents evidencing any plan for McDermott to pursue an Initial Public Offering.
Reply at 1-2; see also id., Appendix A at 10. Significantly, among the withdrawn requests was Request 11:
Documents evidencing Mason‘s financial or accounting treatment of performance guarantee letters of credit issued in connection with construction projects of McDermott and other similarly situated entities.
See Application, Appendix A at 10. In its Reply, Reficar also countered that attorney-client and work product privileges would not apply to the following categories of information:
- Documents created or received by Mason from June 30, 2020 (the beginning of the date range covered by Reficar‘s subpoenas) to early May 2023 (the period when the Ad Hoc Group began considering initiating the foreign restructuring proceedings);
- Documents exchanged between the Ad Hoc Group and the McDermott Group or any of the McDermott Group‘s other creditors before September 8, 2023 (before which date any disclosure among these parties constitutes waiver of privilege); and
- Documents exchanged between the Ad Hoc Group and certain other creditors of the McDermott Group since September 8, 2023.
Reply at 2-5. Reficar did not expressly indicate in its Reply its willingness to narrow its requests according to those time constraints, however.
In its Sur-Reply, Mason reiterated its primary objection that “entire categories of the information [Reficar] seeks are likely to be privileged and/or work product.” Sur-Reply at 1. In addition, Mason argued that Reficar‘s request for valuation-related materials (Reply Requests 1 and 2), as well Reficar‘s requests regarding the Transaction Support Agreement and Arbitration Award (Reply Requests 3, 5, and 6) encompass materials that Reficar could have requested from McDermott. Sur-Reply at 1-3. Next, Mason argued that its internal views on the terms of the Transaction Support Agreement or the Arbitration Award (Reply Requests 3, 5, and 6) have no
At oral argument, Reficar characterized its remaining discovery requests as “revolv[ing] around three buckets“: (1) “the asset valuation that has been put forward in the UK” by CB&I UK‘s valuation expert, (2) how letters of credit should be treated, and (3) what the true relevant alternative is. Jan. 5, 2024 Hr‘g Tr. at 8:3-9:13. Reficar insisted that the relevance of each of these three categories of materials outweighed any burden claimed by Mason. See, e.g., id. at 38:1-9. Mason, on the other hand, explained that it “believe[d] that the letter of credit requests ha[d] been dropped so . . . we are left with” two buckets, id. at 28:13-15, and highlighted its concerns regarding the sheer quantity of privileged materials encompassed by the requests, even as modified, id. at 28:7-35:5. Mason separately objected to Reficar‘s deposition subpoena, urging that the deposition would be “extraordinarily burdensome,” especially in light of the “work product and the privilege issues that are inherent to [Reficar‘s] requests.” Id. at 38:20-39:4. As mentioned, the parties agreed to meet and confer after the argument to determine whether they could agree on a few request categories with modified time frames. Id. at 38:10-18. Although Mason requested that the Court limit the negotiations to only the document requests, the Court asked the parties to include Reficar‘s deposition subpoena in their discussions. Id. at 39:2-4, 41:6-9. Ultimately, the
In the Post-Argument Letter, Reficar explained that it proposed three document request categories, each going from June 1, 2022, through the present:
- All non-privileged and non-work product documents related to any valuation placed on McDermott, CB&I UK and/or CB&I N.V. by Mason or its advisors or consultants.
- All non-privileged and non-work product documents related to financial treatment of performance letters of credit by Mason or its advisors or consultants.
- All non-privileged and non-work product documents concerning CB&I UK‘s proposed Relevant Alternative, including documents regarding consideration of options other than the Plan Company‘s Proposed Plan or the Relevant Alternative.
Id. at 1. Reficar further conveyed its proposal to limit the deposition to four hours with areas of inquiry corresponding to the above categories, along with a fourth category for “[i]nformation concerning all of the documents that are produced by Mason in response to Reficar‘s document subpoena.” Id. at 2.
On the other hand, Mason contended in the Post-Argument Letter that Reficar‘s latest proposals “substantially expand” Reply Requests 1, 2, and 4. Id. Mason further presented its alternative proposal “that it produce any documents that are not privileged, work product, or subject to any other immunity from production” that are encompassed by the following categories:
- From June 1, 2022 to September 7, 2023 responsive to Reficar‘s Reply Requests 1 and 2.10
Id. Mason maintained its objection to the proposed deposition subpoena, adding its view that Reficar is attempting to use the deposition to obtain “what is effectively expert testimony on valuation,” even though both Reficar and McDermott have already submitted expert reports and testimony in the foreign proceedings. Id. at 2-3.
Having considered the parties’ evolving arguments, proposals, and objections, the Court modifies the subpoenas as follows. First, Reficar is granted leave to serve a document subpoena on Mason for the following categories of information:
- From June 1, 2022 to September 7, 2023, all non-privileged information related to any valuation placed on McDermott, CB&I UK, and/or CB&I by Mason or its advisors or consultants, if Mason or the Ad Hoc Group shared such valuation with McDermott, CB&I UK, or CB&I N.V. (including any officer or director of any of those companies).
- From June 1, 2022 to the present, all non-privileged information concerning CB&I UK‘s proposed Relevant Alternative, including documents regarding consideration of options other than the Plan Company‘s Proposed Plan or the Relevant Alternative.
Second, Reficar is granted leave to serve a subpoena on Mason for a deposition limited to four hours on the following categories of information:
- From June 1, 2022 to September 7, 2023, all non-privileged information related to any valuation placed on McDermott, CB&I UK, and/or CB&I by Mason or its advisors or consultants, if Mason or the Ad Hoc Group shared such valuation with McDermott, CB&I, UK or CB&I N.V. (including any officer or director of any of those companies).
- From June 1, 2022 to the present, all non-privileged information concerning CB&I UK‘s proposed Relevant Alternative, including documents regarding consideration of options other than the Plan Company‘s Proposed Plan or the Relevant Alternative.
- Information concerning all of the documents that are produced by Mason in response to Reficar‘s document subpoena.
The Court recognizes that the second category of information, as proposed by Reficar and as adopted by the Court, may also encompass a significant portion of privileged materials. But the time constraint proposed by Mason (i.e., only those documents from September 8, 2023 to the present) risks excluding potentially relevant and probative information. For instance, at oral argument, counsel for Reficar represented that “there are public reports in 2022 that McDermott
Next, as evident from the Court‘s modifications above, the Court declines to add Reficar‘s proposed category for “[a]ll non-privileged and non-work product documents related to financial treatment of performance letters of credit by Mason or its advisors or consultants.” Post-Argument Letter at 1. This request is simply a broader reformulation of Request 11, which Reficar expressly withdrew in its Reply. See Reply at 2. And whereas the Court found Reficar‘s representations in its Reply (supported by the original and supplemental affidavits from Messrs. Schumann and van den Berg) as to the relevance of Reply Requests 1, 2, 3, 5, 6, 7, and 10 sufficient to demonstrate the relevance of the requested discovery, supra IV.A, Reficar did not make a similar showing for the requests it withdrew, including Request 11. Cf. Opposition at 12 (Mason criticizing Reficar‘s opening brief for “mak[ing] no attempt to explain how each of the [twelve original] requests relate to its three categories” of purportedly relevant information).11
Finally, the Court finds that limiting the deposition to four hours, particularly in light of the Court‘s modifications to the areas of designation and inquiry, adequately addresses any concern Mason may have with the burden of preparing its witness for the deposition on a tight timeframe.
V. Conclusion
For the foregoing reasons, the Court grants Reficar‘s application in part. The subpoenas in the form attached to Reficar‘s application are quashed, and the Court grants Reficar leave to serve its document and deposition subpoenas as modified by the Court in this Opinion. Mason is ordered to comply with the document subpoena by January 12, 2024 and with the deposition subpoena by January 17, 2024. Furthermore, the parties are directed to notify the Court when the deposition is scheduled to take place, so the Court can endeavor to make itself available in the event disputes arise during the deposition that require the Court‘s resolution. The Clerk of Court is respectfully directed to terminate the motion pending at Docket Number 8.
SO ORDERED.
Dated: January 8, 2024
New York, New York
JOHN P. CRONAN
United States District Judges