Tag Archives | France

The case of the day is In re Application of Rigby (S.D. Cal. 2013). In 2009, an involuntary bankruptcy petition was filed concerning Michael R. Mastro. The bankruptcy judge found that Mastro and his wife had made false representations and had fraudulently transferred assets. He ordered their arrest. In 2012, they were arrested in France, and they were indicted the next day in the United States for bankruptcy fraud and money laundering. The bankruptcy trustee, James F. Rigby, obtained an order from a court in Annecy, France, authorizing the court to take possession of all documents and property in the Mastros’ home in France. Mastro, his wife, and his son, Michael K. Mastro, who resides in the Southern District of California, petitioned the French court for return of certain property.

Rigby applied to the US court for leave to issue a subpoena to Michael K. Mastro to take his deposition for use in the French litigation. The judge granted the application after a brief Intel analysis. Michael K. Mastro was a party to the French case, which weighs against the application. On the other hand, Rigby showed that the French court would be receptive to the evidence, and there was no apparent undue burden. The judge found that the circumvention of foreign proof-gathering factor didn’t point in either direction, but this was apparently just because Rigby hadn’t briefed the issue in enough detail.

The decision is perhaps most noteworthy for its conclusion:

The Court finds that applying the Intel factors does not clearly suggest how the Court should exercise its discretion in this case. But, considering that our courts generally favor discovery, the Court will authorize the issuance of the requested deposition subpoena.

That’s a perfect summary of the typical American judicial attitude towards discovery, I think.

The case of the day is Application of Auto-Guadeloupe Investissement S.A. (S.D.N.Y. 2012). Auto-Guadeloupe is a French corporation with its offices in Pointe-à-Pitre, Guadeloupe, an overseas department of France. Leucadia is a publicly traded holding company with its offices in New York. The two companies agreed to create a joint venture called Global Caribbean Fiber to combine their Caribbean underseas telecommunications businesses. They were approached by a third party, Columbus, which wanted to buy the new joint venture for $120 million. They apparently had finalized the sale contract, but ultimately Auto-Guadeloupe withdrew from the sale on the grounds that it had not gotten the consent of the Regional Council of Guadeloupe, which was a condition of the sale. Columbus and Leucadia argued that Auto-Guadeloupe had torpedoed the sale by asking the Council to refuse to approve the sale.

The dispute spawned several proceedings. First, Columbus initiated an arbitration against Auto-Guadeloupe and Leucadia in Barbados seeking specific performance or damages in the alternative. Leucadia made a cross-claim against Auto-Guadeloupe. The arbitration found that Auto-Guadeloupe was liable for breach of contract but denied specific performance. The arbitration was still pending on the question of damages, as was a proceeding in Barbados seeking to set aside the award on grounds that the arbitration was not impartial.

Second, Leucadia initiated an arbitration against Auto-Guadeloupe in France, seeking rescission of the joint venture agreement. The tribunal found that Auto-Guadeloupe had breached the agreement but that it lacked jurisdiction to declare the agreement rescinded.

Third, Leucadia sued Auto-Guadeloupe in the Tribunal de Grande Instance in Paris, seeking to sequester € 4.86 million in Golbal Caribbean Fiber’s accounts in order to recover loans it had made to Global Caribbean Fiber to finance its operations during the negotiations with Columbus. The court held that it lacked jurisdiction, because the same or similar claims were pending in the Barbados arbitration. The court of appeals affirmed, which led Leucadia to withdraw its claim for reimbursement in the Barbados case and to re-file its case with the Commercial Court of Paris. That suit was apparently still pending.

Last and most centrally for our purposes is Auto-Guadeloupe’s lawsuit in the Commercial Court of Pointe-à-Pitre. The claim was that Columbus and Leucadia were guilty unfair competition under French law. The basis? The other lawsuits and arbitrations that they had brought against Auto-Guadeloupe!

Auto-Guadeloupe, acting ex parte, sought and received leave to issue a subpoena to Leucadia. The subpoena requested a broad range of documents. Leucadia sought to quash the subpoena. The statutory prerequisites under 28 U.S.C. § 1782 were met, ¹ so the judge undertook an Intel analysis. Leucadia pointed to the fact that it was a party in the Pointe-à-Pitre case and that the court there could order it to produce documents. But the US judge noted that Intel does not bar subpoenas to parties in the foreign cases, noting in particular the breath of US pretrial discovery relative to French pretrial discovery. Auto-Guadeloupe probably could not, the judge concluded, have gotten the material it wanted under French law. On a related note, the judge found that Leucadia had not met its burden to show that the court in Pointe-à-Pitre would be unreceptive to the evidence obtained in the US or that Auto-Guadeloupe, which had chosen to sue in Guadeloupe, was seeking to evade its court’s proof-gathering restrictions. The judge did find, though, that the subpoena was overly broad and unduly burdensome in some respects. For example, it sought “all communications between Columbus and Leucadia related to Global Caribbean Fiber,” but since Leucadia had a major ownership stake in Global Caribbean, the request called for what likely were many thousands of documents with no bearing on Leucadia’s intentions with regard to its dispute with Auto-Guadeloupe. The decision gives similar examples of overbreadth and is a good reminder of the desirability of tailoring a subpoena so as to survive either an Intel analysis or the ordinary overbreadth analysis on a motion to quash. Rather than quashing the subpoena, though, the judge modified it to meet his concerns.

The case has another good reminder, too. The judge criticized Auto-Guadeloupe’s representations to the court at the ex parte phase of the proceedings. He described Auto-Guadeloupe’s recitation of of the several foreign proceedings as “very misleading” and noted that Auto-Guadeloupe had failed to inform the judge, at the ex parte application stage, of relevant findings of arbitrator in one of the foreign proceedings. The usual practice is to seek leave to serve a subpoena ex parte and then to have the substantive fight when the target moves to quash; but lawyers seeking foreign discovery need to bear in mind not just the risk that the court itself will punish incomplete or inaccurate representations later brought to its attention, but also their own professional obligations (e.g., under Rule 3.3(d) of the Model Rules of Professional Conduct or the appropriate state-law analogue):

In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known to the lawyer that will enable the tribunal to make an informed decision, whether or not the facts are adverse.