Case of the Day: In re Braga

The case of the day, In re Braga (S.D. Fla. 2011), involves an application for judicial assistance to take evidence for use in Brazilian bankruptcy proceedings involving Petroforte Brasileiro de Petroleo Ltda. The application for judicial assistance, brought by Braga, the “judicial administrator” of Petroforte (I take it this is the equivalent of a bankruptcy trustee in the U.S.), asserts that Petroforte’s owner, Ari Natalino da Silva, had, through the use of straw men and fraudulent liens, defrauded Petroforte’s creditors.

Braga asserted that the Brazilian court had found that Securinvest Holdings SA and Agroindustrial Esspirito Santo do Turvo Ltda. should be included in the bankruptcy estate, because there had been “patrimonial confusion” (it appears to me that the claim was that assets of Petroforte that should be made available for distribution to its creditors were instead being held, wrongfully, in the name of Securinvest and Agroindustrial). Braga asserted that his investigation had shown that two firms in the Cayman Islands had falsified their records so as to conceal the ultimate ownership interests in Securinvest, and he sought to take discovery from six U.S. entities that supposedly could shed light on the matter. The Brazilian court had issued a letter rogatory seeking assistance in obtaining discovery from four of the six.

Braga had proceeded ex parte, as is common in cases under the judicial assistance statute, and the court authorized issuance of the subpoenas Braga sought. Two of the discovery targets, Carlton Fields, P.A., and Robert B. MacCaulay, objected to the subpoenas. Their client, Rural International Bank (which Braga believed was the ultimate owner of the Cayman Island firms), obtained leave to intervene and moved under Rule 60(b) to vacate the court’s earlier order granting the application for judicial assistance. The gist of Rural’s argument was that Braga was guilty of “unfair surprise” because he proceeded ex parte, and that Braga had wrongfully withheld information from the US court in his application.

The court rejected the “unfair surprise” argument, noting that “correct application of settled law [is not] as an unfair surprise,” and also noting that it was the court’s routine practice to hear applications for judicial assistance ex parte. The court also found that the claim that Braga had failed to disclose material to the court was factually inaccurate (a point Rural conceded) and likewise rejected Rural’s attempt to argue that Braga had nevertheless acted wrongfully by mischaracterizing the effect of the Brazilian court’s decisions. But the court held that Braga had not mischaracterized anything–at most, he had simply not advised the court that his interpretation of the order was open to dispute. Under Rule 60(b), only egregious or extraordinary circumstances will justify relief from the judgment.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2012), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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