We’re Back! Case of the Day: In re Application of Gushlak

Letters Blogatory is back from vacation. We have some interesting cases coming up in the next few days! Also, if you like what you read here, please take a minute to nominate Letters Blogatory for the ABA Blawg 100. The time for nominations ends in a few days.

Before turning to the case of the day, I wanted to update you on a couple of happenings in the the Chevron-Ecuador case. I’ll review these just briefly, because they are not really within the Letters Blogatory scope of coverage. First, in a BIT arbitration administered by the Permanent Court of Arbitration, Chevron received an award of $96 million. The claim is unrelated to the Lago Agrio environmental tort dispute but is part of the wider dispute between Ecuador and Chevron. Second, in the Chevron v. Salazar case in New York, Judge Kaplan, in an interesting procedural decision, granted Chevron’s motion for judgment on the pleadings as to the Lago Agrio plaintiffs’ unclean hands defense insofar as it was asserted as a defense to the claim for a declaration that the Ecuadoran judgment is not entitled to recognition, but denied the motion insofar as unclean hands was asserted as a defense to the prayer for injunctive relief. Before turning to the case of the day, I want to highlight a passage from Judge Kaplan’s decision that I think is worth a comment:

Indeed, a moment’s reflection shows that the LAP Representatives contrary position is baseless. If a judgment is flawed by the inadequacies of the legal system that rendered it, because it was procured by fraud, because the rendering forum lacked jurisdiction over the defendant or for some other reason, it is difficult to see why its flaws should be overlooked by any country in which enforceability of the flawed judgment becomes an issue because the losing party made unsuccessful but improper attempts to avoid its entry. That country or those countries have an independent interest in seeing to it that their courts and institutions are not made tools for the enforcement of fundamentally flawed judgments of other nations.

If this is the judge’s view, then as I commented in March, I think the judge was wrong to preliminarily enjoin the Lago Agrio plaintiffs from seeking to enforce the judgment anywhere in the world. Each country has an interest in ensuring that only fundamentally fair judgments are enforced, and as a matter of comity, I think Judge Kaplan should have had more faith in the ability of foreign courts to make an appropriate decision about the enforceability of the Ecuadoran judgment or about the Lago Agrio plaintiff’s entitlement to preliminary remedies (attachments and the like).

And so without further ado, the case of the day!

Myron Gushlak was an investment banker who, according to the New York Daily News, “live[d] in a mansion in the Cayman Islands and pa[id] no taxes.”In May 2011, he pleaded guilty to conspiracy to commit securities fraud and conspiracy to commit money laundering and was sentenced to 72 months in prison and a $25 million fine. Gushlak was also embroiled in divorce proceedings in the Cayman Islands.

In the case of the day, In re Application of Gushlak (E.D.N.Y. 2011), Gushlak’s wife, Debbie Gushlak,   made an application for judicial assistance seeking subpoenas directed to Yelena Furman (who described herself as Mr. Gushlak’s girlfriend), David Lubin, and Warden Duke Terrell, the warden of the prison where Gushlak was serving his sentence. According to Debbie Gushlak,  Furman was involved in Gushlak’s businesses, and on the day Gushlak was sentenced, Debbie Gushlak claimed that Furman “flew to the Cayman Islands and was seen removing boxes of documents and electronic equipment from the Gushlaks’ condominium.” After Gushlak was sent to prison, according to the affidavit, Furman acted for Gushlak under a power of attorney. Lubin was a lawyer for Gushlak. Mrs. Gushlak’s proposed subpoenas sought, in broad terms, documents relating to property of Mr. or Mrs. Gushlak, documents concerning communications with the Gushlaks or their sons, and documents concerning several companies that Mrs. Gushlak suspected were connected with Mr. Gushlak. From the prison warden, Mrs. Gushlak sought telephone logs and recordings of telephone conversations Mr. Gushlak had while in the prison and copies of emails Gushlak sent or received.

As to Furman and Lubin, the court held that the statutory prerequisites for judicial assistance existed. Furman and Lubin both resided in the Eastern District of New York; the discovery was for use in a proceeding before a foreign tribunal; and Mrs. Gushlak was an “interested person”.  The Intel factors (the factors that guide the court’s exercise of discretion once the statutory prerequisites are met) also favored discovery: the documents were not within the “jurisdictional reach” of the Cayman Islands court; there was no effort to circumvent Cayman Islands restrictions on proof-gathering; and the subpoenas seemed reasonably calculated to lead to evidence that would be relevant to the foreign divorce case. However, the court found that the proposed subpoenas were so broadly worded that they would impose an undue burden on the targets, and it ordered Mrs. Gushlak to submit more narrowly drafted subpoenas aimed at limiting the scope of discovery to Mr. Gushlak’s assets.

As to the warden, the judge, citing De Gortari v. Dept. of the Treasury, 2001 WL 476187 (D.D.C. 2001), held that the application against the warden was, in effect, an application against the United States. As noted in the post on Republic of Ecuador v. Bjorkman, the case of the day form August 16, 2011, the United States is not a “person” under § 1782 from whom discovery may be sought. So the judge reasoned that the application was improper under § 1782. But it’s not self-evident that this is right. The subpoena was not directed to the United States or even to the Bureau of Prisons, but rather to an individual government officer. In an civil rights action under § 1983, you cannot sue the state itself, since it is not a “person” under the statute, but an individual officer can be sued in his or her official capacity, as long as the claim is for equitable relief rather than for damages. I think that there is a clear analogy between § 1983 and § 1782 here, which the court did not explore.

Even if my suspicion is right and the warden should have been deemed a person under § 1782, the government would have plenty of leeway to resist to discovery using arguments not available to private persons. Under the Housekeeping Act, as construed by United States ex rel. Touhy v. Ragen, 340 U.S. 462 (1951), agencies can promulgate regulations that specify the conditions under which they need to respond to civil subpoenas. These Touhy regulations often make the test whether the subpoena serves the purposes of the agency, is convenient for the agency, etc. Depending on the circuit, review of an agency’s decision not to comply with a subpoena may be under the deferential standard of review prescribed by the Administrative Procedure Act. In other words, it can be very difficult to compel the government to answer a civil subpoena addressed to the government or an officer as a third party. But this inquiry would take place after the court had granted the application for judicial assistance and the applicant had issued the subpoena.

One response to “We’re Back! Case of the Day: In re Application of Gushlak”

  1. […] first discussed the case in my post of September 6, 2011. Here was my description of the facts: Myron Gushlak was an investment banker who, according to the […]

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