Case of the Day: In re Gorsoan Ltd.

The case of the day is In re Gorsoan Ltd. (SDNY 2020). Gorsoan, a Cyprus company, and Gazprombank, the Russian bank, sued dozens of defendants, including Janna Bullock, in Cyprus, alleging a $25 million fraud. The Cyprus court issued a worldwide asset freeze injunction and requiring the defendants, including Bullock, to disclose their assets. Bullock did not comply with the order. So in 2013, Gorsoan obtained an order under § 1782 for issuance of a subpoena to Bullock. Although the court granted the application and the Second Circuit affirmed, “Bullock did not produce much, if any, discovery.” The judge, on Gorsoan’s motion, ordered a second deposition under judicial supervision, but at that deposition, Bullock invoked her right against self-incrimination and refused to testify.

In 2018, Gorsoan brought a second § 1782 application seeking leave to serve subpoenas on Zoe Bullock Remmel and Eugenia Bullock, Janna Bullock’s daughters, Zoya Kuznetsova, her mother, and Stuart Sundlun. The court granted the application, and Gorsoan moved to compel. Janna Bullock then moved to intervene, and after leave was granted, she moved to vacate order allowing the discovery and to quash the subpoenas. In January 2020, the court granted the motion to compel and denied the motion to vacate and to quash. 435 F. Supp. 3d 589.

Bullock and the respondents appealed to the Second Circuit, and they moved to stay the proceedings pending the outcome of the appeal. I decided to write about the decision mainly because appeals present a serious problem in Section 1782 practice, especially where there are no parallel US proceedings. In a case where the litigants abroad are also opponents in the US (a typical situation in, say, patent infringement cases), respondents have incentives not to take unreasonable positions, because they have to worry about upsetting the judge who is presiding over the US case. In an asset recovery case, on the other hand, the respondent’s incentive often is to delay the reckoning for as long as possible. On the one hand, the risk of an appeal shapes an applicant’s strategy from the get-go, because if a case gets stuck in the Court of Appeals and is stayed pending the appeal, then often the discovery will be delayed by a year or more. On the other hand, a stay is not automatic, and in many cases where an appeal is just for delay’s sake, the appellant won’t be able to make the necessary showing of likely success on the merits.

In today’s case, the judge found that the respondents were likely to succeed on their argument that the discovery was not “for use” in the Cypriot proceeding, in light of the Second Circuit’s Euromepa decision, which held that asset discovery sought in aid of a foreign judgment is not for use in a foreign proceeding because the proceeding is, at that stage, not “adjudicative.” (Perhaps of less interest to us, he also held that the respondents had shown a likelihood of success on the self-incrimination issue they raised). The other factors (including the risk of irreparable injury and the public interest) also weighed in favor of the stay. So the court stayed the order pending the appeal.

My own view is that a broader reconsideration of the rule of Euromepa is overdue, but I don’t expect this case will be the vehicle. I do think that there is a good chance the petitioner will ultimately prevail, as the Cyprus court could well be asked to adjudicate Bullock’s compliance with the asset freeze injunction. In other words, this is not just a simple case of asset discovery.

2 responses to “Case of the Day: In re Gorsoan Ltd.”

  1. […] 2020). I came across the case on the website of friend of the blog George Benaur. I wrote about a related § 1782 proceeding in July […]

  2. […] 2020). I came across the case on the website of friend of the blog George Benaur. I wrote about a related § 1782 proceeding in July […]

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