TIMOTHY S. BLACK, District Judge.
This case is before the Court pursuant to the Order of General Reference to United States Magistrate Judge Stephanie K. Bowman. Pursuant to such reference, the Magistrate Judge reviewed the pleadings and, on January 27, 2020, issued an Order compelling The Procter & Gamble Company ("P&G") to comply with two subpoenas issued pursuant to 28 U.S.C. § 1782(a) (the "Order"). (Doc. 31). On February 10, 2020, both P&G and five intervenors
The Court will address the Objections after setting forth the background facts and legal standard applicable to its analysis.
On June 13, 2017, Sheikh Osama, a prominent businessman, died intestate in Jeddah, Saudi Arabia. (Doc. 31 at 1; Doc. 1-2 at ¶ 4). Upon his death, Sheikh Osama's interest in a group of companies—the "Abudawood Group companies"—passed to his heirs. (Doc. 31 at 1-2; Doc. 1-2 at ¶¶ 8-9, 10-12). Sheikh Osama's wife ("Petitioner") and daughter ("AA") inherited a percent of that interest pursuant to Sharia Law. (Doc. 31 at 2; Doc. 1-2 at ¶¶ 10-12).
On June 11, 2018, Petitioner/AA commenced a lawsuit against various Abudawood Group companies, relating to the distribution of Sheikh Osama's assets, in the Central District of California (the "California Litigation").
On July 23, 2018, various Abudawood Group companies commenced various lawsuits against Petitioner/AA, relating to the distribution of Sheikh Osama's assets, in the Saudi Arabia Commercial Court (the "Saudi Litigation"). (Doc. 1-2 at ¶¶ 12-14; Doc. 14-2 at ¶ 9). In the Saudi Litigation, the parties again dispute, inter alia, whether the Abudawood Group companies are required to buy out Petitioner/AA's inherited interests at fair market value. (Doc. 1-2 at ¶ 13).
Following the commencement of the Saudi Litigation, Petitioner asked the Saudi court to order a buyout of her/AA's inherited interests. (Id.; Doc. 14-2 at ¶ 9). While it appears that the Saudi court has reserved any decision on whether such a buyout is ultimately appropriate (Doc. 14-3 at ¶ 19), the Saudi court has appointed a valuator— Deloitte Touche Tohmatsu Limited ("Deloitte")—to perform a valuation of the Abudawood Group companies (Doc. 14-2 at ¶ 14).
The Saudi court has instructed Deloitte to conduct its valuation independently. (Doc. 14-3 at ¶ 24). And the Saudi court has empowered Deloitte to seek documents/information relevant to its valuation from the parties directly. (Id.) However, the Saudi court has also reserved the right to appoint another valuator if the parties, including Petitioner, do not accept (i.e., object to) the valuation. (Doc. 22-3 at ¶ 12).
At present, the California Litigation is stayed pending the outcome of the valuation proceedings. (Doc. 14-23 at 81-91). All parties to the California Litigation stipulated to the stay. (Id.)
On October 3, 2019, Petitioner filed an application in this Court for the issuance of two § 1782(a) subpoenas to P&G—"for use" in the Saudi Litigation. (Doc. 1). The § 1782(a) subpoenas primarily seek information relating to the financial performance/ownership structure of two Saudi entities, jointly owned by Al Safwa (an Abudawood Group company) and P&G (an Ohio entity): Modern Industries and Modern Products (collectively the "Modern Entities").
To be clear, P&G does not hold any direct interest in the Modern Entities. (Doc. 21-1 at ¶ 3). Instead, P&G's wholly-owned subsidiary—Detergent Products SAR ("Detpro"), a Swiss entity—owns a direct interest in the Modern Entities, by way of its participation in a joint venture with Al Safwa. (Id.) Accordingly, the § 1782(a) subpoenas only seek that information about the Modern Entities, which is both responsive to the § 1782(a) subpoenas and within P&G "possession, custody, or control." (See Doc. 7 at 7-8 at 8; Doc. 39 at 18).
On October 16, 2019, the Magistrate Judge issued an order granting Petitioner's application for the issuance of the § 1782(a) subpoenas, after determining that the information sought was relevant to the matters at issue in the Saudi Litigation. (Doc. 6 at 2-5). Thereafter, on November 6, 2019, Petitioner served the § 1782(a) subpoenas on P&G. (Docs. 9, 10). On November 14, 2019, the intervenors filed a motion to quash the § 1782(a) subpoenas and vacate the Magistrate Judge's prior order. (Doc. 14). And, on November 20, 2019, Petitioner filed a motion to compel compliance with the § 1782(a) subpoenas. (Doc. 19).
On January 27, 2020, the Magistrate Judge issued an Order denying the intervenors' motion to quash/vacate and granting Petitioner's motion to compel. (Doc. 31). In that Order, the Magistrate Judge ordered P&G to comply with the § 1782(a) subpoenas. (Id. at 11). However, the Magistrate Judge did not order P&G to produce any evidence responsive thereto immediately. (Id.) Instead, to eliminate any potential issues regarding the breadth/burden of the § 1782(a) subpoenas, the Magistrate Judge directed Petitioner and P&G to: (1) meet and confer about the proper scope of discovery; and (2) contact the Court if/as needed for an informal discovery conference. (Id.)
On February 10, 2020, the Objectors filed Objections to the Order.
Since the issuance of the Order, Deloitte has completed a draft valuation. (Doc. 40 at 3). Deloitte has based the draft valuation on financial records provided to it by the Abudawood Group companies. (Doc. 14-2 at ¶¶ 12-18).
"Section 1782 provides federal-court assistance in gathering evidence and testimony for use in foreign tribunals." JSC MCC EuroChem v. Chauhan, No. 18-5890, 2018 WL 9650037, at *1 (6th Cir. Sept. 14, 2018). To invoke § 1782: an applicant must meet the statutory requirements set forth in § 1782(a); and the district court must determine that the issuance of discovery is proper under certain discretionary factors (the "Intel factors"). Id. (citing Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264 (2004)).
In relevant part, § 1782(a) provides as follows:
28 U.S.C. § 1782(a).
The Magistrate Judge properly summarized the Intel factors as follows:
(Doc. 31 at 5 (citing Intel, 542 U.S. at 264-66)).
Ultimately, whether discovery is appropriate under these factors is within the district court's discretion. Chauhan, 2018 WL 9650037, at *1.
In the Order, the Magistrate Judge properly concluded that the subpoenas comply with § 1782(a). (Doc. 31 at 6-8). The Objectors raise two different arguments in opposition to this conclusion. (Docs. 36, 38). Neither is persuasive.
First, the Objectors argue that Petitioner has failed to establish that the § 1782(a) subpoenas target an entity "`found' in the judicial district." (Doc. 36 at 11). The Objectors admit that the actual recipient of the § 1782(a) subpoenas (P&G) is a resident of Ohio. (Id.) But the Objectors assert that the "true target" of the § 1782(a) subpoenas (the Modern Entities) are not. (Id.) Citing Kestrel Coal Pty. Ltd. v. Joy Glob., Inc., 362 F.3d 401 (7th Cir. 2004), the Objectors claim that § 1782(a) does not permit a petitioner to subpoena a domestic corporation (such as P&G) for the records of its foreign affiliates (such as the Modern Entities), absent a "showing to pierce the corporate veil." (Doc. 36 at 12). The Court is not persuaded.
As an initial matter, the Objectors wildly overcomplicate § 1782(a)'s "found in" requirement. That requirement is satisfied when the recipient of the § 1782(a) subpoena "resides or is found" in the same district as the court considering the § 1782(a) application. 28 U.S.C. § 1782(a). Here, Petitioner has directed the § 1782(a) subpoenas to
Moreover, the Objectors' "true target" argument misses the mark. (Doc. 36 at 11). To be clear, the Objectors do not dispute that the § 1782(a) subpoenas were directed to P&G, that the § 1782(a) subpoenas were served on P&G, or that the § 1782(a) subpoenas ask P&G to produce evidence in P&G's possession, custody, or control. (Docs. 7, 8, 9, 10). What the Objectors really dispute is whether the § 1782(a) subpoenas should have targeted someone else—i.e., the Modern Entities. (See Doc. 36 at 11). Thus, the Objectors do not really raise a "true target" argument; they raise a "wrong target" argument.
But, on the Court's review, P&G is not a "wrong target." Section 1782(a) authorizes discovery to proceed "in accordance with the Federal Rules of Civil Procedure." 28 U.S.C. § 1782(a). And the Federal Rules of Civil Procedure require a subpoenaed party to produce those records in its "possession, custody,
Here, the § 1782(a) subpoenas primarily seek information relating to the financial performance/ownership structure of two Saudi entities, jointly owned by Al Safwa (an Abudawood Group company) and P&G (through Detpro, its wholly-owned subsidiary): the Modern Entities. (See Docs. 7, 8; see also Doc. 21-1 at ¶ 3). Petitioner has asserted that, as a joint owner of the Modern Entities, P&G has either the actual possession/custody of or the right to demand (from Detpro) at least
Finally, nothing in Kestrel supports the proposition that P&G is an improper target. (Doc. 36 at 12). In Kestrel, the petitioner sought to serve a § 1782(a) subpoena on a domestic corporation, seeking certain documents held by that domestic corporation's foreign subsidiaries, "for use" in a foreign proceeding. 362 F.3d at 402-04. On review, the Seventh Circuit concluded that the petitioner was not entitled to the documents in the possession of the domestic corporation's foreign subsidiaries. Id. at 403. The Seventh Circuit reasoned that "[o]ne uses [the Federal Rules of Civil Procedure] to get documents from firms that
While, on first blush, Kestrel appears analogous to this case, a close reading renders it distinguishable—for at least two reasons. As an initial matter, the Seventh Circuit did not actually determine whether the petitioner may otherwise be entitled to the documents sought under § 1782(a). Id. at 406. The Seventh Circuit did not need to reach this determination because it found another ground on which to dispense with the case: the foreign tribunal overseeing the foreign proceeding had already determined that the documents were irrelevant. Id. But, more importantly, the Seventh Circuit did not actually reach the key question at-issue here: whether a court can order a domestic corporation to produce those records which it has the
As set forth supra, applicable precedent indicates that production is warranted when such control exists. Accord Bankers, 61 F.3d at 469; Richardson, 97 F.R.D. at 483. And other courts that have considered § 1782(a) discovery requests have reached similar conclusions.
The Objectors' first argument is not availing.
Next, the Objectors argue that Petitioner has failed to establish that the subpoenas seek information "for use" in a foreign proceeding. (Doc. 36 at 12; Doc. 38 at 3). The Objectors claim that Petitioner intends to use the requested discovery in the California Litigation rather than the Saudi Litigation. (Doc. 36 at 12; Doc. 38 at 3-4). In support of this claim, the Objectors, inter alia: note that three of Petitioner's discovery requests seek documents regarding "the dispute pending in the United States District Court, Central District of California" (Doc. 36 at 13; Doc. 38 at 3-4); and assert that Petitioner has no "mechanism to use her requested discovery in the Saudi [Litigation]" because the Saudi court has instructed Deloitte to conduct its valuation independently (Doc. 36 at 12-13; Doc. 38 at 4). Again, the Court is not persuaded.
The Court finds no reason to believe that Petitioner issued the § 1782(a) subpoenas for use in a domestic, as opposed to a foreign, proceeding. As an initial matter, the California Litigation is stayed pending the completion of the Saudi court's valuation of Petitioner's interests. (Doc. 14-23 at 81-91; Doc. 31 at 8). Thus, at present, there is no indication that Petitioner intends to use the requested discovery in the California Litigation. Moreover, Petitioner has asked P&G to produce the requested discovery pursuant to a protective order that prohibits its use outside the Saudi Litigation without written consent or court order. (Doc. 3 at ¶ 8). Thus, moving forward, there is no indication that Petitioner intends to use the requested discovery in the California Litigation.
To be sure, three of Petitioner's discovery requests seek documents regarding the California Litigation. (Doc. 7 at 19-20). However, this point does not indicate that Petitioner intends to use the requested discovery in the California Litigation. On the Court's review, the California Litigation involves some of the same buyout/valuation matters at issue in the Saudi Litigation. (Doc. 14-23 at Ex. A; Doc. 1-2 at ¶¶ 13-14). As such, the Court is not altogether surprised that Petitioner suspects that some of the documents relevant to the California Litigation may also be relevant to the Saudi Litigation.
Moreover, to be sure, the Saudi court has appointed Deloitte to conduct its valuation independently. (Doc. 14-3 at ¶ 24). However, this does not mean that Petitioner is without a "mechanism to use her requested discovery in the Saudi [Litigation]." (Doc. 36 at 13). To the contrary, the Saudi court has reserved the right to appoint a second valuator if the parties, including Petitioner, do not accept (i.e., object to) Deloitte's valuation. (Doc. 22-3 at ¶ 12). As a result, Petitioner will be able to place the requested discovery in front of the Saudi court by way of the objections (if any) she chooses to file to Deloitte's valuation. (See Doc. 27 at 9-10; accord Doc. 1-2 at ¶ 22).
The Objectors' second argument is not availing.
In the Order, the Magistrate Judge properly concluded that each of the Intel factors weighs in favor of discovery. (Doc. 31 at 8-11). The Objectors raise two notable arguments in opposition to this conclusion.
First, the Objectors argue that Petitioner has failed to satisfy the first Intel factor, which considers: "whether the person from whom the discovery is sought is a participant in the foreign proceeding such that the discovery is within the foreign tribunal's jurisdictional reach . . . ." (Doc. 31 at 5 (citing Intel, 542 U.S. at 264-66); Doc. 36 at 15). The Objectors admit that P&G is not a party to the Saudi litigation. (Doc. 36 at 15). But the Objectors claim that the discovery Petitioner seeks is nonetheless available to the Saudi court. (Id.) The gist of the Objectors' argument is: that the Abudawood Group companies (particularly Al Safwa) are able to produce the Modern Entities' financial records; and the Abudawood Group companies (which are parties to the Saudi Litigation) are within the jurisdictional reach of the Saudi court. (Id. at 15-16 (citing Schmitz v. Bernstein Liebhard & Lifshitz, LLP., 376 F.3d 79 (2d Cir. 2004))). The Court is not persuaded.
Petitioner certainly seeks information about the Modern Entities' finances. However, Petitioner does not seek those of the Modern Entities' financial records that are in the
Deloitte has recently completed a draft valuation of the Abudawood Group companies. (Doc. 40 at 3). And Deloitte has based that draft valuation on those financial records it has received from Petitioner's adversaries in the Saudi Litigation (the Abudawood Group companies). (Doc. 14-2 at ¶¶ 12-18). As the Court understands it, Petitioner wants to obtain information about the Modern Entities' financial records from an independent party (P&G) as opposed to her litigation adversaries (the Abudawood Group companies), to ensure that the information on which Deloitte has based its draft valuation is accurate. (See Doc. 22 at 13-14; Doc. 39 at 13-14). As
Importantly, Schmitz, the primary case on which the Objectors rely for their argument to the contrary, aligns with this conclusion. (Doc. 36 at 15). In Schmitz, the petitioners tried to obtain documents from Deutsche Telekom AG ("DT"), their adversary in foreign litigation, by issuing § 1782(a) subpoenas to, inter alia, DT's U.S.-based counsel: Cravath, Swaine & Moore ("Cravath"). 376 F.3d at 81-82. On review, the district court denied the petitioners' application for § 1782(a) discovery, and the Second Circuit affirmed the district court's ruling. Id. at 83, 85.
In affirming the district court's ruling, the Second Circuit said the following about the first Intel factor:
Id. at 85 (quoting Intel, 542 U.S. at 264).
Here, as explained supra, Petitioner does not seek those documents that are in the possession, custody, or control of her adversaries in the Saudi Litigation, either directly or indirectly; Petitioner only seeks those documents that are in the possession, custody, or control of
The Objectors' first argument is not availing.
Next, the Objectors argue that Petitioner has failed to satisfy the second Intel factor, which considers: "the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign court to U.S. federal court assistance . . . ." (Doc. 31 at 5 (citing Intel, 542 U.S. at 264-66); Doc. 36 at 16). The Objectors claim that "numerous relevant facts" show that the Saudi court will not be receptive to this Court's assistance, such as: "(a) the Saudi court ha[s] issued an order requiring Deloitte to conduct its valuation independently; (b) Deloitte ha[s] been successful in obtaining the information it needed; (c) neither Deloitte nor the Saudi court ha[ve] asked for assistance; and (d) Saudi Arabia has not acceded to the Hague Evidence Convention." (Doc. 36 at 16). Again, the Court is not persuaded.
Points (a)-(b) ignore the fact that, while the Saudi court has instructed Deloitte to conduct its valuation of the Abudawood Group companies independently, and while the Saudi court has empowered Deloitte to seek documents/information relevant to its valuation from the parties directly, the Saudi court has
Point (c) seems to rely on the assumption that a foreign court (or an appointed valuator) must request a federal court's assistance under § 1782(a). But the plain language of the statute states that "
And point (d) is not dispositive. The Court acknowledges that Saudi Arabia has not acceded to the Hauge Evidence Convention. But, on this Court's review, at least one other federal court has permitted § 1782(a) discovery for use in Saudi proceedings. See Ahmad Hamad Algosaibi & Bros. Co. v. Standard Chartered Int'l (USA) Ltd., 785 F.Supp.2d 434, 438 (S.D.N.Y. 2011) (permitting § 1782(a) discovery for use in a Saudi proceeding). In the end, the Magistrate Judge properly concluded that the second Intel factor weighs in favor of discovery.
The Objectors' second argument is not availing.
Finally, in the Order, the Magistrate Judge properly set forth a procedure by which Petitioner and P&G can work together to avoid undue breadth/burden. (Doc. 31 at 10-11). To quote directly from the Order:
(Id. at 11). The Objectors raise two different arguments in opposition to this procedure. (Docs. 36, 38). Neither is persuasive.
First, the Objectors argue that the procedure is improper, because it does not limit the scope of P&G's production to evidence located in the United States. (Doc. 38 at 7-8). The Objectors draw this Court's attention to a line of cases holding that § 1782(a) incorporates a per se bar to the discovery of evidence located outside the United States. (Id. at 7). Further, the Objectors claim that Petitioner is trying to turn this Court into a "`clearing house[] for requests for information from courts and litigants all over the world in search of evidence to be obtained . . . all over the world.'" (Id. at 7-8 (quoting In re Judicial Assistance Pursuant to 28 U.S.C. 1782 by Macquarie Bank Ltd., No. 2:14-CV-797, 2015 WL 3439103, at *10 (D. Nev. May 28, 2015)). The Court is not persuaded.
Among the district courts, "there is a split of authority as to `whether § 1782(a) incorporates a per se bar to the discovery of [evidence] located outside the United States.'" In re Application for Discovery Pursuant to 28 U.S.C. § 1782, No. 1:19-MC-102, 2020 WL 364222, at *6 (N.D. Ohio Jan. 22, 2020) (quoting In re Veiga, 746 F.Supp.2d 8, 25 (D.D.C. 2010)). However, both of the Circuit courts that have considered the issue (the Second and Eleventh Circuits) have reached the same conclusion: no such a per se bar exists. In re del Valle Ruiz, 939 F.3d 520, 531-33 (2d Cir. 2019); Sergeeva, 834 F.3d at 1199-1200.
This Court finds the reasoning employed by the Second and Eleventh Circuits persuasive. The plain text of § 1782(a) authorizes discovery to proceed "in accordance with the Federal Rules of Civil Procedure." 28 U.S.C. § 1782(a). And the Federal Rules of Civil Procedure, in turn, authorize extraterritorial discovery so long as the evidence to be produced is within the subpoenaed party's "possession, custody, or control." See Fed. R. Civ. P. 45(a)(1)(A)(iii); Ruiz, 939 F.3d at 533; Sergeeva, 834 F.3d at 1199; Richardson, 97 F.R.D. at 483. Accordingly, § 1782(a) likewise allows extraterritorial discovery.
The Court is, of course, sensitive to the fact that it should not simply become a "clearing house[]" for information located abroad; such an end would inevitably impose an undue burden on both the Court itself and the litigants before it. (Doc. 38 at 7). However, under the facts of this case, the Court trusts that Petitioner and P&G—with the Magistrate Judge's assistance, if needed—will be able to reach an agreement as to a proper scope of discovery, that adequately considers any burden associated with the retrieval of any responsive information, which, although in P&G's possession, custody,
The Objectors' first argument is not availing.
Next, the Objections argue that the procedure is improper, because it does not engage in a line-by-line examination of Petitioner's discovery requests. (Doc. 36 at 19-20; Doc. 38 at 6-7). For example, the Objectors claim: that the "Order did not meaningfully examine" the discovery requests in the subpoenas (Doc. 36 at 5); that the "46 different deposition topics . . . would be unduly burdensome even for party discovery" (Doc. 38 at 6); and that the "largescale demand for decades-worth of documents" is "overbroad," "intrusive," and "expansive" (Doc. 36 at 20; accord Doc. 38 at 6-7). Again, the Court is not persuaded.
The Court is cognizant of the fact that the discovery requests before it are, by Petitioner's own admission, both extensive and burdensome. (See Doc. 19-3 at 1). Nonetheless, all of the Objectors' concerns suffer from the same flaw: the Magistrate Judge has already provided P&G with a way of dealing with them. (See Doc. 31 at 10-11).
P&G can sit down with Petitioner to discuss the proper scope of discovery. (Id.) And P&G can contact the Court for an informal discovery conference if/as appropriate. (Id.) The Court will not allow P&G to throw up its hands and claim that undue breadth/burden exists, before it has put in the time to engage in fulsome meet and confer efforts with Petitioner.
On this Court's review, other district courts have afforded a similar form of relief, with regard to the proper scope of discovery available under § 1782(a), as that afforded by the Magistrate Judge in this case. See Ahmad, 785 F. Supp. 2d at 438 (granting a request for discovery under § 1782(a) and directing the parties to employ largely the same procedure, to address the subpoena recipient's concerns regarding the scope of discovery, as that ordered by the Magistrate Judge in this case: a meet and confer, followed by court intervention, if necessary); see also In re Kleimar N.V v. Benxi Iron & Steel Am., Ltd., No. 1:17-CV-1287, 2017 WL 3386115, at *7 (N.D. Ill. Aug. 7, 2017) (encouraging the issuer and the recipient of a § 1782(a) subpoena "to work cooperatively to narrow the discovery requests as appropriate").
The Objectors' final argument is not availing.
As required by 28 U.S.C. § 636 and Fed. R. Civ. P. 72, the Court has reviewed the comprehensive findings of the Magistrate Judge and considered all of the filings in this matter. Upon consideration of the foregoing, the Court finds that the Order should be and is hereby affirmed.
Accordingly, for the reasons stated supra:
