A group of minority shareholders of Acheron Portfolio Corporation Luxembourg S.A. have convinced a federal district court in New York to permit them to subpoena several large banks for documents in aid of the shareholders' plan to file a criminal action in Luxembourg against the director of Acheron, Jean-Michel Paul. The shareholders allege that Paul improperly failed to disclose his ownership interest in Litai, a company that Acheron hired to administer life insurance policies in which Acheron had invested. The petitioners assert Paul's ownership interest in Litai created a conflict of interest with his position at Acheron.
The petitioners applied to the court under 28 U.S.C. § 1782 for permission to issue the subpoenas. Section 1782 serves two purposes: "providing efficient means of assistance to participants in international litigation in our federal courts and encouraging foreign countries by example to provide similar means of assistance to our courts." There are three statutory prerequisites to obtaining relief under section 1782. "First, the person from whom discovery is sought must reside or be found in the district of the district court where the application is made; second, the discovery must be for use in a proceeding before a foreign tribunal; and third, the application must be made by the foreign tribunal or "any interested person."
Once the statutory requirements are met, the district court has "wide discretion" whether to issue the discovery orders. Generally, the court should consider four discretionary factors: (1) whether the documents are within the foreign tribunal's jurisdictional reach, (2) the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or court abroad to U.S. federal court assistance, (3) whether the section 1782 request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States, and (4) whether the subpoena contains "unduly intrusive or burdensome requests."
Here, the shareholders overcame the fact that no action was pending by submitting a sworn statement that they "intend to file a criminal complaint against Paul in the Luxembourg Criminal Court and have articulated a specific legal theory on which they intend to rely." Paul and Litai argued that it was "clear" that the shareholders had no "basis for bringing a criminal complaint in a Luxembourg court and therefore this application is simply a fishing expedition." The court, however, determined that it was not tasked with considering the merits of the foreign proceeding when presented with an application under section 1782. Although it acknowledged that Paul and Litai "may be right" that the shareholders would ultimately fail, it nevertheless granted their request to issue the subpoenas to the banks. In re Application of Furstenberg Finance SAS, No. 18-mc-44 (USDC S.D.N.Y. July 12, 2018) (Memorandum Opinion & Order) & (Final Order)
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