Sandra Holding Ltd. v. Al Saleh

          ORDER ON PETITIONER'S MOTION FOR ISSUANCE OF LETTERS ROGATORY UNDER 28 U.S.C. § 1782

          DONALD L. CABELL, U.S.M.J.

         I. Introduction

         The petitioner, Sandra Holding Ltd. (Sandra Holding), seeks permission to obtain discovery in the United States for use in a foreign proceeding pursuant to 28 U.S.C. § 1782. (Dkt. 1). In this case the petitioner seeks discovery from Fawzi Musaed Al Saleh (Fawzi), Fawzi's son Ahmad Fawzi Al Saleh (Ahmad), Quabbin Capital Inc. (Quabbin Capital), and John I. Snow, III (Snow) (collectively, respondents), for use in a proceeding before the Grand Court of the Cayman Islands.^[1] The respondents oppose this motion, arguing that Sandra Holding has not satisfied the statutory requirements under 28 U.S.C. § 1782. (Dkt. 18). The respondents argue that the court should exercise its discretion to deny the motion even if Sandra Holding has satisfied these requirements. (Id.). The motion has been referred to this court for resolution. (Dkt. 21). For the reasons set forth below, the petitioner's motion is granted in part with respect to Quabbin Capital and Snow and denied with respect to Fawzi.

         II. Relevant Background

         During the 1980s, a group of brothers from Kuwait began investing in the United States through an offshore special purpose Cayman Islands company called Universal Enterprises, Ltd. (“Universal”). Each brother created an offshore trust company in the Cayman Islands to own his respective shares in Universal. The petitioner is owned by Nuri Musaed Al Saleh (“Nuri”) and holds legal title to Nuri's shares in Universal. Yasmine Holding Ltd. is owned by Fawzi and/or his children and holds legal title to Fawzi's shares in Universal. Fawzi is the founding and sole director of Universal, though he may soon resign the position due to his age and poor health.^[2]

         The petitioner claims that since the creation of Universal, Fawzi has “failed and refused to disclose material information about Universal's finances and business activity to Sandra Holding.” (Dkt. 2, at 2). Upon information and belief and based upon a review of certain company documents, the petitioner claims that Fawzi and/or his son Ahmad “orchestrated” a substantial sale of Universal's assets to a trust company controlled by Fawzi and Ahmad that was not an arms-length transaction in or around 2014. Sandra Holding alleges that it never received a distribution from this sale.

         Pursuant to Universal's Articles of Association, if Sandra Holding were to bring an action against Universal and Fawzi, it must be filed in the Grand Court of the Cayman Islands. The petitioner has not yet filed an action in the Grand Court but contends that it reasonably anticipates doing so and has retained Cayman counsel to that effect. Through the present application, the petitioner seeks information it conceivably might use to prosecute that action, including what amounts to nearly all of Universal's corporate documents for the last thirty years. Specifically, the petitioner seeks to depose, and request documents from Fawzi, Quabbin Capital (an investment management firm the petitioner believes acted as a financial advisor to Fawzi and was a subsidiary of Universal), and Snow (President and Managing Director of Quabbin Capital).

         III. Legal Standard

         A court may allow discovery to be sought in the United States for use in a foreign proceeding through an application pursuant to 28 U.S.C. § 1782. Section 1782 sets out four statutory requirements that a petitioner must satisfy as a threshold matter. Specifically, the petitioner must show that the request for discovery is: (1) directed to a person who “resides in or is found” in the district where the court sits; (2) for documents or testimony for use in a foreign proceeding; (3) made by a tribunal or upon the application of an interested party; and (4) not seeking material protected by “any legally applicable privilege.” See § 1782(a); In re Schlich, 893 F.3d 40, 46 (1st Cir. 2018).

         “If all of these statutory requirements are met, the district court is authorized, but not required, to provide judicial assistance by permitting discovery.” In re Schlich, 893 F.3d at 46 (citing Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247 (2004)) (emphasis added). The Supreme Court identified four factors to be considered when exercising discretion on a § 1782 application in Intel: (1) whether the person from whom discovery is sought is a party to the foreign proceeding; (2) the nature of the foreign tribunal, the character of the foreign proceeding, and the receptivity of the foreign tribunal to the court's assistance; (3) whether the applicant is attempting to circumvent the proof-gathering restrictions or policies of the foreign tribunal; and (4) whether the discovery requested is unduly intrusive or burdensome. Intel, 542 U.S. at 264-65; Minis v. Thompson, No. 14-91050-DJC, 2014 WL 1599947, at *3 (D. Mass. Apr. 18, 2014).

         IV. Discussion

         A. Statutory Requirements

         In this court's view, the petitioner has satisfied all four statutory requirements set out in § 1782. First, the respondents were either found in or reside in the District of Massachusetts. “[I]f a person is served . . . while physically present in the district of the court that issued the discovery order, then for the purposes of § 1782(a), he is ‘found' in that district.” In re Edelman, 295 F.3d 171, 180 (2d Cir. 2002). While Fawzi resides in Kuwait, he was personally served with this application while on Cape Cod. Therefore, Fawzi was “found in” this district. Quabbin Capital's principal place of business is in Boston, Massachusetts, and Snow resides in Winchester, Massachusetts. Therefore, Quabbin Capital and Snow “reside in” this district.

         As to the second requirement, if the foreign proceeding is not already in progress, it must at least be “within reasonable contemplation, ” though it need not be “pending” or “imminent.” Intel, 542 U.S. at 259. The circuit courts have grappled with the definition of “within reasonable contemplation” in this context. The Eleventh Circuit has upheld a § 1782 discovery order where the petitioner had conducted an extensive internal audit related to the contemplated action, provided a facially legitimate and thorough explanation of this ongoing investigation, stated its intent both to commence a civil action and continue a related pending arbitration, and detailed how the discovery sought would be applied in its pleading before a foreign tribunal. Application of Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 747 F.3d 1262, 1269 (11th Cir. 2014). The Second Circuit has upheld the denial of a § 1782 application where the petitioner alleged only “that they had retained counsel and were discussing the possibility of initiating litigation, ” despite having five years and ample opportunity in which to commence investigations or initiate litigation. Certain Funds, Accounts &/or Inv. Vehicles v. KPMG, LLP, 798 F.3d 113, 124 (2d Cir. 2015) (emphasis in original). In both cases, ...