Euromepa, S.A. v. R. Esmerian, Inc.

• Citation: 154 F.3d 24
• Decision Date: 10 August 1998
• Docket Number: Docket No. 97-7333
• Parties: In the Matter of the Application of EUROMEPA, S.A., f/k/a P.N.C. S.A., successor in interest of Mepa France, S.A.; Allied Insurance & Reinsurance Company, Petitioners-Appellants, v. R. ESMERIAN, INC., Respondent-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 24

154 F.3d 24

In the Matter of the Application of EUROMEPA, S.A., f/k/a

P.N.C. S.A., successor in interest of Mepa France,

S.A.; Allied Insurance & Reinsurance

Company, Petitioners-Appellants, v. R. ESMERIAN, INC., Respondent-Appellee.

Docket No. 97-7333.

United States Court of Appeals, Second Circuit.

Argued Dec. 10, 1997.

Decided Aug. 10, 1998.

Constantino P. Suriano, New York, NY (Jeffrey C. Crawford and Michael T. Altman, Mound, Cotton & Wollan, New York, NY, of counsel), for Petitioners-Appellants.

Barton Legum, New York, NY (Meredith M. Brown and Neil S. Binder, Debevoise & Plimpton, New York, NY, of counsel), for Respondent-Appellee.

BEFORE: OAKES, PARKER, and WOOD, JR., ^* Circuit Judges.

PARKER, Circuit Judge:

Petitioners-Appellants Euromepa, S.A. ("Euromepa") and Allied Insurance and Reinsurance Company ("Allied", and together with Euromepa "Petitioners") appeal from an endorsement order, entered February 27, 1997, in the United States District Court for the Southern District of New York (Kevin T. Duffy, Judge ) dismissing as moot their petition pursuant to 28 U.S.C. § 1782 for discovery in aid of foreign proceedings of Respondent-Appellee R. Esmerian & Co. ("Esmerian"). For the following reasons, we affirm the judgment of the district court.

I. BACKGROUND

Euromepa, a French corporation, is an insurance broker under common control with Allied, a Cyprus corporation, which is an insurer and reinsurer. Esmerian, a New York corporation, is a diamond and jewelry dealer. The underlying dispute in this case involves the disappearance of approximately $ 20 million in jewelry owned by Esmerian and insured by Allied through Euromepa.

Affiliates of Esmerian sued Euromepa and Allied in the Commercial Court of the First Instance in Nanterre, France (the "French Trial Court") regarding the loss and insurance of this jewelry (the "French Action"). These affiliates alleged fraudulent conduct by Euromepa and Allied in misrepresenting certain facts regarding the trustworthiness of a courier to be used to transport the jewelry, and counseling Esmerian's affiliates to not take insurance for breach of trust by the courier. Esmerian itself subsequently intervened in this action to assert its rights, eventually taking an assignment of its affiliates' rights in the action, and thus leaving Esmerian as the sole plaintiff.

The French Trial Court found in favor of Esmerian, and issued a judgment of approximately $ 10 million in favor of Esmerian and against the Petitioners. The French Trial Court held that Esmerian and the Petitioners were equally at fault for the loss, and that the loss should therefore be split evenly between them. Following this ruling, and after perfecting their appeal therefrom, Petitioners filed a § 1782 petition (the "Petition"), by order to show cause, in the Southern District of New York, seeking discovery of Esmerian regarding, among other things, proof of ownership of the jewelry, prior insurance of the jewelry, agreements between Esmerian and its affiliates, and substantiation of the jewelry lost. Petitioners sought this discovery for use in the appeal of the French Trial Court's judgment. ¹ The district court denied the Petition in a Memorandum and Order, dated May 10, 1994. Application of Euromepa, S.A., 155 F.R.D. 80 (S.D.N.Y.1994). In doing so, the district court focused largely on the French system of discovery, and concluded that granting the Petition might constitute an affront to the French system. Id. at 82-84. Petitioners timely appealed to this Court.

After the Petitioners' appeal was argued in this Court, but before this Court rendered a decision, the Court of Appeal of Versailles (the "French Court of Appeal") affirmed the judgment of the French Trial Court, and amended that judgment in a manner favorable to Esmerian. The French Court of Appeal held that "[Esmerian] did not itself commit any misconduct ... [and] due to the failure to carry out its duties as consultant and the blatant fraud on [Euromepa's] part, the responsibility cannot be split with the insured party." The French Court of Appeal accordingly entered a judgment holding Euromepa liable for the entire $ 20 million loss. Immediately following this judgment, Euromepa filed a petition seeking French bankruptcy protection (the "French Bankruptcy Proceeding").

On March 9, 1995, Esmerian filed a motion in this Court seeking to have Petitioners' appeal dismissed as moot on the basis of the ruling of the French Court of Appeal. Esmerian argued that the appeal was moot because there was no longer any foreign action pending in which the discovery could be used. On March 20, 1995, this Court, without addressing the motion to dismiss the appeal, issued an opinion reversing the district court, and remanding the case for further proceedings. Euromepa, S.A. v. R. Esmerian, Inc., 51 F.3d 1095 (2d Cir.1995) ("Euromepa I "). Later that month, on March 27, 1995, Petitioners perfected their appeal of the judgment of the French Court of Appeal to the French Cour de Cassation (the "French Supreme Court").

In response to Esmerian's March 9 motion to dismiss the appeal, this Court (on March 29, 1995) issued an order which construed Esmerian's motion to dismiss the appeal as a motion to withdraw an opinion, stayed the issuance of the mandate, and requested additional briefing as to why the parties did not "advise this Court promptly of the circumstances alleged to have mooted this appeal." Subsequently, on April 11, 1995, this Court denied the motion to withdraw the opinion, noting that we were doing so "without prejudice to any consideration of the intervening developments by the district court."

On remand, Esmerian filed a motion to dismiss the Petition as moot in the district court. The parties completed briefing on the motion to dismiss in June of 1995. The district court, however, took no action on the motion despite a series of letters for Euromepa, and responses from Esmerian, which sought a ruling.

Finally, in February of 1997, the French Supreme Court affirmed the judgment of the French Court of Appeal. The French Supreme Court found Petitioners' appeal to it to be an abuse of process, and sanctioned the liquidator of Euromepa for pursuing that appeal. Immediately after this ruling, the district court entered the endorsement order dismissing the Petition as moot because the final judgment of the French Supreme Court eliminated all pending proceedings in which Petitioners sought to use the discovery. This appeal followed.

II. THE APPLICABLE LEGAL PRINCIPLES

A. Standard of Review

As we noted in Petitioners' initial appeal, "[w]e review the district court's decision for abuse of discretion.... But to say that a district court may or may not, in its discretion, order discovery, does not mean that it is free to do so on inappropriate grounds." Euromepa I, 51 F.3d at 1097 (citation omitted). We have also previously held that:

A review of a district court's decision under § 1782, therefore, has two components: the first, as a matter of law, is whether the district court erred in its interpretation of the language of the statute and, if not, the second is whether the district court's decision to grant discovery on the facts before it was in excess of its discretion.

Esses v. Hanania (In re Esses), 101 F.3d 873, 875 (2d Cir.1996) (per curiam).

Thus, we review de novo the district court's determination as to whether the statutory requirements of § 1782 are met, and if we are satisfied that these requirements are met, we review the district court's decision on whether to grant discovery for abuse of discretion. However, we review de novo the question of whether the statute imposes any particular limitations on the exercise of that discretion. Foden v. Gianoli Aldunate (In re Gianoli Aldunate), 3 F.3d 54, 58 (2d Cir.1993); see Malev Hungarian Airlines v. United Technologies International Inc. (In re Malev Hungarian Airlines), 964 F.2d 97, 100-01 (2d Cir.1992).

B. The Statutory Requirements

Section 1782 provides, in pertinent part, "[t]he district court ... may order ... [discovery] for use in a proceeding in a foreign or international tribunal." 28 U.S.C. § 1782(a). This Court has held that § 1782 requires that a three part test must be met prior to its invocation:

(1) that the person from whom discovery is sought reside (or be found) in the district of the district court to which the application is made, (2) that the discovery be for use in a proceeding before a foreign tribunal, and (3) that the application be made by a foreign or international tribunal or "any interested person."

Esses, 101 F.3d at 875 (quoting Gianoli Aldunate, 3 F.3d at 58). In analyzing the second element of this test, which is the only one in dispute in this case, we have, as discussed below, previously focused on two questions: (1) whether a foreign proceeding is adjudicative in nature; and (2) when there is actually a foreign proceeding.

The seminal case in this Court regarding the analysis of whether a foreign proceeding is adjudicative in nature is In re Letters Rogatory Issued by Director of Inspection of Government of India, 385 F.2d 1017 (2d Cir.1967) (Friendly, J.) ("India "). In India, this Court interpreted the meaning of the phrase "a proceeding in a foreign or international tribunal" in the context of an Indian income tax assessment proceeding. This Court concluded that the tax assessment proceeding in question was not a proceeding before a "tribunal" because the role of the government in the administrative proceeding was more akin to a prosecutorial decision to bring a case than to that of a neutral arbitrator, and therefore the proceeding was not adjudicative. Id. at 1020-21. Thus, in India, and later in Fonseca v. Blumenthal, 620 F.2d 322, 323-24 (2d Cir.1980) (analyzing the function of the Superintendent of Exchange Control under Colombian law), this Court explicitly engaged in an analysis of foreign law to determine if a...