Brandi-Dohrn v. IKB Deutsche Industriebank AG

• Decision Date: 06 March 2012
• Docket Number: No. 11–4851–CV.,11–4851–CV.
• Citation: 673 F.3d 76
• Parties: Anselm BRANDI–DOHRN, Petitioner–Appellant, v. IKB DEUTSCHE INDUSTRIEBANK AG, Respondent–Appellee.
• Court: U.S. Court of Appeals — Second Circuit

673 F.3d 76

Anselm BRANDI–DOHRN, Petitioner–Appellant,

v.IKB DEUTSCHE INDUSTRIEBANK AG, Respondent–Appellee.

No. 11–4851–CV.

United States Court of Appeals, Second Circuit.

Argued: Jan. 25, 2012.Decided: March 6, 2012.

Ralph M. Stone, Susan M. Davies, Stone Bonner & Rocco LLP, New York, NY, for Petitioner–Appellant.

Zachary D. Rosenbaum, Lowenstein Sandler PC, New York, NY, for Respondent–Appellee.

Before: KEARSE, CABRANES, STRAUB, Circuit Judges.

STRAUB, Circuit Judge:

Petitioner–Appellant Anselm Brandi–Dohrn appeals from an Order dated November 16, 2011 by the United States District Court for the Southern District of New York (Alvin K. Hellerstein, Judge ) granting Respondent–Appellee IKB Deutsche Industriebank AG's motion to quash subpoenas issued pursuant to 28 U.S.C. § 1782. Under section 1782, a district court is permitted to order a person within its jurisdiction to “give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal.” 28 U.S.C. § 1782(a). Brandi–Dohrn sought assistance from the District Court to order discovery from three non-parties for use in a securities fraud action he filed in Germany. On July 27, 2011, the District Court (Paul A. Crotty, Judge ) allowed the discovery and the relevant subpoenas were issued. However, before any discovery was produced, Respondent–Appellee moved to vacate the July 27, 2011 Order and quash the subpoenas. The District Court granted the motion and ruled that the requested discovery could not be “for use” in the German tribunal because it was unlikely to be admitted in the foreign jurisdiction. We REVERSE the District Court's November 16, 2011 Order because we conclude that the “for use” requirement is not limited to the actual receipt of materials into evidence in the foreign proceeding. Section 1782(a) contains no requirement that particular evidence be admissible in a foreign proceeding to be considered “for use in a proceeding in a foreign or international tribunal.”

BACKGROUND

I. THE FOREIGN PROCEEDING

Brandi–Dohrn is a shareholder of Appellee IKB Deutsche Industriebank AG (“IKB”), a bank located in Germany. In July 2008, Brandi–Dohrn filed an action in Germany against IKB to seek recovery for securities fraud. He alleges that IKB misled him into purchasing its shares by failing to disclose its significant exposure to collateralized debt obligations (“CDOs”) backed by United States based subprime mortgages. He also alleges that IKB issued a press release that falsely downplayed the impact that the ratings agencies' downgrading of the CDOs would have on the Bank's operations.

In August 2010, the German trial court (the “Landgericht”) dismissed the case and, in November 2010, Brandi–Dohrn appealed the action to the German intermediate appellate court (the “Oberlandesgericht”). The German appellate court was expected to hear the appeal in February 2012.

II. PROCEEDINGS BEFORE THE UNITED STATES DISTRICT COURT

Brandi–Dohrn filed an ex parte application in the United States District Court for the Southern District of New York to serve subpoenas for documents and depositions of three non-parties—IKB Capital Corporation, Lord Securities Corporation, and William O'Brien—for use in the German action. The discovery relates to the issue of whether IKB was aware that its substantial exposure to subprime mortgage-backed CDOs created material risks that should have been disclosed to its investors. Brandi–Dohrn intends to use any relevant material he is able to obtain through this proceeding to convince the Oberlandesgericht to overturn the Landgericht. Brandi–Dohrn's American counsel avers that the discovery will be used in Brandi–Dohrn's pending action, but also acknowledges that Brandi–Dohrn's German counsel plans to use this discovery on behalf of other clients who have similar claims pending against IKB in Germany.

The District Court granted the application on July 27, 2011. Brandi–Dohrn issued the subpoenas shortly thereafter, but before any discovery was produced, IKB filed a motion to vacate the July 27, 2011 Order or, in the alternative, to quash the subpoenas. In support of their respective briefs, the parties submitted legal opinions of foreign counsel discussing whether the German appellate court would admit the new evidence.

On November 16, 2011, the District Court granted IKB's motion to quash the subpoenas. The District Court found troubling that Brandi–Dohrn sought this evidence in November 2011—more than a year after the German trial court dismissed the case in August 2010.

THE COURT: I might have felt differently if you brought this before me during the trial or shortly after the trial but the trial ended August 10, 2010. The appeal began November 5, 2010. It's now a year later after the appeal and there hardly would be time to brief it before the argument of February 23, 2012....

(Conference Transcript, November 9, 2011 (“Nov. 9, 2011 Conf. Tr.”), at 15.)

Although the District Court did not suspect bad faith, it did suspect that the evidence sought was actually for use in German counsel's other securities fraud cases.

[I]t's a matter of discretion ... and I see so little purpose that you've pointed out to me that I get the feeling this is a fishing expedition more suitable for harassment and possible use in the many other cases that are pending or sought to be brought against [IKB].

( Id. at 12.)

Furthermore, the District Court found that the evidence would likely not be used in the would admit the evidence:

THE COURT: I am measuring whether you can have use in the particular proceeding on appeal in the German Appellate Court.

MS. DAVIES [Counsel for Brandi–Dohrn]: And under the German Code of Civil Procedure we can use it. We can submit it to that [German] court.

THE COURT: Yes, but the likelihood of use has not been shown.

( Id. at 15.)

Finally, after looking to German law, the District Court granted IKB's motion to quash the subpoenas:

MR. ROSENBAUM [Counsel for IKB]: [T]his application for 1782 discovery is nothing more than a fishing expedition that is related, that is not sanctioned by the German courts absent a very, very narrow exception that, certainly, doesn't apply here.

THE COURT: What is the narrow exception?

MR. ROSENBAUM: Your Honor, as I understand the German law on the subject is that the only manner in which evidence that wasn't brought, at least analogous matter that wasn't brought before the trial court can be presented to the appellate court is if it was obtained without negligence on the part of the proponent.

* * *

THE COURT: You are telling me, are you, that if you could have gotten the evidence during the trial and you didn't, you can't bring it up during the appeal?

MR. ROSENBAUM: Correct.

* * *

THE COURT: That's what German law says?

MR. ROSENBAUM: Yes.

* * *

THE COURT: Waiting all that time is an indication that this is make[weight] and not real. That's essentially your argument.

MR. ROSENBAUM: That is my argument, judge.

THE COURT: And I think that's a good argument. I think following Euromepa S.A. versus R. Esmerian, Inc., 154 F.3d 24 at page 28, the Second Circuit 1998 and In Re: Ishihara Chemical Co., 251 F.3d 120 Second Circuit 2001 in exercising my discretion the for use requirement has not been satisfied and therefore this discovery should not be had. I therefore grant the motion quashing the subpoena.

( Id. at 16–18.)

Based on the above reasoning, the District Court issued a Summary Order dated November 16, 2011, granting IKB's motion and quashing the subpoenas. This appeal followed. After oral argument on January 25, 2012, we issued an Order reversing the District Court's November 16, 2011 Order and reinstating the District Court's July 27, 2011 Order. In view of the imminence of the foreign proceeding, we directed that the mandate should issue forthwith and noted that this Opinion would follow.

DISCUSSION

III. THE DISTRICT COURT ERRED IN QUASHING THE SUBPOENAS ISSUED PURSUANT TO 28 U.S.C. § 1782

Brandi–Dohrn appeals the District Court's Order quashing the subpoenas, arguing that the District Court misconstrued the relevant statutory language and improperly attempted to predict the Oberlandesgericht's outlook towards the admissibility of the evidence. We agree.

A. Applicable Law

Our review of the District Court's decision is two-fold: (1) as a matter of law, whether the District Court erred in its interpretation of the language of the statute; and (2) if not, whether the District Court's decision to grant discovery on the facts before it was in excess of its discretion. See Euromepa, S.A. v. R. Esmerian, Inc., 154 F.3d 24, 27 (2d Cir.1998) ( “ Euromepa II ”).

“A district court's ruling on a motion to quash a subpoena is reviewable for abuse of discretion.” Arista Records, LLC v. Doe 3, 604 F.3d 110, 117 (2d Cir.2010) “A district court has abused its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence, or rendered a decision that cannot be located within the range of permissible decisions.” Sims v. Blot, 534 F.3d 117, 132 (2d Cir.2008) (citations, alterations, and internal quotation marks omitted).

Title 28 United States Code section 1782 reads, in part, as follows:

The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation.

28 U.S.C. § 1782(a).

The goals of the statute are to provide “equitable and efficacious” discovery procedures in United States courts “for the benefit of tribunals and litigants involved in litigation with international aspects,” S.Rep. No. 88–1580 (1964), reprinted in 1964 U.S.C.C.A.N. 3782, 3783, 20 and to “encourag[e] foreign countries by example to provide similar means of assistance to our courts,” In re...