In re Del Valle Ruiz, 18 Misc. 85 (ER), 18 Misc. 127 (ER)

• Decision Date: 19 October 2018
• Docket Number: 18 Misc. 85 (ER), 18 Misc. 127 (ER)
• Citation: 342 F.Supp.3d 448
• Parties: IN RE Application of Antonio DEL VALLE RUIZ and Others for an Order to Take Discovery for Use in Foreign Proceedings Pursuant to 28 U.S.C. § 1782 In re Application of Pacific Investment Management Company LLC and Anchorage Capital Group, L.L.C. for an Order to Take Discovery for Use in Foreign Proceedings Pursuant to 28 U.S.C. § 1782
• Court: U.S. District Court — Southern District of New York

342 F.Supp.3d 448

IN RE Application of Antonio DEL VALLE RUIZ and Others for an Order to Take Discovery for Use in Foreign Proceedings Pursuant to 28 U.S.C. § 1782 In re Application of Pacific Investment Management Company LLC and Anchorage Capital Group, L.L.C. for an Order to Take Discovery for Use in Foreign Proceedings Pursuant to 28 U.S.C. § 1782

18 Misc. 85 (ER), 18 Misc. 127 (ER)

United States District Court, S.D. New York.

Signed October 19, 2018

Alexander Paul Wentworth-Ping, LLP, Lucas Bento, Paul Peter Hughes, Peter E. Calamari, Quinn Emanuel Urquhart Oliver & Hedges, LLP, New York, NY, for Petitioners.

Edward Joseph Fuhr, Jonathan E. Schronce, Hunton & Williams, L.L.P., Richmond, VA, Joseph John Saltarelli, Hunton & Williams, LLP (NYC), New York, NY, Samuel Alberto Danon, Hunton Andrews Kurth LLP, Miami, FL, for Respondents.

OPINION AND ORDER

Edgardo Ramos, U.S.D.J.

Petitioners in the above-captioned actions have applied for court orders to conduct discovery for use in foreign proceedings, pursuant to Title 28, United States Code, Section 1782. Petitioners in both actions seek discovery against Banco Santander, S.A., Santander Holdings U.S.A., Inc., and Santander Bank N.A (collectively, "Santander"). Petitioners in one of the actions also seek an order to conduct discovery against Santander Investment Securities Inc. For the reasons set forth below, Petitioners' applications are GRANTED in part and DENIED in part.

I. BACKGROUND

Banco Popular Español, S.A. was at one point Spain's sixth largest bank, with € 147 billion in assets. See Decl. of Javier H. Rubinstein in Support of Petition for 28 U.S.C. § 1782 Discovery ¶ 21 ("Rubinstein Decl."), Case No. 18 Misc. 85, Doc. 16.¹ On June 6, 2017, the European Central Bank, which comprises one part of Europe's system of banking supervision, informed the European Single Resolution Board, another part of Europe's system of banking supervision, that Banco Popular was failing or likely to fail. See id. ¶ 54. On that same day, and at the direction of the Single Resolution Board, Spain's national banking supervisory authority, the Fondo de Reestructuración Ordenada Bancaria ("FROB"), invited several banks to submit offers to acquire Banco Popular. Id. Of the banks invited to submit a bid, Banco Santander, S.A. was the only bank to submit one. Id. ¶ 56. The next day, June 7, 2017, the Single Resolution Board and FROB accepted Santander's €1 offer and declared Santander the purchaser of Banco Popular. Id. ¶ 59. The government-ordered sale of Banco Popular was ostensibly done pursuant to a "resolution," a process in which the aforementioned authorities can force the total or partial disposal of a financial institution's assets when certain requirements are met. See id. ¶¶ 46–50. Banco Popular was the first European Union financial institution ever to undergo a "resolution." Id. ¶ 5.

Petitioners in the instant actions are former investors in Banco Popular. Petitioners allege that they lost virtually all of their investments when Santander purchased Banco Popular for €1. Petitioners in Case No. 18 Misc. 127—the "PIMCO Petitioners"—manage funds that held Banco Popular bonds. Petitioners in Case No. 18 Misc. 85—the "Del Valle Ruiz Petitioners"—comprise a group of 55 former investors in Banco Popular. Collectively, Petitioners claim to have lost over one billion euros because of the forced sale.

Following Santander's acquisition of Banco Popular, Petitioners initiated actions before the General Court of the Court of Justice of the European Union against the agencies responsible for Banco Popular's resolution. In those actions, Petitioners seek to annul the resolution of Banco Popular, asserting that the resolution was illegal. In addition, Del Valle Ruiz Petitioners initiated investor-state arbitration proceedings against Spain, pursuant to the Mexico-Spain Bilateral Investment Treaty. Del Valle Ruiz Petitioners contend that the Spanish government "actively participated in the design and decision-making process that ultimately led to the European Commission's and the Single Resolution Board's decision to resolve [Banco Popular]." Id. ¶ 2. And PIMCO Petitioners, for their part, filed writs with the Spanish Central Criminal Court to join Spanish criminal proceedings against Banco Popular and its former management personnel. Declaration of Peter Calamari ("Calamari Decl.") ¶¶ 47–48, Case No. 18 Misc. 127, Doc. 8. Neither group of Petitioners have initiated foreign actions against Santander, however.

Pursuant to 28 U.S.C. § 1782, both groups of Petitioners apply for orders from this Court to conduct discovery against Santander for use in the foreign proceedings. PIMCO Petitioners also seek discovery from Santander Investment Securities Inc. Below, the Court analyzes Petitioners' applications.

II. ANALYSIS

Pursuant to Section 1782, "[t]he 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). To obtain a court order for discovery under Section 1782, an applicant must establish the following: "(1) that the person from whom discovery is sought reside[s] (or [can] be found) in the district of the district court to which the application is made, (2) that the discovery [is] for use in a proceeding before a foreign tribunal, and (3) that the application [is] made by a foreign or international tribunal or ‘any interested person.’ " In re Edelman , 295 F.3d 171, 175–76 (2d Cir. 2002) (citation omitted).

"Once a district court is assured that it has jurisdiction over the petition, it may grant discovery under § 1782in its discretion ." Kiobel v. Cravath, Swaine & Moore LLP , 895 F.3d 238, 244 (2d Cir. 2018) (emphases added). "To guide district courts in the decision to grant a Section 1782 petition, the Supreme Court in Intel [Corp. v. Advanced Micro Devices, Inc. ], 542 U.S. 241, 124 S.Ct. 2466, 159 L.Ed.2d 355 [ (2004) ], discussed non-exclusive factors ... to be considered in light of the ‘twin aims’ of Section 1782 : ‘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.’ " Id. (citation omitted). The four Intel factors are as follows:

(1) whether "the person from whom discovery is sought is a participant in the foreign proceeding," in which case "the need for § 1782(a) aid generally is not as apparent as it ordinarily is when evidence is sought form a nonparticipant in the matter arising abroad," given that "[a] foreign tribunal has jurisdiction over those appearing before it, and can itself order them to produce evidence;"

(2) "the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance;"

(3) "whether the § 1782(a) 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 discovery request is "unduly intrusive or burdensome."

Intel , 542 U.S. at 264–65, 124 S.Ct. 2466 ; see also Kiobel , 895 F.3d at 244 (quoting same).

In this case, Santander purports to challenge the propriety of court-ordered discovery pursuant to Section 1782 on both statutory and discretionary grounds. At oral argument, however, Santander effectively conceded that Petitioners, at minimum, have satisfied the second and third statutory elements of Section 1782. Accordingly, in the analysis below, the Court addresses the first statutory element only, ultimately finding a lack of authority to grant Petitioners' applications.

A. Applicable Legal Standard

To obtain a court order for discovery under Section 1782, an applicant must initially establish that the person from whom discovery is sought resides (or can be found) in the district where the application is made. In re Edelman , 295 F.3d at 175–76. Section 1782 does not define what it means to "reside" or be "found" in a particular district, and "[i]t is unclear whether [ Section] 1782's statutory prerequisite that a person or entity reside or be found in a district is coextensive with whether a court has personal jurisdiction over that person or entity." In re Sargeant , 278 F.Supp.3d 814, 820 (S.D.N.Y. 2017).² However, several courts within this District have recognized that, "[a]t minimum ... compelling an entity to provide discovery under § 1782 must comport with constitutional due process." Id. ; accord, e.g. , In re Fornaciari , No. 17 Misc. 521, 2018 WL 679884, at *2 (S.D.N.Y. Jan. 29, 2018) ; Austl. & N.Z. Banking Grp. Ltd. v. APR Energy Holding Ltd. , No. 17 Misc. 216 (VEC), 2017 WL 3841874, at *3 (S.D.N.Y. Sept. 1, 2017) ("Whether section 1782's requirement that the person be found or reside in the district equates to a requirement that the court have personal jurisdiction over the person in order to enforce a section 1782 subpoena is unclear.... Regardless of what section 1782 requires, the Constitution's due process protections apply."); cf. Gucci Am., Inc. v. Li , 768 F.3d 122, 141 (2d Cir. 2014) ("A district court ... must have personal jurisdiction over a nonparty in order to compel it to comply with a valid discovery request under Federal Rule of Civil Procedure 45." (footnote omitted) ).

Given that constitutional due process principles apply to an applicant's request for discovery, it follows that district courts should employ the same analysis as when determining whether personal jurisdiction is present over a person. Indeed, "Hans Smit, a leading academic commentator and drafter of [ Section] 1782, has commented that the language defining [ Section 1782's] in personam reach must be given a liberal construction...