Xitrans Fin. Ltd. v. Adelson (In re Accent Delight Int'l Ltd.)
| Citation | 869 F.3d 121 |
| Decision Date | 28 August 2017 |
| Docket Number | August Term, 2016,Docket No. 16-3655 |
| Parties | IN RE ACCENT DELIGHT INTERNATIONAL LTD., Xitrans Finance Ltd. Yves Bouvier, MEI Invest Ltd., Intervenors-Appellants, v. Warren Adelson, Alexander Parish, Robert Simon, Respondents-Appellees, Accent Delight International Ltd., Xitrans Finance Ltd., Petitioners-Appellees, Sotheby's, Respondent. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Daniel W. Levy (James H. Smith, on the brief), McKool Smith, P.C., New York, NY, for Intervenors-Appellants.
Daniel J. Kornstein (O. Andrew F. Wilson and Douglas E. Lieb, on the brief), Emery Celli Brinckerhoff & Abady LLP, New York, NY, for Petitioners-Appellees.
Before: RAGGI and CARNEY, Circuit Judges, and KAPLAN, District Judge.*
Intervenors-Appellants Yves Bouvier and MEI Invest Ltd. (collectively, "Bouvier") appeal from an order of the United States District Court for the Southern District of New York (Furman, J. ) granting the application of Petitioners-Appellees Accent Delight International Ltd. and Xitrans Finance Ltd. (collectively, "Petitioners") for discovery in aid of foreign litigation under 28 United States Code Section 1782. Section 1782 provides that, upon an "application of any interested person," the "district court of the district in which a person resides or is found may order him ... to produce a document ... for use in a proceeding in a foreign or international tribunal."
This appeal presents primarily two issues regarding the statute's scope. The first is whether discovery sought pursuant to Section 1782 is "for use in a proceeding in a foreign or international tribunal" where the applicant is a crime victim authorized to submit the discovery to the foreign tribunal, but is not making a claim for damages therein. We hold that the statute encompasses such an application. The second is whether an applicant that lawfully has obtained discovery under Section 1782 as to one foreign proceeding may use that discovery in other foreign proceedings. We hold that the statute permits such use absent an order to the contrary by the Section 1782 district court. Because our holdings on these two issues accord with those of the district court, and because Bouvier's remaining grounds for appeal lack merit, we affirm.
Petitioners are British Virgin Island companies owned by family trusts of Dmitry Rybolovlev, a Russian national residing in Monaco. Intervenor Yves Bouvier is a Swiss businessman who invests and deals in art through his co-intervenor MEI Invest Ltd., a Hong Kong company that he controls. This Section 1782 proceeding arises out of a dispute between Bouvier and Petitioners over the sales to Petitioners of thirty-eight artworks, including paintings by Picasso and van Gogh, for a total of approximately $2 billion.
Petitioners, acting on Rybolovlev's behalf, acquired the thirty-eight artworks over the eleven-year period from 2003 to 2014. Bouvier brokered the transactions and generally structured them as follows. Bouvier contacted the owner of an artwork that Petitioners sought to acquire, purchased the work through MEI Invest or another of his associated companies, and later invoiced Petitioners for the purported purchase price plus a two-percent commission. Petitioners consequently had little or no contact with the sellers or their agents. This arrangement provided a degree of privacy often sought in high-profile art sales, in which it is common for buyers and sellers to act anonymously through intermediaries. But Petitioners' remoteness from the deals came with some risk, as it left Bouvier in a privileged position over key details. Petitioners therefore relied heavily on Bouvier's honesty and good faith.
The relationship between Petitioners and Bouvier soured in 2014 when The New York Times reported that Sotheby's had brokered a private sale of Leonardo da Vinci's Christ as Salvator Mundi in May 2013 for between $75 million and $80 million. The news allegedly came as a surprise to Petitioners because they had purchased that same work through Bouvier, also in May 2013, for $127.5 million. According to Petitioners, Bouvier had led them to believe that the sale was the culmination of fraught negotiations with a private seller. Petitioners now allege that Bouvier's account of the sale was entirely false, that he failed to disclose Sotheby's role, and that he inflated the purchase price in order to pocket the $52 million difference. What is more, Petitioners maintain that Bouvier lied about the prices of the other thirty-seven artworks and, all told, defrauded Petitioners of $1 billion in secret margins over the eleven-year relationship.
Alerted to this potential fraud, Petitioners initiated or joined foreign proceedings against Bouvier in Monaco, France, and Singapore.
In Monaco, Petitioners initiated a criminal proceeding against Bouvier. Petitioners later joined the case as civil parties after the investigating magistrate brought charges for fraud and complicity in money laundering against Bouvier. The proceeding is pending.
The proceeding in France, also criminal in nature, was initiated by Pablo Picasso's stepdaughter, Catherine Hutin-Blay. Hutin-Blay alleges that two of the thirty-eight works that Petitioners acquired through Bouvier—Picasso's Tête de femme and Espagnole à l'éventail —were stolen from her. In France, as in Monaco, Petitioners are civil parties to an ongoing criminal investigation.
Petitioners filed also a civil suit in Singapore, where they sought damages from Bouvier for his alleged fraud. Some discussion of that case's procedural history is necessary to an understanding of the current state of play in the foreign proceedings.
Bouvier sought a stay of the litigation in the Singaporean trial court on principally two grounds: first, that Petitioners' damage claims there were duplicative of those in the Monégasque proceeding and, second, that Singapore was not an appropriate forum. The trial court denied Bouvier's stay motion, but in doing so imposed a condition that Petitioners discontinue their civil proceedings in Monaco in order to continue litigating in Singapore. Petitioners acceded to that instruction by disclaiming their right to damages in the Monégasque proceeding, an action that the Singaporean trial court later found had satisfied its condition. Bouvier then appealed the stay motion denial to the Court of Appeal of the Republic of Singapore, the country's court of last resort, where the case remained pending until shortly before we heard oral argument in this appeal. The Singaporean high court, ruling for Bouvier on appeal, granted a stay of the underlying litigation on forum non conveniens grounds, effectively terminating the case.
Two points of significance emerge from this winding procedural path. First, the criminal cases in France and Monaco are the only foreign proceedings remaining as potential bases for Section 1782 discovery. Second, as a result of the Singaporean trial court's rulings, Petitioners do not seek damages in either case.
Petitioners filed this Section 1782 application for discovery in aid of the Monégasque, French, and Singaporean proceedings.2 They named as respondents Sotheby's and the three individuals who had sold da Vinci's Christ as Salvator Mundi in May 2013. In their application, Petitioners claimed that Sotheby's was involved in other relevant acquisitions by Bouvier. Petitioners therefore requested discovery of documents relevant to all thirty-eight artworks because, due to Bouvier's alleged deception, they "did not know with certainty how many of the [artworks] were acquired by Bouvier with Sotheby's involvement, or whether Bouvier paid any undisclosed commission to Sotheby's or to any employee of Sotheby's out of his hidden margins."
Sotheby's and Petitioners then negotiated a settlement in which they agreed that Sotheby's would produce certain limited discovery, primarily concerning the sale of Christ as Salvator Mundi , which Petitioners would accept in total satisfaction of their Section 1782 application.3 Bouvier properly intervened and objected to the agreed-upon production.
At an initial conference, the district court granted the application with respect to the two Picasso paintings at issue in the French proceeding. It reserved judgment, however, on the remainder of the application. Bouvier had argued that one or both of two developments was likely to occur. First, he maintained that he would succeed on his appeal in Singapore and that the suit there would be dismissed. Second, he argued that, even if the Singaporean litigation continued, the Singaporean court nonetheless would require Petitioners to withdraw entirely from the Monégasque proceeding, as opposed to withdrawing only their damages claim. Either way, according to Bouvier, one or both of the proceedings would have come to an end.4 In light of those possibilities, the district court postponed ruling "pending further developments in either or both Singapore or Monaco" and requested that the parties update the court when circumstances had changed sufficiently for it to rule on the balance of the application. Appellants' App. 292-93. In particular, the court stated that it would be helpful if Petitioners included in their update any determination by the magistrate presiding in the Monégasque proceeding that Petitioners' status there gave them "some rights to use evidence in those proceedings." Id. 292.
Over the following months, Petitioners obtained and submitted to the court a letter from the Monégasque magistrate. The magistrate confirmed that Petitioners were "civil parties" to the investigation, a status that made it "perfectly permissible" for them "to take part in the discovery of the truth in the investigative proceeding."5 Id. 304. The magistrate elaborated that, as civil parties, Petitioners "may submit any documents that [they]...
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