In a case involving request for discovery under 28 USC 1782, the Second Circuit held in Bouvier v. Adelson, No. 16-3655 (2d. Cir. 2017) that (1) the use of such discovery may be used in criminal proceedings even where the requested party has not plead monetary relief and (2) the discovery obtained is not limited to the jurisdiction for which it was originally requested.
The underlying issue relates to a series of art dealings between an art dealer, Yves Bouvier and collector, Dmitry Rybolovlev via his holding companies, Access Delight International Ltd. and Xitrans Finance Ltd (“Petitioners”). In his capacity as an art dealer, Bouvier procured thirty-eight artworks for the Petitioners between 2003 and 2014. Bouvier was the sole agent between the seller and Petitioners, who did not have direct access to the seller. Bouvier would procure the art from the seller via his business, MEI Invest Ltd. and then invoice the Petitioners for the purported purchase price along with a two percent commission. Thus, since Rybolovlev himself was removed from the actual seller, he would have relied on Bouvier’s honesty and good faith for all the transactions.
In 2014, the New York Times reported Sotheby’s had brokered a private sale of Leonardo da Vinci’s Christ as Salvator Mundi for a reported price between $75 million and $80 million. The Petitioners, being the ultimate buyers, were surprised upon hearing this news as a payment of $127.5 million was made for the work. The Petitioners subsequently initiated criminal and civil proceedings against Bouvier in Monaco, France and Singapore on the grounds of fraud.
In Monaco, the Petitioners initiated criminal proceedings and then further joined as civil parties. As explained below, Petitioners voluntarily dismissed the civil claims, but the criminal proceedings for fraud and money laundering remain against Bouvier. The French proceedings were initiated by a third party, Catherine Hutin-Blay, a stepdaughter of Pablo Picasso. Hutin-Blay alleges that two of thirty-eight works (Tete de femme and Espagnole a l’eventail) that were sold by Bouvier had been stolen from her (while not stated in the Court opinion, there appears to be acknowledgment that Hutin-Blay may have been aware of the sale).
The Court focused on the Singapore proceedings which were civil in nature (Bouvier appears to be a permanent resident of Singapore). Bouvier initially argued in the lower court that the civil claim was duplicative of the Monaco proceeding and requested a stay on the proceeding. The lower court denied the stay request, but as a condition for the case to proceed, the Petitioners were requested to withdraw any civil claims in Monaco. Subsequently, Singapore’s highest court, the Court of Appeal granted a stay on the litigation proceedings on forum non conveniens grounds. Thus, the French and Monaco criminal cases are the only basis for Section 1782 discovery.
The District Court granted the discovery application with respect to the two Picasso paintings in the French proceedings. Since the Monaco and Singapore proceedings were ongoing, and the certainty of the outcome unclear, the District Court reserved judgment on the use of discovery in these two jurisdictions. Subsequently, the judge in the Monaco proceeding submitted a letter to the District Court indicating that the Petitioners were still civil parties to the investigation and may it was “perfectly permissible” to “take part in the discovery of the truth in the investigative proceeding”. Such discovery also included “any information about the works of art from Sotheby’s New York, including Christ as Salvator Mundi. While Bouvier argued that Petitioners failed to meet the “for use” burden of the Section 1782 requirements, the Court nonetheless granted the request on the grounds that the Petitioners satisfied the factors stated in Intel Corp v. Advanced Micro Devices, Inc. 541 U.S. 241 (2004). The District Court denied Bouvier’s request for a protective order limiting the discovery to be used in the Monaco proceeding. Regardless, the the order limited the discovery to be used for the Monaco, French and Singaporean proceedings and further requested that the Petitioners must seek leave of the court to submit the discovery in any additional proceeding.
Bouvier raised two issues on appeal. First, he challenged the “for use” requirement with respect to the Monaco proceeding. Secondly, Bouvier also argued that the District Court erred in granting a protective order extending the use of discovery in the French and Singapore jurisdictions and thus requested the Court to vacate the order.
With respect to the “for use” requirement, the Court reiterated Section 1782:
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.
Bouvier argued that since the Petitioners were not claiming civil relief i.e. monetary damages in the Monaco proceedings, Section 1782 does not apply since his interpretation is that the statute applies to parties seeking civil relief. The Court applied a textual interpretation of Section 1782 and rejected Bouvier’s argument.
The Court referenced Intel applied the analysis presented in the Supreme Court. The focus was on whether the party had “significant procedural rights” like the power to submit “information in support of its allegation”. Furthermore, in a comparison to the facts presented in Intel, the applicant was not a party to the foreign proceeding, had no claims for relief and nor was there any opportunity to obtain any damages. The Court concluded that since Intel itself did not impose any such requirements, Bouvier’s argument that “for use” was limited to cases where monetary relief was sought was baseless.
Furthermore, the Court also referenced its own decision In re Application for an Order Pursuant to 28 USC 1782 to Conduct Discovery for Use in Foreign Proceedings (Berlamont), 773 F.3d 456 (2d. Cir. 2014), which also related to using discovery in an foreign criminal proceeding. The Court’s decision to affirm the application for discovery in a criminal proceeding although the decision was related to the Swiss court’s status foreign tribunal. Regardless, the facts were fairly analogous to the current case, as the Petitioners appeared in the Swiss proceedings as victims of a fraud case and were requesting discovery for the criminal proceedings.
Bouvier argued that in Intel and Berlamont, the respective parties requesting discovery had a financial interest in the in the “outcome of the proceeding”. The Court was unpersuaded by their argument since the text of Section 1782 does not indicate prima facie that interpretation of the “for use” requirement. The text simply states that the discovery requested needed to be used in “criminal proceedings conducted before formal accusation” and as such does not attach any further requirements. Thus, the Court concluded that a “party’s interests is very much beside the point”.
The Court also addressed further observations of the “for use” requirement that were not previously addressed in other cases namely, Certain Funds, Accounts and/or Inv. Vehicles v. KPMG, L.L.P., 798 F.3d 113 (2d Cir. 2015) (holding that applicants did not satisfy “for use” requirements since they had “no means of injecting the evidence into the proceeding”); Mees v. Buiter, 793 F.3d 291 (2d Cir. 2015) (holding that the applicant did not meet the requirement as she discovery sought was not necessary to draft an adequate complaint) and Brandi-Dorn v. IKB Deutsche Industriebank AG, 673 F.3D 76 (2d Cir 2012).
Thus, the Court set certain factors consistent with the case law above and Intel namely:
“(1) A section 1782 applicant must establish that he or she has the practical ability to inject the requested information into a foreign proceeding.
(2) As long as he or she makes that showing, it is not fatal to the application that he or she lacks a claim for relief before the foreign tribunal, whether for damages or otherwise”
Here, the Court found that the Petitioners have established the the requested discovery is “for use” in the Monaco proceeding. Furthermore, the use of such discovery would give Petitioners an advantage and serve some use in the fraud case.
Finally, the Court disregarded Bouvier’s argument that such a broad holding would allow anyone to obtain discovery under Section 1782 for three reasons: (1) unless there is an apparent connection to the foreign proceeding, the plaintiff would have any procedural opportunity to use said discovery; (2) the focus that only “interested persons” can apply for such discovery and thus would prevent ineligible parties and (3) the discretion of the District Court would act as a gatekeeper for any misuse of the discovery.
With respect to the second issue on appeal, namely the use of the discovery in jurisdictions other than the one originally sought, the Court held that no such limitations were placed by Section 1782.
The Court noted that there wasn’t much legislative history regarding the specific forum where the discovery needed to be used. Once again, the Court appeared to defer to the district court’s discretion as to the jurisdictions to which the discovery can be used, although it referenced Glock v. Glock Inc., 797 F.3d 1002 (11th Cir. 2015) which addressed the use of the discovery obtained under Section 1782 into a subsequent US proceeding.
In Glock, the Eleventh Circuit held that “nothing in the language of Section 1782 purports to to limit the later use of evidence that have been properly obtained under Section 1782”. Since the legislative history does not reference this particular scenario, “nothing precludes a party from using that evidence in a wholly separate lawsuit against same defendant or a different party”.
The Court applied the above principle and also noted that similar discovery obtained under the Federal Rules of Civil Procedure, “nothing regulates what litigants may do with the discovery after it is lawfully obtained”. Once again, it appears that the Court relies on the discretion of the District Court to limit such use of discovery via, as in the case here, protective orders. Addressing Bouvier’s concern that such discovery may be obtained under “sham” circumstances, the Court noted that under Fed. R. Civ. P. 26(c)(1), the district court may still either deny the application or include other restrictions as it deems fit.
The takeaway from this opinion is that the Second Circuit appears to have a expansive interpretation of Section 1782 applications. In addition to establishing some principles, the Second Circuit also defers to the discretion of the District Court in granting these applications.