Court Opinion

ID: 9947441
Source: CourtListenerOpinion
Date Created: 2024-03-04 21:00:34.316909+00
Date Added: 2024-06-11T14:26:30.586594
License: Public Domain

23-7635
     In Re: Frasers Grp. PLC
 1                                           In the
 2                              United States Court of Appeals
 3                                  for the Second Circuit
 4
 5
 6                                   August Term 2023
 7                                Argued: January 23, 2024
 8                                 Decided: March 4, 2024
 9
10                                       No. 23-7635
11
12                                  FRASERS GROUP PLC,
13                                   Applicant-Appellant,
14                                            v.
15                             MORGAN STANLEY, JAMES GORMAN,
16                                 Respondents-Appellees.
17
18
19                     Appeal from the United States District Court
20                       for the Southern District of New York
21                          No. 23-348, Paul A. Engelmayer,
22                                District Court Judge.
23

24   Before: JACOBS, PARKER, and PÉREZ, Circuit Judges.

25          On appeal from an order of the United States District Court for the Southern
26   District of New York (Engelmayer, J.).

27         This appeal arises from a dispute over an Application for Judicial Assistance
28   under 28 U.S.C. § 1782 (the “Application”). Applicant-Appellant Frasers Group
29   PLC (“Frasers”) seeks documentary and testimonial evidence from Respondent-
30   Appellee James Patrick Gorman, the former Chief Executive Officer and now
31   Executive Chair of Respondent-Appellee Morgan Stanley, for use in a lawsuit
32   commenced in the United Kingdom in the High Court of Justice in the Business
33   and Property Courts of England and Wales.
 1           Frasers appeals from an order entered by the district court denying the
 2   Application in its entirety. The district court analyzed the request for discovery
 3   under the factors established by the Supreme Court in Intel Corp. v. Advanced Micro
 4   Devices, Inc., 542 U.S. 241 (2004), that district courts consider when determining
 5   whether to grant domestic discovery for use in foreign proceedings under 28
 6   U.S.C. § 1782(a). It ultimately concluded that the first Intel factor—whether “the
 7   person from whom discovery is sought is a participant in the foreign
 8   proceeding”—and the fourth Intel factor—whether the discovery request is
 9   “unduly intrusive or burdensome”—weighed against granting the Application.
10   Intel, 542 U.S. at 264–65. This case asks us to determine whether the district court
11   abused its discretion in denying the Application. We hold that it did not and
12   AFFIRM.

                                              2
 1
 2
 3                                JOSEPH B. ROME, Sequor Law, PA, Miami, FL (Douglas A.
 4                                Kellner, Kellner Herlihy Getty & Friedman LLP, New
 5                                York, NY, on the brief), for Applicant-Appellant.
 6
 7                                JEFF E. BUTLER (John P. Alexander, on the brief), Clifford
 8                                Chance US LLP, New York, NY, for Respondents-
 9                                Appellees.
10
11
12   MYRNA PÉREZ, Circuit Judge:

13          This appeal arises from a dispute over the propriety of an Application for

14   Judicial Assistance under 28 U.S.C. § 1782 (the “Application”), which permits a

15   district court to grant domestic discovery for use in foreign proceedings.

16   Applicant-Appellant Frasers Group PLC (“Frasers”) seeks documentary and

17   testimonial evidence from Respondent-Appellee James Patrick Gorman, the

18   former Chief Executive Officer and now Executive Chair of Respondent-Appellee

19   Morgan Stanley, 1 for use in a lawsuit commenced in the United Kingdom in the

20   High Court of Justice in the Business and Property Courts of England and Wales

21   (the “English Proceedings”). District courts consider the four discretionary Intel

     1We take judicial notice that, during the pendency of this appeal, Gorman retired as the Chief
     Executive Officer of Morgan Stanley but remains the Executive Chairman of its board. See United
     States v. Nieves, 58 F.4th 623, 634 (2d Cir. 2023).

                                                   3
 1   factors when determining whether to grant a § 1782 application. Intel Corp. v.

 2   Advanced Micro Devices, Inc., 542 U.S. 241, 264–65 (2004). On appeal, we must

 3   determine whether the district court abused its discretion by finding that two of

 4   the four Intel factors weighed against granting the Application. For the reasons

 5   set forth below, we conclude that it did not. Thus, we AFFIRM the district court’s

 6   order denying the Application.

 7       I.   Background

 8            In 2019, Frasers—a British retailer group—entered into various options

 9   transactions with Saxo Bank A/S (“Saxo Bank”) related to shares of the fashion

10   company Hugo Boss. From mid-April 2021 to May 2021, Frasers sold an increasing

11   number of Boss call options. 2 Concurrently, Saxo Bank entered into trades with

12   Morgan Stanley & Co. International PLC (“MSIP”), an English company and a

13   subsidiary of Morgan Stanley, in relation to the Boss call options.

14            On May 25, 2021, MSIP issued a margin call to Saxo Bank (the “Margin

15   Call”). The net amount of the Margin Call was $915 million. On May 26, 2021,

16   Saxo Bank paid $400 million in part satisfaction of the Margin Call. That day, Saxo

     2A call option, a type of derivative securities, “gives its holder the right to purchase shares of an
     equity from the option seller at a specified strike price.” Allaire Corp. v. Okumus, 433 F.3d 248, 250
     n.3 (2d Cir. 2006). If the price of that security rises, the buyer profits by buying it at the agreed
     price and reselling it on the open market at the higher market price. See id. at 251 & n.4.
                                                       4
 1   Bank issued its own, cash-only margin call to Frasers in respect to the Boss call

 2   options with an obligation to pay “immediately” (the “Passed-On Margin Call”).

 3   App’x at 10. Frasers objected to the Passed-On Margin Call and unsuccessfully

 4   engaged in negotiations with MSIP and Saxo Bank.

 5         On June 28, 2021, Frasers commenced the English Proceedings for damages

 6   against Saxo Bank and MSIP.

 7         On September 20, 2023, Frasers submitted an Application for Judicial

 8   Assistance under 28 U.S.C. § 1782, seeking to obtain documentary and testimonial

 9   evidence from Gorman for use in the English Proceedings. Specifically, Frasers

10   sought to depose Gorman and to subpoena certain documents related to the

11   Margin Call. App’x at 30–31.

12         Frasers argued before the district court that the Application supports its

13   allegations in the English Proceedings.     Further, Frasers asserted that the

14   documents and testimony that it sought would help reveal the extent, if any, of

15   Gorman’s knowledge of the Margin Call; his involvement, if any, in the decisions

16   to impose and maintain the Margin Call; and whether the decision to impose and

17   maintain the Margin Call was guided by unwritten policies put in place by Morgan

18   Stanley’s leadership.   After holding a telephonic conference regarding the

                                            5
 1   Application, the district court encouraged the parties to meet and confer, but

 2   negotiations failed.

 3         On October 19, 2023, the district court entered an order denying the

 4   Application in its entirety. Frasers timely filed its notice of appeal.

 5   II.   Discussion

 6         28 U.S.C. § 1782(a) provides, in relevant part:

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

12   Section 1782 allows a district court to order discovery if:

13         (1) . . . the person from whom discovery is sought reside[s] (or [is]
14         found) in the district of the district court to which the application is
15         made, (2) . . . the discovery [is] for use in a proceeding before a foreign
16         tribunal, and (3) . . . the application [is] made by a foreign or
17         international tribunal or any interested person.

18   Esses v. Hanania (In re Esses), 101 F.3d 873, 875 (2d Cir. 1996) (internal quotation

19   marks and citation omitted).

20         The parties do not dispute that the Application meets § 1782’s statutory

21   requirements. Because these statutory requirements have been met, the district

22   court has the discretion to grant or deny the Application. Kiobel by Samkalden v.

23   Cravath, Swaine & Moore LLP, 895 F.3d 238, 242 (2d Cir. 2018) (“Section 1782 states

                                               6
 1   that a court ‘may order’ such discovery; so even if a court has jurisdiction under

 2   the statute to grant a petition, the decision to grant it is discretionary.”).

 3         In Intel, the Supreme Court established the discretionary factors that district

 4   courts should consider when determining whether to grant domestic discovery for

 5   use in foreign proceedings under 28 U.S.C. § 1782(a). 542 U.S. 241. Those four

 6   factors are: (1) whether “the person from whom discovery is sought is a participant

 7   in the foreign proceeding”; (2) “the nature of the foreign tribunal, the character of

 8   the proceedings underway abroad, and the receptivity of the foreign government

 9   or the court or agency abroad to U.S. federal-court judicial assistance”;

10   (3) “whether the § 1782(a) request conceals an attempt to circumvent foreign

11   proof-gathering restrictions or other policies of a foreign country or the United

12   States”; and (4) whether the discovery request is “unduly intrusive or

13   burdensome.” Id. at 264–65.

14         We review a district court’s application of the Intel factors for abuse of

15   discretion. Fed. Republic of Nigeria v. VR Advisory Servs., Ltd., 27 F.4th 136, 147 (2d

16   Cir. 2022). An abuse of discretion occurs if the district court “(1) bases its decision

17   on an error of law or uses the wrong legal standard; (2) bases its decision on a

18   clearly erroneous factual finding; or (3) reaches a conclusion that . . . ‘cannot be

                                                7
 1   located within the range of permissible decisions.’” Id. (quoting Millea v. Metro-

 2   North R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011)). “The Intel factors are not to be

 3   applied mechanically. A district court should also take into account any other

 4   pertinent issues arising from the facts of the particular dispute.” Kiobel, 895 F.3d

 5   at 245.

 6         In denying Frasers’s Application, the district court found that the second

 7   and third Intel factors “moderately favor[ed] granting” the Application, but that

 8   the first and fourth Intel factors weighed heavily against relief. App’x at 215. On

 9   appeal, Frasers challenges the district court’s findings as to the first and fourth

10   Intel factors and contends that the district court arrived at this conclusion by

11   improperly reading an exhaustion requirement into both factors. We disagree and

12   conclude that the district court did not abuse its discretion in analyzing the Intel

13   factors.

14      A. The First Intel Factor

15         The district court did not err in finding that the first Intel factor weighed

16   against relief as to the production of documents because the documents sought

                                              8
 1   were obtainable through discovery from MSIP in the English Proceedings. 3

 2   Contrary to Frasers’s assertions, the district court did not impose an exhaustion

 3   requirement on Frasers. Although the district court considered the availability of

 4   the documents in the English Proceedings, it did not treat Frasers’s failure to first

 5   pursue discovery of these documents in the English Proceedings as a categorical

 6   bar.

 7          In Intel, the Supreme Court described the first factor in the following way:

 8                 First, when the person from whom discovery is sought is a
 9          participant in the foreign proceeding . . . , the need for § 1782(a) aid
10          generally is not as apparent as it ordinarily is when evidence is sought
11          from a nonparticipant in the matter arising abroad. A foreign tribunal
12          has jurisdiction over those appearing before it, and can itself order
13          them to produce evidence. . . . In contrast, nonparticipants in the
14          foreign proceeding may be outside the foreign tribunal’s
15          jurisdictional reach; hence, their evidence, available in the United
16          States, may be unobtainable absent § 1782(a) aid.

17   542 U.S. at 264. Importantly, we have on multiple occasions found that the first

18   Intel factor weighed against relief even where the discovery target was not a party

19   to the foreign proceeding. For example, in Schmitz v. Bernstein Liebhard & Lifshitz,

20   LLP, we concluded that the first Intel factor counseled against discovery against a

21   third-party law firm where the petitioners “for all intents and purposes . . . are

     3The district court found that the first Intel factor was neutral as to Frasers’s request to depose
     Gorman. App’x at 216.

                                                     9
 1   seeking discovery from DT, their opponent in the German litigation.” 376 F.3d 79,

 2   85 (2d Cir. 2004). We stated that “because DT is a participant in the German

 3   litigation subject to German court jurisdiction, petitioner’s need for § 1782 help ‘is

 4   not as apparent as it ordinarily is when evidence is sought from a nonparticipant

 5   in the matter arising abroad.’” Id. (quoting Intel, 542 U.S. at 264); see also Kiobel, 895

 6   F.3d at 245 (applying the first Intel factor against a § 1782 applicant “when the real

 7   party from whom documents are sought (here, Shell) is involved in [the] foreign

 8   proceedings”).

 9         As in Schmitz, Frasers “for all intents and purposes” seeks discovery from

10   MSIP, its opponent in the English Proceedings. 376 F.3d at 85. And because MSIP

11   is a participant in the English Proceedings and “subject to [the foreign] court[’s]

12   jurisdiction, [Frasers]’s need for § 1782 help ‘is not as apparent as it ordinarily is

13   when evidence is sought from a nonparticipant in the matter arising abroad.’” Id.

14   (quoting Intel, 542 U.S. at 264). Although Gorman is not a party to the English

15   Proceedings, Appellees made two concessions: first, that MSIP would treat all

16   documents sought in the English Proceedings that Gorman may hold on his

17   personal devices or in his homes as within MSIP’s custody; and second, that MSIP

18   would not object in the English Proceedings to the disclosure of Morgan Stanley

                                                10
 1   documents on the grounds that they were located in the United States. See App’x

 2   at 216. These concessions indicate that Frasers could obtain these documents in

 3   the English Proceedings, and Frasers did not meaningfully challenge this. Nor is

 4   there any indication that the documents sought are “unobtainable absent § 1782(a)

 5   aid.” Intel, 542 U.S. at 264.

 6         Accordingly, there was no abuse of discretion in finding that the first Intel

 7   factor weighed against granting the Application.

 8      B. The Fourth Intel Factor

 9         The district court also did not abuse its discretion in concluding that the

10   fourth Intel factor weighed against relief because the discovery request was

11   “unduly intrusive or burdensome.” Id. at 265 (holding that “unduly intrusive or

12   burdensome requests may be rejected or trimmed”). “[T]he ultimate question of

13   burdensomeness is within the district court’s discretion to decide,” Fed. Republic of

14   Nigeria, 27 F.4th at 159, and burdensomeness is assessed “by applying the familiar

15   standards of Rule 26 of the Federal Rules of Civil Procedure,” Mees v. Buiter, 793

16   F.3d 291, 302 (2d Cir. 2015); see also Edelman v. Taittinger (In re Edelman), 295 F.3d

17   171, 179 (2d Cir. 2002) (“Limits may be proscribed on [§ 1782] discovery or an

18   existing order may be quashed under Rule 26(c).”). Rule 26 contains general

                                              11
 1   provisions governing discovery and provides, in relevant part, that a “court must

 2   limit the frequency or extent of discovery otherwise allowed by these rules or by

 3   local rule if it determines that . . . the discovery sought is unreasonably cumulative

 4   or duplicative, or can be obtained from some other source that is more convenient,

 5   less burdensome, or less expensive.” Fed. R. Civ. P. 26(b)(2)(C)(i) (emphasis

 6   added); see also Metallgesellschaft AG v. Hodapp (In re Metallgesellschaft), 121 F.3d 77,

 7   79 (2d Cir. 1997) (“[I]f it were clear that discovery were equally available in both

 8   foreign and domestic jurisdictions, a district court might rely on this evidence to

 9   conclude that the § 1782 application was duplicative [under Rule 26] . . . or was

10   brought vexatiously . . . .”).

11         As with the first Intel factor, and contrary to Frasers’s assertions, the district

12   court did not improperly read an exhaustion or “quasi-exhaustion” requirement

13   into its analysis of the fourth Intel factor. See Malev Hungarian Airlines v. United

14   Techs. Int’l Inc. (In re Malev Hungarian Airlines), 964 F.2d 97, 100 (2d Cir. 1992). In

15   In re Malev Hungarian Airlines, we reversed a district court’s denial of a § 1782

16   application when it imposed a condition that the applicant “should have first

17   sought the requested discovery from the [foreign] court.” Id. The district court

18   here did not impose such a condition; rather, it considered the possibility that the

                                                12
 1   applicant could obtain the discovery in the foreign proceedings along with other

 2   factors, including that pursuing discovery in the foreign court would have been

 3   more convenient—an approach consistent with “the familiar standards of Rule 26

 4   of the Federal Rules of Civil Procedure.” Mees, 793 F.3d at 302; see also Fed. R. Civ.

 5   P. 26(b)(2)(C)(i) (requiring a court to limit discovery that “can be obtained from

 6   some other source that is more convenient, less burdensome, or less expensive”).

 7   And with respect to Frasers’s request for Gorman’s testimony, the district court

 8   not only weighed the time commitment required against his competing

 9   obligations as the Chief Executive Officer of Morgan Stanley, but also found that

10   Gorman’s testimony bore little relevance to Frasers’s claims. Thus, the district

11   court also did not abuse its discretion in finding that the fourth Intel factor weighed

12   against granting the Application.

13   III.   Conclusion

14          We have considered Frasers’s remaining arguments and find them to be

15   without merit. Accordingly, we AFFIRM the order of the district court.

                                               13