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In re Application of Bracha Foundation Request For Discovery Pursuant to 28 U.S.C. & 1782

United States District Court, N.D. Alabama, Southern Division

August 8, 2017




         This matter is before the court on “Motion for Protective Order and Other Relief” filed by Intervenors Halliwel Assets, Inc. and Mr. Panikos Symeou (doc. 71); “Motion to Intervene and Amend the Court's Protective Order to Permit the Use of Discovery” (doc. 87) filed by Proposed Intervenor Vadim Shulman, Applicant Bracha and Intervenor Hornbeam; the “Request for the Court to Determine Whether Bracha is an Interested Party” (doc. 74) filed by Applicant Bracha and Intervenor Hornbeam; and this court's “Order to Show Cause” why the court should not grant the motion to intervene and amend and why it should not deem the “interested party” request to be moot (doc. 92).

         For the reasons stated in this Memorandum Opinion, the court WILL GRANT IN PART, DENY IN PART, and FIND as MOOT IN PART the “Motion for Protective Order and Other Relief”; WILL DENY the “Motion to Intervene and Amend the Court's Protective Order to Permit the Use of Discovery”; and FINDS to be MOOT the “Request for the Court to Determine Whether Bracha is an Interested Party.”

         A. Background

         These motions are the latest flurry of filings in a case that began as a request for discovery pursuant to 28 U.S.C. § 1782 to be used in foreign proceedings that had not yet been filed at the time of the request and the ruling upon it. Section 1782 provides a mechanism that allows “any interested person” to apply to the district court for an order granting discovery “for use in a proceeding in a foreign or international tribunal.” 28 U.S.C. § 1782.

         The discovery request in this case asked that this court order Regions Bank in the Northern District of Alabama to provide discovery of certain bank documents focused on Warren Steel Holdings, LLC and related companies, entities and individuals, as the applicants sought evidence of improper conduct to be used in as-of-yet-unfiled foreign proceeding. This court granted the request on behalf of applicant Bracha and intervenor Hornbeam, finding that the request met the four statutory requirements. On appeal, the Eleventh Circuit affirmed the ruling as to Hornbeam, but vacated it to the extent that the court had also granted discovery to Bracha. Recognizing that this court had granted the discovery request on behalf of both Bracha and Hornbeam, but had not made a specific determination of whether Bracha was an “interested party” within the meaning of 28 U.S.C. § 1782, the Court of Appeals remanded for this court to make that determination. (Doc. 65-1).

         In the proceedings on remand, the parties have not been idle; they have continued to file motions and hundreds of pages of supporting documents. Bracha and Hornbeam filed a motion to remove Bracha as a requesting party (doc. 64), which the court subsequently allowed them to withdraw (docs. 74-motion & 81-Order). Intervenors Halliwel and Mr. Symeou filed a motion for protective order prohibiting Hornbeam from engaging in further communications with Regions Bank and requiring that Regions Bank provide future document production to Hornbeam only with approval of the court and with the agreement of movants. The motion also requested other relief, including asking the court to amend its order granting the § 1782 petition. (Doc. 71). Before the court ruled on the motion for protective order, Regions Bank provided to Hornbeam the documents subject to the court's order, which the Eleventh Circuit had affirmed as to Hornbeam. See doc. 73. By agreement of the parties, the court ordered on May 15, 2017 that “Hornbeam shall not share with Bracha any of the documents it received from Regions Bank pursuant to the November 15, 2016 subpoena pending the court's determination whether Bracha is an interested party.” (Doc. 73).

         In early May of 2017, in a related § 1782 action pending in the Southern District of New York, that court granted Mr. Symeou's request for a protective order to prohibit Hornbeam, Bracha, and related persons, including Mr. Shulman, from using discovery produced in New York pursuant to § 1782 in future foreign ex parte or attachment proceedings without prior approval from that court. The parties submitted agreed language to that effect, and the district court in New York entered the protective order.

         On May 12, 2017, Vadim Shulman, who was one of Warren Steel's beneficial owners and who is also the ultimate beneficial owner of Bracha and Hornbeam, filed a foreign legal proceeding in the English High Court of Justice against the two Ukranian businessmen who were beneficial owners of Warren Steel with Mr. Shulman. (Sealed Doc. 91-1 & 91-2; see Michaeli Decl. Doc. 88-1). Mr. Shulman asserts that this English proceeding was one of the foreign proceedings described in the discovery application that this court authorized. See doc. 99. The record is unclear when Halliwel and Mr. Symeou learned of that English proceeding, although the May 2, 2017 hearing in New York referred to an impending action that might be filed in England.

         On the same day that Mr. Shulman filed the English proceeding, Halliwel and Mr. Symeou filed in this court an unopposed motion to amend the October 20, 2015 protective order in this case to use the same or similar language as that in the New York district court's protective order, prohibiting Hornbeam, Bracha and related persons, including Mr. Shulman, from using the information produced from Regions Bank to Hornbeam as a result of this court's orders in any foreign ex parte or attachment proceedings without prior approval from this court. (Doc. 84). This court granted the unopposed motion (doc. 85) and entered an amended protective order on May 15, 2017 (doc. 86). On May 30, 2017, Mr. Shulman filed a motion to intervene in this case and to amend the protective order that his entities had previously not opposed, requesting new language that would permit him to use the discovery in the already filed English proceeding. (Doc. 87).

         B. Motion to Intervene and Amend the Court's Protective Order (doc. 87)

         After more than two years of proceedings on this discovery action, including an appeal to the Eleventh Circuit and remand back to this court, Bracha and Hornbeam and proposed intervenor Vadim Shulman make two requests to this court: (1) to allow Mr. Shulman to intervene in this case; and (2) to amend the court's protective order to permit Mr. Shulman to use the discovery materials produced in this action in support of foreign proceedings he filed in England. In support of the motion is a 37-page brief with two declarations: (a) a declaration of David R. Michaeli, a New York attorney setting out 2017 developments in a § 1782 discovery action that Hornbeam filed in the Southern District of New York (doc. 88-1); and (b) a declaration of Brian Doctor, Q.C. (doc. 88-2), a barrister and Queen's Counsel in London to assist this court in evaluating, among other things, the principles of English law applicable to the claims Mr. Shulman asserts in the English action and the limitations on the English court's ability to compel non-parties located in the United States to produce evidence to support those claims.

         1. Motion to Intervene

         This motion to intervene is the third filed in this discovery action. See Motion to Intervene of Halliwel and Mr. Symeou (doc. 8) and Motion to Intervene by Hornbeam (doc. 32). The court granted the previous two motions to intervene on October 2, 2015, approximately 22 months ago.

         Halliwel and Mr. Symeou oppose the proposed intervention for the following reasons: they assert that (1) the court's § 1782 discovery Orders are final subject only to the Eleventh Circuit's directions on remand, and Shulman cannot piggy-back on final orders; and (2) on the merits, Shulman does not satisfy the standards for Rule 24 intervention because his attempt to intervene is untimely and because he is not an “interested person.”

         (1) Finality and Determination of the Issue

         Halliwel and Mr. Symeou characterize this court's discovery order as a “final order” and assert that this court's authority is limited by the scope of the mandate on remand. This “mandate rule” argument ignores the posture of this proceeding, which is not the usual “final judgment” after summary judgment or trial, such as the case that Halliwel and Mr. Symeou cite as support for their argument. See Litman v. Mass. Mut. Life Ins. Co., 825 F.2d 1506, 1510-13 (11th Cir. 1987) (en banc) (appeal from judgment entered after a jury trial). Rather, it is an amended order on an application for discovery that retains jurisdiction and affords the applicants an opportunity to present further document requests:

The court makes this ruling WITHOUT PREJUDICE to the applicants making further document requests(s) if, after receiving the documents listed in paragraph 2) above, Bracha and Hornbeam find a legitimate reason that they need additional documents, as discussed in the Memorandum Opinion. The court shall retain jurisdiction over the matter for the purpose of enforcement and assessing any supplemental request for discovery assistance.

(Doc. 47). Halliwel and Mr. Symeou appealed from that amended order as well as the denial of a motion to set aside the memorandum opinion and vacate that ...

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