In re Ex Parte Nouvel, LLC

CHARLES F. EICK UNITED STATES MAGISTRATE JUDGE

REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

CHARLES F. EICK UNITED STATES MAGISTRATE JUDGE

This Report and Recommendation is submitted to the Honorable Marc C. Scarsi, United States District Judge, pursuant to 28 U.S.C. section 636 and General Order 05-07 of the United States District Court for the Central District of California.

PROCEEDINGS

On January 7, 2022, Nouvel LLC ("Nouvel") filed an "Ex Parte Application for an Order Pursuant to 28 U.S.C. § 1782 Granting Leave to Obtain Discovery for Use in Foreign Proceedings, etc." ("Application"), accompanied by a Memorandum, declarations and exhibits. Nouvel sought thereby to obtain documents through subpoenas to be served on Mondo Bongo, LLC, William B. Pitt and Warren Grant. On January 12, 2022, the Magistrate Judge granted the Application.

On March 17, 2022, Mondo Bongo, LLC, Pitt and Grant ("the Mondo parties") filed a "Motion to Vacate Order Granting Ex Parte Application Pursuant to 28 U.S.C. § 1782 and to Quash Subpoenas" ("Motion to Vacate" and "Motion to Quash"), accompanied by a Memorandum, declarations and exhibits. On May 6, 2022, Nouvel filed a "Memorandum of Points and Authorities in Opposition to Motion to Vacate, etc.," accompanied by declarations and exhibits. On May 20, 2020, the Mondo parties filed a "Reply Memorandum of Points and Authorities in Further Support of Motion to Vacate, etc.," accompanied by declarations and exhibits.

The Magistrate Judge has read and considered all papers filed in support of and in opposition to the Motion to Vacate and Motion to Quash and has taken the motions under submission without oral argument. See Minute Order, filed June 2, 2022. The Magistrate Judge is recommending a ruling to the District Judge because, on May 18, 2022, the Ninth Circuit decided that a Magistrate Judge lacks the authority to rule on such matters independently. See CPC Patent Technologies Pty Ltd v. Apple, Inc., 2022 WL 1562158 (9th Cir. May 18, 2022) .

BACKGROUND

Nouvel, a holding company formerly owned by Angelina Jolie,seeks to obtain discovery in connection with litigation in Luxembourg and proposed litigation in France involving William B. Pitt and Pitt's holding company, Mondo Bongo, LLC. Briefly, the parties' underlying dispute concerns the ownership, governance and operation of "Quimicum S.A.," a company jointly owned by Mondo Bongo and Nouvel. Quimicum owns Chateau Miraval S.A., which owns a winery business and property located in France. Chateau Miraval is involved with a French winemaker in a joint venture called Miraval Provence. The underlying dispute also concerns the ownership, governance and operation of Chateau Miraval and Miraval Provence. Warren Grant is a registered agent of Mondo Bongo. Grant is a former director of Chateau Miraval. The parties dispute Grant's current status in that regard.

In 2021, Jolie sold her interest in Nouvel to Tenute del Mondo, B.V.

In 2021, Mondo Bongo sued Nouvel in Luxembourg seeking to nullify a 2013 share transfer whereby Mondo Bongo had transferred to Nouvel an interest sufficient to make both companies equal co-owners of Quimicum. This Luxembourg litigation remains pending.

Mondo Bongo also sued Nouvel in Luxembourg seeking appointment of an escrow agent for the disputed Quimicom shares. The Luxembourg court denied Mondo Bongo's application on February 15, 2022.

In December of 2021, Nouvel sought pre-litigation discovery in a French court. The French court initially denied Nouvel's request for discovery on the ground that only a Quimicum shareholder could obtain access to the requested information. Thereafter, Nouvel filed two other applications for discovery in the French court, one seeking to obtain documents from Chateau Miraval and its officers and the second seeking to obtain documents from Miraval Provence. The French court issued orders authorizing the requested discovery on or about February 10, 2022. According to the Mondo parties, French authorities conducted searches pursuant to the French court's orders on March 4, 2022. The documents obtained by the French authorities during the searches presently are in escrow. A motion to retract (i.e., overturn) the French court's discovery orders reportedly is still pending. The proponents of that motion (including Chateau Miraval) argue, inter alia, that the French court's discovery orders should be retracted as "unnecessary" because Nouvel could obtain much the same discovery from this Court through section 1782 of Title 28 U.S.C. (ECF Doc. 31-20, p. 73).

DISCUSSION

Section 1782 of Title 28 U.S.C. authorizes the federal court of the district in which a person resides or is found to order that person "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." Section 1782 authorizes, but does not require, district courts so to assist in the production of evidence for use in a foreign or international tribunal. Intel Corp, v. Advanced Micro Devices, Inc., 542 U.S. 241, 247 (2004) ("Intel"); Khrapunov v. Prosyankin, 931 F.3d 922, 923 (9th Cir. 2019).

"Section 1782's statutory language has been distilled to permit district courts to authorize discovery where three general requirements are satisfied: (1) the person from whom the discovery is sought 'resides or is found' in the district of the district court where the application is made; (2) the discovery is 'for use in a proceeding in a foreign or international tribunal'; and (3) the application is made by a foreign or international tribunal or 'any interested person.'" Khrapunov v. Prosyankin, 931 F.3d 922 at 925 (citations omitted). These statutory requirements are satisfied in the present case.

Even where an applicant satisfies these statutory requirements, however, the district court still retains substantial discretion to permit or deny the requested discovery. Intel, 542 U.S. at 264-65; CPC Patent Technologies Pty Ltd, v. Apple, Inc., 2022 WL 1562158, at *2; Khrapunov v. Prosyankin, 931 F.3d at 926 (citation omitted). The court should exercise this discretion "in light of the twin aims of the statute: 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." Advanced Micro Devices, Inc, v. Intel Corp., 292 F.3d 664, 669 (9th Cir. 2002), aff'd, 542 U.S. 241 (2004). "[A]llowance of liberal discovery seems entirely consistent" with these twin aims. Id. (citation omitted).

In Intel, the Supreme Court identified four factors which a district court should consider in making this discretionary determination: (1) whether the person from whom discovery is sought is a participant in the foreign proceeding; (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 United States federal court judicial assistance; (3) whether the 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 request is unduly intrusive or burdensome. Intel, 542 U.S. at 264-65; see also In re Premises Located at 840 140th Ave. NE, Bellevue, Wash., 634 F.3d 557, 571 (9th Cir. 2011) . These factors "involve overlapping considerations, are considered collectively by the court in exercising its discretion, and are not stand-alone categorical imperatives." In re Mutual Assistance of Local Court of Wetzlar, Germany, 2018 WL 2183966, at *3 (E.D. Cal. May 11, 2018) (citation and quotations omitted). In considering the Intel factors, a court is not required "to address explicitly every factor or argument" made by the parties. Akebia Therapeutics, Inc, v. FibroGen, Inc., 793 F.3d 1108, 1112 (9th Cir. 2015). Here, the Magistrate Judge has considered all of the relevant factors.

Each side has submitted expert declarations concerning: (1) whether Nouvel would be able to obtain the subject discovery from the Luxembourg court and/or the French court; (2) whether a Luxembourg court or French court would admit any of the subject discovery into evidence; (3) whether the law of Luxembourg or the law of France prohibits the discovery sought here, such that the Application might be construed as a purported attempt to circumvent policies or proofgathering restrictions of those countries; and (4) whether the subject discovery involves purportedly confidential information protected under Luxembourgish law and/or French law. The parties' expert declarations are in significant disagreement with regard to each of these matters.

The Court need not and should not referee a "battle-by-affidavit of international legal experts." See Euromepa, S.A, v. R. Esmerian, Inc., 51 F.3d 1095, 1099 (2d Cir. 1995) ("We think that it is unwise -as well as in tension with the aims of section 1782 - for district judges to try to glean the accepted practices and attitudes of other nations from what are likely to be conflicting and, perhaps, biasedinterpretations of foreign law. ... [W]e do not read the statute to condone speculative forays into legal territories unfamiliar to federal judges. Such a costly, time-consuming, and inherently unreliable method of deciding section 1782 requests cannot possibly promote the 'twin aims' of the statute.") (citation omitted); see also In re Application of Kate O'Keeffe, 646 Fed.Appx. 263, 267-68 (3d Cir. 2016) ("the conflicting declarations [regarding foreign law] suggest that looking at either declaration would result in an exercise in analyzing complex and ambiguous aspects of foreign law and deciding what might be admissible in a [foreign] court, something that courts have repeatedly found inappropriate) (citations and quotations omitted); Siemens AG v. W. Digital Corp., 2013 WL 5947973, at *2 (C.D. Cal. Nov. 4, 2013) ("This Court does not believe it is necessary to make findings as to whose expert correctly characterizes German law and procedure.") (citations, quotations and brackets omitted); Cryolife, Inc, v. Tenaxis Med., Inc., 2009 WL 88348 at *3 (N.D. Cal. Jan. 13, 2009) (declining to determine which expert correctly characterized foreign law regarding whether foreign court had authority to compel party to produce discovery); Hans Smit, Recent Developments in International Litigation, 35 S. Tex. L. Rev. 215, 235 (1994) (section 1782's "drafters realized that making the extension of American assistance dependent on foreign law would open a veritable Pandora's box. They definitely did not want to have a request for cooperation turn into an unduly expensive and time-consuming fight about foreign law."). It suffices for present purposes that the Court should conclude, on the record presented, that there exists a significant likelihood that: (1) the subject discovery could lead to evidence admissible in the foreign courts; and (2) the foreign jurisdictions would not regard the subject discovery as an improper circumvention of policy.

See, e,g., Sunstar v. Alberto-Culver Co., 586 F.3d 487, 495-96 (7th Cir. 2009), cert, denied, 560 U.S. 906 (2010) ("[T]he lawyers who testify to the meaning of foreign law, whether they are practitioners or professors, are paid for their testimony and selected on the basis of the convergence of their views with the litigating position of the client or their willingness to fall in with the views urged upon them by the client. Those are banes of expert testimony. . . .").

Hans Smit was the director of the Project on International Procedure tasked with developing appropriate rules of international cooperation in litigation, and Smit also was the reporter for the United States Commission and Advisory Committee on International Rules of Judicial Procedure. See Hans Smit, supra, at p. 217-18. The Committee recommended "substantial" amendments to section 1782 which Congress thereafter enacted in 1964. Id. at 231 (observing that "the changes made necessarily reflect the legislative intent to reject the earlier version").

If the person from whom discovery is sought is not a party to the foreign litigation, the person may be outside the foreign government's jurisdiction, a factor which would weigh in favor of discovery. See Intel, 542 U.S. at 264 ("[N]onparticipants in the foreign proceeding may be outside the foreign tribunal's jurisdictional reach; hence, their evidence, available in the United States, may be unobtainable absent § 1782(a) aid."); In re Ex Parte Application of Nokia Technologies Oy, 2022 WL 788702, at *2 (S.D. Cal. Mar. 15, 2022). Mondo Bongo is a California company and both Pitt and Grant reside in California. Mondo Bongo is a party in the Luxembourg litigation, but Pitt and Grant are not (although Pitt owns Mondo Bongo and Grant is Mondo Bongo's registered agent). The parties' experts dispute whether Nouvel would be able to obtain the requested discovery in Luxembourg, including the discovery from Pitt and Grant. Again, the Court need not and should not wade too deeply into the foreign law quagmire presented by conflicting expert declarations. Sufficient doubt pervades the issue of the alleged availability of the subject discovery directly from the Luxembourg court that this factor should weigh in favor of facilitating the discovery here.

Underscoring this doubt, among other considerations, is the Mondo parties' contention that "Unlike American law, Luxembourg law has no concept of binding precedent. A Luxembourg judge may always depart from existing case law ..." (ECF Doc. 34-3, p. 3).

Nouvel also indicates that it plans to file a French tort lawsuit against, inter alia, officers and directors of Chateau Miraval. Nouvel alleges that Pitt and Mondo Bongo exercise assertedly improper de facto control over Chateau Miraval. The only proceedings in France which have occurred thus far are the French discovery proceedings. While some of the discovery sought in the present section 1782 proceeding may be duplicative of the discovery which Nouvel sought in the French court, the discovery sought in this proceeding exceeds that sought in France in both time and scope.

On April 25, 2022, Nouvel's counsel proposed to the Mondo parties' counsel a resolution of this discovery dispute whereby Nouvel would limit some of the subject discovery requests in light of the French court's ruling and the parties would agree to defer consideration of the remainder of those requests pending resolution of the proceedings in France (see "Declaration of Joe H. Tuffaha in Support of Nouvel, LLC's Opposition, etc.," Ex. 30). On May 4, 2022, the Mondo parties' counsel rejected this proposal (id.).

Furthermore, although the Court may assess whether the foreign court would be receptive to the requested discovery, section 1782 does not require any showing that the discovery sought would be available in the foreign jurisdiction if that discovery were located in that jurisdiction. Intel, 542 U.S. at 260 (section 1782 imposes no "foreign-discovery" rule); Advanced Micro Devices, Inc, v. Intel Corp., 292 F.3d at 668-69 (same). "A foreign nation may limit discovery within its domain for reasons peculiar to its own legal practices, culture, or traditions - reasons that do not necessarily signal objection to aid from United States federal courts." Intel, 542 U.S. at 261.

Moreover, although Nouvel initially sought discovery in France prior to filing the present Application, an applicant need not attempt to exhaust the discovery procedures available in the foreign court before invoking section 1782 in federal court. See Illumina Cambridge Ltd, v. Complete Genomics, Inc., 2020 WL 820327, at *6 (N.D. Cal. Feb. 19, 2020) (citations omitted). To the extent the Mondo parties argue that Nouvel assertedly seeks relief which would preempt or contradict rulings by the French courts, this argument is undercut by the fact that the French court granted the discovery applications filed in that court. This Court's order denying the pending motions (thereby confirming the grant of the Application) would not necessarily conflict with the French court's orders (whether or not the French court's orders are retracted).

A district court may deny a section 1782 request if the court "suspects that the request is a fishing expedition or a vehicle for harassment." See In re Premises Located at 840 140th Ave. NE, Bellevue, Wash., 634 F.3d at 563. However, no such suspicion arises from the present record. Nouvel has satisfied the statutory requirement that the requested discovery be "for use in a proceeding in a foreign or international tribunal." Review of the requests in particular, and the balance of the record in general, does not suggest that Nouvel seeks to engage in any harassing "fishing expedition" untethered to its underlying allegations of wrongdoing by the Mondo parties.

Although the Mondo parties argue that the requested discovery is unduly burdensome because the documents sought are "equally available" to Nouvel, such argument is unpersuasive. "An objection that documents are equally available to the requesting party is inappropriate." Smith v. Montoya, 2021 WL 6618858, at *1 (C.D. Cal. July 21, 2021) (citation omitted). The Mondo parties' argument that the time period set forth in some of the requests is burdensome is also unpersuasive. The Luxembourg litigation concerns, inter alia, the validity of the 2013 share transfer. The proposed French tort action reportedly will concern, inter alia, the ownership, governance and operation of Chateau Miraval.

The Mondo parties have not demonstrated through evidence anywhere within their voluminous submissions that the requests will impose any unreasonable cost or burden on the Mondo parties. "Conclusory, unsupported statements of expense and burden are insufficient to demonstrate why the requested discovery is objectionable." Gold v. Kaplan, 2021 WL 6618643, at *5 (C.D. Cal. Dec. 2, 2021) (citation omitted). The Mondo parties' general, unsupported speculation that, with respect to the Luxembourg litigation, "the vast majority of responsive documents are likely to be privileged" is unpersuasive. With respect to the proposed French tort action, the Mondo parties' general, conclusory assertion that the documents contain "commercially sensitive, confidential information" does not support vacating the January 12, 2022 order. See Nguyen v. Lotus By Johnny Dung Inc., 2019 WL 4570032, at *4 (C.D. Cal. Apr. 12, 2019) ("Trade secret or commercially sensitive information must be important proprietary information and the party challenging a subpoena must make a strong showing that it has historically sought to maintain the confidentiality of this information.") (citation and quotations omitted). Moreover, as indicated above, the Court need not determine the relative merits and credibility of contradictory declarations on the issues regarding whether, or how, the foreign courts will protect allegedly confidential documents. Even so, the Magistrate Judge will recommend that the Court issue a protective order limiting use of the subject discovery to use for purposes of the Luxembourgish and French actions only.

See "Memorandum of Points and Authorities in Support of Motion to Vacate, etc.," p. 14.

See "Memorandum of Points and Authorities in Support of Motion to Vacate, etc.," pp. 23-24.

Therefore, after consideration of all the parties' arguments and evidence, and in the exercise of discretion under the appropriate legal standards, the Motion to Vacate and Motion to Quash should be denied.

RECOMMENDATION

For the foregoing reasons, IT IS RECOMMENDED that the Court issue an Order: (1) accepting and adopting this Report and Recommendation; (2) denying the Motion to Vacate and the Motion to Quash; (3) confirming the January 12, 2022 Order; and (4) issuing a protective order that the use of the discovery obtained herein is limited to use for the purposes of the Luxembourgish and French actions only.

NOTICE

Reports and Recommendations are not appealable to the Court of Appeals, but may be subject to the right of any party to file objections as provided in the Local Rules Governing the Duties of Magistrate Judges and review by the District Judge whose initials appear in the docket number. No notice of appeal pursuant to the Federal Rules of Appellate Procedure should be filed until entry of the judgment of the District Court.