Rotstain v. Trustmark Nat'l Bank
Rotstain v. Trustmark Nat'l Bank
2020 WL 12968653 (N.D. Tex. 2020)
February 19, 2020
Bryant Jr., D. Gordon, United States Magistrate Judge
Summary
The Court found that the Receiver's waivers of Swiss banking confidentiality with respect to R. Allen Stanford and Stanford International Bank, Panama, were not effective. The Court also found that OSIC's argument concerning Swiss Penal Code Article 271 was unavailing, and that requiring OSIC to depose witnesses in accordance with the Hague Convention was not highly prejudicial. The Court also noted that SG Suisse should not provide relevant documents to the Receiver as though he was the signatory on the account.
Additional Decisions
PEGGY ROIF ROTSTAIN, et al., Plaintiffs,
v.
TRUSTMARK NATIONAL BANK, et al., Defendants
v.
TRUSTMARK NATIONAL BANK, et al., Defendants
Civil Action No. 3:09-CV-2384-N-BQ
United States District Court, N.D. Texas, Dallas Division
Signed February 19, 2020
Counsel
Peter D. Morgenstern, Butzel Long PC, David Joseph Ranzenhofer, Pro Hac Vice, Friedman Kaplan Seiler & Adelman LLP, Gregory A. Blue, Dilworth Paxson LLP, Rachel K. Marcoccia, Morgenstern & Blue LLC, New York, NY, Benjamin D. Reichard, James R. Swanson, Lance C. McCardle, Molly Wells, Pro Hac Vice, Fishman Haygood Phelps Walmsley Willis & Swanson LLP, New Orleans, LA, Edward C. Snyder, Castillo Snyder PC, San Antonio, TX, for Plaintiffs Guthrie Abbott, Steven Queyrouze, Sarah Elson-Rogers, Salim Estefenn Uribe, Ruth Alfille de Penhos.Peter D. Morgenstern, Butzel Long PC, David Joseph Ranzenhofer, Pro Hac Vice, Friedman Kaplan Seiler & Adelman LLP, Gregory A. Blue, Dilworth Paxson LLP, Rachel K. Marcoccia, Morgenstern & Blue LLC, New York, NY, Benjamin D. Reichard, Fishman Haygood LLP, James R. Swanson, Lance C. McCardle, Molly Wells, Pro Hac Vice, Fishman Haygood Phelps Walmsley Willis & Swanson LLP, New Orleans, LA, for Plaintiff Gabriel Suarez.
David Joseph Ranzenhofer, Pro Hac Vice, Friedman Kaplan Seiler & Adelman LLP, Joshua E. Abraham, Peter D. Morgenstern, Butzel Long PC, New York, NY, Benjamin D. Reichard, James R. Swanson, Lance C. McCardle, Molly Wells, Pro Hac Vice, Fishman Haygood Phelps Walmsley Willis & Swanson LLP, New Orleans, LA, Edward C. Snyder, Castillo Snyder PC, San Antonio, TX, for Plaintiff Diana Suarez.
Robin C. Gibbs, Ashley McKeand Kleber, Colin Cairney Pogge, Conor Paul McEvily, Jeffrey C. Kubin, Larston Bruce Baldree, Michael R. Absmeier, Robert J. Madden, Barrett H. Reasoner, Scott A. Humphries, Gibbs & Bruns LLP, Houston, TX, for Defendant Trustmark National Bank.
Rodney Acker, Ellen B. Sessions, James V. Leito, IV, Norton Rose Fulbright US LLP, Dallas, TX, Courtney A. Welshimer, Pro Hac Vice, Eamonn W. Campbell, Pro Hac Vice, Joshua Polster, Pro Hac Vice, Lynn Neuner, Melissa Vallejo, Pro Hac Vice, Meredith D. Karp, Pro Hac Vice, William Russell, Jr., Linton Mann, III, Pro Hac Vice, Stephen J. Digregoria, Pro Hac Vice, Thomas McMahon Cramer, Pro Hac Vice, Peter E. Kazanoff, Pro Hac Vice, Simpson Thacher & Bartlett LLP, New York, NY, for Defendant The Toronto-Dominion Bank.
Noelle M. Reed, Wallis Mizell Hampton, Daniel E. Bolia, Skadden Arps Slate Meagher & Flom LLP, Houston, TX, Allen L. Lanstra, Julia Nahigian, Pro Hac Vice, Skadden Arps Slate Meagher & Flom LLP, Los Angeles, CA, George A. Zimmerman, Pro Hac Vice, Julie Elizabeth Cohen, Pro Hac Vice, Skadden Arps Slate Meagher & Flom LLP, New York, NY, Michelle L. Davis, Skadden Arps Slate Meagher & Flom LLP, Midlothian, TX, for Defendant SG Private Banking (Suisse) S.A.
Roger B. Cowie, Taylor F. Brinkman, Locke Lord LLP, Dallas, TX, John K. Schwartz, Locke Lord LLP, Austin, TX, for Defendant HSBC Bank PLC.
Brian A. Herman, Matthew E. Cooper, Pro Hac Vice, Stephanie Gamiz, Pro Hac Vice, Morgan Lewis & Bockius LLP, New York, NY, Aaron C. Christian, Arcadi Jackson LLP, Danny S. Ashby, Jillian R. Harris, Morgan, Lewis & Bockius, LLP, Dallas, TX, Lewis A. Smith, Morgan Lewis & Bockius LLP, Ryan C. Wooten, Orrick Herrington & Sutcliffe LLP, Houston, TX, for Defendant Blaise Friedli.
Paul C. Watler, Cody Andrew Martinez, Edwin M. Buffmire, Jonathan D. Neerman, Lindsey Marsh Brown, Minoo Blaesche, Jackson Walker L.L.P., Dallas, TX, Anthony F. Sullivan, Galloway Johnson Tompkins Burr & Smith, Houston, TX, for Defendant Independent Bank.
Noelle M. Reed, Skadden Arps Slate Meagher & Flom, Houston, TX, Allen L. Lanstra, Skadden Arps Slate Meagher & Flom LLP, Los Angeles, CA, George A. Zimmerman, Pro Hac Vice, Skadden Arps Slate Meagher & Flom LLP, New York, NY, for Defendant Societe Generale Private Banking.
Bryant Jr., D. Gordon, United States Magistrate Judge
ORDER GRANTING MOTION FOR PROTECTIVE ORDER
*1 Defendants Société Générale Private Banking (Suisse) S.A. (“SG Suisse”) and Blaise Friedli have filed an opposed Rule 26 Motion for Protective Order, asking the Court to quash Plaintiff The Official Stanford Investors Committee's (OSIC) Rule 30(b) deposition notices served on Friedli, as well as SG Suisse and one of its employees, Louis Clemencet. ECF No. 585. SG Suisse and Friedli object to OSIC's deposition notices mainly because OSIC seeks to depose witnesses pursuant to the Federal Rules rather than under the Hague Convention on the Taking of Evidence Abroad in Civil and Commercial Matters (Hague Convention). See Defs.’ Br. in Supp. 1, ECF No. 586 [hereinafter Defs.’ Br.]. After several attempts by the parties to resolve the issue, including a telephonic hearing with the undersigned, SG Suisse and Friedli filed the motion now before the Court.
The district judge has referred discovery issues such as those raised in the pending motion to the undersigned magistrate judge, see Orders, In re Stanford Entities Secs. Litig., 3:09-MD-2099-N (N.D. Tex. Sept. 24, 2012, and Feb. 13, 2014) (ECF Nos. 30, 50), and the motion is ripe for review. The undersigned has considered the papers filed by the parties and determined that the motion should be GRANTED.
I. Background
OSIC served Rule 30(b) deposition notices on Friedli and Clemencet, as well as a Rule 30(b)(6) deposition notice on SG Suisse.[1] See Defs.’ App. 32–38, ECF No. 587. Each notice sets the deposition in Dallas, Texas.[2] See id. OSIC seeks Rule 30(b)(6) testimony concerning twenty-eight topics, including SG Suisse's: (1) banking relationship with Stanford and Stanford-controlled entities;[3] (2) communications with various government officials or regulators, including Swiss officials; (3) discussions with other Defendant-banks about Stanford, Stanford entities, and accounts they maintained; (4) alleged loan to Stanford of $95 million; and (5) involvement in “legal and administrative proceedings in Switzerland concerning ... Stanford, including proceedings commenced by the Federal Financial Market Supervisory Authority and the Federal Administrative Court Decision of October 4, 2016.” See id. at 43–49.
Through their Motion, SG Suisse and Friedli (collectively, Defendants) assert that OSIC improperly seeks deposition testimony under the Federal Rules of Civil Procedure “about SG Suisse's banking relationship with Mr. Stanford and Stanford-owned companies that implicates Swiss financial privacy laws ... and testimony from Mr. Friedli about his knowledge of the relationship with Mr. Stanford and Stanford-related entities during his SG Suisse employment.” Defs.’ Br. 5. According to Defendants, because the testimony would involve Swiss financial privacy laws and likely subject them to penalties, OSIC must either conduct the depositions in Switzerland or use the Hague Convention's procedures to obtain the desired discovery. Id. at 4. Under either scenario, SG Suisse avers the parties must obtain approval from a Swiss court before testifying to avoid potential civil and criminal penalties.
*2 Defendants specifically cite Article 47 of the Swiss Banking Act (SBA), as well as Articles 271 and 273 of the Swiss Penal Code (SPC), in arguing that Swiss law prohibits them from testifying to the topics covered by OSIC's notices. Id. at 5–10. Were they to testify without prior approval from a Swiss court, Defendants claim they could face severe penalties, including criminal prosecution, monetary fines, and administrative sanctions. Id. at 5–11. Defendants do acknowledge, however, that under the SBA's Article 47, a “customer may consent to waiver of its private financial secrecy rights.” Id. at 11. Similarly, Defendants agree that “[i]nformation that falls within the ambit of Article 273 of the [SPC] may also be disclosed with the voluntary consent of the holder of the business secret but only if no national interest of Switzerland is affected.” Id. at 11–12. Despite such provisions authorizing some level of disclosure, Defendants nonetheless maintain that “it is impossible to state with any certainty whether the disclosure of information with a customer's consent would nonetheless implicate Swiss national interests in this case.” Id. at 13.
Defendants further observe that this Court has employed a seven-factor comity test—known as the Credit Lyonnais factors—to analyze whether a party should first seek discovery under the Hague Convention. Id. at 14–15 (citing S.E.C. v. Stanford Int'l Bank, Ltd., 776 F. Supp. 2d 323, 330 (N.D. Tex. 2011)). On balance, Defendants argue that all seven factors “favor[ ] requiring OSIC to seek the Swiss deposition testimony through the Hague Convention.” Id. at 15–24. Thus, the Court should quash OSIC's deposition notices and require OSIC to obtain the discovery through the Hague Convention. Id. at 13, 25.
OSIC argues in response that the Court need not reach the Credit Lyonnais test because the requested discovery is not prohibited by Swiss law due to waivers executed by the Accountholders. OSIC's Br. in Opposition 6–10, ECF No. 606 [hereinafter Pl.’s Resp.]. Specifically, OSIC claims that “all of the [A]ccountholders”—including SIBL, SFGL, and BoA—“have agreed to waive the protections of Swiss bank secrecy law.” Id. at 1, 4–6. Thus, Defendants “cannot meet their burden of showing that their testimony is barred by foreign law.” Id. at 10. OSIC also asserts that, even if the Court undertakes the comity analysis, the Credit Lyonnais factors “weigh strongly in favor of depositions being conducted pursuant to the Federal Rules.” Id. at 11.
Defendants reply that the purported waivers from the Accountholders, which OSIC presents for the first time in its Response, “do not cover all of the accounts for which OSIC seeks information.” Defs.’ Reply 1, ECF No. 619. Namely, Defendants observe that OSIC did not obtain waivers from SBP or RAS, “although OSIC seeks testimony about their banking activities.” Id. at 1–2, 4–5. Defendants further argue that in any event, the Accountholders cannot validly waive SPC Article 273's protection where the information relates to Switzerland's national interests. Id. at 5–6.
Ultimately, the parties’ dispute can be summarized as follows: (1) whether Swiss law prohibits the deposition testimony OSIC seeks; and (2) if it does, whether OSIC should seek discovery first under the Federal Rules or the Hague Convention. The Court addresses each issue in turn.
II. Analysis
A. Legal Standard
Rule 26 of the Federal Rules of Civil Procedure defines the permissible bounds of discovery:
Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.
Fed. R. Civ. P. 26(b)(1). Information must therefore be nonprivileged, relevant, and proportional to the needs of the case to constitute discoverable material. See Samsung Elecs. Am., Inc. v. Chung, 321 F.R.D. 250, 279 (N.D. Tex. 2017) (citing Rocha v. S.P. Richards Co., Civil Action No. 5:16-CV-411-XR, 2016 WL 6876576, at *1 (W.D. Tex. Nov. 17, 2016)) (“Under Rule 26(b)(1). discoverable matter must be both relevant and proportional to the needs of the case—which are related but distinct requirements.”).
*3 Rule 26(c)(1) authorizes courts to issue a protective order, for good cause shown, “to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.” A court may impose a protective order that, inter alia, forbids “the disclosure or discovery,” specifies the “terms, including time and place or the allocation of expenses” of the discovery, prescribes “a discovery method other than the one selected by the party seeking discovery,” or prohibits “inquiry into certain matters, or limiting the scope of disclosure or discovery to certain matters.” Fed. R. Civ. P. 26(c)(1)(A)–(D). Courts have broad discretion in determining whether to impose a protective order. Harris v. Amoco Prod. Co., 768 F.2d 669, 684 (5th Cir. 1985).
“[T]he burden is upon [the party seeking the protective order] to show the necessity of its issuance, which contemplates a particular and specific demonstration of fact as distinguished from stereotyped and conclusory statements.” Meisenheimer v. DAC Vision Inc., No. 3:19-cv-1422-M, 2019 WL 6619198, at *2 (N.D. Tex. Dec. 4, 2019) (quoting In re Terra Int'l, 134 F.3d 302, 306 (5th Cir. 1998)). Thus, courts have generally concluded that to obtain a protective order, the moving party must demonstrate both “good cause and a specific need for protection.” Id. (citing Landry v. Air Line Pilots Ass 901 F.2d 404, 435 (5th Cir. 1990)). The Fifth Circuit has noted the following about Rule 26(c)’s good cause requirement:
[T]he federal courts have superimposed a somewhat demanding balancing of interests approach to the Rule. Under the balancing standard, the district judge must compare the hardship to the party against whom discovery is sought against the probative value of the information to the other party. Courts also weigh relevant public interests in this analysis.
Cazorla v. Koch Foods of Miss., L.L.C., 838 F.3d 540, 555 (5th Cir. 2016) (internal quotations and citations omitted).
When, as here, foreign law applies, “United States courts are presumed competent to apply foreign law, and Federal Rule of Civil Procedure 44.1 governs federal courts’ determination of foreign law.” Alim v. KBR, Inc., Civil Action No. 3:11-CV-1746-N, 2012 WL 12857421, at *5 (N.D. Tex. Mar. 15, 2012) (Godbey, J.) (internal citations omitted). Rule 44.1 provides that “[i]n determining foreign law, the court may consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence,” and “[t]he court's determination must be treated as a ruling on a question of law.” Fed. R. Civ. P. 44.1. In support of their respective positions, both parties submitted declarations from witnesses represented to be experts on Swiss law. See Decl. of Professor Dr. Isabelle Romy 1–15, ECF No. 587-4 [hereinafter Romy Decl.]; Decl. of Professor Dr. Luc Thevenoz 1–25, ECF No. 607 [hereinafter Thevenoz Decl.]; Reply Decl. of Professor Dr. Isabelle Romy 1–10, ECF No. 620-1 [hereinafter Romy Reply Decl.]; Suppl. Decl. of Professor Dr. Luc Thevenoz 2–7, ECF No. 644-1 [hereinafter Thevenoz Suppl. Decl.].[4] The Court has considered the declarations of both parties in evaluating the relevant law.
B. The disputed discovery requests.
*4 SG Suisse objected to the Rule 30(b)(6) deposition notice on many grounds. Defs.’ App. 50–95. In its motion, however, SG Suisse only asks the Court to quash the deposition notices because they impermissibly seek testimony under the Federal Rules. Defs.’ Br. 16 n.61; see Defs.’ Reply 6 n.8. Thus, the Court only considers the arguments raised in Defendants’ motion, as discussed below. See McKinney/Pearl Rest. Partners, L.P. v. Metropolitan Life Ins. Co., 322 F.R.D. 235, 244 (N.D. Tex. 2016) (explaining that “in order to prevail on a motion for protective order,” the moving party must “specifically object and show that the requested discovery does not fall within Rule 26(b)(1)’s scope of relevance (as now amended) or that a discovery request would impose an undue burden or expense or is otherwise objectionable”). Stated differently, this Order solely addresses whether OSIC must depose SG Suisse, Friedli, and Clemencet through the Hague Convention, rather than under the Federal Rules of Civil Procedure.[5]
C. Swiss law potentially prohibits the noticed deposition testimony.
Initially, the Court must determine whether Swiss law proscribes the disputed testimony. See Alfadda v. Fenn, 149 F.R.D. 28, 34 (S.D.N.Y. 1993) (explaining that “the party relying on foreign law bears the burden of demonstrating that such law actually bars the production or testimony at issue”). Defendants contend that “[t]he subject matter of the testimony [OSIC] seek[s] implicates” the SBA and SPC and testifying to such information, without prior approval from a Swiss court, could result in serious criminal, monetary, and administrative penalties. Defs.’ Br. 2–3, 8–11. OSIC argues, however, that the waivers it obtained from the Accountholders protect against any potential violation of Swiss law. Pl.’s Resp. 6–8. OSIC asserts that all of the Accountholders have waived their privacy rights under SBA Article 47 and SPC Article 273 (id. at 7–9) and that SPC Article 271 only applies to depositions taken in Switzerland, which “is why the depositions have been noticed for outside of Switzerland.” Id. at 9–10.
Despite OSIC's assertion to the contrary, “all” Accountholders have not waived their financial secrecy rights. Importantly, OSIC has not obtained written waivers from RAS and SBP—two Accountholders about whom OSIC seeks deposition testimony. See id. at 8; Defs.’ App. 43–49. OSIC acknowledges as much, but argues that the Receiver in this action, Ralph S. Janvey (Receiver), “can waive Article 47 [and SPC Article 273] on behalf of all Receivership entities,” including RAS and SBP.[6] Pl.’s Resp. 6–9 & n.4. The Court disagrees.
In S.E.C. v. Stanford Int'l Bank, Ltd., United States District Judge Godbey considered and rejected a similar argument. 776 F. Supp. 2d at 326–27, 332, 342 (noting that this Court appointed the Receiver and authorized him to obtain account records from financial institutions “in the same manner as ... would be provided were the Receiver the signatory on the account,” but nevertheless holding that the Receiver must first seek discovery—“documents and information concerning the Stanford Defendants and their related entities from SG Suisse”—under the Hague Convention because Swiss authorities might not recognize such authority).[7] As noted in OSIC's Response, Judge Godbey stated that “this Court considers the Receiver to be SG Suisse's customer [and therefore] the Receiver's request constitutes no more than a bank customer asking for a copy of its own records.” Stanford Int'l Bank, 776 F. Supp. 2d at 332 (emphasis added). Judge Godbey then observed, however, that it was possible “Swiss authorities [might] ultimately disagree with the Court that the Receiver merely seeks his own records.” Id. Stated differently, the Stanford Int'l Bank decision expressly considered the possibility that a Swiss court might not recognize the Receiver as the “accountholder” of the Stanford accounts held at SG Suisse. See id.
*5 Defendants’ expert, Dr. Isabelle Romy, similarly highlights such a concern with respect to RAS and SBP. According to Dr. Romy, the Swiss Financial Market Supervisory Authority (FINMA) entered an order June 8, 2010, rejecting the Receiver's request for it to recognize this Court's orders appointing the Receiver. Romy Decl. 7 ¶ 32. Dr. Romy opines that, in light of FINMA's decision, “it is highly likely that a Swiss court would not recognize the authority of the Receiver to act on behalf of ... [RAS and SBP] and to validly waive any clients’ rights” under SBA Article 47. Id.; see Romy Reply Decl. 5 ¶ 22 (opining that “the current representative of SBP”—as opposed to the representative in place at the time of SBP's sale—must “submit a valid waiver in accordance with Art. 47 [S]BA”). Dr. Romy also states that because this Court appointed the Receiver “over the opposition of [RAS,] ... any purported waiver by the Receiver would not be deemed an expression of the free will of a client and would not be valid” under Swiss law. Romy Decl. 7 ¶ 32.
In response, OSIC's expert, Dr. Thevenoz, equates the Receiver to a Swiss commissioner (appointed by a Swiss bankruptcy court), or special administrator (appointed by the creditors of a bankrupt debtor), who “sort[s] out the estate of the debtor,” but Dr. Thevenoz cites no Swiss authority for this proposition. Thevenoz Decl. 12–13 ¶ 33. Dr. Thevenoz avers that “commissioners and special administrators do not formally need to waive the debtor's right to confidentiality owed by banks because they inherently have the power to obtain that information notwithstanding the bank's duty of confidentiality.” Id. at 13 ¶ 34. Thus, he maintains, SBA Article 47 does not apply to RAS.[8] Id. Conversely, Dr. Romy believes that “[a] foreign Receiver or Liquidator does not have by law the same powers and rights as a Swiss Commissioner or Special Administrator under the Federal Act on Debt Enforcement and Bankruptcy.” Romy Reply Decl. 5 ¶ 24.[9]
Considering the foregoing, the Court finds Defendants have met their burden of demonstrating that Swiss law potentially prohibits the noticed deposition topics.[10] See Alfadda, 149 F.R.D. at 34 (explaining that “the party relying on foreign law bears the burden of demonstrating that such law actually bars the production or testimony at issue”); see also Stanford Int'l Bank, 776 F. Supp. 2d at 339 (finding, in the context of the sixth Credit Lyonnais factor, that “Swiss law provides criminal, civil, and administrative penalties that might possibly apply to at least some of the acts that the Receiver's discovery request would require SG Suisse and its employees to perform” and noting that such “finding comports with caselaw going back at least” to a 1958 United States Supreme Court decision). The undersigned concludes that this Court's prior decision, coupled with Dr. Romy's opinion that a Swiss court would likely not recognize any purported waiver of confidentiality signed by the Receiver on behalf of RAS and SBP, compels a finding that, at a minimum, RAS and SBP have not effectively waived their confidentiality rights, and testimony concerning such accounts is potentially, if not likely, prohibited under relevant Swiss law.[11] See EFG Bank AG v. AXA Equitable Life Ins. Co., 17-CV-4767 (JMF), 2018 WL 1918627, at *1 (S.D.N.Y. Apr. 20, 2018) (“Notably, however, the Court's ultimate task ‘is not to definitively determine what Swiss law is, but rather to decide whether the risk of prosecution ... is so great’ as to warrant a protective order.”). The Court therefore turns to the Credit Lyonnais factors to determine whether they support imposing protective orders regarding the noticed depositions of Friedli, Clemencet, and SG Suisse.
D. On balance, the Credit Lyonnais factors weigh in favor of requiring OSIC to first pursue the noticed depositions through the Hague Convention.
*6 The Hague Convention establishes “procedures for judicial authorities of one signatory country to use in requesting evidence located in another signatory country.” 8 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 2005.1 (3d ed. 2019). The United States and Switzerland are both signatories to the Hague Convention. See id.; see also Stanford Int'l Bank, 776 F. Supp. 2d at 327. The Hague Convention is not the exclusive or mandatory method for obtaining discovery in a foreign country, nor are parties first required to seek information through the Hague Convention. Société Nationale Industrielle Aérospatiale v. U.S. Dist. Court for S. Dist. of Iowa, 482 U.S. 522, 534–36, 542 (1987). Courts should, however, “take care to demonstrate due respect for any special problem confronted by the foreign litigant on account of its nationality or the location of its operations, and for any sovereign interest expressed by a foreign state.” Id. at 546; see In re Anschuetz & Co., GmbH, 838 F.2d 1362, 1364 (5th Cir. 1988) (emphasizing “that it is most important that the district court should consider, with due caution, that many foreign countries, particularly civil law countries, do not subscribe to our open-ended views regarding pretrial discovery, and in some cases may even be offended by our pretrial procedures”). In each case, therefore, the court must scrutinize “the particular facts, sovereign interests, and likelihood that resort to those [Hague Convention] procedures will prove effective.” Aerospatiale, 482 U.S. at 544.
To aid in its analysis, this Court relies on the seven-factor balancing test set out in Strauss v. Credit Lyonnais, S.A., 242 F.R.D. 199 (E.D.N.Y. 2007) [hereinafter Credit Lyonnais I]. See Stanford Int'l Bank, 776 F. Supp. 2d at 330. Under this test, courts examine:
(1) the importance to the ... litigation of the documents or other information requested; (2) the degree of specificity of the request; (3) whether the information originated in the United States; (4) the availability of alternative means of securing the information; (5) the competing interests of the nations whose laws are in conflict; (6) the hardship of compliance on the party or witnesses from whom discovery is sought; and (7) the good faith of the party resisting discovery under the Federal Rules.
Id. (internal citations and quotations omitted). Courts assign greater weight to factors five and six—the competing interests of the nations involved in the conflict and the potential hardship on the complying party—in assessing the foregoing factors. Id. (citing Minpeco, S.A. v. Conticommodity Servs., Inc., 116 F.R.D. 517, 522 (S.D.N.Y. 1987) [hereinafter Minpeco I]). The party seeking application of the Hague Convention procedures—i.e., Defendants, in this case—“bears the burden of showing its applicability to the disputed discovery matters.” Id.
Defendants generally do not dispute that the deposition testimony OSIC seeks is relevant to the litigation. Defs.’ Br. 16–17. Instead, they contend that OSIC “plan[s] to conduct a broad fishing expedition” through the depositions. Id. OSIC responds that the breadth of the noticed topics are irrelevant to the question of importance and, given SG Suisse's lengthy banking relationship with Stanford, the requested depositions “are vital, crucial, and relevant to this case.” Pl.’s Resp. 11–12. The Court agrees.
OSIC alleges that “SG Suisse and Friedli played major and essential roles in the management of the Stanford Entities’ businesses and assets, and in facilitating Stanford's fraudulent scheme.” Intervenor Compl. 16 ¶ 46. Specifically, OSIC claims that SG Suisse maintained multiple accounts on behalf of RAS and the Stanford entities, and “all the money deposited or transferred into these accounts and from these accounts, were investor funds derived from the sale of SIBL CDs.” Id. at 17 ¶ 47. OSIC further avers that, beginning in at least 1994, Friedli supervised all of the Stanford accounts at SG Suisse and “served on Stanford's International Advisory Board, which was a group of influential business and political figures hired by Stanford as trusted advisors on the operation and directions of SIBL and the other Stanford Entities.” Id. at 18 ¶¶ 48–51 (detailing Friedli's alleged extensive relationship with Stanford). OSIC asserts several claims against SG Suisse and Friedli, including fraudulent transfer, breach of fiduciary duty, and civil conspiracy. Id. at 31–39 ¶¶ 92–117.
*7 Having considered OSIC's allegations, the Court finds that the deposition testimony from SG Suisse, Friedli, and Clemencet is both relevant and vital to the litigation of its claims. See, e.g., Stanford Int'l Bank, 776 F. Supp. 2d at 331 (finding first factor weighed in Receiver's favor because the documents sought “will aid [him] in discovering the disposition of the Ponzi scheme funds obtained and used by the Stanford Defendants”); Strauss v. Credit Lyonnais, S.A., 249 F.R.D. 429, 440 (S.D.N.Y. 2008) [hereinafter Credit Lyonnais II] (concluding that the first comity factor weighed in plaintiffs’ favor where they alleged that defendant provided financial services, “including accepting deposits from and/or distributing funds to alleged terrorist organizations on behalf of” client “for more than thirteen years”) The first factor therefore weighs in OSIC's favor.
Defendants argue that “OSIC has made no effort to limit the topics of its proposed depositions to information relevant to claims against SG Suisse or Mr. Friedli or, in the case of SG Suisse, to topics for which a corporate representative reasonably could be asked to prepare.” Defs.’ Br. 17. Defendants assert that “OSIC's Rule 30(b)(6) topics for SG Suisse ... are overly broad, unduly burdensome, and not particularized.” Id. As OSIC points out, however, “SG did not move for a protective order on the basis of the relevance, breadth, or burden of the Rule 30(b)(6) notice.” Pl.’s Resp. 12. Indeed, Defendants acknowledge that their motion “focuse[s] on the gateway issue of OSIC's refusal to follow the Hague Convention....” Defs.’ Br. 16 n.61; see supra Section II.B. Considering RAS's purported “penchant for using and managing offshore banking resources” and “because the transactions in the SG Suisse accounts were integral to the Stanford Defendants’ scheme,” the undersigned finds that the noticed depositions of SG Suisse, Friedli, and Clemencet—who allegedly “played major and essential roles in the management of the Stanford Entities’ businesses and assets” (Intervenor Compl. 16 ¶ 46)—are tailored to OSIC's claims in this action. Thus, the second factor also weighs in favor of OSIC.
Defendants assert that “[w]itness testimony ‘originates’ where the witness resides,” and “[t]he proposed witnesses here reside in Switzerland.” Defs.’ Br. 17–18 (citing Swapalease, Inc. v. Sublease Exchange.com, Inc., Case No. 1:07–CV–45, 2008 WL 11355018, at *4 (S.D. Ohio Sept. 19, 2008)). OSIC counters, however, that “if the depositions occur outside Switzerland,” the testimony will necessarily originate elsewhere.[12] Pl.’s Resp. 14. The parties also disagree whether the substance of the testimony—generally, RAS and related entities’ banking relationship with SG Suisse and Friedli—“originates” in Switzerland or the United States. Compare Defs.’ Br. 18 (“The substance of the testimony that OSIC seeks also relates to banking activity in Switzerland, so in that sense, too, the testimony ‘originates’ in Switzerland.”), with Pl.’s Resp. 15 (“[T]he testimony sought concerns SG's decades-long relationship with a criminal enterprise centered in Texas, and SG received instructions relating to the accounts held by Stanford from personnel located primarily in Texas, Mississippi, and Tennessee....”).
*8 The parties do not dispute that RAS and the Stanford entities maintained accounts in Switzerland at SG Suisse—a bank incorporated under Swiss law with no American offices. See, e.g., Intervenor Compl. 17 ¶ 46; Defs.’ Br. 3. Despite such general agreement, OSIC argues that Stanford's “criminal enterprise” was located in Texas, and “SG received instructions relating to the accounts held by Stanford from personnel located primarily in Texas, Mississippi, and Tennessee”; thus, the substance of the deposition testimony does not arise in Switzerland. Pl.’s Resp. 15. But through its complaint against Defendants, OSIC also specifically claims that SG Suisse and Friedli maintained and managed accounts in Switzerland where significant alleged unlawful activity occurred. See, e.g., Intervenor Compl. 20 ¶ 53 (claiming that “Stanford ... used [an SG Suisse slush fund] account to transfer at least $80 million to his personal bank accounts at JPMorgan Chase, Bank of New York Mellon, Sterling Bank, Bank of Antigua and elsewhere through his personal banker, Friedli”), 22 (asserting that Friedli executed “at least $80 million in transfers”/ww the SG Suisse slush fund account to accounts in Texas), 27 ¶¶ 79–81 (alleging that SG Suisse loaned RAS $95 million, which was deposited into RAS's personal SG Suisse account, some of which was then “transferred to [RAS's] private bank accounts in Houston and Miami”). OSIC does not contend that SG Suisse and Friedli conducted transactions in the United States. See Defs.’ Reply 8 (“Even in briefing SG Suisse's personal jurisdiction arguments, OSIC never alleged that SG Suisse or Mr. Friedli performed any banking activity services in the United States.”). Indeed, OSIC seeks to depose SG Suisse,[13] Friedli, and Clemeneet concerning Swiss banking activity (Defs.’ App. 34–49) and apparently does not dispute that all three “reside” in Switzerland. See, e.g., Pl.’s Br. 20. The Court therefore finds that the third comity factor weighs in Defendants’ favor.
Defendants do not dispute that they are in a unique position to testify concerning the relevant information. Defs.’ Br. 18. Instead, they argue that the Hague Convention provides OSIC an adequate way to obtain the information it seeks while preserving Swiss interests and protecting Defendants from potential civil and criminal liability. Id. In contrast, OSIC maintains that the Hague Convention is not a viable alternative where, as here, it seeks to orally question each witness in an “American-style” deposition, e.g., transcribed and under oath. See Pl.’s Br. 15–16. OSIC claims it “would be prejudiced by depositions pursuant to the Hague Convention because such depositions do not offer a meaningful alternative to Federal Rules depositions.” Id. at 16.
Courts have recognized that proceeding under the Hague Convention can, in some instances, prove time consuming and expensive. See, e.g., Wultz v. Bank of China Ltd., 910 F. Supp. 2d 548, 557–58 (S.D.N.Y. 2012) (finding that obtaining documents through the Hague Convention from a Chinese bank was not viable given that prior discovery request via the Hague Convention took many months and Chinese authority “denied some of the valid discovery requested”); Stanford Int'l Bank, 776 F. Supp. 2d at 341 (acknowledging that discovery under the Hague Convention “will inevitably entail some measure of added expense and inconvenience, whether i[n] the form of translator's costs, foreign legal fees, or the inability to obtain evidence in precisely the form that one could secure it in domestic discovery” but noting that such costs “are minor relative to the scope of the underlying litigation” (quotations omitted)); Triple Crown Am., Inc. v. Biosynth AG, No. CIV.A. 96-7476, 1998 WL 227886, at *4 (E.D. Pa. Apr. 30, 1998) (“It appears that requiring plaintiff to seek to depose individual agents of [defendant] in Switzerland would entail substantial time, effort, expense and delay, and would not effectively facilitate the gathering of evidence in a manner contemplated by the Federal Rules.”). As Defendants argue, however, “the Swiss procedure is analogous to the written deposition provided for in the Federal Rules.” Defs.’ Br. 7 (citing Fed. R. Civ. P. 31). Ultimately, OSIC appears to take issue more with how the information is acquired (if procured under the Hague Convention) rather than overall access to such information.[14] Pl.’s Resp. 15–17. Stated differently, OSIC does not dispute that it can “obtain admissible testimony about [SG Suisse's] alleged banking relationships with Mr. Stanford and the Stanford Entities through the Hague Convention process.” Defs.’ Reply 6; cf. Milliken & Co. v. Bank of China, 758 F. Supp. 2d 238, 247–48 (S.D.N.Y. 2010) (citing a United States Department of State circular suggesting that “[w]hile it is possible to request compulsion of evidence in China pursuant to ... [the Hague Convention], such requests have not been particularly successful in the past”). Because the Hague Convention provides, at least initially, a viable method for obtaining the information OSIC seeks, the undersigned concludes that the fourth factor weighs in favor of Defendants.
*9 “The comity factor—requiring analysis of the competing interests of the United States and [Switzerland]—‘is of the greatest importance in determining whether to defer to the foreign jurisdiction.’ ” Credit Lyonnais II, 249 F.R.D. at 443 (quoting British Int'l Ins. Co., Ltd. v. Seguras La Republica, S.A., No. 90Civ.2370 (JFK)(FM), 2000 WL 713057, at *9 (S.D.N.Y. June 2, 2000)). “This does not mean that the factor should be dispositive,” but a court must nevertheless “demonstrate due respect for any special problem confronted by the foreign litigant on account of its nationality or the location of its operations, and for any sovereign interest expressed by a foreign state.” Stanford Int'l Bank, 776 F. Supp. 2d at 334 n.19 (quoting Aérospatiale, 482 U.S. at 546).
Here, both countries have compelling interests at stake. OSIC alleges that Defendants substantially assisted RAS and the Stanford-controlled entities in executing, among other acts, fraudulent transfers. See, e.g., Intervenor Compl. 31–34 ¶¶ 92–104. Certainly, “the United States has ‘a substantial interest in fully and fairly adjudicating matters before its courts.’ ” Credit Lyonnais I, 42 F.R.D. at 214 (quoting Minpeco I, 116 F.R.D. at 523–24). It also has a significant interest in “ensur[ing] the integrity of its financial markets.” Minpeco I, 116 F.R.D. at 523.
But Switzerland also has substantial interests at stake. The Swiss place great importance “on the sovereign independence of the nation” and “individual autonomy.” Stanford Int'l Bank, 776 F. Supp. 2d at 336 (quotations omitted). Switzerland's bank secrecy statutes embody those values and are intended to protect “commercial privacy inside and outside Switzerland.” Minpeco I, 116 F.R.D. at 524. Moreover, “Switzerland subscribes to the typical civil law view that the taking of evidence is essentially a domestic judicial function.” Stanford Int'l Bank, 776 F. Supp. 2d at 336 (quotation omitted). Consequently, “the Swiss government has long maintained that” a United States court order, backed “with its coercive powers” and requiring “a party to produce evidence from Switzerland ... violates Swiss sovereignty and international law, even when the [United States] court has personal jurisdiction over the party.” Id. (quotations, alterations, and internal citations omitted).
Ultimately, the undersigned finds, consistent with Judge Godbey's conclusion in Stanford International Bank, that both the United States and Switzerland “have spoken by adopting the Hague Convention.” Id. at 337. The Hague Convention “inherently, and adequately, balances the competing sovereign interests ... because [their] use will benefit U.S. interests by providing the needed evidence, and protect Swiss interests by avoiding intrusions upon Swiss sovereignty.” Id. at 337 (quotation omitted).[15] Thus, the fifth factor does not carry the day for either party.
*10 Courts generally consider three elements in analyzing whether a party will face substantial hardship by complying with the discovery request: (1) “whether foreign law creates penalties for complying with discovery requests of U.S. origin”; (2) “the likelihood that foreign authorities will enforce those laws”; and (3) “the party/nonparty status of the litigant resisting discovery.” Stanford Int'l Bank, 776 F. Supp. 2d at 337 (citing Credit Lyonnais I, 242 F.R.D. at 224–26 and Minpeco I, 116 F.R.D. at 525–27).
At least two hardship factors weigh in favor of Defendants. As discussed in section II.C. supra, Defendants’ compliance with the deposition notices potentially subjects them to criminal, civil, and administrative penalties. See Stanford Int'l Bank, 776 F. Supp. 2d at 339 (concluding same with respect to Receiver's document requests related to Stanford accounts maintained at SG Suisse); see also Minpeco, S.A. v. Conticommodity Servs., Inc., 118 F.R.D. 331, 332 (S.D.N.Y. 1988) [hereinafter Minpeco II] (observing that penalties for violating Swiss law “are potentially draconian”). Defendants’ expert opines that criminal punishment under SBA Article 47 or SPC Article 273 is a very real possibility. See, e.g., Romy Decl. 8 ¶¶ 35–36, 38–39 (explaining that Article 47 “is an ex officio” offense, Swiss prosecutors do not have discretion whether to prosecute an Article 47 offense, and between 1993 and 2009, Switzerland had convicted 48 people for violating Article 47), 10–11 ¶¶ 49–50 (noting that Article 273 is also “an ex officio” offense and “[t]he Swiss Federal Office for Statistics reports 40 cases from 1984 through 2018 in which the defendant was convicted for violating Art. 273 SPC”). “Although the Court declines to guess at the likelihood of successful prosecution, the probability is nonzero.”[16] Stanford Int'l Bank, 776 F. Supp. 2d at 340.
The third hardship factor arguably favors OSIC. Unlike in the Stanford International Bank case, the parties resisting discovery in this action are a party to the case—i.e., Defendants—and according to OSIC, they “have made extensive use of the Federal Rules.” Pl.’s Resp. 20; see Stanford Int'l Bank, 776 F. Supp. 2d at 340. While Defendants’ party status before the Court, and the federal discovery rule's resulting general applicability, certainly provide a viable basis for placing this factor in OSIC's column, the Court concludes that, at least at this juncture, the import of the other hardship factors tips the scale in Defendants’ favor.
The Court finds that Defendants have acted in good faith in this dispute. Although OSIC avers that Defendants sat on their hands by failing “to obtain waivers from ... [the] [A]ccountholders” (Pl.’s Resp. 22), SG Suisse has consistently maintained that OSIC should pursue depositions through the Hague Convention. Decl. of Allen Lanstra 2 ¶ 8, ECF No. 587-3 (hereinafter Lanstra Decl.) (stating that, as SG Suisse's counsel, he “met and conferred with OSIC's counsel and Mr. Friedli's counsel about the deposition notices multiple times between July and October 2019” and “consistently informed OSIC's counsel that depositions of SG Suisse and its witnesses would have to be taken in Switzerland through Hague Convention procedures”). Moreover, consistent with the Court's discussion in section II.C. above, even if Defendants had obtained the waivers, their concerns regarding Swiss law and the potential penalties for testifying without a Swiss court's permission would not have been alleviated with respect to RAS and SBP. Finally, this Court has, on two prior occasions, found that proper consideration of the Credit Lyonnais factors required that the party seeking discovery first pursue such requests through the Hague Convention. See Rotstain v. Trustmark Nat'l Bank, Case No. 3:09-CV-2384-N-BG, 2015 WL 13031698, at *5 (N.D. Tex. Dec. 9, 2015) (Koenig, J.) (“On balance, the court concludes that the seven comity factors weigh in SG Suisse's favor....”); Stanford Int'l Bank, 776 F. Supp. 2d at 341.
*11 The Court does not find any evidence suggesting that Defendants have acted in bad faith. At present, therefore, this factor weighs in Defendants’ favor. Defendants shall, however, “use all reasonably available efforts to secure the assistance of the appropriate Swiss authorities to the full extent allowed under Swiss law” and work with OSIC to draft mutually acceptable Hague Convention requests for the depositions.[17] Stanford Int'l Bank, 776 F. Supp. 2d at 341.
E. The Credit Lyonnais factors weigh in Defendants’ favor.
In sum, having weighed the Credit Lyonnais factors, the Court finds that OSIC should, in the first instance, pursue the disputed depositions through applicable Hague Convention procedures. In reaching this conclusion, the Court is not prohibiting OSIC from ultimately deposing SG Suisse, Friedli, and Clemencet under the Federal Rules of Civil Procedure. Rather, the undersigned “is requiring only that [OSIC] in the first instance avail [itself] of the [Hague] Convention's procedures in the interest of comity.” Id. at 342. Should OSIC fail to obtain the needed testimony through the Hague Convention, the Court is prepared to revisit the Credit Lyonnais balancing test.
III. Conclusion
The Court concludes that Defendants have demonstrated good cause and a specific need for imposition of a protective order, in the form of quashing the noticed depositions of SG Suisse, Friedli, and Clemencet. Accordingly, the Court hereby GRANTS Defendants’ Motion for Protective Order (ECF No. 585). OSIC's notices of deposition of SG Suisse, Blaise Friedli, and Louis Clemencet are hereby QUASHED, and OSIC is directed to pursue, in the first instance, any deposition testimony from these witnesses through the Hague Convention procedures.
All other relief not expressly granted herein is DENIED.
SO ORDERED.
Footnotes
“Friedli is a former SG Suisse employee who resides in Switzerland, and ... Clemencet is a current SG Suisse employee who resides in Switzerland.” Defs.’ Br. 3. “SG Suisse is a bank incorporated under the laws of Switzerland and located in Geneva”; it has no offices in the United States. Id.
OSIC noticed Friedli's deposition for November 12, 2019, Clemencet's for November 19, 2019, and SG Suisse's for December 19, 2019. Defs.’ App. 32–35, 37–38.
OSIC cites eight accounts held at SG Suisse by: (1) Stanford International Bank Limited (SIBL); (2) Stanford Financial Group Limited (SFGL); (3) Bank of Antigua (BoA); (4) R. Allen Stanford (RAS); and (5) Stanford International Bank, Panama (SBP) (“Accountholders”). Defs.’ App. 45 ¶ 9.
OSIC filed a Motion to Strike certain portions of Romy's Reply Declaration or, alternatively, for leave to file a supplemental declaration addressing alleged “new evidence and arguments raised” by Defendants’ Reply. ECF No. 644. Defendants responded, generally opposing OSIC's requested relief. ECF No. 670. By separate order of even date herewith, the undersigned has granted OSIC's motion to allow the supplemental declaration and has considered all declarations, including Thévenoz's Supplemental Declaration, in reaching its decision herein. Because Thévenoz's Supplemental Declaration is not paginated, page citations refer to the electronic page number assigned by the Court's electronic filing system.
In its Reply, SG Suisse asserts that it “served substantive objections to the [deposition] topics”; thus, such objections “are preserved.” Defs.’ Reply 6 n.8. SG Suisse did not move this Court for a protective order on relevance grounds, breadth, or burden, and the Court has not considered such objections herein.
SBP was a Panamanian bank. Pl.’s Resp. 5. “In February 2010, SBP's account at SG was closed. Shortly thereafter, pursuant to an order of this Court, SBP was sold.” Id.
The Court reached this decision after considering the parties’ various submissions and conducting a hearing. See S.E.C. v. Stanford Int'l Bank, Ltd., Civil Action No. 3:09-cv-298-N BQ, ECF Nos. 1252, 1259, 1260, 1264, 1266. The Receiver contended that SG Suisse should provide relevant documents to him as though he was “the signatory on the account.” See ECF No. 1259; ECF No. 1280, at 21 (Examiner argued at the hearing that the records the Receiver was requesting from SG Suisse were “the Court's records”—“the bank records of the entities that are in receivership.”). As explained above, however, this Court found otherwise. See Stanford Int'l Bank, Ltd., 776 F. Supp. 2d at 326–27, 332, 339, 342.
Notably, Dr. Thevenoz's declarations do not address the Receiver's ability to waive Swiss banking confidentiality with respect to SBP.
In his Supplemental Declaration, Dr. Thévenoz disputes Dr. Romy's opinion, Thevenoz Suppl. Decl. 6–7 ¶¶ 14–16. He explains that “[a]lthough a foreign liquidator for a natural person [such as RAS] would need to be recognized under [Swiss law] to access the assets of the bankrupt in Switzerland, such recognition is not required where the foreign liquidator is seeking information or authorizing the release of information outside of Switzerland.” Id. at 6 ¶ 15 (emphasis added). Dr. Thévenoz states that “OSIC is not seeking to access assets of RAS in Switzerland. OSIC is seeking to obtain information to which [the Receiver] is entitled. Therefore, recognition in Switzerland is not required.” Id. at 6–7 ¶ 16. Significantly, however, Dr. Thévenoz does not provide an opinion about whether a “foreign liquidator” could legitimately seek information maintained and sought to be obtained in Switzerland, such as deposing witnesses in Switzerland regarding RAS's banking activity, which is the question squarely before the Court. See id. 6–7 ¶¶ 14–16. In addition, as discussed above, Dr. Thévenoz's opinion that a Swiss court would view the Receiver's waiver on behalf of RAS as merely obtaining information to which the Receiver is entitled is a position that this Court has rejected. See Stanford Int'l Bank, 776 F. Supp. 2d at 326–27, 332, 342.
The Court finds OSIC's argument concerning SPC Article 271 unavailing. OSIC maintains that Defendants need not fear prosecution because Article 271 only applies if the depositions take place in Switzerland, and it has noticed the depositions for outside Switzerland. Pl.’s Resp. 9–10. Even assuming depositions taken outside Switzerland do not implicate Article 271, however, any testimony may nevertheless involve SBA Article 47 and SPC Article 273 because, as the Court has discussed above, the RAS and SBP waivers are not effective. See Romy Reply Decl. 9 ¶¶ 49–50 (explaining that SBA Article 47 and SPC Articles 271 and 273 are cumulative—i.e., witnesses must comply with all three provisions—and “[o]fficers and employees of a Swiss bank who reside outside of Switzerland are equally bound by Art. 47 [S]BA and Art. 273 SPC”).
The parties dedicate a substantial portion of their briefing, and supporting declarations, to discussing whether the Antiguan-appointed liquidators can effectively waive Swiss financial privacy rights on behalf of SIBL, SFGL, and BoA, entities organized under the laws of Antigua. See Pl.’s Resp. 5, 7–8; Defs.’ Reply 4; Pl.’s Mot. to Strike 8, ECF No. 644. Because the Court has concluded that RAS and SBP have not effectively waived their rights under Swiss law, however, it does not consider the legitimacy of the purported Antiguan-entity waivers and any impact they might have on Defendants’ ability to testify regarding SIBL, SFGL, and BoA banking activities. As Defendants argue, without an RAS waiver, the witnesses could not discuss RAS's banking activity, which implicates one of OSIC's central claims (Defs.’ Reply 1–2)—that SG Suisse and Friedli managed an SFGL account that was RAS's “personal ‘slush fund.’ ” See Intervenor Compl. 20–25 ¶¶ 53–72.
OSIC's argument presumes that the waivers relieve Defendants of any liability, criminal or otherwise, for testifying without prior permission from a Swiss court. Because the Court has concluded the RAS and SBP waivers are not effective, however, the Court must consider where the testimony originates within the context of the Credit Lyonnais factors.
OSIC claims that with respect to the Rule 30(b)(6) deposition, SG Suisse “could designate a witness who lives outside of Switzerland.” Pl.’s Br. 14. Other than characterizing OSIC's contention as “ridiculous,” SG Suisse does not state who it intends to designate to testify on its behalf, much less whether it has a viable Rule 30(b)(6) witness who resides outside Switzerland. See Defs.’ Reply 8 n.10; see Credit Lyonnais II, 249 F.R.D. at 441 n.12 (observing that plaintiffs conceded most of the discovery originated outside United States but also noting that defendant “d[id] not assert that it [could not] produce a Rule 30(b)(6) witness who resides outside of France and could testify after a review of relevant records”). Regardless, Rule 30(b)(6) provides that SG Suisse—not OSIC—dictates who it designates as the entity's witness.
OSIC asserts that requiring it to depose witnesses in accordance with the Hague Convention is “highly prejudicial ... because Swiss depositions are limited to pre-submitted written questions, which the witness can review and prepare answers to in advance, asked by a Swiss judicial officer with little or no meaningful follow-up or cross examination by the parties.” Pl.’s Resp. 1. While the Court certainly understands OSIC's preference for oral depositions, the mechanism provided by the Hague Convention, if ultimately used by the Swiss court, nevertheless closely aligns with a process recognized by the Federal Rules of Civil Procedure.
OSIC maintains that if this Court requires it to depose Defendants via the Hague Convention, Defendants will have “an extraordinary advantage” in this litigation because they have employed the Federal Rules to obtain discovery from OSIC. Pl.’s Resp. 18. The Court finds that the cases OSIC cites in support of their position, however, are inapposite to the present dispute. In re Honda addressed whether compelling Japanese nationals to submit to depositions in the United States violated Japan's sovereignty; however, the court notably did not weigh the Credit Lyonnais factors because Japan is not a signatory to the Hague Convention, In re Honda Am. Motor Co., Inc. Dealership Relations Litig., 168 F.R.D. 535, 537–38 (D. Md. 1996). The court observed that Japan did not subscribe to the common law view on discovery (open discovery and compelled depositions); therefore, “the scope of plaintiffs’ discovery would necessarily be limited under Japanese law.” Id. at 539 (emphasis added). Moreover, “most of the relevant documents ..., which the parties ... need[ed] to refer to at deposition, [were] being held at a depository in” the United States. Id. at 539-40. Thus, the court generally found that “comity and judicial economy” favored requiring the depositions in the United States because Japan's sovereignty interests were not so strong as to necessitate quashing the deposition notices. Id. at 540. In contrast, Switzerland—a Hague Convention signatory—has express laws potentially prohibiting the topics of testimony, and in the form (written versus oral deposition) OSIC desires; Swiss law, however, will not necessarily limit the scope of discovery.
The undersigned also finds In re Anschuetz & Co., GmbH, 754 F.2d 602 (5th Cir. 1985), vacated sub nom. Anschuetz & Co., GmbH v. Miss. River Bridge Auth., 483 U.S. 1002 (1987) (remanding in light of Aérospatiale), distinguishable. There, a third-party defendant argued, in effect, that the plaintiff should have to conduct discovery pursuant to the Hague Convention to promote international comity. In re Anschuetz & Co., 754 F.2d at 606. The Fifth. Circuit disagreed, observing that foreign defendants would obtain “an extraordinary advantage in United States courts” were American litigants exclusively required to obtain discovery through the Hague Convention while foreign litigants could avail themselves of the Federal Rules. Id. The court did not hold that, after weighing the comity factors, American interests could not be served by first directing litigants to avail themselves of the Hague Convention procedures. See id. at 606–07 n.7 (observing that “the Hague Convention is not the exclusive method for obtaining discovery ... [and] that the Federal Rules remain viable against a foreign party”). The undersigned therefore does not consider the In re Anschuetz statement OSIC cites in its brief to be controlling, or even persuasive, under the present circumstances of this dispute.
Citing Credit Lyonnais I for support, OSIC argues that Defendants have “fail[ed] to show that they likely, as opposed to merely possibly, would be prosecuted if they testify,” Pl.’s Resp. 20 (citing Credit Lyonnais I, 242 F.R.D. at 224). OSIC claims that the statistics Defendants cite regarding the number of prosecutions suggest only a “small” number of people are actually prosecuted by Swiss authorities. Id. at 20–21, In any event, the Court finds that Defendants have sufficiently shown that there is a real risk of prosecution.
The parties agree that generally, a deposition in Switzerland has the following characteristics: a Swiss judge examines the witness; the parties’ counsel may not ask the witness direct or cross-examination questions, “although the parties are allowed to address supplementary questions to the witness”; and the deposition is not transcribed or taken under oath. Romy Decl. 3 ¶ 14; Pl.’s Resp. 16; see also Triple Crown Am., 1998 WL 227886, at *4 (explaining that according to plaintiff, “any deposition in Switzerland ... would be conducted in German by a judicial officer who would issue a report from handwritten notes, that the proceedings could not be transcribed by a party and that the ability of any Swiss attorney engaged by a party to pose questions to a deponent is not assured”). The parties also observe, however, that “[t]he requesting foreign court [i.e., this Court] may ask for a specific procedure to be followed, for instance that the US [sic] counsels of the parties attend the judicial examination and submit supplementary questions to the witness, that a court reporter attend the examination and transcribe the testimony, or that a testimony be taken under oath, should the witness agree to it.” Romy Decl. 13–14 ¶ 66. According to Dr. Romy, Swiss courts retain the discretion whether to grant such requests, but in her experience, a Swiss court “may allow” American-type procedures. Id.