In re Application of Oasis Focus Fund LP
In re Application of Oasis Focus Fund LP
2024 WL 1081533 (W.D. Tex. 2024)
January 31, 2024
Pitman, Robert, United States District Judge
Summary
Petitioners sought discovery from Respondent under 28 U.S.C. § 1782 for use in a foreign proceeding. The court granted the application and authorized the issuance of a subpoena, which Respondent sought to vacate. The court denied Respondent's motion for reconsideration or stay pending appeal, finding that he had not shown a strong likelihood of success on the merits and that the public interest was neutral. The issue of control over the requested Electronically Stored Information had already been resolved in previous proceedings.
Additional Decisions
IN RE APPLICATION OF OASIS FOCUS FUND LP, QUADRE INVESTMENTS, L.P., and 507 SUMMIT LLC, Petitioners
1:23-CV-239-DII, 1:23-MC-473-RP
United States District Court, W.D. Texas, Austin Division
Filed January 31, 2024
Counsel
Duane L. Loft, Pro Hac Vice, John Patrick McAdams, Pro Hac Vice, Melissa J. Kelley, Pro Hac Vice, Pallas Partners (US) LLP, New York, NY, John P. Lewis, Jr., Hayward PLLC, Dallas, TX, Todd Brice Headden, Hayward PLLC, Austin, TX, for Petitioners Oasis Focus Fund LP, Quadre Investments, L.P. in 1:23-CV-239.Ira A. Schochet, Pro Hac Vice, Labaton Sucharow LLP, New York, NY, Minyao Wang, Yonah Jaffe, Pro Hac Vice, Reid Collins & Tsai LLP, New York, NY, Aaron Alexander Brown, William T. Reid, IV, Reid Collins & Tsai LLP, Austin, TX, for Petitioner 507 Summit LLC in 1:23-CV-239.
Adam Baker Banks, Pro Hac Vice, Milana Bretgoltz, Pro Hac Vice, Miranda Schiller, Pro Hac Vice, Weil Gotshal & Manges LLP, New York, NY, Brian T. Frawley, Pro Hac Vice, Charles H. Sullivan, Pro Hac Vice, Sullivan & Cromwell LLP, New York, NY, Len A. Wade, Pro Hac Vice, Jackson Walker LLP, Fort Worth, TX, Jennifer S. Freel, Jackson Walker, Austin, TX, for Hisayuki Idekoba in 1:23-CV-239.
Minyao Wang, Pro Hac Vice, Yonah Jaffe, Reid Collins & Tsai LLP, New York, NY, William T. Reid, IV, Reid Collins & Tsai, LLP, Austin, TX, for Petitioners in 1:23-MC-473.
Jennifer S. Freel, Jackson Walker, Austin, TX, for Hisayuki Idekoba in 1:23-MC-473.
Pitman, Robert, United States District Judge
ORDER
*1 Before the Court is Respondent Hisayuki Idekoba's (“Respondent”) Motion for Reconsideration and, in the alternative, Request for a Stay Pending Appeal. (Dkt. 53). Petitioners 507 Summit LLC (“507 Summit”), Oasis Focus Fund LP (“Oasis”), and Quadre Investments, L.P. (“Quadre”) (collectively, “Petitioners”) filed a response, (Dkt. 58), and Respondent filed a reply, (Dkt. 59). Having considered the background, the parties' briefing, and the relevant law, the Court will deny the motion for reconsideration and the request for a stay pending appeal.
I. BACKGROUND
Petitioners are members of a group of dissenting shareholders of 51job, Inc., a human resources company incorporated in the Cayman Islands and headquartered in China. (R. & R., Dkt. 44, at 2). Japan-based Recruit Holdings Co. (“Recruit”) is the majority shareholder in 51job. (Id.). Respondent is CEO of Recruit and resides in Austin, Texas. (Id.). Petitioners brought an appraisal proceeding in the Grand Court of the Cayman Islands to determine the fair value of their former shares following a merger transaction involving 51job. (Id.). Respondent is not a party to the Cayman Islands proceeding, and because he resides here in Austin, he is beyond the jurisdictional reach of that court. (Id.). Accordingly, Petitioners Oasis and Quadre filed an ex parte application in this Court to obtain discovery from Respondent pursuant to 28 U.S.C. § 1782, which authorizes U.S. district courts to order residents of their district to respond to discovery for use in foreign proceedings. (Id.).
United States Magistrate Judge Dustin Howell granted Petitioners Oasis and Quadre's application and authorized the issuance and service of a subpoena on Respondent. (Id. at 3).[1] Respondent then moved to vacate the Court's order. (Id.). On September 26, 2023, Judge Howell issued his report and recommendations on the motion to vacate, in which he concluded that: (1) the discretionary factors weighed in favor of authorizing discovery, (2) Respondent has possession or control over the documents at issue, (3) the document requests were not overbroad, and (4) a deposition of Respondent was not necessary. (Id. at 7–18). Respondent timely objected to the report and recommendation on October 10, 2023. (Dkt. 46). On November 2, 2023, the Court adopted the report and recommendation. (Dkt. 49). The Court denied Respondent's motion to vacate and authorized the service of document production requests on Respondent. (Id.).
On November 30, 2023, Respondent filed the instant motion for reconsideration or request for a stay pending appeal. (Dkt. 53). Respondent argues that the Court erred in its analysis of whether he has control of the documents at issue and that it applied the wrong test to determine “control.” (Id.). He further argues that he will suffer irreparable harm if forced to violate Japanese law and that Petitioners will not be harmed by a stay. (Id.).
II. LEGAL STANDARD
A. Motion for Reconsideration
*2 Rule 59(e) “serve[s] the narrow purpose of allowing a party to correct manifest errors of law or fact or to present newly discovered evidence.” Waltman v. Int'l Paper Co., 875 F.2d 468, 473 (5th Cir. 1989). It is not the proper vehicle to “raise arguments which could, and should, have been made before the judgment issued.” Simon v. United States, 891 F.2d 1154, 1159 (5th Cir. 1990). Altering, amending, or reconsidering a judgment under Rule 59(e) is an extraordinary remedy that courts should use sparingly. Templet v. HydroChem Inc., 367 F.3d 473, 479 (5th Cir. 2004).
B. Stay Pending Appeal
A district court's discretion to grant a stay of discovery orders extends to Section 1782 proceedings. In re Application of Alves Braga, 789 F. Supp. 2d 1294, 1307 (S.D. Fla. 2011) (noting that “[t]he broad authority to grant a stay extends to 28 U.S.C. § 1782 proceedings”). In determining whether to grant a stay pending appeal, courts consider four factors: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” Planned Parenthood of Greater Tex. Surgical Health Servs. v. Abbott, 734 F.3d 406, 410 (5th Cir. 2013) (citation omitted).
III. DISCUSSION
A. Motion for Reconsideration
Respondent objects to the Court's holding that he maintains control of the documents at issue in Petitioner's request. However, as Respondent notes, this issue has already been considered and resolved. (See Mot. Reconsider, Dkt. 53, at 6 (“As explained in Respondent's Objections to the Report ... and Reply ..., the magistrate judge's Report rested on at least two fundamental errors[.]”). The parties briefed the issue of control when they litigated the motion to vacate, (see Dkts. 17, 30, 36), and again in their objections to the report and recommendation, (see Dkts. 46, 47, 48). Respondent's arguments remain almost identical to those in his objections, which have already been overruled by the Court. (Compare Objs., Dkt. 46, at 3 (“The Report overlooked controlling Fifth Circuit authority that holds that an officer or employee of a company lacks ‘control’ over documents that belong to the company.”) with Mot. Reconsider, Dkt. 53, at 5 (“[T]he magistrate judge's ‘practical ability’ test for ‘control’ is at odds with Fifth Circuit precedent”)). In short, the Court has twice decided the issues that Respondent argues in his motion for reconsideration. This motion does not warrant revisiting the Court's prior decisions.
More substantively, the Court is not convinced that the report and recommendation contains a “manifest error of law” as required by Rule 59(e). Rosenblatt v. United Way of Greater Hous., 607 F.3d 413, 419 (5th Cir. 2010). Respondent contends that the magistrate judge used the wrong test for “control”—but the magistrate judge expressly considered the Fifth Circuit case cited by Respondent, and explained why it did not support Respondent's arguments. (See R. & R., Dkt. 44, at 14–15 (“But unlike the respondent in Wiwa, [Respondent] is not a former employee; he is currently CEO of Recruit Holdings and serves on the company's board.”)). Likewise, the magistrate judge rejected the notion that Respondent's confidentiality agreement could supersede a subpoena authorized by this Court, noting that the agreement “is not a bar to production in a court proceeding” and “[a]ny confidentiality concerns raised by this agreement can be addressed by entry of a protective order.” (Id. at 15–16). In sum, the magistrate judge did not err in his analysis and it was not manifest error for the Court to adopt his report and recommendation. The Court will therefore deny Respondent's motion for reconsideration.
B. Motion to Stay Pending Appeal
*3 In the alternative, Respondent asks the Court to stay Petitioners' production deadline pending appeal. (Mot. Reconsider, Dkt. 53, at 14). In determining whether to grant a stay pending appeal, courts consider four factors: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” Planned Parenthood of Greater Tex., 734 F.3d at 410 (citation omitted).
The Court finds that the factors are either neutral or lean in Petitioners' favor. First, for the reasons discussed above, Respondent has not made a strong showing that he will succeed on the merits. At most, Respondent has demonstrated that Petitioners' success depends upon the validity of the “practical ability test” and that the Fifth Circuit has never squarely addressed the practical ability test as applied to a company's sitting officer. See Dotson v. Edmonson, 2017 WL 4310676, at *5 (E.D. La. Sept. 28, 2017) (“It appears there is no binding precedent in the United States Court of Appeals for the Fifth Circuit regarding whether an employee who is a party to litigation can be compelled to produce his non-party employer's documents if he has the ability to access them, but not the authority to disclose them.”). The absence of directly controlling Fifth Circuit authority does not constitute a “strong showing” of success. Nor does Respondent's reliance on Wiwa—a case that the Court and the magistrate judge already found to be distinguishable—display a strong likelihood of success.
Second, Respondent will not be irreparably injured absent a stay. Any harm resulting from Respondent's production of documents may be alleviated by returning those documents in the event the Fifth Circuit vacates this Court's order. See U.S. v. Chevron U.S.A., Inc., 186 F.3d 644, 647 (5th Cir. 1999) (“Were we to vacate the enforcement order on any of the grounds Chevron advances, MMS would be required to return documents produced in response to the subpoenas, alleviating Chevron's concern.”). Respondent contends he “will suffer irreparable harm, instead, from being forced to violate Japanese law, Recruit company policy, and his own confidentiality agreement ....” (Reply, Dkt. 59, at 8). Again, this argument ignores the critical fact that Respondent will be disclosing information pursuant to his legal obligations under a court order. Moreover, as the magistrate judge noted, the confidentiality concerns may be alleviated by the entry of a protective order.
Third, Petitioners are likely to suffer harm in the event of a stay. Although Respondent correctly points out that there is no trial date in the underlying proceeding in the Cayman Islands, (Reply, Dkt. 59, at 9), there is no guarantee that the Fifth Circuit will resolve Respondent's appeal prior to the close of discovery or even the underlying trial once it is set. See In re Aso, No. 19MC190JGKJLC, 2019 WL 2572491, at *3 (S.D.N.Y. June 21, 2019) (noting that a petitioner is more likely to suffer irreparable harm because a stay runs the risk of the foreign proceeding terminating prior to a decision from the court of appeals) (citing In re Gushlak, No. 11-MC-218 (NGG) (JO), 2012 WL 2564466, *8 (E.D.N.Y. Jan. 30, 2012), adopted by 2012 WL 1514824 (E.D.N.Y. Apr. 30, 2012)).
Finally, the public interest is neutral. There is at least some public interest in ensuring that Section 1782 applications are resolved prior to the close of the foreign proceedings. See id. (noting that a stay would hurt the public interest where it risks depriving petitioner of the evidence in the foreign proceeding). Still, as one court has noted, the “[p]ublic interest clearly favors protecting Respondents from being forced to suffer potentially unnecessary burdens that the Court could subsequently determine to be unjustified” under Section 1782. LEG Q LLC v. RSR Corp., No. 3:17-CV-1559-N-BN, 2017 WL 4222690, at *5 (N.D. Tex. Sept. 22, 2017) (citation omitted). This is especially the case where Respondent has raised a colorable argument that the documents sought by the Section 1782 application reside in a country where they may not normally be subject to discovery. Overall, the public interest factor is neutral.
*4 In sum, three of the four factors weigh against a stay and the fourth is neutral. Therefore, the Court will deny Respondent's request for a stay pending appeal.
IV. CONCLUSION
IT IS ORDERED that Respondent's motion for reconsideration, or in the alternative, for a stay pending appeal, (Dkt. 53), is DENIED.
SIGNED on January 31, 2024.
Footnotes
Petitioner 507 Summit filed a separate application, which Respondent opposed. That application (rather than a motion to vacate) was at issue in the report and recommendation, (Dkt. 44).