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Ings v. Ferguson

August 10, 1960


Author: Moore

Before LUMBARD, Chief Judge, and MOORE and FRIENDLY, Circuit Judges.

MOORE, Circuit Judge.

These proceedings were instituted in the District Court for the Southern District of New York by orders to show cause (1) by the New York Agency of The Bank of Nova Scotia and (2) by the New York Agency of The Toronto-Dominion Bank, to quash subpoenas duces tecum served in New York on the Agencies requiring them to produce in New York records physically located in branches of the banks in Canada. From an order refusing to quash the Agencies appeal.

The appellee is Murray Ferguson, trustee of Equitable Plan Company, Debtor in a Chapter X reorganization in the United States District Court for the Southern District of California. Because of a desire to make further inquiry into assets of the Debtor, ancillary proceedings were brought in the Southern District of New York.

The immediate inquiry giving rise to the subpoenas relates to a stockholders' derivative action (Weinberger et al. v. Bradley) pending in the Supreme Court of the State of New York brought primarily to obtain the cancellation of 1,000,000 shares of the stock of Doeskin Products, Inc. A settlement of that action has been proposed and referred to a referee to pass upon its fairness and adequacy. Although not a party to the state court action the Equitable Plan, as the holder of 198,480 shares of Doeskin stock, seeks information with which to challenge the fairness of the proposed settlement which returns to Doeskin only 250,000 shares of its stock out of 1,000,000 shares allegedly held by or for the benefit of Lowell M. Birrell, a fugitive from justice, whose financial machinations are related to Equitable Plan. See Pettit v. Doeskin Products, Inc., 2 Cir., 1959, 270 F.2d 95.

The detailed allegations of the Trustee may be accepted as establishing for purposes of these proceedings the relevancy of the information sought to possible objections to the settlement which he may wish to interpose. The primary question, however, is the effect upon the New York Agencies of subpoenas calling for the production of records of banks of a foreign country, which records are located in that foreign country, Canada.

Briefly summarized The Bank of Nova Scotia subpoena requires the production of records of a transfer of $100,000 from The Chase Manhattan Bank to The Bank of Nova Scotia in Montreal and its disbursement; The Toronto-Dominion Bank subpoena of records of a transfer of funds between the Havana Branch of The Royal Bank of Canada and a Montreal branch of The Toronto-Dominion. The New York Agency of The Bank of Nova Scotia reports a transfer to the Sherbrooke & Union branch in Montreal and interposes no objection to producing its New York Agency records. The New York Agency of The Toronto-Dominion Bank reports no records of the transaction in New York.

Opinions (in affidavit form) from Canadian counsel for The Bank of Montreal, The Bank of Nova Scotia, The Toronto-Dominion Bank and The Royal Bank of Canada all came to the conclusion that Chapter 42 of the Statutes of Quebec, 6-7 Elizabeth II, 1957-1958 respecting records of business concerns in the Province of Quebec prohibit the banks and their employees from sending outside the Province any of the documents demanded by the subpoenas. A letter from other Canadian counsel submitted by the Trustee indicates a different interpretation of the statute. It is not necessary to attempt an interpretation of Canadian law. The fact that a conflict of theories exists between Canadian counsel only demonstrates the problem inherent in the issuance of subpoenas having extra-territorial effect upon Canadian subjects and parties to the litigation and points to the desirability of having the impact of Canadian statutes passed upon by Canadian courts.

An elementary principle of jurisdiction is that the processes of the courts of any sovereign state cannot cross international boundary lines and be enforced in a foreign country. Thus service of a United States District Court subpoena by a United States Marshal upon a Montreal branch of a Canadian bank would not be enforceable. However, amongst civilized nations, between which international comity exists, procedures have long been established whereby the requests of litigants in other countries seeking testimony and records are honored. Such reciprocity is evidenced by the laws which each of the sovereign states has enacted to enable this purpose to be achieved. Each state nevertheless by the very definition of sovereignty is entitled to declare its own national policy with respect to such limitations upon the production of records as its lawmakers may choose to enact.

For many years the time honored custom of seeking evidence in foreign countries, particularly in cases in which the aid of foreign courts may be necessary to secure the production of records, has been by letters rogatory. As the term implies this is a request made to the foreign court to give its aid, backed by its power, to secure the desired information. The Federal courts (and the New York State court as well*fn1) have recognized this procedure in their provisions for letters rogatory. 28 U.S.C.A. ยง 1781 (Fed.R.Civ.Pr. 28(b), 28 U.S.C.A.).

Provision for compliance with such requests is found in the Special Procedure Act of the Province of Quebec Chapter 342 (1941), section 16 which reads:

"When, upon petition to that effect, it is shewn to the Superior Court or to one of the judges thereof, charged with the administration of justice in the district, that a court of any other Province of Canada, or of any other British possession, or of a foreign country, before which any civil or commercial case is pending, desires to have the evidence of any party or witness in the district, such court or judge may order that such party or witness may be examined under oath, either by means of questions in writing or otherwise, before any person mentioned in the said order, and may summon, by the same or by a subsequent order, such party or witness to appear for examination, and may order him to produce any writing or document mentioned in the order, or any other writing or document relating to the matter, and which may be in his possession. R.S.1925, c. 277, s. 16."

Under this statute it would appear possible to secure both the testimony of witnesses and the production of the desired documents. Thus under the laws of both the United States*fn2 and Canada procedures are available for securing evidence within the confines of the other's territory.

Subpoena power is not absolute. Even if exercised within proper territorial limits, the subpoena may be scrutinized by the courts. Every reason exists for careful scrutiny here. No claim is being made against either bank by any litigant. At most the bank is being called as a witness. The transactions did not originate in the New York Agencies. And the records sought are in the custody of branches in Canada. Under these circumstances it seems highly undesirable that the courts of the United States should countenance service of a subpoena upon a New York agency of a foreign bank which is ...

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