United States District Court, S.D. New York
November 19, 2004.
LYONDELL-CITGO REFINING, LP, Plaintiff,
PETROLEOS DE VENEZUELA, S.A. AND PDVSA-PETROLEO, S.A., Defendants.
The opinion of the court was delivered by: CONSTANCE MOTLEY, Senior District Judge
MEMORANDUM OPINION AND ORDER
Defendant requests that this court set aside Magistrate Judge
Peck's October 1, 2004 order requiring defendant to produce to
plaintiff Board of Director minutes, reports and presentations
for the period between January 1, 1998 to December 31, 2002. For
the reasons set forth below, defendant's request is DENIED.
I. The Parties
Plaintiff, Lyondell-Citgo Refining, LP ("LCR"), is a limited
partnership with its principal place of business in Houston,
Texas, where it owns a crude oil refinery. Defendant Petroleos de
Venezuela, S.A. ("PDVSA"), is the national oil company of
Venezuela, and defendant PDVSA-Petroleo, S.A. ("Petroleo"), is a
wholly owned subsidiary of PDVSA.
In response to a dispute concerning the discovery of Board of
Director minutes, reports and presentations, Magistrate Judge
Peck issued an order on October 1, 2004 requiring defendant to
produce to plaintiff all Board of Director minutes, reports and
presentations for the period between January 1, 1998 to December
31, 2002. See 10/1/04 Tr. at 37.
On October 15, 2004, Magistrate Judge Peck clarified the order,
stating that he "was not ordering defendant to produce irrelevant
using `irrelevant' in a discovery sense Board of Director
minutes." Rather, because the court "could no longer rely on
PDVSA or its counsel to search those board minutes," he gave
plaintiff the "unusual opportunity" to search the minutes
directly for relevant and responsive documents. See 10/15/04 Tr. at 2-3.
Magistrate Judge Peck noted that he was providing such relief to
plaintiff because defendant was responding to discovery requests
"on the 11th hour, if not the 13th hour . . . that had
been pending for months with respect to the board minutes." Id.
at 3. Finally, Magistrate Judge Peck stated that "the whole
purpose of this was that the Court could not trust defendant's
review of this material and, therefore, it was giving the
plaintiff the authority to review it and determine what was
responsive to its document requests and relevant to the
litigation and take only such material. I note that I never
ordered copies of all material, as opposed to that material that
plaintiffs decided was relevant, and that to the extent you
disagreed with that, that issue could be brought before the
Court's attention." Id. at 5 (emphasis added).
Defendant objects to this order on the grounds that it is
overly broad and contrary to the principle of relevance as set
forth in Federal Rule of Civil Procedure 26(b)(1). Def.'s
Objections to Disc. Orders by Magistrate Judge at 9. Defendant
further argues that where material is not properly discoverable,
a court cannot use its power of sanction to compel production.
Id. at 11. Defendant contends that it has made a good faith
effort to locate and produce all relevant and responsive
documents, and that it should not have to comply with the order
as it will be subject to criminal penalties in Venezuela if the
materials at issue are disclosed. Id. at 14; Def.'s Resp. to
Pl.'s Opp'n to Def.'s Objections to Disc. Orders by Magistrate
Judge at 3. The court addresses each of these issues in turn.
III. Standard of Review
Rule 72(a) of the Federal Rules of Civil Procedure and the
Federal Magistrates Act, 28 U.S.C. §§ 636(b)(1)(A) (2002) provide
this court with the standard by which to review Magistrate Judge
Peck's discovery-related ruling. Pretrial discovery matters are
generally considered nondispositive of the litigation. See
Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522 (2d Cir.
1990). Both the rule and the statute state that, as to
non-dispositive matters, a district court shall reverse a
Magistrate Judge's order only where it has been shown that the
order is "clearly erroneous or contrary to law."
28 U.S.C. § 636(b)(1)(A) (1988); Fed.R. Civ. P. 72(a). Elaborating on the
"clearly erroneous" standard, the Supreme Court has held that a
finding is "clearly erroneous" if the reviewing court is "left
with the definite and firm conviction that a mistake has been
committed." Easley v. Cromartie, 532 U.S. 234, 242 (2001)
(quoting United States v. United Gypsum Co., 333 U.S. 364, 395
(1948)). Indeed, "[w]here there are two permissible views of the
evidence, the factfinder's choice between them cannot be clearly
erroneous." Anderson v. City of Bessemer City, 470 U.S. 564,
574 (1985) (citing United States v. Yellow Cab Co.,
338 U.S. 338, 342 (1949)). Pursuant to this highly deferential standard of
review, a magistrate judge is "afforded broad discretion in
resolving discovery disputes and reversal is appropriate only if
their discretion is abused." Derthick v. Bassett-Walker Inc.,
1992 WL 249951, at *8 (S.D.N.Y. Sept. 23, 1992). Thus, a party
seeking to overturn or modify a discovery order bears a heavy
burden. IV. The Scope of Ordered Discovery
Defendant argues that Magistrate Judge Peck's discovery order
is overly broad and requires the production of documents that are
not relevant. Specifically, defendant argues that the production
of all Board of Director minutes for a specified period would
include documents that are irrelevant to the issues in the
instant lawsuit. Fed.R. Civ. P. 26(b) provides the standard for
determination of this issue, and states in relevant part:
Parties may obtain discovery regarding any matter,
not privileged, that is relevant to the claim or
defense of any party . . . For good cause, the court
may order discovery of any matter relevant to the
subject matter involved in the action. Relevant
information need not be admissible at the trial if
the discovery appears reasonably calculated to lead
to the discovery of admissible evidence.
Fed.R. Civ. P. 26(b)(1).
This rule has been liberally construed. See Oppenheimer
Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978) (relevance "has
been construed broadly to encompass any matter that bears on, or
that reasonably could lead to other matter that could bear on,
any issue that is or may be in the case."). It is well-settled
within this Circuit that the rule will be satisfied if there is
"any possibility" that the information sought may be relevant to
the subject matter of the action. Daval Steel Prods. v. M/V
Fakredine, 951 F.2d 1357, 1367 (2d Cir. 1991) (quoting
Mallinckrodt Chem. Works v. Goldman Sachs & Co., 58 F.R.D. 348,
353 (S.D.N.Y. 1973). See also Estee Lauder, Inc. v.
Fragrance Counter, Inc., 189 F.R.D. 269, 274 (S.D.N.Y. 1999);
Santrayll v. Burrell, 1997 WL 24375, at *2 (S.D.N.Y. Jan. 221,
1998); United States v. Barrier Indus., Inc., 1997 WL 97842, at
*2 (S.D.N.Y. Mar. 5, 1997). Indeed, this court has held that
"[i]n federal actions, discovery should be broad, and all
relevant materials which are reasonably calculated to lead to the
discovery of admissible evidence should be [discoverable]."
Morrissey v. City of New York, 171 F.R.D. 85, 88 (S.D.N.Y.
1997)). See also Tangorre v. Mako's, Inc., 2002 WL 206988,
at *3 (S.D.N.Y. Feb. 8, 2002); Nat'l Cong. for Puerto Rican
Rights v. City of New York, 194 F.R.D. 88, 92 (S.D.N.Y. 2000).
Based on this liberal discovery regime, as well as the broad
discretion afforded magistrate judges when resolving discovery
disputes, this court finds that Magistrate Judge Peck was well
within his discretion by resolving the instant discovery dispute
as he did. Indeed, Magistrate Judge Peck was clear to note that
he was not requiring production of all materials. Rather, he
was merely requiring production of materials that plaintiff
designated as relevant after reviewing all materials. Further, he
noted that if defendant disagreed with plaintiff about the
relevance of particular documents, the parties could appear
before him to discuss the relevance of the specific documents in
question. Because this court finds that Magistrate Judge Peck did
not abuse his discretion, it need not reach defendant's claim
that a court cannot use its power of sanction to compel
production of otherwise non-discoverable material. V. The Possibility of Imposition of Criminal Penalties by a
Defendant argues in its objection to Magistrate Judge Peck's
order that the President of PDVSA does not have authority to
permit individuals without security clearances to search PDVSA's
Board of Director files, as they contain confidential and
classified information. Def.'s Objections to Disc. Orders by
Magistrate Judge at 8. Shortly after filing its objection,
defendant submitted a declaration to the court dated October 15,
2004, which included a letter from the Minister of Energy and
Mines of the Bolivarian Republic of Venezuela stating that
decisions made by the authorities of PDVSA are strictly
confidential, as they are associated with the public interest and
national security of Venezuela. The letter further noted that
employees who grant access to such files may be subject to
criminal sanctions. Letter from Rafael Ramirez Carreño to Ali
Rodriguez of 10/14/04.
Defendant relies on First Am. Corp. v. Price Waterhouse LLP,
154 F.3d 16 (2d Cir. 1998), for its position that production of
the documents in question should not be compelled. In First
American, the circuit court approved the balancing test that the
district court applied to determine the reasonableness of foreign
discovery. The balancing test consisted of four factors: (i) the
competing interests of the nations whose laws are in conflict;
(ii) the hardship that compliance would impose on the party or
witness from whom discovery is sought; (iii) the importance to
the litigation of the information and documents requested; and
(iv) the good faith of the party resisting discovery. Id. at
22. Defendant resolves this balancing test in favor of itself.
This court now considers these factors in the instant case.
Courts have acknowledged that fear of criminal prosecution is a
hardship and a "substantial excuse" for nonproduction. Compagnie
Francaise D'Assurance Pour Le Commerce Exterieur v. Phillips
Petroleum Co., 105 F.R.D. 16, 30 (S.D.N.Y. 1984). See also
Societe Internationale v. Rogers, 357 U.S. 197, 211 (1958).
Yet, as Magistrate Judge Peck noted during the October 15, 2004
conference, defendant never raised this issue until October 7,
2004, while seeking a stay of Magistrate Judge Peck's discovery
order from Judge Baer. See 10/15/04 Tr. at 3-6. Further, aside
from blanket statements about the need to protect the national
security and public interest of Venezuela, the material supplied
to the court does not provide a basis on which to determine
whether the documents being withheld contain such information. To
sustain defendant's objections on this basis alone would be to
give any government or government-related plaintiff the ability
to frustrate discovery and unduly disadvantage the adversary.
This is of particular concern where, as here, the documents in
question are likely to bear on a central issue in the case.
Though defendant insists that it has made a good faith effort
to produce the requested documents, it appears that Magistrate
Judge Peck believes otherwise. In discussing the current
discovery dispute, Magistrate Judge Peck noted that defendant had
never looked at the minutes in question "until a gun was held to [defendant's] head" and
further, that defendant "had made representations that turned out
to be inaccurate to the court." See 10/15/04 Tr. at 2. While
this court is not yet prepared to find that defendant has acted
in bad faith, based on the transcripts of the discovery
conferences it can neither conclude that defendant has made an
affirmative showing of good faith.
On balance, this court finds that after weighing the factors
above, the possibility of criminal penalties is not sufficiently
strong to impede the production of the documents in question. At
minimum, this court finds that Magistrate Judge Peck was not
clearly erroneous in ordering the production of Board of Director
minutes, reports and presentations for the specified period.
Defendant has failed to show, as it must, that Magistrate Judge
Peck's October 1, 2004 order was "clearly erroneous" or "contrary
to law." Magistrate Judge Peck's discovery order of October 1,
2004, is therefore hereby affirmed over defendant's objection.
© 1992-2004 VersusLaw Inc.