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United States District Court, S.D. New York

November 19, 2004.


The opinion of the court was delivered by: CONSTANCE MOTLEY, Senior District Judge


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.

  II. Background

  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 Foreign Government

  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.

  VI. Conclusion:

  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.



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