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Thai Lao Lignite (Thailand) Co., Ltd. & Hongsa Lignite (Lao Pdr) Co., Ltd v. Government of the Lao People's Democratic Republic

September 13, 2011

THAI LAO LIGNITE (THAILAND) CO., LTD. & HONGSA LIGNITE (LAO PDR) CO., LTD.,
PETITIONERS,
v.
GOVERNMENT OF THE LAO PEOPLE'S DEMOCRATIC REPUBLIC,
RESPONDENT.



The opinion of the court was delivered by: Kimba M. Wood, U.S.D.J.:

OPINION and ORDER

Thai Lao Lignite (Thailand) Co., Ltd. ("TLL"), a company organized under the laws of Thailand, and Hongsa Lignite (LAO PDR) Co., Ltd., ("HLL"), a company organized under the laws of the Lao People's Democratic Republic (collectively, "Petitioners"), moved for confirmation of an arbitral award (the "Award") pursuant to the United Nations Convention on the Recognition of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 53 (the "Convention"), as implemented by the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 201 et seq. The Government of the Lao People's Democratic Republic ("Respondent") opposed confirmation and moved to dismiss the petition.

On August 3, 2011, the Court denied Respondent's motion to dismiss and granted Petitioners' petition to confirm the Award. (See Dkt. Entry No. 50.)

Currently before the Court is Respondent's objection to a discovery order issued by Magistrate Judge Freeman on April 4, 2011 (the "April 4 Order") (See Dkt. Entry No. 25 (order); Dkt. Entry No. 29 (notice of objection)). Petitioners opposed Respondent's objection and moved for sanctions against Respondent and/or its counsel pursuant to Rule 37 of the Federal Rules of Civil Procedure ("Rule 37"), § 28 U.S.C. 1927, and the Court's inherent authority to impose sanctions. (See Dkt. Entry No. 30.)

I.Background

On October 14, 2010, while the petition for confirmation and motion to dismiss were pending, Petitioners served discovery requests and interrogatories on Respondent, principally to obtain information about Respondent's assets located in the United States, in anticipation of the enforcement of a judgment if this Court confirmed the Award. On November 15, 2010, Respondents submitted a letter to this Court requesting permission to file a motion for a stay of discovery and a protective order pursuant to Rule 26(c) of the Federal Rules of Civil Procedure. The Court denied this request and permitted Petitioners to seek discovery. The Court referred disputes about the scope of discovery to Magistrate Judge Freeman. (See Dkt. Entry No. 22.)

The parties conferred in the ensuing weeks about limiting the scope of discovery, but no agreement was reached. On January 28, 2011, Respondent served responses to the Petitioners' discovery requests. The interrogatory responses were unsigned and unsworn. Respondent's counsel later informed Petitioners that two of the answers to those interrogatories were inaccurate. On February 8, 2011, Petitioners sought leave to move to compel compliance with their discovery requests. Respondents replied by letters dated March 8 and March 16, 2011.

On March 18, 2011, Judge Freeman convened a telephonic conference during which the parties discussed their positions regarding the various outstanding discovery issues. One of the subjects discussed was whether Petitioners could seek discovery of documents related to Respondent's bank accounts in the United States. The parties disagree on exactly what each side (and Judge Freeman) said regarding these issues. (The conference was not recorded or transcribed by a court reporter.)

According to Respondent, Petitioners raised the issue of the existence of U.S. bank accounts held by Respondent's embassy. Respondent's counsel states that he told Petitioners that those accounts were immune from attachment or discovery under the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. § 1602 et seq., and the Vienna Convention on Diplomatic Relations, Apr. 18, 1962, 23 U.S.T. 3227, T.I.A.S. No. 7502 (the "Vienna Convention").

Petitioners then purportedly argued that they needed discovery of information about Respondent's U.S. bank accounts to ascertain whether the accounts were, in fact, immune under the FSIA.*fn1 According to Petitioners, Respondent's counsel affirmatively agreed to produce the records of those accounts.

At the conclusion of the conference, Judge Freeman ordered the following, inter alia:

1) Respondent was to serve final, sworn responses to Petitioner's First Set of Interrogatories by March 28, 2011;

2) Respondent was to file and serve a letter brief in support of its objections by April 1, 2011. Petitioner was permitted to reply to this brief by April 8, 2011; and

3) Respondent was to produce by April 8, 2011 documents relating to bank accounts in the United States maintained by the Government of the Lao People's Democratic Republic. (See Dkt. Entry No. 25.)

Petitioners' counsel requested that Judge Freeman's oral order be memorialized in writing, and Judge Freeman requested that the parties confer on a form order for her to enter. The parties conferred but were unable to reach agreement on the wording and scope of the order, so both parties separately submitted their own formulations. Judge Freeman entered Respondent's version of the order nunc pro tunc to March 18, 2011 on April 4, 2011. (See Dkt. Entry No. 25.)

Respondent did not produce any documents by April 8, 2011. On April 12, 2011, Respondent's counsel sought from this Court an extension of time to object to the April 4 Order. (See Dkt. Entry No. 26.) Petitioners objected to the request for an extension. The Court granted Respondent's request.

Respondent timely filed its objection to the April 4 Order on April 28, 2011. (See Dkt. Entry No. 29.) Petitioners opposed the objection and cross-moved for sanctions pursuant to Rule 37, § 28 U.S.C. 1927, and the Court's inherent authority to impose sanctions. (See Dkt. Entry No. 30.)

On July 5, 2011, Judge Freeman sua sponte stayed the April 4 Order pending this Court's resolution of the instant objection. (See Dkt. Entry No. 42.) At that time, Judge Freeman also denied Petitioner's application for an Order to Show Cause for discovery sanctions against Respondent. (Id.)

II.Respondent's Objections to the April 4 Order

Respondent objects to the April 4 Order regarding discovery of its bank accounts, contending that those accounts are held by the embassy and consulate of Laos, and are thus immune from attachment and discovery under the FSIA and the Vienna Convention. For the following reasons, Respondent's objection to the April 4 Order is overruled.

A.Standard of Review

For non-dispositive matters, including discovery disputes, a district court shall reverse a magistrate'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) (2002); see also Fed. R. Civ. P. 72(a); Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990). Courts in this Circuit have held that a magistrate's ruling on a discovery dispute should be overturned only for an abuse of discretion. Edmonds v. Seavey, No. 08 Civ. 5646, 2009 WL 2150971, at *2 (S.D.N.Y. July 20, 2009) (noting that the fact that "reasonable minds may differ on the wisdom of granting [a party's] motion is not sufficient to overturn a magistrate judge's decision"). A "court has the discretion to deny discovery requests if it determines that . . . 'the burden ...


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