United States District Court, S.D. New York
THAI LAO LIGNITE (THAILAND) CO., LTD. & Hongsa Lignite (Lao PDR) Co., Ltd., Petitioners,
GOVERNMENT OF the LAO PEOPLE'S DEMOCRATIC REPUBLIC, Respondent.
[Copyrighted Material Omitted]
James Evan Berger, King & Spalding LLP, New York, NY, for Petitioners.
Anthony J. Hatab, Dressel & Hatab, George A. Bermann, Columbia University School of Law, Joel Maximino Melendez, Robert Kelsey Kry, Steven Francis Molo, Molo Lamken LLP, New York, NY, David J. Branson, Sole Practitioner, Anthony Frazier King, King Branson LLC, Washington, DC, for Respondent.
OPINION AND ORDER
KIMBA M. WOOD, District Judge:
Thai Lao Lignite (Thailand) Co., Ltd., a company organized under the laws of Thailand, and Hongsa Lignite (LAO PDR) Co., Ltd., 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, as implemented by the Federal Arbitration Act, 9 U.S.C. § 201 et seq. The Government of the Lao People's Democratic Republic (" Respondent" or the " Lao Government" ) opposed confirmation and moved to dismiss the petition.
On August 3, 2011, the Court granted Petitioners' petition to confirm the Award and denied Respondent's motion to dismiss. See Thai-Lao Lignite (Thailand) Co., Ltd. v. Gov't of the Lao People's Democratic Republic, No. 10 Civ. 5256, 2011 WL 3516154, at *1 (S.D.N.Y. Aug. 3, 2011), aff'd, 492 Fed.Appx. 150 (2d Cir.2012). The parties have been engaged in protracted post judgment discovery, supervised by Magistrate Judge Debra Freeman, regarding Respondent's assets potentially available to satisfy the $56,210,000 judgment. 
Currently before the Court are Respondent's objections to discovery orders issued by Judge Freeman on May 29, 2012 (the " May 29 Order" ), July 20, 2012 (the " July 20 Order" ), and July 31, 2012 (the " July 31 Order" ), which denied Respondent's request for a stay of the two prior orders. [Dkt. No. 124]. Respondent also objects to an order issued on November 26, 2012 (the " November 26 Order" ) denying its request for a protective order, and Judge Freeman's December 17, 2012 denial of its request for a stay (the " December 17 Order" ). [Dkt. Nos. 186, 192]. Finally, the Bank of the Lao People's Democratic Republic (the " Lao Bank" ) moved to intervene in the pending action, [Dkt. No. 116], and was granted permissive intervention by Judge Freeman on November 29, 2012. [Dkt. No. 182]. The Lao Bank objects to the July 20 Order and a further discovery order issued on August 1, 2012 (the " August 1 Order" ). [Dkt. No. 121]. Because the challenged orders arise fro two different sets of facts, the Court divides its analysis into two parts. The Court first addresses the objections from Respondent and the Lao Bank to the May 29, July 20, July 31, and August 1 Orders, and then turns to Respondent's objections to the November 26 and December 17 Orders.
I. STANDARD OF REVIEW
A magistrate judge's ruling on a nondispositive matter, including a discovery dispute, may be set aside only if the district court determines the ruling to be " clearly erroneous or contrary to law." 28 U.S.C. § 636(b)(1)(A); see also Fed.R.Civ.P. 72(b); Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir.1990) (holding discovery disputes to be nondispositive). Under this highly deferential standard, magistrate judges " are afforded broad discretion in resolving nondispositive disputes and reversal is appropriate only if their discretion is abused."
Ritchie Risk-Linked Strategies Trading (Ireland), Ltd. v. Coventry First LLC, 282 F.R.D. 76, 78 (S.D.N.Y.2012) (internal quotation omitted); see also Edmonds v. Seavey, No. 08 Civ. 5646, 2009 WL 2150971, at *2 (S.D.N.Y. July 20, 2009) (Baer, J.) (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 magistrate's ruling is contrary to law if it " fail[s] to apply or misapplies relevant statutes, case law, or rules of procedure," Moore v. Publicis Groupe, No. 11 Civ. 1279, 2012 WL 1446534, at *1 (S.D.N.Y. Apr. 26, 2012) (Carter, J.), and is clearly erroneous if the district court is " left with the definite and firm conviction that a mistake has been committed," Easley v. Cromartie, 532 U.S. 234, 242, 121 S.Ct. 1452, 149 L.Ed.2d 430 (2001) (internal citation omitted). " The party seeking to overturn a magistrate judge's decision thus carries a heavy burden." Samad Bros., Inc. v. Bokara Rug Co., Inc., No. 09 Civ. 5843, 2010 WL 5095356, at *1 (S.D.N.Y. Dec. 13, 2010) (Keenan, J.) (internal citation omitted).
Rule 72(a) precludes the district court from considering factual evidence that was not presented to the magistrate judge. See Haines v. Liggett Grp., Inc., 975 F.2d 81, 91 (3d Cir.1992) (" The district court is not permitted to receive further evidence; it is bound by the clearly erroneous rule in reviewing questions of fact." ); State Farm Mut. Auto. Ins. Co. v. CPT Med. Servs., 375 F.Supp.2d 141, 158 (E.D.N.Y.2005) (refusing to consider new evidence on nondispositive issue based on reading of Rule 72 and lack of case law to the contrary). The Court accordingly confines its analysis to the factual record before Judge Freeman.
II. OBJECTIONS TO THE MAY 29, JULY 20, JULY 31, AND AUGUST 1 ORDERS
Respondent and the Lao Bank raise objections to a series of discovery rulings stemming from Petitioners' discovery requests for information regarding Respondent's U.S. bank accounts and payments Respondent received from various hydropower projects. The Court overruled Respondent's and the Lao Bank's objections orally at a conference on January 31, 2013. [Dkt. No. 199]. The following Opinion provides the reasons for these rulings.
A. Factual Background
On October 14, 2010, while the petition for confirmation of the Award and motion to dismiss were pending, Petitioners served discovery requests and interrogatories on Respondent. Petitioners primarily sought information about Respondent's assets located in the United States, which may be used to satisfy the judgment if the Court confirmed the Award. The Court referred disputes regarding the scope of this discovery and other pretrial matters to Magistrate Judge Freeman. [ See Dkt. No. 22].
This is not the first occasion that the Court has been called upon to settle Respondent's objections to Judge Freeman's discovery orders. On April 4, 2011, Judge Freeman ordered discovery regarding Respondent's bank accounts (the " April 4 Order" ), which Respondent contended were immune from discovery and attachment under the Foreign Sovereign Immunities Act of 1996 (" FSIA" ), 28 U.S.C. §§ 1609-11. The Court dismissed Respondent's
objections and sustained Judge Freeman's order, noting that, although discovery in FSIA cases " should be ordered circumspectly" and should protect " legitimate claim[s] to immunity from discovery," Judge Freeman's orders satisfied this standard and imposed only a reasonable, even " minimal," discovery burden. See Thai Lao Lignite (Thailand) Co. v. Gov't of the Lao People's Democratic Republic, No. 10 Civ. 5256, 2011 WL 4111504, at *6-7 (S.D.N.Y. Sept. 13, 2011) (Wood, J.). In addition, pursuant to Rule 37, the Court ordered Respondent to pay Petitioners' reasonable attorney's fees associated with litigating the objections because " merely filing an objection to that order does not excuse a party from complying with it." Id. at *11.
The series of discovery disputes currently before the Court stems from discovery requests Petitioners submitted in September 2011 (the " Amended First Discovery Requests" ) and January 2012 (the " Amended Third Discovery Requests" ). The Amended First Discovery Requests sought documents and information concerning Respondent's receipt of payments in U.S. dollars from its commercial hydropower projects. ( See Sun Decl., dated Sept. 6, 2012, Ex. A [Dkt. No. 147] (" Sept.2012 Sun Decl." )). The Amended Third Discovery Requests requested documents and information regarding Respondent's bank accounts in the United States (the " U.S. accounts" ) that Respondent's counsel, David Branson, had mentioned in the course of discovery. ( See id. Ex. B).  Specifically, the Amended Third Discovery Requests sought information and documents regarding Respondent's ability to control funds in the U.S. accounts, and regarding transfers from the U.S. accounts to Respondent.
Respondent objected to the requests, claimed that the U.S. accounts were immune from discovery, and disclosed only that the U.S. accounts are maintained by the Lao Bank. ( See id. ¶¶ 5-6; Exs. C, D). After Respondent refused Petitioners' repeated offers to narrow the scope of its requests, Petitioners sought leave to move to compel Respondent's compliance, and Respondent reiterated its objections on immunity grounds.
1. The May 17, 2012 Conference
On May 17, 2012, Judge Freeman held a conference to consider the pending discovery issues, including issues relating to the Amended First Discovery Requests and the Amended Third Discovery Requests. Judge Freeman acknowledged that she intended to order discovery " circumspectly" and would " proceed with caution." (Sept. 2012 Sun Decl. Ex. J, at 45:5-45:16). After determining that information or assets located outside of the United States were not automatically immune from discovery, Judge Freeman held that Petitioners could seek such information so long as there was a " nexus to U.S. assets used for a commercial purpose." ( Id. at 45:4-45:16, 64:24-65:12). Judge Freeman applied these principles in a series of rulings regarding Respondent's discovery obligations, later memorialized in a written order (the " May 29 Order" ).
First, Judge Freeman ordered Respondent to produce all documents concerning " Payments," which included any payment
or revenue distribution made to Respondent in connection with any of its thirteen commercial hydropower projects, provided the payments were made in U.S. dollars and the documents indicated involvement by a bank located in the United States. (May 29 Order ¶ 1a, n. 1 [Dkt. No. 95] ). If Respondent had any such documents in its possession, it must also produce any project finance agreements pursuant to which the payments were made, as well as any communications concerning the payments to the extent that they evidenced communication with any bank office, branch, or other financial institution located in the United States. ( Id. ¶ 1b, 1c). Although Respondent had argued that these payments were simply Electronic Fund Transfers (" EFTs" ), or momentary transactions using U.S. banks as intermediaries, Judge Freeman ruled that Petitioners should be able to have discovery about these payments to determine whether the payments were in fact EFTs or were more substantial transactions. (Sept. 2012 Sun Decl. Ex. J, at 86:24-88:14).
Second, Judge Freeman ordered Respondent to disclose information concerning the Lao Bank's U.S. Accounts; information about Respondent's access to and authority over those accounts; and any payments made— or that would be made in the next twelve months— from the U.S. Accounts to Respondent. ( See May 29 Order ¶ 4; see also Sept. 2012 Sun Decl. Ex. J, at 124:14-125:24 (explaining rationale for order)). The May 29 Order directed the parties to appear at a " follow-up discovery conference" on July 18. (May 29 Order ¶ 8).
Respondent made a motion for " limited reconsideration" — later superseded by a motion for a stay— requesting additional time to comply with the May 29 Order. ( See Mot. for Reconsideration & Clarification of May 29 Order [Dkt. No. 97] ). Respondent specifically asserted that it " ha[d] decided not to appeal" the May 29 Order. (Resp.'s Mem. in Support at 1 [Dkt. No. 98] ). Judge Freeman extended the production deadline from June 18 until July 13, and Respondent submitted its answer on that date. As to the hydropower payments and associated documentation, Respondent claimed that it " has no such documents in its possession, custody or under its control." (Sept. 2012 Sun Decl. Ex. K, at 1). In response to the interrogatories requesting information on the U.S. accounts to which Mr. Branson had referred, Respondent answered that " [n]o Respondent personnel have knowldge [sic] of the Central Bank's bank accounts maintained in New York; no Respondent personnel are authorized to access or direct disposition of funds maintained in those accounts and no Respondent personnel have access to the records of those accounts." ( Id. ).
These assertions were supported by a notarized document and a letter from Mr. Branson listing the Laotian officials with whom he had met to answer the discovery requests. ( Id. ). Aside from these brief statements, Respondent did not produce any documents or other information in response to the May 29 Order.
On July 17, Petitioners wrote to Judge Freeman to say that Respondent's submissions were " simply impossible to accept as credible," and provided documentary evidence to support this contention. ( Id. Ex. L). First, Petitioners provided a Lao statute establishing the Lao Bank as equivalent to a government ministry (presumably indicating a close relationship with Respondent), requiring the Lao Bank to hold Respondent's assets if they are maintained outside of Laos, and providing Respondent a wide-ranging statutory right to request information of the Lao Bank.  ( Id. ). Petitioners
also supplied a newspaper article showing that Respondent will receive approximately $27 million in royalties from one hydropower project, Nam Theun 2, and supplied transaction reports from Standard Chartered Bank showing ongoing royalty payments from the Nam Theun 2 project passing through ...