THAI LAO LIGNITE (THAILAND) CO., LTD. & HONGSA LIGNITE (LAO PDR) CO., LTD., Petitioners,
GOVERNMENT OF THE LAO PEOPLE'S DEMOCRATIC REPUBLIC, Respondent.
OPINION and ORDER
KIMBA M. WOOD, District Judge.
On August 5, 2011, this Court entered a judgment in favor of Thai-Lao Lignite (Thailand) Co., Ltd. and Hongsa Lignite (Lao PDR) Co., Ltd. (collectively, "Petitioners"), enforcing a $56 million arbitral award against the Government of the Lao People's Democratic Republic ("Respondent" or "the Lao Government"). See Thai-Lao Lignite (Thailand) Co., Ltd. v. Gov't of the Lao People's Democratic Republic, 10 Civ. 5256, 2011 WL 3516154 (S.D.N.Y. Aug. 3, 2011), aff'd, 492 F.Appx. 150 (2d Cir. 2012), cert. denied, No. 12-878, 2013 WL 182791 (Feb. 21, 2013) [Dkt. No. 50]. The parties have since been engaged in protracted post-judgment discovery, supervised by Magistrate Judge Debra C. Freeman, regarding assets potentially available to satisfy the award. Presently before the Court is Petitioners' motion for discovery sanctions against Respondent and Respondent's lead counsel, David J. Branson, pursuant to Federal Rule of Civil Procedure 37. For the following reasons, Petitioners' motion for sanctions is DENIED.
I. RELEVANT BACKGROUND
Pursuant to the Foreign Sovereign Immunities Act ("FSIA"), Respondent's assets may be attached only where the assets are (1) located in the United States and (2) used for a commercial purpose. 28 U.S.C. § 1610. However, Petitioners "need not satisfy the stringent requirements for attachment in order to simply receive information about [a sovereign's] assets." EM Ltd. v. Republic of Argentina, 695 F.3d 201, 209 (2d Cir. 2012). Indeed, discovery against Respondent's assets may proceed as it would against any other judgment creditor, and is "constrained principally in that it must be calculated to assist in collecting on a judgment." Id. at 207.
In 2012, Judge Freeman entered a series of rulings relating to Respondent's discovery obligations. [ See Dkt. Nos. 95 (May 29, 2012 Order); 111 (July 20, 2012 Order); 112 (July 31, 2012 Order); 113 (Aug. 1, 2012 Order); 183 (Nov. 26, 2012 Order); 187 (Dec. 17, 2012 Order)]. Respondent, and the Bank of the Lao People's Republic ("Lao Bank"), which has intervened in this case, filed objections these rulings. Petitioners cross-moved for discovery sanctions against Respondent. [Dkt. No. 144]. On January 17, 2013, this Court held a conference to discuss the status of ongoing discovery and to address the possibility of sanctions against Respondent. However, because Respondent had retained new counsel, Steven Molo, the Court deferred consideration of Petitioners' sanctions motion until Mr. Molo could familiarize himself with the case. At a follow-up conference on January 31, 2013, the Court orally overruled the parties' discovery objections and sustained Judge Freeman's orders. The Court issued a written opinion explaining its oral rulings on February 11, 2013 (the "February 11 Order"). Thai-Lao Lignite, 10 Civ. 5256, 2013 WL 541259 (S.D.N.Y. Feb. 11, 2013) [Dkt. No. 202].
In its February 11 Order, the Court set a hearing date for Petitioners' sanctions motion and directed the parties to submit revised statements explaining what sanctions were appropriate and against whom any sanctions should be imposed. Id. at *18. Respondent and the Lao Bank appealed the Court's ruling to the Second Circuit and requested a stay pending appeal. [Dkt. No. 210]. On February 27, 2013, the Second Circuit temporarily stayed enforcement of the February 11 Order pending a ruling on the merits of the stay motion. [Dkt. No. 218]. Accordingly, the Court deferred resolution of Petitioners' sanctions motion until the Second Circuit issued its ruling with respect to the merits of the stay.
On May 29, 2013, the Second Circuit lifted the stay with respect to most of the February 11 Order, staying proceedings "only to the extent that the [February 11] Order affirmed the November 26, 2012 order of the magistrate judge, " which related to depositions of Lao officials regarding diplomatic bank accounts. [Dkt. No. 268, at 2]. The Second Circuit "decline[d] to stay discovery efforts aimed at enforcing [the] judgment, except to the limited extent set forth" in its order. ( Id. at 3). The Second Circuit thus lifted the stay with respect to the discovery orders at the heart of Petitioners' sanctions motion. Accordingly, the Court held an evidentiary hearing to address the sanctions motion on July 18, 2013. The Court heard testimony regarding the parties' conduct during the discovery process from Respondent's lead counsel, Mr. Branson, and from Outakeo Keodouangsinh, the Deputy Director General of the Ministry of Planning and Investment for the Lao Government, who has been coordinating the Lao Government's responses to this litigation. At the close of the hearing, the Court requested supplemental submissions from the parties' regarding the parties' efforts to meet and confer. Petitioners submitted its response to this request on July 19, 2013, and Respondent did the same on July 22, 2013.
Petitioners seek three types of relief: (1) monetary sanctions against Respondent requiring Respondent and its counsel to pay $112, 059.50 of attorneys' fees and costs; (2) a finding that Respondent is in contempt of court and the imposition of a per diem fine until Respondent complies with pertinent discovery orders; and (3) deeming certain facts established for the pendency of the litigation, principally relating to the Lao Government's ability to control and access funds held by the Lao Bank. The Court denies all three requests.
A. Request for Attorney's Fees and Costs
Rule 37 authorizes discovery sanctions where a party "fails to provide or permit discovery." Fed.R.Civ.P. 37(b)(2)(A). The court "must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure." Fed.R.Civ.P. 37(b)(2)(C). Fees must be imposed unless the "failure was substantially justified or other circumstances make an award of expenses unjust." Fed.R.Civ.P. 37(b)(2)(C). A party's noncompliance is "substantially justified" where "reasonable people could differ as to the appropriateness of the contested action." Pierce v. Underwood, 487 U.S. 552, 565 (1988) (citing Fed.R.Civ.P. 37 advisory committee note).
The discovery orders at issue relate to two principle categories of documents: (1) accounts maintained by the Lao Bank in the United States (the "U.S. accounts") and (2) payments Laos receives in connection with its commercial hydropower projects. After hearing oral testimony and reviewing the extensive record provided by the parties, the Court is convinced that Respondent's actions were substantially justified.
1. Discovery Relating to the U.S. Accounts
During discovery, Mr. Branson mentioned the existence "of one or more bank accounts maintained in the United States by separate legal entities or instrumentalities of the respondent." [Dkt. No. 147 Ex. J, at 117:20-24]. Petitioners requested documents and information regarding the U.S. accounts, but Respondent's initial response revealed only that the U.S. accounts are maintained by the Lao Bank. [Dkt. No. 147 Exs. C, D]. Judge Freeman's May 29, 2012 Order directed Respondent to disclose information concerning the U.S. Accounts; information about Respondent's access to and authority over those accounts; and any past or future payments made to Respondent from the U.S. Accounts. [Dkt. No. 95]. Respondent, through Mr. Branson, averred that "[n]o Respondent personnel have knowlwdge [sic] of the Central Bank's bank accounts maintained in ...