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In re Application of Kreke Immobilien Kg

United States District Court, Second Circuit

November 8, 2013

In re Application of: KREKE IMMOBILIEN KG, Petitioner, To Issue a Subpoena to Deutsche Bank AG, for Production of Documents and Testimony for Use in a Foreign Proceeding

Leif T. Simonson, Esq., Robert L. Schnell, Esq. Faegre Baker Daniels LLP, Minneapolis, MN, Attorneys for Petitioner.

Pamela Rogers Chepiga, Esq., Michael F. Westfal, Esq., Allen & Overy LLP New York, NY, Attorneys for Respondent.



On March 27, 2013, petitioner Kreke Immobilien KG ("Kreke") applied to this Court for an order pursuant to 28 U.S.C. § 1782 ("§ 1782") authorizing its attorneys to issue and serve subpoenas upon respondent Deutsche Bank AG ("Deutsche Bank") for the production of discovery in aid of a foreign proceeding. Specifically, Kreke sought documents and testimony from Deutsche Bank for use in connection with a lawsuit that it intended to file in Germany against Deutsche Bank's wholly-owned subsidiary, Sal. Oppenheim jr. & Cie. AG & Co. KGaA ("Oppenheim"). Subsequently, on July 26, 2013, Kreke moved to supplement the record to indicate that it had filed suit against Oppenheim in the district court of Cologne, Germany on May 21, 2013. However, the substance of Kreke's discovery application to this Court remained unchanged. For the reasons set forth below, Kreke's application is denied.


Kreke is a German limited partnership that was formed to manage the real estate assets of the Kreke family. Pet'r's Appl. ¶ 2. Dr. Henning Kreke and Dr. Jörn Kreke, both German citizens, are the general partners of Kreke; its limited partners include Dr. Henning's four children, each of whom has U.S. citizenship. Id.

Oppenheim is a German private bank engaged in asset management for institutional clients, private clients, and investment funds. Id . ¶ 3. Beginning in the 1990s, Oppenheim started promoting real estate investments in certain funds known collectively as the Oppenheim-Esch funds. These funds were formed to purchase land, develop real estate on that land, and then manage those real estate projects. Id . ¶ 4.

Beginning in 2000, Kreke decided to invest in three of Oppenheim's real estate investment funds. Pet'r's Mem. at 5. According to Kreke, Oppenheim solicited its investment by emphasizing that the funds were designed mainly for investment by partners and shareholders of the bank, though a small portion of them would be opened up to external investment for tax purposes. Pet'r's Appl. ¶ 9. However, Kreke maintains that the funds were ultimately marketed more extensively to outside investors than was advertised, subjecting them to more risk than could have been anticipated. Kreke further submits that Oppenheim made various other misrepresentations about the safety of investing in the funds. Id . ¶¶ 10-11. The petitioner claims that, as a result of Oppenheim's fraudulent conduct, the funds at issue now have present values of 35-70% less than the amount of capital that Oppenheim raised from investors. Id . ¶ 21.

Deutsche Bank acquired Oppenheim and made Oppenheim its wholly-owned subsidiary in March 2010, after Kreke had already invested in the Oppenheim-Esch funds. Id . ¶ 5; Pet'r's Mem. at 4. Kreke asserts that, while conducting the requisite due diligence for the acquisition, Deutsche Bank created and obtained documents that detail Kreke's investment in the Oppenheim-Esch funds. Pet'r's Appl. ¶ 7. Additionally, the petitioner believes that, by virtue of the parent-subsidiary relationship, Deutsche Bank now has control over all of the documents that are possessed by Oppenheim, including those that may describe the bank's allegedly fraudulent activities. Id.

On December 26, 2011, Kreke entered into formal mediation with Oppenheim in Germany. That mediation terminated without resolution on January 10, 2013. Id . ¶ 22. On May 21, 2013, Kreke filed suit in the District Court of Cologne, Germany, naming as a party Oppenheim, but not Deutsche Bank. Pet'r's Mem. 2d at 1-2. Although the copy of the complaint submitted to this Court was both incomplete and written in German, Kreke indicated in its March application that it intended to assert claims for fraud, breach of duty, and breach of contract in the German proceeding against Oppenheim. Pet'r's Appl. ¶ 23.

Kreke filed this § 1782 application to obtain documents from Deutsche Bank to assist in the German action against Oppenheim. Petitioner requests sixteen categories of documents that can be divided into two groups: (1) documents prepared by or for Deutsche Bank relating to the purchase of Oppenheim[2] and (2) documents detailing Oppenheim's continued management of all Oppenheim-Esch funds[3]. See generally Pet'r's Appl., Ex. B ("Proposed Subpoena"). Kreke has applied to this Court for discovery because "as a practical matter, German-style discovery is limited to gaining access to documents whose contents are already known to the applicant in great detail." Pet'r's Supp. Appl. at 3. In order for the petitioner to obtain documents that "generally pertain" to Oppenheim's alleged wrongdoing, Kreke believes that its only "conceivable" approach is filing a § 1782 application with a U.S. district court. Id . The German court has not, to this Court's knowledge, issued any ruling or statement regarding this application.


I. Legal Standard

A district court is authorized to grant a § 1782 request when the petitioner demonstrates "(1) that the person from whom discovery is sought reside[s] (or [is] found) in the district of the district court to which the application is made, (2) that the discovery [is] for use in a proceeding before a foreign tribunal, and (3) that the application [is] made by a foreign or international tribunal or any interested person." Schmitz v. Bernstein Liebhard & Lifshitz, LLP , 376 F.3d 79, 83 (2d Cir. 2004) (internal quotation marks omitted). "Once the statutory requirements are met, a district court is free to grant discovery in its discretion.'" Brandi-Dohrn v. IKB Deutsche Industriebank AG , 673 F.3d 76, 80 (2d Cir. 2012) (quoting Schmitz , 376 F.3d at 83-84); see also In re Edelman , 295 F.3d 171, 181 (2d Cir. 2002) ("Congress planned for district courts to exercise broad discretion over the issuance of discovery orders pursuant to § 1782(a)...."). Nonetheless, that discretion is "not boundless." Schmitz , 376 F.3d at 84. The Second Circuit has held that district courts must exercise their discretion in light of the twin aims of § ...

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