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In re Operacion Y Supervision De Hoteles, Sa De Cv

United States District Court, S.D. New York

January 6, 2015

In Re Application of OPERACION Y SUPERVISION de HOTELES, S.A. de Cv. for an Order to Conduct Discovery for Use in a Foreign Proceeding.

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, District Judge.

Non-party Thomas Ruffing brings this motion pursuant to Rules 26 and 45 of the Federal Rules of Civil Procedure to quash a subpoena served upon him by Operación y Supervisión de Hoteles, S.A. de C.V. ("OSH") and to extend the time for compliance with the subpoena. For the reasons set forth below, Ruffing's motion will be denied.

BACKGROUND

The subpoena at issue relates to a litigation pending before the Federal District Court in Mexico City (the "Mexican Proceeding"). OPYSSA v. Promotor de Inmuebles del Caribe, S.A. de C.V., et al., Case No. 479/2010-IV (6th Dist. Ct., Mexico City). OSH, a Mexican hotel management company, is involved in litigation with Bank of America ("BoA") and Promotora de Imnuebles del Caribe, S.A. de C.V. ("PIC") in relation to a 1994 hotel management agreement for the operation of hotel properties in Cancun, Mexico. (Mendez Decl. (Dkt. No. 9) ¶ 3) OSH claims it is entitled to management fees - including charges for taxes and regulatory fees - pursuant to that agreement, in which OSH agreed to manage certain hotel properties, including Hotel Park Royal in Cancun, Mexico, in exchange for management fees from PIC. (Id. ¶ 3, 5, 6, 10)

In 2006, PIC entered into a cash management agreement in relation to a $103 million loan from BoA, which provided that all income PIC generated through Hotel Park Royal be kept in a "Peso Lockbox Account" controlled by BoA. (Id. ¶¶ 3-4) BoA collected all receivables in connection with the operation of Hotel Park Royal; accordingly, PIC received no income from that property. (Id. ¶ 5) PIC submitted an estimate of OSH's disbursements to CT Investment Management Co., LLC ("CTIM"), the servicing agency for the loan, which then reviewed those estimates and released funds to OSH from the Peso Lockbox Account controlled by BoA. (Id. ¶ 5-6)

In 2010, PIC submitted estimates for OSH that included charges for Value Added Tax and Accommodation Tax - which were supposed to be paid to the Mexican tax authorities - as well as charges for operating on a Federal Maritime Land Zone in Mexico. (Id. ¶¶ 6-7) In response, Ruffing - as CTIM's Chief Credit Officer[1] - instructed BoA to withhold from PIC the amounts corresponding to the Value Added Tax and Accommodation Tax that were collected due to Hotel Park Royal operations, and BoA then refused to approve the expenditures. (Id. ¶¶ 3, 4, 7) Although PIC sent several written requests explaining that withholding taxes could subject PIC to criminal sanctions by the Mexican tax authorities, BoA never responded. (Id. ¶ 8) In May 2010, Ruffing wrote a letter to PIC and other entities refusing to release funds sufficient to pay the taxes. ( Id., Ex. 1) OSH alleges in the Mexican Proceeding that this failure to release funds from the Peso Lockbox Account constitutes a breach of the 1994 hotel management agreement and that, as a result, OSH has suffered losses and damages. (Id. ¶ 10)

On March 3, 2014, Judge Enrique Claudio Gonzalez Meyenberg of the Federal District Court of Mexico City issued a letter rogatory to the U.S. Justice Department to facilitate the testimony of Ruffing. ( Id., Ex. 2) In the letter rogatory, the Mexican Judge approved fifteen questions for OSH to ask Ruffing.[2] (Id.) The fifteen questions, according to a certified translation, are as follows:

(1) What are the parties of this procedure?
(2) Why does he know them?
(3) What is the relation between the parties of the procedure?
(4) How did such relation arise?
(5) How does he know about relation between the parties?
(6) How was the relation between the parties documented?
(7) The reason why is Operacion y Supervision de los Hoteles S.A. de C.V., in possession of the real estate located in Lot 18, Section I-B of the Hotel Zone of Cancun, Quintana Roo?
(8) The reason why the Promotora de Inmuebles del Caribe S.A. de C.V., executed with Bank of America National Association (previously La Salle Bank National Association) the Contract of Cash Handling dated October 3, 2006.
(9) The reason why the Promotora de Inmuebles del Caribe S.A. de C.V., executed with Bank of America National Association (previously La Salle Bank National Association) the Assignment of Administration Guarantee dated October 3, 2006.
(10) If he personally knows Augustin Garcia Bolaños Cacho.
(11) How did he know Augustin Garcia Bolaños Cacho?
(12) If he knows where Augustin Garcia Bolaños Cacho was on October 3, 2006.
(13) If he knows Augustin Garcia Bolaños Cacho was outside the country (Mexico) during ...

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