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In re Application of XPO Logistics, Inc.

United States District Court, S.D. New York

May 22, 2017


          OPINION & ORDER

          SARAH NETBURN United States Magistrate Judge

         Respondent Elliott Capital Advisors, L.P., Elliott Management Corporation, and Elliott Associates L.P. (collectively “Elliott”) filed this motion pursuant to 28 U.S.C. § 1782 on October 27, 2015, seeking to compel production of certain documents by Petitioner, XPO Logistics, Inc. (“XPO”). On February 8, 2017, the Court lifted the stay that it had imposed on January 8, 2016.

         On February 15, 2017, Elliott moved for additional § 1782 discovery from two wholly owned subsidiaries of Norbert Dentressangle, S.A. (“ND”), a California-based corporation named XPO GF America, Inc. (“XPO GF”), and a number of Iowa-based corporations (“Jacobson”). XPO GF was previously ND's principal American subsidiary, and ND had acquired 100% of Jacobson in 2014, while maintaining its separate incorporation. Both XPO GF and Jacobson have asserted in previous litigation in the Central District of California and the Southern District of Iowa that they would consent to the jurisdiction of this Court, so that all of the outstanding disputes could be adjudicated efficiently and consistently.

         For the reasons set forth below, both Elliott's original motion and its motion pertaining to XPO GF and Jacobson are GRANTED in part and DENIED in part.

         I. Underlying French Litigation

         The § 1782 motions at issue relate to litigation pending before the Paris Commercial Court. On April 28, 2015, XPO announced an agreement to acquire 66.71% of the shares of a French corporation, Norbert Dentressangle (“ND”), and its intention to launch a tender offer for the remaining shares. XPO stated that if it reached the 95% controlling ownership threshold, it would exercise its right under French law to conduct a squeeze-out of the remaining shareholders. Following this announcement, Elliott began acquiring shares and contracts for difference (“CFDs”) in ND. On June 8, 2015, XPO acquired 66.71% of the shares of ND and on June 11, 2015, XPO filed a tender offer for the remaining shares. Throughout this period, Elliott continued to acquire shares and CFDs in ND. On June 26, 2015, Elliott informed XPO that it had acquired the statutory threshold of 6% of shares in ND, and on July 6, 2015, Elliott announced that it intended to continue to acquire ND shares and would not tender its shares to XPO's bid.

         On July 8, 2015, XPO filed a Summary Proceeding against Elliott in Paris Commercial Court, alleging that Elliott had illegally obtained its interest in ND with an improper motive. On the same day, the French court granted XPO's request for a provisional order barring Elliott from transferring any of its interest in ND to a third party other than XPO. On July 16, 2015, Elliott filed a Summary Proceeding against XPO and ND in Paris Commercial Court, alleging that XPO had wrongfully stripped assets from ND contrary to the interests of ND and its minority shareholders. Elliott also asked the French court to appoint an expert to collect documents from XPO to assess whether XPO's actions related to its attempt to acquire ND were consistent with the interests of ND and its minority shareholders. On the same day, the French court granted Elliott's request for a provisional order suspending all integration activities from XPO and ND until the court ruled on whether to appoint an expert.

         On July 29, 2015, the Paris Commercial Court issued an order consolidating the two actions into a single proceeding (the “French Proceeding”), lifted both provisional orders and denied interim relief to either party.

         On September 29, 2015, Elliott submitted its defenses and counterclaims and renewed its request for the appointment of an expert. In its counterclaims, Elliott seeks compensatory damages for (1) XPO's alleged misrepresentation of its tender offer materials relating to ND, on which Elliott relied to its detriment, and (2) XPO's alleged “gutting” of ND, contrary to the interests of ND and its shareholders. In regards to its first counterclaim, Elliott argued that it detrimentally relied on XPO's public claims that “its new majority stake . . . could potentially release some unrealized value for ND and its shareholders including its minority shareholders, ” that ND would be “the development platform for all the European activities of XPO Logistics, Inc., ” and that it would continue to be led by then Chairman of the Executive Board Hervé Montjotin. See ECF No. 131-1, Statement in Defence and Counterclaim at ¶¶ 91-93. In regards to the second counterclaim, Elliott argues that XPO has tried to make up for the loss of its prospective gains when it was not able to acquire 95% of ND's shares by wrongfully divesting ND of assets and revenues in derogation of the rights of ND's minority shareholders. Specifically, Elliott alleges that XPO has provided ND with an inter-company loan at rates far above ND's previous cost of borrowing, in order to maximize XPO's cash flow (id. at ¶¶ 102- 09); required ND to use XPO's trademark in exchange for royalties paid by ND to XPO (id. at ¶¶ 110-14); redirected web traffic from ND's American subsidiary, Jacobson Companies, to XPO's website (id. at ¶ 119) and announced on its website that XPO is the “official carrier of the Tour de France, ” even though ND had paid to renew its partnership with the Tour de France through 2018 (id. at ¶ 120).

         In addition to asserting its defenses and counterclaims, Elliott also petitioned the Paris Commercial Court for the appointment of an expert, pursuant to Article 146 of the French Code of Civil Procedure.[1] Specifically, Elliott requested an expert to “report on the extent of the misconduct committed against the company and its minority shareholders, to identify those responsible and jointly responsible, and the extent of the damage caused as a result.” Id. at ¶ 147.

         On May 2, 2016, Elliott filed a separate ut singuli action, which is similar to a shareholder's derivative suit, against present and former ND executives in Paris Commercial Court. See ECF No. 97 (May 12, 2016 status report); ECF 132-12 (ut singuli complaint). On October 3, 2016, the ND executives did not oppose the consolidation of their case with the underlying XPO-Elliott dispute. ECF No. 104 (October 13, 2016 status report). In its complaint, Elliott made a similar request for the appointment of a court expert pursuant to Article 146 of the French Code of Civil Procedure. See ECF No. 132-12, Ut Singuli complaint at ¶¶ 111-17.

         II. Procedural History in the U.S. District Court

         On July 10, 2015, XPO filed an ex parte application for an order pursuant to 28 U.S.C. § 1782 to conduct expedited discovery for use in the French Summary Proceeding. On the same date, the Court granted XPO's request for expedited discovery of the following categories of documents:

(i) All documents regarding transactions in any ND or XPO securities, or relating to XPO's tender offer, including any documents related to or reflecting such transactions;
(ii) All documents concerning any communications or agreements with third parties regarding ND Securities' or XPO's tender offer;
(iii) All documents concerning Elliott's plans or intentions with respect to XPO's tender offer for ND shares, including documents regarding Elliott's financing of its acquisition of ND securities, and all documents concerning valuations of ND securities;
(iv) Documents sufficient to show Elliott's document retention policies. (ECF No. 5, Ex. 1-4).

         On July 20, 2015, Elliott filed an ex parte motion for an order of judicial assistance pursuant to § 1782. (ECF No. 15, 16.) On July 24, 2015, Elliott filed a separate ex parte motion seeking discovery from Morgan Stanley & Co. LLC (“Morgan Stanley”) and KPMG LLP (“KPMG”), who served as XPO's investment banker and auditor, respectively. (ECF No. 28.) On the same day, the Honorable Ronnie Abrams, Part I, granted both of Elliott's § 1782 requests, and ordered the following discovery:

(i) The deposition of an XPO representative with extensive knowledge of its plans for integrating ND into XPO;
(ii) All documents related to the purpose of evaluating XPO's contemplated acquisition of ND, including internal memoranda, reports, analyses and presentations to XPO's committees and board;
(iii) All documents related to the financial implications of the contemplated acquisition of ND;
(iv) All documents related to or filed pursuant to items 4(c) and 4(d) of the Hart-Scott- Rodino Act notification form or French Foreign investment notification;
(v) All documents related to actual or contemplated transactions or arrangements between ND and XPO;
(vi) All documents related to changes in compensation of ND board members; and
(vii) Production of witnesses for depositions by Morgan Stanley and KPMG. (ECF No. 19, Ex. 1, & 22.)

         In response to the parties' ongoing disagreements regarding the timeliness of production and running of search terms, the Honorable Lorna G. Schofield, Part I, issued an order on August 7, 2015, directing XPO to proceed with email searches for five identified custodians, to provide Elliott with an affidavit from the individual at XPO with the greatest day-to-day involvement in the buy-out of ND, and to identify all other individuals who were involved in the transaction. She further ordered that the parties agree to categories of documents to be produced in a rolling production by August 17, August 23, and September 3, 2015.

         At a status conference held on September 14, 2015, Judge Schofield exempted from XPO's production to Elliott any documents or portions of documents that related to the following issues: (i) tax consolidation of XPO and ND; (ii) the financial implications of XPO not reaching 95% ownership of ND; (iii) XPO's public relations strategy related to the proposed acquisition of ND; (iv) post-integration compensation of ND's directors; and (v) inter-company indebtedness. ECF Nos. 60 & 63 at 34. Judge Schofield gave Elliott leave to renew its application for these documents at a later date, provided that Elliott could explain to the Court how this information supported its counterclaims or defenses in the French proceeding. Id.

         On October 27, 2015, Elliott submitted a motion to renew its application to compel XPO to produce documents that Judge Schofield excluded in the September 14, 2015 Order. At this time, Judge Schofield referred this proceeding to me. XPO opposed Elliott's motion, and submitted a cross-motion seeking an order to compel production of numerous ...

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