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In re Vivendi Universal, S.A. Securities Litigation
S.D.N.Y.,2006.
Only the Westlaw citation is currently available.
United States District Court,S.D. New York.
In re VIVENDI UNIVERSAL, S.A. SECURITIES
LITIGATION
No. 02CIV5571RJHHBP.
Nov. 16, 2006.
MEMORANDUM OPINION AND ORDER
PITMAN, Magistrate J.
I. Introduction
*1 Plaintiffs move for an Order compelling non-party
Lazard Group LLC (“Lazard”) to produce documents
that are located outside the United States pursuant to a
subpoena duces tecum that was served upon it in or
about October 2005. Lazard cross-moves for a
protective order (1) requiring that discovery of
documents located in France be conducted pursuant to
Chapter II of the Hague Convention on the Taking of
Evidence Abroad in Civil and Commercial Matters,
Mar. 18, 1970, 23 U.S.T. 2555, 847 U.N.T.S. 231,
reprinted at 28 U.S.C. § 1781 (the “Hague
Convention”), and (2) directing plaintiffs to reimburse
it for its costs, including attorneys' fees, in responding
to plaintiffs' motion and preparing its cross-motion.
For the reasons set forth below, plaintiffs' motion is
granted and Lazard's cross-motion is denied.
II. Facts
This is a securities fraud class action in which
plaintiffs allege that defendants violated Sections 11,
12(a)(2) and 15 of the Securities Act of 1933, 15
U.S.C. §§ 77k, 771(a)(2) and 77o, and Sections 10(b),
14(a) and 20 of the Securities Exchange Act of 1934,
15 U.S.C. §§ 78j(b), 78n(a), 78u, along with the
regulations promulgated by the Securities and
Exchange Commission to enforce these provisions.
The underlying factual allegations are set forth in
detail in the decision of the Honorable Harold Baer,
United States District Judge, to whom this matter was
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previously assigned, denying in substantial part
defendants' motion to dismiss. In re Vivendi
Universal, S.A., 381 F.Supp.2d 158 (S.D.N.Y.2003).
Familiarity with this decision is assumed. In very
general terms, plaintiffs allege a pattern of
misstatements and material omissions by the
defendants which had the effect of overstating
Vivendi's financial prospects and understating its
liabilities, causing plaintiffs to suffer millions of
dollars in losses.
Lazard, a non-party witness in this matter, describes
itself as follows:
a preeminent international financial advisory and asset
management firm that has long specialized in crafting
solutions to the complex financial and strategic
challenges of [its] clients. [Lazard] serve[s] a diverse
set of clients around the world, including corporations,
partnerships, institutions, governments and high-net
worth individuals.... [Lazard] operate[s] today from 29
cities in key business and financial centers across 16
countries throughout Europe, North America, Asia
and Australia.
(Lazard Form 10-K for the Fiscal Year Ending
December 31, 2005, at 1, annexed as Exhibit C to the
Memorandum of Law in Support of Plaintiffs' Joint
Motion to Compel Lazard Group LLC to Produce
Documents that Are Located Outside the United
States, dated July 28, 2006 (“Pl.Mem.”)).
The present dispute arises out of a subpoena plaintiffs
served on Lazard approximately one year ago. By that
subpoena, plaintiffs seek 53 categories of documents
from Lazard and its subsidiaries concerning Vivendi
and services that Lazard performed for Vivendi.
Lazard claims that as a matter of comity and in
deference to the French “Blocking” statute,FN1
plaintiffs should be required to seek documents that
are within its (or its subsidiaries') possession, custody
or control and that are located in France only pursuant
to Chapter II of the Hague Convention. Plaintiffs
claim that the subpoena is sufficient to compel the
production of the requested documents. Lazard, whose
principal office is in Manhattan, concedes that it is
subject to the jurisdiction of this Court and that this
Court has the power to compel it to produce all
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materials that are within its possession, custody or
control regardless of their physical location.
FN1. The French Blocking statute, Law No.
80-538 of July 16, 1980, provides:
Art. I bis-Subject to international or
accords and laws and regulations in effect,
any individual is prohibited from
requesting, seeking or disclosing, in
writing, orally, or in any other form,
documents or information of an economic,
commercial, industrial, financial or
technical
nature
directed
toward
establishing evidence in view of legal or
administrative proceedings abroad or in
relation thereto.
....
Art. 3 -Without prejudice to heavier
penalties set out by law, any violation to
[sic ] the provisions of articles 1 and 1 bis
of this law shall be punishable by
imprisonment of two to six months and a
fine of FRF 10,000 to FRF 120,000 or by
either one of these two penalties.
(Exhibit 4 to the Declaration of Ellen V.
Hollman, Esq., dated August 23, 2006
(“Hollman Decl.”)).
III. Analysis
*2 It is beyond cavil that “the Hague Convention is not
the exclusive means for obtaining discovery from a
foreign entity.”Société
Nationale Industrielle
Aérospatiale v. United States District Court for the
Southern District of Iowa, 482 U.S. 522, 539-40
(1987); First American Corp. v. Price Waterhouse
LLP, 154 F.3d 16, 21 (2d Cir.1998); In re Vivendi
Universal, S.A. Sec. Litig., 02 Civ. 5571(RJH), 2004
WL 3019766 at *1 (S.D.N .Y. Dec. 30, 2004);
Madanes v. Madanes, 199 F.R.D. 135, 140
(S.D.N.Y.2001). Rather, the Hague “Convention was
intended as a permissive supplement, not a
pre-emptive replacement, for other means of obtaining
evidence
located
abroad.”Société
Nationale
Industrielle Aérospatiale v. United States District
Court for the Southern District of Iowa,supra, 482
Page 2
U.S. at 536. Nevertheless, in deciding whether
discovery should proceed under the Hague
Convention or the Federal Rules of Civil Procedure,
“American courts should ... take care to demonstrate
due respect for any special problem confronted by the
foreign litigant on account of its nationality or the
location of its operations, and for any sovereign
interest
expressed
by
a
foreign
state.”Société Nationale Industrielle Aérospatiale v.
United States District Court for the Southern District
of Iowa,supra, 482 U.S. at 546.
Courts have considered four factors in determining
whether considerations of comity justify resort to
Hague Convention procedures in lieu of the discovery
vehicles provided in the Federal Rules of Civil
Procedure:
(1) the competing interests of the nations whose laws
are in conflict; (2) the hardship of compliance on the
party or witness from whom discovery is sought; (3)
the importance to the litigation of the information and
documents requested; and (4) the good faith of the
party resisting discovery.
First American Corp. v. Price Waterhouse LLP, 988
F.Supp. 353, 364 (S.D.N.Y.1997), aff'd,154 F.3d 16
(2d
Cir.1998),
citingMinpeco,
S.A.
v.
ContiCommodity Servs., Inc., 116 F.R .D. 517, 523
(S.D.N.Y.1987).AccordReino de Espana v. American
Bureau of Shipping, 03 Civ. 3573(LTS)(RLE), 2005
WL 1813017 at *3 (S.D.N.Y. August 1, 2005);
Bodner v. Banque Paribas, 202 F.R.D. 370, 375
(E.D.N.Y.2000); S.E.C. v. Euro Sec. Fund, 98 Civ.
7347(DLC), 1999 WL 182598 at *3 (S.D.N.Y. April
2, 1999). The party seeking to displace the Federal
Rules of Civil Procedure in favor of the Hague
Convention bears the burden of demonstrating that it
is more appropriate for the Court to follow the Hague
Convention. In re Automotive Refinishing Paint
Antitrust Litig., 358 F.3d 288, 305 (3rd Cir.2004); In
re Vitamins Antitrust Litig., 120 F.Supp.2d 45, 51
(D.D.C.2000); Valois of America, Inc. v. Risdon
Corp., 183 F.R.D. 344, 346 (D.Conn.1997); In re
Perrier Bottled Water Litig., 138 F.R.D. 348, 354
(D.Conn.1991).
As explained below, application of these four factors
demonstrates that there is no substantial reason to
depart from the procedures set forth in the Federal
Rules of Civil Procedure.
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*3 The competing interests of the nations whose laws
are in conflict.The United States has an obvious
interest in the application of its procedural rules to
discovery. The action is pending in the United States,
and plaintiffs allege the violation of United States law.
The third-party witness on which the subpoena in
issue was served is a Delaware corporation with its
principal executive offices in New York City (Lazard
Form 10-K for the Fiscal Year Ending December 31,
2005, at 1, annexed as Exhibit C to Pl. Mem .). Finally,
any court has a strong interest in applying its own
rules of procedure to actions pending before it.
The majority of courts that have examined the issue
have held that France has little interest in the
enforcement of its Blocking statute. As the Honorable
John F. Keenan, United States District Judge, held:
At first impression, French interests [in enforcing the
Blocking statute] also appear to be substantial. Article
One is explicitly intended to protect the “sovereignty,
security and vital economic interests” of France. On
closer examination of French Law No. 80-538, which
encompasses Article One, however, Judge Leval
concluded that the “legislative history of the statute
gives strong indications that it was never expected nor
intended to be enforced against French subjects but
was intended rather to provide them with tactical
weapons and bargaining chips in foreign
courts.”Adidas, Slip op. at 8; seeid. at n.
4;seealsoUnited States v. Gonzalez, 748 F.2d 74, at
77-78 (2d Cir.1984) (French Law No. 80-538 intended
to protect French business from foreign discovery);
Graco, 101 F.R.D. at 508 (“The Blocking Statute
obviously is a manifestation of French displeasure
with American pretrial discovery procedures, which
are significantly broader than the procedures accepted
in other countries”). Therefore, France's real interests
in promulgating Article One are dwarfed by American
interests in complete discovery.
Compagnie Francaise d'Assurance Pour le
Commerce Exterieur v. Phillips Petroleum Co., 105
F.R.D. 16, 30 (S.D.N.Y.1984).
Other cases reaching the same result for substantially
the same reasons include Société Nationale
Industrielle Aérospatiale v. United States District
Court for the Southern District of Iowa,supra, 482
U.S. at 544 n. 29;Bodner v. Banque Paribas,supra,
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202 F.R.D. at 375;Valois of America v. Risdon
Corp.,supra, 183 F.R.D. at 348-49;Rich v. KIS
California,
Inc.,
121
F.R.D.
254,
258
(M.D.N.C.1988); Adidas (Canada) Ltd. v. SS Seatrain
Bennington, 80 Civ.1911(PNL), 82 Civ. 0375(PNL),
1984 WL 423 at *3 (S.D.N.Y. May 30, 1984).
The hardship of compliance on the party or witness
from whom discovery is sought.The only substantial
hardship to Lazard if discovery pursuant to Rule 34 is
ordered is the possibility of criminal prosecution in
France pursuant to the Blocking statute (see Lazard
Group LLC's Memorandum of Law in Opposition to
Plaintiffs' Joint Motion to Compel, dated August 23,
2006 (“Lazard's Memo.”), at 19). However, as noted
in Bodner v. Paribas,supra, 202 F.R.D. at 375,“[a]s
held by numerous courts, the French Blocking Statute
does not subject defendants to a realistic risk of
prosecution, and cannot be construed as a law
intended to universally govern the conduct of
litigation within the jurisdiction of a United States
court.”SeealsoCompagnie Francaise d'Assurance
Pour le Commerce Exterieur v. Phillips Petroleum
Co.,supra, 105 F.R.D. at 30;Graco, Inc. v. Kremlin,
Inc., 101 F.R.D. 503, 514 (N.D.Ill.1984).
*4 Although Lazard has been threatened with
prosecution by two French agencies (Lazard Memo. at
19), the United States' experience with the French
Blocking statute teaches that there is little likelihood
these threats will ever be carried out. This speculative
possibility of prosecution is insufficient to displace the
Federal Rules of Civil Procedure.
The importance to the litigation of the information and
documents requested.Although Lazard does have
some relevance objections, it does not seriously
contest that at least some of the documents sought by
plaintiff are relevant to this litigation. Given the nature
of the claims and the relationship between Vivendi
and Lazard, it would be extremely surprising if Lazard
did not have at least some relevant documents.
The good faith of the party resisting discovery.Lazard
argues that its attempts to obtain permission from the
French government to produce its subsidiaries'
documents and its production of documents that are
not subject to the Blocking statute demonstrate good
faith (see Lazard Mem. at 20).
Although plaintiffs argue that defendants have failed
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to show good faith by not obtaining an exemption
from the Blocking statute, their argument is
unconvincing. The Blocking statute, on its face, is a
criminal statute. Plaintiffs do not explain how an
exemption from a criminal statute could be granted
under French law or who, if anyone, could grant it. As
far as I know, no official in the United States could
prospectively grant an individual or entity an
exception from a federal criminal statute because
criminal statutes are intended to establish minimum
and universal standards of conduct.
Since Lazard has demonstrated good faith and
plaintiffs have not established that Lazard has failed to
do something it could have done, I find that this factor
weighs in favor of the application of the Hague
Convention.
Summary Since three of the four factors weigh in favor
of the application of the discovery provisions of the
Federal Rules of Civil Procedure, I conclude that
discovery from Lazard should be conducted pursuant
to Rule 34 and 45 and that the Hague Convention
protocols need not be followed.
IV. Conclusion
Accordingly, for all the foregoing reasons, plaintiffs'
motion to compel Lazard to produce in the United
States documents that are in its possession, custody
and control in France pursuant to the Federal Rules of
Civil Procedure is granted, and Lazard's cross-motion
for a protective order and other relief is denied.
SO ORDERED
S.D.N.Y.,2006.
In re Vivendi Universal, S.A. Securities Litigation
Not Reported in F.Supp.2d, 2006 WL 3378115
(S.D.N.Y.)
END OF DOCUMENT
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