Optimal Investment Services, S.A. v. Berlamont, No. 14-2807-cv (2d Cir. Dec. 12, 2014) [click for opinion]

In Optimal Investment Services, S.A. v. Berlamont, the Second Circuit Court of Appeals considered a matter of first impression: whether 28 U.S.C. § 1782, which authorizes federal courts to order document production for use in certain foreign proceedings, permits discovery of documents in the United States for use in a foreign criminal investigation conducted by a foreign investigating magistrate.

Franck Berlamont ("Berlamont") is the President and CEO of Geneva Partners, a Swiss investment firm that invested in a fund managed by Optimal Investment Services, S.A. ("OIS"). OIS had invested substantial monies with Bernie Madoff. In June 2009, Berlamont commenced a criminal proceeding in Switzerland accusing OIS and its former Director General, Manuel Echeverría ("Echeverría"), of misrepresenting its investments with Madoff. A Swiss investigating magistrate opened a criminal investigation against Echeverría on suspicion of "unlawful management." In support of the Swiss criminal proceeding, Berlamont sought the production of certain documents relating to an examination of Rajiv Jaitly ("Jaitly"), a former Chief Risk Officer for OIS. These documents were produced during discovery in a case formerly pending before the U.S. District Court for the Southern District of New York,Rembaum v. Banco Santander, S.A., No. 10 Civ. 4095 (S.D.N.Y. 2010). The district court granted Berlamont's request for the Jaitly documents pursuant to § 1782, prompting the appeal to the Second Circuit.

On appeal, OIS and its U.S. counsel challenged the district court's decision on a variety of grounds. They argued that (1) Berlamont's claim did not meet the requirements of § 1782 because a Swiss investigating magistrate was not a "foreign or international tribunal" within the meaning of § 1782, and (2) that the district court should have denied Berlamont's application pursuant to the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, international comity, and Swiss attorney-client privilege.

A district court is authorized to grant a § 1782 request where: (1) the person from whom discovery is sought resides (or is found) in the district of the district court to which the application is made, (2) the discovery is for use in a proceeding before a foreign or international tribunal, and (3) the application is made by a foreign or international tribunal or any interested person. Once the statutory requirements are met, a district court is free to grant discovery in its discretion.

Appellants did not dispute that Berlamont's application satisfied the first and third requirements for a grant of his § 1782 request, but they claimed that the second factor was not met because a Swiss investigating magistrate was not a "foreign or international tribunal."

In upholding the district court's ruling that § 1782 does, in fact, permit discovery for such a purpose, the Court of Appeals held that the Swiss criminal investigation in the instant case is exactly the type of proceeding that the 1996 amendments to the statute were intended to reach in that (1) the criminal inquiry is a proceeding and an investigation being conducted by a Swiss magistrate; (2) the defendant, Mr. Echeverría, had already been charged; and (3) the investigating magistrate explicitly stated that the Jaitly documents would be of great usefulness to his inquiry.

Andray Napolez of the Chicago office contributed to this summary.