Weber v. Finker

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JAN 15, 2009
No. 08-13372 THOMAS K. KAHN
________________________ CLERK

D. C. Docket No. 07-00027-CV-J-32MCR

GALINA WEBER,
In the Matter of Her Application,

Petitioner-Appellee,

versus

LAZAR FINKER,
RAISSA M. FRENKEL,
STEVEN CHARLES KOEGLER,
WILLIAM E. CHATTIN,
THEODORUS J. KAVALIEROS,
AFRODITI KAVALIEROS,
individuals; respondent discovery sought from,

Respondents-Appellants,

IGOR V. MAKAROV,
an individual; respondent discovery sought from,

Respondent.
 ________________________

Appeal from the United States District Court
for the Middle District of Florida
_________________________

(January 15, 2009)

Before WILSON and COX, Circuit Judges, and ALBRITTON,* District Judge.

WILSON, Circuit Judge:

This case involves the authority of the federal district courts to assist

litigants before foreign tribunals with the production of evidence in the United

States. The Appellants are shareholders in Itera Group, Ltd., a Cypriot

corporation, who all reside in Jacksonville, Florida (“Florida shareholders”). The

Florida shareholders appeal the Magistrate Judge’s April 15, 2008 Order granting

in part and denying in part Galina Weber’s Motion to Compel Discovery, and the

district court’s May 20, 2008 affirmance of that Order. Weber’s Motion to Compel

Discovery was filed pursuant to 28 U.S.C. § 1782(a), which provides discovery

assistance for litigants before foreign tribunals. After review and oral argument,

we affirm.

I. BACKGROUND

Weber is a citizen of Switzerland and a resident of Monaco. Like the

*
Honorable William H. Albritton, III, United States District Judge for the Middle District
of Alabama, sitting by designation.

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Florida shareholders, she is a shareholder of Itera Group. Itera Group is a large

company with many subsidiaries throughout the world, with oil and natural gas

concerns in Russia and real estate holdings. Weber’s husband, Urs Weber, was

legal counsel to an Itera subsidiary, and her brother-in-law, Silvio Weber, was a

director of an Itera subsidiary.

A. Foreign Legal Actions

Weber is involved with two separate foreign legal actions. Both involve

business transactions with Itera Group. Weber is the plaintiff in a Cypriot civil

action. She is also the defendant in a Swiss criminal action, which Itera instituted

against her, alleging that she received property embezzled from the company.

Weber filed a civil lawsuit in Cyprus against Itera Group, the CEO of Itera

Group, Igor V. Makarov, and Sweet Water Intervest Corporation, which is a

British Virgin Islands corporation that Weber alleges is controlled by Makarov.

Weber claims that Makarov offered to buy her 14% ownership interest in Itera

Group, but then backed out when he believed he could get her shares for less

money. She alleges that Makarov had Itera Group’s Board of Directors authorize

the issuance of six million shares to dilute her ownership interest from 14% to 4%.

She further alleges that she was denied the right of first refusal and that other

shareholders received funds to purchase the additional shares from Makarov,

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through Itera Group or an affiliated company.

After Weber instituted the Cypriot action, Gas Itera, an Itera Group

subsidiary, filed criminal charges against Weber in Switzerland, alleging that

Weber embezzled Itera Group assets. Specifically, Itera alleges that Weber,

through collusion with her husband and brother-in-law, embezzled a Swiss castle

worth $4.8 million from Itera Group. Weber’s defense is that Itera Group owed

her $4.8 million in unpaid dividends. Under Swiss law, offsetting a debt in such a

situation is a complete defense to embezzlement.

Weber alleges that, in January 2005, the Itera Group Board of Directors

approved a shareholder dividend of $80 million, to be dispersed in two payments

(“tranches”) of $40 million. In March 2004, Itera paid the first dividend, and all

shareholders, including Weber, received their proportionate share. Weber alleges

that the Itera Group Board approved the second payment at its May 28, 2005

meeting, but that she did not receive her proportionate share. Weber alleges she

received an amount equal to 2.5% ownership interest rather than the 14.5%

ownership interest she had in the corporation. The unpaid 12% would have been

equal to $4.8 million. Weber further alleges that the Florida shareholders received

full payment of their proportionate shares.

B. Petition for Discovery in Aid of Foreign Proceedings

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 On April 27, 2007, Weber filed a Petition for Discovery in Aid of Foreign

Proceedings, pursuant to 28 U.S.C. § 1782(a), which she later amended. Weber’s

Amended Petition seeks discovery of documents related to both the Cypriot and

Swiss actions. On October 11, 2007, the Magistrate Judge issued a Report and

Recommendation concluding that Weber was entitled to discovery governed by the

Federal Rules of Civil Procedure. The United States District Court for the Middle

District of Florida adopted the Magistrate Judge’s Report and Recommendation

and granted Weber’s Amended Petition for Discovery in Aid of Foreign

Proceedings. The district court authorized the Magistrate Judge to consider

Weber’s Motion to Compel and enter an Order with the final decision on the scope

of permissible discovery, which would be subject to review only if clearly

erroneous or contrary to law.

On May 20, 2008, the district court ordered that the Florida shareholders

produce responsive documents by June 5, 2008. The Florida shareholders filed a

Motion to Stay. The district court entered its Order and granted a temporary stay

pending appeal on the Motion to Stay to this Court. On August 4, 2008, we denied

the Florida shareholder’s Motion to Stay. The district court directed that the

Florida shareholders had until August 12th to produce responsive documents. The

Florida shareholders appealed.

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II. STANDARD OF REVIEW

We review a district court’s grant of judicial assistance to a foreign country

for abuse of discretion. In re: Clerici, 481 F.3d 1324, 1331 (11th Cir. 2007).

“[T]his deferential standard is identical to that used in reviewing the district court’s

ordinary discovery rulings.” Id. (internal quotation marks and citation omitted).

We review a district court’s interpretation of law de novo. Id. “Thus, this

Court reviews de novo the district court’s interpretation of a treaty or a federal

statute such as § 1782.” Id.

III. DISCUSSION

A. The Relationship Between 28 U.S.C. § 1782 and the U.S.-Switzerland

MLAT

The Florida shareholders argue that Weber should have brought her request

for judicial assistance under The Treaty Between the United States of America and

the Swiss Confederation on Mutual Assistance in Criminal Matters, (“U.S.-

Switzerland MLAT”) rather than under 28 U.S.C. § 1782. We disagree.

“As ‘in all statutory construction cases, we begin with the language of the

statute.’” Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 255, 124 S.

Ct. 2466, 2477 (2004) (quoting Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450,

122 S. Ct. 941, 950 (2002)) (alternations omitted). 28 U.S.C. § 1782(a)

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specifically provides that “[t]he district court of the district in which a person

resides or is found may order him . . . to produce a document or other thing for use

in a proceeding in a foreign or international tribunal, including criminal

investigations conducted before formal accusation.” Section 1782(a) further

provides that “[t]he order may be made . . . upon the application of any interested

person. . . .” 28 U.S.C. § 1782(a) (emphasis added). See also Intel Corp., 542

U.S. at 256-58, 124 S. Ct. 2478-79 (holding that private parties may seek discovery

for use in a foreign proceeding through § 1782).

In contrast, the U.S.-Switzerland MLAT provides that “[t]he Contracting

Parties undertake to afford each other . . . mutual assistance in: [a] investigations

or court proceedings in respect of offenses the punishment of which falls or would

fall within the jurisdiction of the judicial authorities of the requesting State or a

state or canton thereof. . . .” Treaty Between the United States of America and the

Swiss Confederation on Mutual Assistance in Criminal Matters, U.S.-Switz., art. 1,

Dec. 23, 1975, 27 U.S.T. 2019 (hereinafter “U.S.-Switz. MLAT”) (emphasis

added).

28 U.S.C. § 1782(a) and the U.S.-Switzerland MLAT are consistent with one

another. Whereas § 1782 specifically provides that “any interested person” may

apply to a United States district court for foreign discovery assistance, the U.S.-

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Switzerland MLAT is a treaty between States Parties. 28 U.S.C. § 1782(a). All of

the language in the treaty speaks to facilitating discovery for the “Contracting

Parties” or “Contracting States,” namely, the United States and Switzerland. A

plain reading of the U.S.-Switzerland MLAT indicates that it is designed to help

federal and state prosecutors. The treaty is silent on its applicability to discovery

requests by non-States Parties criminal defendants.2 See, e.g., In re: Request from

the Swiss Fed. Dep’t of Justice & Police, 731 F. Supp. 490, 491 (S.D. Fla. 1990)

(holding, in a case where the Swiss government sought assistance in a criminal

prosecution, that the MLAT and § 1782 should be read as consistent with one

another).

Moreover, even if § 1782 and the U.S.-Switzerland MLAT were

inconsistent, § 1782 would still be the appropriate vehicle for Weber’s discovery

request under the last in time rule. “When [a treaty and statute] relate to the same

subject, the courts will always endeavor to construe them so as to give effect to

both, if that can be done without violating the language of either; but if the two are

inconsistent, the one last in date will control the other . . . .” Whitney v.

Robertson, 124 U.S. 190, 194, 8 S. Ct. 456, 458 (1888). See also Valencia v.

2
We decline to hold that no private party could ever seek redress, facilitated by their
State Party, pursuant to the MLAT. However, a plain reading of the treaty indicates that the
MLAT is designed to facilitate discovery between States Parties.

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United States AG, No. 05-15748, 2006 U.S. App. LEXIS 9999, *13 (11th Cir. Apr.

20, 2006) (per curiam); Guevara v. United States AG, No. 04-13712, 2005 U.S.

App. LEXIS 9552, *15 (11th Cir. May 24, 2005) (per curiam). The U.S.-

Switzerland MLAT went into force on January 23, 1977. Although § 1782 was

enacted in 1948, it was amended in 1996, rendering it “last in date.” Regardless of

the fact that the U.S.-Switzerland MLAT provides that “[t]he provisions of this

Treaty shall take precedence over any inconsistent provisions of the municipal

laws in the Contracting States,” § 1782 controls. U.S.-Switz. MLAT, art. 38.

Furthermore, when Congress amended § 1782 in 1996, it did so by inserting

“including criminal investigations conducted before formal accusation” after the

words “for use in a proceeding in a foreign or international tribunal. . . .” Congress

clearly intended for § 1782 to facilitate discovery by individuals for use in foreign

criminal actions. Here, Weber sought judicial assistance prior to formal accusation

by the Swiss government. Section 1782 is expressly applicable to her request.

B. The Federal Rules of Civil Procedure

The Magistrate Judge ordered that the Florida shareholders provide

discovery pursuant to the Federal Rules of Civil Procedure. Section 1782 provides

that “[t]he order may prescribe the practice and procedure, which may be in whole

or part the practice and procedure of the foreign country . . . [t]o the extent that the

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order does not prescribe otherwise, . . . the document [shall be] produced, in

accordance with the Federal Rules of Civil Procedure.” 28 U.S.C. § 1782(a)

(emphasis added). See also Kestrel Coal PTY. Ltd. v. Joy Global Inc., 362 F.3d

401, 404 (7th Cir. 2004) (holding that discovery “must conform either to the

procedure of the foreign nation or to that of the Federal Rules of Civil Procedure”);

In re Edelman, 295 F.3d 171, 178 (2d Cir. 2002) (applying the Federal Rules of

Civil Procedure to a § 1782(a) discovery request); Bayer AG v. Betachem, Inc., 173

F.3d 188, 192 (3d Cir. 1999) (“[S]ection 1782 . . . incorporates by reference the

scope of discovery permitted by the Federal Rules of Civil Procedure.);

Application of Sumar, 123 F.R.D. 467, 469-70 (S.D.N.Y. 1988) (declining to apply

the Federal Rules of Criminal Procedure where the foreign proceeding was

criminal in nature). Given that § 1782(a) directs judges to provide discovery

assistance pursuant to the Federal Rules of Civil Procedure, the district court was

well within its discretion to order discovery pursuant to the Federal Rules of Civil

Procedure in this case.3

3
The Florida shareholders contend that Weber will be able to discover a broader range of
documents under the Federal Rules of Civil Procedure than she would be able to discover under
the Federal Rules of Criminal Procedure. They argue that we should not allow Weber to receive
more discovery for her Swiss criminal action than a United States prosecutor would be allowed
to discover for use in a prosecution in the United States. This argument is without merit. The
Supreme Court held in Intel that discovery under § 1782 is not limited to discovery that would
be allowed under United States law “in domestic litigation analogous to the foreign proceeding.”
See Intel, 542 U.S. at 263, 124 S. Ct. at 2483.

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 The Florida shareholders contend that we should limit discovery to

documents “for use in a proceeding in a foreign or international tribunal.” 28

U.S.C. § 1782(a). They argue that the “for use in” language limits the scope of

discovery available through § 1782(a) to documents that will actually be used in

the foreign proceedings.

“Once discovery is authorized under § 1782, the federal discovery rules,

Fed. R. Civ. P. 26-36, contain the relevant practices and procedures for the taking

of testimony and the production of documents.” In re Clerici, 481 F.3d at 1336.

Section 1782 does not require that every document discovered be actually used in

the foreign proceeding. Quite the opposite. Section 1782 expressly provides that

the district court should grant discovery under the Federal Rules of Civil

Procedure. Pursuant to Rule 26(b)(1) of the Federal Rules of Civil Procedure,

“[p]arties may obtain discovery regarding any nonprivileged matter that is relevant

to any party's claim or defense– including the existence, description, nature,

custody, condition, and location of any documents. . . .” F ED. R. C IV. P. 26(b)(1).

The Magistrate Judge did not err by granting discovery “for context,” when such

discovery is allowed under Rule 26(b)(1).4

4
Although Weber simultaneously sought discovery for both her Cypriot and Swiss
actions, the Magistrate Judge made careful rulings on the scope of discovery, separating out
which discovery requests were appropriate for each action. The Magistrate Judge’s careful
analysis was adopted by the district court. The district court did not abuse its discretion.

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C. Order Granting In Part Weber’s Motion To Compel

Finally, the Florida shareholders contend that a Motion to Compel under §

1782 is a final, dispositive order because, although there is an ongoing action in a

foreign tribunal, the Motion to Compel is the final order to be issued by the United

States court. They argue that the district court improperly determined the Motion

to Compel to be a pretrial matter that could be referred to the Magistrate Judge.

The Florida shareholders did not object to the referral until after the

Magistrate Judge entered his Order. “[A] party who objects to a reference to a

magistrate must make his objections known either at the time of reference or soon

thereafter.” Hill v. Duriron Co., Inc., 656 F.2d 1208, 1213 (6th Cir. 1981). “A

party waives his objection when he participates in a proceeding before a magistrate

and fails to make known his lack of consent or fails to object to any other

procedural defect in the order referring the matter to the magistrate until after the

magistrate has” ruled. McLeod, Alexander, Powel & Apffel, P.C. v. Quarles, 925

F.2d 853, 857 (5th Cir. 1991). The Florida shareholders waived this challenge to

the referral by failing to timely object.

IV. CONCLUSION

Upon review of the record and the parties’ briefs, and with the benefit of oral

argument, we discern no error. Accordingly, we affirm the district court’s May 20,

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2008 Order.

AFFIRMED.

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