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In re Application of Hornbeam Corp.

United States District Court, S.D. Florida

April 27, 2018

IN RE APPLICATION OF HORNBEAM CORPORATION, Request for Discovery Pursuant to 28U.S.C. § 1782



         THIS CAUSE is before the Court on the Order of the Magistrate Judge [DE 153] granting Intervenor Shulman's Application for Discovery pursuant to 28 U.S.C. § 1782. Shulman seeks discovery for use in a claim against Intervenors Kolomoisky and Bogolyubov in England ("English action"). Kolomoisky filed objections [DE 156] and Shulman filed a response [DE 162], to which Kolomoisky replied [DE 181]. Additionally, Kolomoisky filed a Notice [DE 179] regarding developments in the underlying English action. Because of the changed factual circumstances, the Court reviewed the record de novo. The Court finds that the English action is no longer pending or reasonably contemplated, and thus Shulman fails to meet the requirements for a § 1782 application. See Intel Corp. v. Advanced Micro Devices Inc., 542 U.S. 241 (2004). Therefore, the Court vacates Magistrate Judge Turnoff s Order granting Shulman's Application, and denies Shulman's Application.[1]

         I. Background

         This dispute arises from the purchase of a steel mill in Warren, Ohio by three Ukranian businessmen: Shulman, Kolomoisky, and Bogolyubov. [DE 122 at 3]. Ownership of the mill was then transferred to Warren Steel Holdings, LLC, who transferred ownership to Halliwel, a British Virgin Islands (BVI) company. Id. Halliwel's shareholders are: (1) Hornbeam, a Panamanian entity whose beneficiary is Bracha Foundation, a Lichtenstein trust, whose beneficiary is Shulman; (2) Symeou, a Cyprus attorney, who represents Kolomoisky; and (3) Marigold Trust Asset Management, on behalf of Bogolyubov. [DE 156 at 3].

         In 2006, a Kolomoisky-controlled entity opened a $90 million line of credit for Warren Steel, and in 2008, companies associated with Kolomoisky, Bogolybov, and Korf (an individual appointed president of Warren Steel) provided over $106 million to Warren Steel. [DE 157 at 3] Still, due to deteriorating finances, Warren Steel closed in March 2014. Id. Again, companies related to Kolomoisky, Bogolybov and Korf provided new financing to reopen the facility. Id. Halliwel's shareholders approved this financing at an extraordinary general meeting. Id.

         However, in August 2014, Hornbeam, one of the shareholders, filed an ex parte application seeking to enjoin the extraordinary general meeting and subsequently filed a claim for unfair prejudice under BVI law. [DE 157 at 4]. Hornbeam asked the BVI court to liquidate Halliwel which the court denied. Id. On December 10, 2014, the BVI court assessed $846, 526 in costs and attorneys' fees against Hornbeam in favor of Halliwel, Symeou, and Marigold. Id. : On December 29, 2014, Hornbeam filed an application for discovery in this Court under 28 U.S.C. § 1782 for use in the BVI proceedings against Symeou and Halliwel. Id. In November 2016, Hornbeam paid the $1.8 million judgment and has not filed any new action in the BVI. Id.

         A. Hornbeam's Application

         Hornbeam filed its § 1782 discovery application on December 29, 2014 which Magistrate Judge Turnoff approved on February 11, 2015 ("2015 Order"). The 2015 Order made no findings or conclusions that Hornbeam satisfied the requirements for a § 1782 application. [DE 12]. After subpoenas were served, a stay was entered due to an appeal pending before the Eleventh Circuit Court of Appeals on a related § 1782 application in Alabama. [DE 157 at 5]. After that appeal was resolved in 2016, Hornbeam requested an extension of the stay, which the Court granted, because it planned to litigate in the BVI. [DE7l;DE74]. As the stay was set to expire, Hornbeam moved to lift the stay because, while it had not filed any claims in the BVI, Shulman, on his own behalf, had filed claims in England on the same allegations for the same damages. [DE 75]. Shulman also moved to intervene in Hornbeam's § 1782 application granted by the 2015 Order. [DE79].

         In August 2017, Magistrate Judge Turnoff lifted the stay, granted Shulman's motion to intervene, and also required Shulman to file his own § 1782 application. [DE 108]. Interveners Symeou and Halliwel moved to vacate the 2015 Order and to deny Hornbeam's application [DE 128] and Kolomoisky opposed Shulman's application. [DE 129].

         B. Shulman's English Action

         On May 12, 2017, Shulman sued Kolomoisky and Bogolybov in England regarding Warren Steel. In compliance with Magistrate Judge Turnoff s Order [DE 108], Shulman filed his own § 1782 application in September 2017 to obtain the discovery that the 2015 Order authorized for Hornbeam and to "use that discovery in the recently filed English [a]ction." [DE 122 at 2]. Shulman claimed to satisfy the § 1782 requirements because the discovery is for "use in the English [a]ction, which is indisputably a proceeding in a foreign or international tribunal." [DE 122 at 13].

         Kolomoisky opposed Shulman's application arguing that the Court should stay this matter until the English court decided jurisdiction. On January 22, 2018, Magistrate Judge Turnoff issued an Order: (1) denying the motion to vacate the 2015 Order granting Hornbeam's application; and (2) granting Shulman's application because he "initiated legal proceedings in the British courts and it is clear he is seeking evidence for use in said proceedings." [DE 153 at 3].

         However, on February 2, 2018, after Magistrate Judge Turnoff entered his Order, the English court determined it had no jurisdiction to try the underlying claims and dismissed Shulman's claim. [DE 156]. On February 21, 2018, the English court orally denied permission to Shulman to appeal. [DE 181 at 3]. On March 2, 2018, the English court entered a written order on the February 2018 decision, stating that Shulman could appeal this latest decision by filing a notice of appeal by March 15, 2018. [DE 179-1]. Shulman has not provided any notice to this Court indicating he filed a timely appeal.

         II. ...

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