CFE Int'l v. Antaeus Grp.

1

IN RE APPLICATION OF CFE INTERNATIONAL LLC, Petitioner, v. ANTAEUS GROUP, LLC, Respondent.

No. A-23-CV-56-DII-ML

United States District Court, W.D. Texas, Austin Division

September 5, 2023

REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

MARK LANE, UNITED STATES MAGISTRATE JUDGE

TO THE HONORABLE UNITED STATES DISTRICT JUDGE:

Applicant CFE International LLC (“CFEi”) again comes to this Court seeking expansive document and deposition discovery from Respondent Antaeus Group LLC (“Antaeus”) and Respondent Arbor Glen Consulting LLC (“Arbor Glen” and, together with Antaeus “Respondents”), pursuant to 28 U.S.C. § 1782, purportedly in aid of an ongoing Mexican criminal investigation concerning the award of certain natural gas contracts to a third party (the “Mexican Investigation”). In re Application of CFE Int'l LLC v. Antaeus Grp. LLC, No. 1:23-cv-00056-DII-ML (“Antaeus II”), Dkt. #1; In re Application of CFE Int'l LLC v. Arbor Glen Consulting LLC, No. 1:23-cv-00057-DII-ML (“Arbor Glen II”), Dkt. #1. CFEi issued these renewed § 1782 applications (the “Applications”) following this Court's order quashing CFEi's first set of similar subpoenas last year. See generally CFE Int'l LLC v. Antaeus Grp. LLC, Nos. 1:22-cv-00365-DII-ML &amp 1:22-cv-00429-DII-ML, 2022 WL 17731821 (W.D. Tex. Aug. 26, 2022), accepted & adopted as stated in CFE Int'l LLC v. Antaeus Grp. LLC, 2022 WL 19569581 (W.D. Tex. Dec. 6, 2022). This Report and Recommendation concerns Respondents' Motions to Quash Subpoenas Issued Pursuant to 28 U.S.C. § 1782 and, in the Alternative, Motions for a Protective Order.^[1]Antaeus II, Dkt. #31; Arbor Glen II, Dkt. #26.

For the reasons set forth below, the court submits this Report and Recommendation to the District Judge, recommending that the District Court grants Respondents' motions to quash and vacates the previous orders granting the Applications.^[2]

I. Background

The relevant parties and background facts have already been summarized in the first iteration of these proceedings. See CFE Int'l, 2022 WL 17731821 at *1-4. These facts are incorporated here by reference. CFEi had initiated those first proceedings by filing ex parte applications pursuant to 28 U.S.C. § 1782 seeking discovery from Antaeus and Arbor Glen in aid of the Mexican Investigation. In re Ex Parte Application of CFE Int'l LLC v. Antaeus Grp. LLC, No. 1:22-cv-00365-DII-ML (W.D. Tex.) (“Antaeus I”), Dkt. #1; In re Ex Parte Application of CFE Int'l LLC v. Arbor Glen Consulting, LLC, No. 1:22-cv-00429-DII-ML (W.D. Tex.) (“Arbor Glen I”), Dkt. #1. The court initially granted the Applications. Antaeus I, Dkt. #20; Arbor Glen I, Dkt. #12. After full briefing on Respondents' motions to quash, the parties appeared for oral argument on August 17, 2022, and the undersigned issued a Report and Recommendation on August 26, 2022, concluding the subpoenas should be quashed. See generally CFE Int'l, 2022 WL 17731821. United States District Judge Yeakel subsequently entered an Order for the District Court on December 6, 2023, adopting the Report and Recommendation in large part and “agree[ing] . . . that consideration of the non-exhaustive Intel factors and the circumstances at issue support[ed] quashing the subpoenas at issue.” CFE Int'l, 2022 WL 19569581 at *3. CFEi did not move to alter or amend the District Court's Order, or otherwise move for reconsideration. See FED. R. CIV. P. 59(e); Banca Pueyo SA v. Lone Star Fund IX (US), L.P., 55 F.4th 469, 472 (5th Cir. 2022). Nor did CFEi appeal. FED. R. APP. P. 4(a). The time to take either action has passed.^[3]

On January 18, 2023, CFEi filed another set of applications pursuant to 28 U.S.C. § 1782, again seeking discovery from Antaeus and Arbor Glen in aid of the same Mexican Investigation. Antaeus II, Dkt. #1; Arbor Glen II, Dkt. #1. The court granted the Applications on January 27, 2023 (Arbor Glen II) and February 9, 2023 (Antaeus II). Antaeus II, Dkt. #27; Arbor Glen II, Dkt. #18. The Applications seek substantially similar testimonial and documentary discovery as the initial applications, although CFEi claims to have narrowed its requests and proposed a more robust protective order. In support of its renewed applications, CFEi also offered what it alleges to be certain “new” facts and circumstances that have developed since Antaeus I and Arbor Glen I, including: (1) a letter dated December 14, 2022 from the prosecutor in charge of the Mexican investigation-written at CFEi's request-stating that “her office has ‘decided to pursue criminal action against' Gutierrez and Valdez Garcia,[3] because ‘the investigative file' established that an ‘act has been committed stipulated in law as a crime,'” and that her office would be willing to review documents resulting from the § 1782 discovery (the “FGR Letter”); (2) a draft Antaeus investor presentation from April 2013 that refers to Gutierrez as a “principal”; and (3) the substantive completion of the arbitration between CFEi and WhiteWater Midstream, LLC (“WhiteWater”).

On March 13, 2023, Respondents moved to quash the Subpoenas on res judicata grounds based on the preclusive effect of the District Court's prior judgment or, in the alternative, for CFEI's failure to satisfy the statutory and/or discretionary requirements for § 1782 discovery. Antaeus II, Dkt. #31; Arbor Glen II, Dkt. #26. After full briefing, Antaeus II, Dkt. #34-35; Arbor Glen II, Dkt. #29-30, the parties appeared for oral argument on August 1, 2023.

II. Applicable Law

A. Res Judicata and Collateral Estoppel

Res judicata ensures “the finality of judgments and thereby conserves judicial resources and protects litigants from multiple lawsuits.” United States v. Shanbaum, 10 F.3d 305, 310 (5th Cir. 1994) (citation omitted). The umbrella doctrine of “res judicata” encompasses two separate but closely related preclusive doctrines: (1) true res judicata (or “claim preclusion”), and (2) collateral estoppel (or “issue preclusion”). Houston Pro. Towing Ass'n v. City of Houston, 812 F.3d 443, 447 (5th Cir. 2016) (citing Comer v. Murphy Oil USA, Inc., 718 F.3d 460, 466-67 (5th Cir. 2013)). True res judicata “bars the litigation of claims that either have been litigated or should have been raised in an earlier suit,” whereas collateral estoppel “precludes relitigation of only those issues actually litigated in the original action, whether or not the second suit is based on the same cause of action.” Id. at 447 (citations omitted).

Specifically, under res judicata, “a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.” Id. (quoting Allen v. McCurry, 449 U.S. 90, 94 (1980)). In short, it “prevents a later suit . . . from collaterally attacking a prior judgment by a court of competent jurisdiction.” Oreck Direct, LLC v. Dyson, Inc., 560 F.3d 398, 401 (5th Cir. 2009) (citation omitted). Res judicata precludes a subsequent action when four elements are satisfied: “(1) the parties are identical or in privity; (2) the judgment in the prior action was rendered by a court of competent jurisdiction; (3) the prior action was concluded by a final judgment on the merits; and (4) the same claim or cause of action was involved in both actions.” Houston Pro. Towing, 812 F.3d at 447 (quoting Comer, 718 F.3d at 467).

Collateral estoppel similarly “promotes the interests of judicial economy by treating specific issues of fact or law that are validly and necessarily determined between two parties as final and conclusive.” Shanbaum, 10 F.3d at 311. “Under collateral estoppel, once an issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation.” Montana v. United States, 440 U.S. 147, 153 (1979) (citations omitted); see also, e.g., Lehigh Portland Cement Co. v. Swope, 455 F.2d 638, 638-39 (5th Cir. 1972) (affirming dismissal of successive proceedings when “the exact issues [had] already been determined adversely” to plaintiff on motion to quash or modify subpoena duces tecum). Collateral estoppel precludes a party from re-litigating an issue when four conditions are met: (1) “the issue under consideration in a subsequent action must be identical to the issue litigated in a prior action,” (2) “the issue must have been fully and vigorously litigated in the prior action,” (3) “the issue must have been necessary to support the judgment in the prior case,” and (4) “there must be no special circumstance that would render preclusion inappropriate or unfair.” Shanbaum, 10 F.3d at 311 (citing Universal Am. Barge Corp. v. J-Chem, Inc., 946 F.2d 1131, 1136 (5th Cir. 1991)).

B. Section 1782(a) Discovery

28 U.S.C. § 1782(a) authorizes U.S. courts to order discovery in aid of foreign proceedings only where an applicant shows that the requested materials are “for use in a proceeding before a foreign or international tribunal.” In re Request for Jud. Assistance from the Consumer Ct. of Istanbul in Istanbul, Turkey, No. 1:21-mc-476-RP, 2021 WL 6750936, at *1 (W.D. Tex. June 11, 2021) (quoting Tex. Keystone, Inc. v. Prime Nat. Res., Inc., 694 F.3d 548, 553 (5th Cir. 2012)). This threshold showing merely “authorizes, but does not require” the court to permit discovery, which is wholly discretionary. See Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264-66 (2004). In Intel, the Supreme Court identified four non-exhaustive factors to guide courts' exercise of that discretion: (1) whether the person from whom discovery is sought is a participant in the foreign proceeding; (2) the nature and character of the foreign proceeding and the receptivity of...