In re: Eduardo Gonzalez v. Verfruco Foods, Inc.

• Court: Court of Appeals for the Eleventh Circuit
• Decided: February 7, 2023
• Docket: 21-12922
• Status: Unpublished

Opinion

USCA11 Case: 21-12922 Document: 47-1 Date Filed: 02/07/2023 Page: 1 of 11

[DO NOT PUBLISH]

In the

United States Court of Appeals For the Eleventh Circuit

____________________

No. 21-12922

Non-Argument Calendar

In re: EDUARDO GONZALEZ, Pursuant to 28 U.S.C. 1782 For Judicial Assistance in Obtaining Evidence for Use in Foreign International Proceedings,

Petitioner-Appellee,

versus

VERFRUCO FOODS, INC., USCA11 Case: 21-12922 Document: 47-1 Date Filed: 02/07/2023 Page: 2 of 11

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Respondent-Appellant,

VICTOR SEBASTIAN MAURICIO, et al.,

Respondents.

Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 1:20-mc-24628-DPG ____________________

Before ROSENBAUM, GRANT, and EDMONDSON, Circuit Judges.

PER CURIAM:

This appeal stems from an application for judicial assistance under 28 U.S.C. § 1782. Eduardo Gonzalez filed ex parte a section 1782 application seeking discovery from Verfruco Foods, Inc. (“Verfruco US”) for use in anticipated litigation in Mexico. The district court granted Gonzalez’s application and ordered the issu- ance of Gonzalez’s proposed subpoenas. The district court later USCA11 Case: 21-12922 Document: 47-1 Date Filed: 02/07/2023 Page: 3 of 11

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denied Verfruco US’s motion to vacate and to quash the subpoe- nas. No reversible error has been shown; we affirm.* I. Gonzalez is a Mexican engineer with expertise in processing avocados. In 2007, Gonzalez and two Mexican businessmen -- Vic- tor Sebastian-Mauricio and Jaime Sebastian-Mauricio (the “Broth- ers”) --formed a new business entity focused on processing avoca- dos and selling avocado pulp and guacamole in Mexico and inter- nationally. The newly-created Mexican entity was called Verfruco de Mexico, S. de R.L. de C.V. (“Verfruco Mexico”). Gonzalez re- ceived an 8% equity interest in Verfruco Mexico. The Brothers re- ceived a combined 35% ownership interest and became managers- of-record for Verfruco Mexico, authorizing the Brothers to act on behalf of the company under Mexican law. In 2009, the Brothers established Verfruco US -- a United States entity with its principal place of business in Coral Gables, Florida -- to supply pulp and guacamole to a specific client based

* Verfruco US identifies three orders in its notice of appeal: (1) the district court’s 17 November 2020 order granting Gonzalez’s section 1782 application; (2) the magistrate judge’s 14 April 2021 order denying Verfruco US’s motion to vacate and to quash the subpoenas; and (3) the district court’s 26 July 2021 order affirming the magistrate judge. Gonzalez contends that Verfruco US’s notice of appeal (filed 24 August 2021) was untimely filed for the 17 November 2020 order. We need not decide that issue today. Because we affirm the denial of Verfruco US’s motion to vacate the 17 November 2020 order, the underly- ing order necessarily stands, regardless of whether it was timely appealed. USCA11 Case: 21-12922 Document: 47-1 Date Filed: 02/07/2023 Page: 4 of 11

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within the United States. The Brothers obtained a 97% ownership share in Verfruco US and provided Gonzalez with a 3% ownership share. By 2020, the overall Verfruco business had become a lucra- tive operation, generating more than $50 million in annual reve- nues. According to Gonzalez, the Brothers have since frozen him out of the business and have sought to deprive Gonzalez of his eq- uity interest in Verfruco Mexico. Gonzalez contends that the Brothers transferred Verfruco Mexico’s assets and clientele to other companies owned or controlled (or both) by the Brothers, thus de- pleting Verfruco Mexico of all value. The companies to which as- sets were transferred include three Mexican entities: Freshcourt, S. de R.L. de C.V. (“Freshcourt”), Novafoods, S. de R.L. de C.V. (“No- vafoods”), and FI Avocados, S. de R.L. de C.V. (“FI Avocados”). Gonzalez filed in the United States District Court for the Southern District of Florida the section 1782 application underlying this appeal. Gonzalez said he intends to initiate litigation in Mexico against Verfruco Mexico, Freshcourt, Novafoods, and FI Avocados (collectively, the “Mexican Companies”) to recover the value of his 8% ownership interest in Verfruco Mexico. In preparation for his anticipated litigation in Mexican court, Gonzalez sought to obtain from Verfruco US discovery about the purported fraudulent trans- fer of assets. USCA11 Case: 21-12922 Document: 47-1 Date Filed: 02/07/2023 Page: 5 of 11

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The district court granted Gonzalez’s application and or- dered the Clerk of Court to issue the proposed subpoenas. The district court ordered Verfruco US to provide deposition testimony and to produce documents requested by subpoena that were within its “possession, custody, and/or control.” The subpoenas sought documentary and testimony evidence from Verfruco US on (1) assets, revenues, and profits of the Mexican Companies; (2) transfers of assets or cash from the Mexican Companies to the Brothers or to companies owned and/or controlled by them; and (3) evidence of Gonzalez’s ownership interest in the Mexican Com- panies and efforts to deprive him of that interest. Verfruco US moved to vacate the district court’s order and to quash the subpoenas. A magistrate judge denied the motions. Verfruco US objected to the magistrate judge’s ruling. The district court overruled those objections and affirmed the magistrate judge’s decision. This appeal followed. II. We review for abuse of discretion the district court’s rulings on a section 1782 application, including the denial of a motion to vacate a section 1782 order. See In re Clerici, 481 F.3d 1324, 1331 (11th Cir. 2007). We apply an “extremely limited and highly defer- ential” standard “identical to that used in reviewing the district court’s ordinary discovery rulings.” See id. Under this abuse-of- discretion standard, “we will leave undisturbed a district court’s ruling unless we find that the district court has made a clear error USCA11 Case: 21-12922 Document: 47-1 Date Filed: 02/07/2023 Page: 6 of 11

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of judgment, or has applied the wrong legal standard.” See Harri- son v. Culliver, 746 F.3d 1288, 1297 (11th Cir. 2014). A district court has authority under section 1782 to grant an application for judicial assistance if these statutory requirements are met: (1) the request is “made by a foreign or international tri- bunal, or by any interested person”; (2) the request seeks testimo- nial or documentary evidence; (3) the requested evidence is “for use in a proceeding in a foreign or international tribunal; and (4) the person from whom discovery is sought . . . reside[s] or [is] found in the district of the district court ruling on the application for assistance.” Id. at 1331-32 (quotations omitted). That Gonzalez satisfied these statutory criteria is undisputed. If all four statutory requirements are met, the district court may -- but is not required to -- grant relief under section 1782. Id. at 1332. In deciding whether relief is warranted, the district court next considers the four discretionary factors articulated in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004): (1) whether the person from whom discovery is sought is a participant in the foreign proceeding, . . .;

(2) the nature of the foreign tribunal, the char- acter of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assis- tance; USCA11 Case: 21-12922 Document: 47-1 Date Filed: 02/07/2023 Page: 7 of 11

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(3) whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering re- strictions or other policies of a foreign country or the United States; and

(4) whether the request is otherwise unduly in- trusive or burdensome.

See id. at 1334 (quotations omitted) (citing Intel, 542 U.S. at 264-65). Verfruco US raises no challenge to the district court’s de- termination that the second and third Intel factors weigh in Gon- zalez’s favor. Only the first and fourth factors are at issue in this appeal. A. The magistrate judge determined that the first Intel factor weighed in Gonzalez’s favor. The magistrate judge noted that Gonzalez sought discovery from Verfruco US: a United States cor- poration not subject to the jurisdiction of the Mexican courts and “a nonparticipant in the prospective foreign proceeding.” Never did Verfruco US object in the district court to the magistrate judge’s findings or conclusions on the first Intel factor. On appeal, Verfruco US now contends that the “true tar- gets” of Gonzalez’s discovery requests are the Mexican Companies: the intended defendants in the anticipated Mexican litigation. In support of its argument, Verfruco US relies chiefly on events that happened after the magistrate judge and the district court issued USCA11 Case: 21-12922 Document: 47-1 Date Filed: 02/07/2023 Page: 8 of 11

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the orders underlying this appeal. Briefly stated, Verfruco US al- leges that Gonzalez engaged in a “bait-and-switch” by expanding the scope of his discovery requests after the district court granted his section 1782 application and had affirmed the magistrate judge’s order denying Verfruco US’s motion to vacate. We will not consider this supposed new evidence on appeal. See Selman v. Cobb Cty. Sch. Dist., 449 F.3d 1320, 1332 (11th Cir. 2006) (“In deciding issues on appeal we consider only evidence that was part of the record before the district court.”). The record that was before the district court at the pertinent time supports the magistrate judge’s determination that the first Intel factor favored Gonzalez. B. About the fourth Intel factor, Verfruco US contends that Gonzalez’s discovery requests are unduly burdensome for two rea- sons: (1) because the requests seek evidence that “is within the ex- clusive possession of” the Mexican Companies; and (2) because Verfruco US supposedly lacks the requisite control over the Mexi- can Companies to obtain the evidence. Discovery authorized under section 1782 is to be produced “in accordance with the Federal Rules of Civil Procedure.” 28 U.S.C. § 1782(a). Under Fed. R. Civ. P. 45, subpoenaed parties are required to “produce designated documents, electronically stored information, or tangible things in that person’s possession, custody, or control.” See Fed. R. Civ. P. 45(a)(1)(A)(iii) (emphasis added). USCA11 Case: 21-12922 Document: 47-1 Date Filed: 02/07/2023 Page: 9 of 11

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Rule 45 imposes no geographical limitation on the location of doc- uments or information to be produced. See Sergeeva v. Tripleton Int’l Ltd., 834 F.3d 1194, 1200 (11th Cir. 2016). Thus, a subpoenaed party can be required to “produce responsive documents and infor- mation located outside the United States -- so long as [the party has] possession, custody, or control of such responsive material.” See id. We have “broadly construed ‘control’ for purposes of dis- covery as ‘the legal right to obtain the documents requested upon demand.’” See id. at 1201. A “legal right to obtain” does not require actual possession or legal control. See id. at 1201 n.6. Sufficient “control” may be established for discovery purposes by showing that “affiliated corporate entities . . . have actually shared respon- sive information and documents in the normal course of their busi- ness dealings.” Id. at 1201. Here, the magistrate judge determined that Verfruco US had sufficient “control” within the meaning of Rule 45 over documents within the physical possession of the Mexican Companies. Based on unrebutted sworn statements in Gonzalez’s declaration, the magistrate judge determined that Verfruco US and the four Mexi- can Companies share a common ownership. The magistrate judge also credited Gonzalez’s assertion that Verfruco US and the Mexi- can Companies operate essentially as a single business group. In doing so, the magistrate judge took judicial notice of the websites for Verfruco US and Freshcourt: websites that evidenced overlap- ping contact information, business addresses, and personnel USCA11 Case: 21-12922 Document: 47-1 Date Filed: 02/07/2023 Page: 10 of 11

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between Verfruco US, Verfruco Mexico, and Freshcourt. Verfruco US also registered in its own name the trademarks for Freshcourt and for Verfruco Mexico. In the light of the evidence of shared ownership and an in- terrelationship between Verfruco US and the Mexican Companies, the magistrate judge concluded that Gonzalez had demonstrated sufficiently that Verfruco US had the requisite “control” over re- quested documents within the physical possession or custody of the Mexican Companies. In a similar way, the magistrate judge concluded that Gonzalez’s discovery requests would result in no undue burden, given the shared management and ownership be- tween Verfruco US and the Mexican Companies. On appeal, Verfruco US disputes the magistrate judge’s fac- tual findings about the interrelationship between Verfruco US and the Mexican Companies. The magistrate judge’s factual findings are, however, supported by the undisputed record evidence then before the magistrate judge. Nothing evidences that the magistrate judge’s factual findings are clearly erroneous. We conclude that the magistrate judge made no clear error of judgment in determin- ing that Verfruco US exercised sufficient control over the requested documents and that Gonzalez’s discovery requests stopped short of being “unduly burdensome.” Because the record supports the magistrate judge’s determi- nation that all four Intel factors weighed in favor of Gonzalez, the district court abused no discretion in affirming the magistrate USCA11 Case: 21-12922 Document: 47-1 Date Filed: 02/07/2023 Page: 11 of 11

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judge’s denial of Verfruco US’s motion to vacate the order granting Gonzalez’s application for judicial assistance under section 1782. AFFIRMED.