In Re Application of GORSOAN LIMITED and GAZPROMBANK OJSC for an Order Pursuant…

Background

Gazprombank OJSC and its assignee, Gorsoan Limited, sought discovery under 28 U.S.C. § 1782 for use in an ongoing proceeding in Cyprus. That proceeding alleged that Bullock and 29 other defendants fraudulently diverted bond proceeds and sought approximately $22 million in damages. The Cyprus court had also frozen Bullock’s assets worldwide and required her to disclose assets worth more than 10,000 euros.

The federal court had previously authorized discovery from Bullock, her daughter Zoe Bullock Remmel, RIGroup LLC, and former counsel Stuart A. Smith. After earlier disputes and a contempt finding, the current case concerned Bullock’s alleged failure to produce categories of documents and her failure to appear for, or answer truthfully at, depositions.

At a February 2018 deposition, Bullock repeatedly answered that she did not know basic information about her assets, expenses, and property. She also denied having an ownership interest in a Southampton property even though she had signed a deed selling it on behalf of the entity identified as the seller. The court later ordered additional document review and production, including documents concerning the Landmark Trust. At a resumed deposition in August 2018, Bullock invoked her Fifth Amendment right against self-incrimination in response to every question and asserted the same right regarding remaining document-production duties.

Requests for Factual Findings

Gorsoan asked the court to find that Bullock violated her discovery obligations and to draw adverse inferences that she held assets worth more than 10,000 euros, or had transferred such assets in violation of the Cyprus court’s order. Gorsoan wanted those findings for consideration in the Cyprus proceeding.

The court agreed that Bullock had failed to satisfy her discovery obligations but denied the request for factual findings. Section 1782 authorizes a federal court to help gather testimony and documents for a foreign tribunal; it does not authorize the federal court to decide facts in place of that tribunal when discovery is unsuccessful. The court stated that the Cyprus court, not the federal court, had responsibility for deciding whether to draw adverse inferences in the Cyprus proceeding.

Document Production and the Fifth Amendment

The court granted Gorsoan’s request to compel document production. It held that Bullock had waived any act-of-production privilege under the Fifth Amendment by asserting it too late. The act-of-production privilege can protect the act of producing documents when that act itself would communicate incriminating information, but the privilege must be asserted in a timely manner.

The court concluded that Bullock intentionally delayed asserting the privilege for strategic advantage. After the court raised the possibility of a perjury investigation in April 2018, Bullock continued negotiating a document-review process and led the court and Gorsoan to believe that additional production remained possible. She asserted the privilege only after those negotiations and shortly before the resumed deposition. The court found that the delay prejudiced Gorsoan because the Cyprus proceeding was moving toward its merits phase.

The court ordered Bullock to resume the previously agreed document-review process and produce all responsive documents by July 15, 2020. If she claimed another privilege, such as attorney-client privilege, she had to establish that privilege separately for each document.

Spoliation Sanctions

Gorsoan sought sanctions based on Bullock’s destruction of an old laptop in December 2017. The court applied the three-part spoliation standard: the party had to be required to preserve the evidence, the evidence had to be destroyed with a culpable state of mind, and the evidence had to be relevant to the claim or defense.

The court granted in part Gorsoan’s request for spoliation sanctions. It found that Bullock had a duty to preserve the laptop, that circumstantial evidence showed she destroyed it intentionally and in bad faith, and that the laptop’s contents were relevant and likely favorable to Gorsoan. The court pointed to the timing of the destruction, Bullock’s repeated discovery misconduct, and her refusal to explain the destruction.

Because the court could not draw an adverse inference for use in the Cyprus proceeding, it ordered Bullock to pay Gorsoan’s reasonable attorney’s fees and costs related to the spoliation dispute. Gorsoan was directed to submit documentation of those fees and costs by June 25, 2020, and Bullock could object to their reasonableness by July 1, 2020.

Other Sanctions

Gorsoan also sought broader monetary sanctions for fees and costs arising from Bullock’s discovery conduct. The court had already found Bullock in civil contempt for violating an order requiring her to attend the February 2018 deposition and answer questions truthfully.

The court awarded $26,624.80 in contempt sanctions for the February 2018 deposition and April 2018 hearing, including attorney’s fees and costs. It also awarded $16,815.57 for work connected to the August 2018 deposition. In addition, it awarded $50,402 for fees connected to Bullock’s failure to attend the November 2017 deposition and the resulting December 2017 hearing.

The court denied, without prejudice to renewal, other additional sanctions concerning Bullock’s assertion that she had produced all responsive documents and the broader history of misconduct. It stated that those issues could be evaluated more fully after the ordered document review and resolution of disputes about the subpoena’s scope and other privileges.

Disposition

The order denied Gorsoan’s request for factual findings in lieu of discovery; granted its request to compel Bullock to produce documents; granted in part its request for spoliation sanctions; and granted in part its request for other sanctions. The court imposed total sanctions of $94,382.37 against Bullock in favor of Gorsoan, consisting of $89,357 in attorney’s fees and $5,025.37 in costs. The parties were also ordered to resume the document-review process and complete it by July 15, 2020. Judge Richard J. Sullivan signed the order as a United States Circuit Judge sitting by designation.