Top Matrix Holdings, In Re
Posted on Categories Court Decisions, Securities Customers

By Ben Suter

The Court grants in part and denies in part the petitioner’s application for an order to take discovery for use in a foreign proceeding.

Top Matrix Holdings, In Re, No. 18 Misc. 465 (ER), U.S. Dist. LEXIS 210264 (S.D. N.Y., 12/2/19).

The Court grants in part and denies in part the application for an order to take discovery for use in a foreign proceeding, finding that, although the petitioner was entitled to conduct discovery for use in anticipated foreign litigation, the discovery requests were overly burdensome as phrased.

Top Matrix Holdings Ltd. (“Top Matrix”) is a company established by Credit Suisse AG (“Credit Suisse”) on behalf of businessman and former Russian senator Vitaly Malkin (“Malkin”) and his then-business partner Bidsina Ivanishvili (“Ivanishvili”), the former Prime Minister of Georgia. Credit Suisse established Top Matrix on their behalf as part of a trust and offshore company structure. In 2015, Credit Suisse discovered that its Russia Desk Relationship Manager Patrice Lescaudron (“Lescaudron”) had perpetrated a fraudulent scheme falsifying trades and distributing false statements in his role at Credit Suisse. Lescaudron admitted to “trading without clients’ authorization, purchasing investments at higher-than-agreed quantities, trying to cover losses and submitting fabricated statements to clients to disguise losses.”

Top Matrix alleges that Credit Suisse failed to prevent and detect the fraudulent scheme perpetrated by Lescaudron, causing hundreds of millions of dollars in damages as a result. Accordingly, Top Matrix plans to file suit against Credit Suisse in Switzerland. Pursuant to 28 U.S.C. § 1782, Top Matrix applied for court orders to conduct pre-litigation civil discovery for information from wholly-owned U.S. subsidiaries of Credit Suisse (“Credit Suisse USA”) that it claims will be highly material to its anticipated Swiss litigation. Credit Suisse argues that Top Matrix has not actually initiated a proceeding or objectively indicated its intent to litigate, as required by the statute. The Court disagrees based on the fact Top Matrix submitted a sworn statement from its Swiss lawyer attesting to its intent to litigate in Switzerland and providing the legal theories on which it intended to rely.

The Court then turns to the three applicable (of four total) discretionary factors described in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). First, Credit Suisse USA was not within the jurisdiction of the Swiss courts. That the information sought might also be in Credit Suisse’s possession is irrelevant because Credit Suisse and Credit Suisse USA are separate legal entities. Second, the Court determines that Top Matrix was not seeking to circumvent Swiss discovery restrictions because Top Matrix has not previously received an adverse discovery decision from the Swiss courts and Credit Suisse has not articulated a specific Swiss policy that Top Matrix might be attempting to circumvent.

Finally, the Court demurs, the requests, as phrased, are overly burdensome. The requests sought “any and all information” relating to various broad matters spanning a period of 13 years. Accordingly, the Court directs Top Matrix to submit a narrower discovery request. In the interim, it grants in part and denies in part the application for an order to take discovery for use in a foreign proceeding.

(B. Suter)

(SOLA Ref. No. 2020-08-09)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis. 

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