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Compagnie DES Grands Hotels d'Afrique S.A. v. Starman Hotel Holdings LLC

United States District Court, D. Delaware

July 15, 2019



         Plaintiff filed a Motion for Issuance of a Hague Convention Letter of Request to Obtain Evidence in Morocco. (D.I. 82). Defendant does not oppose this motion but does seek to add more evidence to the request. (D.I. 86). Plaintiff opposes these additions. (D.I. 89).

         I. Factual and Procedural History

         On August 6, 2013, Plaintiff Compagnie des Grands Hotels d'Afrique SA. ("CGHA") commenced an arbitration proceeding (the "Arbitration") through the International Chamber of Commerce ("ICC") against Woodman Maroc S.a.r.l. ("Woodman"), a former subsidiary of Starwood Capital Group Global I LLC ("SCG") and Defendant Starman Hotel Holdings LLC ("Starman"). (D.I. 82-1 at 4). CGHA contracted with an entity now known as Woodman approximately thirty years ago for the management of CGHA's Royal Mansour Hotel (the "Hotel"). (Id. at 3). The basis of the Arbitration was that, after Woodman was obtained by Meridian Group in 2005, Woodman failed to properly invest in the Hotel. (Id.). Ten months after CGHA commenced the Arbitration, Starman, which had obtained Woodman's parent company and Woodman, sold them to a United Kingdom entity, Maquay Investments Ltd. ("Maquay"). (Id. at 4). Maquay then placed Woodman's parent into insolvency proceedings. (Id.). Woodman formally withdrew from the Arbitration, citing insolvency and inability to pay any judgment or award. (Id.). CGHA requested and received an interim order from the Arbitrators directing Woodman to (1) return possession and operation of the Hotel to CGHA, (2) account for payments it had made after ceasing to pay the minimum fee of the Arbitration award, and (3) cease making payments to third parties. (Id. at 4-5). CGHA was awarded approximately $60 million in damages from Woodman in the Arbitration. (Id. at 5). The Arbitrators also found that Starman had acted in the place of Woodman under the management agreement, that CGHA was led to believe that it could rely on Starman assuming all of Woodman's responsibilities under the agreement, and that Maquay had been formed solely to receive the shares of Woodman's parent and place it into voluntary liquidation. (Id.). The Arbitration award was recognized in a court tribunal in Morocco on December 14, 2016. (Id.).

         The Arbitration award was against Woodman only. Because of the insolvency proceedings, Woodman is now unable or unwilling to pay the award. (Id.). CGHA brought the present action against Starman in order to collect the award from it. (D.I. 83 at 3). CGHA initially claimed that Starman could be held liable for Woodman's actions based either on agency theory or alter ego theory. (Id.). This Court dismissed the agency cause of action on January 9, 2019, but allowed CGHA to proceed with the alter ego claim. (Id. at 2).

         CGHA filed a motion for the issuance of a letter of request to obtain discovery in Morocco. (D.I. 82). The request seeks evidence from seven entities and one individual: Woodman, PwC Maroc, FIDAB, FIGES, Societe Generate, Abdelghani Hadri, KPMG and Fidaroc Grant Thornton ("FGT"). (Id. at 5-6). As this evidence is sought in Morocco, a letter of request must be issued in accordance with the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters ("Hague Convention"). (Id. at 1). Both the United States and Morocco are signatories to the Hague Convention. (Id.).

         The issues addressed in this opinion are: (1) whether to issue a letter of request, pursuant to 28 U.S.C. § 1781, to obtain evidence in Morocco, and (2) if the letter of request is issued, what evidence to request from KPMG and FGT.

         II. Legal Standard

         a. Standard for the Issuance of Letters of Request

         The parties in this case agree to the issuance of a letter of request to obtain evidence in Morocco. (D.I. 83 at 5-8). Further, both the United States and Morocco are signatories of the Hague Convention, indicating a mutual commitment to providing evidence for use in the other's legal proceedings. (D.I. 82 at 3). Courts "routinely issue such letters where the movant makes a reasonable showing that the evidence sought may be material or may lead to the discovery of material evidence." Netherby Ltd. v. Jones Apparel Grp., Inc., 2005 WL 1214345, at *1 (S.D.N.Y. May 18, 2005); see Tulip Computers Intern. B. V. v. Dell Computer Corp., 254 F.Supp.2d 469, 474 (D. Del. 2003). The "burden is not great" for a party seeking a letter of request because "the Convention procedures are available whenever they will facilitate the gathering of evidence by the means authorized in the [Hague] Convention." Tulip Computers Intern. B. V, 254 F.Supp.2d at 474. However, "[w]here the relevancy or materiality of the [discovery] sought is doubtful, the court should not grant the application for letters of request." Merck Sharp & Dohme Corp. v. Sandoz, Inc., 2013 WL 12203112, *3 (D.N.J. June 7, 2013) (quoting United States v. Rosen, 240 F.R.D. 204, 215 (E.D. Va. 2007)).

         b. The Alter Ego Theory

         In order to prove alter ego liability, a plaintiff "must show (1) that the corporation and its shareholders operated as a single economic entity, and (2) that an overall element of injustice or unfairness is present." Trevino v. Merscorp, Inc., 583 F.Supp.2d 521, 528 (D. Del. 2008). The second element requires plaintiffs to prove that defendants' "use of the corporate form would, if left unchecked, work as a fraud or something in the nature of a fraud." Mobil Oil Corp. v. Linear Films, Inc., 718 F.Supp. 260, 267 (D. Del. 1989). The evidence sought by the letters of request must relate to one of the two elements of alter ego liability.

         III. Discussion

         a. Whether to Issue a Letter of Request

         Both parties agree to the evidence requested of Woodman, PwC Maroc, FIDAB, FIGES, Societe Generale, and Abdelghani Hadri. (Id.). The request of Woodman, the judgment-debtor, is for documents and communications regarding its dealings with Starman, its financial status, and its dealings with auditors. (D.I. 83 at 5). The request of PwC Maroc, a legal service provider, is for documents prepared and filed for Woodman, and for communications between PwC Maroc and Woodman and Woodman's parent company. (Id. at 5-6). The request of FIDAB, a legal service provider, is for documents prepared and filed for Woodman. (Id. at 6-7). The request of FIGES, a legal service provider, is for communications relating to Woodman's handover of the Hotel to CGHA and communications between FIGES and CGHA and CGHA's parent company. (Id. at 7). The request of Societe Generale, a bank, is for materials showing Woodman's continued payments to third parties while failing to make minimum fee payments. (Id. at 7-8). The request of Hadri, the General Manager of the Hotel ...

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