Years after Plaintiffs brought a federal securities complaint against Petrobras, and more than a year after the case settled for approximately $3 billion, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York ordered the unsealing of the majority of documents attached to parties’ summary judgment papers. Judge Rakoff’s decision comes as an important reminder that sealing orders are not intended to last forever.
- Cornell University moved to intervene in the U.S. securities class action against Petrobras for an order under 28 U.S.C. Section 1782, which authorizes discovery for use in foreign proceedings. Basically, Cornell wanted document produced in the U.S. suit for its arbitration proceedings in Brazil. The Honorable Judge Rakoff denied the Section 1782 request on the grounds that (a) as a non-U.S. company with overseas operations, Petrobras did not sufficiently “reside” and was not legally “found” in the district, and (b) the term “foreign or international tribunal” did not encompass the CAM arbitration chamber in Brazil as it was the creation of private parties.
- Judge Rakoff largely granted Cornell’s alternate motion to unseal documents including those used in the summary judgment proceedings, which will make them publicly available for use in Brazil. He ordered the parties to review the documents and agree or present arguments why specific documents should or should not be unsealed.
Meanwhile, in Brazil, the tribunal arbitrating Petrobras claims has taken an expansive view of its jurisdiction, requiring the majority shareholder to submit to arbitration.
- While complicated, the decision boiled down to this: if an issuer’s bylaws require arbitration when claims are filed, the Market Arbitration Chamber of the B3 S.A. (“CAM”) has jurisdiction over them even if the company did not expressly submit to mandatory arbitration at CAM until later.
- This ruling is a bellwether for future securities matters and the decision encourages those with claims under investigation or book-building against Brazilian issuers for alleged wrongdoing. Parties contemplating foreign proceedings potentially can use 28 U.S.C. §1782 to obtain broad discovery from U.S. persons for use in their foreign proceedings.
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- FRT’s Fast Five: Week ending August 22, 2019: https://frtservices.com/frts-fast-five-week-ending-august-22-2019/
- The Limits of Obtaining Discovery From U.S. Persons for Use in Foreign Proceedings: https://www.law.com/newyorklawjournal/2019/08/22/the-limits-of-obtaining-discovery-from-u-s-persons-for-use-in-foreign-proceedings/?slreturn=20190728090814
- Judge Rakoff Unseals Documents in Petrobras Securities Class Action To Allow Use in Foreign Arbitration, Bypassing Traditional Requirements of 28 U.S.C. § 1782: https://www.natlawreview.com/article/judge-rakoff-unseals-documents-petrobras-securities-class-action-to-allow-use
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