UNITED STATES DISTRICT COURT SOUTHERN DISTRICT …blogs.reuters.com/.../files/2013/10/wultzvboc-hapaolimquashbrief.pdf · united states district court southern district of new york

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

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SHERYL WULTZ, et al.,

Plaintiffs,

v.

BANK OF CHINA, LTD.,

Defendant.

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Case No. 11 Civ. 1266 (SAS) (GWG)

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MEMORANDUM OF LAW IN SUPPORT OF MOTION BY NON-PARTY BANK HAPOALIM B.M. TO QUASH OR MODIFY THE

SUBPOENA DATED JUNE 20, 2013

HERRICK, FEINSTEIN LLP Carol M. Goodman Janice I. Goldberg 2 Park Avenue New York, New York 10016 Tel: (212) 592-1400 Fax: (212) 592-1500 [email protected]

Attorneys for Non-Party Bank Hapoalim B.M.

Case 1:11-cv-01266-SAS-GWG Document 298 Filed 08/12/13 Page 1 of 32

TABLE OF CONTENTS

Page

TABLEOF AUTHORITIES .........................................................................................................iii

PRELIMINARYSTATEMENT .....................................................................................................1

THESUBPOENA............................................................................................................................ 4

ARGUMENT...................................................................................................................................6

1. THIS COURT SHOULD QUASH THE SUBPOENA FOR FAILURE TO COMPLY WITH RULE 45 OF THE FEDERAL RULES OF CIVIL PROCEDURE......................................................................................................................6

II. THE INFORMATION THAT BOC SEEKS FROM HAPOALIM MAY NOT BE DISCLOSED UIN'DER ISRAELI LAW ..............................................................................9

A. Under Israeli Law, Hapoalim Has a Duty Not to Testify Regarding its Bank-Client Relations ............................................................................................ 11

B. Israel's Banking Ordinance Prohibits Hapoalim From Disclosing Information It Has Exchanged with the Bank of Israel ......................................... 14

C. Israel's Prohibition on Money Laundering Law and Prohibition of Terror Financing Law Prohibit Hapoalim from Disclosing Certain Information thatBOCSeeks......................................................................................................16

D. Under Israeli Law, Hapoalim Cannot Be Compelled To Give Self- Incriminating Testimony........................................................................................17

III. INTERNATIONAL COMITY WEIGHS AGAINST COMPELLING HAPOALIM TO PRODUCE A WITNESS TO TESTIFY ON THE TOPICS DESIGNATED BY BOC ..................................................................................................18

A. Compliance With The Subpoena Would Undermine Significant Israeli Interests..................................................................................................................19

B. The Information that BOC Seeks Is Not Essential to the Underlying Litigation................................................................................................................21

C. The Information Originates in Israel, the Information Sought is Overbroad, and There are Alternate Means of Securing It .................. ................. .24

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IV. THIS COURT SHOULD LIMIT BOC'S SUBPOENA ON THE BASIS OF U.S. LAWALONE.................................................................................................................... 25

CONCLUSION ..............................................................................................................................26

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TABLE OF AUTHORITIES

Page

Federal Cases

In re ANC Rental Corp., Misc. Action No. 02-148; 2002 WL 34729302 (ED. Pa. June 20, 2002)................................ 8

Cates v. LTV Aerospace Corp., 480 F.2d 620 (5th Cir. 1973) ..................................................................................................... 7

Cuomo v. Clearing House Ass'n, 557 U.S. 519 (2009)................................................................................................................. 22

Gucci Amer. Inc. v. Li, No. 10 Civ. 4974(RJS), 2011 WL 6156936 (S.D.N.Y. Aug. 23, 2011).................................. 22

Linde v. Arab Bank, Civil Case No. 1 :04-cv-02799-NG-VVP, 262 F.R.D. 136 (E.D.N.Y. 2009) ..................passim

Madanes v. Madanes, 186 F.R.D. 279 (S.D.N.Y. 1999) ............................................................................. 9, 18, 19, 20

Minpeco. S.A. v. Conticommodity Servs., Inc., 116 F.R.D. 517 (S.D.N.Y. 1987) ................................................................................. 18, 19,20

Minpeco, S.A. v. Conticommodity Servs., Inc., 118 F.R.D. 331 (S.D.N.Y. 1988) ............................................................................................. 19

Prokosch v. Catalina Lighting, Inc., 193 F.R.D. 633 (D.Minn. 2000)............................................................................................... 25

Price Waterhouse LLP v. First Amer. Corp., 182 F.R.D. 56 (S.D.N.Y. 1998) ............................................................................................. 2,7

Reinsurance Co. of Am. v. Administratia Asigurarilor de Stat, 902F.2d 1275 (7thCir. 1990) ................................................................................................. 20

Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468 (9th Cir. 1992) ........................................................................................... 21, 24

RP Family Inc. v. Commonwealth Land Title Ins. Co., No. IOCVI 149 (DLI) (CLP), 2011 WL 6020154 (E.D.N.Y. Nov. 30, 2011) ...........................7

Smith v. BIC Corp., 121 F.R.D. 235 (E.D. Pa. 1988), aff'd ....................................................................................... 7

ff


Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court for S. Dist. of Iowa, 482 U.S. 522 (1987).................................................................................................................20

Sprint Commc'ns Co., L.P. v. Theglobe.corn, Inc., 236 F.R.D. 524 (D.Kan. 2008)................................................................................................. 25

St. Paul Fire & Marine Ins. Co. v. Royal Ins. Co., No. 91 Civ. 6151 (PNL), 1993 WL 267347 (S.D.N.Y. July 12, 1993) .....................................7

Stanford v. Kuwait Airlines Corp., No. 85 Civ. 0477 (SWK), 1987 WL 26829 (S.D.N,Y. Nov.25, 1987)......................................8

Tiffany (NJ) LLC v. Qi Andrew, 276 F.R.D. 143 (S.D.N.Y. 2011) .......................................................................................18, 21

Tiffany (NJ) LLC v. Forbse, No.11 Civ. 4976(NRB), 2012 WL 1918866 (S.D.N.Y. May 23, 2012).................................21

In re Westinghouse Elec. Corp. Uranium Contracts Litig., 563 F.2d 992 (10th Cir. 1977...................................................................................................21

Statutes

Fed. R. Civ. P. 26(b)(2)(C)(iii) ......................................................................................................26

Fed . R. Civ. P. 30(b)(6)................................................................................................................ 7, 8

Fed . R. Civ. P.30.1 .................................................................................................................... 8,26

Fed . R. Civ. P. 45(a)(2)(B) .............................................................................................................. 7

Fed . R. Civ. P. 45(c)(3)(A)(iv) ........................................................................................................7

Fed. R. Civ. P. 45(c)(3)(A)(ii) ......................................................................................................... 8

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Bank Hapoalim B.M. ("Hapoalim") respectfully submits this memorandum of law in

support of its motion to quash or in the alternative modify the 30(b)(6) subpoena (the

"Subpoena") served on it by Defendant Bank of China, LTD. ("BOC"). Together with this

memorandum of law, Hapoalim also submits the Supplemental Declaration of Ehud Arzi

pursuant to Fed, R. Civ. P. 44.1. sworn to August 8, 2013 ("Arzi Supp. Dccl."), which encloses

as an exhibit the Declaration of Ehud Arzi sworn to May 21, 2007 ("2007 Arzi Deci."), the

Declaration of Gina Frederique, sworn to August 12, 2013 ("Frederique Dccl."), and the

Declaration of Carol M. Goodman, Esq., sworn to August 12, 2013 ("Goodman Dccl.")

PRELIMINARY STATEMENT

In this action, Plaintiffs have accused BOC of knowingly providing material support and

resources to the Palestine Islamic Jihad ("PIJ") terrorist organization, allowing PIJ to carry out a

2006 suicide bombing in Tel Aviv, Israel. The Complaint asserts this allegation on various

bases. The basis relevant to the instant motion is as follows: that BOC was warned that the

deposits into, and transfers from, the account of its client Said al-Shurafa ("Shurafa") were being

used to fund PIJ terrorist attacks, yet ignored demands to halt such transfers. (Dkt. No. 12, First

Amended Complaint ("FAC") ¶ 77.)

Through the Subpoena, BOC seeks extensive testimony from non-party 1-lapoalim

regarding its confidential records and correspondence in an apparent attempt to prove that "the

Israeli officials didn't warn an Israeli bank" about Shurafa -- thus, somehow, that must mean that

the Israeli officials did not warn BOC. The Subpoena seeks this testimony from Hapoalim

despite the fact that it would require Hapoalim, a non-party, to produce a witness located in

Israel in violation of the Federal Rules; and that any such testimony is protected from disclosure

by Israeli immunity laws. Significantly, the information sought is immaterial to the claims in the


action and speculative -- whether or not the Israeli officials met with Hapoalim has nothing

whatsoever to do with what transpired between Israeli officials and BOC. This legal theory

certainly does not constitute the "compelling and rare circumstance" necessary to compel a non-

party to disclose confidential and protected information.

First, the Subpoena must be quashed in its entirety because it seeks testimony that can

only be provided by a Hapoalim employee that works and resides in Israel. Therefore, the

Subpoena fails to meet Rule 45's territorial requirements concerning the location from which

deposition subpoenas must issue and the distance a deponent may be forced to travel.

Second, the Subpoena must be quashed or substantially modified because Hapoalim

should not be forced to engage in cumulative (and likely irrelevant) discovery that will cause it to

violate numerous laws in Israel and subject it to possible criminal and civil liability. Hapoalim is

not alleged by the plaintiffs to have participated in any terrorist financing. There is no allegation

that Hapoalim participated in any wrongdoing whatsoever. Rather, the Subpoena is attempting

to use an Israeli bank to deflect attention from the true issues in this case -- the propriety of

BOC's (not Hapoalirn's) conduct.

The relevant international comity factors -- which guide the Court's analysis of whether

to compel a non-party's compliance with a subpoena that demands discovery in violation of

foreign law weigh strongly in favor of quashing the Subpoena. Foremost, BOC has not even

explained how certain of the information it seeks may be relevant. Moreover, Hapoalim is not a

party, all of the information sought by BOC is exclusively located abroad in Israel, BOC is

apparently seeking similar information from another source, and Hapoalirn could be subject to

civil and criminal penalties in its home country -- including imprisonment for up to five years --

for disclosing: (1) confidential banking information in violation of the bank-client privilege;

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(2) confidential communications with its regulator, the Bank of Israel, in violation of the

Banking Ordinance and (3) information in its possession in violation of Israel's Prohibition of

Money Laundering Law and Prohibition of Terror Financing Law. In addition, the Subpoena

calls for testimony that could cause Hapoalim to waive its right against self-incrimination. The

Israeli interests that such laws further would be severely undermined by Hapoalim's compliance

with the Subpoena, whereas noncompliance would not greatly undermine important interests of

the United States.

Under circumstances markedly similar to this case, the District Court for the Eastern

District of New York held, in Linde v. Arab Bank, PLC, that Hapoalim, a non-party, could not

be compelled to produce documents or provide testimony relating to such documents in response

to subpoena requests that would violate any of the foregoing Israeli laws. 262 F.R.D. 136, 147-

153 (E.D.N.Y. 2009).

Third, and notwithstanding the comity analysis, the Subpoena should be quashed or

substantially modified at any rate in accordance with the permissible scope of discovery allowed

under the Federal Rules of Civil Procedure. The Subpoena, in certain instances, impermissibly

seeks a Hapoalim employee to act as expert for BOC, and seeks to impose a burden on Hapoalim

that markedly outweighs any likely benefit occasioned by production of the information sought.

Moreover, the Subpoena would require Hapoalim to educate a 30(b)(6) witness on numerous

vague topics for which BOC has not described the information sought with reasonable

particularity.

For these reasons, as set forth more fully below, the Subpoena should be quashed. In the

alternative, the Court should at minimum substantially modify the Subpoena and order that BOC

may not obtain testimony protected from disclosure under Israeli law. Lastly, the Court should


limit the information sought from the Subpoena on the grounds that many of the requests are

burdensome, overbroad, cumulative and irrelevant.

THE SUBPOENA

BOC served a document subpoena on Hapoalim dated September 28, 2012 (the

"Document Subpoena") seeking three (3) categories of documents. Briefly, the Document

Subpoena requested (i) documents concerning particular banking transactions that originated

from Hapoalim in Israel for ultimate deposit, after processing through intermediary

correspondent banks, in the BOC account of Said Shurafa ("Shurafa") in China (the "Shurafa

Wire Transactions"); (ii) Israeli Bank policies relating to the Shurafa Wire Transactions; and (iii)

general banking policies. (See Goodman Dccl., Ex. 1.)

In response to the Document Subpoena, Hapoalim produced its internal policies' as well

as transaction records -- redacted to comply with the obligations imposed by Israeli law -- for

wire transfers despite the fact that BOC has had its own copies of such transaction records since

the inception of this litigation. (See, Goodman Dccl., ¶ 3.) Obviously aware of the Linde

decision, BOC did not object to Hapoalim's redactions, or request any further documentation.

Nonetheless, BOC is now attempting to circumvent the principles established in the

Linde decision by demanding testimony (as opposed to documents) through a 30(b)(6)

Subpoena. In particular, BOC demanded via its Subpoena that on July 23, 2013, Hapoalim

produce for examination a 30(b)(6) witness to provide testimony concerning 16 markedly broad

categories (each category with numerous sub parts) relating to Hapoalim's and its client's

Because category 3 of the Document Subpoena was general, Hapoalim produced internal policies for both Israel and New York in response to the Document Subpoena, even though the only policies relevant to the Shurafa Wire Transactions are the Israeli policies (the "Policies"). Indeed, BOC did not even realize that it had requested policies that did not relate to the Shurafa Wire Transactions until a meet-and-confer session between counsel, and BOC has since conceded that it does not seek deposition testimony concerning Hapoalim's New York policies. (Goodman Dccl. at ¶ 2, 7A.)

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business dealings in Israel. As discussed below, BOC's 30(b)(6) Subpoena facially requests

information that is protected from disclosure by numerous Israeli laws.

A copy of the Subpoena is annexed hereto as Goodman Decl., Exhibit 2. Briefly

summarized:

The Subpoena seeks information from Hapoalim about its dealings with its customer in

Israel and their transactions, as well as any investigations made into transactions ordered by its

customer or conversations with the Israeli government concerning same. (Id., Topics 1-6.)

The Subpoena seeks information about Hapoalirn's internal policies for its Israeli

branches (Id. Topics 8-9, 16). Although numerous of Hapoalim's banking policies have already

been produced, BOC has made clear during the parties' meet-and-confer sessions that the

testimony it seeks concerning such policies is not abstract and general but instead as applied to

the Shurafa Wire Transactions originated by Hapoalim (Goodman Deci., at ¶ 7B.)

The Subpoena seeks information concerning Hapoalim's internal organization (Goodman

Decl., Ex. 2, Topic 10) and the roles and responsibilities of its Israeli personnel for drafting and

implementing policies and communicating with the Israeli government (id. at Topics 11-12).

The Subpoena also seeks information about a myriad of Hapoalim's public statements in 2005

and 2006 annual reports. (Id., Topics 13-14.) With regards to the annual reports, BOC made

clear during the parties' rneet-andconfer sessions that it seeks an explanation of these

statements, which speak for themselves, and seeks to test the veracity of these statements (i.e.,

BOC seeks Hapoalim to testify as to whether it stands in compliance with or in violation of the

laws that govern its behavior in Israel even though Hapoalim is not alleged to have acted in

violation of any laws), (Goodman Dccl., at ¶ 7C.)

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Finally, the Subpoena seeks information about Hapoalim's dealings with BOC, which

BOC already possesses, and information about the Israeli government's processes and

procedures, which BOC has already sought through the Hague Convention. (Id., Topics 7, 15.)

Hapoalim responded with General and Specific Objections on July 11, 2013 (Goodman

Dccl., Ex. 4),2 and also met and conferred with counsel for BOC on July 3, 11, 16 and 19, 2013.

(Goodman Deci., at ¶ 6.) The parties were unable to agree on the scope of the testimony sought

by the Subpoena.

ARGUMENT

I. THIS COURT SHOULD QUASH THE SUBPOENA FOR FAILURE TO COMPLY WITH RULE 45 OF THE FEDERAL RULES OF CIVIL PROCEDURE

The Shurafa Wire Transactions (and policies that govern them) for which BOC seeks

testimony originated in Israel and have no connection to Hapoalim's New York office

whatsoever. (Frederique Dccl., at ¶ 4.) Not surprisingly, there are no employees located in New

York with any relevant knowledge of these topics. (Id. at ¶ 5.) Regardless, during the parties'

meetandconfer sessions, BOC took the position that Hapoalim is obligated to fly a deponent to

New York 3 or educate a New York designee -- someone with no knowledge concerning the

Israeli issues that are the sole target of the Subpoena -- to give testimony in New York.

(Goodman Dccl., at ¶ 7D.) BOC is mistaken. First, it is not reasonable or even practical to

2 Hapoalim reserves all objections set forth in its July 11,2013 written objections.

BOC claimed, in part, that it is entitled to a New York deponent on confidential Israeli issues because in Linde v. Arab Bank, Civil Case No. 1:04-cv-02799-NG-VVP (E.D.N.Y.), Arab Bank has procured New York employees of Hapoalirn to testify to such issues at trial. (Goodman Deci. at ¶ 9.) There is no indication from the record in JJpe that that is the case and in fact the trial witness list has identified certain Hapoalini New York and Israeli current and former employees only to elicit what it calls "banking and industry standards" not any confidential information possessed by Hapoalim. Moreover, Arab Bank has yet to attempt to subpoena any such individual for trial testimony. (Goodman DecI. at ¶ 9.)

6


"educate" a New York employee concerning transactions and policies in which they have no

knowledge,

Second, pursuant to Rule 45, a subpoena must be quashed or modified if it (a) requires a

person that is not a party or a party's officer to travel more than 100 miles from where that

person resides, is employed, or regularly transacts business in person, or if it (b) subjects a

person to undue burden. Fed. R. Civ. P. 45(c)(3)(A)(ii) and (iv). Moreover, a deposition

subpoena must issue from a court in the district where the deposition is to be taken. Fed. R.

Civ. P. 45(a)(2)(B). 4

BOC's obligation to comply with Rule 45 is not obviated simply because BOC issued a

Rule 30(b)(6) subpoena. A Rule 30(b)(6) designee cannot be required to travel outside of the

geographical limits imposed by Rule 45. Cates v. LTV Aerospace Corp., 480 F.2d 620, 623 (5th

Cir. 1973); see also RP Family Inc. v. Commonwealth Land Title Ins. Co., No. 1OCV1 149 (DLI)

(CLP), 2011 WL 6020154, at *2 (E.D.N.Y. Nov. 30, 2011) (Rule 45 applies even to those

individuals designated under Rule 30(b)(6)). Nor may the Court modify the Subpoena to compel

testimony abroad given Rule 45(a)(2)(B)'s strictures that a subpoena issue "from the court for

the district where the deposition is to be taken." 121 F.R.D. 235, 245 (E.D.

Pa. 1988), aff'd in part and rev'd in part, remanded, 869 F.2d 194 (3d Cir. 1991), As this Court

has stated, "Rule 45's goal is to prevent inconvenience to the fleshandblood human beings who

are asked to testify, not the legal entity for whom those human beings work." Price Waterhouse

LLP v. First Amer. Corp., 182 F.R.D. at 62.

On the other hand, Rule 45 does not place any similar territorial limitation on the production of documents by a nonparty. Price Waterhouse LLP v. First Amer. Corp., 182 F.R.D. 56, 62 (S.D.N.Y. 1998). Thus, the fact that Hapoalim produced documents in response to the Document Subpoena has no bearing on the propriety of HOC's attempt to depose Hapoalirn in New York.

See also, St. Paul Fire & Marine Ins. Co. v. Royal Ins. Co., No.91 Civ. 6151 (PNL), 1993 WL 267347, at *I*2 (S.D.N.Y. July 12, 1993) (quashing a New York subpoena served on an employee of the defendant corporation

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In In re ANC Rental Corp., Misc. Action No. 02-148; 2002 WL 34729302 (E.D. Pa. June

20, 2002). the United States District Court for the Eastern District of Pennsylvania quashed a

30(b)(6) subpoena served on Dollar Rent-A-Car Systems ("Dollar") pursuant to Rule 45

precisely because Dollar's 30(b)(6) designee lived and regularly transacted business in

Oklahoma, not Pennsylvania. To the extent the "person" subpoenaed was Dollar's out-of-state

employee, Rule 45(c)(3)(A)(ii)'s 100-mile territorial limitations were violated. Id. at *1. To the

extent the "person" subpoenaed was Dollar itself, the subpoena was too burdensome under

Rule 45(c)(3)(A)(ii) because it would have required Dollar to transport its designee hundreds of

miles to testify. Id. Here, Israel and New York are thousands of miles apart, and the burden

Hapoalim would suffer if it were compelled to produce an Israeli designee in New York is

immeasurably greater. What is more, any deposition of an Israeli employee (in New York or

elsewhere) would be additionally burdensome due to the obvious need of not only United States

counsel for all parties but in addition (a) translators and (b) an Israeli attorney capable of

objecting to all lines of questioning that impinge upon information protected from disclosure

under Israeli law.

In view of the foregoing, and given that any knowledgeable 30(b)(6) designee lives and

transacts business in Israel, not New York, the Subpoena should be quashed pursuant to Rule 45.

In the event that the Subpoena is not quashed, the Court should substantially modify the

Subpoena (see below) and issue an order, pursuant to Local Civil Rule 30.1, providing that "prior

because the subpoena required him to travel more than 100 miles); Stanford v. Kuwait Airlines Corp., No. 85 Civ. 0477 (SWK), 1987 WL 26829, at *3 (S.D.N.Y. Nov.25, 1987) (denying motion to compel nonresident witnesses who were employees of a foreign nonparty entity doing business in New York to attend depositions in New York, stating that "the [territorial] proscriptions of [Rule 45] also apply to individual employees who are the subject of a subpoena served upon a corporation").

N.


to the examination," BOC "shall pay the expense (including a reasonable counsel fee) of the

attendance of one attorney for each other party" at a deposition to be taken in Israel.

II. THE INFORMATION THAT BOC SEEKS FROM HAPOALIM MAY NOT BE DISCLOSED UNDER ISRAELI LAW

BOC did not dispute during the parties' meet-and-confer sessions that Israeli

confidentiality and secrecy laws apply to much of the discovery sought in the Subpoena.

(Goodman Deci., at ¶ 8).6 Recognizing the Linde decision, BOC's position was simply that the

information it seeks is necessary (it is not), that the international comity analysis favors BOC,

and thus BOC is entitled to the information regardless of the ramifications or burden to non-party

Hapoalim. (i ¶ 8).

In Linde, the District Court for the Eastern District of New York affirmatively held that

Israeli confidentiality and secrecy laws "erect prohibitions on disclosure that raise a true conflict

between United States discovery rules and Israeli confidentiality laws." 262 F.R.D. at 148.

Linde is especially instructive because the facts of that case were more compelling in terms of

the relevance of the information sought yet the court barred disclosure of information protected

by Israeli law.

In Linde, defendant Arab Bank is alleged to have knowingly sponsored suicide bombing

attacks in Israel by providing banking services to organizations identified by the U.S. and Israeli

governments as terrorist organizations -- Arab Bank was alleged to have known of its

wrongdoing by reason of publically available information. Id. at 140. Like BOC attempts to do

6 These laws are briefly described below and further described in the Supplemental Declaration of Ehud Arzi, sworn to August 8, 2013 ("Arzi Supp. DecI.") and the Declaration of Ehud Arzi sworn to May 21, 2007 ("2007 Arzi Dccl.") submitted by Hapoalim herewith. The 2007 Arzi DecI. is annexed as Ex. 3 to the Arzi Supp. DecI. Mr. Arzi is an Israeli attorney with over 20 years of practice experience and a partner at one of Israel's leading law firms. Pursuant to Rule 44,1 of the Federal Rules of Civil Procedure, a court may consider any relevant material or source, including evidence submitted by a party, in order to determine foreign law. Madanes v, Madanes, 186 F.R.D. 279, 283 (S.D.N.Y. 1999).


here, Arab Bank sought evidence from Hapoalim, a non-party, demonstrating Hapoalim's

knowledge of the nature of the terrorist organization (from the same publically available

information), arguing that such information was somehow essential to Arab Bank's defense. 7

In opposition to Arab Bank's motion to compel, Hapoalim submitted the Declaration of

Ehud Arzi, an expert on Israeli banking law, setting forth that Israeli law prohibited the

discovery sought by Arab Bank. Relying upon Mr. Arzi's Declaration, the Court concluded that

Israeli law barred Hapoalim from producing the information sought by Arab Bank. Linde, 262

F.R.D. at 148-49. Having determined that foreign law prohibited disclosure, the Court then

applied an international comity analysis and concluded that the overwhelming weight of the

comity factors favored Hapoalim. Id. at 149-52. Accordingly, the Court denied Arab Bank's

motion to compel the production of documents in substantial part and refused to compel

Hapoalim to produce documents falling within the provisions of Israel's confidentiality and

secrecy laws. Id. at 152. The Court likewise instructed Arab Bank to serve Rule 30(b)(6)

subpoenas "seeking testimony on topics delimited by the permitted document discovery." jj at

152-53.

As demonstrated below, the same analysis governs here. The Supplemental Declaration

of Ehud Arzi, submitted herewith, establishes that the same Israeli confidentiality laws that

prohibited Hapoalim's production of documents in Linde apply with equal force to sworn

testimony, and thus prohibit Hapoalim from producing a corporate designee to testify concerning

the topics in BOC's Subpoena. (Arzi Supp. Dccl. ¶ 11, 36, 42, 51, 52, 55-59). Because

Hapoalim is a non-party from whom information -- much of which is barred from disclosure

In Linde, the court found the likely relevance of such information tenuous, at best. Id. at 146. Here, BOC is alleged to have known of its wrongdoing by reason of information solely available to BOC, making any information Hapoalim may possess entirely immaterial.

10


under Israeli law (see Section III, infra) -- is sought, the international comity analysis strongly

favors Hapoalim here. Moreover, given that the information sought from Hapoalim is

immaterial or (at best) of speculative relevance, the Subpoena should be quashed. At minimum,

the Subpoena should be limited as it was in Linde, and BOC should be instructed that it may not

obtain information that is irrelevant or information that is protected from disclosure by Israeli

law and that all questioning should be limited to general information.

A. Under Israeli Law, Hapoalim Has a Duty Not to Testify Regarding its Bank- Client Relations

Under Israeli law, a bank's clients have the right to keep their activities through and

relations with their bank secret. (Arzi Supp. Dccl. ¶ 26-28; 2007 Arzi Decl. ¶ 23-35.) Israeli

banks thus owe their customers a strict duty of confidentiality. (Arzi Supp. Dccl. ¶ 26-28;

2007 Arzi Decl. ¶ 23-25.) The Israeli Supreme Court has explained that the customer's right to

confidentiality and the bank's duty to preserve that confidentiality are essential to the

preservation of a vital public interest: a trusted banking system. (2007 Arzi Dccl. ¶ 24 (citing

Leave for Civil Appeal 1917/92, Skoler v. Jerbi, PD 47(5) 764 (1993); Arzi Supp. DecI. ¶ 27

(citing same).)

Israel's Supreme Court has cited a strong statutory basis for the bank-client privilege as

well: the Protection of Privacy Law, 5741-198 1. (Arzi Supp. Dccl. ¶ 34; 2007 Arzi Dccl. ¶J 25,

35-40.) In addition, Israel's quasi-constitutional Basic Law: Human Dignity and Liberty, 1992,

defines privacy as a "basic right." (2007 Arzi Dccl. ¶ 25.) Section 2(8) of the Protection of

Privacy Law prohibits "infringing a duty of secrecy laid down by express or implied agreement

in respect of a person's private affairs," and Section 2(9) prohibits "using, or passing on to

11


another, information on a person's private affairs otherwise than for the purpose for which it was

given." (Id. ¶ 38.)

The penalties for violating the Privacy Law may be civil or criminal. Under Section 4 of

the law, an infringement of privacy constitutes a civil wrong to which the provisions of the Civil

Wrongs Ordinance (New Version) apply; that is, the party violating the Privacy Law may be

sued and held liable in tort. (Id. ¶ 39.) And Section 5 of the law criminalizes intentional

infringements upon an individual's privacy, the punishment for which can be up to five years'

imprisonlrient. (Id.)

Furthermore, Israel's banking privacy rules apply with even greater stringency when

discovery is sought concerning the bank's clients that are non-parties. (j.ç ¶ 27.) Israel's

Supreme Court has stated that "it would be monstrous to presume that in proceedings between

two parties, such parties would have free access to the bank accounts of third parties." (Id. ¶ 28

(citing Civil Appeal 174/88, Gozlan v. Parisian Company, PD 42(1) 563, 566 (1998), at

paragraph 4).) Israeli courts accordingly will waive a non-party's bank-client privilege only on

"rare and extraordinary occasions," such as where the client has some connection to the

litigation, the clients' information must be truly vital for deciding the dispute in question and

there must be no other alternative evidence available. (Id. ¶J 27-3 2; see also Arzi Supp. DecI. ¶

29-33 (citing Leave for Civil Appeal 62 1/13 Gregor Hairn Laizerowiiz 1'. Union Israel Bank Ltd.

(published in Nevo on 17.4.2013) (discovery of non-party banking information is "possible only

in rare and exceptional cases") and Verdimos Zeiier v. Bank Hapoalirn B.M. (published in Nevo

on 31 .10.2011) (when balancing the need for a just trial and potential harm, the "balance shifts in

direction of adding weight to the protection of privacy" when information is sought from a non-

12


party). Moreover, the party seeking such discovery bears a heavy burden of persuading the court

that it is truly necessary to the litigation. (2007 Arzi DecI, ¶ 29.)

BOC seeks to discover the details of Hapoalim's interactions with its client and details

relating to its client's transactions when no allegations of relevance were made for much of this

information. In doing so, BOC seeks to avoid the clear legal restrictions applicable to the

information it seeks by couching its requests in terms of the wire transactions recipient --

Shurafa. This guise must fail.

Topic Nos. I and 2 demand information provided to or collected by Hapoalim in

connection with its client's transactions. 8 (Goodman Decl., Ex. 2.) Topic No. 3 demands that

Hapoalim discuss how it evaluated its client's activities and whether it pursued any investigation

into same. (Id.) Topics 4-6 demand Hapoalirn to answer whether or not Sharkawi Hafiz is one

of its clients and further identify any communications with the Israeli government or any other

investigations concerning its client's transactions. (Id.) Topic No. 7 again demands information

about communications relating to Hapoalim's client's transfers, only this time with BOC itself.

(Id.) Topic Nos. 8 and 9, as clarified by BOC during the parties' meet-and-confer sessions, seek

further information concerning Hapoalim's analysis of its client's transactions under the policies

governing its Israeli branches. (Id.; Goodman Dccl., at ¶ 7B.)

As explained more fully in Sections III. B. & C,, infra, these Topics seek evidence that is

neither vital to BOC's case nor unavailable elsewhere. Moreover, the information sought is

certain to reveal information about the banking relationship between Hapoalim and its client.

Accordingly, these Topics offend Israel's bank-client privilege and the Privacy Law

8 To the extent BOC may argue that Topic No. 1 seeks only a recitation of the face of the records produced (given that the remainder of the request calls for information protected by the attorney-client privilege), that information is already available to BOC because the documents speak for themselves.

1-, 1.)


underpinning it, and Hapoalim would risk incurring civil or criminal penalties were it to comply

with them, (Arzi Supp. Dccl. ¶I 34-36.)

B. Israel's Banking Ordinance Prohibits Hapoalim From Disclosing Information It Has Exchanged with the Bank of Israel

Section ISA of Israel's Banking Ordinance of 1941 imposes a strict duty of

confidentiality upon any bank exchanging information, pursuant to this law, with the Bank of

Israel (Israel's banking regulatory authority). Violating this duty subjects an entity to fines or

imprisonment of up to one year. (Arzi Supp. Dccl. ¶ 37; 2007 Arzi Dccl. ¶J 41-49.)

The Israeli Supreme Court has held that this provision also immunizes information

exchanged with the Bank of Israel pursuant to this Ordinance from civil discovery. (2007 Arzi

Dccl. ¶J 45-47 (citing Leave for Civil Appeal 6546/94, Union Bank of Israel Ltd. v. Azulai, PD

49(4) 54 (1995); Arzi Supp. Dccl. ¶ 39.) Israeli courts have continued in recent orders to

prohibit production of information exchanged with the Bank of Israel under the framework of

civil discovery. (Arzi Supp. Dccl. ¶ 40 (citing Class Action (Haifa) 34200-06-11 Echo-Tech

(Micro Paris) Ltd. v. Credits Cards Company in Israel Ltd. (published in Nevo on 21.5.2012).)

This protection cloaks more than mere documents and extends to include information received

from, or delivered to, the Bank of Israel. (Id. ¶ 39.)

According to the Israeli Supreme Court, the public has an interest in commercial banks

freely exchanging information with the Bank of Israel, without fearing that it will be used as

evidence in civil litigation. (Id. ¶ 41; 2007 Arzi Dccl. ¶ 46, 49.) While the Banking Ordinance is

not absolute, and its prohibition on disclosure may be lifted by a court where circumstances

warrant, such circumstances arc rare. (2007 Arzi Dccl. ¶ 48; Arzi Supp. Dccl. ¶ 38.) Moreover,

This rule also applies to information exchanged with the Bank of Israel during a bank audit. (2007 Arzi Dccl. ¶ 47 (citing Miscellaneous Civil Motion 2939/03, Bank Leumi le-lsrael BM. v. Stockman et 4J (2004).)

14


where information exchanged with the Bank of Israel is sought from a bank in the context of

litigation to which that bank is not even a party, this duty of confidentiality should apply even

more strictly. (2007 Arzi Deci. ¶ 49.)

BOC's Topic Nos. 2-6 demand testimony concerning communications with the

Government of Israel and/or investigations, including those conducted by the Government of

Israel, which the subpoena broadly defines in such a way as to include the Bank of Israel. (See

Goodman Dccl., Ex. 2.) By way of example only, BOC demands testimony regarding:

• Topic No. 2(h) - any communications or messages to or from the Government of Israel in the execution of the Shurafa Wire Transfers;

• Topic No. 5 - any inquiry or investigation conducted by Bank Hapoalirn or the Government of Israel into the beneficiary (Shurafa) of the Shurafa Wire Transfers;

• Topic No. 6 - all communications or meetings between Bank Hapoalim and the Government of Israel concerning (a) the Shurafa Wire Transfers; (b) Sharkawi Hafiz; (c) Shurafa; or (d) wire transactions to BOC generally. (j)

Hapoalim would be barred from giving testimony on Topics 2-6 pertaining to information

that it has exchanged with the Bank of Israel. (Arzi Supp. Dccl, ¶ 42.) See also Linde, 262

F.R.D. at 148-49.

Moreover, Topic No. 11 demands information regarding the roles and responsibilities of

Hapoalim personnel in communicating with the Government of Israel. To the extent BOC seeks

to ask questions beyond mere generalities in order to obtain information pertaining to actual

Hapoalim conversations with the Bank of Israel, Hapoalim again would be barred from

providing such testimony under Israeli law. (Arzi Supp. Dccl. ¶ 42.) See also Linde, 262 F.R.D.

at 148-49.

15


C. Israel's Prohibition on Money Laundering Law and Prohibition of Terror Financing Law Prohibit Hapoalim from Disclosing Certain Information that BOC Seeks

Under Israeli law, a bank must keep confidential all information it receives pursuant to

the Prohibition on Money Laundering Law, 5 760-2000 and the Prohibition on Terror Financing

Law, 5765-2005. (Arzi Supp. Dccl. ¶ 43; 2007 Arzi Deel. ¶J 5 1-62.) Both of these laws impose

certain reporting obligations on providers of financial services regarding the financial activities

of their clients. (Arzi Supp. Deci. ¶ 44; 2007 Arzi Decl. ¶J 52-55, 60.) Section 31A of the

Prohibition on Money Laundering Law and Section 48(b) of the Prohibition on Terror Financing

Law make absolutely clear that information collected or received by any person pursuant to the

law must be kept strictly confidential, and may only be disclosed to the appropriate

governmental authorities within the channels established by the laws themselves upon pain of

imprisonment. (Arzi Supp. Dccl. ¶J 45-46; 2007 Arzi Dccl. ¶j 56-58, 60-6 1.) In addition, the

Governor of the Bank of Israel issued an Order known as an Order Prohibiting Money

Laundering, 5761-2001 which contains within its frameworks a special provision prohibiting the

bank from disclosing information reported by it. (Arzi Supp. Dccl. ¶ 47). In fact, even the

negligent disclosure of information collected pursuant to these laws may result in one year's

imprisonment. (Arzi Supp. Dccl. ¶ 48; 2007 Arzi Dccl. ¶J 58, 60.)

Information responsive to BOC's Request Nos. 1-6, 9 and 15 may well include data

gathered or reported in compliance with Hapoalim's duties under the Money Laundering Law

and the Terror Financing Law. (Arzi Supp. Dccl. ¶ 51.) Disclosing such information would

likely expose Hapoalim to criminal sanctions under Israeli law. (,)

See al so Linde, 262

F.R.D. at 149. Regarding Topics 11-12, to the extent BOC seeks to ask questions beyond mere

generalities in order to obtain information pertaining to information collected or reported

16


pursuant to the foregoing laws, Hapoalim would again be barred from providing such testimony

under Israeli law, (Jd)

D. Under Israeli Law, Hapoalim Cannot Be Compelled To Give Self- Incriminating Testimony

Israeli law contains a broad privilege against self-incrimination. (Arzi Supp. Dccl. ¶ 52;

2007 Arzi Dec!. ¶J 63-67.) The Israeli Supreme Court has held that the right of privilege against

self-incrimination applies both to criminal and civil proceedings, and to individuals as well as

corporations. (Arzi Supp. Dccl. ¶ 52; 2007 Arzi Dccl. ¶J 64-65.) Moreover, and like all other

immunities discussed herein, the privilege against self-incrimination applies not only to

documentary discovery but to testimony as well. (Arzi Supp. Decl. ¶ 52.)

The privilege against self-incrimination under Israeli law is not absolute, and Israeli

courts would balance the damage that may be caused as a result of revealing such information

with the benefit that may result from disclosure under the circumstances of each particular case.

(Arzi Supp. Dccl. ¶ 53.) However, even if an Israeli court requires that information be supplied,

it is also authorized to provide absolute assurance that the information so supplied will not be

used to incriminate the supplier. (Id.) This Court, however, cannot provide Hapoalim with this

protection. (2007 Arzi Dccl. ¶ 66.) Furthermore, the fact that self-incriminating information is

sought from a person who is not even a party to the litigation in question would weigh strongly

against compelling production. (2007 Arzi Dccl. ¶ 67.)

Request Nos. 13 and 14 seek an explanation of public statements made in annual reports.

Goodman Dccl.. Ex. 2.). BOC stated during the parties' meet-and-confer sessions that it will

seek testimony concerning the basis for Hapoalim's statements and the veracity of such

assertions (id., at ¶ 7C), thus forcing Hapoalim to testify as to whether it has or has not complied

17


with the law. Thus, under the circumstances of this case, at least certain of the information

demanded in requests 13-14 (and perhaps additional topics depending on the precise questions

posed) would be privileged in accordance with the privilege against self-incrimination. (Arzi

Supp. Dccl. ¶ 54; 2007 Arzi Dccl. ¶ 67.)

III. INTERNATIONAL COMITY WEIGHS AGAINST COMPELLING HAPOALIM TO PRODUCE A WITNESS TO TESTIFY ON THE TOPICS DESIGNATED BY BOC

Given the foregoing privileges and immunities under Israeli law, courts in this district

apply a comity analysis to determine whether information must be disclosed in discovery.' 0 That

is, the Court should consider: (1) the importance of the documents or information to the

litigation; (2) the degree of specificity of the request; (3) whether the information originated in

the United States; (4) the availability of alternative means of retrieving the information; and (5)

the extent to which noncompliance with the request would undermine the important interests of

the state where the information is located. Id. BOC did not dispute during the parties' meet-

and-confer sessions that Israeli law may bar disclosure of at least certain of the information it

seeks. BOC instead took that position that the foregoing comity analysis strongly favors BOC

because BOC requires information about Hapoalim's communications with Israeli officials to

mount its defense. While certain of BOC's requests touch upon communications with Israeli

officials, many have nothing to do with that issue whatsoever. BOC has not even articulated the

importance of certain privileged information that it seeks.

'° "It is not disputed that a district court has the power to impose discovery under the Federal Rules of Civi] Procedure when it has personal jurisdiction over the foreign party . . . [t]he critical question is whether the court should, as a matter of discretion, issue such an order in view of the [foreign law] secrecy objections raised[.]" Minpeco, S.A. v. Conticommodity Servs., Inc., 116 F.R.D. 517, 520 (S.D.N.Y. 1987) (internal quotations omitted) (emphasis in original) ("Minpeco I"). "American courts, in supervising pretrial proceedings, should exercise special vigilance to protect foreign litigants from the danger that unnecessary, or unduly burdensome, discovery may place them in a disadvantageous position." Madanes, 186 F.R.D. at 286. Thus, while this Court has the authority to order discovery that is barred under foreign law, it must consider international comity when exercising that authority. Tiffany (NJ) LLC v. Qi Andrew, 276 F.R.D. 143, 151 (S.D.N.Y. 2011) (collecting cases).

18


As an initial matter, Courts in performing a comity analysis have taken into consideration

the nonparty status of the party from whom discovery is sought in evaluating any hardship

imposed by compelling compliance. Linde, 262 F.R.D. at 149-150 (collecting cases). In fact,

foreign non-party discovery should be compelled "only in extreme circumstances," even where

the party seeking foreign discovery has made a "respectable showing that these documents might

strengthen his defense," and is particularly inappropriate where another nation may impose harsh

penalties on the non-party for complying with such an order. Minpeco, S.A. v. Conticommodity

Servs., Inc., 118 F.R.D. 331, 332 (S.D.N.Y. 1988).' Indeed, this factor should be given

particular weight here, given that Israel would strictly limit discovery that could be obtained

from non-parties to a litigation such as Hapoalim, regardless even of the immunities prescribed

by Israeli law. (Arzi Supp. DecI. TT 18-25.)

As set forth above (see Point II, supra) one court in New York has already determined,

under facts similar to this case, that when the international comity analysis is applied, Hapoalim

should not be compelled to produce the very same information being sought here by BOC.

Linde, 262 F.R.D. at 149-153. In the present dispute, as in Linde, each of the comity factors

weighs in Hapoalim's favor -- and against forcing it to disclose the information that BOC seeks.

A. Compliance With The Subpoena Would Undermine Significant Israeli Interests

The fifth factor in the international comity calculus -- the balance between U.S. and

Israeli interests -- is considered the most important. Madanes, 186 F.R.D. at 286. Some of the

Israeli interests threatened by BOC are: (1) the protection afforded non-parties from being

drawn into discovery; (2) the privacy rights of bank clientele and (3) the confidentiality of

See also Minpeco 1, 116 F.R.D. at 526 (fact that entity to be compelled to produce documents in violation of foreign law is "merely a neutral source of information, and not itself a target of a criminal investigation or an adverse party in litigation" weighs heavily against compelled production in comity balancing test).

19


sensitive communications with Israel's central bank -- both of which allow an effective banking

system; and (4) the strict enforcement of anti-money-laundering and anti-terror laws. while

preventing their abuse in the form of leaked confidential data. (See generally Arzi Supp. Dccl.

2007 Arzi Dccl, ). See also Linde, 262 F.R.D. at 151. The importance of these interests to Israel

is demonstrated by the fact that Israeli courts are strict not to overly broaden discovery and by

the substantial civil and criminal penalties that attach to violations of the Privacy Law, Banking

Ordinance, and Money Laundering and Terror Financing Laws. See pcpj, 116 F.R.D. at

524 (existence of criminal penalties demonstrates strength of foreign nation's interests in bank

secrecy laws). 12 Hapoalim's privilege against self-incrimination under Israeli law weighs further

against compelling testimony under the comity analysis. See Madanes, 186 F.R.D. at 285

(weighing Argentine privilege against self-incrimination in comity analysis).

As the Court in Linde explained, production of information in violation of these laws

would undermine important Israeli interests but would not greatly undermine any important

interests of the United States. Linde, 262 F.R.D. at 151. 13 Particularly, although the United

States has an interest in fostering full and fair litigation, that interest is mitigated both by

Hapoalim's non-party status and the fact that the documents sought from Hapoalim were of

2 The Israeli statutes are designed to protect the confidentiality of banking customers, furthering the Israeli interest in a strong banking industry and personal privacy. They are vastly different from the "blocking statutes" enacted by certain countries in order to impede discovery of foreign parties in U.S. litigation, which are afforded less weight in the comity analysis. Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court for S. Dist. of Iowa, 482 U.S. 522, 544 n.29 (1987); Reinsurance Co. of Am. v. Administratia Asigurarilor de Stat, 902 F.2d 1275, 1280 (7th Cir, 1990),

' A nation's sovereign interest "encompasses not only the powers of government but also the limitations imposed by [its laws] on the exercise of these powers." Madanes, 186 F.R.D. at 286.

20


"indirect and attenuated significance to the issues to be decided." Id. 14 Here, Hapoalim is in the

same position as it was in Linde, and BOC has yet to set forth any meaningful argument that a

comity analysis would favor its position.

B. The Information that BOC Seeks Is Not Essential to the Underlying Litigation

Even assuming, arguendo, that the evidence BOC seeks in this matter is important to the

claims in issue, BOC should not be entitled to the deposition testimony it seeks because all other

comity factors weigh heavily in favor of Hapoalim (as discussed herein). Tiffany (NJ) LLC, 276

F.R.D. at 151. In Tiffany, New York plaintiffs served a Rule 45 subpoena on BOC for

information retained by BOC overseas. Id. at 145-46. This Court agreed with Plaintiffs that the

information requested was vital to plaintiffs' claims and unavailable from any other source

(which is not even the case here). Id. at 151-52. Nonetheless, because so many other factors

weighed against disclosure from non-party BOC, this Court directed Plaintiffs to proceed

through the Hague Convention instead of ordering BOC to produce information. Id. at 160.

Here, the evidence in issue is not necessary, unique to Hapoalim, nor vital. "Where the

outcome of litigation 'does not stand or fall on the present discovery order,' or where the

evidence sought is cumulative of existing evidence, courts have generally been unwilling to

override foreign secrecy laws." Richrnark Corp. v. Timber Falling Consultants, 959 F.2d 1468,

To the extent BOC would argue that the United States has a compelling interest in criminalizing the provision of financial services to terrorist organizations and creating civil tort remedies for American victims of international terrorism, the Linde court has already stated that such interests are of no moment when the discovery is sought from a non-party who is not accused of violating the U.S. statutes that embody those interests. See Linde, 262 F.R.D. at 151.

21


1475 (9th Cir. 1992) (quoting In re Westinghouse Elec. Corp. Uranium Contracts Litig., 563

F.2d 992. 999 (10th Cir. 1977)))

The outcome of this matter will not stand or fall based upon the information BOC seeks

from Hapoalim. As previously stated, one of Plaintiff's allegations against BOC is that Israel

told China - and that China in turn told BOC -- that BOC's client Said al-Shurafa was obtaining

deposits and forwarding funds to promote terrorist activity. (FAC ¶ 77.) BOC seeks to disprove

this theory through Hapoalim's testimony. BOC's stance is as follows: whether or not the

Israeli government met with Hapoalim to discuss Shurafa is highly probative of the veracity of

Plaintiffs' claims that the Israeli government met with China to discuss same. (Goodman DecI.,

at p. 8). The answer to one question however does not impute the answer to the other. The

evidence certainly is not necessary to any party's claims.

BOC has not even alleged (likely because it cannot) that Hapoalim has a client

relationship with Shurafa. Moreover, no one knows why the Israeli government purportedly met

with China to discuss Shurafa -- be it due its own investigations, due to a tip revealing BOC's

involvement with telTorist organizations through Shurafa's, or be it the result from some other

This Court has ordered BOC as non-party to produce foreign records in other litigations. However, the facts of those cases, and BOC's bad faith conduct in at least one of those cases, differentiate those cases from the facts and issues before the Court. See. Tiffany (NJ) LLC v. Forbse, No. 11 Civ. 4976(NRB), 2012 WL 1918866 (S.D.N.Y. May 23, 2012) (requiring non-party BOC to produce foreign account records -- but requiring the plaintiff to follow the Hague Convention to obtain records from other Chinese banks -- where (a) the BOC records were necessary to calculate damages; (b) the BOC records belonged to the defendants themselves (as opposed to some unrelated third party against whom no claims had been pleaded); (c) the United States interests were paraniount given that BOC was attempting to employ China's secrecy laws to protect a Chinese citizen that according to the plaintiff's complaint engaged in unlawful behavior; (d) it was unclear whether China would comply with the Hague Convention because the Hague request issued in the Tiffany (NJ) v. Qi Andrew action had been outstanding for months; and (e) BOC had acted with potential bad faith); Gucci Amer. Inc. v. Li, No. 10 Civ. 4974(RJS), 2011 WL 6156936 (S.D.N.Y. Aug. 23, 2011) (requiring non-party BOC to produce foreign account records where (a) the BOC records were necessary to calculate damages and identit' co-conspirators; (b) the BOC records belonged to the defendants themselves (as opposed to some unrelated third party against whom no claims had been pleaded); (c) the Court believed that the Hague Convention was of minimal utility in securing documents from China because China's compliance was unpredictable, and (d) although BOC's conduct had not been labeled as bad faith, it had already flouted an order of the court).


motivation. Whatever the case may be, it is nothing less than a leap of faith to assume that

Hapoalim's private communications with its regulators would prove, disprove, or make any more

or less likely what transpired between Israel and China and why.' 6

Aside from this, BOC has not even attempted to articulate the purported relevance of any

of the other information it seeks. Topics 1-3 seek privileged information regarding Hapoalirn's

bank-client relationship yet much of this information has nothing to do with communications

with any Israeli officials. Topic No. 7 demands information about communications and meetings

between Fiapoalim and BOC. (Goodman Dccl., Ex. 2.) If Hapoalim and BOC had

communications and/or meetings, then BOC should have that information and should be able to

testify to or otherwise demonstrate as much. No reasonable interpretation of international comity

can favor compelling Hapoalim to produce substantially the same evidence that BOC has at its

fingertips.

Topic Nos. 10-12 seek information about Hapoalim's organizational structure, its

drafting, review and implementation of its anti-money laundering, customer due diligence and

counter-terrorism financing policies and procedures in accordance with Israeli law, and its

communications with the Government of Israel, which is defined to include the Bank of Israel,

Hapoalim's regulator. (Id.) Topic Nos. 13-14 seek information about Hapoalim's own

compliance with Israeli law -- Hapoalim is not on trial, (Id.) Topic No. 15 seeks information

about the Government of Israel's processes and procedures -- information that is apparently

being sought from another source. (Id) And Topic No. 16 seeks someone to testify as to how

records are retained at one of Israel's largest banks. (Id.) BOC has not disclosed the purpose of

6 $gg Cuomo v. Clearing House Ass'n, 557 U.S. 519, 531 (2009) ("Judges are trusted to prevent 'fishing expeditions' or an undirected rummaging through bank books and records for evidence of some unknown wrongdoing.")

23


these requests. These requests are not "essential" for BOC to prove the legitimacy of its own

conduct. BOC seeks, in sum, precisely the sort of non-essential material that does not justify

disregarding a sovereign nation's banking and privacy laws.

C. The Information Originates in Israel, the Information Sought is Overbroad, and There are Alternate Means of Securing It

The fact that "the information to be disclosed (and the people who will be deposed or

who will produce the documents) are located in a foreign country weighs against disclosure,

since those people and documents are subject to the law of that country in the ordinary course of

business." Richmark Corp., 959 F.2d at 1475. The information BOC seeks can only be obtained

from Hapoalim employees in Israel.

Moreover, the information sought is so incredibly diffuse that it may require multiple

foreign individuals to provide it. BOC seeks confidential information about a Hapoalim client,

high level correspondence with Hapoalim's regulators spanning a five year period, sufficient

information to explain and test the veracity of myriad different statements made in public filings

in 2005 and 2006, as well as someone capable of explaining the maimer and mode of record

retention at one of Israel's largest banks. Indeed, Hapoalim would be unable to even prepare a

30(b)(6) deponent on certain of the topics due to the fact that the topics of inquiry are not

reasonably defined. BOC, for example, seeks testimony without limitation concerning multiple

of Bank Hapoalim's complex internal banking policies and procedures. BOC additionally seeks

testimony relating to wholly unspecified statements made by it concerning its "organizational

structure" and "size". Generalized searches for information, especially where disclosure is

prohibited under foreign law, are discouraged. Id.

24


Finally, it appears that BOC has obtained from this Court -- Letters of Request for

International Judicial Assistance Pursuant to the Hague Convention ("Letters of Request") to

obtain such information directly from the Government of Israel. (Goodman Dccl., Ex. 3.)

IV. THIS COURT SHOULD LIMIT BOC'S SUBPOENA ON THE BASIS OF U.S. LAW ALONE

Even United States law would require, at minimum, that the Subpoena be substantially

modified. Setting aside the fact that BOC has not alleged any relevance for much of the

information sought (which alone supports modification), the Subpoena in numerous instances

fails to adequately tailor the testimonial categories so as to allow Hapoalim to adequately prepare

a 30(b)(6) witness, See Section III.C, supra, see also Sprint Commcns Co., L.P. v.

Theglobe.com , Inc., 236 F.R.D. 524, 528 (D.Kan. 2008) (quoting Prokosch v. Catalina Lighting,

Inc., 193 F.R.D. 633, 638 (D.Minn. 2000) (explaining that in order for Rule 30(b)(6) to function

effectively, the party seeking testimony must "take care to designate, with painstaking

specificity, the particular subject areas that are intended to be questioned, and that are relevant to

the issues in dispute"). Moreover, the Subpoena seeks information that is overbroad, cumulative,

inelevant and improper under the facts of this case. By way of example only:

• BOC demands that Hapoalim explain documents it did not produce relating to the Shurafa Wire Transactions, notwithstanding the fact that it made no objection to Hapoalim's production of documents and notwithstanding the fact that any such explanation would undoubtedly require the involvement of counsel. (Goodman Dccl., Ex. 2atTopicNo. 1.)

• BOC demands that Hapoalim explain whether transaction documents contain indicia of suspicious activity, including under Israeli law, when in truth and fact such testimony requires legal conclusion and is more properly the subject matter of an expert witness. (Id. at Topics No. 1 and 3.)

• BOC demands Hapoalim haul an Israeli witness to New York to testify to Hapoalim-BOC communications. (Id. at Topic Nos. 2 and 7.) BOC, having participated in any such communications, already has this information.

25


• BOC demands to depose a Hapoalim representative on the basis for multiple statements made in Annual Reports published in 2005 and 2006. (Id. at Topic Nos. 10, 13-14.) Setting aside whether this information is at all relevant, the sheer burden of locating and/or educating an employee in Israel regarding the basis for each and every public statement identified by BOC dating from 2005 and 2006 -- which statements speak for themselves -- outweighs any contrived relevance BOC could attempt to articulate.

• BOC demands to depose Hapoalim regarding the Israeli government's (not Hapoalirn's) processes and procedures, even though BOC has obtained Letters of Request requesting similar information. (Id. at Topic 15.)

• BOC seeks substantial information about the wire transfers sent to Shurafa's BOC account. (RI. at Topic Nos. 1-3, 8-9.) BOC has (and has produced) mirror image transaction records already.

• Lastly, BOC has requested testimony about Hapoalim's document retention policies (. at Topic 16), though relevance has not been articulated.

Pursuant to Federal Rule of Civil Procedure 26(b)(2)(C)(iii), a Subpoena should be

limited where the burden or expense of the proposed discovery outweighs the likely benefit,

considering the needs of the case and the importance of the discovery in resolving material

issues. Here, BOC seeks information that it may glean directly from the face of documents

produced by Hapoalim. Other than such information, there is little to no unprotected, proper

information that can be obtained from Hapoalim's testimony.

For all of the reasons above, Hapoalim respectfully requests that this Court quash the

Subpoena served on it by BOC. In the event that the Subpoena is not quashed, Hapoalim in the

alternative requests that the Court substantially modify the Subpoena (i) to strike irrelevant

topics; (ii) to prohibit BOC from obtaining testimony concerning confidential and privileged

information protected and/or prohibited from disclosure under Israeli law; and (iii) to otherwise

limit the information sought on the grounds that many of the requests are burdensome, overbroad

and cumulative. In the event that the Subpoena is not quashed, Hapoalim respectfully further

26


requests that BOC be responsible for any costs associated with traveling to Israel by counsel,

including the cost of additional counsel fees associated with traveling to Israel) pursuant to Local

Civil Rule 30.1.

Dated: New York, New York August 12, 2013

HERRICK, FEINSTEIN LLP

Carol M. Gooqnan Janice 1. Goldberg 2 Park Avenue New York, New York 10016 Tel: (212) 592-1400 Fax: (212) 592-1500 [email protected] Attorneys for Non-Party Bank Hapoalirn B. M.

27


Documents

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT …blogs.reuters.com/.../files/2013/10/wultzvboc-hapaolimquashbrief.pdf · united states district court southern district of new york