Lavecky v Visa Inc

Case [2017] FCA 454

FEDERAL COURT OF AUSTRALIA

Lavecky v Visa Inc [2017] FCA 454

File number(s): NSD 557 of 2016
Judge(s): PERRAM J
Date of judgment: 8 May 2017
Catchwords: PRACTICE AND PROCEDURE – application for Court endorsement of proposed § 1782 applications under Title 28 of the United States Code – principles of case management – whether application a fishing expedition – whether Court should exercise discretion to endorse application to be filed in foreign jurisdiction
Legislation:

Evidence Act 1995 (Cth) s 75

Federal Court of Australia Act 1976 (Cth) ss 37M, 37M(1)

Federal Court Rules 2011 (Cth) r 20.23

United States Code (US) Title 28 § 1782  
Cases cited:

Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 4) [1996] FCA 1270; (1996) 64 FCR 61

Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1955) 72 WN (NSW) 250

Australian Competition and Consumer Commission v Visa Inc [2015] FCA 1020; (2015) 339 ALR 413

Jones v Treasury Wine Estates Ltd [2016] FCAFC 59; (2016) 241 FCR 111

Pathway Investments Pty Ltd v National Australia Bank Ltd (No 2) [2012] VSC 495

Sentry Corporation v Peat Marwick Mitchell & Co [1990] FCA 278; (1990) 24 FCR 463

South Carolina Insurance Company v Assurantie Maatschappij De Zeven Provincien NV [1987] AC 24

Date of hearing: 11 April 2017
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Economic Regulator, Competition and Access
Category: Catchwords
Number of paragraphs: 39
Counsel for the Applicants: Dr A Bell SC with Mr T Maltz
Solicitor for the Applicants: Arnold Bloch Leibler
Counsel for the Respondents: Mr J Karkar QC with Mr D Roche
Solicitor for the Respondents: Herbert Smith Freehills

ORDERS

NSD 557 of 2016
BETWEEN:

DANIEL LAVECKY

First Applicant

SUNIL SHARMA

Second Applicant
AND:

VISA INC

First Respondent

VISA WORLDWIDE PTE LTD

Second Respondent

VISA U.S.A. INC (and others named in the Schedule)

Third Respondent

JUDGE:

PERRAM J

DATE OF ORDER:

8 MAY 2017

THE COURT ORDERS THAT:

1.The Court approves the Applicants making applications for orders under §1782 of Title 28 of the United States Code seeking documents from Global Payments Inc, Jefferies LLC and Atos SE. in substantially the same form as those exhibited to the Affidavit of Jonathan Milner of 9 February 2017 on condition that any such proposed application be served on the Respondents at least 21 days before it is filed in the United States.

2.Costs of the hearing on 11 April 2017 be costs in the cause.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

PERRAM J:

1.    Introduction

  1. § 1782 of Title 28 of the United States Code is entitled ‘Assistance to foreign and international tribunals and to litigants before such tribunals’.  Amongst other things, § 1782 authorises the District Court for a federal district to order a person who resides in that district, or is there to be…

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AGLC
Lavecky v Visa Inc [2017] FCA 454
Case
[2017] FCA 454
Decision Date

CaseChat Overview and Summary

In the case of Lavecky v Visa Inc, the applicants, former directors and shareholders of Pure Commerce, sought the endorsement of their application for orders under § 1782 of Title 28 of the United States Code to obtain documents from Global Payments Inc, Jefferies LLC, and Atos SE. These documents were intended to assist in their proceedings against the respondents, who were implicated in Visa’s alleged anti-competitive conduct. The applicants argued that their opportunity to sell their shares in Pure Commerce at a higher price in 2010 was lost due to the respondents’ actions, and they sought documents held by the third parties to substantiate their claims.

The central legal issue before the court was whether to endorse the applicants’ proposed applications under § 1782, given the principles of case management and the potential for these applications to be considered fishing expeditions. The court had to weigh the significance of the sought documents against other potential means of obtaining them and consider the costs and proportionality of the proposed applications.

The court concluded that approval should be granted with a minor condition. The importance of the documents to the applicants’ case was highlighted, as they pertained to the alleged loss of specific opportunities in 2010. The court considered that there were no other readily available methods for obtaining these documents, and the proposed applications were not frivolous or obviously doomed to fail. Additionally, the court reasoned that the applicants should provide the respondents with the proposed applications and supporting materials at least 21 days before filing in the United States, ensuring the respondents were adequately informed and could respond if necessary.

In conclusion, the court made an order approving the applicants’ proposed applications under § 1782, subject to the condition that the respondents be served with the applications at least 21 days prior to their filing in the United States. The court also ordered that the costs of the hearing on 11 April 2017 be costs in the cause.

Orders

Orders of the court

1. The Court approves the Applicants making applications for orders under §1782 of Title 28 of the United States Code seeking documents from Global Payments Inc, Jefferies LLC and Atos SE. in substantially the same form as those exhibited to the Affidavit of Jonathan Milner of 9 February 2017 on condition that any such proposed application be served on the Respondents at least 21 days before it is filed in the United States.

2. Costs of the hearing on 11 April 2017 be costs in the cause.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The three entities are a French entity, Atos SE (‘Atos’) (which was formerly known as Atos Origin SA during the times material to the Applicants’ proceeding in this Court), Jefferies LLC (‘Jefferies’) (formerly known as Jefferies & Company, Inc) and Global Payments Inc (‘Global Payments’). Before applying, the Applicants have first applied to this Court for an indication that it endorses the Applicants in making those applications. For the reasons which follow, it is appropriate that this Court endorse the making of the applications. Costs of the hearing on 11 April 2017 will be costs in the cause.2. Facts The Applicants are former directors and shareholders of Pure Commerce Pty Ltd (‘Pure Commerce’). Mr Daniel Lavecky, the First Applicant, was also its founder. At all relevant times, Pure Commerce provided currency conversion services to participants in international payment card networks, including the payment card network operated by Visa Inc and its related entities (compendiously, ‘Visa’). Starting in 2010, various regulators around the world commenced investigations into alleged anti-competitive conduct by Visa, in which it was said that Visa had sought to restrict the ability of companies such as Pure Commerce to provide currency conversion services to participants in Visa’s payment card network. In 2013, the Australian Competition and Consumer Commission commenced a lawsuit against Visa. The lawsuit resulted in a settlement in which Visa admitted that some of its alleged conduct had violated the anti-trust provisions of the Competition and Consumer Act 2010 (Cth) and was required to pay a monetary penalty of $18 million imposed by this Court: see Australian Competition and Consumer Commission v Visa Inc [2015] FCA 1020; (2015) 339 ALR 413. In April 2016, the Applicants commenced these proceedings against the Respondents. They claim that at the time of the Respondents’ allegedly anticompetitive conduct in 2010, they were in advanced negotiations to sell their shares in Pure Commerce to at least two interested parties. They allege that as a result of the Respondents’ conduct, the proposed sale was derailed and that it was not until January 2013 that they were finally able to sell their interests in Pure Commerce. In consequence, they claim to have lost the opportunity to sell their shares in Pure Commerce in 2010 at a higher price than that which they ultimately went on to receive in January 2013. It is, therefore, a lost opportunity case. The present dispute before the Court arises because the Applicants wish to apply under § 1782 to have Jefferies, Atos and Global Payments produce documents to assist in the prosecution of that case. Towards the end of 2009, Jefferies was engaged as Pure Commerce’s financial advisor in relation to a potential sale of the shares in the company. Jefferies is alleged by the Applicants to have provided valuations for the Pure Commerce business; to have identified a list of potential purchasers for Pure Commerce; and to have had extensive contact with those prospective purchasers.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

I turn then to whether I should impose conditions upon the grant of permission. The case management requirements of this Court do not necessitate the involvement of the Respondents in the District Court and I will not require the Applicant to pay the Respondents’ costs of any such foray. The Respondents should, I think, be put in much the same position that they would be if the Applicants were making an application under FCR 20.23 for discovery from a non-party. That rule does not require service of the application on the other parties to the litigation, but the electronic court file means that parties such as the Respondents would be immediately aware of the application having been made (unless it was for some reason subject to a suppression order). The rule also makes no provision for the right of another party to be heard and whether that is a useful course would generally be for the judge hearing the application to determine based on the circumstances of the particular case. In this case, the only condition that should be imposed is that the Applicants provide the Respondents with the proposed application and any material in support at least 21 days before its filing in the District Court. This will put them in a similar position to that which would have existed by reason of the electronic court file if an application under FCR 20.23 had been made.5. Conclusion I will make the following orders: (1)The Court approves the Applicants making applications for orders under §1782 of Title 28 of the United States Code seeking documents from Global Payments Inc, Jefferies LLC and Atos SE. in substantially the same form as those exhibited to the Affidavit of Jonathan Milner of 9 February 2017 on condition that any such proposed application be served on the Respondents at least 21 days before it is filed in the United States.(2)Costs of the hearing on 11 April 2017 be costs in the cause.

Ratio Decidendi

Legal Principle Established

Whilst it is unwise to be definitive about these matters in advance, the following matters are likely to be germane to a consideration of whether to endorse an application made under procedures such as § 1782:(1)What is the importance of the material to be sought under the procedure to the applicant’s case? (2)Are there other methods available for obtaining it? (3)Does the material sought impinge upon or undermine some important procedural limitation in this jurisdiction such as, for example, the unwillingness of the Court to permit fishing expeditions or, perhaps, the general unwillingness of this Court to order depositions? (4)What is the cost involved in the process for the parties before this Court? (5)Is that cost a proportionate burden having regard to the significance of the material? (6)Is the proposed proceeding under § 1782 in the District Court frivolous or obviously doomed to fail? (7)How long might the applications take to resolve and what impact might they have upon the timely preparation of the matter before this Court for trial?(8)Is there any need to impose conditions upon the endorsement so as to address any issues arising from (1)-(7) above?3. Consideration A consideration of these matters suggests that in this case approval should be granted subject to a minor condition. The material sought from the Southern District is important material for the disposition of the proceeding before this Court. The Applicants’ primary claim for loss and damage appears at paragraphs [170]-[181] of the Further Amended Statement of Claim (‘the FASOC’) under the heading ‘Damages and Causation: Loss of Specific Opportunities in 2010’. There are three cases pleaded further and in the alternative to the claims pleaded in the paragraphs above. Those are pursued at paragraphs [182]-[192] of the FASOC; but the primary case remains the case pleaded at paragraphs [170]-[181]. Those paragraphs are as follows:Damages and Causation: Loss of Specific Opportunities in April 2010170From no later than September 2009, Daniel Lavecky and Sunil Sharma (and the other shareholder in Pure Commerce, Holdings and PCL) (Prospective Vendors and Applicants) had as an objective to enter into a transaction with an acquirer involving the sale of all, or a substantial portion, of the Prospective Vendors’ shares in Pure Commerce (and/or Holdings and PCL) for:(i) cash; and/or(ii) valuable stock issued by the acquiring company.(the Contemplated Transaction)171On or around 11 September 2009, Holdings engaged Jefferies & Co lnc, an investment bank (Jefferies), as a financial advisor in relation to a possible transaction involving the shares or assets of Pure Commerce or its related entities (Jefferies Engagement).172From around September 2009 onwards, pursuant to the Jefferies Engagement, Jefferies (in collaboration with the management of Pure Commerce) engaged in a process of:(a) identifying companies who may be interested in acquiring Pure Commerce and/or its related entities (Prospective Acquirers); and(b) communicating with the Prospective Acquirers, including by the making of presentations to the Prospective Acquirers.173By April 2010 the list of Prospective Acquirers had been narrowed to a list of two Prospective Acquirers.174By late-April 2010 representatives of each of the two Prospective Acquirers had each separately stated that they intended to make some form of an acquisition offer in relation to Pure Commerce (Two Potential Acquirers) and the Contemplated Transaction with one of them had a material prospect of taking place.ParticularsParticulars of likely acquirers and expression of interestTo be disclosed subject to a confidentiality regime being agreed.175In the premises, by April 2010, the Prospective Vendors had a valuable opportunity to enter into the Contemplated Transaction (Valuable Opportunity) with:(a) one of the Two Potential Acquirers; and/or(b) another (as yet unknown) acquirer, from among the Prospective Acquirers.176Each of the Two Potential Acquirers learned, by early May 2010, of the substance of the changes to the VIOR in Australia and/or elsewhere, either:(a) by being notified by Pure Commerce itself; and/or(b) by independently acquiring knowledge of the VIOR changes.177 Due to the Part IV Infringements:(a)each of the Two Potential Acquirers learned of the changes to the VIOR.(b) it can be inferred that each of the Two Potential Acquirers revised and downgraded their view about the prospects of the Pure Commerce DCC Business.(c) each of the Two Potential Acquirers ceased expressing any interest making an offer to acquire the shares in Pure Commerce.(d) neither of the Two Potential Acquirers made an offer to the Prospective Vendors to acquire the shares in Pure Commerce.178.In the premises, the Valuable Opportunity was lost due to Visa Group’s Conduct (Loss of Opportunity).179On or around 4 January 2013, Daniel Lavecky, Sunil Sharma and Cibalis Pty Limited (together, the 2013 Vendors) entered into an agreement under which they sold their shares in Pure Commerce to epay Australia Holdings Pty Limited (Share Sale Agreement).ParticularsParticulars of Share Sale AgreementParticulars of the Share Sale Agreement will be provided after a confidentiality regime is entered into.180The value to the 2013 Vendors of their consideration under the Share Sale Agreement was lower than the value (adjusted to account for the time-value of funds from 2010) of the price and terms they would have obtained in 2010, in the absence of the Loss of Opportunity (Loss of Opportunity Difference).181The Loss of Opportunity Difference is damage or loss within the meaning of s.82 of the Act.