United States District Court, D. Minnesota
In re Application of CA Investment (Brazil) S.A. for an Order to Take Discovery for Use in Foreign Proceedings Pursuant to 28 U.S.C. § 1782
Douglas L. Elsass, Nilan Johnson Lewis PA, and Kenneth
Puhala, Schnader Harrison Segal & Lewis LLP, (for
E. Rau United States Magistrate Judge
matter is before the Court, United States Magistrate Judge
Steven E. Rau, on CA Investment (Brazil) S.A.'s Ex
Parte Application for an Order to Take Discovery for Use
in Foreign Proceedings Pursuant to 28 U.S.C. § 1782.
(ECF No. 1). For the reasons set forth below, the application
Brasil Celulose S.A. (“Eldorado”) is a Brazilian
company that produces market bleached hardwood kraft pulp.
(Decl. of Claudio Laert Cotrim Passos ¶ 2, ECF No. 3).
CA Investment (Brazil) S.A. (“CA Investment”) is
a Brazilian corporation. (Cotrim Passos Decl. ¶ 2). CA
Investment holds 49.41% of the total issued and outstanding
shares of Eldorado. (Cotrim Passos Decl. ¶ 2). The
remaining 50.59% of the issued and outstanding shares in
Eldorado are held by J&F Investimentos S.A. (Cotrim
Passos Decl. ¶ 3). J&F Investimentos is controlled
by two brothers, Joesley Mendonça Batista and Wesley
Mendonça Batista. (Cotrim Passos Decl. ¶ 3).
a corruption probe by Brazilian authorities, Joesley
Mendonça Batista and Wesley Mendonça Batista,
as well as other officers of various companies owned by
J&F Investimentos, entered into plea bargains with the
Brazilian Federal Prosecutor Service on May 3, 2017. (Cotrim
Passos Decl. ¶ 4). The pleas called for fines totaling
R$225 million. (Cotrim Passos Decl. ¶ 4). On June 5,
2017, J&F Investimentos entered in a leniency agreement
wherein it assumed responsibility for the criminal conduct
outlined in the May 3, 2017 pleas; J&F Investimentos
agreed to pay a R$8.0 billion fine and contribute R$2.3
billion over a 25-year period for social
projects. (Cotrim Passos Decl. ¶ 5).
these fines, Joesley Mendonça Batista, Wesley
Mendonça Batista, and J&F Investimentos sought to
sell various assets, including Eldorado. (Cotrim Passos Decl.
¶ 7). On September 2, 2017, CA Investment entered into a
share purchase agreement with J&F Investimentos to
purchase its ownership interest in Eldorado, which was 80.9%
of Eldorado's total issued and outstanding capital stock.
(Cotrim Passos Decl. ¶ 8). The share purchase agreement
provided that CA Investment would acquire all shares in
Eldorado by September 2, 2018. (Cotrim Passos Decl. ¶
transactions were made pursuant to the share purchase
agreement. First, J&F Investimentos sold CA Investment
13% of the total and voting share capital of Eldorado for
R$1, 006, 000 on September 25, 2017. (Cotrim Passos Decl.
¶ 9(a)). On December 12, 2017, CA Investment purchased
34.45% of the indirect total share capital of Eldorado from
Florestal Fundo de Investimento em Participacoes
Multiestrategia for R$2, 700, 000, 000 and 1.96% of the
indirect total and voting share capital for R$151, 000, 000.
(Cotrim Passos Decl. ¶ 9(b)). This brought CA Investment
to a total of 49.41% ownership of the shares of Eldorado.
(Cotrim Passos Decl. ¶ 9(b)).
sale of the remaining Eldorado shares to CA Investment has
not occurred. (Cotrim Passos Decl. ¶ 9(c)). On July 18,
2018, CA Investment remitted the necessary funds to finalize
the purchase of the remaining Eldorado funds pursuant to the
share purchase agreement. (Cotrim Passos Decl. ¶ 9(c)).
Due to various market changes-a significant increase in pulp
prices in China and favorable changes to the US/Brazilian
exchange rate-J&F Investimentos and Eldorado frustrated
CA Investment's efforts under the share purchase
agreement. (Cotrim Passos Decl. ¶ 11). Accordingly, CA
Investment sought an injunction in Brazilian courts on August
14, 2018. (Cotrim Passos Decl. ¶ 12). On August 31,
2018, the Brazilian court determined that the dispute between
CA Investment and J&F Investimentos and Eldorado should
be resolved by ICC arbitration under the terms of the share
purchase agreement. (Cotrim Passos Decl. ¶ 13). The
Brazilian court enjoined J&F Investimentos from (1)
disposing of its shares in Eldorado pending the arbitration
and (2) any transactions outside the ordinary course of
business without CA Investment's consent. (Cotrim Passos
Decl. ¶ 13).
September 4, 2018, J&F Investimentos notified CA
Investments that it was terminating the share purchase
agreement on the grounds that the September 2, 2018 deadline
had passed and CA Investment failed to fulfill its
obligations. (Cotrim Passos Decl. ¶ 14).
Investimentos and CA Investments appealed the Brazilian court
decision. (Cotrim Passos Decl. ¶ 15). The São
Paulo State Court of Appeals issued its decision on November
28, 2018, suspending J&F Investimentos' termination
notice and extending the injunctive relief through an
arbitration decision. (Cotrim Passos Decl. ¶ 15;
see Cotrim Passos Decl. Ex. B).
Investment submitted its arbitration request to the
Secretariat of the International Court of Arbitration of
Brazil on September 5, 2018. (Cotrim Passos Decl. ¶ 16).
J&F Investimentos and Eldorado responded on October 15,
2018. (Cotrim Passos Decl. ¶ 16). On March 21, 2019, an
arbitral tribunal was constituted under ICC No. 23909/GSS.
(Cotrim Passos Decl. ¶¶ 16-17).
shareholders' meeting on February 6, 2019, J&F
Investimentos approved, over the objection of CA Investment,
the issuance of US$500 million in new bonds listed on the
Singapore Exchange Securities Trading Limited
(“Singapore Exchange”) by an Eldorado affiliate,
Eldorado Intl. Finance GmbH. (Cotrim Passos Decl. ¶ 18).
The bonds would be guaranteed by Eldorado and another
Eldorado affiliate, Cellulose Eldorado Austria GmbH. (Cotrim
Passos Decl. ¶ 18). This proposed bond offering had been
approved at a January 21, 2019 meeting of Eldorado's
board of directors. (Cotrim Passos Decl. ¶
In relation to the proposed new bonds, CA Investment obtained
from a third party-not Eldorado or J&F Investimentos-the
accompanying bond offering memorandum. (Cotrim Passos Decl.
¶ 20). CA investment asserts there are numerous
fraudulent representations in the bond offering memorandum.
(Cotrim Passos Decl. ¶¶ 21-22).
February 7, 2019, CA Investment commended dual actions in the
High Court of Singapore (HC/OS 169/2019) and the Singapore
High Court (HC/SUM 612/2019) seeking an injunction
restraining Eldorado from taking any steps to publish or
disseminate the bond offering memorandum or applying to list
the proposed bonds on the Singapore Exchange. (Cotrim Passos
Decl. ¶¶ 23-24). The Singapore High Court ...