Discovery and Immunity: LIV v. PGA
May 10, 2023
Photo by Edwin Compton on Unsplash
The U.S. legal battle between the PGA Tour (Tour) and the upstart rival LIV Golf continues to revolve around discovery. As regular TLB readers know, LIV Golf is a new professional golf tour that competes with the PGA, in part by luring PGA players to play in LIV tournaments. LIV is financed by the Public Investment Fund of the Kingdom of Saudi Arabia (“PIF”), whose leaders include His Excellency Yasir Othman Al-Rumayyan, a Minister in the Kingdom of Saudi Arabia. PIF has invested in a variety of sports around the world, including soccer, wrestling, and motorcycle racing. Those efforts are projected to continue and are widely understood as “sportswashing,” meaning the use of sports and sporting events to improve the global image of Saudi Arabia and to distract from its recent human rights violations.
LIV’s forays into the world of golf extend globally. LIV has, for example, recruited players away from the established Australian tour – leading to massive fines against those who competed in the LIV events. The same tactics generated the U.S. litigation, which was originally brought in August 2022 by players who had defected from the PGA Tour and who were threatened with sanctions and bans from competition. LIV soon joined the suit, and along with the players alleged that the Tour engaged in unlawful conduct to maintain its monopoly power over golf competitions, including breaches of state contract and tort law as well as violations of state and federal antitrust statutes. The Tour counterclaimed against LIV for tortious interference with contractual relations. In February of 2023, the Tour amended its counterclaim to add PIF and Al-Rumayyan as parties.
The hot issue in the litigation is discovery. PIF and Al-Rumayyan, who are not parties to the suit because they have not been served, moved to quash subpoenas issued to them for a variety of reasons, including foreign state and foreign official immunity. As previously covered on TLB, the magistrate judge denied the motions to quash and granted the motions to compel, reasoning in part that commercial activity exceptions to both foreign sovereign immunity and foreign official immunity applied and meant that neither PIF nor Al-Rumayyan were immune.
PIF and Al-Rumayyan moved for relief from the magistrate judge’s discovery order. The motion was heard by Judge Beth Labson Freeman of the Northern District of California. The Kingdom of Saudi Arabia filed an amicus brief in opposition to the discovery, arguing in part that international conventions or letters rogatory are the proper method of taking discovery from a foreign sovereign, in part that there is no source of authority for the enforcement of a subpoena against sovereign parties, and in part that the subpoenas should be quashed based on international comity. Judge Freeman rejected these arguments in an April 3, 2023 order and opinion denying the relief sought by PIF and Al-Rumayyan. Both the magistrate judge and the district court did a good job with difficult issues, but some uncertainties remain.
Discovery in Litigation with Foreign Sovereign Parties and Foreign Officials
Some basic issues involving foreign sovereign and discovery were resolved by the Supreme Court in the 2014 case Republic of Argentina v. NML Capital, Ltd. NML Capital, a hedge fund, purchased distressed Argentine bonds and won lawsuits in federal court in New York to require full repayment of the debts. NML then used discovery to seek information about Argentina’s assets around the world. Argentina argued that the subpoenas infringed its sovereignty, were outside the scope of the exceptions to the FSIA, and sought information about assets that might not be subject to execution. The U.S. government filed an amicus brief in support of Argentina, arguing that broad discovery would undermine international comity and could subject the U.S. to broad discovery in litigation abroad.
The Supreme Court rejected these arguments. It held that the Foreign Sovereign Immunities Act (FSIA) did not grant foreign sovereigns any special status with respect to discovery. Instead, normal discovery rules applied, even with respect to property that might ultimately be immune from execution. To be sure, district court judges have a great deal of discretion in all cases to weigh the burdens of discovery against its benefits under Federal Rule of Civil Procedure 26(b)(1) – that balancing might well take into consideration hardships that are particular to foreign sovereigns. The same general approach should apply to cases against foreign officials. If a foreign official lacks common law immunity and a case accordingly goes forward against it, presumably the general framework for discovery that applies in all civil litigation will also apply to litigation against foreign officials. For both foreign sovereigns and foreign officials, jurisdictional discovery may also be available to help determine the factual basis for granting or denying immunity.
Finally, as the district court noted in the LIV v. PGA case, to the extent that discovery is ordered against parties to the litigation, the enforcement of such orders can take many forms, such as deeming relevant facts admitted or even dismissing an action or rendering a default judgment. For these same reasons, in private litigation involving discovery of information abroad, discovery against parties to the litigation generally moves forward under the Federal Rules of Civil Procedure, not the optional Hague Evidence Convention. Although PIF and Al-Rumayyan are not parties to the litigation, the district court noted that they likely would be soon, meaning that there will be multiple ways to enforce discovery orders against them.
Discovery Against Non-Parties Who Are Foreign Sovereign and Foreign Officials
As it stands, PIF and Al-Rumayyan are not parties to the lawsuit. Enforcement of discovery subpoenas against foreign entities that are not parties is much more difficult, especially if those parties are foreign sovereigns. Case-related measures of enforcing discovery orders – such as entry of default – are obviously unavailable. Any property that might be used to satisfy a sanctions-related judgment against a foreign sovereign is presumptively immune from execution under the FSIA. Some courts have hesitated to order monetary contempt sanctions against foreign sovereigns because such sanctions cannot be enforced, but others have held that monetary sanctions for discovery violations may be granted even if enforcement appears impossible. (See Restatement Fourth, U.S. Foreign Relations Law, §462 reporters’ note 5). The property of foreign officials is unlikely to receive the same kind of protection, so enforcement of contempt sanctions against foreign officials would be easier – assuming that they have property in the United States.
Putting aside enforcement, the subpoenas directed to PIF are an assertion of “jurisdiction” by the courts of the United States. They are accordingly only permissible under the FSIA if an exception to immunity applies. Cases against foreign officials fall outside the FSIA, but those officials may be entitled to common law immunity. Judge Freeman agreed with the reasoning of the magistrate judge and held the subpoena against PIF is based on commercial activity with a direct effect in the United States, and that an exception to immunity applies. The FSIA has a commercial activity exception, and common law immunity may have an exception for commercial activity as well. Judge Freeman ruled that it does, but that issue is unsettled. More fundamentally, one might question whether the FSIA and common law immunities apply at all to third party discovery, although there is a strong argument that they do, as the courts in this case held.
The FSIA’s Commercial Activity Exception
Even application of the FSIA’s commercial activity exception is not entirely straightforward in this case. The exception applies to actions based upon commercial activity by a foreign sovereign in the United States and also to actions “based upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.” The exception applies here, the court reasoned, because the commercial activity of PIF in Saudi Arabia had a direct effect in the United States. PIF funded LIV, oversaw its operations, negotiated player contracts, engaged in financial planning for LIV, and so on. These activities in Saudi Arabia had a “direct effect” in the United States because “PIF created a new professional golf league in the United States” and “made a concerted effort to disrupt” PGA’s operations in the United States.
That reasoning is odd, because the “direct effect” of the conduct sounds more like conduct that actually happened in the United States. Apparently, however, some or all the conduct in the United States did not form the “gravamen” of the suit, meaning that it was not the core conduct upon which the causes of action or the counterclaim are based. But the “gravamen” test – which the Supreme Court has applied to conduct that takes place in the United States – does not apply, the court reasoned, to conduct that takes place outside the United States but that has a direct effect in the United States. It seems that the court relied on the “direct effect” test to avoid the “gravamen” requirement.
Note, however, that the gravamen test under the FSIA is basically assessing the relationship between the contacts with the forum and conduct on which the claim is based – roughly the inquiry that courts use for specific jurisdiction in personal jurisdiction cases under the Fourteenth Amendment. The exceptions to immunity under the FSIA serve as a federal long arm statute by conferring personal jurisdiction over defendants that come within an exception. If comparable minimum contacts reasoning applies in the Fifth Amendment context, then there needs to be some connection between PIF’s conduct that has a direct effect in the United States and the conduct that gives rise to the suit, whether or not the gravamen test applies. Maybe such a test is easily satisfied in this case, but it would be helpful to know exactly what PIF did in the United States, what it did in Saudi Arabia, and what actions of PIF allegedly give rise to liability.
Violations of Saudi Arabian Domestic Law
Saudi Arabia also asserted in its amicus brief that compliance with the discovery requests could require PIF and Al-Rumayyan to violate Saudi Arabian law. In general, courts have taken a dim view of such arguments, in part because of the interests of parties in the United States in redressing violations of the law, but also because the threat of actual prosecution seems low. So too in this case. The court was unconvinced that the Saudi laws in question would be enforced, and it wanted to make sure that potential violations of U.S. law were explored through discovery.
PIF and Al-Rumayyan have moved to stay discovery pending appeal, so the case is far from over. It is an interesting one, in part because many discovery issues never make their way into published opinions (much less ones involving foreign sovereigns), but also because of various complexities in the commercial activity exceptions to immunity under the FSIA and federal common law.