Broidy Capital Management LLC v. Nicolas Muzin

Citation: Not availableDocket: 22-7082

Court: Court of Appeals for the D.C. Circuit; March 9, 2023; Federal Appellate Court

Original Court Document: View Document

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The United States Court of Appeals for the District of Columbia Circuit ruled on an appeal involving Broidy Capital Management LLC and Elliott Broidy against Nicolas D. Muzin and others, with the State of Qatar as the appellant. The case arose from a discovery dispute in a District Court where plaintiffs accused the defendants of aiding Qatar in hacking their computer systems and conducting a public relations campaign using the stolen materials. The core issue revolved around the status of certain documents as inviolable under the Vienna Conventions, which obligate the U.S. and Qatar to protect foreign diplomatic missions and their documents.

The District Court had compelled the defendants to produce documents related to their work for Qatar. Qatar argued that these documents were protected from disclosure under international comity due to their inviolable status. However, since Qatar was not a party to the original suit and only filed statements of interest, the Court held that it could not appeal the discovery order. The ruling reaffirmed the principle that only parties to a case can appeal adverse judgments.

Despite dismissing the appeal, the Court recognized the need to respect Qatar's sovereign interests and acknowledged the complexities involved in how a foreign state may assert its treaty rights without relinquishing its sovereign immunity. The Court remanded the case, instructing the District Court to allow Qatar the opportunity to intervene or take other steps to become a party in the proceedings before enforcing the discovery order.

In January 2019, Elliott Broidy and Broidy Capital Management, LLC initiated a lawsuit against Nicolas D. Muzin, Joseph Allaham, Gregory Howard, and Stonington Strategies LLC in the U.S. District Court for the District of Columbia. The defendants, U.S.-based political consultants hired by Qatar to advance its foreign policy in the U.S., are accused of disseminating hacked materials related to Broidy due to his criticism of Qatar. The case was appealed in 2020 after the court denied the defendants' motion to dismiss based on claims of foreign official immunity and a concept they termed "derivative" immunity. The appellate court affirmed the denial, acknowledging a perceived risk to Qatar's sensitive communications but determined this did not warrant immunity, while trusting the district court could safeguard Qatar’s sovereign immunities during litigation.

Following the remand, Qatar submitted a "Notice of Interest" to monitor proceedings, asserting it was a non-party and not seeking to intervene. Plaintiffs opposed this notice and the appearance of Qatar's attorney, David M. Zionts, arguing that Qatar needed to formally intervene to participate. Subsequently, defendants filed an emergency motion to prevent the release of sensitive information during discovery, alleging that plaintiffs had stalled negotiations for a joint protective order and had improperly served third-party subpoenas. Defendants' proposed protective order mirrored one from a prior case in California but included an immunity protocol for Qatar to review third-party information before production. Plaintiffs countered with an alternative protective order omitting the immunity protocol.

The District Court issued a protective order for the Defendants but rejected the proposed immunity protocol, stating Qatar could not participate in ongoing discovery without intervening as per Federal Rule of Civil Procedure 24(b). The court referenced a case emphasizing that allowing a non-party to engage in discovery disputes equates to authorizing intervention. Qatar's notice and appearance were not struck down as requested by the Plaintiffs; instead, the court considered them akin to amicus briefs and noted that Qatar's status did not need to be addressed at that time.

Discovery disputes were contentious, with Defendants objecting to the Plaintiffs' document requests on grounds of privilege and protections under the Vienna Conventions. Plaintiffs' subsequent motion to compel led to Qatar filing a statement of interest regarding its treaty rights. The District Court granted the motion, ruling that Defendants were not protected from discovery due to their business relations with Qatar. It interpreted Article 24 of the Vienna Convention as applying only to documents possessed by a mission, not those delivered to intended recipients, concluding the documents in question were no longer "of the mission." The court also determined that international comity did not inhibit discovery.

Qatar appealed the District Court's order and requested a stay pending appeal. The appeal raised novel issues, including Qatar's contention that the District Court misinterpreted the Vienna Conventions and argued for a broader protection scope regarding documents involving third-party contractors. However, as a nonparty, Qatar lacked the standing to appeal the District Court’s ruling. The law is well established that only parties to a lawsuit can appeal adverse judgments, a procedural requirement separate from standing or jurisdiction issues.

The term “party” in legal proceedings refers not to a fixed characteristic but to a designation that varies based on procedural context. Parties to a case include original parties, as well as those who join through intervention, substitution, or third-party practices. The Supreme Court has recognized that individuals involved in trial proceedings, even if not named in underlying judgments, may be considered “parties” when appealing collateral orders. For example, nonnamed parties appealing contempt findings, bidders in foreclosure sales, and court receivers have been classified as parties for appeal purposes. In "Devlin," the Court extended this classification to nonnamed class members who object to settlements during fairness hearings, despite prior rulings like "Marino," which denied party status to those who did not intervene. The distinction was based on whether the action affected their rights. The Devlin majority emphasized the significance of being bound by the settlement, asserting that class action procedures allow nonnamed members to appeal decisions disregarding their objections. Ultimately, Devlin upheld the principle that only parties can appeal adverse judgments while clarifying that the definition of “party” encompasses those bound by an order and participating under the applicable procedural rules. Thus, unnamed class members who timely object to class settlements are classified as proper parties for appeal under Federal Rules of Civil Procedure, which mandates a fairness hearing to determine if a proposal is fair, reasonable, and adequate before binding class members.

Nonnamed parties historically have the right to appeal District Court orders that negatively impact their interests in this Circuit, as established under the collateral order and Perlman doctrines, provided they have taken prior procedural actions such as intervention or ancillary proceedings. In *In re Stone*, the court noted that parties typically sought to intervene or take similar actions before appealing adverse orders. In *United States v. American Telephone and Telegraph Co.*, a party that unsuccessfully sought to intervene to protect a work product privilege was allowed to appeal an interlocutory discovery order after the court reversed the denial of intervention, affirming that the appeal was viable under the relevant legal doctrines. Similarly, in *United States v. Hubbard*, an outsider to a criminal case who argued for the confidentiality of documents was permitted to appeal a decision unsealing those documents after employing multiple legal mechanisms to assert their interest. The Court emphasized that an individual must make an effort to become a party in the District Court to appeal; failure to do so precludes them from bringing the case to a higher court. Qatar's appeal was rejected because it did not take steps to become a party in the original proceeding, and the District Court’s order did not impose any legal duties on Qatar, which is necessary for a binding effect as defined in prior cases. The court also declined to extend appeal rights to foreign sovereigns acting as nonparty amici curiae based on their stated interests, reiterating that the underlying order did not legally bind Qatar.

Approval of a class action settlement, as established in Devlin, binds petitioners as class members, extinguishing their claims and preventing subsequent actions (536 U.S. at 9; Cooper v. Fed. Rsrv. Bank of Richmond, 467 U.S. 867, 874). This binding preclusive effect does not extend to nonparties, except under certain recognized exceptions, which are not applicable in this case (Ethnic Emps. of Libr. of Cong. v. Boorstin, 751 F.2d 1405, 1409). Qatar, as a nonparty to the underlying suit, is not bound by the District Court's order regarding discovery, nor does it have the standing to appeal (Holland v. Nat’l Mining Ass’n, 309 F.3d 808, 810). Furthermore, Qatar has not demonstrated any relevant action taken during the District Court proceedings, nor does it fit the criteria established in Eisenstein, which requires a procedural vehicle for nonparties to appeal (556 U.S. 928, 934 n.3). 

The ability to appeal for nonnamed parties in Devlin stemmed from a fairness hearing process allowing objections to class settlements, which is absent in this case. Qatar's status as analogous to an amicus curiae does not confer party status (Moten v. Bricklayers, Masons, Plasterers, Int’l Union of Am., 543 F.2d 224, 227). Expanding the ability to appeal to nonparties would disrupt procedural order and efficiency in the judicial system, which is designed to manage numerous cases systematically (Seigel, 168 F.2d at 146). The principle of party presentation emphasizes that courts rely on parties to frame issues, maintaining their role as neutral arbiters (United States v. Sineneng-Smith, 140 S. Ct. 1575, 1579). Thus, the rule that only parties may appeal adverse judgments is essential for the orderly administration of justice.

Qatar, as a nonparty, is not bound by the underlying order and did not utilize procedural options like intervention to join the related proceedings or appeal the discovery order. The appeal is deemed improper as no party to the original case has initiated it. Qatar argues that requiring it to become a party for the appeal would risk its sovereign immunity, which is protected under the Foreign Sovereign Immunities Act (FSIA). Courts have the discretion to establish procedural rules, but these must align with constitutional and statutory provisions; thus, the rule that only parties can appeal could be invalid if it conflicts with the FSIA. Sovereign immunity must be addressed early in litigation, and the FSIA establishes a presumption of immunity for foreign states, with specific exceptions for jurisdiction. Qatar is concerned that intervening could expose it to direct lawsuits under the FSIA's counterclaim or waiver exceptions. However, precedents suggest that Qatar’s concerns about intervening are misplaced, as the FSIA provides clear rules regarding immunity in counterclaims, which do not protect foreign states in certain scenarios related to the claims they bring.

The counterclaim exception under the Foreign Sovereign Immunities Act (FSIA) is applicable only when a foreign state either initiates an action or intervenes in an existing one, and the counterclaim is made within that same context. The FSIA stipulates that a foreign state is not immune from jurisdiction if it has explicitly or implicitly waived its immunity, with explicit waivers requiring clear and unambiguous language. Implicit waivers, while not defined, are interpreted narrowly and necessitate evidence of the foreign state's intent to waive immunity, which has been established in limited scenarios: executing a contract with a choice-of-law clause favoring U.S. law, filing a responsive pleading without asserting immunity, or agreeing to arbitration in the U.S. Courts are generally reluctant to expand beyond these examples. 

Nonparties can file motions for limited intervention while reserving their rights, and such interventions can be subject to conditions for efficient proceedings. Under Rule 24 of the Federal Rules of Civil Procedure, limited-scope interventions are permissible. Qatar could have pursued limited intervention while maintaining its sovereign immunity, as the FSIA exceptions referenced would not apply in this situation. A foreign sovereign must assert a claim for the counterclaim exception to be relevant. A counterclaim is defined as a claim for relief against an opposing party after an original claim is made. A motion to intervene solely for asserting privileges does not assert a claim for relief and therefore does not fall within the counterclaim exception. Furthermore, Qatar could have requested that its intervention be specifically limited to prevent delays or prejudice to the ongoing claims.

The counterclaim exception and waiver exception to the Foreign Sovereign Immunities Act (FSIA) do not apply to Qatar, which has consistently stated its reliance on sovereign immunity throughout the litigation. Referencing *Ex parte Republic of Peru*, the Supreme Court ruled that actions taken by Peru, such as filing a motion to intervene while reserving its rights to immunity, did not constitute a waiver of sovereign immunity, a principle that remains relevant even after the enactment of the FSIA. Qatar's various litigation actions, including motions to intervene or dismiss, do not qualify as responsive pleadings that would result in a waiver of immunity. Similar cases support this assertion, confirming that participation in litigation does not imply a waiver of sovereign immunity if the foreign nation consistently asserts its immunity. Consequently, Qatar’s limited intervention cannot be seen as an implicit waiver of its sovereign immunity rights.

A motion to intervene for a limited purpose does not constitute an implied waiver of sovereign immunity, as recognized by the D.C. Circuit. Discovery motions do not qualify as contracts or arbitration agreements, thus the two other recognized circumstances for waiver do not apply. Qatar's limited intervention would not waive its foreign sovereign immunity, and therefore, it must adhere to procedural rules that state only parties can appeal. Qatar could have pursued its rights under the Vienna Conventions by filing for limited intervention under Federal Rule of Civil Procedure 24(b)(1)(A) to seek protective orders or related relief, but failed to do so, resulting in its status as a nonparty, which precludes it from appealing. The ruling in Marino reiterates that only named parties or those who properly become parties through established procedures can appeal adverse judgments. Qatar had options to seek intervention without forfeiting its immunity; if the District Court mistakenly believed immunity needed to be waived for intervention, Qatar could have appealed that denial. The denial of intervention, whether as of right or permissively, is an appealable order, regardless of the merits of the intervention claim.

Qatar had the option to intervene at the District Court with the specific aim of appealing a negative discovery order, acknowledging that any unraised arguments would not be preserved for appeal. The precedent set in Tachiona v. United States illustrates that a party can seek to appeal after filing a motion for limited intervention. However, Qatar's failure to intervene or take necessary actions to secure party status at the District Court means it is not considered a "party" under the relevant legal framework, thus barring its ability to appeal the order compelling discovery. The court refrains from addressing whether the District Court's order is immediately appealable under specific doctrines. Qatar's inaction regarding alternative remedies results in the court lacking jurisdiction to treat its notice of appeal as a mandamus petition. Despite this, Qatar has expressed its interest and concerns regarding its privileges and immunities in the ongoing litigation. The court instructs the District Court to allow Qatar the opportunity to timely intervene and assert its rights under international law, specifically the Vienna Conventions, or to file an appropriate motion to become a party in the case. Consequently, the appeal is dismissed, and the case is remanded for further proceedings.