Where a conflict of interest disqualified a law firm from representing a Russian bank that sought discovery in aid of an alleged fraud, its subpoenas were quashed. The bank could seek them again through conflict-free counsel.
VUZ Bank JSC is a commercial bank in Russia that asserts it is the victim of a perpetrated “by a number of parties, including, but not limited to, Rus-AgroExport LLC , Hakan Holdings Limited (‘Hakan Holdings’), and Hakan Agro DMCC (‘Hakan Agro’),” which “resulted in the misappropriation of funds loaned by VUZ Bank.” VUZ Bank’s application, pursuant to 28 U.S.C. § 1782, sought the issuance of subpoenas to Agropex International and Hakan USA. Agropex and Hakan move to quash those subpoenas.
Also seeking to quash the subpoenas are Deniz Yelda Bahceci and Alettin Bahceci. The court granted their motion for leave to intervene for the purpose of asserting objections and a motion to quash the subpoenas issued to Agropex and Hakan. Deniz’s children own 75 percent of Hakan Holdings, and Hakan Holdings owns 100% of Hakan Agro.
Alettin is alleged in the application to be among the potential targets of criminal proceedings in Dubai; to the court’s knowledge, no such proceedings have been initiated against Alettin or any other person or entity as contemplated by the application. In addition to seeking to quash the subpoenas, Deniz and Alettin raise the issue of a potentially disqualifying conflict of interest involving VUZ Bank’s law firm, Baker McKenzie.
Almost the exact same scenario occurred in a Georgia federal district court. There, VUZ Bank sought information from Ashley Anderson Bahceci, the ex-wife of Hakan Bahceci, the now-deceased founder of Hakan Holdings. The magistrate judge recommended that the motion to disqualify be granted. That report and recommendation was adopted by the district court.
The court in Georgia found that Baker McKenzie should be disqualified from representing VUZ Bank pursuant to Georgia Rule of Professional Conduct 1.18(c), which provides that “[a] lawyer [who has learned information from a prospective client] shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except [if both the prospective client and current client have given informed consent in writing].”
The Virginia rule that applies in this matter is identical in all material respects to the one considered by the Georgia court. As the Georgia magistrate judge found, “It is undisputed that when Baker McKenzie attorneys met with Kroll, Hakan Agro’s agent, concerning Hakan Agro’s insolvency and possible liquidation on June 15, 2021, Baker McKenzie represented a client, VUZ Bank, ‘with interests materially adverse to those of’ Hakan Agro (a prospective client) ‘in the same or substantially related matter’ as the matter for which Baker McKenzie attorneys met with Hakan Agro’s agent Kroll, i.e., the liquidation of Hakan Agro.”
Moreover, it is undisputed that neither VUZ Bank nor Hakan Agro gave “informed consent in writing to the conflict, particularly given that Baker McKenzie lawyers had represented that there were no conflicts with the representation of Hakan Agro.” And because the Virginia rule bars representation by any lawyer at a firm with which a disqualified lawyer is “associated,” all Baker McKenzie lawyers are disqualified from representing VUZ Bank in this matter.
VUZ Bank argues, as it did in the Georgia matter, that the intervenors, Deniz and Alettin, do not have standing because they are not a party to the relevant attorney-client relationship. The Georgia court rejected this argument. Caselaw in the Fourth Circuit takes a similarly broad view of standing in this context. Moreover, the rights of the intervenors are clearly implicated by this action.
The minor intervenors own 75% of Hakan Holdings, which owns Hakan Agro, and Alettin is a potential target of criminal proceedings involving Hakan Holdings and Hakan Agro. Those proceedings are the stated justification for seeking discovery in this § 1782 action. Given the disqualification of VUZ Bank’s attorneys, the court is compelled to deny the application without prejudice to VUZ Bank’s right to re-file the application through conflict-free counsel.
Motions to quash granted.
In the Matter of the Application of VUZ Bank JSC, Case No. 5:21-mc-00011, Oct. 14, 2022. WDVA at Harrisonburg (Dillon). VLW 022-3-462. 8 pp.