Posted by Article Authored By: Peter Danos
The Seventh Circuit Court of Appeals (“Seventh Circuit”) recently issued an opinion affirming that a pre-filing deposition under Federal Rule of Civil Procedure 27 (“Rule 27”) is not appropriate to obtain jurisdictional discovery.
In 2011, Prospective Plaintiff Qi Qin (“Mr. Qin”) and other foreign limited partners (collectively, the “investors”), invested roughly $82.5 million into a limited partnership called Regional Center Project Solaris LLLP (“CRCPS”)[1], whose general partner is Colorado Regional I LLC (“CRC-1” or “LLC”). Waveland Ventures LLC (“Waveland”) is CRC-1’s parent company wherein Paul Deslongchamps (Mr. Deslongchamps) serves as a member. Under the limited partnership agreement with CRPRS, CRC-1 invested CRPRS’ funds into a condominium project in Vail, Colorado, through a series of five-year loan advances (the “investment”). The investors also provided CRC-1 with an annual management fee of $1.6 million dollars. Due to CRC-1’s alleged misconduct, the investment failed, and the investors lost $40 – $70 million dollars.
Consequently, Mr. Qin wanted to sue CRC-1 in the Eastern District of Wisconsin (the “District Court”) alleging that CRC-1 breached the partnership agreement by mismanaging the investment funds. However, Mr. Qin did not know the identities or citizenships of the LLC’s members and therefore, filed a Rule 27 petition seeking leave to depose Mr. Deslongchamps. By deposing Mr. Deslongchamps, Mr. Qin sought to identify the LLC’s members to determine whether diversity jurisdiction existed. The District Court denied Mr. Qin’s petition for two reasons: (1) the proposed lawsuit did fall within the purview of federal subject matter-jurisdiction; and (2) Rule 27 may not be used to obtain jurisdictional discovery in “the face of CRC-I’s unwillingness to disclose the identity of its members.” The Court further noted that Mr. Qin did not face an injustice in its ruling, as he had standing to assert his breach of contract claim in state court. Mr. Qin appealed.
Rule 27 governs the circumstances under which the Court may enter an order perpetuating testimony. In relevant part, the rules states:
A person who wants to perpetuate testimony about any matter cognizable in a United States Court may file a verified petition in the district court for the district court where any expected adverse party resides. The petition must ask an order authorizing the petitioner to depose the named persons in order to perpetuate their testimony.
Rule 27 “provides only for the perpetuation of testimony that is at risk of becoming unavailable.” Qin v. Deslongchamps, 31 F.4th 576 (7th Cir. 2022) (citing Rule 27(a)(3)). This includes “the testimony of a witness who is aged or seriously ill, might flee, or who may become unavailable by reason of relocation or other geographic constraints before a suit can be filed.” Id.
On appeal, Mr. Qin argued it is necessary to invoke Rule 27 because without the opportunity to depose Mr. Deslongchamps, he is unable to plead himself into federal court. The Seventh Circuit disagreed, explaining that Mr. Qin’s rationale “attributes a breadth and purpose to the rule that it does not possess.” Qin v. Deslongchamps, 31 F.4th 576 (7th Cir. 2022). Indeed, “[Mr.] Qin’s petition is not one to perpetuate testimony material to a prospective suit that he and the court have reason to believe is cognizable in federal court but rather one to identify whether a particular action is cognizable in federal court.” Id. Thus, the Seventh Circuit affirmed the District Court, holding that Mr. Qin’s assertion contrasts with the spirit of Rule 27.
[1] CRPS was part of an approved United States immigrant visa program through which Mr. Qin could obtain permanent-resident visas as a result of his investment. As a result of his investment with CRCPS, Mr. Qin is now a permanent United States resident and lives in Florida.
About the Author:
Pantelis “Peter” Danos is a litigation associate at CROKE FAIRCHILD MORGAN & BERES, where where he works on a wide array of commercial matters.
Upon graduating from the University of Illinois Chicago School of Law, Peter clerked for the Honorable Charles P. Kocoras of the U.S. District Court for the Northern District of Illinois. Peter’s work clerking afforded him the opportunity to work on a broad range of matters, while giving him unique insight into effective litigation strategies across a broad spectrum of venues and forums. Peter then worked at an AM 200 law firm, where he continued to polish his litigation skills. In addition to his broad experiences, Peter also has extensive experience analyzing electrical and computer science technologies for complex intellectual property matters.