Federal Procedural Rules Trump Hague Convention
By Douglas E. Motzenbecker, Litigation News Associate Editor – May 7, 2012

A federal district court has held that a foreign corporation defending a civil action in the United States must comply with its discovery obligations under the Federal Rules of Civil Procedure even if the corporation faces possible criminal liability abroad for doing so. Disagreeing that the Hague Convention’s procedures controlled, the court ruled that a French-blocking statute did not excuse the defendant from providing discovery pursuant the Rules. Under this ruling, foreign corporations should expect that the Hague Convention and their own country’s laws will not protect them from providing discovery in U.S. courts, at least that which is necessary to determine personal jurisdiction issues.

U.S. Antitrust Claims Trigger International Discovery
In Trueposition, Inc. v. LM Ericsson Tel. Co., the plaintiff company brought suit in federal court against various defendants—including various standard-setting entities—alleging they violated the Sherman Antitrust Act by conspiring to determine that the plaintiff’s technology failed to meet the defendants’ standards. Defendant European Telecommunications Standards Institute (ETSI), based in France, argued that the court lacked personal jurisdiction over it. The court denied the motion without prejudice and allowed the parties to conduct limited discovery with respect to jurisdictional issues.

ETSI moved for a protective order, arguing that the plaintiff was required to follow the Hague Convention on Taking of Evidence Abroad in Civil and Commercial Matters. The Convention was first signed in 1970 and has since been ratified by 65 countries, including the United States and France. It requires each ratifying country to designate a central authority to which letters of request may be submitted. The Convention seeks to reconcile the different, often conflicting, discovery procedures of civil and common-law countries, and enables a judicial authority in one country to request evidence located in another country. The Convention also establishes procedures for taking depositions abroad.

The U.S. Supreme Court’s Guidance
In Societe Nationale Industrielle Aerospatiale v. United States District Court for the Southern District of Iowa, the U.S. Supreme Court held that courts should not, as a first resort, depart from the Rules in favor of the Hague Convention. Aerospatiale adopted a rule of comity by which courts must weigh the following factors in deciding whether to defer to the Convention: (a) the importance of the documents or information being sought; (b) the specificity of the requests; (c) whether the information originated in the United States; (d) whether the materials sought are available by alternative means; and (e) the extent to which noncompliance with the requests would undermine interests of the United States or the foreign state in which the evidence is located. Subsequent courts have inquired whether the party resisting the request is acting in good faith and whether the request would put the responding party to undue hardship.

The District Court Affirms Truposition’s Position
In Trueposition, ETSI argued that a French law—known as a blocking statute—permitted it to respond only to discovery requests made in accordance with the Hague Convention. ETSI claimed that it faced criminal liability if it responded to a request propounded under the Rules. The district court observed that, in Aerospatiale, the Supreme Court held that blocking statutes do not deprive U.S. courts of jurisdiction. The district court cited several subsequent decisions that have refused to accord substantial weight to such foreign laws.

Applying the Aerospatiale factors, the district court found that (1) documents concerning ETSI’s contacts with the United States are necessarily relevant; (2) the plaintiff’s requests were specific and reasonably tailored to the jurisdictional inquiry; (3) this evidence originated in France because ETSI does not do business elsewhere; (4) the Hague Convention’s procedures are generally cumbersome and time-consuming; and (5) the United States’ compelling interest in enforcing its antitrust laws outweighed the French interests in limiting discovery of evidence within its borders, particularly since the plaintiff’s discovery demands were not the kind of vexatious requests for which the blocking statute was apparently adopted.

As for the possible criminal penalties cited by ETSI, the court noted that no defendant has faced a significant risk of prosecution under the French blocking statute in comparable circumstances, i.e., where the responding party, a defendant in a federal civil action, had merely been ordered to provide jurisdictional discovery.

In one of the cases cited by the district court, a U.S. Bankruptcy Court reached a similar decision in In re Global Power Equipment Group, Inc. That court held that, under the Aerospatiale factors, a French company would be required to provide discovery in accordance with the Rules. It also concluded that that the defendant faced minimal risk of criminal prosecution.

Global Power additionally summarized the procedural hurdles and delay that using the Hague Convention can entail in cases involving French parties: “Under the Hague Evidence Convention, Letters of Request are given to the French Central Authority who determines the appropriate implementation of the Letters. The French Central Authority then dispatches the Letters of Request to a French judge who supervises the taking of discovery. Letters of Request can take up to six months to complete. The Letters are mandatory for the French entity that is producing discovery.”

Implications of Trueposition
“In my view, the court reached the correct and defensible result,” notes Joan K. Archer, Kansas City, MO, cochair of the ABA Section of Litigation’s Pretrial Practice and Discovery Committee. “The defendant failed to demonstrate that it faced undue hardship in responding to the requests.”

“Generally speaking, defendants and other discovery respondents have a tactical reason to prefer the Hague Convention. . . . [I]ts procedures are nowhere near as efficient as the federal rules,” says Ian H. Fisher, Chicago, cochair of the Section’s Pretrial Practice and Discovery Committee. “The court’s terse finding that the French interest in limiting discovery ‘pales in comparison’ to the United States’ interest in enforcing its antitrust laws is striking,” he adds. “The irony of jurisdictional discovery is that the very discovery ordered from the defendant could lead the court to find that it lacked jurisdiction over the defendant.”

“Judges know that defendants sometimes prefer the Convention because it can slow or limit discovery,” Fisher notes. “Anyone who needs to obtain discovery abroad—particularly from a non-party—would do well to flag the issue for the court early on, because the process can often take several months.”

“Suits against foreign companies take extra time. Not only can discovery under the Hague Convention on evidence be slow, but service of process under the Hague Service Convention can take as much as half a year,” Fisher notes.

Keywords: Hague Convention, international discovery, federal rules, Sherman Antitrust Act

 

 
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