Drowning in international waters?

How to stay abreast of treacherous cross-border e-discovery issues

The sweeping effects of globalization continue to transform the economic fortunes of many organizations. Companies that were previously content to limit their business operations to the U.S. are now branching into international markets in an effort to increase their revenues. As organizations push farther into unchartered economic waters, they are frequently encountering a range of murky legal issues. These issues, particularly cross-border discovery matters, can mushroom into costly and time-consuming tsunamis. Three cross-border discovery issues that have the potential to drown unsuspecting corporations in excess legal fees, lost opportunities and legal minutiae include:

  1. International discovery requests;
  2. Discovery requests made pursuant to 28 U.S.C. §1782; and
  3. The application of the attorney client privilege to corporate counsel.

Hostility to international discovery requests originating from the U.S.

The treatment of international discovery requests represents a potential trap for organizations. Those companies accustomed to U.S. litigation may be surprised that other countries do not appreciate the broad discovery traditions embraced in U.S. courtrooms. In fact, the American concept of discovery is unknown in most of the world. Interrogatories, categorical document requests and requests for admissions are generally unavailable as discovery tools. Instead, many countries allow only a limited exchange of documents. Typically referred to as “disclosure,” parties are frequently obligated to produce only that information that supports their claims.

Given this resistance to pretrial discovery, it should come as no surprise that foreign courts often deny requests for electronically stored information (ESI) that originate from the U.S. Such requests, made pursuant to the Hague Convention of March 18, 1970, on the Taking of Evidence Abroad in Civil or Commercial Matters (Hague Convention), may be rejected in some locales because they are overly broad and violate the principles of proportionality that govern litigation in other regions.

Those nations that are not signatories to the Hague Convention will typically not accept requests made pursuant to that treaty. To obtain ESI in those lands, litigants must take their chances with the cumbersome and time-consuming process of submitting letters rogatory through the U.S. State Department. Finally, requests for information that seek email or other “personal information” (i.e., information that could be used to identify a person) must often satisfy a patchwork of strict data protection rules.

Those organizations that safely navigate these complex provisions should have modest expectations about the results. Not only are such requests narrowly construed by foreign tribunals, they are rarely acted on with the alacrity required by the Federal Rules of Civil Procedure. Indeed, delays may stretch into months or years before a response is received. Given these factors, organizations should consider moving early in the case to acquire ESI from foreign venues if it is deemed essential to their claims or defenses.

28 U.S.C. §1782Enabling “American style” discovery in foreign litigation

Another cross-border discovery trap lies in a somewhat obscure federal statute that could open the door to “American style” discovery in foreign disputes. 28 U.S.C. §1782 enables companies involved in foreign legal proceedings to obtain from parties or nonparties discovery of ESI from their U.S. offices. A petitioning litigant under section 1782 need only make a minor threshold showing to a U.S. district court to justify the discovery. If successful, the petitioner “can obtain as much discovery as it could if the lawsuit had been brought in [the U.S.] rather than abroad.” Heraeus Kulzer GmbH v. Biomet, Inc., 633 F.3d 591, 594 (7th Cir. 2011). The Heraeus decision issued last year by the 7th Circuit is particularly instructive on this issue.

In Heraeus, a German company filed a trade secret misappropriation action in Germany against an American competitor and its European affiliates. Shortly after that litigation commenced, the plaintiff requested a U.S. district court to order an “American style” document production pursuant to section 1782 from the competitor’s Indiana-based office. In granting the request, the court determined that the plaintiff could not have obtained the ESI through the more restrictive German procedural rules. On remand, the competitor was ordered to turn over several categories of emails from a four-year period.

As the Heraeus case demonstrates, unsuspecting enterprises can be exposed to the full spectrum of American e-discovery headaches even in foreign legal proceedings. As a result, organizations should be prepared to address foreign e-discovery matters in the same efficient, cost-effective and defensible manner required for American litigation. This will likely include the development of an overall information governance strategy that can integrate “upstream” data retention protocols with “downstream” e-discovery processes. Having an integrated information governance process, supported by effective, enabling technologies, will likely facilitate the organization’s ability to address this potential pitfall.

The attorney client privilege may not extend to corporate counsel

A third discovery trap for unwary corporations lies in the limited recognition that many foreign countries have of the attorney client privilege for corporate counsel. Simply put, many nations do not extend the protections of the attorney client privilege to in-house lawyers. Continental Europe has a particularly deep-seated skepticism on this issue. That skepticism is based on the argument that in-house lawyers do not have sufficient “economic independence” from their employers to adequately provide unbiased legal advice. Such a view was recently affirmed by the European Court of Justice (ECJ) in Akzo Nobel Chems. Ltd. v. European Comm’n (Sept. 14, 2010). In Akzo, the ECJ held that the attorney client privilege does not encompass communications involving in-house counsel and company employees under European Union law. Invoking the issue of independence, the Akzo court reasoned that, “[i]t follows, both from the in-house lawyer’s economic dependence and the close ties with his employer, that he does not enjoy a level of professional independence comparable to that of an external lawyer.”

For U.S. companies accustomed to American evidentiary rules that typically shield corporate lawyer communications from disclosure, European privilege rules might create an unsuspecting litigation trap unless appropriate safeguards are taken. This may include some general research regarding the laws of privilege for those countries where company operations are based. If these laws do not appear favorable on the issue of privilege, organizations might consider engaging outside counsel to conduct internal investigations or address other matters routinely performed by in-house attorneys. While there is undoubtedly a monetary cost for going down this alternative path, it could end up costing less than the damage that could result from exposed lawyer communications.

Conclusion

While it is impossible to anticipate every international pitfall, organizations can begin to chart out a safe course by obtaining a better understanding of cross-border legal issues. There are various resources that provide straightforward answers to these issues at no cost to the end-user. For example, Symantec recently released a series of e-discovery Passports™ that touch on the basic issues underlying disclosure and data privacy in various European countries. The Sedona Conference and other “think tanks” also have materials that provide helpful detail on these issues. By understanding how foreign nations approach legal matters differently from the U.S., organizations can be better prepared for the traps implicit in cross-border e-discovery.

Contributing Author

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Philip Favro

Philip Favro brings over fourteen years of expertise to his position as Senior Discovery Counsel for Recommind, Inc. Phil is an industry thought leader, a...

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