The 'Salt River' case illustrates that with timely, effective advocacy, cross-border discovery under the Hague Evidence Convention may be accommodated within an expedited discovery schedule, a major obstacle cited by courts in the past.
With workforce globalization and modern data management practices, it is increasingly likely that U.S. litigants will face demands for discovery of evidence from data sources such as electronic records and documents that reside outside of the United States. However, a party producing documents in response to U.S.-issued discovery demands risks violating foreign laws that prevent this discovery.
These laws may include general “blocking statutes”, like those found in France and Switzerland, which were designed specifically to restrict or prohibit cross-border data transfers and U.S.-style discovery practices. Other sector-specific laws, such as banking secrecy statutes and health care and telecom laws, and data protection laws such at the EU’s General Data Protection Regulation (GDPR), may also restrict a party’s ability to transfer data and disclose it in the United States. Where this circumstance occurs, a responding party must find ways to balance its competing legal obligations to produce for discovery on one hand, but to decline to produce on the other.
A recent decision of the U.S. District Court for the District of Arizona provides a creative way of facilitating this process.
Blocking statutes and data protection laws often provide that discovery may nevertheless proceed under an applicable international treaty. The Hague Evidence Convention (Hague Convention of March 18, 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters, 23 U.S.T. 2555, T.I.A.S. No. 7444) to which the United States is a signatory presents a potential means of compliance.
However, under U.S. case law international treaties like the Hague Evidence Convention are rarely deemed to be available for conducting party discovery. Since the U.S. Supreme Court’s 1987 holding in Aérospatiale (Société Nationale Industrielle Aérospatiale v. U.S. Dist. Ct. for S. Dist. of Iowa, 482 U.S. 522 (1987)) that Hague Evidence Convention procedures are not mandatory but only permissive, U.S. courts have conducted particularized comity analyses to determine whether it is nevertheless appropriate to allow discovery to proceed under the Hague Evidence Convention rather than U.S. civil procedure rules in a given case.
In weighing factors favoring and against using the Hague Evidence Convention, courts have generally emphasized the fifth factor in the comity analysis outlined in Aérospatiale: “the extent to which noncompliance with the request would undermine important interests of the United States, or compliance with the request would undermine important interests of the state where the information is located.”
Overwhelmingly, courts have found that the U.S. interest in allowing discovery outweighs any countervailing foreign sovereign’s concerns. New York federal courts have generally ordered that discovery proceed under U.S. rules. See, e.g., Strauss v. Credit Lyonnais, S.A., 249 F.R.D. 429, 400 (E.D.N.Y. 2008) (denying bank’s motion for a protective order that would have compelled plaintiffs to obtain discovery under the Hague Evidence Convention or excused discovery under France’s banking secrecy laws); Catalano v. B.M.W. of North America, 2016 WL 3406125 (S.D.N.Y. June 16, 2016) (international comity considerations did not warrant proceeding under the Hague Evidence Convention where assertions that discovery would violate German law were too vague to establish a conflict; ordering parties to meet and confer in order to narrow the scope plaintiff’s overbroad discovery demands); Laydon v. Mizuho Bank, 183 F. Supp. 3d 409 (S.D.N.Y. April 29, 2016) (comity analysis weighed against requiring use of the Hague Evidence Convention where discovery would allegedly violate the U.K. Data Protection Act and banking secrecy laws).
This has been especially true where the conflicting foreign law at issue is a so-called “blocking statute” that places a general ban on providing disclosure in foreign proceeding. One such law that has received little deference in the United States is French Penal Code Law No. 80-538, commonly referred to in the United States as the “French blocking statute.” For a roundup of such case law, see Pierre Grosdidier, The French Blocking Statute, the Hague Evidence Convention, and the Case Law: Lessons for French Parties Responding to American Discovery, 50 Tex. Int’l L. J 11 (2014).
In a unique approach to the issue, one federal district court recently ruled that discovery from a French party could proceed under the Hague Evidence Convention. In Salt River Project v. Trench France SAS, 2018 WL1382529 (D. Az., March 19, 2018), Judge David Campbell accepted the French defendant’s representation that providing discovery from sources in France would cause it to violate the French blocking statute, which provides that: “[subject to treaties or international agreements and applicable laws and regulations, it is forbidden for any person, to request, search or communicate under written, oral, or any other form, documents or information of an economic, commercial, industrial, financial, or technical nature for the purpose of constituting evidence for or in the context of foreign judicial or administrative proceedings.” Salt River, at*1.
The court also accepted that penalties for violation included up to 6 months of jail time and up to €90,000 in fines. In granting the French defendant’s motion over the plaintiff’s objections, Judge Campbell conducted a comity analysis and found that all factors in the Ninth Circuit test weighed, to varying extent, in favor of proceeding under the Hague Evidence Convention.
Two things in particular stand out in this decision: one concerns the specific provisions of the Hague Evidence Convention invoked by the French defendant; and the other is Judge Campbell’s assessment of the relative interests of the United States and France.
Reported cases of parties seeking to invoke the Hague Evidence Convention generally concern the Letters of Request procedures described in Chapter I. The Supreme Court’s description in Aérospatiale of these procedures as being too slow, burdensome, uncertain and costly to be generally appropriate has commonly been adopted by other courts.
However, in addition to this avenue, the Hague Evidence Convention’s Chapter II provides means for facilitating discovery by Diplomatic Officers, Consular Agents and Commissioners. In particular, Article 17 permits a duly-appointed commissioner to “take evidence in the territory of a Contracting State in aid of proceedings commenced in the courts of another Contracting State,” provided that a competent authority in the State where evidence will be taken gives permission, and that the commissioner complies with the authority’s conditions.
Under Chapter II, the U.S. court appoints a commissioner and then application is made to the Ministry of Justice in France to formally authorize the appointment. In Salt River, the French defendant represented that the appointment should take about 60 days and that discovery would then proceed swiftly. The French defendant had positioned the process to move forward by identifying an independent French attorney and submitting a formal request form to the court which, once granted, could be translated and provided to the French Ministry.
Moreover, the defendant represented that the scope of discovery would not likely be substantively limited and offered to bear all associated costs. Judge Campbell noted the French defendant’s early identification of and consistent position on the issue, and that the proposed timing fell within the expedited discovery schedule under the court’s mandatory initial discovery pilot.
In assessing competing national interests in requiring or prohibiting discovery, Judge Campbell considered whether important national interests or policies would be affected. He noted the United States’s interests in vindicating plaintiff rights and in fair party discovery would not likely be impaired by using the Hague Evidence Convention where the defendant agreed to the expedited Chapter II proceedings. He also noted that the court retained the power to order discovery under the federal rules.
In enacting its Blocking Statute, the court ruled, France “expressed an emphatic sovereign interest in controlling foreign access to information within its borders, and in protecting citizens from foreign discovery practices it views as antithetical to French legal culture.” Id. at *4 (citation omitted). Unlike the U.S. interest, the French interest could be impaired if the court ordered discovery. Accordingly, the court found that this factor weighed in favor of using the Hague Evidence Convention.
The Salt River case illustrates that with timely, effective advocacy, cross-border discovery under the Hague Evidence Convention may be accommodated within an expedited discovery schedule, a major obstacle cited by courts in the past. If parties know that cross-border discovery is likely, arrangements under the Hague Convention can get underway while the U.S. court is considering discovery motions.
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Denise E. Backhouse is e-discovery counsel at Littler Mendelson. Philip M. Berkowitz is a shareholder of the firm and co-chair of the its U.S. international employment law and financial services practices.
Reprinted with permission from the February 01, 2019 edition of the New York Law Journal©
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