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Litigating global electronic discovery considerations in a United States courtroom

By Michael Swarz

Swarz

Famous naturalist John Muir once remarked that “when one tugs at a single thing in nature, he finds it attached to the rest of the world.” With the interconnectedness and globalization of today’s world, the same can be said when dealing with internationally located electronically stored information (ESI). The world is smaller, it seems, than it once was and a host of global discovery archetypes are now being applied to bring cases involving international data to a successful resolution.

In the United States, courts have followed this lead by maintaining, at times, that ESI is fully discoverable, whether or not the individual controlling the ESI is located within United States jurisdiction. This determination is consistent with the well-respected principle that international individuals and entities doing business in the United States are subject to the advantages and drawbacks of United States regulations that, naturally, contain the laws of discovery as well.

The question for counsel has undoubtedly become where to begin in litigating the unique electronic discovery considerations that invariably arise when dealing with international ESI. To successfully navigate these truly uncharted international waters attorneys will need to pay close attention first and foremost to domestic and foreign choice of law considerations. In addition, counsel must be mindful of the concurrent limits of jurisdiction as they relate to the source of each international ESI request.

Beware conflicting laws

The moment international ESI is sought, a United States court must first establish whether discovery will take place under the Federal Rules of Civil Procedure (FRCP) or the Hague Convention on Taking of Evidence Abroad in Civil or Commercial Matters (the Hague Convention). The FRCP establishes rules governing civil procedure in the United States and is known quite well to most attorneys. Established in 1938, these rules provide a clear roadmap for civil litigation. Of note within the milieu of electronic discovery is the fact that they were amended on Dec. 1, 2006, to incorporate ESI into the discovery process. Choosing whether to apply the recent FRCP amendments, which have become in essence the default rules in many states, is step one for a court to consider when confronted with international ESI.

Option number two is the previously mentioned Hague Convention. The Hague Convention is a multilateral treaty that was constructed to help resolve differences between civil and common law discovery regulations of its State Parties. Approximately 40 nations and the United States have signed the treaty that provides for obtaining evidence via letters of request, and for the taking of depositions before court-appointed commissioners. Critical to the Hague Convention is Article 9, which maintains that letters of request be executed according to the law of the State Party that is responding to the request. When applied to litigating international ESI in a United States courtroom, this may entail following the rules of other, distinct localities outside of the United States.

Paradigm application

In order to determine which legal standard to apply, especially when dealing with international ESI, most United States courts look to the seminal case of Aerospatiale. In Aerospatiale, the Supreme Court provided clear guidance as to when, and to what extent, United States litigants must adhere to Hague Convention procedures when requesting discovery from an international party. The court mandated that lower courts follow a three-pronged test. Lower courts must reflect on (a) sovereign interests, (b) the specific facts and (c) the probability that Hague Convention protocols will be effective. This three-part test was created in Aerospatiale to protect international parties from unneeded and oppressive discovery, which included electronic discovery.

Taking their cue from Aerospatiale, some United States courts have relied on the FRCP rules citing fast-paced litigation deadlines and the ineffectiveness of Hague Convention protocols in general. In particular these courts are concerned about how long discovery of any sort, electronic or otherwise, would take under the Hague regime.

Conversely and also equally based upon Aerospatiale, other United States courts have preferred the Hague Convention’s regulations if the FRCP rules would subject a party to criminal penalties in their home country or if foreign sovereignty issues are at stake.

In addition to case law, many United States courts look to the Restatement (Third) of the Foreign Relations Law §442 (The Restatement) for guidance when confronted with international ESI. The Restatement provides a clear comity analysis that can be used when struggling over which laws to consider when dealing with foreign entities. Factors enunciated by the Restatement include (1) the significance to the proceedings of the data requested, (2) the measure of particularity of the request, (3) whether information sought emanated in the United States, (4) if identical data could be procured by other means and, perhaps most on point as it relates to choice of law considerations, (5) the contending interests of the nations whose regulations are in conflict.

These indicia have been consistently relied upon by United States courts and are critical to balancing the opposing interests of the United States against the interests of a foreign state when dealing with international ESI.

What if my country did not sign the Hague Convention?

For those nations that are not signatories to the Hague Convention, letters of request can be used to appeal for assistance from a foreign court to obtain (electronic) evidence. The most common remedies sought by letters of request are service of process and obtaining the actual evidence. When seeking service of process on a non-Hague Convention signatory country, a court will usually invoke universal jurisdiction.

Therefore, a person seeking to take an action against a person in another country will need to seek assistance from the judicial authorities in the other country. This is, of course, assuming the foreign court in its own country has jurisdiction to hear the case matter to begin with. In addition, as previously mentioned, United States courts frequently employ letters of request to obtain evidence from a witness. This evidence may be to answer questions relevant to the determination of an issue of fact, or for disclosure of documents or ESI.

In terms of case law, the aforementioned Aerospatiale criteria have not been specifically applied to situations where there is tension between countries that have not signed the Hague Convention and the FRCP. Nevertheless, Aerospatiale did in passing mention benchmarks to factor into any comity examination that can be applied to international ESI as well. These items include (a) the accessibility of substitute methods of acquiring the data, (b) if the data originated in the United States, (c) how detailed the request is, (d) the degree that noncompliance would disturb state interests, and (e) how important the data is to the case.  Courts have frequently employed this balancing test when determining whether to apply the FRCP or the law of the country where discovery, or electronic discovery, was sought.

United States businesses with offshore auxiliaries

The issue of managing international ESI becomes muddier when dealing with United States businesses with affiliates located overseas. Although many courts have shied away from this topic, a recent Illinois court case took this issue head on in Uranium Antitrust. In this case the court deliberated the query of the defendants’ management of the data of business subsidiaries located beyond the physical borders of the United States.

The court then concluded that a balancing test should be established to ascertain if the United States corporations had control over the overseas data. In creating the balancing test, the court measured three variables as represented by the following three questions.

First, did the auxiliary have a management structure that was linked to the United States home branch? Second, what extent of control did the United States home branch have over the subsidiary’s employees? And third, was the United States home branch granted an ownership stake in the affiliate? The more likely a court is to conclude a “yes” to these three questions, the greater the possibility that ESI data at offshore branches will be deemed discoverable in a United States court.

In applying this balancing test, subsequent courts have often gone further and mandated the actual production of foreign data. For example, in Afros v. Krauss, that court ordered the data overseas to be produced since the company had control over the foreign data and the branches abroad were entirely owned. In addition, both the home and auxiliary were organized and run in an interconnected fashion. With recent case law, United States jurisdiction can and will be extended to digital data as well when dealing with international ESI.

Conclusion

There can be no question that in today’s modern, ever-interconnected world, the prospects for litigating matters that involve global ESI considerations are on the rise. What will be interesting to see will be how the discovery of intercontinental ESI actually plays out in United States courts.

As shown above, courts have traditionally placed a high value on domestic considerations and at the same time there are definitive instances when courts alternatively rely on foreign law. Knowing when to shift from one paradigm to the other can and must be based on the variety of above-mentioned balancing tests, hardship and good faith considerations associated with discovery of international ESI.

• Michael Swarz currently works for eClaris Inc., an electronic discovery consultancy and service provider that helps law firms and corporations classify, process and review ® electronically stored information. For more information, visit eclaris.com or call 213/623-1620.

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Indicate whether the following statements are true or false after reading the MCLE article. Use the answer form provided to send the test, along with a $25 processing fee, to the State Bar. If you do not receive your certificate within four to six weeks, call 415-538-2504.

1. When confronted with international ESI, United States courts look to the Federal Rules of Civil Procedure or the Hague Convention.
2. The FRCP represents a benchmark for criminal litigation.
3. Before December 2006, the FRCP did not address ESI in a comprehensive fashion.
4. Countries that are not signatories to the Hague Convention can be subject to its jurisdiction under Article 9.
5. The United States is a party to the Hague Convention.
6. Aerospatiale is the seminal case when determining whether to apply the Hague Convention of the FRCP.
7. If it can be shown that the Hague Convention will not be effective, then courts may disregard the Hague Convention and implement the FRCP rules instead when dealing with international ESI.
8. Criminal penalties in foreign countries can be a factor when opting to use the Hague Convention.
9. Time sensitivity of the case life cycle is not a concern to United States courts when grappling with whether to apply the Hague Convention.
10. Under the Restatement balancing test, courts can look at whether information originated in the United States.
11. Courts in the United States can invoke universal jurisdiction when seeking ESI.
12. Dicta in Aerospatiale cite the specificity of the request as a variable when dealing with countries that are not signatories to the Hague Convention.
13. Uranium Antitrust Litigation stands for the proposition that United States courts should never consider foreign law.
14. If a United States home branch has an ownership stake in its affiliate, data found in the affiliate will likely be discoverable.
15. The most common Hague Convention remedies sought by letters of request are service of process and obtaining the actual evidence.
16. Management structure is a key component that must be analyzed when dealing with auxiliary businesses.
17. There has been no instance where the actual production of international ESI has been ordered by a United States court.
18. In Afros v. Krauss, the court was not concerned with the interconnectedness between the parent and subsidiary company.
19. The Hague Convention will point United States courts to follow the law of the state party that is responding to the request.
20. United States courts typically do not employ balancing tests when entertaining the notion that the implementation of foreign law may be a possibility.