6 November 2009
In a decision that highlights the uncertain terrain faced by US litigants involved in overseas discovery, the United States Bankruptcy Court for the District of Delaware held on October 28 that the Federal Rules of Civil Procedure trump a French “Blocking Statute” that restricts discovery. The Blocking Statute, French Penal Code Law No. 80-538, imposes criminal penalties on any French national or corporation that engages in discovery under a foreign judicial system without using the procedures of the Hague Evidence Convention—letters rogatory or letters of commission. In In re Global Power Equipment Group, Inc., No. 06-11045, 2009 WL 3464212 (Bankr. D. Del. Oct. 28, 2009), the court ordered a claimant in the Global Power bankruptcy proceeding, Maasvlakte Energie B.V., to produce documents and personnel for depositions from its French affiliate. It ordered production even though Maasvlakte had claimed, belatedly, that this discovery would violate the French Blocking Statute and expose its affiliate to prosecution in France.
In response to the bankruptcy plan administrator’s discovery requests, Maasvlakte initially agreed to produce documents and witnesses, and identified its affiliate’s French documents as likely to be relevant, without mentioning the Blocking Statute. Maasvlakte first raised the French Blocking Statute only three days before it was scheduled to produce documents, arguing that the statute required the administrator to follow Hague Convention procedures to obtain discovery in France. After the administrator moved to compel Maasvlakte to produce the documents and deponents, the court rejected Maasvlakte’s position. It held that the Blocking Statute did not prevent it from applying the Federal Rules, and it ordered Maasvlakte to produce the documents and witnesses.
The court emphasized the fact that when Maasvlakte filed its bankruptcy claim it had submitted to the court’s jurisdiction, and that using the Hague Evidence Convention procedures would slow resolution of the claim. The court held that considerations of comity established by the Supreme Court in Société Nationale Industrielle Aérospatiale v. United States Dist. Court for S.D. Iowa, 482 U.S. 522 (1987), weighed in favor of application of the Federal Rules, particularly in light of the fact that the subject matter of the disputed claim was centered in the Netherlands, rather than in France.
Importantly, the court also found that Maasvlakte had not demonstrated any hardship, a factor often considered by US courts in combination with the Société Nationale comity analysis. The court reasoned that (i) Maasvlakte had submitted to jurisdiction of the US court by filing the proof of claim and (ii) the chance of prosecution under the French Blocking Statute was minimal. The court reached this latter conclusion despite the widely publicized 10,000 Euro fine assessed under the Blocking Statute in 2007 against a French lawyer in In re Advocat Christopher X, Cour de Cassation, Chambre Criminelle, Paris, Dec. 12, 2007, No. 07-83228. While other US courts had previously downplayed the likelihood of prosecution under the French Blocking statute, the court in Global Power appears to be the first to have done so while openly acknowledging the Advocat Christopher X decision.
Commentators, including the Sedona Conference and the EU’s Article 29 Data Protection Working Party, have expressed the hope that US courts will find a way to reconcile federal procedure with foreign laws like the French Blocking Statute. Global Power does not fulfill this hope. Instead, it confirms the risks of bringing a claim in a US court before considering the relevance of evidence maintained outside the United States. Maasvlakte sought relief in a US court and agreed to produce documents and witnesses before it discovered that doing so would violate the Blocking Statute. Had Maasvlakte located the information and evaluated applicable law before filing its claims—or at least before agreeing to produce the documents and witnesses—it would have been better positioned to object to production from the outset, giving it a more consistent and stronger argument for application of Hague Convention procedures in lieu of the Federal Rules.
Subsequent proceedings in this case will be closely watched. If Maasvlakte declines to comply with the court’s order and continues to invoke the prohibitions of the Blocking Statute, the court may be forced to confront whether to enforce its order through imposition of Rule 37 discovery sanctions. The imposition of sanctions would likely involve a separate inquiry under Société Internationale v. Rogers, 357 U.S. 197 (1958), as to whether, in light of the Blocking Statute, the failure to comply involved willfulness, bad faith, or fault on the part of Maasvlakte.
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