By: Michelle Aiena

            The United States District Court for the Eastern District of Pennsylvania recently ruled that a foreign corporation defending a civil action in the United States must comply with the Federal Rules of Civil Procedure with regards to discovery, even if the foreign corporation will face possible criminal liability abroad for complying with the Federal Rules.  The court held that neither the Hague Convention nor a French Blocking Statute excused the foreign defendant from providing discovery pursuant to the Federal Rules, and rejected the defendant’s argument that the Hague Convention’s procedures controlled.  For now, this decision appears to be limited to discovery relating to jurisdictional issues.  Nevertheless, as a consequence, foreign corporations in U.S. litigation must be aware that the Hague Convention, or their own country’s laws, will not necessarily protect them from U.S. discovery rules.

In TruePosition, Inc. v. LM Ericsson Telephone Co., et al., plaintiff TruePosition, a company that develops and markets positioning technology that operates over cellular telecommunications networks, brought suit against various defendant companies in the international telecommunications market.  TruePosition alleged that the defendants violated the Sherman Antitrust Act by conspiring to determine that TruePosition’s technology failed to meet the defendants’ standards.  Among the defendants is European Telecommunications Standards Institute (“ETSI”), a standard-setting organization located in France and comprised of more than 700 member companies from 62 countries.

ETSI moved to dismiss the complaint against it for lack of personal jurisdiction, and the court ruled that limited jurisdictional discovery was needed before it could determine whether it has personal jurisdiction over ETSI.  In response, ETSI moved for a protective order, asserting that the jurisdictional discovery between the parties must be secured through the Hague Convention on Taking Evidence Abroad in Civil or Commercial Matters, 28 U.S.C.S. § 1781, March 18, 1970 (the “Hague Convention”).  TruePosition argued that discovery should proceed pursuant to the Federal Rules of Civil Procedure.  The court ultimately agreed with TruePosition.

            Both the U.S. and France are signatories to the Hague Convention and, according to ETSI’s argument, Letters of Request are the preferred method of taking discovery under the Hague Convention.  The court, however, noted that the Hague Convention does not provide exclusive procedures for obtaining documents and information located in a foreign territory and  does not deprive the court of its jurisdiction to order a foreign party to produce evidence according to the Federal Rules of Civil Procedure.  Citing the U.S. Supreme Court’s ruling in Societe Nationale Industrielle Aerospatiale v. United States District Court for the Southern District of Iowa, 482 U.S. 522, 524 (1987), the court stated that U.S. courts should not, as a first resort, depart from the Federal Rules in favor of the Hague Convention for discovery procedures.

In Aerospatiale, the Supreme Court adopted a rule of comity, stating that courts must determine whether to resort to the Hague Convention or the Federal Rules by scrutinizing the facts of each case, the sovereign interests, and the likelihood that such resort will be effective.  There are five factors identified by the U.S. Supreme Court to consider in the analysis: (1) the importance of the documents or information requested to the litigation; (2) the degree of specificity of the requests; (3) whether the information originated in the U.S.; (4) the availability of alternative means of securing the information; and (5) the extent to which noncompliance with the requests would undermine important interests of the U.S. or of the state where the information is located.  In construing Aerospatiale, courts have also created two additional factors to consider: (1) the good faith of the party resisting discovery; and (2) the hardship of compliance on the party or witness from whom discovery is sought.

After conducting its own analysis of the Aerospatiale factors, the TruePosition court found that the factors were split—some favoring ETSI and some favoring TruePosition.  The court noted that (a) the documents at issue involved necessary and relevant jurisdictional discovery regarding ETSI’s contacts with the U.S.; (b) TruePosition’s document requests were specific and reasonable; (c) the evidence was located in France because ETSI only had an office location in France; (d) limited jurisdictional discovery is not as intrusive as merit discovery; (e) jurisdictional discovery was necessary to determine whether the court had jurisdiction over ETSI; (f) the Hague Convention procedures for securing information were more time-consuming than the Federal Rules; and (g) several strong national interests of the U.S. were implicated, including the interest in enforcing the policies of free market competition, especially in an antitrust case involving the international telecommunications market.  The court acknowledged that France had a sovereign interest in managing access to information within its borders and protecting its citizens from discovery in foreign litigation, but dismissed the interest as “relatively weak” in comparison to the significant interests of the U.S.

The court also noted that the final factors of good faith and potential hardship weighed slightly in favor of ETSI, especially since ETSI, citing a French Blocking Statute in the French Penal Code, argued that it would face potential criminal liability under French law if it responded to discovery requests that did not comply with the Hague Convention.  The French statute prescribes sanctions for French nationals who disclose information in foreign discovery without using procedures in the Hague Convention.  The court, however, dismissed ETSI’s concerns, noting that ETSI presented no evidence that the French Blocking Statute had ever been enforced in the context of a federal suit filed in the U.S. regarding jurisdictional discovery or that ETSI would face a significant risk of prosecution if it complied with discovery pursuant to the Federal Rules of Civil Procedure.  In support of this position, the court cited cases holding that blocking statues do not subject a defendant to a realistic risk of prosecution and do not deprive a U.S. court of jurisdiction.

Following its analysis, the court determined that the interests of comity set forth in Aerospatiale weighed in favor of the Federal Rules of Civil Procedure.  ETSI bore the burden of proof and the court found that it failed to meet its burden that the Hague Convention should apply.  The court thus denied ETSI’s request for an order of protection and ruled that ETSI had to comply with TruePosition’s discovery requests under the Federal Rules of Civil Procedure.