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Discovery, requests from abroad.


Plaintiff, Anselm Brandi-Dohrn (Plaintiff), is a shareholder of Defendant, IKB Deutsche Industriebank AG (IKB), a bank located in Germany. In July 2008, Plaintiff sued IKB in Germany to recover for securities fraud. He stated that IKB misled him into buying its shares by failing to disclose its significant exposure to risky collateralized debt obligations (CDOs) backed by U.S. based subprime mortgages. Moreover, IKB issued a press release that falsely downplayed the impact that the ratings agencies' downgrading of the CDOs would have on the Bank's operations. During the August 2010 trial in Germany, the court dismissed the case and Plaintiff appealed to an intermediate appellate court.

Plaintiff then filed an ex parte application in the U.S. District Court for the Southern District of New York to serve subpoenas on three nonparties. The discovery sought related to the exposure of the CDOs and Plaintiff wishes to use it to persuade the German appellate court to overturn the dismissal. The district court initially granted the application on July 27, 2011 and Plaintiff issued the subpoenas. Before the third parties produced discovery, IKB moved to vacate the order or quash the subpoenas. On November 16, 2011, the district court granted IKB's motion to quash the subpoenas, finding that the evidence sought was actually for use in the German counsel's other cases.

The U.S. Court of Appeals for the Second Circuit reverses the district court's order. The Court analyzes 28 U.S.C. [section]1782. The Court notes that the goal of the statute is to provide equitable discovery procedures in the U.S. courts; therefore, courts have liberally construed the statute. In the Court's view, the district court must consider several statutory requirements and then use discretion in balancing a number of factors. Once the balancing is complete, a district court can deny the discovery request if they find that the information sought is solely for the purpose of harassment. This discretion does have some limitations.

"District courts must exercise their discretion under [section] 1782 in light of the twin aims of the statute: providing efficient means of assistance to participants in international litigation in our federal courts and encouraging foreign countries by example to provide similar means of assistance to our courts. We have thus held, for example, that although there is no requirement under [section] 1782 that the type of discovery sought be available in the relevant foreign jurisdiction, a court may look to the nature, attitude and procedures of that jurisdiction as 'useful tool[s]' to inform its discretion." [Slip op. 9]

The Plaintiff argued that the district court had misconstrued the "for use" requirement of [section] 1782 as requiring that the Plaintiff show that the foreign tribunal would admit the material sought. The Court agrees. "As in [Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264-65 (2004)] there is no statutory basis for any admissibility requirement. If Congress had intended to impose such a sweeping restriction on the district court's discretion, at a time when it was enacting liberalizing amendments to the statute, it would have included statutory language to that effect." [Slip op. 11]

The Court states that the district court should not have been concerned with admissibility abroad because it is up to the foreign tribunal to determine this issue. The German appellate court is free to admit or exclude any evidence it so chooses. Requiring a district court to apply the admissibility rules of a foreign jurisdiction would require interpretation and analysis of foreign law, which the Court finds to be fraught with danger. "Accordingly, as a district court should not consider the discoverability of the evidence in the foreign proceeding, it should not consider the admissibility of evidence in the foreign proceeding in ruling on a section 1782 application. We join our sister Circuits in coming to this conclusion." [Slip op. 12]

"IKB contends that, although there is no foreign admissibility requirement, the receptivity of the foreign court to the evidence sought is a relevant consideration when a district court decides how to exercise its discretion. Accordingly, IKB argues that the District Court properly concluded that, since the evidence would likely not be admitted in the proceeding before the German appellate court, it was being sought for purposes of harassment because it would be used in other cases brought by Plaintiff's German counsel." [Slip op. 13]

"We recognize that section 1782(a) gives discretion to the District Court, as it authorizes, but does not require, a federal district court to provide judicial assistance to foreign or international tribunals or to interested person[s] in proceedings abroad. Indeed, we have affirmed denials of section 1782 applications where, although the statutory requirements of section 1782 were met, the twin goals of the statute were not." [Slip op. 13-14] Therefore, the district court exceeded its discretion.

CITATION: Brandi-Dohrn v. IKB Deutsche Industriebank AG, No. 11-4851-cv, 2012 US App. LEXIS 4719 (2d Cir. Mar. 6, 2012).
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Publication:International Law Update
Geographic Code:4EUGE
Date:Jan 1, 2012
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