Second Circuit denies interlocutory appeal of discovery sanctions requiring foreign defendant to violate bank secrecy laws.
The Federal Rules of Civil Procedure assure all litigants that legal actions will be determined in a legitimate and uniform fashion. (1) During discovery, bank secrecy laws protect the private information of foreign banks and their clients, and United States courts frequently have considered what information is protectable in litigation involving American plaintiffs and foreign bank defendants. (2) In Linde v. Arab Bank, PLC,3 the United States Court of Appeals for the Second Circuit considered whether foreign bank secrecy laws should protect documents allegedly linking Arab Bank (Bank) to multiple terrorist organizations. (4) The Second Circuit held that Arab Bank's interlocutory appeal challenging an order for sanctions was not within its jurisdiction, and refused to vacate the district court's order. (5)
Early in 2005, thousands of victims and family members of victims who had been injured or killed in terrorist attacks in Israel and Palestinian Territories brought a class action suit against the Bank. (6) The plaintiffs alleged that the Bank unlawfully provided financial resources to foreign terrorist organizations to engage in various acts of terror and crimes against humanity in an attempt to rid the Middle East of any Israeli presence. (7) The plaintiffs' allegations rested on two theories. (8) The first was that the Bank administered a "death and dismemberment benefit plan," by distributing cash payments to terrorists and their families. (9) The plaintiffs alleged that the Bank provided cash incentives for suicide bombers who killed or injured plaintiffs and their relatives. (10) Furthermore, the plaintiffs claimed that families of terrorists could claim rewards from the Bank by obtaining official certification that the deceased terrorist was a martyr, which included an official martyr identification number. (11)
The plaintiffs' second theory was that the Bank provided various financial services to terrorist entities and individuals acting on behalf of Hamas and similar organizations. (12) Because the plaintiffs were comprised of U.S. citizens and foreign nationals, they asserted claims under two different U.S. laws. (13) Based on their two theories, the plaintiffs requested the production of certain documents regarding specified accounts kept at the Bank. (14) The Magistrate Judge assigned to the case issued specific production orders requiring the Bank to turn over banking information linked to suspected terrorists. (15) In response to the order, the Bank asserted that such information was protected from disclosure under numerous bank secrecy laws, and that permission was necessary from regulatory authorities in those countries in order to release the information. (16) In 2006, the Bank received permission from the proper authorities, and produced the documents requested by the plaintiffs. (17)
Problems arose when the district court granted plaintiffs' motion to compel previously requested documents allegedly linking the Saudi Committee to terrorist organizations, and which the Bank again claimed were protected by bank secrecy laws. (18) Relevant authorities denied the Bank's release request, and the Bank subsequently refused to produce the materials, prompting the plaintiffs to move for sanctions against the Bank. (19) The Magistrate Judge granted the motion, and provided jury instructions to the district court should the case go to trial. (20) The Bank appealed the order for sanctions to the Second Circuit, claiming that the jury instruction would inevitably result in a finding for the plaintiffs, and notwithstanding the Bank's right to appeal, result in irreparable financial consequences for the Bank by virtue of the verdict alone. (21) The Bank also claimed that the district court abused its discretion when it issued the sanctions, and requested a writ of mandamus to direct the district court to correct its erroneous order. (22) The Second Circuit held that it did not have jurisdiction to dismiss the sanctions, and that the Bank was not entitled to a writ of mandamus vacating the sanctions order. (23)
Since the initiation of formal discovery rules in the United States, courts have encountered obstacles in complex international cases when documents requested by an American litigant are considered privileged under the laws of a foreign country. (24) Issues are often determined according to a treaty or international agreement between the United States and the home country of a foreign litigant. (25) Despite international agreements and treaties, the United States has carved out unilateral reasonableness tests, which provide its courts with a framework to assess foreign litigants who refuse to disclose documents during discovery. (26) In response, many foreign countries have combated U.S. discovery procedures by adopting blocking laws that prevent disclosure of privileged documents. (27) In response to the terrorist attacks of September 11, Congress created laws forbidding terrorist financing, resulting in the increase of discovery between litigants located in the United States and those located in suspected terrorist countries. (28) Because of the importance of uniform discovery procedure, U.S. courts have traditionally emphasized the role of U.S. procedural rules in ordering the production of documents, regardless of whether the disclosure of documents would violate the laws of a foreign country. (29)
In Societe Internationale v. Rogers, the United States Supreme Court considered whether a Swiss plaintiff had to produce specific banking records even though doing so would violate Swiss penal laws. (30) Rogers set the precedent that foreign law does not prevent American courts from ordering a party to produce evidence, even where the act of production may violate the laws of that country. (31) The Court further stated that a district court could draw inferences unfavorable to the party failing to produce requested documents as to particular information allegedly contained in those documents. (32)
The Court has affirmed the maxims it set forth in Rogers. (33) Following Rogers and its progeny, courts consider several factors in determining whether to issue a document production order for information located abroad. (34) When deciding whether to impose sanctions on a party for not fulfilling requests for information during discovery, courts employ a good-faith analysis based on the Rogers holding, which established that sanctions should not be ordered when a party is legally unable to produce documents, rather than when a party acts in bad faith. (35)
Despite these established threads of analysis, U.S. courts do not apply them uniformly in determining whether to compel the production of documents from a foreign litigant. (36) During trial. American plaintiffs have the potential to enjoy a favorable position merely because of the inability of a foreign defendant to produce requested documents, which could subsequently point to the defendant's liability before the trial actually begins. (37) Consequently, a mere discovery test has largely determined the outcomes of many trials based on similar sets of facts. (38) The lack of judicial uniformity compounds the problem of limited access to appellate review for parties seeking interlocutory appeals pursuant to the discovery test, thus placing one litigant at an immediate disadvantage. (39) The vast discretion granted to the circuit courts has resulted in the blurring of boundaries within the judiciary, and between the judicial and legislative branches of the U.S. government. (40)
In Linde v. Arab Bank, PLC, the Second Circuit considered whether jurisdiction existed to grant an interlocutory appeal based on sanctions ordered by the district court. (41) First, the Bank argued that the sanctions order were vital to the outcome of the case and should be reversed immediately. (42) Second, the Bank requested a writ of mandamus to vacate the sanctions order by arguing that the district court abused its discretion in issuing the sanctions. (43) The Second Circuit rejected the Bank's first argument, determining that it did not have jurisdiction to hear the Bank's appeal under the collateral order doctrine, which prohibits the interlocutory appeal of non-final matters. (44) The court reasoned that because the order for sanctions was intertwined with the merits of the case, and was appealable after the jury reached a verdict, there was no need for immediate review. (45)
The court also denied the Bank's request for a writ of mandamus, determining that the Bank did not meet the demanding requirements necessary for issuance. (46) The court explained that the district court's actions did not constitute an abuse of discretion, even if it made an incorrect determination regarding the issue of sanctions. (47) The Second Circuit dismissed the Bank's appeal, effectively affirming the district court's order for sanctions. (48)
In holding that it did not have jurisdiction to hear the Bank's interlocutory appeal, the Second Circuit essentially raised the bar for what constitutes a final judgment of a district court. (49) The Linde court brought new meaning to the Supreme Court's definition of "final" judgment by denying the interlocutory appeal of a highly prejudicial jury instruction that would likely determine the outcome of the trial regardless of the Bank's defenses. (50) Two problems likely will arise from Linde's holding. First, litigants will be prevented from appealing an order for discovery sanctions, even when the sanctions encompass a prejudicial jury instruction. (51) Second, in following the model set forth in Rogers, the Second Circuit denigrated international comity to a mere figment of the legal world's imagination, once again proving that it is America's way or the highway. (52)
The first problem will inhibit defendants who have been negatively affected by discovery sanctions from seeking appellate relief. (53) Although a negative inference should be drawn from a defendant's failure to produce requested documents, it is necessary to maintain a fair, unbiased forum during trial. (54) Jury instructions implying the liability of a defendant based on his failure to produce certain documents diminishes the importance of the trial itself. (55) When a foreign defendant obeys its country's laws due to potential criminal prosecution, but is still issued an unfair jury instruction that could decide the outcome of a trial, the faith in the U.S. justice system is diminished. (56) Even more troublesome is the fact that a foreign defendant who produces documents, which actually bolster a plaintiff's case, could still be hammered with a prejudicial jury instruction based on subsequent instances of non-production. (57) The Second Circuit, although attempting to use precedent as its basis, actually increased the threshold for finality, by determining that a detrimental jury instruction did not constitute a final judgment, ripe for appeal. (58)
The Second Circuit's holding illustrates a second problem: the judicial branch's belief that U.S. concerns and objectives trump all extra-territorial interests during the pre-trial phase of litigation. (59) It is the clear objective of the legislative and executive branches to track terrorist financing following September 11, which requires the disclosure of a substantial amount of confidential documents preceding litigation between American and foreign litigants. (60) However, the need to thwart terrorist funding should not completely eviscerate the laws of foreign nations or the rights of foreign defendants during pre-trial discovery. (61) The judiciary is clearly biased towards U.S. procedural rules and litigants, and is overstepping its Constitutional boundaries by taking on the role of the legislative branch. (62) The power held by federal judges is astronomical, and needs to be reeled in through Congressional action. (63) Nonetheless, the Second Circuit further expanded the power of district judges by eliminating interlocutory appeals of sanctions for non-production of documents, and allowing lower courts to continue trampling on foreign laws and the rights of foreign litigants. (64)
The Second Circuit's decision in Linde v. Arab Bank, PLC, exemplifies the difficulties presented during discovery between American and foreign litigants. Linde's holding greatly deviated from prior decisions regarding what constitutes a "final" judgment, meaning foreign litigants will still encounter numerous difficulties in appealing pre-trial orders. Foreign litigants will be provided with no interlocutory appellate relief from discovery sanctions, but will instead have to wither away during trial until the jury hands down a skewed verdict based on prejudicial jury instructions. Underlying Linde is the question of whether foreign defendants will ever be able to appeal orders from a single district court judge when those orders require the violation of foreign laws. Furthermore, there is the concern of whether U.S. courts should be overtaking the role of the legislative branch, determining when to violate the laws of foreign countries in order to serve the interests of American litigants. Unless Congress scales back the limitless power of district courts in international litigation, judges will continue to disregard international comity in favor of American superiority.
(1.) See generally Fed. R. Civ. P. 1 (providing mission statement for Federal Rules). The Rules are in place to "secure the just, speedy, and inexpensive determination of every action and proceeding." Id.
(2.) See Bank Secrecy Act, 12 U.S.C. [section][section] 3401-22 (1982) (codifying United States bank secrecy law); In re Sealed Case, 825 F.2d 494, 499 (D.C. Cir. 1987) (holding U.S. bank owned by foreign sovereign not required to comply with document request); United States v. First Nat'l Bank of Chicago, 699 F.2d 341, 346 (7th Cir. 1983) (holding documents protected from discovery under Greek Bank Secrecy Act); United States v. Bank of Nova Scotia, 691 F.2d 1384, 1391 (11th Cir. 1982) (finding no privilege protecting documents of foreign defendant under Bahamian bank secrecy laws); United States v. Field, 532 F.2d 404, 408 (5th Cir. 1976) (finding no privilege under Cayman law against disclosure of bank records); Trade Dev. Bank v. Continental Ins., 469 F.2d 35, 40 (2d Cir. 1972) (holding Swiss Ticino Code did not prevent bank from disclosing customer identities during discovery); United States v. First Nat'l City Bank, 396 F.2d. 897, 900 (2d Cir. 1968) (holding defendant's refusal to obey subpoena for documents was not justified); see also Kurt Riechenberg, The Recognition of Foreign Privileges in United States Discovery Proceedings, 9 Nw. J. Int'l L. & Bus. 80, 103 (1988) (noting varying bank secrecy laws among foreign countries); William B. Haseltine, International Regulation of Securities Markets: Interaction Between United States and Foreign Laws, 36 Int'l & Comp. L. Q. 307, 312-14 (1987) (differentiating between bank secrecy and blocking laws). Here, the defendant bank argued that producing requested documents could result in civil and criminal liability under German bank secrecy laws. Id.; Chase Manhattan Bank, 297 F.2d 611, 613 (2d Cir. 1962) (recognizing international comity between United States and foreign nations). There is an obligation to respect the laws of other nations, regardless of whether they differ from ours. Id.; Ings v. Ferguson, 282 F.2d 149,152-53 (2d Cir. 1960) (holding production of documents should not be ordered where it violates foreign law); First Nat'l City Bank of New York v. Internal Revenue Service, 271 F.2d 616, 619 (2d Cir. 1959) (recognizing Panamanian privilege law but holding it unavailable to foreign defendant); Munroe v. United States, 216 F. 107,109 (1st Cir. 1914) (holding French defendant had right to object to subpoena for privileged documents).
(3.) 706 F.3d 92 (2d Cir. 2013).
(4.) Id. at 95.
(6.) Id. at 98.
(7.) Id. at 95.
(8.) Id. at 97.
(9.) Linde, 706 F.3d at 97.
(12.) Id. The financial services were allegedly maintenance of bank accounts, making wire transfers and facilitating the movement of funds. Id.
(13.) Id. Plaintiffs sued under the Anti-Terrorism Act (ATA) and the Alien Tort Claims Act, also known as the Alien Tort Statute (ATS). Id.; see generally 18 U.S.C. [section] 2333 (ATA); 28 U.S.C. [section] 1350 (ATS).
(14.) Linde, 706 F.3d at 98. In 2005, Magistrate Judge Victor V. Pohoelsky issued production orders for specific banking information concerning known or suspected terrorists. Id.
(16.) Id. The specific information requested was going to be obtained from the Bank's Lebanese branch, where a website allegedly affiliated with terrorism had transferred funds. Id. The Magistrate Judge instructed the Bank to obtain permission from Jordan, Lebanon, and Palestinian authorities. Id.
(17.) Id. The Lebanese branch of the Bank requested permission for production from the Lebanese authorities, which was granted. Id. However, Lebanese, Jordanian and Palestinian authorities denied subsequent requests. Id. After initially resisting, the Bank disclosed documents regarding fund transfers through its New York branch. Id. The Bank also received permission from the Saudi Committee and Lebanese Special Investigation Commission to disclose a substantial volume of material relevant to the plaintiffs' case. Id. However, these disclosures were limited in scope and did not satisfy the plaintiffs' full request. Id.
(18.) See id. at 101-02 (detailing Magistrate Judge's order). The Magistrate Judge and district court performed a balancing test, weighing the interests of foreign governments in enforcing their laws and the possible hardship created for the Bank with the interests of the United States in enforcing its laws and the Plaintiffs' need for the documents to support their claims. Id.; see also infra note 34 (outlining balancing test regarding foreign discovery issues encountered by U.S. courts).
(19.) Linde, 706 F.3d at 100-01. The Bank requested disclosure of the documents from Jordan, Lebanon and Palestinian Territories. Id. These requests were denied. Id. During this time the Plaintiffs acquired some documents relating to their discovery requests, both from the Bank and third-party sources. Id. Based on the acquired documents, the Plaintiffs stressed the need for further discovery, which created the foundation for the motion for sanctions against the Bank. Id. at 101-02. During the dispute over production, the documents Plaintiffs' obtained documents that linked the Bank to the Holy Land Foundation, which was allegedly a laundering front for Hamas. Id. Additional documents also linked the Lebanese branch of the Bank to a "high ranking member of Hamas." Id. at 100. These documents also bolstered Plaintiffs' claim for the necessity for additional documents. Id. In response to the motion for sanctions, the Bank claimed that because it had previously received permission from the Saudi Committee to disclose 180,000 documents, no further disclosure was necessary. Id. The Bank also claimed that it had never requested martyr certificates from the families of deceased terrorists. Id. The Plaintiffs argued that since numerous documents had already been disclosed, without violating foreign bank secrecy laws, that the remainder of relevant documents should also be produced. Id.
(20.) Id. at 101-02. (detailing Magistrate Judge's report and recommendation). The judge's recommendation was a result of continued discovery obstruction by the Bank. Id. It was the judge's recommendation that it should be established "that between 2000 and 2004 the defendant provided financial services on behalf of the Saudi Committee to various terrorists and terrorist organizations." Id. The district court adopted this recommendation and explained that at trial "the court will instruct the jury that, based on Arab Bank's failure to produce documents, the jury may--but need not--conclude both that Arab Bank provided financial services to foreign terrorist organizations and that it did so knowingly and purposefully." Id. Furthermore, the Bank was barred from introducing any evidence that it withheld on foreign secrecy grounds, explaining that the Bank could not argue that a certain customer was not a terrorist if it did not provide that person's complete account records. Id. This restriction prevented the Bank from profiting from "evidentiary gaps that it chose to create." Id.; see also Fed. R. Civ. P. 37(b) (granting power to courts to sanction non-disclosing party); Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee 456 U.S 694, 707 (1982) (explaining appropriate instances for sanctions). Any sanction must be just and relate specifically to the claim that was at issue in the discovery order. Linde, 706 F.3d at 101-02.
(21.) Linde, 706 F.3d at 102 (noting primary issue on appeal). At this point in the proceeding, the Second Circuit considered whether or not it could even review the district court's order due to the fact that its jurisdiction only exists over "appeals brought after the district court has entered a final judgment." Id. The court applied the three-prong Cohen test to determine if the issue was in fact appealable at that stage in the litigation. Id. at 103. The three-prongs of the test are: (1) whether the order from the lower court was conclusive; (2) whether the order was inextricably intertwined with the merits of the action; and (3) whether, even if the merits were completely divorced from the issue at hand, the order would be un-appealable as an interlocutory proceeding because it could be effectively reviewed after the case had been resolved in the lower court. Id.; see also Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 205-209 (1949) (creating three-pronged test for appeals courts to determine whether jurisdiction exists over collateral matters).
(22.) Linde, 706 F.3d at 107. The court provided an extensive explanation for when it was appropriate to issue a writ of mandamus. Id. at 107-08. The court analyzed "three demanding requirements" that had to be met before a writ of mandamus is issued. Id. The first is that a petitioner must demonstrate that his "right to issuance of the writ is clear and indisputable." Id. (quoting Cheney v. U.S. Dist. Court for Dist. of Columbia, 542 U.S. 367 (2004)) The second is that the "party seeking issuance of the writ must have no other adequate means to attain the relief it desires," for which the standard is whether issuing the writ would prevent "an otherwise irreparable harm." Id. at 12. The third is "even if the first two prerequisites have been met, the issuing court, in the exercise of its discretion, must be satisfied that the writ is appropriate under the circumstances. Id.; see also Cheney, 542 U.S. at 380-81 (outlining three-part test for issuing a writ of mandamus); In re City of New York, 607 F.3d 923, 929, 932, 943 (2d Cir. 2010) (recognizing Cheney test had been applied in the Second Circuit).
(23.) Linde, 706 F.3d at 119. The court had to decide whether the Bank was appealing a "final" decision of the lower court. Id. at 95. Federal courts of appeals only have jurisdiction to hear appellate arguments after a lower court has "entered judgment" on a matter. Id. The issue in Linde was whether the district court's order for sanctions against the Bank was considered "final." Id.; see also 28 U.S.C. [section] 1291 (establishing jurisdiction of appellate courts). Federal courts of appeals "have jurisdiction of appeals from all final decisions of the district courts of the United States." Linde, 706 F.3d at 95. Cunningham v. Hamilton Cnty., 527 U.S. 198, 203 (1999) (establishing the "collateral order doctrine"). The Court in Cunningham, interpreted 28 U.S.C. [section] 1291, and reaffirmed the precedent that appellate courts only had jurisdiction to hear appeals brought after the district court has entered a final judgment. Id. The issue in Cunningham was whether an order for monetary sanctions imposed by a federal district court against an attorney was ripe for interlocutory appeal. Id. at 20003. But see Swint v. Chambers Cnty. Comm'n, 514 U.S. 35, 42 (1995) (establishing jurisdiction for federal courts of appeal on certain matters that do not end litigation). Swint established that there is a small category of decisions that should be considered final, even though they do not conclude litigation. Id.
(24.) See supra note 2 and accompanying text (providing historical examples of international discovery conflicts); Keith Y. Cohan, Note, The Need for a Refined Balancing Approach when American Discovery Orders Demand the Violation of Foreign Law, 87 Tex. L. Rev. 1009, 1019 (2009) (explaining why national interests of foreign countries conflict with those of the United States). Foreign countries are adverse to American discovery procedure. Id. Many countries enact blocking laws specifically to undermine extraterritorial discovery. Id. Silvia B. Pinera-Vazquez, Comment, Extraterritorial Jurisdiction and International Banking: A Conflict of Interests, 43 U. Miami L. Rev 449, 449 (1988) (acknowledging "considerable" conflicts when United States courts exercise jurisdiction over foreign banks); David E. Teitelbaum, Note, Strict Enforcement of Extraterritorial Discovery, 38 Stan. L. Rev. 841, 844 (1986) (noting that until recently American courts infrequently faced foreign blocking laws); Riechenberg, supra note 2, at 82 (noting adverse reactions from foreign countries during discovery as early as 1956).
(25.) See C. Todd Jones, Compulsion Over Comity: The United States' Assault on Foreign Bank Secrecy, 12 Nw. J. Int'l L. & Bus. 454, 472-80 (1992) (listing various agreements and treaties between the United States and foreign countries). The United States has many specialized treaties with various foreign countries pertaining to taxes, narcotics, securities and antitrust issues. Id. at 479-80. These treaties dictate how and when information can be procured from foreign litigants. Id.
(26.) See infra note 34 (outlining framework for production order from foreign litigant); James G. Dwyer and Lois A. Yurow, Taking Evidence and Breaking Treaties: Aerospatiale and the Need for Common Sense, 21 Geo. Wash. J. Int'l L. & Econ. 439, 444-45 (1988) (listing various options that United States courts have available when dealing with uncooperative foreign litigants). If a party fails to comply with a court order compelling documents, the court can: (1) Draw inferences adverse to that party with respect to the issue that cannot be resolved because of a lack of evidence; (2) Limit the party's discovery to put both parties on equal ground; (3) Award costs that the requesting party incurs when obtaining evidence by other means. Id.; Jones, supra note 25, at 468 (explaining why foreign countries adopt blocking laws). Foreign countries use blocking statutes to "block the United States legislation and protect their territorial sovereignty. Some statutes cover all documents, while others prohibit certain categories of information." Id.
(27.) See Cohan, supra note 24 at 1019 (explaining foreign countries' responses to U.S. discovery procedures).
(28.) See Patrick M. Connorton, Note, Tracking Terrorist Financing Through Swift: When U.S. Subpoenas and Foreign Privacy Law Collide, 76 Fordham L. Rev. 283, 283 (2007) (citing United States government's priority to track terrorist funding). President Bush signed Executive Order 13224, which granted the Treasure Department's Office of Foreign Asset Control the power to serve subpoenas demanding financial records allegedly related to terrorism. Id. at 288; see also International Emergency Economic Powers Act, 50 U.S.C. [section][section] 1701-1706 (2000) (granting power for Executive Order 13224).
(29.) See Craig Depew, Comment, Sidestepping Foreign Bank Secrecy Laws: No Sanctuary in the Fifth Amendment and Little in the Interest of Comity, 10 Hous. J. Int'l L. 57, 60 (1987) (noting that United States court pay little deference to international comity). Although courts perform comity analyses, they typically favor United States' procedural rules over foreign laws that prevent disclosure of certain documents. Id.; John L. O'Donnell, The Secrets of Foreign Bankers and the Federal Investigation: Tottering Balances, 20 Case W. Res. J. Int'l L. 509, 538-39 (1988) (questioning whether U.S. courts would accept foreign nation seeking to circumvent U.S. secrecy laws); United States v. Nixon, 418 U.S. 683, 710 (1974) (noting that exceptions to full disclosure of documentary evidence must not be created lightly); United States v. Procter & Gamble Co., 356 U.S. 677, 682 (1958) (referencing importance of discovery instruments). Discovery makes a trial fairer on both sides when it is based on basic facts and issues. Id. Disclosure of information during discovery should be allowed unless outweighed by strong public policy. Id.; Ings v. Ferguson, 282 F.2d 149, 153 (2d Cir. 1960) (holding production of documents necessary if legal under foreign law).
(30.) See Societe Internationale v. Rogers, 357 U.S. 197, 203 (1958) (noting primary issue on appeal).
(31.) Id. at 204-06 (explaining reasons for jurisdiction by U.S. courts). According to Rogers, "United States courts should be free to require claimants of seized assets who face legal obstacles under the laws of their own countries," to put forth maximum efforts to produce the requested documents. Id. at 205.
(32.) See Rogers, 357 U.S. at 213 (noting justification of district court in drawing inferences). The "District Court possesses wide discretion to proceed in whatever manner it deems most effective." Id. Regardless of a foreign party's good faith in attempting to satisfy a production order, district courts may draw adverse inferences from that party's non-compliance. Id. at 207.
(33.) See Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court for Sn. Disl. of Iowa, 482 U.S. 522, 522 (1987) (holding that international comity does not require American litigants to delay discovery under U.S. law).
(34.) See Restatement Third of Foreign Relations Law of the United States [section] 442 (1987) (providing basis for test performed by U.S. courts). The factors that are looked at by U.S. courts are: (1) the importance to the investigation of the documents requested; (2) the degree of specificity of the request; (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 request would undermine important interests of the U.S or compliance with the request would undermine important interests of the country where the information is located. Id. [section] 442(l)(c).
(35.) See, e.g., First Am. Corp. v. Price Waterhouse, LLP, 154 F.3d 16, 22 (2d Cir. 1998) (discussing good faith factor); United States v. Davis, 767 F.2d 1025, 1033-34 (2d Cir. 1985) (discussing good faith factor); Ohio v. Arthur Anderson & Co., 570 F.2d 1370,1373 (10th Cir. 1978) (applying good faith inquiry to determine whether to issue sanctions); Arthur Anderson & Co. v. Finesilver, 546 F.2d 338, 342 (10th Cir. 1976) (noting lack of good faith could result in sanctions).
(36.) See Cohan, supra note 24, at 1013 (noting that Rogers decision did not give specific guidance to lower courts). Rogers led to an "array of various lower-court approaches in dealing with nonproduction when foreign law prohibits disclosure." Id. The Second Circuit followed Rogers by taking an "international comity" approach, where production would not be ordered if it violated foreign law. Id. at 1014. However, other circuits employ balancing tests using the Restatement factors when determining whether to order production. Id. at 1017. Compare In re Chase Manhattan Bank, 297 F.2d at 612-13 (applying international-comity approach), and Nat'l City Bank v. I.R.S., 271 F.2d at 619 (applying international-comity approach), with Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468, 1474-75 (9th Cir. 1992) (applying balancing approach), and Reinsurance Co. of Am. v. Administratia Asigurarilor de Stat, 902 F.2d 1275, 1279-80 (7th Cir. 1990) (applying balancing approach).
(37.) See Dwyer and Yurow, supra note 26 and accompanying text (discussing possible courses of action against non-producing party). Regardless of the consequence given to the non-producing party by a court, the party is put at an immediate disadvantage, either monetarily or through negative inferences. Id.
(38.) See Riechenberg, supra note 2, at 127 (acknowledging that the balancing test implies the possibility that foreign litigants will be treated unequally); Depew, supra note 29 (noting boundless power of judicial branch in applying balancing test); Cohan, supra note 24, at 1032 (discussing lack of uniformity in applying balancing tests). The main criticism regarding balancing tests is that "because of the subjectivity involved in weighing contradictory interests against one another, courts could very well reach inconsistent, unpredictable conclusions using the same balancing test." Id. This stems directly from the discretionary power that district judges have to "decide when a factor favors the requesting or nonproducing party and how important that factor should be in the court's analysis." Id.
(39.) See Martin H. Redish, The Pragmatic Approach to Appealability in the Federal Courts, 75 Colum. L. Rev. 89, 92 (1975) (introducing flexible approach for interlocutory appeals). When interlocutory appeals do not fall within any established exception to the final judgment rule, "the danger of prejudicing the litigants as a result of delaying the appeal will be so substantial as to outweigh any countervailing interest in avoiding the harms of piecemeal appeal." Id.; Michael E. Solimine, Revitalizing Interlocutory Appeals in the Federal Courts, 58 Geo. Wash. L. Rev. 1165, 1175 (1990) (explaining why interlocutory appeals are fair way of reaching decisions). Interlocutory appeals are fairer to the individual litigant who "otherwise would be forever bound by the decision of one unreviewable judge." Id.
(40.) See Timothy P. Glynn, Article, Discontent and Indiscretion: Discretionary Review of Interlocutory Orders, 77 Notre Dame L. Rev. 175, 243 (2001) (contending that discretion of circuit courts is "undesirable"). "Discretionary review of interlocutory orders goes further; it is certiorari power." Id. at 244. Unlike the Supreme Court, circuit courts have traditionally been courts of error. Id. at 245. Although circuit judges employ legitimate factors in determining whether to grant interlocutory review, they also employ other, "troublesome considerations--consciously or unconsciously--in deciding which probable errors to review." Id.; see also Redish, supra note 39, at 96 (discussing judicial invasion into functions of legislative branch). If the judiciary were to conclude that it is beyond its power in implementing appellate framework, congressional action might be necessary. Id.
(41.) See Linde, 706 F.3d at 95 (citing primary issue on appeal).
(42.) Id. (describing Bank's first argument). The Bank argued that although the district court's decision was not "final" in the sense that it ended the litigation, the decision did, however, "virtually dictate the outcome of the case." Id. Because the order was the difference between winning and losing the case, it should therefore be appealable. Id. at 96.
(43.) Id. (describing Bank's second argument).
(44.) Id. at 104-06 (citing reasons for no jurisdiction). The court discussed how there was only instance in which the Supreme Court directly addressed the appealability of a district court's order for sanctions, in which the Court found jurisdiction did not exist. Id. Under Cunningham, interlocutory appeals involving sanctions are prohibited. Id. Furthermore, the court found that even if it were "unconstrained by Cunningham's categorical holding," the Cohen test would still prohibit interlocutory review. Id.; see also Cunningham v. Hamilton Cnty., 527 U.S. 198, 200-03 (1999) (describing primary issue on appeal); Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure [section] 3914.23 (2d ed. 1992) (explaining interlocutory appeal of sanctions orders). Interlocutory appeals for sanctions are usually limited to those that conclude litigation or involve nonparties. Id.
(45.) See Linde 706 F.3d at 104-06 (citing reasons for lack of jurisdiction). The court also explained that caution is necessary in determining jurisdiction of an interlocutory appeal to prevent obstructing the traditional function of the district courts. Id. at 103-04. When a sanction "bears directly on the resolution of the merits of the case," appellate jurisdiction is likely inappropriate. Id. In Linde, if the Second Circuit were to rule on the district court's order for sanctions, it would have had to also consider the probable effect on the jury's verdict, which is traditionally a function of the district court. Id.
(46.) Id. at 107 (denying the Bank's request for a writ of mandamus). The court concluded that the Bank did not show support for issuance of a writ under any of the three prongs created in Cohen. Id.
(47.) Id. at 107-08 (stating reasons for denying Bank's request for a writ of mandamus). Further, mandamus is warranted only under "circumstances amounting to a judicial usurpation of power or a clear abuse of discretion" by the district court. Id.
(48.) Id. at 119 (stating court's holding).
(49.) Id. at 104-06 (citing Cunningham test); Cunningham v. Hamilton Cnty., 527 U.S. 198, 203 (1999) (outlining "final decision" test as applied to Rule 37(b) sanctions).
(50.) See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949) (defining "final" judgment). There is a small category of decisions that do not end the litigation but can still be considered "final." Id. The category includes only conclusive decisions that resolve important questions separate from the merits, which are effectively unreviewable on appeal from the final judgment in the underlying action. Id.
(51.) See Linde, 706 F.3d at 104-06 (applying Cunningham Court's reasoning to facts in Linde.) By following the Cunningham Court's holding, which prevented the interlocutory review of sanctions on an attorney, the Linde court effectively extended the bar on interlocutory appeal from discovery sanctions from a non-party (an attorney) to a party to the litigation (the Bank). Id.; see also Wright Miller & Cooper, supra note 44 (discussing interlocutory appeal of order for discovery sanctions).
(52.) Linde, 706 F.3d at 114 (discussing conflicts with foreign law). Rogers and Aerospatiale held that operation of foreign law "does not deprive an American court of the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate that law." Id. "The District Court possesses wide discretion to proceed in whatever meaning it deems most effective." Id. The court recognized that the "Restatement (Third) of Foreign Relations Law of the United States" provides the framework for district courts analyzing whether to compel the production of documents despite violating foreign law. Id.; Jones, supra note 25, at 506 (discussing situation where foreign nation sought to bypass U.S. secrecy laws). "Would U.S. courts accept the claim of a foreign nation that the attorney-client privilege could be violated simply because the foreign nation desired such information and U.S. rules allow the breach in certain situations? Probably not." Linde, 706 F.3d at 114. U.S. courts rely on the fact that foreign countries are unable to pierce U.S. secrecy laws, which greatly bolsters the power of U.S. courts to force violations of foreign laws. Id.
(53.) Id. at 106-07 (recognizing possible consequences of sanctions order). Despite acknowledging that it could be "too late to reverse the substantial financial consequences resulting from the reputational harm the Bank would sustain as a consequence of an adverse jury finding," the court determined that such a concern does not compel review under the collateral order doctrine. Id. "The collateral order doctrine respects the district court's role in managing litigation by barring 'appeals, even from fully consummated decisions, where they are but steps towards final judgment in which they will merge." Id. (citing Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949)).
(54.) See Fed. R. Civ. P. 37(b)(2)(a) (allowing district courts to order sanctions); Societe Internationale Pour Participations Indus. Et Commerciales, S.A. v. Rogers, 357 U.S. 197, 207 (1958) (holding district courts may draw adverse inferences from non-compliance with production order). Regardless of a party's good faith attempt to circumvent a foreign country's blocking statute, federal district courts may draw adverse inferences from a foreign party's non-compliance with a production order. Id.
(55.) See Linde, 706 F.3d at 101-02 (providing jury instruction). The jury instruction that will be provided at trial is "based on Arab Bank's failure to produce documents, the jury may--but need not--conclude both that Arab Bank provided financial services to foreign terrorist organizations and that it did so knowingly and purposefully." Id.
(56.) See Solimine, supra note 40 at 1175 (discussing reasons for allowing interlocutory appeals). If the decision to issue a prejudicial jury instruction is made by a single district court judge, and is unappealable, the litigant has to live with that decision forever. Id.; Linde, 706 F.3d at 106-07 (noting Bank could appeal final verdict). Although the final verdict is still appealable, the Bank has no recourse to reverse the prejudicial jury instruction, which could prove to be determinative of the Bank's liability. Id.
(57.) See Linde, 706 F.3d at 100-01 (acknowledging Bank previously complied with numerous discovery requests). Plaintiffs had previously obtained documents which tended to support an inference that the Bank knew its services were benefiting terrorists. Id. Despite the fact that these documents were representative of the Bank's transfers to terrorist organizations, the court still handed down the jury instruction based on the Bank's subsequent non-production. Id.
(58.) Id. at 103-04 (applying Cohen and Cunningham reasoning); see generally Cunningham v. Hamilton Cnty., 527 U.S. 198 (1999) (confronting attorney's appeal from sanctions order); Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541 (1949) (creating test to determine final judgment). The problem with expanding the Cohen test to encompass a prejudicial jury instruction is that neither the Cohen nor Cunningham Court dealt with the appeal of a prejudicial jury instruction. Id. The finality of the jury instruction in Linde was not in line with the finality considered in Cohen or the sanctions order in Cunningham. Id. The jury instruction in Linde is final in the sense that it likely will cause harm that is irreparable on appeal after the trial concludes. See Linde, 706 F.3d at 101; see also Solimine, supra note 39, at 1175 (noting finality of lower court judgment when interlocutory appeal denied).
(59.) See Depew, supra note 29, at 72 (criticizing United States judicial system). "Due to the burgeoning power of the courts in international investigations, the illusion of 'ultimate justice' provided by the 'balancing' approach is rapidly becoming transparent," and "the judiciary is pushing the line of demarcation separating the three branches to its limit." Id. When applying a balancing test that thwarts foreign laws, courts are essentially playing the role of the legislative and executive branches of the United States government. Id. at 73.
(60.) See supra note 28 and accompanying text (discussing government response to September 11).
(61.) See Depew, supra note 29 (discussing American courts' disregard for foreign secrecy laws); O'Donnell, supra note 29 (providing situation in which the role of U.S. courts and foreign governments is reversed).
(62.) See Depew, supra note 29, at 73 (criticizing power held by courts in international litigation); Glynn, supra note 40 (referring to power of circuit courts as "certiorari power").
(63.) See supra note 40 and accompanying text (discussing discretionary power of district courts in international litigation).
(64.) See Linde, 706 F.3d at 92 (providing holding); supra note 39 and accompanying text (noting pre-trial inequality between American and foreign litigants when interlocutory appeal is denied).
|Printer friendly Cite/link Email Feedback|
|Author:||Duval, J. Daniel|
|Publication:||Suffolk Transnational Law Review|
|Date:||Jun 22, 2013|
|Previous Article:||Epic failure: the uncomfortable truth about the United States' role in the failure of the global war on drugs and how it is going to fix it.|
|Next Article:||Ninth Circuit issues preliminary injunction recognizing activist conservation society as pirates.|