In dispute over value of real
estate, Second Circuit upholds discretionary denial of request from German
litigants for production of documents under 28 U.S.C. Section 1782 though it
complied with statutory requirements because granting discovery assistance
would not, under circumstances, further goals of Section 1782
Michael Schmitz and 27 other
German investors (hereinafter petitioners) filed a lawsuit in Germany against
the German telecom company “Deutsche Telekom AG” (hereinafter DT) which the
government owns in part. Petitioners claimed that the company had misled
investors by overstating the value of its real estate assets. Similarly,
American investors brought a parallel action in a New York federal court.
In January 2003, petitioners
sought the production of evidence under 28 U.S.C. Section 1782 from the U.S.
law firms involved in the U.S. action, particularly the documents that DT had
already produced and handed over to those firms.
Section 1782(a) provides for
judicial aid in obtaining evidence for foreign proceedings. It provides that
“the district court ... may order [a person] to give his testimony or
statements or to produce a document or other thing for use in a proceeding in a
foreign or international tribunal ...” The district court first decided that
petitioners met the statutory requirements of Section 1782. Nevertheless, it
concluded that the request would run counter to the twin aims of the statute.
These are [1] to provide efficient evidentiary assistance to international
tribunals and litigants and [2] to encourage foreign countries to give similar
aid to American courts.
Here, the German government
opposed judicial assistance by the American court. The German Ministry of
Justice and the Prosecutor in Bonn who were looking into DT’s affairs asked the
district court to deny production. They asserted that it would jeopardize the
ongoing German criminal investigation and impugn German sovereignty.
Furthermore, the Federal Ministry
of Justice submitted that DT had made the documents available in the American
action on condition that they be used exclusively for that action. Exercising
its statutory discretion, the court denied the application for evidence and
petitioners filed this appeal. The U.S. Court of Appeals for the Second Circuit
affirms.
The Court first lays down the
standard for granting such discovery requests. “We have held that a district
court is authorized to grant a Section 1782 request where ‘(1) ... the person
from whom discovery is sought reside[s] (or [is] found) in the district of the
district court to which the application is made, (2) ... the discovery [is] for
use in a proceeding before a foreign tribunal, and (3) ... the application [is]
made by a foreign or international tribunal or ‘any interested person.’‘ [Cite]
‘Once the statutory requirements are met, a district court is free to grant
discovery in its discretion.’ This discretion, however, is not boundless.
Rather, we have held that district court have to exercise their discretion
under Section 1782 in light of the twin aims of the statute.” [Slip op. 9-10]
The Court of Appeals decides that
the district court did not abuse its discretion in this case. Technically, the
respondents here from whom petitioners sought evidence were the U.S. law firms,
but in reality the documents belonged to DT whom petitioners were suing in
Germany.
“[W]e find no error in the
court’s decision to deny, rather than merely limit, discovery. Although we have
expressed a preference for narrowly tailored discovery orders where possible,
... the district court did not abuse its discretion in deciding that no such
order was possible in this case. The German authorities objected to any
disclosure of DT documents to petitioners at this time. ... Despite their
protestations to the contrary, petitioners are thus not in the same position as
the American plaintiffs.”
“The latter received access to
the documents only because they were not involved in the German litigation and
promised not to disclose the documents to anyone, including the German
plaintiffs. ... But petitioners, themselves German plaintiffs, want the documents
for use in their actions in Germany. It is hard to imagine a discovery order
that could have effectively eliminated the concerns raised by the German
authorities and fulfilled the aims of Section 1782.” [Slip op 13-15]
Citation: Schmitz v.
Bernstein, Liebhard & Lifshitz, LLP, 376 F.3d 79 (2d Cir. 2004).
**** Mr. William B. Blanchard (“Bill Blanchard”) is a Real Estate Attorney with offices in St. Charles and Oakbrook Terrace, Illinois. Bill specializes in representing real estate clients for purchases and sales as well as home owner real estate tax assessment appeals. Mr. Blanchard is General Counsel for Gaia Title, Inc. a title insurance agency and settlement services provider. The Company is owned by real estate attorneys who demand exemplary title insurance services and accurate and efficient settlement services. As General Counsel he is responsible for title examination, commitment and policy review, escrow settlement supervision and regulatory review. - Attorney Profile: https://solomonlawguild.com/william-b-blanchard%2C-esq - Attorney News: https://attorneygazette.com/william-blanchard%2C-esq#40b43d7b-94b2-48d3-b055-1979a636f1e7
