The world is small. The advance of virtualisation allows almost anything to be done almost anywhere. As I write this, I’m at home in New York, working for a company in San Francisco, writing for a blog in London. I’m fully connected to the network. This permits a more efficient utilisation of resources than we’ve ever had before. It also presents challenges that we’ve never had before.
The Seventh Circuit Court of Appeals, covering the states of Wisconsin, Illinois, and Indiana, recently encountered such a challenge. The Court was presented with an international discovery issue. A German company sued a US company in German court for theft of trade secrets.
German discovery and evidence rules are almost exactly opposite from US rules. In Germany, discovery is minimal, but most everything is admissible. In US courts, discovery is virtually unlimited, but admissibility is much stricter. The German company sought to use the US court system for discovery in its suit against the US company. US law allows for discovery in the US of a US company, even if for use in a foreign court. The purpose for this allowance was to encourage foreign countries to allow more expansive discovery.
The law is clear, but the Court was wary of potential abuses, including forcing companies to litigate in two, far-flung jurisdictions. Also, the court was worried that liberal US laws would flood foreign courts with evidence that would be inadmissible in a US court but admissible in the non-US court.
As the Court noted, a discovery demand in the US court could yield 30 million emails, few of which would be admissible in the US court. Should the litigant try to overwhelm the German court with the “harvest of American discovery,” the court “might not be well equipped by its procedures to stem the flow.” Biomet was also concerned that the fight wasn’t fair. The German company could exploit liberal US discovery, but Biomet’s discovery options in German court were much more limited.
Biomet, however, did not ask the German court for an order limiting discovery, nor did Biomet ask the original US court for an order that would allow cross-discovery. The appeals court took that as a sign that Biomet was neither truly concerned with a level playing field, nor was it worried about the German discovery limitations.
Biomet also refused to meet with its opponent to discuss what discovery was reasonable. Although not required, the panel of judges thought that a meeting to help set the bounds of reasonable discovery was “strongly recommended for any complex discovery proceeding.” The German company was seeking over 15 years of material. Although it might not have gotten everything, the failure to negotiate anything was a key factor that the appeals court considered.
Once again, we see that although litigation is an adversarial process, the discovery process isn’t. Biomet raised objections to the discovery that the court found “spurious,” because Biomet took no other actions to protect itself, nor did it negotiate in good faith. Companies should take note that US courts allow international discovery, and that some parts of a case are more amenable to compromise than confrontation.