Second Circuit finds that attorney-client privilege and confidentiality order outweighs proportionality concerns in reversing order to subpoena documents for foreign proceeding

On July 10, 2018, the United States Court of Appeals, Second Circuit reversed the order of the United States District Court for the Southern District of New York, where the district court had granted appellee’s petition to subpoena documents from the appellant law firm.

The law firm represented a Netherlands-based client whom the appellee had sued in prior litigation. In the course of that matter, the U.S. law firm had come into possession of certain client documents that had been sent to the United States solely for the purpose of the American litigation under a stipulated confidentiality order. Eventually, the suit was dismissed because it was found that United States courts lacked jurisdiction.

The appellee subsequently brought another action against the law firm’s client, this time in the Netherlands. The appellee also petitioned the district court to subpoena the documents held by the law firm under 28 U.S.C. § 1782 to aid in her litigation in the Netherlands.

Section 1782 provides federal-court assistance in gathering evidence for use in foreign tribunals and allows a district court the discretion to order a person (including a law firm) to give testimony or provide documents. However, that person may not be compelled to take such action “in violation of any legally applicable privilege.” Moreover, the Supreme Court in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) has discussed four non-exclusive factors to be considered in granting a petition under § 1782 (“the Intel factors”).

The four Intel factors are:

1) whether the person from whom discovery is sought is a participant in the foreign proceeding (if not, that weighs in favor of granting the § 1782 petition);

2) the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance;

3) whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States; and

4) whether the request is unduly intrusive or burdensome.

The district court had granted the motion to compel by applying the Intel factors. It had found that (1) the law firm was not a party in the Dutch litigation, (2) there was no evidence that the Netherlands courts would be unreceptive to U.S. discovery, (3) the requested documents were likely to be discoverable under Dutch law, and (4) the production would be minimally burdensome for the law firm. In addition to the Intel factors, the district court also determined that not all of the requested documents were likely to be in the Dutch client’s possession more than a decade after the litigation had begun in the United States.

"Citing a case it had decided in 1997, the Second Circuit ruled in favor of the law firm because granting the motion to compel would jeopardize “the policy of promoting open communications between lawyers and their clients."

The law firm argued that the district court lacked jurisdiction to grant the petition, and that in any event it was an abuse of discretion to do so. The Second Circuit held that the district court had correctly determined that it possessed jurisdiction over the appellee’s petition, because the elements for personal jurisdiction were satisfied. However, the Second Circuit also held that the district court had abused its discretion under § 1782. It stated that under existing precedent, when the “real party from whom documents are sought” (here, the Dutch client) is involved in foreign proceedings, the first Intel factor counsels against granting a § 1782 petition seeking documents from U.S. counsel for the foreign company.

Noting that the Intel factors were non-exclusive, the Second Circuit found that the district court did not give the confidentiality order proper weight, and had not taken into account attorney-client privilege concerns. Citing a case it had decided in 1997, the Second Circuit ruled in favor of the law firm because granting the motion to compel would jeopardize “the policy of promoting open communications between lawyers and their clients.”

The Second Circuit reversed the order of the district court and remanded for the district court to revise its order.

The case is Kiobel by Samkalden v. Cravath, Swaine & Moore LLP, No. 17-424-CV (2nd Cir. 2018). A copy of the opinion can be found here.


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