Tag Archives: blocking statute

Case of the Day: United States v. Badger

The case of the day is United States v. Badger (D. Utah 2013). In 2004, the defendant, George Badger, had consented to entry of a judgment against him in a case brought by the SEC. The claim in the case was that Badger had bribed brokers to induce them to sell stock in his golf course development to their clients. The judgment was for $19 million, of which Badger had voluntarily paid $2,228. (The government had collected an additional $13,000 by garnishment). With interest, the amount outstanding was $32 million.

The government brought a second action against Badger and his wife, the SB Trust, Ardco Leasing & Investment LLC, American Resources and Development Co., and Springfield Finance and Mortgage Co. The claim was that the other defendants were Badger’s nominees and alter egos and that their assets should be available to satisfy the judgment.

The government sought issuance of a letter of request to obtain discovery from Miltex, Banque SCS, and Camille Froidevaux, all in Switzerland; according to the government, Badger “has used them as nominees to funnel money into the United States.” Badger and the other defendants opposed the motion on the grounds that “Swiss law will prevent [the government] from obtaining the discovery it seeks.”

The judge’s discussion of the general law of letters of request is not recommended: he says, incorrectly, that he is being asked to issue a letter of request pursuant to 28 U.S.C. § 1782, and he seems to say that the Hague Evidence Convention is the sole mechanism by which a court can issue a letter of request. But the judge properly dispatched Badger’s argument. I assume Badger’s argument is a reference to Article 271 of the Swiss Penal Code, which makes it illegal in Switzerland to “carr[y] out activities on behalf of a foreign state on Swiss territory without lawful authority, where such activities are the responsibility of a public authority or public official.” Article 271 curtails the ability of a US court to order a Swiss party to provide discovery under the FRCP, but the whole point of the Hague Convention is to allow the US court to request the Swiss authorities themselves to compel the evidence, so I question whether Badger’s argument has any real force. In any case, the judge found that Badger had failed to persuade him that the evidence would not be produced, and “mere speculation about whether Plaintiff will in fact obtain the desired discovery does not constitute good cause” to refuse to issue a letter of request.

Update: The Sedona Conference’s International Principles

SedonaIn February I posted on the American Bar Association’s resolution encouraging courts to “consider and respect, as appropriate, the data protection and privacy laws of any applicable foreign sovereign” in discovery matters. Now the Sedona Conference has published International Principles on Discovery, Disclosure & Data Protection, which are in the same spirit as the ABA resolution. The Principles, which are available on the Sedona Conference website, call for courts and parties to show “due respect” to foreign data protection laws, to resolve conflicts between data protection laws and US discovery rules “under a standard of good faith and reasonableness”, to limit discovery of protected data to information that is “reasonable and necessary to support any party’s claim or defense,” to make use of protective orders, and to provide for safeguarding of documents with protected data.

These principles, like the ABA resolution, seem eminently reasonable. It does seem, though, that both have a subtext—both stem from the impression that US courts today are not sufficiently respectful of EU data protection law. Otherwise, why the felt need to make a statement? One difficulty for making a change in the practice of the courts is that the language of Aérospatiale encourages the district courts to favor application of the FRCP. Perhaps groups interested in changing the trend in the law will ultimately need to bring another case to the Supreme Court, or to go through the rulemaking or legislative process. Given the large number of precedents applying Aérospatiale in a way that leads courts to apply the FRCP, it seems to me that efforts by the bar to alter the trend in the law face serious obstacles.

Case of the Day: In re Air Cargo Shipping Services Antitrust Litigation

Concorde taking off
The Concorde
The case of the day is In re Air Cargo Shipping Services Antitrust Litigation (E.D.N.Y. 2012). The decision does not give details of the underlying dispute, though the title of the case (a multi-district litigation consolidated in the Eastern District of New York) pretty much says it all. The issue was whether the defendant, Société Air France, should be required to produce documents that it had withheld on the grounds that production was forbidden by the French blocking statute. Air France claimed the plaintiffs should have to proceed under the Hague Evidence Convention rather than via the Federal Rules of Civil Procedure. The judge undertook a very standard Aérospatiale analysis and concluded, unsurprisingly, that Air France had to produce the documents. The factors were mixed: the documents sought were clearly relevant, and the request was precise and specific. On the other hand, Air France was acting in good faith and had not, for instance, invoked the blocking statute strategically in some instances and not in others. Several of the factors were difficult to weigh. The Hague Evidence Convention was, according to the judge, of questionable effectiveness as an alternative, and Air France’s claim of hardship relied solely on the Christopher X case, which the judge discounted because “the legislative history of the statute gives strong indications that it was never expected or intended to be enforce against French subjects but was intended rather to provide them with tactical weapons and bargaining chips in foreign courts.” Take that, ABA!

On the main issue—the balance of national interests—the judge found that the US had strong interests in enforcement of our antitrust laws, and that France’s interests were weak insofar as France had already consented to disclosure of the information in connection with criminal antitrust proceedings the United States had brought against Air France.

Photo credit: Alexander Jonsson