Case of the Day: Brandi-Dohrn v. IKB Deutsche Industriebank AG

The case of the day is Brandi-Dohrn v. IKB Deutsche Industriebank AG (2d Cir. 2012). Anselm Brandi-Dohrn was an investor in IKB, a German bank. He sued IKB in Germany for securities fraud in 2008. He alleged that the bank had failed to disclose that it had significant exposure to US collateralized debt obligations and that IKB “falsely downplayed” the impact that a ratings agency downgrade of CDOs would have on its operations. In 2010, the Landgericht dismissed the case, and Brandi-Dohrn appealed to the Oberlandesgericht. The appeal is apparently still pending—a hearing was to be held in February 2012.

While the appeal was pending, Brandi-Dohrn made an ex parte application under 28 U.S.C. § 1782 for issuance of document and deposition subpoenas to three non-parties in the United States. He sought evidence relating to whether IKB was aware that its exposure to the CDO market created a material risk that should have been disclosed to investors. Brandi-Dohrn asserted that he would use the evidence gathered in his German appeal, and that his counsel also intended to use the information to benefit other plaintiffs in Germany with claims against IKB. The District Court granted the application.

After the subpoenas issued, IKB moved to quash them. The judge granted its motion on the grounds that the evidence would not be admissible in the German appellate proceeding. The basis for this conclusion in the statute is the requirement must be “for use in a proceeding in a foreign or international tribunal.” If the evidence is inadmissible, then how can it be sought “for use” in the proceedings? Or so the argument goes. By way of background, it is established that the evidence sought in the US need not be discoverable under the law of the foreign countries, but in many countries where pre-trial discovery is much more limited than in the US, lots of evidence may be admissible at trial even though it is not discoverable.

The Second Circuit rejected this argument:

While Intel [the Supreme Court case establishing the rule that discoverability is not required] concerned the discoverability of evidence in the foreign proceeding, we see no reason why it should not extend to the admissibility of evidence in the foreign proceeding. As in Intel, there is no statutory basis for any admissibility requirement. … A foreign admissibility rule would also serve “only to thwart § 1782(a)’s objective to assist foreign tribunals in obtaining relevant information that the tribunals may find useful but, for reasons having no bearing on international comity, they cannot obtain under their own laws.” … Finally, requiring a district court to apply the admissibility laws of the foreign jurisdiction would require interpretation and analysis of foreign law and such comparisons of that order can be fraught with danger.”

I think that the last of these arguments is the strongest—better to let the foreign tribunal sort out what is and is not admissible than to have the US court consider the inevitable dueling declarations of foreign lawyers, one of whom says the evidence is plainly admissible and the other of whom says it isn’t. The other arguments strike me as weaker. It seems that the “for use” provision of the statute has a natural application to admissibility that it does not have to discoverability. A party may be able to use evidence in a foreign trial even if foreign law does not permit the party to compel disclosure of the evidence from a third party. But what does it mean to say that a party can “use” inadmissible evidence in a foreign proceeding?

The court recognized that receptivity is one of the discretionary factors to be considered in deciding whether to grant a § 1782 application: how receptive will the foreign tribunal be to the evidence? Nevertheless, the court reversed the lower court rather than simply vacating and remanding for application of the proper standard. I am not sure why the Second Circuit took this approach. The answer may be practical. Because the evidence was needed immediately if it was to have an impact in the German case, perhaps there simply was not enough time for a remand. But all else being equal, I think a remand would have been the more appropriate order.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2d ed. 2016), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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