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Case of the Day: In re Frau R

The case of the day, courtesy of Peter Bert of Taylor Wessing, is In re Frau R (German Fed. Constitutional Ct. 2015). Yes, I know that’s not the proper form for citing German cases, but it will have to do. Frau R., a Romanian national, sued a Romanian widow for a share of her dead husband’s estate on the grounds that the widow and her husband had adopted her. The widow denied the adoption, and so Frau R. sought recognition, in Germany, of the Romanian adoption. The lower court that heard the case failed to request the record of the adoption from the Romanian court under Council Regulation (EC) No 1206/2001, the EU regulation on judicial assistance, even though Frau R. had presented a letter from the Romanian authorities indicating that they would be receptive to a request from the German court. On appeal, the Federal Constitutional Court held that the lower court had violated Frau R.’s constitutional right to effective judicial protection.
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Case of the Day: Derr v. Swarek

The case of the day is Derr v. Swarek (S.D. Miss. 2013). Hermann P. Derr was the owner of Derr Plantation, Inc., a Mississippi corporation. The claim was that in 2005, Derr Plantation had made a contract with Thomas L. Swarek and Thomas A. Swarek for the lease and purchase of a farm Derr Plantation owned in Mississippi. The Swareks claimed that Derr Plantation breached the agreement and sued Derr and Derr Plantation for specific performance and damages in the Chancery Court of Issaquena County, Mississippi.

In 2006, Hermann Derr died. The Swareks moved to substitute his estate as a party defendant. The court didn’t rule on the motion for three years, but the motion eventually became moot when the Swareks dimissed their claims against Hermann Derr with prejudice in 2010.

Meanwhile, 2009, Hermann Derr’s heirs brought a complaint against the Swareks in the Regional Court of Düsseldorf, seeking a declaration that the Swareks had no claim against them arising out of the Mississippi contract that had formed the basis of the Swareks’ claims in the Mississippi chancery court. The Swareks appeared in the German action. In 2010, the court in Düsseldorf denied Derr’s heirs a declaratory judgment. However, on appeal, the Higher Regional Court reversed and granted a declaratory judgment in the heirs’ favor, notwithstanding the Swareks’ dismissal of their claim against Derr (and accordingly, his estate and heirs) with prejudice:

The validity of this withdrawal [of the complaint with respect to the deceased Mr. Hermann Derr in the Mississippi lawsuit] as well as the question whether it causes a procedural preclusion (“res judicata”) with respect to the plaintiffs that did not become a party to the Mississippi proceeding can remain open. Even if this were the case, in the event of an action filed against them plaintiffs would be required to prove that the res judicata effect extends to them. Their interest in a declaratory judgment remains, because any ambiguity will be resolved at their expense.

The German court refused to apply the rule of lis alibi pendens, on the grounds that it was unclear whether Hermann Derr had been properly been served with process (it’s impossible to determine from anything I’ve read whether there was a problem with service of process in the chancery action) and that “Insofar as there may have been a lis alibi pendens initially, this obstacle was dispensed with upon the claim being dismissed against the deceased Mr. Hermann Derr.”

The German appellate court also entered a judgment requiring the Swareks to pay the costs of the proceeding, which amounted to more than € 200,000.

The Derr heirs then brought an action in the Southern District of Mississippi for recognition and enforcement of the German judgment. Mississippi has enacted neither the UFMJRA nor the UFCMJRA, and thus the case was to be decided under common law principles of comity.

It’s difficult to understand what the case is really about. On the one hand, if the Swareks had dismissed their claim against Derr and thus against his estate with prejudice, then why should they care whether the German courts decide that they have no right against the Derr heirs? On the other hand, since the Swareks did dismiss their claim with prejudice in Mississippi, why should the Derr heirs seek a declaration in Germany in the first place?

But for whatever reason, the parties did spend a fair amount of money litigating in Germany. The Mississippi court denied the claim for recognition and enforcement on the grounds that the German action had been filed after the US action for the purpose of interfering with the US action and thus was not entitled to comity under precedents such as Laker Airlines, Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909 (D.C. Cir. 1984).

The German decision seems odd to me on its own terms, though of course I hesitate to comment on the substance of a foreign judgment. Why did the German court not make an effort to figure out the procedural effect in Mississippi of a dismissal with prejudice, which would seem to me to be dispositive? And in any case, isn’t there a problem with saying, on the one hand, that the American case was not a lis alibi pendens because of the voluntary dismissal with prejudice but then saying ignoring the effect of the voluntary dismissal under US law, which on ordinary principles should, it seems to me, have been res judicata in Germany (though I would like a German lawyer’s view on that).

Pre-Trial Discovery under the Hague Evidence Convention: Is Germany’s Position Softening?

Peter Bert is back with a report of an interesting development—or hint of a development—in how the German courts think about requests for the production of documents. This is cross-posted at Peter’s blog.

A recent Frankfurt case raises this issue: Germany has declared “that it will not execute Letters of Request issued for the purpose of obtaining pre-trial discovery of documents as known in Common Law countries,” in accordance with Art. 23 of the Hague Convention on Taking of Evidence Abroad in Civil or Commercial Matters. This notwithstanding, the President of the Frankfurt Court of Appeals (Präsident des Oberlandesgerichts) accepted a request for pre-trial discovery of documents from California. In doing so, he was acting in his capacity as the Central Authority under the Hague Evidence Convention. The request was passed it on to the Local Court (Amtsgericht) of Bad Homburg for execution—so at first sight, Germany’s position has softened, at least in Frankfurt. The party concerned challenged the decisions made by the President, and the Frankfurt Court of Appeals (Oberlandesgericht) reviewed the decision. It did not agree with the President and set his order aside, so the answer is: Germany’s Position has not softened—yet.

In my opinion, it is not so much the judgment of the Frankfurt Court of Appeals that is surprising. This was to be expected—it was rather the fact that the President as the Central Authority had accepted the letter of request in the first place, and defended the position during the judicial review proceedings.

Before we come to the arguments made by the President, however, we need to sort out how it is possible for the President of the Court of Appeals to decide one way and the Court of Appeals the other way. We had discussed this in the context of the Hague Service Convention before, and the same principles apply to the Hague Evidence Convention:

A decision by the Central Authority under the Hague Evidence Convention constitutes a Judicial Administrative Act (Justizverwaltungsakt). The Central Authority in our case was the President of the Court of Appeals (Oberlandesgericht) in Frankfurt, for Hessen as the German federal state concerned. He was acting in an administrative capacity rather than in a judicial one. Judicial Administrative Acts constitute a separate class of actions taken within the court system. One can, by and large, characterize these acts as everything that is not a substantive decision of a judge in a pending litigation itself, be it procedural or otherwise.

Section 23 et seq. of the Introductory Act to the Courts Constitution Act (EGGVG) governs the judicial review of such Judicial Administrative Acts. A party who is requested to disclose documents in pre-trial discovery, or who is compelled to testify as a witness, can approach the Court of Appeals—acting in its judicial, not in its administrative capacity—and seek review of the decision to order disclosure of documents as per the request of the US litigant.

The President of the Frankfurt Court of Appeals had argued that Germany’s objection to Art. 23 of the Hague Evidence Convention must be interpreted narrowly, in the light of changes to the German Code of Civil Procedure (ZPO) that came into force in 2002. In that year, a limited duty for third parties to disclose documents in their possession was introduced in Sec. 142 ZPO. Furthermore, the German Act on the Implementation of the Hague Evidence Convention (Ausführungsgesetz; AusfG HBÜ) allows for the execution of letters of request, if and as far as fundamental principles of German procedural law do not require otherwise. 1

The Frankfurt Court of Appeals was not persuaded by its President’s arguments—for which, I must disclose, have some personal sympathy. It held that, even if the domestic procedural rules since 2002 allow for a limited power of the courts to order the production of documents by third parties, this does not change the assessment of common law style pre-trial discovery as a procedure which is fundamentally different from German law. In particular, the element of “fishing for evidence” (Ausforschung) remained imminent in any pre-trial discovery and hence, pre-trial discovery on the one hand, and an order based on Sec. 142 ZPO on the other hand are so fundamentally different that there is no reason to construe Germany’s objection narrowly in the light of Sec. 142 ZPO.

This assessment of the court is also not changed by Sec. 14 AusfG HBÜ. This provision only kicks in once a statutory instrument (Rechtsverordnung) has been issued by the Ministry of Justice. As the Ministry of Justice has not yet issued such an instrument, Germany’s objection stands unchanged. The Frankfurt Court of Appeals acknowledged that the issues before it were of a fundamental nature, and therefore granted leave of appeal (Zulassung der Rechtsbeschwerde) to the Federal Supreme Court (Bundesgerichtshof). However, it appears that the matter has not been pursued further.

So where does this leave foreign parties who are trying to pursue pre-trial discovery of documents in Germany? My personal take is as follows: If a request for discovery of documents in Germany is to be made, it is worth having another go at it—even more so if it is to be made to the President of the Frankfurt Court of Appeals. Ideally, the request would be narrowly worded and be as specific as possible as to the documents requested. I would then argue that the request were to be granted even under Sec. 142 ZPO, had it been made in a domestic context. And if it were to be granted in a domestic context, it cannot fall under the objection, as it is not a request for pre-trial discovery of documents as known in common law countries.” It would be great to see a case being appealed to the Federal Supreme Court, and the Frankfurt decision should help in persuading other courts grant leave of appeal, even if they do not grant the request. On a political level, the Ministry of Justice should revisit its power to issue the statutory instrument that Sec. 14 AusfG HBÜ provides for. At least, such an instrument should avoid a situation where the foreign applicant is granted even less disclosure than a domestic party would have been granted under Sec. 142 ZPO.

Notes:

  1. Sec. 14 AusfG HBÜ reads: (1) Letters of Request that relate to proceedings defined in Article 23 of the Convention will not be executed. (Rechtshilfeersuchen, die ein Verfahren nach Artikel 23 des Übereinkommens zum Gegenstand haben, werden nicht erledigt.) (2) This notwithstanding, such Letters of Request may be executed, if fundamental principles of German procedural law do not require otherwise, once the preconditions and the applicable procedure have been defined in detail in a statutory instrument; such a statutory instrument may be issued by the Ministry of Justice with the consent of the Upper House. (Jedoch können, soweit die tragenden Grundsätze des deutschen Verfahrensrechts nicht entgegenstehen, solche Ersuchen unter Berücksichtigung der schutzwürdigen Interessen der Betroffenen erledigt werden, nachdem die Voraussetzungen der Erledigung und das anzuwendende Verfahren durch Rechtsverordnung näher geregelt sind, die der Bundesminister der Justiz mit Zustimmung des Bundesrates erlassen kann.)