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Case of the Day: Lantheus Medical Imaging, Inc. v. Atomic Energy of Canada Ltd.

H/T to Antonin Pribetic for a pointer to the case of the day, Lantheus Med. Imaging, Inc. v. Atomic Energy of Canada Ltd. (Ontario Super. Ct. of Justice 2011). In the underlying case, Lantheus Med. Imaging, Inc. v. Zurich Am. Ins. Co., pending in the Southern District of New York, Lantheus sued Zurich, its insurer, for failure to pay on a lost business income claim arising out of the shutdown of a nuclear reactor in Chalk River, Ontario. The shutdown of the reactor, according to Lantheus, caused a disruption in Lantheus’s supply of Molybdenum-99, a raw material Lantheus used to manufacture radiopharmaceutical products.

On Lantheus’s motion, the US court issued a letter rogatory to the Ontario court seeking testimony and documents from Atomic Energy of Canada Ltd. (a letter rogatory was necessary because Canada is not a party to the Hague Evidence Convention). AECL, according to the Ontario court’s opinion, is a Crown agent of the Government of Canada. I assume that it is, in effect, an agent or instrumentality of Canada, and thus generally immune from the jurisdiction of the courts of the United States under § 1604 of the Foreign Sovereign Immunities Act (under § 1603, the term “foreign state” includes the agencies and instrumentalities of the state).

The Ontario court refused to grant the US court’s request for judicial assistance. The gist of the decision was that under Section 60(1) of the Ontario Evidence Act, the court could grant the request only if the US court was a court of competent jurisdiction, and that in fact the US court was not a court of competent jurisdiction, because the AECL, as an agency or instrumentality of the Government of Canada, was immune from the jurisdiction of the US court under the FSIA. By way of reference, the FSIA provides:

Subject to existing international agreements to which the United States is a party at the time of enactment of this Act a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this Chapter.

It’s unclear whether the US court’s inability to subpoena AECL played a real role in the Ontario court’s analysis: one the one hand, the court noted that it was clear that “the U.S. Court did not have jurisdiction to issue a subpoena against AECL if it had been in its jurisdiction.” This suggests that the court understood that because AECL was located in Canada, the power or lack of power to issue a subpoena was not really in play. On the other hand, though, the court noted the lack of jurisdiction to issue a subpoena as one of the two bases for its decision. There is no question but that the US court lacked jurisdiction to issue a subpoena to AECL to compel AECL’s testimony. But this is trivial: the US court lacks jurisdiction to issue a subpoena to anyone outside of its territorial jurisdiction (there are minor exceptions to this rule, e.g., the 100-mile “bulge jurisdiction” of Fed. R. Civ. P. 45(b)(2)(C), or service on a national or resident of the United States abroad under 28 U.S.C. § 1783). Parties that direct letters rogatory to Canada do so precisely because the subpoena power of the US courts does not extend to Canada.  So the court’s lack of jurisdiction to issue a subpoena proves too much, and the Ontario court was unwise, in my view, to treat it as a fact of significance.

The Ontario court denied the request without prejudice to a renewed request after the US court had addressed the issue of FSIA immunity. In my view, the Ontario court’s concern about the FSIA was misplaced. I do not read the FSIA to bar issuance of a letter rogatory to a foreign court seeking discovery from a foreign state or an agency or instrumentality of the foreign state, because the US court is not exercising jurisdiction over the foreign state, but is requesting that the foreign court, as a matter of comity, exercise jurisdiction over the foreign state.

There is not much, if any, case law on this issue. Comment c to § 451 of the Restatement (Third) of the Foreign Relations Law of the United States notes:

Neither the Foreign Sovereign Immunities Act of the United States nor corresponding legislation in other states addresses the issue of discovery against foreign states. . . . Discovery from a foreign state that is not a party to a proceeding has apparently not been attempted in international practice and is not provided for in either the FSIA or the corresponding laws of other states. Since sovereign immunity is the rule, and amenability to judicial process an exception to that rule, such discovery would seem to be precluded.

But this comment merely restates the rule noted above: foreign states are immune from “judicial process”, e.g., subpoenas. A letter rogatory is not process: it is a request to a foreign court.

I don’t feel competent to comment on the proper interpretation of the Ontario Evidence Act, but I wonder whether “court of competent jurisdiction” should be read so as to focus the inquiry on whether the US court had jurisdiction to adjudicate the dispute before it, not whether the US court had jurisdiction to issue the letter rogatory to the AECL.

Case of the Day: Third Point LLC v. Fenwick

H/T to Antonin I. Pribetic for bringing to light the case of the day, Third Point LLC v. Fenwick, 2011 ONSC 2068, an Ontario case on a letter rogatory from the New Jersey Superior Court seeking a summons for a deposition in Ontario. Canada is not a party to the Hague Evidence Convention, which is why resort to a letter rogatory was necessary.

The Ontario case does not spell out the facts of the underlying case in detail, but in short, Fenwick (who was not a party to the New Jersey case) was a securities analyst employed by Cormark Securities. He was the author or co-author of a document on Fairfax Financial Holdings Ltd., one of the companies he covered, which councluded that “Fairfax was likely to perform with its peer group.” The plaintiffs in the New Jersey case alleged that the defendants there “did their best to dissseminate false information so that they could profit when the price of the shares of Fairfax declined.” The plaintiffs claimed reputational damage. The defendants sought to depose Fenwick, because they believed that his analysis was inconsistent with Fairfax’s claims.

After referring to the relevant statutes (the Canada Evidence Act and the Ontario Evidence Act) and the general principles that the court has power to enforce a letter of request, that it will do so when possible for reasons of comity, and that the court will not enforce a letter of request if “contrary to public policy or otherwise prejudicial to the sovereignty or the citizens of Canada,” the court identified six relevant factors: (1) relevance of the evidence; (2) necessity of the evidence for trial; (3) whether the evidence is otherwise available; (4) public policy; and  (5) undue burden. Fortunately (from the perspective of U.S. lawyers if not of Canadian witnesses), the court held that it could grant the application even if the evidence was sought in the course of pre-trial discovery and not for use at trial. Even if the factors are satisfied, the court has discretion to deny to execute the letter rogatory or to limit its scope.

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