The case of the day is Lombard-Knight v. Rainstorm Pictures, Inc. (Cal. Ct. App. 2015). Rainstorm was a California movie production company. It entered into two investment agreements with Fortnom & Co. SA, under which Fortnom was required to provide $300 million upon Rainstorm’s delivery to it of performance bonds. It turned out, according to the court, that “Fortnom was never formed and did not exist as a separate legal entity at the time the agreements were executed.” Oops! Both contracts were signed on Fortnom’s behalf by Anthony Lombard-Knight. Both agreements had arbitration clauses, and both contained the following provisions:
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The case of the day is CTI Systems, SA v. Herr Industrial, Inc. (E.D. Pa. 2015). CTI, a Luxembourg company, contracted with Herr, a Pennsylvania corporation, for supplies and labor in connection with a “painting installation” in Kansas. The contract amount was $5.2 million, and the contract had Luxembourg choice of law and choice of forum clauses. According to the allegations in the complaint, Herr failed to complete the work required by the contract, and CTI overpaid Herr.
In 2014, CTI sued Herr in the District Court of Luxembourg, seeking to recover the alleged overpayment. Herr was served with process but did not appear. The Luxembourg court entered a default judgment for nearly $400,000. CTI then sued in the Eastern District of Pennsylvania, seeking recognition and enforcement of the judgment.
In between the date of the Luxembourg judgment and the date when CTI sued on the judgment, Herr sued CTI in the District of Kansas, alleging that it was still owed money under the contract. The suit alleged a violation of the Kansas Fairness in Private Construction Contracts Act (the KFPCCA), which requires all payment disputes concerning Kansas construction contracts to be brought in Kansas courts. Herr served process on CTI before CTI filed its suit for recognition and enforcement.
The issue before the Pennsylvania court was whether to dismiss CTI’s claim on the grounds that the Kansas suit was the first-filed suit.
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The case of the day is Via Vadis Controlling GmbH v. Skype, Inc. (D. Del. 2013). Via Vadis is the exclusive licensee of a European patent, and it sued Skye Software S.A.R.L. for infringement in Germany. Via Vadis also applied to a Luxembourg court for an Ordonnance permitting court-appointed experts to search Skype Software’s offices in Luxembourg. The experts executed the Ordonnance but did not recover source code that Via Vadis thought important to its infringement case. Via Vadis then sued Skype Software in Luxembourg for infringement of the same patent.
In parallel US litigation, the judge in Delaware permitted Via Vadis to discovery relevant portions of Skype’s source code, subject to a protective order. Via Vadis then moved for issuance of a subpoena under § 1782 to allow it to obtain the source code for use in the foreign proceedings. Skype was a party to the foreign cases, which weighs against the application. The judge found that Via Vadis had shown that the German courts would be receptive to the evidence, which weighs for the application. They keys to the decision seem to be the judge’s views on circumvention of foreign proof-gathering restrictions and undue burden.
The judge recognized that under Intel information need not be discoverable under the foreign law in order to be discoverable under § 1782. But he went on to say:
This court declines, especially in the absence of any request from the foreign courts, to help Via Vaid overcome the rules and procedures of the foreign courts. Despite their jurisdiction over SkypeS, the foreign courts have not forced SkypeS to produce the requested materials. Discovery under § 1782 would be, in essence, a circumvention of the foreign courts’ rules and enforcement procedures.
On this point, the judge is an outlier, and despite his protestations, he clearly appears to be confusing discoverability with circumvention. There are many decisions that reach the opposite conclusion, and those decisions are better-reasoned insofar as they take into account the difference between civil law systems and our system. A German court does not decide not to order production of source code. That kind of pre-trial discovery is simply not part of what happens in Germany, for the most part.
The judge was not on stronger footing when he pointed to the burdensomeness of the production. Because the materials had already been gathered and produced in the US parallel case, there would seem to be no burden involved in producing it again. The judge noted that the US protective order specifically prohibited disclosure of the source code in connection with the foreign proceedings; but that is precisely why the § 1782 application was appropriate.