S.D.N.Y. Upholds Discovery of Non-U.S. Bank Branches, but Only after Hague Convention Procedures Are Utilized

S.D.N.Y. Upholds Discovery of Non-U.S. Bank Branches, but Only after Hague Convention Procedures Are Utilized

By:  Louis M. Solomon

Tiffany (NJ) LLC, et al. v. QI Andrew, et al., 10 Civ. 9471 (S.D.N.Y. July 2011)(Mag. J. Peck) [enhanced version available to lexis.com subscribers], addresses international discovery issues and can serve as a refresher of several of the areas that arise frequently in international litigation. Plaintiffs moved for an order compelling document production from three Chinese banks (the Bank of China, the Industrial and Commercial Bank of China, and China Merchants Bank). In denying the motion subject to future renewal, the Magistrate Judge ruled as follows:

First, because the branches of the banks are "branches of the same corporate entities as their counterparts in China", the Court found that it had personal jurisdiction over the banks, including the non-U.S. branches/offices.

Second, the Court applied the same standard to a Rule 45 subpoena as it would to a Rule 30 document request.

Third, the banks objected to producing documents at any branch or office outside the U.S. The Court rejected the argument; the governing standard of possession, custody, or control could be satisfied even though the documents reposed outside the U.S. The issue was whether there existed a "practical ability to obtain the documents". The Court rejected application of the "separate entity" line of cases given the facts before it, and there was no discussion in the decision of the fact that, under New York law, the "separate entity" rule dictates that each branch of a bank be treated as a separate entity for attachment purposes. See our blog posting of discussing the separate entity doctrine and Allied Maritime, Inc. v. Descatrade, S.A., 620 F.3d 70 (2d Cir. 2010) [enhanced version  / unenhanced version available from lexisONE Free Case Law] .

Fourth, the banks demonstrated that the production was prohibited (or at least suspect) under Chinese law. On that basis they argued that comity dictated denial of the requested discovery, at least until more deferential routes of obtaining the information were tried. Here the Court agreed. Specifically, the Court applied the five-part test of the Restatement (Third) of Foreign Relations Law § 442(1)(c) that it consider:

(1) the importance of the documents or information requested to the litigation; (2) the degree of specificity of the request; (3) whether the information originated in the United States; (4) the availability of alternative means of retrieving the information; and (5) the extent to which non-compliance with the request would undermine important interests of the United States, or compliance with the request would undermine the important interests of the state where the information is located.

Of particular note is the fact that the Court finds that pursuing the Hague Convention in China would not be futile, concluding that prior cases determining that such an avenue was futile were based on factual circumstances and on State Department views that might no longer obtain. The Court cited Societe Nationale Industrielle Aerospatiale v. United States District Court for the Southern District of Iowa, 482 U.S. 522 (1987) [enhanced version  / unenhanced version ], but did not discuss whether that case permitted it to ignore the Hague Convention entirely in performing the comity analysis, as we discuss in our e-book, International Practice: Topics and Trends.

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