Discovery is a large source of anxiety for companies facing litigation in the U.S., and costs can be astronomical if poorly managed. Kirkland & Ellis partner Atif Khawaja, in Part II of his two-part series examining challenges facing foreign companies in U.S. litigation, focuses on the discovery process and laws.
Any party to U.S. litigation, whether foreign or domestic, will be expected to provide discovery, the pre-trial collection and exchange of evidence. Foreign companies in U.S. litigation are subject to U.S. discovery laws and laws in their home country, making “threading the needle” of compliance even tougher.
Each party to a lawsuit is required to disclose the evidence that it intends to use at trial. To that end, each party can make “discovery requests” of every other party and even non-parties. That means that your litigation opponents can make you search your own files for evidence that might favor their case, and vice versa.
To the extent that a company’s data is competitively sensitive or confidential for other reasons, it is typical for courts to enter protective orders prohibiting public disclosure of that information.
The definition of what might be considered evidence is broad. It includes not just paper documents and easily-available computer files, but also email and, increasingly, text messages and other electronic communications.
Further, parties can compel the depositions of each other’s officers, directors, and employees—i.e., taking pre-trial, sworn testimony from them outside the presence of a judge. Parties are also entitled to serve written questions on each other, and responses must be certified by the person responding.
The costs of compliance with U.S. discovery can be astronomical if poorly managed, particularly where there is a large amount of electronic data of potential relevance. Having that said, there are areas in which a skilled practitioner can add value.
First, courts may impose presumptive limits on the scale and scope of discovery, such as the number of individuals from whom to collect evidence. Fighting to apply those limits to your case is essential.
Second, there is often an opportunity at the outset of a case for the parties to agree to restrictions on the scope of discovery. Particularly where both sides have voluminous data, it is often in everyone’s interest to agree on reasonable bounds. But once a case has progressed, and one party senses a tactical advantage in prolonged discovery, the window to reach an agreement is usually closed.
Discovery for Non-Parties
Your company can also be ordered to disclose documents and data if it possesses evidence that is relevant to someone else’s litigation (“third-party discovery”). The broad discovery laws of the United States often permit parties to litigation to seek relevant evidence from non-parties, and courts can compel the cooperation of any company—litigation party or not—that is subject to their jurisdiction.
If your company is subject to the jurisdiction of U.S. courts, any third-party discovery will normally be requested by a subpoena. It is important that the recipient of a subpoena understand its rights and work closely with a lawyer in strategizing a response. A recipient of a subpoena has the right to appear in court and contest any improper requests.
If your company is not subject to the jurisdiction of any U.S. court, there are still scenarios in which it could be compelled to provide evidence for a U.S. proceeding. The U.S. is party to the Hague Convention on the Taking of Evidence, along with approximately 60 other countries. The Convention provides a mechanism for U.S. litigants to compel production of evidence from abroad. That said, any request under the Convention is subject to the law of the receiving country—many of which do not permit broad, American-style discovery.
Conflicts of Law
To further complicate matters, companies situated abroad may have to comply with local laws that are in tension, or direct conflict, with U.S. discovery obligations.
A recent and much talked-about example is the European Union’s General Data Protection Regulation, which limits the dissemination of data about individuals in the interest of protecting their privacy. In short, some of what the European Union might restrict from disclosure are, here, subject to disclosure.
Companies subject to both sets of laws will need to thread the needle in order to ensure that they are in compliance.
As discussed above, emails are considered “fair game” in U.S. discovery, and emails sent through company accounts are typically considered property of the company and not property of the individual senders and recipients. This may contrast with data privacy regimes in other countries, where “personal” information must be redacted from disclosure regardless of whether the email account belonged to the company.
Foreign firms facing the risk of litigation in the United States—or involvement in someone else’s litigation—must understand what, if any, obligations they have when it comes to turning over potential evidence. Discovery obligations in the United States are strictly enforced and are often broader than one imagines.
Foreign firms face the additional hurdle of ensuring that they remain in compliance with any data protection laws that other jurisdictions may apply to them. These challenges require a thorough understanding of cross-border litigation and development of a comprehensive discovery strategy early in the case.
Atif Khawaja is a partner at Kirkland & Ellis in New York. He has broad experience litigating major disputes across a variety of industries. He regularly advises foreign corporations on matters of U.S. law and litigation strategy, and he has extensive experience litigating cross-border disputes in U.S. courts.