Vringo, Inc. v. ZTE Corp., 14-cv-4988 (S.D.N.Y. Aug. 12, 2015); ZTE Corp. v. Vringo, Inc., 15-cv-0986 (S.D.N.Y. Aug. 12, 2015) [click for opinion]

Two federal civil lawsuits stemming from a worldwide patent dispute over telecommunications equipment between Vringo, Inc. and Vringo Infrastructure Inc. (collectively “Vringo”) and ZTE Corporation and ZTE USA Inc. (collectively “ZTE”) were consolidated before the U.S. District Court for the Southern District of New York (“SDNY”) for the purposes of discovery.

ZTE, one of China’s largest smartphone manufacturers, is headquartered in Shenzhen, China. Vringo sought to depose a ZTE executive and chief counsel, Mr. Guo. When ZTE stalled, Vringo moved to compel Mr. Guo’s deposition and sought a determination that all ZTE witnesses would be deposed in New York. ZTE argued that Mr. Guo’s connection with the case was tangential and that his travel to the U.S. would be unnecessarily disruptive to ZTE and adversely affect its affairs. The court ordered that ZTE witnesses would be deposed in New York, but deferred ruling on whether Mr. Guo would be deposed until the other ZTE witnesses testified.

Subsequently, Vringo asserted that document production indicated Mr. Guo’s heavy involvement with key issues, and that questions had arisen about whether Mr. Guo’s hard drive had been included in previous ZTE production efforts. Therefore, Vringo filed a second motion to compel Mr. Guo’s deposition in New York and to direct a full search and production of Mr. Guo’s documents. Unsupported by any affidavit or substantiating evidence, ZTE again opposed deposition in New York on grounds that traveling to the U.S. was disruptive both for Mr. Guo personally and for ZTE’s affairs; it also argued that depositions normally are taken where personnel reside and that Mr. Guo did not have “unique knowledge” of any pertinent facts. The court granted Vringo’s motion, reasoning that the depositions should take place in New York to permit immediate resolution of disputes during the deposition, and since ZTE, as a plaintiff in one of the lawsuits, had chosen to litigate in the forum.

ZTE, represented by new counsel, then moved to modify the court’s order so as to allow the deposition of Mr. Guo to take place outside the United States. In support of this request, ZTE’s counsel submitted a declaration disclosing, for the first time, the existence of a federal criminal investigation of ZTE for alleged export control violations and expressing concern that Mr. Guo would be questioned or detained were he to enter the United States. The declaration stated that several ZTE employees had been temporarily detained and searched upon entry to the United States in connection with the investigation, and that there was no way to know whether sealed indictments or arrest warrants existed for Mr. Guo.

First noting that ZTE did not cite any legal authority in support of its request, the court considered and rejected SDNY Local Civil Rule 6.3 and Federal Rule of Civil Procedure 54(b) as legal bases for reconsideration. Relief under Rule 6.3 was not available because the facts of the criminal investigation were well known to ZTE yet not put before the Court on the underlying motion. Relief under Rule 54(b), which gives the Court the power to revise interlocutory orders if necessary, was also not appropriate since ZTE had not demonstrated that a revision was needed because of an intervening change of controlling law, new evidence, or to correct a clear error or prevent manifest injustice. The court also found that, given ZTE’s lack of candor in causing the parties to litigate two motions to compel without ever informing the Court of the criminal investigation, ZTE was not entitled to a favorable exercise of discretion. Therefore, the motion was denied on the ground that relief was not available nor warranted under Rules 6.3 or 54(b).

The court went on to hold that, even if the court were to reconsider its order de novo on the merits, it would still require Mr. Guo to be deposed in New York. The court cited a line of cases holding that the pendency of criminal charges against a deposition witness was not an appropriate factor for a court to consider in determining the location of a deposition in a civil case. A contrary rule, the court considered, would cause the court to aid the witness in avoiding apprehension on U.S. charges. Here, though, it was unnecessary for the court to reach a categorical view on the issue, because there was no evidence of any actual pending indictments or arrest warrants for Mr. Guo. Moreover, a deposition outside of the U.S. would be a poor substitute for a deposition within the forum where Mr. Guo would be subject to the court’s contempt powers, since the litigation history indicated a strong likelihood that the deposition of Mr. Guo would be rife with disputes that might need to be resolved and enforced quickly.

Laura Zimmerman of the New York office contributed to this summary.