In a development that should be of great interest to all lawyers and companies involved in litigation in the United States, a recent Ninth Circuit decision confirmed that the risks associated with bringing foreign-originating evidence into the United States – even for what is believed to be a limited purpose – are very real and could result in that evidence being subpoenaed for use in a criminal investigation.
On December 7 2010 the US Court of Appeals for the Ninth Circuit ordered several law firms acting for defendants in the liquid crystal display (LCD) civil class action to turn over documents produced in that litigation to a grand jury charged with reviewing the defendants' behaviour for potential criminal liability stemming from the same underlying events. The court found that documents that would otherwise fall outside the grand jury's subpoena authority must be produced if:
"by a chance of litigation, the documents have been moved from outside the grasp of the grand jury to within its grasp. No authority forbids the government from closing its grip on what lies within the jurisdiction of the grand jury."
The risk is not limited to defendants in antitrust cases; the same rationale would seem to apply to any situation in which related civil and criminal matters temporally overlap. Foreign defendants could be required to produce foreign documents under risk of penalties in a civil suit, knowing that the government could then subpoena those same otherwise-undiscoverable documents for use in a criminal investigation.
In 2006 the Department of Justice Antitrust Division, through a grand jury in the Northern District of California, began investigating anti-competitive activity in the LCD market; numerous related civil cases were filed and consolidated in the Northern District of California. The division moved to stay discovery in the civil cases, arguing, among other things, that because discovery in civil cases is broader than criminal discovery, there was a risk that the parties would gain access to sensitive information about the grand jury investigation through civil discovery. The district court granted a partial stay, but allowed some civil discovery to take place. Permitted discovery included production of some foreign-originating documents and evidence (including transcripts of depositions taken outside the United States). These documents were produced pursuant to a protective order limiting their use to the civil proceedings.
In an interesting twist that highlights the department's aggressive posture toward criminal antitrust investigations, the grand jury then subpoenaed those non-privileged civil discovery documents from the law firms representing defendants in the civil cases, arguing that the foreign evidence was now within the grand jury's jurisdiction. This type of foreign evidence would generally be accessible to the grand jury only through cumbersome and often only moderately effective diplomatic legal channels, such as letters rogatory or international agreements (eg, mutual legal assistance treaties). The law firms moved to quash the subpoenas, citing the protective order in the civil matter.
The precise question faced by the district court was whether the grand jury could subpoena the foreign-based documents of an unindicted foreign defendant that would "otherwise be outside the geographic scope of its subpoena power, but that are located in the United States by virtue of the civil discovery in a related [multi-district litigation] proceeding". The Honourable Susan Illston found that the motions to quash the subpoenas:
"raise[d] novel issues with potentially far-reaching implications about the power of the grand jury and the relationship between grand jury proceedings and civil discovery of unindicted foreign defendants."
Finding no helpful precedent on this issue, Illston took the conservative approach by quashing the subpoenas and inviting the department to appeal to the Ninth Circuit, saying that it was "prudent to allow the appellate process to establish such precedent if appropriate". The department accepted Illston's invitation to appeal, and the Ninth Circuit provided the guidance that she requested, finding that in the absence of bad faith on the government's part or collusion between government and private counsel in parallel cases, the per se rule that a grand jury subpoena trumps a civil protective order as to non-privileged evidence dictates that the subpoenas be enforced.
At minimum, all US counsel, including in-house counsel, must continue to assess carefully whether possessing or producing foreign evidence in the United States under any circumstances may expose that evidence to being subpoenaed in a criminal investigation. Foreign lawyers and companies must understand that foreign-originating non-privileged documents sent to US counsel are vulnerable to being subpoenaed for use in a criminal investigation. In the LCD case, for example, one of the foreign defendants was indicted earlier in 2010 and it appears that case is heading for trial – a trial that, after this decision, may include foreign evidence that the department would otherwise have been unable to access.
For further information on this topic please contact Megan Dixon at Hogan Lovells US LLP's San Francisco office by telephone (1 415 374 2300), fax (1 415 374 2499) or email firstname.lastname@example.org). Alternatively, please contact Janet L McDavid or Peter Spivack at Hogan Lovells US LLP's Washington DC office by telephone (+1 202 637 5600), fax (+1 202 637 5910) or email (email@example.com or firstname.lastname@example.org).
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