Lantheus Medical Imaging, Inc. v. Zurich Am. Ins. Co., No. 10-9371, 2012 U.S. Dist. LEXIS 3359 (S.D.N.Y. Jan. 11, 2012)

Plaintiff, a maker of radiopharmaceutical products, purchased an insurance policy from Defendant that provided coverage for, among other things, certain contingent business interruption losses.  Beginning in 2009, the Chalk River Laboratories Nuclear Reactor in Ontario, Canada—which produced a key isotope used in the manufacture of Plaintiff’s product—  was shut down for fifteen months after the reactor’s vessel suffered damage.  Plaintiff sought reimbursement from Defendant for business interruption losses it claimed to have suffered as a result of the shutdown.  Defendant rejected the claim and litigation ensued.

In seeking to prove that the reactor damage and resultant shutdown was a “covered peril” under the insurance policy, Plaintiff sought discovery—in the form of documents and deposition testimony—from non-party Atomic Energy of Canada Limited (“AECL”), the operator of the plant and a “Canadian Crown” corporation owned by the government of Canada.  Plaintiff moved for, and the district court ordered, the issuance of letters rogatory requesting the assistance of the Canadian courts in obtaining the documents and depositions.  At a subsequent hearing in Canada, however, the Ontario Superior Court of Justice dismissed Plaintiff’s application to enforce the letters rogatory, reasoning that it was not convinced that the district court had the power to issue the letters rogatory because the district court never considered whether the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. § 1602 et seq., applied to letters rogatory and, if it did, whether AECL enjoyed immunity under the FSIA.  Plaintiff then filed a second motion with the district court seeking amended letters rogatory and arguing that the FSIA did not apply to its request; AECL entered a special appearance as amicus curiae for the limited purpose of opposing the motion based on this threshold jurisdictional issue.

The FSIA shields foreign sovereign entities from the jurisdiction of U.S. federal and state courts unless one of the enumerated exceptions to the FSIA applies.  In advancing the claim that the FSIA applies to letters rogatory, AECL argued that, because it is a foreign sovereign, the FSIA would undoubtedly apply if AECL were present in the territorial jurisdiction of United States and Plaintiff were seeking to obtain discovery from AECL in the U.S. rather than in Canada.  AECL thus argued that it would be illogical if the district court could issue letters rogatory without considering the FSIA, since this would in effect give parties a greater right to obtain evidence from a non-party foreign sovereign located outside the court’s territorial jurisdiction than one located within.  The district court, however, disagreed with this analysis, agreeing instead with Plaintiff that issuance of the letters rogatory did not depend on whether the district court had jurisdiction under the FSIA. 

In reaching this conclusion, the district court considered the principles underlying letters rogatory versus those supporting traditional discovery devices such as subpoenas.  Letters rogatory, the district court reasoned, are non-binding: they are requests by a domestic court to a foreign court to order the taking of evidence from a certain witness.  Further, when U.S. courts issue and then transmit letters rogatory to foreign courts for enforcement, the foreign courts enforce the letters rogatory pursuant to local statute or common law.  The district court thus observed that both the issuance and enforcement of letters rogatory by U.S. courts rest entirely upon principles of comity, rather than jurisdiction.  By contrast, subpoenas issued to non-parties under Rule 45 of the Federal Rules of Civil Procedure are mandatory: they cannot be enforced unless the U.S. court has jurisdiction over the non-party to whom they are issued.  In the case of non-party foreign sovereigns, this means jurisdiction pursuant to one of the exceptions in the FSIA.

Applying those principals to the case at hand, the district court found that because it does not have the authority to compel compliance with letters rogatory, it may issue letters rogatory regardless of whether it has jurisdiction over the non-party from whom discovery is sought.  By extension, the district court concluded that the FSIA—which it described as a statute “outlining the scope and applicability of jurisdiction over foreign sovereigns”— is not relevant to a motion for letters rogatory.  Accordingly, after finding that considerations of comity weighed in favor of issuing the letters rogatory, the district court granted Plaintiff’s motion.

As an alternative basis for its decision, the district court found that it could exercise jurisdiction over AECL because AECL’s activities in operating the nuclear reactor and supplying raw materials to parties in the United States (including Plaintiff) fell within the “commercial activities” exception to the FSIA.  Therefore, the district court determined that it could issue the letters rogatory even if the FSIA applied.