COURT OF APPEALS FOR THE SEVENTH CIRCUIT, DECISION OF 24 JANUARY 2011, HERAEUS KULZER GMBH V. BIOMET, INC., NOS.09-2858 AND 10-2639

American-style discovery is available to “any interested person” for use in a foreign or international tribunal under 28 U.S.C. § 1782. A foreign litigant may obtain the same breadth of discovery as it could if the lawsuit had been brought in the U.S. – from both its opponent and non-parties.

Heraeus Kulzer, a German producer of bone cement, sued Biomet in a German court for theft of trade secrets.

Biomet had launched its own competing product soon after acquiring 100% ownership of a joint venture which may have been in possession of Heraeus’ bone cement trade secrets. Heraeus alleged that Biomet improperly used the trade secrets to rapidly develop its new product.

Under 28 U.S.C. § 1782, a district court can order Americanstyle discovery “for use in a proceeding in a foreign or international tribunal,” including depositions and the production of documents and things. Heraeus sought discovery from Biomet’s affiliates in the United States via § 1782. Permission to issue a subpoena was granted but the subpoena was later quashed due to Biomet’s objections. On appeal, the Seventh Circuit reversed and remanded.

The Seventh Circuit explained that Congress enacted § 1782 to set “an example to encourage foreign countries to enlarge discovery rights in their own legal systems.” It confirmed that “a party to litigation in a foreign country can seek discovery relating to that litigation in a federal district court, and, in the discretion of that court [...] can obtain as much discovery as it could if the lawsuit had been brought in that court rather than abroad.”

The court acknowledged several potential abuses that could warrant denial of an application for discovery under § 1782:

(a) harassment of the opponent (e.g., seeking discovery that the party could obtain in the foreign jurisdiction, or seeking material that would be inadmissible in the foreign court);  

(b) seeking broad discovery to overwhelm the foreign court with evidence that would be inadmissible in an American court;  

(c) seeking discovery that the foreign court would disapprove of as imposing undue expense;  

(d) attempting to circumvent agreements between the parties (e.g., forum-selection clauses that indicate the parties’ preference for a jurisdiction with limited or no discovery); or

(e) attempting to improperly “combine the substantive law of a foreign country with the expansive discovery opportunities available in the United States.”

However, the court found none of those abuses present.

The court did note that Biomet could have asked the German court to limit U.S. discovery if Biomet was concerned about Heraeus abusing § 1782. In addition, Biomet’s concern about the lack of discovery “reciprocity” could be addressed by requesting the U.S. district court to condition discovery on Heraeus’ consent to similar discovery.

Since the threshold requirements of 28 U.S.C. § 1782 had been met, the Seventh Circuit ruled that Heraeus’ discovery requests are simply governed by the Federal Rules of Civil Procedure – as they would be in any other U.S. federal case.

On remand, the district court ordered Biomet to provide extensive document discovery.