The US court system provides the most complex, all-encompassing and thorough discovery processes of any jurisdiction in the world. The overwhelming majority of other nations' courts either completely prohibit the parties of civil court proceedings from excursions into the wealth of documents that are in the opponent’s possession or such expeditions are strictly limited. Instead of allowing requests, which can often be for millions of documents, courts outside of the U.S. grant requests only if they are relevant and if the requests specifically indentify those documents the party wishes to see. Broad US-style requests are generally rejected. This key difference between legal systems has driven international litigation strategies for decades.
However, nothing is more reliable than change. This year, the Seventh Circuit Court of Appeals in Chicago in the case of Heraeus Kulzer GmbH v. Biomet Inc1 introduced a new option into the landscape of international dispute resolution. The Seventh Circuit's new opinion has opened the door for parties litigating in non-US courts to use the U.S. federal court system for the purposes of obtaining discovery that is otherwise not available in courts outside the US.
The case started about two years ago in a German court when German based Heraeus filed a complaint against US headquartered Biomet for theft of trade secrets relating to medical device technology. At the same time as commencing in Germany, Heraeus made a tactical move into the US court system. Using 28 U.S.C. §1782, Heraeus petitioned the U.S. District Court for the Northern District of Indiana to conduct discovery of documents relating to the trade secrets which were expected to be in Biomet’s possession in the US. Heraeus was able to lodge such suit at the US court as Biomet’s corporate headquarters is located in Indiana, USA.
Biomet tried everything to stay out of discovery proceedings and argued, inter alia, that Heraeus could not properly invoke 28 U.S.C. §1782 because it was attempting to (i) harass Biomet, (ii) obtain discovery that would be unacceptable under the rules of the originating German court, (iii) bypass German law inappropriately and (iv) misuse discovery principles in order to impose an undue burden on Biomet. The U.S. District Court did not grant the requested opening of discovery procedures, but Heraeus appealed the decision. In its judgment, the Seventh Circuit Court of Appeals applied 28 U.S.C. §1782 differently and overturned the District Court's view on the basis of unreasonableness. As a consequence, Heraeus was finally granted discovery in accordance with the US Federal Rules of Civil Procedure.
The impact of the Seventh Circuit’s judgment on international dispute resolution could become significant. Armed with this case law, the option of seeking discovery in the US in order to gain additional evidence has the potential to become a sharp sword for any party involved in a cross-border lawsuit. The prospect of looking out for the “smoking gun” piece of evidence and/or to force the other party into a costly US discovery is very appealing, both from the standpoint of settlement negotiations or from a more general litigation strategy point of view.
The counter-argument in invoking 28 U.S.C. §1782, is that there is a requirement for the party in receipt of the discovery request to be residing in the US. In many cases this is a weak argument. In a more and more globalised world, it would be unusual if a commercial enterprise of a certain size would not (from a legal standpoint) reside one way or another (via subsidiaries, sister corporations, affiliates etc.) in the largest economy worldwide.