By Mike Hamilton, J.D.
As I discussed in my last post, Cross-Border E-Discovery – A choice between two lesser evils?, the complexity of e-discovery heightens when discovery cuts across borders. In these situations, legal teams are often forced to decide between obeying United States’ discovery rules or complying with foreign data privacy and protection laws. A third option exists. The doctrine of international comity, domestic courts giving deference to foreign law, enables U.S. courts to excuse the discovery of data located in foreign countries. To determine if this doctrine is appropriate, courts will conduct a fact-based analysis using the popular five-factor balancing test established in Aerospatiale v. United States (482 U.S. 522). Like last week’s post, the analysis of In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation (E.D.N.Y. Aug. 27, 2010), Linde v. Arab Bank, PLC (E.D.N.Y May 22, 2009) provides another prime example of how U.S. courts will apply the Aerospatiale test. In Linde, the U.S. court declined to compel a third party to produce documents located in Israel after concluding that the benefits of the document production did not justify violating Israeli law.
Stemming from attacks in Israel and throughout the Middle East, the defendant, Arab Bank, motioned the U.S. court to compel the plaintiff, Linde, to produce information, including foreign documents held by a third-party Israeli parent bank, which would may have proved the defendant processed transactions for terrorist fronted organizations. The Israeli third-party parent bank complied with the court’s Rule 45 subpoena but objected to production of electronically stored information (ESI) located in Israel, claiming that Israeli bank secrecy laws superseded U.S. discovery rules under the doctrine of international comity.
Under Aerospatiale’s balancing test, courts consider five factors when deciding if international comity applies:
- (1) The importance to the litigation of the information electronically stored information located in Israel
- (2) The specificity of the request
- (3) Whether the information originated in the United States
- (4) Whether alternative means exist to obtain the information
- (5) Whether the interests of the United States outweigh the interests of the foreign jurisdictions in maintaining confidentiality.
The party opposing discovery of foreign ESI bears the burden of proof on these factors. In Linde, the court ruled that the third-party Israeli bank met this burden. In its ruling, the court cited the existence of alternative avenues for the defendant to identify the same information without compelling discovery from Israel. Also, the court noted that complying with the discovery request would cause undue hardship to the third-party Israeli bank and undermine Israeli privacy concerns. Israeli secrecy laws prohibit disclosing transactional and customer account information to third parties. Parties that violate these Israeli laws face civil and criminal charges, including in some cases imprisonment.
THE E-DISCOVERY BEAT’S TAKE
As evidenced from Linde, U.S. courts are willing to defer to foreign data privacy and protection laws. The real problem arises when legal teams don’t proactively leverage protections, like the doctrine of international comity. As soon as it is known that discovery may involve ESI stored abroad, legal teams should make it their first priority to understand what data privacy or protection laws apply and how they might affect their e-discovery obligations in the U.S. In some instances, it may be useful, even necessary, to involve local foreign attorneys or experts who can provide counsel on how foreign privacy laws may conflict with U.S. discovery rules.
Furthermore, legal teams need to raise these foreign discovery issues with the court and opposing counsel at the outset of the case. It will demonstrate a proactive response, which judges always appreciate, and may invoke a more favorable reaction from the court when it comes to deciding whether to compel production of foreign-based ESI.
To learn more about cross-border e-discovery and how to address these emerging challenges, view Exterro’s recently-aired, educational webcast titled, “Cross-Border E-Discovery Beyond the EU: Recent Developments, Practical Advice” here.
Mike Hamilton, J.D. is a Sr. E-Discovery Analyst at Exterro, Inc., focusing on educating Exterro customers, prospects and industry experts on how to solve e-discovery issues proactively with technology. His e-discovery knowledge, legal acumen and practical experience give him a valuable perspective on bridging the gap between IT and legal teams. You can find him on Google+, Twitter and Linkedin.