US Chapter 11 Filing Opens the Door To Discovery of Otherwise Unavailable Records – Mass Tort
A US bankruptcy court in Delaware ruled that an overseas company that files for chapter 11 in the US will be subject to discovery regardless of the law of its home country. This ruling could be big in some particular mass tort situations since it might make available myriad corporate records that would not otherwise be available.
Here is a Mayer Brown article on the ruling. The key excerpts from the article are as follows:
“In a decision that highlights the uncertain terrain faced by US litigants involved in overseas discovery, the United States Bankruptcy Court for the District of Delaware held on October 28 that the Federal Rules of Civil Procedure trump a French “Blocking Statute” that restricts discovery. The Blocking Statute, French Penal Code Law No. 80-538, imposes criminal penalties on any French national or corporation that engages in discovery under a foreign judicial system without using the procedures of the Hague Evidence Convention–letters rogatory or letters of commission. In In re Global Power Equipment Group, Inc., No. 06-11045, 2009 WL 3464212 (Bankr. D. Del. Oct. 28, 2009), the court ordered a claimant in the Global Power bankruptcy proceeding, Maasvlakte Energie B.V., to produce documents and personnel for depositions from its French affiliate. It ordered production even though Maasvlakte had claimed, belatedly, that this discovery would violate the French Blocking Statute and expose its affiliate to prosecution in France.
In response to the bankruptcy plan administrator’s discovery requests, Maasvlakte initially agreed to produce documents and witnesses, and identified its affiliate’s French documents as likely to be relevant, without mentioning the Blocking Statute. Maasvlakte first raised the French Blocking Statute only three days before it was scheduled to produce documents, arguing that the statute required the administrator to follow Hague Convention procedures to obtain discovery in France. After the administrator moved to compel Maasvlakte to produce the documents and deponents, the court rejected Maasvlakte‘s position. It held that the Blocking Statute did not prevent it from applying the Federal Rules, and it ordered Maasvlakte to produce the documents and witnesses.
The court emphasized the fact that when Maasvlakte filed its bankruptcy claim it had submitted to the court’s jurisdiction, and that using the Hague Evidence Convention procedures would slow resolution of the claim. The court held that considerations of comity established by the Supreme Court in Société Nationale Industrielle Aérospatiale v. United States Dist. Court for S.D. Iowa, 482 U.S. 522 (1987), weighed in favor of application of the Federal Rules, particularly in light of the fact that the subject matter of the disputed claim was centered in the Netherlands, rather than in France.”
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