Euromepa S.A. v. R. Esmerian, Inc.

• Decision Date: 20 March 1995
• Docket Number: D,No. 606,606
• Citation: 51 F.3d 1095
• Parties: In the matter of the Application of EUROMEPA S.A., formerly known as P.N.C. S.A.; successor in interest of Mepa France, S.A. and Allied Insurance & Reinsurance Company, Petitioner-Appellants, v. R. ESMERIAN, INC., Respondent-Appellee. ocket 94-7523.
• Court: U.S. Court of Appeals — Second Circuit

Page 1095

51 F.3d 1095

In the matter of the Application of EUROMEPA S.A., formerly known as P.N.C. S.A.; successor in interest of Mepa France, S.A. and Allied Insurance &amp Reinsurance Company Petitioner-Appellants, v. R. ESMERIAN, INC., Respondent-Appellee.

No. 606, Docket 94-7523.

United States Court of Appeals, Second Circuit.

Argued Nov. 22, 1994.

Decided March 20, 1995.

Constantino P. Suriano, Jeffrey C. Crawford, Mound Cotton and Wollan, New York City, for appellants.

Barton Legum, Merideth M. Brown, Carl Micarelli, Debevoise & Plimpton, New York City, for appellee.

Before: OAKES, JACOBS and CALABRESI, Circuit Judges.

CALABRESI, Circuit Judge:

This case raises the question of the degree to which federal district courts, in deciding whether to order discovery under 28 U.S.C. Sec. 1782(a) in aid of a foreign litigation, should delve into the mysteries of foreign law.

BACKGROUND

Euromepa, S.A., a French insurance brokerage firm, and Allied Insurance and Reinsurance Company, an affiliated underwriter of commercial risk coverage (hereinafter collectively referred to as "MEPA") appeal from the judgment of the United States District Court for the Southern District of New York After a trial, the Tribunal de Commerce de Nanterre, France found MEPA liable to Esmerian for $10,127,500. MEPA has appealed the judgment to the Cour d'Appel de Versailles (the "French Court of Appeal"), which will hear and consider new evidence--not introduced at trial--as part of the French appellate process. In aid of its French appeal, MEPA sought deposition and document discovery from Esmerian under section 1782.

(Duffy, J.), denying their petition for court-ordered discovery pursuant to 28 U.S.C. Sec. 1782(a). ¹ See Application of Euromepa, S.A., 155 F.R.D. 80 (S.D.N.Y.1994). MEPA requested that the district court direct Ralph Esmerian, Inc., a New York jewelry designer, to produce both witnesses for deposition and documents for use in a pending French litigation. The underlying dispute involves a claim that MEPA breached its duty as an insurance agent by failing to inform its insured, Esmerian's intermediary jewelry dealer, that a proposed gem courier was untrustworthy. MEPA's misrepresentations regarding the courier's honesty induced Esmerian's intermediary to cancel its employee "infidelity" coverage. Inevitably, the courier absconded with $26 million of Esmerian's gems.

After reviewing the parties's conflicting submissions on French procedural law, the district court concluded that

the elected representatives of France have, as a matter of policy, determined that pre-trial discovery and use of evidence is controlled by the court and not by the parties.... Granting this petition would undeniably infringe on the power that the French legislature has bestowed on its courts. MEPA, instead of the French Court, would control the process by which any evidence was obtained and submitted. Such a decision would be contrary to the policy formulated and instituted by the French Legislature.

Id. at 83. Exercising the discretion to withhold discovery assistance provided by section 1782, see 28 U.S.C. Sec. 1782 (the district court "may order" discovery) (emphasis added), Judge Duffy denied MEPA's petition.

We review the district court's decision for abuse of discretion. See In re Malev Hungarian Airlines, 964 F.2d 97, 99 (2d Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 179, 121 L.Ed.2d 125 (1992). But to say that a district court may or may not, in its discretion, order discovery, does not mean that it is free to do so on inappropriate grounds. In this case, we conclude that the district court misapplied our guiding precedents, and misperceived the extent to which it should construe foreign law in deciding whether to order discovery. We therefore reverse the district court's judgment and remand the case for further consideration.

DISCUSSION

I.

We have previously instructed the district courts in this Circuit to evaluate discovery requests under section 1782 in light of the statute's "twin aims of providing efficient means of assistance to participants in international litigation in our federal courts and encouraging foreign countries by example to provide similar means of assistance to our courts...." Malev, 964 F.2d at 100. We have also noted that Congress purposefully engineered section 1782 as " 'a one-way street. It grants wide assistance to others, but demands nothing in return.' " Id. at 101 (quoting Amram, The Proposed International Convention on the Service of Documents Abroad, 51 A.B.A.J. 650, 651 (1965)); see also John Deere Ltd. v. Sperry Corp., 754 F.2d 132, 135 (3d Cir.1985) (section 1782 "does not require reciprocity as a predicate to the grant of a discovery order").

Relying on the plain language of the statute, this Court has also refused to engraft a "quasi-exhaustion requirement" onto section 1782 that would force litigants to seek "information through the foreign or international tribunal" before requesting discovery from the district court. Malev, 964 F.2d at 100. By the same reasoning, we have also rejected "any implicit requirement that any evidence sought in the United States be discoverable under the laws of the foreign country." In re Application of Aldunate, 3 F.3d 54, 59 (2d Cir.) ("If Congress had intended to impose such a sweeping restriction on the district court's discretion, at a time when it was enacting liberalizing amendments to the statute, it would have included the statutory language to that effect."), cert. denied, --- U.S. ----, 114 S.Ct. 443, 126 L.Ed.2d 376 (1993). Instead, we held that the discoverability of requested material under foreign law is simply one factor that a district judge may consider in the exercise his or her discretion. See id. at 60.

In this case, the district court denied MEPA's discovery request after conducting an analysis that runs counter to the principles set forth in Malev, Aldunate, John Deere, Ltd. and, we believe, in the statute itself. To start, the district judge noted that "a mechanism was available for MEPA to seek [specific] documents while in French courts," and then remarked disapprovingly that "MEPA failed to even attempt to use the mechanism provided by French procedure for obtaining documents." Euromepa, 155 F.R.D. at 83. In essence, this criticism faults MEPA for having failed to exhaust its discovery options in France before seeking assistance in this country, and thus embodies the "extra-statutory barrier[ ] to obtaining discovery" that we explicitly rejected in Malev. 964 F.2d at 100.

Recognizing Malev 's "non-exhaustion" rule, the district court sought to bypass it by linking MEPA's failure to exhaust its French discovery options to an additional factor that the court believed weighed against granting MEPA's request. Judge Duffy concluded that "MEPA's failure to seek production of documents and witnesses through the French courts cannot be disregarded when considering 'the nature and attitudes' of France toward discovery." Euromepa, 155 F.R.D. at 83 (quoting S.Rep. No. 1580, 88th Cong., 2d Sess. (1964), reprinted in 1964 U.S.C.C.A.N. 3782, 3788 [hereinafter "Senate Report "]. On its face, this consideration seems to be just another way of examining whether the evidence that MEPA seeks in the United States is ultimately discoverable under French law. And linking an impermissible factor (lack of exhaustion) to a factor whose relevance we have held to be quite limited under the statute (lack of discoverability) cannot suffice to justify a denial of discovery.

The district court, however, sought to distinguish its inquiry into the "attitudes" of the French towards discovery from a discoverability analysis by stating that

[w]hether the evidence MEPA seeks would be discoverable in France or not is unknown and irrelevant to me. My decision is based on the determination that granting this petition would be an unwarranted intrusion into France's system of evidence gathering.

Euromepa, 155 F.R.D. at 84 n. 2. We take this to mean that the court below was not so much concerned with whether comparable discovery exists under French law, but with whether France would in some sense be offended by our grant of discovery and, therefore, view it as an "unwarranted intrusion."

There is some support for this distinction. In Aldunate, we acknowledged "that in appropriate cases a determination of discoverability under the laws of the foreign jurisdiction is a useful tool in [a district judge's] exercise of discretion under section 1782." 3 F.3d at 60. That appeal involved a section 1782 petition filed in aid of a Chilean incompetency hearing. The district court granted the petition, concluding that the requested discovery "would not be an affront to the Chilean court or the Chilean sovereignty" because "allowing the depositions to proceed would actually assist the Chilean court in its on-going proceedings." Id. at 61. On review, we took note that "the district court did not make a finding as to the parties' ability to obtain pre-trial discovery under Chilean law," but we did not consider this problematic. Rather, we approved the discovery order The present case requires us to consider the appropriate scope of this "inquiry" into the likelihood that providing section 1782 discovery assistance to foreign litigants will offend a foreign tribunal.

because the district court "clearly made an inquiry into whether its grant of discovery under section 1782 would circumvent Chilean restrictions on discovery and whether its grant of discovery would be an affront to the Chilean court or Chilean sovereignty." Id.

II.

We do not believe that an extensive examination of foreign law regarding the existence and extent of discovery in the forum country is desirable in order to ascertain the attitudes of foreign nations to outside discovery assistance. For, as a chief architect of section 1782's current version recently stated:

[the statute's] drafters realized that...