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International Law

: International Asset Recovery Law Blog

The 7th Circuit Illustrates When U.S. Discovery Can Be Obtained For A Foreign Proceeding

By Rick Rein

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The 7th Circuit this week in Heraeus Kulzer, GMBH v. Biomet, Inc, 2011 WL 198117 (7th Cir. 2011), amplified when a foreign party is entitled to pursue discovery under 28 U.S.C. Section 1782 for use in a foreign proceeding.

There, a German company, Heracus Kulzer, sued Biomet and its affiliates for theft of trade secrets in a German court in 2008 and one month later applied to the federal district court where Biomet's corporate family has its headquarters to be permitted by section 1782 to conduct discovery of materials in Biomet's possession. The 7th Circuit noted that discovery is unobtainable in the German legal system in the same broad way as under Rule 26 of the Federal Rules of Civil Procedure and a party to a German lawsuit cannot demand categories of documents from his opponent. Instead, a request must specifically identify a document. As a result, the Court also noted that this discovery was undeniably important to prove misappropriation.

Once a section 1782 applicant demonstrates a need for extensive discovery for aid in a foreign lawsuit, the 7th Circuit found that the burden shifts to the opposing litigant to demonstrate that allowing the discovery sought would disserve the statutory objectives. The Court decided that there was no abuse to warrant denial of the application for discovery. There was no indication that the German court would refuse to admit evidence obtained through U.S. discovery nor that the discovery requests if allowed by a German court would impose an undue burden on Biomet. Biomet had time to ask the German court to bar the U.S. discovery or could have asked the district court to condition discovery on reciprocal discovery from Heraeus. Biomet did not do either. The section 1782 should have been permitted.

The 7th Circuit further decided that the district court erred in its application of Rule 26 as to the scope of discovery sought. A court cannot merely turn down a request without requiring the parties to negotiate a limitation to discovery to eliminate excessive burdens. "(T)he district court can and should cut down its request, but not to nothing, as it did. That is unreasonable." Biomet refused to lay an empirical foundation for its contention of undue burden. Consequently, the district court must consider the discovery demands under Rule 26 as it would in any other complex case.

Full post as published by International Asset Recovery Law Blog on January 26, 2011 (boomark / email).