LEWIS A. KAPLAN, District Judge.
This is another of the increasingly frequent applications pursuant to Section 1782 of the Judicial Code
In this case, the applicant is Porsche Automobil Holding SE ("Porsche" or "PSE"), the well known automobile company. It has been sued in a number of cases in Germany that claim, generally speaking, that Porsche made misrepresentations and engaged in market manipulation in connection with its 2008 investment in Volkswagen, AG ("VW"), another equally well known auto firm. What appears to have sparked Porsche's attempt to secure evidence under Section 1782 is the fact that at least some of the German plaintiffs seek to establish a so-called "model case" under the German Capital Markets Model Case Act ("KapMuG") — a mechanism that, if established by the German courts, would designate one or more of the cases against Porsche as a vehicle, a "model case," in which issues of fact and law common to all affected cases would be decided only in the model case, with binding effect on all others. And the nettle to be grasped here is that Porsche contends in the German litigation that some or all of the cases against it are time barred, in substance because the plaintiffs in those cases or their close affiliates knew or could have known of their claims against Porsche but failed to sue within the period prescribed by German law.
Porsche has advanced that defense in Germany already. Thus far, the German court has indicated that Porsche, in order to prevail on its untimeliness defense, will "have to name the exact [press] article [known to each plaintiff], list the information [it contained] and . . . also . . . establish that the party in question, whose knowledge counts in the case, had known about this press release or could have taken note of it."
Here, subpoenas issued pursuant to leave granted by the Part I judge under Section 1782 and have been served.
As a general matter, the Supreme Court and the Second Circuit have made clear that district courts are to take a hospitable view of applications to compel the production of evidence by persons found or residing in the United States for use in foreign litigation. That hospitality derives from Congress's desire to make the United States a helpful world citizen and, moreover, in the hope of obtaining similar receptivity abroad to efforts by litigants in American courts to obtain evidence located in other countries.
In this case, all parties agree that Porsche has satisfied all of the statutory prerequisites to relief under Section 1782. Whether and to what extent it should be permitted to obtain the requested evidence therefore is committed to the discretion of this Court. Having considered the exceptionally helpful papers and arguments submitted by both sides, the Court modifies the subpoenas somewhat to reduce any burden that compliance otherwise might impose, grants Porsche's cross-motion to compel compliance with the subpoenas as modified, and denies the motion to quash.
In a formal sense, the parties to this proceeding are Porsche, which obtained leave from this Court to serve subpoenas on eight entities, and the eight subpoena recipients ("Subpoena Recipients" or "Recipients").
The Subpoena Recipients all have their principal places of business in the Southern District of New York.
In addition to the Subpoena Recipients, the motion to quash is brought also by nine additional entities that are not located within this district.
For the purposes of this opinion, the entities moving to quash Porsche's subpoenas
The German Action
Porsche seeks evidence in aid of a proceeding currently pending in the German Regional Court of Hanover and entitled Effecten-Spiegel, et al. v. Porsche Automobil Holding SE, Dkt. No. 18 O 175/15 ("Effecten"). Effecten is one of several German cases pending against Porsche in which investors in the securities of VW seek to recover for losses they claim they suffered due to alleged misrepresentations and market manipulation by Porsche concerning Porsche's investment in VW and related derivatives in 2008.
Effecten was brought by thirty-two large investor plaintiffs (the "German Plaintiffs") in early 2015.
On July 31, 2015, Porsche filed a statement of defense in Effecten asserting, inter alia, that Germany's three-year statute of limitations barred the German Plaintiffs' claims.
On November 24, 2015, the German Plaintiffs filed a response to Porsche's defenses, including its limitations defense, and supplemented their "model case" application.
The German court held a hearing on December 8, 2015 at which several issues were discussed, including PSE's motion "to dismiss the action" and the German Plaintiffs' application for "model case" treatment.
The German court concluded the December 8, 2015 hearing by establishing April 13, 2016 as the date "for the announcement of the decision on remaining matters."
The German Plaintiffs are due to make a final submission to the German court on February 29, 2015. Porsche is due to make its final submission to the German court on March 15, 2016. According to Porsche's German counsel, its submission may focus (at least in part) on its limitations defense, particularly if Porsche can bolster its argument with evidence — obtained through this Section 1782 proceeding — demonstrating when specific plaintiffs knew or could have known about their potential claims against Porsche.
The KapMuG Statute
The KapMuG statute
The KapMuG Application Stage
In a case that falls within the scope of the KapMuG,
If such an application is granted, the court of first instance must publish its determination and the establishment of a KapMuG Complaint Registry in the German Federal Gazette.
Here, the German Plaintiffs have moved for model case treatment under the KapMuG, and PSE has opposed that motion. The motion is pending before the German court and, as noted, is expected to be resolved on April 13, 2016, and no later than May 8, 2016.
The Determination of Common Questions
If the ten-case threshold is met, the court of first instance issues an order referring the common questions to the competent court of appeals for a determination of common questions.
Application of the Model Case Ruling
After the model case ruling is issued, the individual cases — which are stayed during the second stage — are resumed in the courts of first instance. The courts of first instance must apply the model case ruling to each individual case and adjudicate all remaining individual issues.
The Section 1782 Proceeding
On December 23, 2015, Porsche filed ex parte applications in this Court and in the District of Connecticut for evidence in aid of the Effecten action pursuant to Section 1782. This Court granted the ex parte application on December 29, 2015, permitting Porsche to serve document and deposition subpoenas on eight Recipients, and Porsche served the subpoenas on December 30 and 31, 2015.
Porsche seeks to aid its limitations defense in Effecten by requesting documents and deposition testimony here that may establish when plaintiffs knew of specific press releases or other public information that alerted, or could have alerted, them to their potential claims. Specifically, Porsche seeks to obtain documents from the Subpoena Recipients that fall into four categories and to take depositions of the Subpoena Recipients pursuant to Federal Rule of Civil Procedure 30(b)(6) on five topics.
Documents and communications concerning:
Porsche has limited its deposition requests to one Rule 30(b)(6) deposition per Recipient "family," that is, Firefly, Marble Arch, and Tremblant.
Movants now move to quash the subpoenas, and Porsche moves to compel compliance on an expedited basis.
In Mees v. Buiter,
Here, all agree that the three statutory factors are met. The Movants, however, argue that the four discretionary factors under Intel Corporation v. Advanced Micro Devices, Inc.
The Discretionary Intel Factors
Factor 1: Are Subpoena Recipients "Participants" in the German Proceeding?
Movants contend that the Subpoena Recipients all are "participants" in the foreign proceeding and that this factor cuts in their favor. Specifically, they argue that because one Subpoena Recipient is a plaintiff in Effecten and the others are general partners or investment managers of German Plaintiffs, all eight Subpoena Recipients are directly or indirectly within the jurisdictional reach of the German court, which could order production of the evidence sought if it saw fit. Porsche counters that the German court has jurisdiction only over parties to the German action and that it cannot order production of evidence from non-party Recipients, even if they are related to German Plaintiffs. Porsche argues further that the analysis would come to the same conclusion even if all Recipients were within the German court's jurisdictional reach because the first Intel factor is concerned primarily with whether the evidence sought is available in the foreign proceeding, which it is not. In Germany, as in many civil law countries, Porsche argues, courts can order document production only when documents are described in great detail, and may question a witness only when a party makes a detailed and convincing showing of the need for the court to elicit testimony from a particular witness within its power.
It is important to note that, in Germany, as in most civil law countries, the gathering of evidence is the province of the judge, not the lawyers as is the case in the United States.
Porsche's statement of the law concerning the first Intel factor — that the relevant inquiry is whether the foreign tribunal has the ability to control the evidence sought and order production, not whether the tribunal has control over the party targeted by the Section 1782 application — is supported by the weight of authority in this district. For example, in In re Application of Auto-Guadeloupe Investissement S.A.,
Here, although there is some quibbling among the experts about the availability in the German court of the documents and testimony sought here, there is little question that it cannot and, in any case, would not order the type (and scope) of evidentiary production sought by Porsche in this Court. Indeed, Movants' counsel conceded during oral argument that Porsche would have to "specify with considerable precision the particular documents [it] want[s]" in order to get document production in Germany.
To be sure, Movants argue that Porsche may be able to obtain from the German Plaintiffs documents relating to its limitations defense at some point in the German action because Germany requires some disclosure.
Finally, Movants' contention that "Porsche has failed to demonstrate that it cannot establish its limitations defense without § 1782 assistance"
Accordingly, the first Intel factor cuts in favor of Porsche.
Factor 2: Would the German Court Be Receptive to U.S. Federal Court Judicial Assistance?
The law on this factor is clear: "District courts have been instructed to tread lightly and heed only clear statements by foreign tribunals" that they would reject Section 1782 assistance.
Here, Movants have submitted no evidence that a German court would object to evidence obtained through a Section 1782 proceeding. Porsche, moreover, has provided evidence that German courts have been receptive to such evidence in the past.
Factor 3: Is Porsche Seeking to Circumvent Foreign Proof-Gathering Restrictions?
Movants complain that Porsche never attempted to obtain the evidence it seeks in the German court. But that argument is unpersuasive. The Supreme Court and the Second Circuit have made clear that the third Intel factor does not turn on whether the evidence sought in the U.S. proceeding would be available in the foreign proceeding. Indeed, "§ 1782 contains no foreign-discoverability requirement."
Accordingly, the third Intel factor cuts in favor of Porsche.
Factor 4: Are the Subpoenas Unduly Intrusive and Burdensome?
"[A] district court evaluating a § 1782 discovery request should assess whether the discovery sought is overbroad or unduly burdensome by applying the familiar standards of Rule 26 of the Federal Rules of Civil Procedure."
Here, Porsche seeks documents and deposition testimony principally on four topics that, it contends, could yield evidence concerning when the US Plaintiffs knew or could have known that they had potential claims against Porsche relating to Porsche's investment in VW in 2008.
The evidence sought here is relevant because each topic "`bears on, or reasonably could lead to other matter that could bear on'" Porsche's limitations defense.
The Movants have the burden to "justify curtailing" the relevant evidence sought by Porsche.
First, Movants' argument that the evidence Porsche seeks is not proportional to the needs of the case because Porsche can seek this evidence through procedures in the German court is without merit for the reasons stated earlier in this opinion.
Second, Movants' contention that documents responsive to Topics (1) and (2) would be overbroad because Porsche seeks documents "whenever dated" is rejected. Porsche has agreed to limit the early date boundary to October 26, 2008 — the date of Porsche's alleged misstatement concerning its intent to acquire VW shares — and the outer date boundary to March 2, 2015 — the filing date of Effecten.
Third, the Court rejects Movants' arguments that document requests and deposition testimony concerning Topics (3) and (4) implicate privileged material. Porsche has asserted that it seeks only non-privileged materials on these topics, as well as non-privileged information concerning otherwise privileged communications, such as the names of the persons sending and receiving communications, and the dates, locations, and general subject matter of communications.
Fourth, Movants' argue that Rule 30(b)(6) depositions on Topic (2) would be overbroad because they would seek testimony concerning PSE's "financial condition." Porsche counters that it seeks only evidence relating to "Respondents' knowledge of, or communications about PSE's financial condition vis-a-vis its investments in VW securities."
Fifth, Movants contend that Porsche's request for expedited document production and deposition testimony is "unfounded and [would be] unduly burdensome." But they have made no real showing of undue burden apart, perhaps, with respect to the short timetable which is dealt with below.
Nonetheless, the Court encourages the parties to meet and confer in an effort to trim any remaining fat off these subpoena requests. In particular, the parties are encouraged strongly to discuss narrowing custodians and search terms for retrieval of electronically stored information where possible. Indeed, Porsche has indicated its willingness to meet and confer "as soon as possible."
Finally, the Court modifies Topics (1) and (2) as follows:
Document Request (1)
Document Request (2)
Movants remaining arguments are rejected as meritless.
In the last analysis, both the uncontested statutory factors and the discretionary Intel factors weigh in favor of granting Porsche access to the evidence it seeks in this Section 1782 proceeding, as modified by this opinion.
Movants argue that the Court should require Porsche, as a matter of reciprocity, to produce certain documents sought by the German Plaintiffs in Effecten in the event the Court enforces Porsche's subpoenas.
Here, Porsche seeks evidence concerning when US Plaintiffs became aware of certain information that alerted them, or could have alerted them to their claims in Effecten. By contrast, the so-called reciprocal evidence Movants seek from Porsche does not, and, indeed, could not bear on when plaintiffs became aware of any information, nor could it unearth novel theories relevant to Porsche's limitations defense. Movants' counsel conceded this point during oral argument.
Porsche argues that it needs this evidence quickly so that it has time to review any new information and incorporate it into its March 15, 2016 "final submission." Porsche offers two explanations for how this evidence may benefit it in Effecten. First, it may persuade the German court to dismiss Effecten as to the US Plaintiffs on limitations grounds as part of its April 13, 2016 (or perhaps slightly later) decision. Second, it may persuade the German court to deny the "model case" application as to the US Plaintiffs, the German Plaintiffs, or to similarly-situated plaintiffs in other German actions.
The German court last discussed Porsche's limitations defense during the December 8, 2015 hearing, where it explained that Porsche could establish the defense only if it could demonstrate when specific information concerning PSE that could have alerted certain German Plaintiffs to their claims came to their attention. The German court did not foreclose the limitations defense, but stated that the defense had not been established at that time.
The official minutes to the December 8 hearing announce that the German court set April 13, 2016 as the date "for the announcement of the decision on remaining matters."
During oral argument, the Court noted that if a model case is formed in Germany, Effecten would be stayed for its duration, after which Porsche would have a full opportunity to litigate its limitations defense. It then inquired whether Porsche would suffer any harm or prejudice if its Section 1782 application were granted but production were not required on an expedited basis. Porsche explained, however, that if it does not get the expedited schedule it seeks, it may have a sizeable exposure on its balance sheet based on time-barred claims for years while the model case plays out, and that this exposure could affect the company's securities price and cost of capital, among other things, materially. Moreover, it contended that evidence bearing on its limitations defense could influence the German court's decision whether to grant the model case application.
Porsche's first argument intuitively seems correct, although it would be a mistake to give it undue weight. Large enterprises often have to live with large contingent exposures while claims wend their ways through the courts.
The second argument is more difficult to analyze. The KapMuG statute directs a German court to deny a model case application when, as relevant here, (1) "[a] decision on the dispute upon which the application for the establishment of a model case is based is not dependent on the claimed establishment objective," or (2) "[t]he significance of the case for other legal disputes is not demonstrated." There are at least two ways to read these provisions. This analysis might be based only on alleged common issues, i.e., whether common issues sufficiently similar among model case applicants and similarly situated parties, irrespective of any individual issues, justify litigating those common issues in a model case. Alternatively, the statute might be read to call for an inquiry similar to a predominance inquiry under Federal Rule of Civil Procedure 23, i.e., whether individual issues predominate over common issues to such an extent that a model case is not warranted. Porsche advocates the second interpretation, arguing that it would benefit from submitting evidence demonstrating that individual issues, such as statute of limitations inquiries, would predominate over common issues.
Both readings seem plausible. Based on the statutory language and the limited English language commentary, it perhaps is more likely than not that the German court would take the first view, in which case individual timeliness issues would be irrelevant.
Accordingly, Porsche has demonstrated a need for an expedited production and deposition schedule, and its request is granted, as detailed below. The Court understands this is a tight schedule. Movants, however, should bear in mind that Porsche is seeking only three depositions and that Porsche's document requests have been somewhat narrowed. Moreover, Movants have known since December 2015 that this outcome was possible. To be sure, they have moved to quash, but it was relatively evident from precedent in this circuit generous to Section 1782 applicants that there was a reasonable chance they would have to produce documents and prepare witnesses on a short timetable. In any event, as noted above, the parties are encouraged to meet and confer and the Court is ready to pitch in and get this process done in a practical way.
Porsche's motion to compel compliance [DI 40] is granted insofar as:
Porsche's motion is denied in all other respects.
Movants' motion to vacate the Section 1782 order and quash the subpoenas [DI 36] is denied in all other respects.