E-Discovery in Cross-Border Litigation: The “Blocking Statute Defense”

May 25, 2016Articles The E-Discovery Blog

Foreign parties litigating cases in the United States do not always play by the same discovery rules as their domestic counterparts. Sometimes, they invoke their country’s so-called blocking statute—designed to frustrate American discovery—to resist a discovery request for data stored outside of the United States.

Turning foreign data over in the normal course, foreign parties’ arguments go, violates the blocking statute, exposing them to criminal and civil penalties in their home country. And because ESI is typically voluminous and permanent, the risk of violating a blocking statute in producing ESI may dwarf that of producing less voluminous, impermanent, paper-form data.

The U.S. Supreme Court, however, has empowered U.S. courts to order production of data housed in a foreign country despite a blocking statute. See Société Nationale Industrielle Aérospatiale v. U.S. Dist. Ct. for the S. Dist. of Iowa, 482 U.S. 522 (1987). U.S. courts perform “comity analysis” in deciding whether to exercise that power. Id. at 542, 544 n.28. Most do so according to the five-factor test of the Restatement (Third) of the Law of Foreign Relations § 442. Among other considerations, the test analyzes the importance of the data to the litigation and balances the foreign nation’s interests against those of the United States.

But how can the foreign party provide the data’s contents to the court for comity analysis without violating the blocking statute it invoked in the first place? And how is a court to perform comity analysis without access to the data’s contents?

This problem of known unknowns was recently confronted by the court on a motion to compel employee personnel files—triggering Germany’s blocking statute—in In re Xarelto (Rivaroxaban) Products Liability Litigation, MDL No. 2592, 2016 WL 2855221 (E.D. La. May 16, 2016). Comity considerations, the court observed, are “difficult to weigh” without “the material at issue.” Id. at *5. Although the court noted that review of such material “would be best conducted” through in camera review, it acknowledged the review “may itself constitute a violation[.]” Id.

Still, the court refrained from both blindly ordering production of foreign discovery and denying the discovery outright. Explaining that an “American court should employ all of the tools at its disposal before treading on the laws and policies of a foreign nation,” the court ordered the foreign parties to prepare a privacy log for its review. Id. at *5.

This “alternative” mode of review allows a court to assess the foreign state’s interest in specific data requested. See In re Xarelto, 2016 W 2855221 at *5. A foreign state has less interest in protecting data showing that “Employee A started a carpooling program,” for example, than it does in showing that “Employee B took a leave of absence for a health issue.” Id. A privacy log which “adequately describe[s] the document without disclosing its contents” allows the court to reasonably differentiate among documents. See id. (emphasis added).

The court in In re Xarelto demonstrated that courts will neither mechanically defer to a blocking statute nor order production of potentially protected data outright. They must first have “some conception of the type or nature of the material at issue” before fashioning an order. Id. To that end, parties on both sides of a discovery battle involving a “blocking statute defense” should expect the court to explore all available ways of determining the nature of data and documents for full comity analysis. If necessary, a privacy log will serve that end.