Stephen J. Pollak of Goodwin | Procter LLP 22-11
PRACTICAL ISSUES IN DISCOVERY RESPECTING
ANTITRUST CLAIMS AGAINST FOREIGN FIRMS AND CARTELS:
A SPECIAL MASTER’S PERSPECTIVE
The Vitamins Antitrust Litigation is a perfect vehicle for examining practical issues arising in discovery respecting antitrust claims against foreign firms and cartels. This litigation, initiated as a class action in 1998, addressed claims of massive and long-running international conspiracies among foreign manufacturers of bulk vitamins and their UnitedStates subsidiaries to fix prices, allocate market shares, and commit other unlawful practices designed to inflate prices for these products sold to plaintiffs and other purchasers in the United States and elsewhere. Indicative of the scope of the activities at issue, certain of the defendants had pled guilty or agreed to plead guilty to violating Section1 of the Sherman Act, and as part of those pleas, two had agreed to pay, respectively, $500million and $225million, the largest and second-largest fines ever paid in an antitrust investigation for conspiracy to fix the price and allocate sales of products sold in the UnitedStates.[1]
The Joint Panel on Multi-District Litigation consolidated the cases for coordinated pretrial discovery in the United States District Court for the District of Columbia, and on or about July 7, 1999, assigned them to Judge Thomas F. Hogan. On March 1, 2000, Judge Hogan, noting that I had been serving as Special Master on appointment by District Judge Paul L. Friedman, to whom the cases had originally been assigned, continued my appointment and defined my role as follows:
“2. Any disagreements among the parties regarding the scope, relevance or reasonableness of any discovery request, the adequacy of any response or answer thereto, or any other disputes relating to discovery shall be resolved, in the first instance, by the Master. Appeals from a decision of the Master concerning any discovery matter may be taken to this Court, provided that any such appeal shall be filed within 10 days of the date of the Master’s decision.
“3. The Master shall also hear and resolve such other matters as the Court shall refer as well as any other matters that the parties consent to bring before him, including mediation or facilitation of settlement negotiations if the parties so desire.”[2]
The litigation was a clash of titans, guaranteeing that the parties would be ably represented and that all issues, discovery disputes included, would be pursued with zeal. The cast of characters on both sides of the “v” read like a who’s who of national and international commerce. In addition to an extensive class of littler guys, opt-out plaintiffs included food and animal feed producer and processor giants – Cargill, Coca-Cola, Kellogg, Tyson Foods, Archer Daniels Midland, Quaker Oats, General Mills, Kraft Foods, and ConAgra, to name only a few. Defendants included world-renown foreign corporations of immense size and power and their UnitedStates subsidiaries, including, to name only the mightiest, F. Hoffmann-LaRoche Ltd. andLonzaAG of Switzerland; Rhone-Poulenc S.A. of France; BASF AG and Merck KGaA of Germany; UCB S.A. of Belgium; Eisai Co., Ltd.,Takeda Chemical Industries, Ltd., and Daiichi Pharmaceutical Co., Ltd. of Japan; and Bioproducts, Inc. of Canada.
All discovery disputes were presented first to the Special Master. After briefingand oral argument, I issued a written Report and Recommendations (“R&R”) that, if not appealed to the District Court, became the law of the case. All told, I issued 31 R&Rs, the first on August 20, 1999, and the last, so far – a portion of the litigation continues in the U.S. District Court for the District of Columbia – on May 15, 2003. Most of my rulings were appealed to the Court, which set short time limits for briefing and limited the parties’ briefs to new matters not briefed to the Special Master. Most, but not all, of my recommendations were affirmed by Chief Judge Hogan, generally with a full Memorandum Opinion explaining his reasoning.[3]
In my view, it would have been difficult for the Court to manage the consolidated cases without the assistance of a special master. The discovery issues, impacted by the presence of foreign defendants and the international locus of their activities, were too many, too complex, and too ardently disputed by the parties.[4] A single motion could generate hundreds of pages of briefs, scores of factual exhibits, and many affidavits of experts expressing differing views as to the meaning of foreign laws and procedures. Even when my recommendations were appealed, my reports identified the major issues, summarized the parties’ arguments, and presented recommendations as to how each issue should be resolved and the reasons therefor. This, along with the parties’ arguments for and against the Master’s recommendations, provided a solid platform on which the Court could assess the merits of the disputes.
The intensity and scope of the litigation is illustrated by some numbers. As of July12, 2006, the Court’s docket included 4,836 entries. Commencing in June 2000, the parties arranged with Verilaw Technologies, Inc. (now LexisNexis) for electronic service of all filings. Through October 2003, 9,645 distinct documents had been served on Verilaw.[5] Instantaneous service on the hundreds of interested parties, which was available through Verilaw, greatly facilitated the litigation.
The parties presented many significant issues respecting discovery. For discussion here, I have selected two that may arise in other antitrust litigations involving foreign corporations. First, a word about the procedures I followed in addressing the issues presented to me. Once a discovery motion had been fully briefed, I would study the filings – motions, briefs, exhibits, affidavits, and expert reports – as well as the key cases cited, noting questions I wanted to pose to the parties at oral argument. Next, I would arrange a telephone conference with counsel at which we would identify a mutually convenient date for a hearing on the motion. In the course of those conferences, I would identify particular issues or subjects I hoped counsel would address in the course of their arguments at the hearing. Hearings generally took place in Chief Judge Hogan’s courtroom, where I sat on the bench but did not wear a robe; I listened to the arguments presented; and if questions I had noted in reading the briefs and other filings remained unanswered, I posed them to counsel. I wanted all the help counsel could provide, for I knew that in writing my report I would want to evaluate and respond to each contention.
Following argument, I would review the briefs and supporting papers and the hearing transcript, study the relevant cases, and prepare the R&R. My outline was generally simple. After an introduction identifying the issue and summarizing my recommendations, I would set forth the relevant background facts. Then, I would summarize the contentions of the parties, generally proceeding chronologically through the briefs, with references to the hearing where arguments and responses to questions went beyond the briefs. Finally, I would identify and explain my conclusions and recommendations respecting the contentions advanced by the parties. As the Court’s agent, I endeavored to respond expressly to each contention and the cases cited so that the parties and Chief Judge Hogan would know in detail what I had recommended, why, and on what authority.[6]
In short, that’s what I tried to do. I received my report card from Chief Judge Hogan whenever there was an appeal.
1. Is Personal Jurisdiction Discovery Governed by the Hague Convention or the Federal Rules of Civil Procedure?
I turn now to the first, and possibly the toughest, of the issues the parties presented – whether discovery to establish personal jurisdiction over foreign defendants must proceed in accordance with the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters or under the Federal Rules of Civil Procedure;[7] and if mandatory resort tothe Hague procedures is not required, what test is to be applied for determining which rules govern. The Supreme Court had addressed these very issues in 1987 in Société Nationale Industrielle Aérospatiale v. UnitedStates District Court for the Southern District of Iowa, 482 U.S. 522, with one major difference: there, personal jurisdiction over the defendants had been established.[8]
The state of play when this issue arose was as follows: Foreign defendants moved to dismiss plaintiffs’ complaints for lack of personal jurisdiction. Plaintiffs then served on each of the defendants broadly drawn Rule 30(b)(6) deposition notices, document requests, and interrogatories seeking facts they said they needed to establish the court’s jurisdiction over the defendants. Defendants filed objections and responses. Plaintiffs filed joint motions to compel responses, and eight foreign defendants moved for protective orders. The parties filed extensive briefs supported by affidavits of experts in the laws of France, Germany and Switzerland, each a signatory to the Hague Convention, who analyzed whether resort to the Hague procedures would prove effective under those laws and reviewed the sovereign interests at stake.[9]
This was quite a mouthful on which to cut my teeth as a special master. As Chief Judge Hogan stated in his opinion denying defendants’ Rule 53 objections to my recommendations respecting use of the Hague Convention:
“This is an issue of first impression in our jurisdiction; in fact, not only is there no guidance from the Supreme Court or the United States Court of Appeals for the District of Columbia Circuit on theapplication of Aérospatiale to jurisdictional discovery, there is no caselaw from any circuit court on this issue.”[10]
The Supreme Court’s decision in Aérospatiale framed the issue but did not resolve it. The Court did decide whether discovery from a foreign defendant over whom the trial court had undisputed personal jurisdiction must proceed under the Hague Convention’s procedures rather than the Federal Rules of Civil Procedure. It held that the Hague procedures were not mandatory but exhorted trial courts “supervising pretrial proceedings * * * [to] exercise special vigilance to protect foreign litigants from the danger that unnecessary, or unduly burdensome, discovery may place them in a disadvantageous position.” Aérospatiale, 482 U.S. at 546. Instead of setting forth bright-line rules for determining whether the Hague procedures orthe Federal Rules should apply to merits discovery, the Supreme Court left the decision to the trial courts which, it indicated, should consider “the particular facts, sovereign interests, and likelihood that resort to [the Hague Convention’s] procedures will prove effective.” Id. at 544 (emphasis added).
Thus, the first question I addressed was whether plaintiffs’ discovery to establish personal jurisdiction must proceed under the Hague Convention and only subsequently under the Federal Rules in the event the Hague procedures proved ineffective. If I concluded that first resort to the Hague procedures was required, that would end the matter. Otherwise, I would have to decide whether to apply the three-prong test of Aérospatiale (or some other standard) to the facts and circumstances of the Vitamins Antitrust Litigation to determine whether jurisdictional discovery offoreign defendants in France, Germany and Switzerland should be governed by the Hague Convention or Federal Rules.
These were issues one might think had come up repeatedly and been decided in thoughtful opinions by well-informed courts. I always think that and am often, as here, disappointed. The parties cited me to five decisions. Knight v. Ford Motor Co., from a NewJersey Superior Court,[11] and Jenco v. Martech Int’l, Inc., from the Eastern District of Louisiana,[12] favored defendants’ position but offered no meaningful analysis. Rich v. KIS California, Inc., from the Middle District of North Carolina,[13] and two other decisions, Fishel v. BASF Group[14] and In re Bedford Computer Corp.,[15] citing Rich, allowed discovery strictly related to jurisdictional issues to proceed under the Federal Rules. I found Knight and Jenco distinguishable, Rich and Fishel better reasoned, and concluded that application of the three-prong Aérospatiale test would satisfy the Supreme Court’s admonition that federal courts should be vigilant to protect foreign litigants.[16] Were the Court to disagree and recognize a general rule requiring first use of Hague, I recommended an exception for these foreign defendants whose “assertion[s] of lack of personal jurisdiction,” the District Court had already found, were “highly suspect in light of the representations made by [them] to the government” in guilty pleas to criminal antitrust violations and, in the case of one defendant, an agreement for immunity under the Department of Justice’s corporate leniency program.[17]
I proceeded to apply the three-prong test of Aérospatiale to the particular circumstances at issue, recognizing that the foreign defendants, as proponents of the Hague procedures, had the burden of establishing the need for, and effectiveness of, those procedures.[18] I recall taking all the briefs, exhibits, and affidavits of foreign law experts with me to the celebration of my mother’s 95th birthday at a lakeside resort in Rhinelander, Wisconsin. I stole time from the festivities to familiarize myself with what proceeding under the Hague would mean for discovery of defendants in France, Germany, and Switzerland.
The first prong of Aérospatiale required analysis of the particular facts at hand. The parties identified two significant sets of facts to be addressed. Defendants pointed to the breadth and burden of the discovery requests and plaintiffs to the criminal pleas and leniency agreement entered into by seven of the eight foreign defendants contesting the jurisdictional discovery. As to breadth and burden, the devil was in the details. The cited cases were less helpful because they did not identify in full the requests at issue so that I might make accurate and reliable comparisons with those at issue before me. While extended negotiations between the parties had narrowed the discovery, it was clear to me “that even the narrowed discovery will impose a significant burden.”[19] On the other hand, I found that, with further narrowing, which I detailed request-by-request in an appendix to the R&R, the discovery was targeted at obtaining facts relevant to establishing personal jurisdiction over the foreign defendants and was “not so severe or inordinate as to require first use of the Hague Convention.”[20]
It seemed to me that burden and intrusiveness were not the only facts to be addressed under the first prong of Aérospatiale. That all but one of the defendants contesting thediscovery had either pled guilty to criminal antitrust violations paralleling those in the complaints or entered into a leniency agreement with the United States lent support to proceeding under the Federal Rules. “The solicitousness on discovery matters ordinarily warranted for foreign defendants is,” I concluded, “reasonably diminished when it comes to defendants who have admitted to violating United States criminal antitrust laws.”[21]