In a development that should be of great interest to all lawyers
and companies – foreign and domestic – involved
in litigation in the United States, a recent Ninth Circuit decision
confirmed that the risks associated with bringing
foreign-originating evidence into the U.S. – even for
what is believed to be a limited purpose – are very real
and could result in that evidence being subpoenaed for use in a
criminal investigation. On 7 December the Court of Appeals for the
Ninth Circuit ordered several law firms acting for defendants in
the Liquid Crystal Display (LCD) civil class action to turn over
documents produced in that litigation to a grand jury charged with
reviewing the defendants' behavior for potential criminal
liability stemming from the same underlying events. The Court found
that documents that would otherwise fall outside the grand
jury's subpoena authority must be produced if "by a chance
of litigation, the documents have been moved from outside the grasp
of the grand jury to within its grasp. No authority forbids the
government from closing its grip on what lies within the
jurisdiction of the grand jury." The risk is not limited to
defendants in antitrust cases; the same rationale would seem to
apply to any situation in which related civil and criminal matters
temporally overlap. Foreign defendants could be required to produce
foreign documents under risk of sanctions in a civil suit, knowing
that the government could then subpoena those same
otherwise-undiscoverable documents for use in a criminal
investigation.
In 2006, the Department of Justice Antitrust Division (DOJ),
through a grand jury in the Northern District of California, began
investigating anti-competitive activity in the LCD market and
numerous related civil cases were filed and consolidated in the
Northern District of California. DOJ moved to stay discovery in the
civil cases, arguing, among other things, that because discovery in
civil cases is broader than criminal discovery, there was a risk
that the parties would gain access to sensitive information about
the grand jury investigation through civil discovery. The District
Court granted a partial stay, but allowed some civil discovery to
take place. Permitted discovery included production of some
foreign-originating documents and evidence (including transcripts
of depositions taken outside the U.S.). These documents were
produced pursuant to a protective order limiting their use to the
civil proceedings.
In an interesting twist that highlights DOJ's aggressive
posture toward criminal antitrust investigations, the grand jury
then subpoenaed those non-privileged civil discovery documents from
the law firms representing defendants in the civil cases, arguing
that the foreign evidence was now within the grand jury's
jurisdiction. This type of foreign evidence would generally be
accessible to the grand jury only through cumbersome and often only
moderately effective diplomatic legal channels such as letters
rogatory or international agreements (e.g., Mutual Legal Assistance
Treaties). The law firms moved to quash the subpoenas, citing the
protective order in the civil matter.
The precise question faced by the district court was whether the
grand jury could subpoena the foreign-based documents of an
unindicted foreign defendant that would "otherwise be outside
the geographic scope of its subpoena power, but that are located in
the United States by virtue of the civil discovery in a related MDL
proceeding." The Honorable Susan Illston found that the
motions to quash the subpoenas "raise[d] novel issues with
potentially far-reaching implications about the power of the grand
jury and the relationship between grand jury proceedings and civil
discovery of unindicted foreign defendants." Finding no
helpful precedent on this issue, The Honorable Illston took the
conservative approach by quashing the subpoenas and inviting DOJ to
appeal to the Ninth Circuit, saying it was "prudent to allow
the appellate process to establish such precedent if
appropriate." DOJ accepted The Honorable Illston's
invitation to appeal, and the Ninth Circuit provided the guidance
The Honorable Illston requested, finding that in the absence of bad
faith on the government's part or collusion between government
and private counsel in parallel cases, the per se rule that a grand
jury subpoena trumps a civil protective order as to non-privileged
evidence dictates that the subpoenas be enforced.
At a minimum, all U.S. counsel, including in-house counsel, must continue to carefully assess whether possessing or producing foreign evidence in the U.S. under any circumstances may expose that evidence to being subpoenaed in a criminal investigation. Foreign lawyers and companies must understand that foreign-originating non-privileged documents sent to U.S. counsel are vulnerable to being subpoenaed for use in a criminal investigation. In the LCD case, for example, one of the foreign defendants was indicted earlier this year and it appears that case is headed for trial – a trial that may after this decision include foreign evidence DOJ may not otherwise have been able to access.
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