Recovering Fees and Expenses For U.S. Discovery Compliance in Foreign Litigation – Improbable Even When Possible

Under 28 USC Section 1782, parties involved (or expected to become involved) in foreign litigation are authorized to seek discovery in the United States for use in foreign litigation. Specifically, under § 1782, a foreign litigant may apply directly to any U.S. district court where the person or entity with information relevant to the foreign litigation is located or can be found, and that court may not do so. can be ordered to discover

If discovery is granted (which is usually the case), the party providing the discovery typically bears the costs of providing it. As with any discovery in the United States, compliance costs are considered “normal costs of doing business” and are generally not passed on to the party seeking discovery.

However, Rule 45(d)(2)(B) allows non-parties to pass on the costs of discovery compliance in certain circumstances, such as when certain orders result in “substantial costs.” I’m here.convincing manufacture or inspection. However, despite the fee transfer mechanism for nonparties, courts have granted a very limited number of requests for recovery of fees and costs of compliance in § 1782 proceedings under Rule 45. rice field. Reasonable and supported by impartial considerations. However, in the broader context of Rule 45, courts generally limit or deny claims for fees and costs to those resulting from court-mandated production.

Accordingly, this article will focus on the rules and decisions relating to subpoenas for discovery issued under Rule 45 in § 1782 proceedings, and specifically in the context of discovery under § 1782. provides insight into how courts are likely to decide requests for recovery of fees and costs.

Limited Application of Rule 45 in 1782 Proceedings

Although Rule 45 provides guidance on transferring fees in response to § 1782 discovery, few courts have addressed the issue of awarding fees to nonparties in § 1782 proceedings. Nevertheless, the application of the impartial considerations of Rule 45 is inconsistent.

For example, in one case, a litigation funder requested $100,000 in fees and costs for reviewing documents pursuant to a § 1782 subpoena relating to a UK litigation that the funder helped fund. . Despite the funder’s financial interest (hence its disputable non-party status) in the English case, the court granted the funder all the fees requested. We determined the costs to be “significant” under Rule 45 without considering any impartial factors (such as those discussed in Section III). pay these costs.

Full cost shift is not the norm, but possible. If the party seeking discovery argued that the fees and costs requested were immaterial on impartial consideration, the court may have refused collection. The outcome of cost-shift claims is highly unpredictable in the context of § 1782 discovery, as there is little precedent covering this issue.

Does Rule 45 govern the 1782 Discovery specifically for nonparties?

§1782 permits some procedures for conducting discovery, but does not prescribe the specific governing law for proceeding with discovery. By default, the Federal Rules of Civil Procedure govern the making of § 1782 and provide certain protections to nonparties under Rule 45. Federal regulations may not apply.

However, assuming rule 45 governs discovery, cost shifting becomes available. To maintain such a claim, the party responding to the disclosure must timely file a motion to waive or challenge the §1782 subpoena. Failure to do so will result in loss of 45(d)(2)(B)(ii) protection. After a timely objection or motion, the party seeking discovery may formally attempt to force production.

If production is forced, the court order must protect non-parties from “substantial costs resulting from compliance.” Accordingly, conduct outside the scope of the court order does not give rise to an injunctive claim to transfer costs under the terms of Rule 45. complianceFor example, costs incurred while in-house counsel is reviewing documents that may be addressed under a production contract are not recoverable. In contrast, costs incurred from outside counsel’s review of potentially objectionable documents were eligible for recovery if the objection was submitted to the court and compliance was ordered before the review took place.

Courts have also interpreted the language of Rule 45 to exclude unreasonable or unfounded claims for reimbursement of costs. For example, charges related to inefficient or duplicate work are considered unreasonable. Nor will courts reward time spent resisting subpoenas or opposing compliance. Parties to the 1782 discovery should therefore be aware that compliance in the absence of a court order or conduct beyond the scope of the order may waive future claims for cost-shifting.

Using Rule 45 to Guide 1782 Cost Shifting for Non-Parties

Because Section 1782 does not provide specific cost transfer guidelines, courts may find decisions involving domestic application of Rule 45 persuasive. In such cases, cost shifts under Rule 45 are only applied when the cost of compliance is deemed “significant”, a seemingly high threshold. Courts have ruled that for several banks with billions of dollars in revenue, the $1 million request is not material. A court also dismissed a nearly $1 million reimbursement claim from a law firm whose total revenue he reported was $300 million, and that compliance costs would be “for non-party witnesses in complex litigation.” “Typical,” he said.

While there are no hard-and-fast rules about when costs are considered material, courts usually use an impartial analysis to determine what level of cost transfer is justified by examining three factors: to hold.

• whether non-parties have an interest in litigation;
• Whether the non-party can bear the costs more easily than the requesting party.and
• Whether the lawsuit is of public importance.

In sum, these factors mean that claims under $1 million from well-capitalized sophisticated entities interested in relevant litigation should expect to face scrutiny on issues of materiality. suggests that Also, if the requesting party has a significant financial interest in the relevant foreign proceedings and/or has received substantial income from the parties to the relevant foreign proceedings, a request for cost transfer may be considered “typical.” ” may be rejected as non-party costs.

The first factor is that parties providing discovery do not like cost shifting when they are concerned with the financial, reputational, or other outcome of the case. for example, Blue Radio V. Coppin, Blueradios provided Kopin’s prosecution attorney, HBSR, with a subpoena seeking all documents related to the prosecution of Kopin’s 30 different patent applications. Given HBSR’s “substantial” interest in his litigation outcome, the court ruled that HBSR should bear half of the fees and costs arising from compliance.

Similarly, Bell vs. GE Lighting, Bell sued GE for infringing patents originally indicted by (and acquired from) iPack. GE argued that the patent in litigation was invalid for unfair conduct, and Bell asked iPack for prosecution history materials. Considering the first factor, the court found iPack to be an interested party. Because a finding of unfair conduct could lead to future litigation against iPack, this stake has a significant impact on cost shifts.

A second factor considers the relative financial strength of the parties to a discovery dispute. Regardless of the financial gain in ongoing litigation, cost shifting is not favored when the cost of compliance is insignificant relative to the assets and revenues of the parties resisting production.

for example, Nike vs Wu, after attempting to enforce its trademark infringement judgment, Nike sought records from several banks of judgment debtors. Denied cost shift. Each bank had “billions of dollars in revenue and trillions of dollars in assets,” but the cost of compliance, he said, was $1.2 million, which was relatively small by comparison.

Even if the party providing discovery has no particular interest in the litigation, cost shifting may be undesirable if the party providing discovery has significant income from the litigation’s named party. .of cardinal growth, the plaintiff sought disclosure from Cardinal’s principal transaction attorney. Cardinal’s attorneys sought reimbursement of approximately $40,000 in compliance costs. The court considered the amount sought in comparison to the total attorney’s fees earned working with Cardinal over the past decade (over $2 million). In light of this significant income and previous business relationships, the court denied cost shifting.

A third element examines the public significance of the litigation. Purely private disputes usually justify shifting costs to the party seeking discovery. The lack of public interest in litigation is due to the unwillingness to burden non-parties. Unlike most private actions, trademark infringement is generally in the public interest because it creates the potential for consumer confusion and subsequent damage. In these cases, as the Court has held, Nike In the above cases, the public facing impact of trademark infringement litigation outweighs cost shifting.

Patent infringement lawsuits, on the other hand, may not bring public interest to the outcome of the lawsuit. blue radio and BellHowever, there may be significant public interest if, for example, an allegedly infringing product is sold to a government or its agent (for example, an infringing product sold to Medicare). Courts have also suggested that critical technology, such as that used to perform major surgeries, may be of public interest. Indeed, it is not hard to imagine public interest being found in, for example, a patent litigation involving a COVID vaccine.

§ 1782 Transfer of fees to non-parties subject to discovery – unlikely

Complying with a discovery subpoena is generally considered a normal obligation (even for non-parties) and is unlikely to result in transfer of fees. Guidance on cost shifting is limited in the context of § 1782 proceedings, so this article discusses common pitfalls of cost recovery in the domestic context of Rule 45, the default procedure governing § 1782 discovery. . In such cases, voluntarily complying with the subpoena may preclude claims of cost pass-through, unless otherwise ordered by a court. However, assuming production was coerced, courts usually exercise impartial analysis to apportion costs or limit recovery so that parties seeking fees have no substantial financial or business impact on the outcome of litigation. Because they have a benefit, they often deny passing on costs. Also, in the case of patent or trademark infringement, by demonstrating public trust or government use of the potentially infringing intellectual property, Cost pass-through can be even more unfavorable. Thus, consistent with the American Rule, cost-shifting is the exception, not the norm, even when the underlying litigation is in a foreign jurisdiction.

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