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IN RE VITAMINS ANTITRUST LITIGATION

September 20, 2000

IN RE VITAMINS ANTITRUST LITIGATION. THIS DOCUMENT RELATES TO: ALL ACTIONS.


The opinion of the court was delivered by: Thomas F. Hogan, District Judge.

MEMORANDUM OPINION Re: Jurisdictional Discovery Issues

Pending before the Court are eight foreign defendants' Rule 53 Objections to the Special Master's Report and Recommendation Respecting Plaintiffs' Motion to Compel and Defendants' Motions for Protective Orders ("Report" or "Report and Recommendation"). Upon careful consideration of the Special Master's Report regarding jurisdictional discovery, the defendants' Objections, the plaintiffs' response, the defendants' replies, and the entire record herein, the Court will adopt the Special Master's Report in part and deny it in part.*fn1 Specifically, the Court will adopt the Special Master's recommendations that jurisdictional discovery in this case be ordered to proceed under the Federal Rules of Civil Procedure ("Federal Rules") rather than through the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters*fn2 ("Hague" or "Convention" or "Hague Convention"). The Court will also adopt the Special Master's recommendations regarding narrowing plaintiffs' discovery requests and respecting discovery through foreign parents of domestic subsidiaries and former employees. However, the Court will decline to adopt the Special Master's recommendations regarding Interrogatory No. 2; the Court finds this Interrogatory to be wholly improper, even as refined by the Special Master, and will thus grant defendants' motions for protective orders to the extent that they seek permission to refuse to answer Interrogatory No. 2.

I. BACKGROUND

The Court's March 27, 2000 Memorandum Opinion and Order allowed plalntiffs to take further jurisdictional discovery in order to determine whether personal jurisdiction exists over the foreign defendants under state long-arm statutes or under Fed.R.Civ.P. 4(k)(2). In response, on April 10, 2000, plaintiffs served all foreign defendants with a Rule 30 (b)(6) deposition notice, document requests, and interrogatories, all relating to jurisdictional discovery. On or about April 24, 2000, the foreign defendants served responses, which largely contained objections to the plaintiffs' requests and effectively refused to grant discovery. On May 15, 2000, plaintiffs filed a joint motion to compel responses to their jurisdictional requests.*fn3 In response, all eight defendants filed motions for protective orders.

Thereafter, the Court referred plaintiffs' joint motion to compel and defendants motions for protective orders to the Special Master for a Report and Recommendation. After exhaustive briefing, consisting of three separate rounds of motions, the filing of numerous expert affidavits and declarations, several rounds of negotiations to revise and narrow plaintiffs' discovery requests, and extensive oral argument on these motions, the Special Master issued a fifty-one page Report and Recommendation addressing issues raised by plaintiffs' joint motion to compel and jurisdictional discovery requests and the eight foreign defendants' motions for protective orders.

On or around August 29, 2000, defendants filed Rule 53 Objections to the Special Master's Report. Plaintiffs have since filed responses to these Objections and the defendants have filed replies. The Court heard oral argument on this issue on September 13, 2000.

II. DISCUSSION

A. Hague Convention

The primary issue presented to the Special Master and now to the Court is whether discovery taken to establish personal jurisdiction over these eight foreign defendants must proceed under the Hague Convention or whether the Court has discretion to order this discovery to proceed in accordance with the Federal Rules. In Societe Nationale Industrielle Aerospattale v. United States District Court for the Southern District of Iowa, 482 U.S. 522, 107 S.Ct. 2542, 96 L.Ed.2d 461 (1987), a case involving a foreign defendant over whom the trial court had undisputed personal jurisdiction, the Supreme Court rejected a rule of first-resort to Hague and held that a trial court should consider "the particular facts, sovereign interests, and likelihood that resort to [the Hague Convention's] procedures will prove effective" in determining whether to proceed under Hague or the Federal Rules. Id. at 544-46, 107 S.Ct. 2542. Since Aerospatiale did not involve a situation like the present case, where jurisdiction is contested, the first issue to be resolved is whether jurisdictional discovery must proceed first under the Hague Convention and only later under the Federal Rules should the Convention's procedures prove ineffective or whether the Aerospatiale analysis also applies in cases where jurisdiction is still in dispute. If Aerospatiale applies, the Court must then decide whether utilization of its three-prong test leads to a ruling in favor of the Hague Convention or the Federal Rules in this case. Finally, the Court must consider whether the Aerospatiale analysis has any applicability to the Belgian and Japanese defendants, since Belgium and Japan are not signatories to the Hague Convention and, if the Aerospatiale test is inapplicable to them, whether to apply the laws of those countries or follow the Federal Rules for jurisdictional discovery of defendants UCB S.A. and ECL.

1. Applicability of Aerospatiale to Jurisdictional Discovery for Signatories

The first question to be answered is whether the Court must always require first-resort to Hague procedures for jurisdictional discovery or whether the three-prong test established by the Supreme Court in Aerospatiale governs even in cases where personal jurisdiction has not yet been conclusively established.*fn4 Defendants argue that, since Aerospatiale makes repeated references to the presence of personal jurisdiction in that case, the Supreme Court did not intend for its holding to apply to actions in which personal jurisdiction is still at issue. Plaintiffs respond that, although the Supreme Court noted the existence of personal jurisdiction in Aerospatiale, the reasoning of that case and the majority's refusal to accept a bright-line principle mandating use of Hague counsels against a rule of first-resort to the Convention even in cases where the jurisdictional issue has not yet been resolved.

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 the application of Aerospatiale to jurisdictional discovery, there is no caselaw from any circuit court on this issue. Defendants are correct that Aerospatiale makes numerous references to the existence of personal jurisdiction in that case. See 482 U.S. at 524, 107 S.Ct. 2542 ("The question presented in this case concerns the extent to which a federal district court must employ the procedures set forth in the Convention when litigants seek answers to interrogatories, the production of documents, and admissions from a French adversary over whom the Court has personal jurisdiction") (emphasis added); id. at 541, 107 S.Ct. 2542 (When a litigant is subject to the jurisdiction of the district court, . . .) (emphasis added); id. at 540 n. 25, 107 S.Ct. 2542 ("since the District Court unquestionably has personal jurisdiction over petitioners, they are subject to the same legal constraints, including the burdens associated with American judicial procedures, as their American competitors") (emphasis added); id. at 544 n. 29, 107 S.Ct. 2542 ("It is well settled that such [blocking] statutes do not deprive an American court of the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate that statute") (emphasis added). More importantly, the question decided by the Eighth Circuit and certified by the Supreme Court for review in Aerospatiale was whether "when the district court has jurisdiction over a foreign litigant the Hague Convention . . . appl[ies] to the production of evidence in that litigant's possession, even though the documents and information sought may physically be located within the territory of a foreign signatory to the Convention." Id. at 528, 107 S.Ct. 2542. Therefore, it is clear that the Supreme Court in Aerospatiale never addressed the issue of what procedures to follow in cases of jurisdictional discovery; that issue was never before the Court and certainly was not resolved by the holding of Aerospatiale.

Since Aerospatiale does not answer the question at issue here, this Court must consider whether there are legal or policy reasons for requiring first use of Hague for jurisdictional discovery of foreign defendants despite the Supreme Court's clear rejection of this first-resort rule in cases where jurisdiction has been established. Defendants maintain that a rule of first-resort is more important for jurisdictional discovery than for merits discovery because the comity interests of the foreign nations are higher before defendants are conclusively found to be subject to the Court's jurisdiction. This Court disagrees. It is well-established that a trial court has jurisdiction to determine its jurisdiction. See Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 706, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982) ("By submitting to the jurisdiction of the Court for the limited purpose of challenging jurisdiction, the defendant agrees to abide by that court's determination on the issue of jurisdiction"). Since the Court has jurisdiction over these foreign defendants to the extent necessary to determine whether or not they are subject to personal jurisdiction in this forum, the Court sees no legal barrier to exercising the discretion given to trial courts by Aerospatiale in cases of jurisdictional discovery. This conclusion is supported by the large majority of the lower court decisions that have considered this issue. See Rich v. KIS California, Inc., 121 F.R.D. 254, 260 (M.D.N.C. 1988) (holding that jurisdictional discovery need not be taken under Hague because Aerospatiale "did not carve out any exception for disputes involving personal jurisdiction" and "[s]ufficient protection is given by the Supreme Court's admonishment to district courts to be particularly sensitive to claims of abuse of discovery made by foreign litigants"); Fishel v. BASF Group, 175 F.R.D. 525, 529 (S.D.Iowa 1997) (concluding that the reasoning and holding of Aerospatiale provide that the Hague procedures are optional and do not divest federal district courts of authority to order discovery under the Federal Rules); In re Bedford Computer Corp., 114 B.R. 2, 5-6 (Bankr. D.N.H. 1990) (citing Rich and allowing discovery strictly related to jurisdictional issues to proceed under the Federal Rules). In fact, there are only two cases that support defendants' position and both are far from convincing. See Jenco v. Martech Int'l, Inc., No. 86-4229, 1988 WL 54733 (E.D.La. May 19, 1988) (holding, with almost no meaningful analysis, that certain jurisdictional discovery requests must be made under Hague because "[w]hile judicial economy may dictate that the Federal Rules of Civil Procedure should be used, the interests of protecting a foreign litigant in light of the jurisdictional problems are paramount");*fn5 Knight v. Ford Motor Co., 260 N.J. Super. 110, 615 A.2d 297, 301 n. 11 (L.Div. 1992) (noting, in dicta, that "[i]f jurisdiction does not exist over a foreign party . . ., the Convention may provide the only recourse for obtaining evidence.") (emphasis added). Therefore, the only reason to depart in this case from the three-part balancing test would be if, as defendants assert, the foreign nations' sovereign interests are more threatened by potential application of the Federal Rules at the jurisdictional discovery stage than they would be with merits discovery.

After careful consideration of the facts of this case and the principles of international comity, the Court cannot find that the sovereign interests of these six signatory countries would be more affected by application of the Aerospatiale balancing test in this case than they would be in a case where the Court has conclusively established its jurisdiction. First, the Court sees no reason why the foreign nations' sovereign interests would be offended by the investigation of this antitrust price-fixing conspiracy; many of these nations prohibit this type of conduct in their own laws and presumably all of these countries would want to have these laws enforced to the fullest extent. Second, this is not a case of speculative jurisdiction. All six of the defendants from signatory countries have already admitted their involvement in this antitrust price-fixing conspiracy.*fn6 In addition, although the Court denied defendants' motions to dismiss without prejudice and ordered plaintiffs to undertake further jurisdictional discovery, the Court did find plaintiffs' allegations to show strong potential for findings of jurisdiction. Therefore, although this Court agrees that plaintiffs have not yet alleged facts sufficient to give this Court conclusive jurisdiction over these defendants, it believes that plaintiffs' allegations amount to more than mere blanket fishing expeditions. In fact, the Court agreed to allow plaintiff's jurisdictional discovery solely because it felt that they had essentially established a prima-facie basis for jurisdiction; therefore, the allegations in plaintiffs' complaints are not the type of bare-boned allegations that potentially could lead to the fishing expeditions of obvious concern to the signatory countries. Compare Rich., 121 F.R.D. at 260 (holding that use of Hague was not required for jurisdictional discovery because the allegations that the French defendant had manufactured the machine involved in the suit and that it had been sold by a U.S. subsidiary were sufficient to allow limited jurisdictional discovery under the Federal Rules) and Geo-Culture, Inc. v. Siam Investment Management, Inc., 147 Or. App. 536, 544, 936 P.2d 1063, 1067 (1997) (requiring plaintiff to conduct jurisdictional discovery, at least initially, only through Hague, noting that it had failed to allege a prima facie basis for asserting jurisdiction over the defendant). Third, the Court finds that the Special Master has sufficiently revised plaintiffs' jurisdictional discovery requests so as to make them narrowly tailored to issues relating to the jurisdictional questions at issue rather than to the defendants' general liability. Accordingly, the Court does not ...


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