Practical Advice About Handling Document Requests to Japanese Companies in U.S. Litigation

Japanese companies and their U.S. subsidiaries remain significantly involved in U.S. civil litigation, including in the areas of antitrust, intellectual property, environmental law, and product liability. ¹For example, In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, U.S. District Court, Eastern District of Louisiana, No. 2:10-md-02179-CJB-SS, MDL No. 2179 (BP Oil Spill); In re: TFT-LCD (Flat Panel) Antitrust Litigation, U.S. District Court, Northern District of California, No. 3:07-md-01827-SI (alleged conspiracy to raise and fix prices of TFT-LCD panels used in flat panel televisions, computer monitors, and other devices); In re Static Random Access Memory (SRAM) Antitrust Litigation, U.S. District Court, Northern District of California, M:07-CV-01819-CW, MDL No. 1819 (alleged conspiracy to fix, raise, maintain or stabilize prices of SRAM); Toshiba Corp. v. Imation Corp., U.S. District Court, Western District of Wisconsin, No. 3:09-cv-00305-slc (patent infringement action by Japanese corporation alleging that defendants did not have licensing agreements with plaintiff for its patents relating to DVD format specifications); Ceats, Inc. v. Continental Airlines, Inc., et al., U.S. District Court, Eastern District of Texas, No. 6:10-cv-120 LED (Japanese airline named as a defendant in suit alleging violation of patents used in the technology that allows customers to view, select, and reserve seats online). At the same time, document discovery, especially discovery of electronically stored information (“ESI”), has become one of the most labor intensive aspects of litigation, requiring extensive planning, collection and review, as well as compliance (when applicable) with Rule 26 of the Federal Rules of Civil Procedure.

This article discusses some practical issues that Japanese companies and the attorneys representing them face when handling a U.S. civil litigation document request: whether the discovery is available; how document collection, review and production should occur; whether a production must comply with Rule 26; and, how non-Japanese speakers can use Japanese language documents in litigation once produced.

Discoverability

A Japanese company subject to a U.S. document request must first determine whether it must comply with the request. This depends on the form of the request and the status of the entity in the litigation.

Third-party Subpoena.

Federal Rule of Civil Procedure 45 outlines the procedures for compelling discovery from a non-party by issuing and serving a subpoena. Due to Rule 45’s territorial limits on subpoena issuance ²“A subpoena must issue as follows: (A) for attendance at a hearing or trial, from the court for the district where the hearing or trial is to be held; (B) for attendance at a deposition, from the court for the district court where the deposition is to be taken; and (C) for production or inspection, if separate from a subpoena commanding a person’s attendance, from the court for the district where the production or inspection is to be made.” Fed. R. Civ. P. 45(a)(2). and service, ³“Subject to Rule 45(c)(3)(A)(ii), a subpoena may be served at any place: (A) within the district of the issuing court; (B) outside that district but within 100 miles of the place specified for the deposition, hearing, trial, production, or inspection; (C) within the state of the issuing court if a state statute or court rule allows service at that place of a subpoena issued by a state court of general jurisdiction sitting in the place specified for the deposition, hearing, trial, production, or inspection; or (D) that the court authorizes on motion and for good cause, if a federal statute so provides.” Fed. R. Civ. P. 45(b)(2). document discovery of a Japanese company is often not available if it is not a party to a litigation.

Exceptions exist. A nonparty foreign company or individual may be within the reach of a Rule 45 subpoena if service is effected on a branch office or other significant presence in the forum; on an officer, partner, or agent who is physically present in the forum; or on a foreign nonparty witness who is temporarily present in the United States. ⁴Born & Rutledge, International Civil Litigation in United States Courts, 4th ed. (2007) at 937-38. A foreign nonparty can thus potentially be compelled to produce documents if it can be served with a subpoena pursuant to Rule 45.

However, the nonparty must also be subject to the personal jurisdiction of a U.S. court. ⁵Id. at 938. Even if these two requirements are met, a court may quash the subpoena due to prudential considerations. ⁶Id. at 934.

If a foreign nonparty is beyond the reach of a Rule 45 subpoena, a party seeking discovery may attempt to obtain foreign judicial assistance by applying to a local U.S. District Court for letters rogatory or by resorting to procedures outlined in the U.S.-Japan Bilateral Consular Convention and Protocol of 1963 (15 U.S.T. 768).

A party seeking documents from a Japanese nonparty, however, is unlikely to succeed. Japan “has advised the United States that Japanese law does not include any provision for compulsion of documents or other physical evidence” in civil cases. ⁷Japan Judicial Assistance, available at http://travel.state.gov/law/judicial/judicial_678.html

In addition, it is “generally understood that a Japanese court, acting as a commissioned or assigned judge as defined by the Code of Civil Procedure, cannot issue an order to produce documents or other tangible evidence in executing letters rogatory from a foreign court.” ⁸Kitagawa, Doing Business in Japan §14.07.

Japanese Entity as a Party in a U.S. Action.

The situation is different if the Japanese company is a party to a U.S. litigation. A federal court has the power to require the production of documents located in a foreign country if the court has personal jurisdiction over the person who possesses or controls the material. ⁹United States v. First Nat’l City Bank, 396 F.2d 897, 900-01 (2d Cir. 1968).

Because “document requests are a necessary, if not routine, facet of civil litigation, … solicitude for foreign procedures here would be a particularly significant intrusion upon American sovereignty.” ¹⁰First Nat’l Bank v. Reinhart Vertrieb’s AG, 116 F.R.D. 8, 9 (N.D. Ill. 1986). See also In re Honda Am. Motor Co, 168 F.R.D. 535, 539 (D. Md. 1996) (“[I]t would be patently unfair to constrain plaintiffs’ ability to discover facts necessary to make their case by allowing Honda Japan’s managing agents to be deposed in Japan pursuant to Japanese rules.”). U.S. courts thus routinely order litigants to produce documents that are located abroad. ¹¹See Born & Rutledge at 920; In re Uranium Antitrust Litig., 480 F. Supp. 1138 (N.D. Ill. 1979) (conceding that “jurisdiction is less certain when American courts order a defendant to produce documents located abroad” but noting that “[t]he location of the documents is irrelevant”).

Serving a complaint on a Japanese company in a U.S. action, however, is neither simple nor quick. The United States and Japan are parties to the Hague Convention on the Service Abroad of Judicial and Extra Judicial Documents in Civil and Commercial Matters. ¹²The Convention applies only to “a transmittal abroad that is required as a necessary part of service.” Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 707 (1988). Some federal courts have held that substituted service on a local entity, where authorized by state law and followed by a mailing directly to the entity being served, satisfied the Convention. See, e.g., Paradigm Entertainment, Inc. v. Video System Co., No. 3:99-CV-2004-P (N.D. Tex. Mar. 3, 2000). Others have held the requirements of the Convention inapplicable if state law does not require that documents be transmitted abroad. See, e.g., Volkswagenwerk, 486 U.S. at 708 (where the law of the forum court does not require transmittal abroad in order to properly serve a foreign corporation, and proper local service is made, the Convention does not apply).

The Hague Convention requires that each contracting state designate a central authority to receive requests for service coming from other contracting states. ¹³Art. 2. The Japanese central authority is the Ministry of Foreign Affairs. Although U.S. attorneys are qualified to execute service requests, ¹⁴United States v. First Coast Meat & Seafood, 452 F. Supp. 2d 1348, 1349 (Ct. Int’l Trade 2006). the process can be time-consuming, currently requiring around four months. ¹⁵http://www.hcch.net/index_en.php?act=authorities.details&aid=261. The complaint must also be translated into Japanese before it will be served. ¹⁶Id.

Discovery of a Japanese Entity Via a U.S. Related Entity.

If a related entity is involved in a U.S. litigation, discovery of the Japanese entity may be available under Fed. R. Civ. P. 34(a)(1) if the related entity is deemed to have “possession, custody or control” of the Japanese entity’s documents. The burden is on the party seeking discovery to show that the other entity has control over the materials sought. ¹⁷S.E.C. v. Credit Bancorp, Ltd., 194 F.R.D. 469, 472 (S.D.N.Y. 2000).

In some cases control “has been construed broadly by the courts as the legal right, authority, or practical ability to obtain the materials sought upon demand.” ¹⁸Securities and Exchange Commission v. Credit Bancorp, Ltd., 194 F.R.D. 469, 471 (S.D.N.Y. 2000), but see, Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 233 F.R.D. 143, 146 (D. Del. 2005) (“[T[he Court is not persuaded that the Third Circuit has adopted as expansive a definition of ‘control’ as that used by courts in the Second Circuit. Cases in the Second Circuit go beyond defining ‘control’ as the legal right of the subpoenaed party to obtain the documents and include an inquiry into the practical ability of the subpoenaed party to obtain those documents.”).

Courts engage in a fact-intensive inquiry to determine if the nature of the relationship warrants finding that an entity controls the documents in the possession of a related entity. Three factors are of “paramount importance in ascertaining this relationship”:

1. the corporate structure encompassing the different parties;
2. the non-party’s connection to the transaction at issue; and
3. to what degree the non-party will receive the benefit of any award in the case. ¹⁹Afros S.P.A. v. Krauss-Maffei Corp., 113 F.R.D. 127, 130 (D. Del. 1986).

In parent/subsidiary situations, “the determination of control” has been said to “turn[ ] upon whether the intracorporate relationship establishes some legal right, authority or ability to obtain the requested documents on demand.” ²⁰Camden Iron & Metal, Inc. v. Marubeni America Corp., 138 F.R.D. 438, 442 (D.N.J. 1991) In Ferber v. Sharp Elecs. Corp., 84 Civ. 3105, 1984 U.S. Dist. LEXIS 24861 (S.D.N.Y. Nov. 28, 1984), the court concluded that “[w]hat appears to be required is that the subsidiary and parent have worked sufficiently closely in the particular field of endeavor that is the subject of the lawsuit to suggest that the subsidiary could be deemed to have constructive control of the information sought - that is, the ready ability to obtain it - even if not actual possession.” ²¹Id. at *5. See also Afros S.p.A. v. Krauss-Maffei Corp., 113 F.R.D. 127, 131 (D. Del. 1986) (“a non-party’s participation in a transaction, and its consequent possession of related documents, must be considered in determining control for Rule 34 purposes”); Camden, 138 F.R.D. at 443 (noting that inability of subsidiary’s counsel to obtain the documents “is at best theoretical” since he had apparently “never made even an informal request for the [parent corporation] documents at issue, which greatly undermines his claim that he is unable to obtain” them); Japan Halon Co. v. Great Lakes Chemical Corp., 155 F.R.D. 626, 627 (N.D. Ind. 1993) (rejecting Japanese plaintiff’s argument that it did not have “the requisite control over the documents because ‘Japanese law makes clear that [it] has no right to broadly demand internal documents’ ” from its Japanese parent companies).

Compliance with Rule 26(f) and Practicalities For Collection, Review, and Production

If a Japanese entity must respond to a U.S. document request, then document collection, review, and production must occur.

Rule 26.

Japanese companies as parties to a U.S. litigation must comply with the provisions of Rule 26. These include disclosing under Rule 26(a) a copy of each document the party may use to support its claims or defenses along with the names and contact information of individuals likely to have discoverable information.

Under Rule 26(f) the party must also plan for and confer with the other parties regarding steps to preserve discoverable information, handle privileged material, and address ESI (including format of production and production of associated metadata), among other things.

If a U.S. entity in a litigation is producing material from a related nonparty Japanese entity, that production must also be made in compliance with Rule 26. Effectively this means that the Japanese entity, while not a party, will be part of the Rule 26 initial disclosure and discovery process (at least as to documents) via its related entity.

Since Rule 26(f) applies only to “parties” it would not apply when a Japanese entity produces documents in response to a Rule 45 subpoena, but it may be advisable for the producing party to confer with requesting counsel on the scope of preservation and production as outlined under Rule 26(f).

There are at least two reasons for this. First, the procedures in Rule 26(f) provide an accepted process for preservation and production, and compliance with them will help immunize the producing party from claims of inadequate production. Second, a nonparty Japanese entity may later become a party and thus be subject to Rule 26.

How to Collect the Material.

Collecting documents from a Japanese company is not very different from collecting from a U.S. company. Efforts must be made to identify all relevant sources of material, including both hard copy and ESI.

If using search terms to narrow a data set, care must be taken to identify the proper Japanese language search terms, in all appropriate dialects (such as Kanto (Tokyo) or Kansai (Osaka).)

Where to Conduct the Review.

A question may exist about where to conduct a review of the documents before they are produced—in the U.S. or in Japan.

In the United States, review is typically done by law firms or vendors, and is conducted either by firm lawyers or contract attorneys working on a temporary basis. Since many (if not all) of the documents to be reviewed from a Japanese company will be written in Japanese (or a combination of English and Japanese), but will be used in the United States, it is best to use a bi-lingual review team. While bi-lingual reviewers are available in both countries, the U.S. and Japanese legal professions are very different, with Japan having few fully qualified bengoshi (those authorized to represent others), and the U.S. having far more law school trained personnel available for temporary assignment. Thus, if the Japanese entity is a party to the litigation, or the documents in question are deemed to be in the “control“ of a related U.S. entity, it may be preferable to review the material in the United States, because of the ready number of available contract attorneys.

Caution Advised.

Caution must be exercised, however, if it remains important to avoid creating the appearance of “control“ of the documents in the United States. If, for example, a Japanese entity is not yet a party in a U.S. litigation, and will resist becoming one, or if it holds documents that a third party contends are within the “control” of a related U.S. company, but the Japanese entity disputes that, then bringing the documents to the U.S. for review, or even reviewing them virtually from the U.S. may weigh in favor of finding U.S. “control” of them.

If a review is to be run in Japan, significant advance work must be done by the U.S. legal team, including locating suitable bi-lingual staff, clearing conflicts for them, thoroughly educating the review team about the case and the requests, and then monitoring and conducting quality control of the review.

Practical Issues for Use of Japanese Language Documents in the U.S.

Once Japanese language documents are produced (whether from a Japanese or U.S. entity), attorneys in the litigation who do not read Japanese must decide what mechanism they will use to understand the documents. Translation is the obvious solution, but it poses several issues.

First, creating translations can be expensive if done manually, or inaccurate if done with translation software.

Second, it can be very difficult to create indisputable translations of Japanese documents, because the language is very contextual, often omitting reference to the subject of a discussion since it is expected that all participants know what it is. Even where the subject of a communication is known, different translators can create different translations based on their understanding of the subject matter, or the nuance of terms used in the original.

Last, courts sometimes order that any translations created by a party must be produced in the litigation, and it would be undesirable to produce any preliminary or inaccurate translations.

An option for non-Japanese speakers to understand the material is to have the review team (which will be thoroughly familiar with the case) create brief work product summaries of the documents during the review, describing their relevance and importance in the litigation. Another option is to simply work directly with translators or, if they are English speakers, the persons who wrote the documents, discussing their contents and importance.

If a Japanese language document is to be used at deposition or trial, translation is probably required so that the attorneys and trier of fact can understand them. The process to do so will usually be negotiated between the parties.

If a non-producing party wishes to use a document at deposition with a witness from the producing party, for example, the producing party may ask the non-producing party to translate it, and retain the right to correct or challenge the translation.

Whatever the process agreed to, sufficient time must be allowed before use of the document, because of the significant labor involved.