U.S. Discovery in Aid of German Proceedings: Kreke Immobilien, Sal. Oppenheim and Deutsche Bank

Today’s guest post is a slightly amended version of a post published at Letters Blogatory last week. Ted Folkmann discusses In re application of Kreke Immobilien, a case from the U.S. District Court for the Southern District of New York. A German party was seeking discovery under Sec. 1782 U.S.C. in support of German proceedings. Sec. 1782 has become an increasingly popular tool (see here for an earlier post on the topic) for German litigants to overcome the inherent limitations of German civil procedure to obtain documents from the opponent, or from third parties. But let’s now hear from Ted:

Kreke was a German limited partnership. It invested in real estate investment funds offered by Oppenheim, a German bank later purchased by Deutsche Bank. Kreke claimed that Oppenheim had misrepresented the risk of the funds.

Kreke sued Oppenheim, but not Deutsche Bank, in the District Court in Cologne. It then brought a Sec. 1782 action to obtain documents from Deutsche Bank for use in the German case. In particular, it sought documents relating to Deutsche Bank’s purchase of Oppenheim and documents detailing Oppenheim’s management of the funds in question. Judge Buchwald found that the statutory prerequisites for a Sec. 1782 application were met. Deutsche Bank argued that the court had to deny the application because the documents in question were not kept in the United States. The statute does not, on its face, impose such a requirement. But the judge noted a split in the precedents on the question whether the statute permits discovery of documents located abroad. Citing Judge Rakoff’s decision in In re Godfrey, 526 F. Supp. 2d 417 (S.D.N.Y. 2007), the judge held that the statute does indeed bar extraterritorial discovery. She therefore denied the application.

How strong is this conclusion? Well, I don’t think Judge Rakoff’s decision was particularly compelling. He argued that in Intel the Supreme Court “implicitly assumed that evidence discoverable under Sec. 1782(a) would be located in the United States.” But the evidence of that implicit assumption is merely the following dictum: “nonparticipants in the foreign proceeding may be outside the foreign tribunal’s jurisdictional reach; hence, their evidence, “available in the United States,” may be unobtainable absent Sec. 1782(a) aid.”

I think Judge Rakoff, and thus Judge Buchwald, reads too much into the reasoning of Intel here. “Available in the United States” could mean simply that the evidence is obtainable in the United States; it need not mean that the evidence is actually found in the United States. And this seems the more sensible reading, particularly given the realities of cloud computing and the difficulty, in 2014, in determining exactly where a document is located. Charles Kotuby, writing at “Conflict of Laws” agrees. His post has a useful summary of the split in the precedents on this question, including a citation to In re Gemeinschaftspraxis Dr. med. Schottdorf, a 2006 SDNY decision that may be of particular interest to German readers.

None of this is to say that the location of the documents need be irrelevant to a court’s decision under Sec. 1782. But in the absence of any clear statutory direction, the better course seems to me to be to treat the location of the documents as a discretionary factor.

Letters Blogatory, by the way, turns three tomorrow – happy birthday! 

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