Sections 3102 and 3108 of the CPLR outline methods for conducting discovery, including discovery “outside” or “without” the state. But what about demands for discovery and inspection of documents located outside the country?

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A recent decision from Justice Robert Reed of the Manhattan Commercial Division in Bagatelle Little W. 12th LLC v. JEC II, LLC demonstrates the substantial burden that parties must overcome in seeking international discovery.

The conflict in Bagatelle stemmed from a joint restaurant venture between plaintiff Bagatelle Little West 12th LLC, its affiliated companies (the “Bagatelle Entities”), and defendants JEC II, LLC and The One Group LLC. Defendants brought counterclaims against Plaintiff and its affiliates alleging that the Bagatelle Entities improperly transferred funds from Plaintiff around the same time Plaintiff received a significant investment from NextStage, a European-based private equity firm. Defendants alleged that the improper transfers limited Plaintiff’s ability to pay management fees and distributions to Defendants as part of the joint venture.

Defendants moved under CPLR 3102 and 3108 for the issuance of letters rogatory to the relevant authority in France to compel the nonparty European investor, NextStage, to produce documents that purportedly would provide information regarding the nature of NextStage’s investment in Plaintiff and/or the Bagatelle Entities and/or its involvement in the improper transfers.

Justice Reed began his analysis by noting that “in all cases involving international discovery, the court should take into account: the importance of the information sought to the litigation, the degree of specificity of the request, the availability of alternative means of securing the information, the extent to which noncompliance with the request would undermine important interests of the United States, or whether compliance with the request would undermine important interests of the state where the information is located.” Justice Reed also noted that New York courts routinely employ a heightened standard for international discovery in comparison to a purely domestic discovery dispute. That is, parties seeking discovery from international entities must “establish that the sought information is crucial to the resolution of a key issue in [the] case.”

Defendants argued that the information sought from NextStage purportedly would demonstrate the nature of allegedly improper intercompany transfers made by the Bagatelle Entities and NextState’s involvement therein. Specifically, Defendants contended that “[i]t is necessary and convenient to issue a letter rogatory because NextStage is a hostile witness headquartered in France and cannot be compelled to produce documents in the State of New York,” and because “many of the requested documents are likely NextStage internal communications so there is no other source from which counterclaimants can obtain this information.”

In opposition, Plaintiff contended that Defendants failed to meet the heightened burden for international discovery because they did not demonstrate how the NextStage investment was connected to the alleged intercompany transfers made by the Bagatelle Entities. Further, Plaintiff contended that the issuance of letters rogatory prior to the completion of discovery would only serve to delay discovery in the case.

Justice Reed, siding with Plaintiff, refused to issue letters rogatory for international discovery, stating that “convenience is not the standard.” Justice Reed also found that Defendants were unable to demonstrate how their requests to NextStage differed from those they could make directly to Plaintiff or how Plaintiff’s production was otherwise deficient, justifying the need for additional nonparty discovery from NextStage. The court further found that Defendants’ motion failed to establish how the information sought from NextStage was “crucial to the resolution of a key issue in this case.”

Takeaway

In seeking international discovery, a party must clearly establish the nexus between the information sought from an international entity and any key issues in the case. Blanket statements regarding the alleged materiality, necessity, and/or convenience of information sought are insufficient bases to overcome the stringent standard for international discovery.

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