The Third Circuit has vacated and remanded a district court’s decision quashing a subpoena issued pursuant to 28 U.S.C. § 1782, which allows a party to procure discovery for us in a foreign proceeding, finding that the district court had misunderstood certain facts and not given adequate consideration to others.
The discovery in question was sought in connection with a trade-secret dispute being litigated in a German court between Biomet, Inc. and Heraeus Kulzer GmbH. Biomet initiated a section 1782 action in the Eastern District of Pennsylvania to subpoena the production of all documents produced in a prior, related matter that were in the possession of two law firms (neither representing Biomet or Heraeus) in Philadelphia. Section 1782 provides in part that “[t]he district court of the district in which a person resides or is found may order him to . . . to produce a document or other thing for us in a proceeding in a foreign or intentional tribunal, including criminal investigations conducted before formal accusation.” Heraeus objected to the discovery request, arguing that the subpoena did not comply with section 1782, as interpreted by the Supreme Court in Intel Corp. v. Advanced Micro Devices. The district court quashed the subpoena.
On appeal, the Third Circuit found that the subpoena did comply with the statute, rejecting an argument that section 1782 did not apply to these documents because they were held by law firms rather than Heraeus, which was the real party in interest, as the plain language of the statute did not require the court “to consider a principal-agent relationship, or whether the documents being held by the subpoenaed party belong to a foreign party.” The court then looked at the Intel factors and found that the district court’s consideration of these factors was “cursory and conclusory” and “relied upon an incomplete understanding of the pertinent facts surrounding the German proceeding.” Specifically, the Third Circuit found that the district court erred in finding that Biomet had delayed in requesting the documents, incorrectly placed the burden on Biomet to show that the German court would be receptive to this discovery, and erred by flatly rejecting the discovery based on concerns regarding the disclosure of proprietary information without requiring the parties to negotiate regarding the scope of the discovery or the entry of an appropriate protective order. The Third Circuit thus remanded the matter to the district court for reconsideration, while particularly stating that “it will be within the District Court’s discretion to grant or deny the motion to quash the subpoena.