THE ABCs OF CROSS-BORDER LITIGATION IN THE UNITED STATES
a practice spanning the globe
experience. creativity. results.
WASHINGTON, DC
NEW YORK
SAN FRANCISCO
LOS ANGELES
ORANGE COUNTY
ANCHORAGE
LONDON
BRUSSELS
WWW.CROWELL.COM
Conducting business in: Arabic,
Bengali, Chinese, English, Flemish,
French, German, Gujarati, Hindi,
Italian, Japanese, Malay, Marathi,
Portuguese, Russian, Spanish, and Urdu.
can still be down to earth
WITH THE EXPANDING GLOBALIZATION OF BUSINESS,
NON-U.S. COMPANIES INCREASINGLY ARE FINDING THEMSELVES
PURSUING OR DEFENDING LEGAL ACTION IN U.S. COURTS
the ABCs
of cross-border litigation in the United States
With parallel judicial systems in the state and federal courts,
broad discovery tools (including electronic discovery),
and a complex maze of procedural and evidentiary rules,
successful navigation of the U.S. judicial system requires
specialized skill and knowledge. For any company looking
to conduct business in the U.S., partnering with experienced
legal counsel who can provide an understanding of the U.S.
legal system is essential to a proper assessment of risks and
opportunities. We are pleased to offer you the following guide
as a brief overview of the U.S. judicial system and to highlight
specic aspects of U.S. litigation that non-U.S. companies
may encounter for the rst time.
Litigation in the U.S. often is a long and expensive process, involving many layers of
judicial review and in which an array of legal issues—both procedural and substantive—
must be addressed. This guide is not intended to serve as a comprehensive roadmap
or instruction manual for the conduct of litigation in the United States. Nor is it designed
to provide solutions to every issue a non-U.S. company may face, either as a plaintiff
or as a defendant, in U.S. courts. Rather, it is intended to provide an overview of the
process, and highlight the kinds of strategic issues that must be addressed.
Every case presents unique legal and practical challenges that must be considered
carefully in the context of the U.S. and international legal systems. In all cases, you
should consult U.S. litigation counsel for advice on your particular issues.
SHOULD YOU HAVE ANY QUESTIONS,
PLEASE DO NOT HESITATE TO CONTACT US.
Washington, D.C.
1001 Pennsylvania Avenue, N.W.
Washington, DC 20004-2595
Phone: 202.624.2500
Fax: 202.628.5116
San Francisco
275 Battery Street, 23rd Floor
San Francisco, CA 94111
Phone: 415.986.2800
Fax: 415.986.2827
London
11 Pilgrim Street
London, EC4V 6RN
United Kingdom
Phone: +44.207.413.0011
Fax: +44.207.413.0333
New York
590 Madison Avenue, 20th Floor
New York, NY 10022-2524
Phone: 212.223.4000
Fax: 212.223.4134
Orange County
3 Park Plaza, 20th Floor
Irvine, CA 92614-8505
Phone: 949.263.8400
Fax: 949.263.8414
Brussels
71, Rue Royale
Brussels, B - 1000
Belgium
Phone: +32.2.282.4082
Fax: +32.2.230.6399
Los Angeles
515 South Flower St., 40th Floor
Los Angeles, CA 90071
Phone: 212.223.4000
Fax: 213.622.2690
Anchorage
1029 W. 3rd Avenue Suite #402
Achorage, AK 99501
Phone: 907.865.2600
experience. creativity. results.
WWW.CROWELL.COM
the U.S. legal system
AN OVERVIEW
Almost all litigation in the U.S. takes place either
in U.S. federal courts or in the local courts of the
50 states and the District of Columbia. The courts
typically have three layers: the trial courts (U.S. district
courts and local state courts), the appellate courts
(U.S. courts of appeals and state appellate courts),
and the U.S. Supreme Court, which generally grants
review only to those appeals from the federal and state
appellate courts that it determines are of sufcient
national importance. Most cases brought in federal
court receive nal review at the U.S. Court of Appeals
stage; most cases brought in state courts are nally
reviewed by the local state Supreme Court (sometimes
called the state Court of Appeals).
Broad Scope of Issues
One of the principal reasons there is so much litigation
in the U.S. is that there are few limits on the types of
cases that may be brought in U.S. courts. Subject to
certain jurisdictional rules discussed in more detail
below, a broad range of disputes —e.g., contractual
disagreements, copyright and trademark infringement
issues, labor and employment disputes, consumer
fraud and product liability allegations, negligence
and intentional torts (including vicarious liability
for the actions of a company’s employees) —may
be resolved in U.S. courts. Whatever the context,
businesses operating in the U.S. must be prepared to
defend themselves against a broad range of potential
complaints relating to their business operations.
Sources of Law
The sources of law for cross-border disputes are
similarly expansive. Many cases deal with disputes
arising under U.S. statutes and regulations, or those
of any of the 50 states where individuals or companies
act or conduct business. Even where no written (or
“codied”) laws exist, U.S. courts may follow what
is called “common law”—legal principles that have
been developed over the years by judges—to resolve
commercial and other disputes. In still other cases,
litigants may ask a U.S. court to resolve questions
arising exclusively under international or foreign laws
or treaties. Because of the broad scope of jurisdiction
in the U.S. state and federal courts, it is important
to understand the substantive rights and defenses
available in each of these various areas.
THE U.S. JUDICIAL SYSTEM
It is often said that the United States is the most litigious society in the world. There may be many
reasons for this phenomenon, including the minimal risk of filing a lawsuit in a system where each
side pays its own legal fees, the unprecedented breadth and intrusiveness of discovery, the unusually
expansive scope of jurisdiction of U.S. courts, or the unique potential for substantial monetary awards
and punitive damages. In cases involving foreign governments or government-owned entities, the
U.S. judicial system also is unique in its waivers of sovereign immunity in a variety of circumstances.
Even where mediation, arbitration, or other alternative dispute resolution mechanisms are pursued,
such processes generally follow initiation of a lawsuit in state or federal courts. Whatever the reason,
this much is clear: Any company choosing to do business in the United States must be familiar with the
U.S. legal system and be prepared to litigate within that system.
This guide will provide insight into the nuances of the litigation process in U.S. courts. At the outset,
however, it is useful to consider some of the basic elements of the U.S. judicial system and the scope
of issues addressed in U.S. courts.
The rst question in any litigation is whether the court
has the power to resolve the dispute by requiring the
defendant to take a particular action. This question is
especially signicant for non-U.S. defendants, who
may be able to avoid litigation altogether if the court
determines that they are not subject to its jurisdiction
at all. The question of jurisdiction over a person or
entity is called “personal jurisdiction.”
This inquiry does not arise usually for the party bringing
the lawsuit (the plaintiff) because the plaintiff, by
ling the action, voluntarily submits to the jurisdiction
of the court where the suit is led. Still, there are
requirements that a plaintiff, too, must satisfy in
order to maintain a lawsuit in U.S. courts—the most
signicant of which is that the plaintiff allege an injury
as a result of the action complained of in the lawsuit.
This concept commonly is referred to as “standing
to sue.”
“Minimum Contacts”
As a threshold matter, a U.S. court may exercise
jurisdiction over a person or company only where that
entity has “minimum contacts” with the particular state
in which that court sits. These contacts may take a
variety of forms, including the commission of some act
within the state, contracting for the provision of goods
or services within the state, or deriving some benet
from conducting business within the state. Additional
examples may include the ownership of property,
maintaining a bank account, or placing an item in
the stream of commerce with the intention that it be
distributed within the state. Additionally, each of the 50
states and the District of Columbia has what is called a
“long-arm statute,” which sets out the circumstances
under which an entity is considered subject to the
jurisdiction of that state’s courts, even though it is not
physically “present” in that state.
In the modern global economy, jurisdictional lines are
increasingly blurred, such that it is increasingly difcult
for a non-U.S. company to avoid jurisdiction under
the theory that it lacks “minimum contacts” with a
U.S. forum. In addition to some of the more traditional
methods described above, minimum contacts may
be established by such basic conduct as using the
Internet for business purposes, advertising in the
U.S., or conducting business through subsidiaries
or agents in the U.S.
Ultimately, whether a non-U.S. party has “minimum
contacts” with a forum sufcient for a court to
assert personal jurisdiction over it is a highly factual
determination that will depend on the circumstances
of each case. Those circumstances also may
determine how broadly that jurisdiction may extend
(e.g., jurisdiction over disputes arising only from
conduct relating to those contacts, or jurisdiction over
any dispute involving that non-U.S. entity). Therefore,
the question of “minimum contacts” can be a critical
threshold issue which ultimately determines whether
a dispute involving a non-U.S. party will proceed in a
U.S. court.
personal jurisdiction—
who can be sued in U.S. courts?
The simplest way for a court to exercise jurisdiction
over a non-U.S. party is for that party to take some
action that the courts deem to constitute “consent”
to jurisdiction of the forum. This consent can occur
as a result of a voluntary contractual provision,
physical presence in the forum, or some other
circumstance by which the party avails itself of the
privilege of conducting business or other activities
within the forum.
In business transactions in the U.S., it is common for
at least one side (usually the U.S. business partner)
to insist on a “forum selection” clause in the written
contract governing the transaction which specically
designates the courts before which a dispute must
be resolved. By agreeing to this clause, both parties
are deemed to consent to the jurisdiction of the
designated courts. Still, as is almost always the case in
U.S. litigation, there may be exceptions. For example,
a court may consider an argument that the clause
should be ignored because the contract was procured
by fraud, or that proceeding in the selected forum
would be highly unreasonable or unfair. Even in these
circumstances, however, the question of whether the
clause is valid must be litigated in the U.S. court.
In some cases, the forum selection clause identies
a non-U.S. forum for resolving the dispute. The same
rules apply in these cases—i.e., the courts generally
respect the choice of the parties; however, they
also may consider arguments for an exception. One
example may be where the purpose of a U.S. law or
regulation would be compromised signicantly were
the case to be resolved in another jurisdiction, with
different legal guidelines. Here too, companies must
be prepared to litigate at least the procedural issue in
a U.S. court.
A litigant also may be considered to have “consented”
to personal jurisdiction where it is physically present in
the forum. Presence may occur in the ways described
above to establish “minimum contacts” with the forum.
Presence also may be established simply by appearing
in a judicial proceeding. For example, if a party les
a lawsuit in a U.S. court or even simply appears to
defend a claim it believes to be unfounded, that itself
may be enough in certain circumstances to provide
personal jurisdiction over the party.
JURISDICTION BY CHOICE
U.S. courts also have little trouble exercising
jurisdiction over foreign entities with a minimal nexus
to the U.S. when the federal law giving rise to the claim
specically establishes personal jurisdiction over the
defendant upon receipt of proper service of process
(for a discussion of “service” issues, see below). Some
of the most common of these “statutory jurisdiction”
provisions facing non-U.S. parties include the Foreign
Sovereign Immunities Act, the Clayton Antitrust Act,
the Securities Act and the Racketeering-Inuenced and
Corrupt Organizations Act.
Yet another way a U.S. court may exercise personal
jurisdiction over a non-U.S. party is when a plaintiff is
able to “serve” that non-U.S. party (i.e., the defendant)
in the relevant forum. This form of jurisdiction—often
called “tag” or “transient” jurisdiction—applies when
a defendant is served (or “tagged”) with a complaint
when they are found physically in the forum, even if
the defendant’s presence is only temporary or the
defendant is simply passing through. There is some
debate among courts whether “tagging” a corporate
agent is sufcient to confer personal jurisdiction over
a corporation, and thus, companies should be aware
that this may be a risk.
Whether service is proper can be a critical issue
when determining whether a lawsuit may go forward
against any defendant, domestic or foreign. “Service of
process” is a legal term that simply means the delivery
of various court orders required by the relevant rules
of law, including subpoenas, writs, and other orders
issued in the course of litigation. Note, however, that
the requirements for serving the initial notice to the
defendant that a lawsuit has been led against it are
usually more rigorous. Service of that “initial notice”
(i.e., the Summons and Complaint) both ofcially
noties the defendant that it has been sued and
informs it that the court intends to adjudicate its rights.
All courts, state and federal, have elaborate provisions
governing service of this initial notice to defendants.
Importantly, a failure by a party initiating litigation
to properly follow the service rules may result in a
dismissal of the case.
Proper methods of service may depend on the nature
and location of the defendant, i.e., whether it is an
individual, corporation, or government and whether
it is present in the United States. Not surprisingly,
the rules for serving a corporation or government are
more complex than those for serving an individual
defendant. Properly serving a corporation in the U.S.
generally requires serving one of several specic
ofcers or agents designated by statute. Properly
serving a corporation not found in the U.S. requires
an even more particularized procedure involving the
use of international conventions and government
ofces designated as conduits for service. The
Hague Convention on the Service Abroad of Judicial
and Extrajudicial Documents, to which the U.S.
is a signatory, provides methods of service on
entities located outside the U.S. that can be used in
conjunction with U.S. federal or state rules relating to
service of process. Because proper service on a party
is so closely tied to the court’s rules for proceeding
with litigation, special attention by a legal professional
must be paid to service requirements.
JURISDICTION BY LAW—SERVICE OF PROCESS
Jurisdiction in the U.S. federal courts is somewhat
more restrictive. The federal courts are called courts
of “limited jurisdiction” because they are available only
for certain limited types of disputes, including cases
involving the U.S. or foreign governments, questions
relating to international treaties or agreements, cases
arising under federal laws or regulations, and cases
between residents of different states.
Still, the jurisdiction of federal courts remains broad,
especially for disputes between U.S. and non-U.S.
parties. The procedural rules governing the federal
courts expressly grant subject matter jurisdiction over
claims between U.S. and non-U.S. citizens. While
the text appears simple, this rule in practice can
present many complexities. For example, what is the
citizenship of an entity that is incorporated in Hungary
but has its primary place of business in the U.S.? What
about a corporation that is separately incorporated
in the U.S. and in the E.U.? There are a range of
legal strategies that may be available to a non-U.S.
company in this regard. It is important to discuss
these options with U.S. counsel to be able to make an
informed judgment regarding how to proceed in the
U.S. litigation.
It is important to bear in mind that some federal
statutes may apply to conduct abroad of both foreign
and U.S. corporations. For example, certain federal
antitrust laws may apply where the conduct was meant
to produce and in fact did produce a substantial effect
in the United States. Other examples of laws that
may be applied extraterritorially include certain federal
securities and international banking laws, the Alien Tort
Claims Act, suits against foreign states, various federal
civil rights acts, and claims related to international
arbitration agreements.
subject matter jurisdiction and venue —
what disputes may be brought before U.S. courts, and where?
In addition to personal jurisdiction over the parties, a U.S. court also must have
jurisdiction over the subject matter of the claim for a litigation to proceed.
This threshold issue is referred to as the “subject matter jurisdiction” of the court.
Subject matter jurisdiction in U.S. state courts
is extremely broad. In fact, except in limited
circumstances where exclusive jurisdiction is vested
in the federal courts (e.g., suits against the U.S.
government), almost any dispute, including disputes
involving non-U.S. parties, can be brought in the local
state courts, assuming the court’s personal jurisdiction
requirements are satised.
STATE COURT JURISDICTION
FEDERAL COURT JURISDICTION
“Removal” permits defendants sued in state court
to “remove” the case from state court, in certain
circumstances, so that it may be adjudicated by a
federal court. A party sued in state court may favor
proceeding in federal court for many reasons: federal
courts may be more predictable, consistent, and
experienced in certain matters than state courts;
however, federal court litigation also may be more
expensive and time-consuming than litigation in
the state courts. As usual, with each rule there are
exceptions. For example, federal courts in the Eastern
District of Virginia are known for moving extremely
quickly while some judges in other jurisdictions
can take months or even years to resolve threshold
questions in a case.
REMOVAL FROM STATE COURT TO FEDERAL COURT
Even where personal jurisdiction, subject matter
jurisdiction, and venue all are proper, a court
nevertheless may conclude, as a matter of law, or
even of common sense, that a dispute should be
litigated somewhere else. Thus, the non-U.S. litigant
may have yet another opportunity to avoid litigation in
an unfavorable U.S. court by seeking to transfer the
case from one federal district to another, or to have it
dismissed in its entirety. This concept—which arises
primarily in the federal court system—is referred to as
one of “proper venue.”
When considering the proper venue of a lawsuit, courts
generally look for a sensible relationship between
the dispute and the forum. Thus, while the court may
consider many factors in this analysis, the primary
issue is whether the forum has some “connection” to
the parties or the subject matter of the lawsuit. Where
this link does not exist, a court may transfer the case
to another forum with a greater interest in the outcome
of the dispute, or it may dismiss the case entirely (e.g.,
so that it may be brought in a more appropriate forum
within or outside the U.S.).
Even where venue is technically “proper” because
of a reasonable “connection” to the forum, a court
nevertheless may transfer or dismiss the case as
a matter of common sense or convenience for the
parties. Where a defendant is merely seeking to
transfer a case—e.g., from one federal district to
another—the court will consider whether transfer
will promote the “convenience of the parties and
witnesses” or will serve the “interests of justice.” This
standard is intentionally vague and the determination
rests largely within the discretion of the transferring
court. The effect of a transfer may be limited, however,
because the mere transferring of a case from one
district to another—while changing the court and
potential jury pool—often will not impact the law to
be applied by the court.
A second, more dramatic, alternative is for the court
to dismiss the case on what is called “forum non
conveniens” grounds. This may occur when the
court determines that an adequate alternative forum
—frequently outside the U.S.—exists to resolve the
lawsuit. In cross-border litigation, this issue commonly
turns on questions of the nationalities of the parties,
location of the evidence, location and availability
of witnesses, respective burdens on the parties of
proceeding in the initial forum, and the potential impact
of the lawsuit on the relationship between the U.S. and
another sovereign nation. Courts also consider whether
or how bringing the suit in an alternate forum would
impact the substantive rights of the parties—e.g.,
if one party stands to gain a material advantage in
the alternate forum, the court may be more reluctant
to dismiss the case. Ultimately, the analysis is an
equitable one, but because the remedy is an outright
dismissal of the case, U.S. courts generally require
that the factors weigh heavily in favor of the alternative
forum before granting a motion to dismiss on forum
non conveniens grounds.
Finally, when considering a legal strategy involving
venue, a defendant must be especially mindful of the
timing of raising an objection. If not timely raised,
an objection to venue or on forum non conveniens
grounds may be waived by the defendant and an
opportunity to transfer or dismiss the litigation
potentially lost.
VENUE AND FORUM NON CONVENIENS
Assuming the lawsuit proceeds in a U.S. forum, a
cross-border litigation may be further complicated
by the multidimensional nature of many international
disputes. Thus, the same dispute may be the subject
of litigation in a U.S. federal district court as well as
a lawsuit in a civil law country, and perhaps even an
arbitration before an international tribunal. Fortunately,
the U.S. judicial system contemplates the potential
for these sorts of “parallel proceedings,” and has
established tools to assist parties in navigating these
complex circumstances to maximize opportunities
for fair and uniform process and results.
One of the most common of these tools is the
“anti-suit injunction.” An anti-suit injunction is a judicial
order preventing a party from initiating or pursuing a
particular action in another jurisdiction. Although these
orders may give the appearance of an overreaching
of judicial power, U.S. courts have issued anti-suit
injunctions with some regularity to restrain litigants
subject to their jurisdiction from pursuing relief in other
forums (including international courts and arbitral
tribunals). Not surprisingly, anti-suit injunctions by
U.S. courts often create tensions between judicial and
arbitral bodies before which similar disputes have been
raised. Still, because the injunction is directed at the
litigants themselves rather than the other courts or
tribunals, such orders by U.S. courts have binding
effect and may impact signicantly the positions of
the parties in the U.S. litigation.
When deciding whether to prohibit parties from
participating in parallel proceedings, U.S. courts apply
a exible standard. Thus, anti-suit injunctions—which
are issued pursuant to the court’s inherent powers and
the common law, rather than state or federal statutes
—reect primarily the court’s assessment of the risk
of duplicative or inconsistent results, the respective
public policy interests of the respective jurisdictions,
the relationship of each jurisdiction to the facts or
parties underlying the dispute, and evidence of any
agreement by the parties to litigate the dispute in a
particular forum.
ANTI-SUIT INJUNCTIONS AND PARALLEL PROCEEDINGS
the mechanics of U.S. litigation
There are several signicant and distinguishing
characteristics of U.S. litigation that must be borne in
mind, especially for litigants accustomed to litigating
in civil law jurisdictions or other legal systems. First,
although there are certain extraordinary circumstances
where a party may be compelled to pay an opponent’s
legal costs, each party in a U.S. litigation (state or
federal) generally bears its own costs in connection
with a litigated dispute, even if the case is dismissed
summarily by the court. Second, the discovery rules
in the U.S. can be so burdensome on defendants that
plaintiffs often will pursue claims simply because the
threat of discovery may be sufcient to compel an
early out-of-court resolution. Third, most disputes are
subject to extensive (and expensive) pretrial motions
practice. Indeed, the vast majority of litigation in the
U.S. is resolved by settlement, and litigation and trial
strategy is largely driven by the parties’ ability to
utilize strategically the legal process to reach a
favorable settlement.
Especially in cross-border disputes, non-U.S.
defendants will want to explore every possible
opportunity to avoid or cut short litigation in the U.S.
in favor of resolution in some other forum. Many of the
strategies for achieving this goal are outlined above
and companies should consult with U.S. and local
counsel to fully understand their range of options.
In reality, however, the likelihood is that the non-U.S.
party will be compelled to engage, to some extent, in
U.S. federal or state court litigation—from preliminary
procedural disputes to litigating the entire case on the
merits. Therefore, it is vitally important for companies
doing business in the U.S.—and particularly non-U.S.
companies that may be less familiar with the U.S.
legal system—to appreciate, as much as possible, the
litigation environment and its risks and benets when
developing their U.S. business and litigation strategies.
The following sections highlight some of the most
basic elements of U.S. litigation practice. Every case is
different, however, and will require a careful balancing
of strategies to achieve the best result.
Perhaps the greatest difference between litigation
in the U.S. and litigation in other jurisdictions is the
U.S. discovery rules. While many other legal systems
afford parties some opportunity to gather and review
information from their adversaries to help analyze
their case and prepare for trial, the U.S. legal system
permits discovery that is so broad and takes so many
different forms that parties who are unfamiliar with
the rules and practice often can be blindsided by the
U.S. discovery process. The consequences of failing
to comply with these complex rules can be signicant.
Depending on the severity of the offense, U.S. courts
have wide discretion to assess monetary sanctions
(e.g., civil penalties and attorneys’ fees), impose
preclusion sanctions (i.e., precluding the use
of certain evidence by the offending party), draw
adverse inferences, allow the other party virtually
unlimited access into the offending party’s les, or
even—in extreme cases—to award default judgment.
Accordingly, it is important to be familiar with the
three basic forms of discovery in the U.S.: Document
Requests, Interrogatories, and Depositions.
Document Requests: Either party may require its
opponent to make available or produce documents
related to the case. This process can be extremely
burdensome, time-consuming, and expensive
because there are very few limits on the categories
of documents a party may be required to produce so
long as they “may” lead to the discovery of admissible
evidence. In complex litigations, it is not uncommon
for parties to exchange hundreds of thousands of
pages of documents, or more, pursuant to these
document requests.
For this reason, negotiating discovery parameters
can be very important in complex litigation. By mutual
agreement, the parties may agree to limit the scope
of discovery to reduce costs and burdens. A party
also may seek protection from the court from harassing
or overly burdensome discovery requests.
Interrogatories: In addition to document requests,
parties are entitled to submit written questions to
their opponents which, in turn, must be responded
to in writing, and under oath, within a limited time
period. This process is much less expensive and
time-consuming than responding to document
requests, but can be similarly intrusive with respect
to the information requested. The receiving party
can object to the questions if they are overbroad,
harassing, or ask for information protected by the
attorney-client or similar privileges. Still, the rules are
quite liberal, and are designed to encourage a free
ow of information between the parties.
Depositions: Third, the parties are entitled to take
the oral testimony of witnesses they believe possess
information relevant to the case. The rules regarding
depositions are similarly exible and the party seeking
the information generally is able to select whom to
depose, when, and where. Testimony is recorded,
under oath, by a court reporter, but the judge generally
is not present. The witness’s attorney may object
to certain questions but, unless there is a danger of
violating the attorney-client or similar privileges, the
witness generally will be required to answer.
DISCOVERY
The burdens of discovery have increased exponentially
as a result of the use of electronic communication
and document retention systems. Consider how many
emails go back and forth each day with respect to a
business arrangement or transaction, or how many
electronic documents (including previous versions)
may exist on the companies’ servers. All of these
documents may be subject to discovery, pending
objection by the party requested to produce them.
Not surprisingly, the exchange of this electronic data
or “e-discovery” can be an attractive discovery tool
because this material can be searched, stored, and
organized much more easily than boxes of paper, and
is much more difcult to destroy.
E-discovery also can be extremely expensive. Because
businesses generate staggering amounts of electronic
data — including emails, presentations, reports,
accounting records, and spreadsheets — responding
to e-discovery requests accurately and completely
can be very time-consuming and require substantial
resources (both internal and external). Responding to
e-discovery requests often requires the assistance of
outside vendors who are able to capture electronic
material in a comprehensive and efcient manner.
The process can be highly disruptive of the
company’s daily business operations and can
burden the company’s data systems by requiring
the suspension of document removal protocols
throughout the litigation.
For this reason, the Federal Rules instruct parties
to address e-discovery issues as early as possible.
Parties are encouraged to agree on the scope of
e-discovery, including the type of responsive data
(e.g., email, PowerPoint presentations), the format in
which data will be produced, and where parties should
search for responsive data. Most important, parties
are encouraged to agree on their duty to preserve
discoverable data. Even absent agreement, however,
a party’s obligation to preserve discoverable data
begins when the complaint is led. For this reason,
it is important to contact a lawyer immediately, so
that he or she can draft a “legal hold notice” for your
company. By distributing a legal hold notice, a party
instructs employees to avoid accidentally or purposely
destroying any data that could potentially be subject to
the litigation.
“E-DISCOVERY”
Different notions of attorney-client and other litigation
privileges in the U.S. and abroad also play an
important role in discovery. Generally, condential
attorney-client communications are privileged in the
U.S. and protected from discovery. This is equally
true of an in-house attorney who is employed by the
business he or she represents. However, the rules are
not the same in every country. In the E.U., for example,
privilege rules require the attorney to be “independent,”
thereby removing any privilege from communications
from in-house lawyers. When engaging in discovery
for a U.S. proceeding, parties may be able to withhold
documents that they would not be able to withhold
elsewhere in the world.
Conducting proceedings in multiple jurisdictions with
different rules can create unique risks. For example,
by disclosing material in a non-U.S. proceeding, a
party may be deemed to have waived any privilege
that otherwise would have been applicable in the U.S.
litigation. Developing a proper approach to discovery
can be tricky, and it is important to consult counsel
who are familiar with the discovery and evidentiary
rules in each jurisdiction where litigation currently is
proceeding, or may proceed in the future.
PRIVILEGE
The robust U.S. discovery rules, when applied
extraterritorially, can make obtaining discovery
abroad a problematic, long, and expensive process.
Additionally, the consequences of failing to account
for the effect of foreign discovery on U.S. litigation can
be signicant.
As a general matter, U.S. discovery rules provide for
discovery outside the U.S. by the traditional forms
described above. Normally, U.S. courts direct that
the depositions of foreign persons take place in the
U.S., and that the party seeking the deposition bear
the nancial burden of this discovery. U.S. courts also
compel the production of documents located abroad
when the custodian of the documents is subject to the
court’s personal jurisdiction—emphasizing further how
critical “jurisdictional” contacts may become in U.S.
litigation. Even a non-party foreign corporation may
be compelled to produce evidence pursuant to a U.S.
court subpoena if that entity is subject to the court’s
personal jurisdiction. Multinational corporations,
in particular, should be mindful of how a court’s
jurisdictional reach can render discovery much
broader and more expensive than anticipated.
U.S. discovery rules also allow litigants to seek
discovery through international treaties and
conventions, such as the Hague Evidence Convention
to which the U.S. is a signatory. The Hague Convention
authorizes transmission of Letters Rogatory (also
known as “Letters of Request”)—from a domestic
court in one signatory nation to a domestic court in
another—for the purpose of obtaining evidence without
requiring the requesting party to utilize consular or
diplomatic channels. In practice, parties typically le
a motion in the U.S. court for a Letter of Request,
explaining the reasoning behind the request and
specically describing the desired evidence. If granted,
the Letter is transferred to a receiving tribunal in the
foreign country, and the receiving tribunal obtains the
evidence pursuant to local procedures.
Among the many countries that are signatories to the
Hague Convention, there are a variety of approaches
taken for accommodating discovery requests. In
France, for example, Letters Rogatory are addressed
to the designated Central Authority, Bureau de
L’Entraide Judicaire Internationale. Once received,
the letters are transferred to the appropriate District
Attorney who formally requests the evidence from
the local court. If oral testimony is requested, French
law requires that parties may submit questions, but
only the judge may ask the questions of the witness.
The judge then summarizes the testimony in a report
which the witness signs. Alternatively, China—a
recent signatory to the Hague Convention—does not
recognize the authority of foreign persons (e.g., U.S.
counsel) to take depositions within that country at all.
Moreover, scheduling a deposition in China requires a
Letter of Request to be transmitted through diplomatic
channels, a process that may take more than a year.
Before embarking on the lengthy and expensive
process of taking depositions abroad, it is wise
to consult competent U.S. counsel, who can help
navigate the maze of foreign discovery.
OBTAINING DISCOVERY OUTSIDE THE U.S.
FOREIGN PRIVACY LAW ISSUES
Obtaining discovery outside the U.S. is made even
more complex in the context of e-discovery by the
presence of foreign privacy and data protection laws
that impose restrictions on the collection, review, and
dissemination of various forms of “personal data.”
Personal data is dened broadly enough to include
business emails with identiable email addresses—
one of the most voluminous forms of e-discovery.
For example, the E.U.’s Directive on Data Protection
(which has been implemented in all E.U. member
states) generally limits the collection and review of
personal data to that for “legitimate purposes,” which
does not ordinarily include compliance with foreign
legal requirements. Even if a legitimate ground can
be found to support review and collection of personal
data, national laws implementing the Directive prohibit
the disclosure and export of personal data to countries,
such as the U.S., that do not meet the Directive’s
minimum standards of “adequate” data protection.
Foreign parties faced with a need to export protected
personal data to the U.S. also will need to establish a
legal basis for the transfer, as well as for the subsequent
possible disclosure of such information to third parties
once the transfer has taken place. In addition, data
protection laws require transparency, which may
require providing notice to affected individuals prior
to any potential document review.
Local regulatory authorities also may impose
injunctions to prohibit the transfer of personal data
where there are concerns that local data protection
obligations have not been complied with. Although
the authorities may be approached directly for advice,
the practical reality is that it often is difcult—and time
consuming—to obtain approval from local authorities
to proceed with a data transfer. Sometimes, the
local authorities provide no guidance at all, leaving
companies to independently balance the risks of
failing to comply with either an order of a U.S. court or
local laws. Earlier this year, the French data protection
authority (the “CNIL”) expressed concern over the
ever-increasing amount of data—both personal and
proprietary—that European companies are being asked
to transfer across the Atlantic as part of preparation for
litigation in the U.S. The CNIL has said that it will ask
the Article 29 Working Party (an independent advisory
body made up of data protection commissioners from
the 27 E.U. member states) to discuss the issues. It
is possible that the European Commission also may
launch direct negotiations with the U.S. in an attempt
to nd a solution. Despite these “real-life” quandaries,
U.S. courts often are loathe to relieve parties of their
discovery obligations based on discovery restrictions
abroad. Those restrictions do not “shield” parties from
U.S. discovery, so it becomes very important to involve
counsel early in the discovery process to address
these issues. Adopting some precautionary measures,
such as comprehensive internal privacy policies,
will enable companies to give themselves some
measure of advance protection when a speedy
response is required.
DISPOSITIVE MOTIONS AND TRIAL PRACTICE
Litigation in the U.S. is often a slow and expensive
process. Discovery can take many months or even
years, and can be a constant distraction for a
company’s business. As litigation drags on, legal fees
and the burdens of litigation can take a substantial toll.
Because of this, a signicant part of the legal strategy
in U.S. litigation revolves around assembling enough
information to support a preliminary motion seeking
dismissal of the case at some point before a trial on the
merits. Even where such a motion is not successful,
it may provide an opportunity to present the case in
a way that informs your opponent of the potential
strengths of your position and the weaknesses of
theirs. It also may provide an opportunity to educate
the judge about the case which may help with other
rulings as the litigation progresses.
There are two primary opportunities to ask the court
to dismiss a lawsuit: a motion to dismiss at the outset
of the litigation, and a motion for summary judgment
after discovery has been completed.
Motions to Dismiss
The rst type of dispositive motion occurs at the very
outset of litigation. This is called a “motion to dismiss”
and usually is based on the argument that the plaintiff
has failed to allege enough facts to support its claim.
A motion to dismiss also may be led on the ground
that the court lacks jurisdiction over the case for one
of the reasons discussed above. A motion to dismiss
for lack of personal jurisdiction must be brought at the
outset of the case because once a party appears in the
case, it may be deemed to have waived that objection.
A motion to dismiss for subject matter jurisdiction, on
the other hand, is never waived and may be brought
at any time.
Because they generally occur before any discovery
has been taken, motions to dismiss are difcult to
win. Indeed, when ruling on the motion, the court is
required to assume that all of the plaintiff’s allegations
are true (the assumption only applies at this preliminary
stage for determining whether discovery may proceed).
Remember, the entire U.S. legal system is designed in
such a way as to facilitate the opportunity for parties
to have their “day in court.” This is not to say that
motions to dismiss are never granted or that they
should not be attempted. In fact, it is rare that such a
motion is not led at the beginning of a case because
the rewards—avoiding costly discovery and the
uncertainty of trial—are great.
Even when a motion to dismiss is granted, the court
often will give the losing party an opportunity to
re-plead its case to cure whatever defects existed
in the original complaint. Or, the losing party may
appeal an order dismissing the case. Even in these
circumstances, there may be an opportunity to explore
a more favorable settlement.
Motions for Summary Judgment
When a case is permitted to proceed to discovery,
parties still have the opportunity to ask the court
to dismiss the case before proceeding to trial. This
motion, typically brought at the close of discovery, is
called a motion for summary judgment. Unlike a motion
to dismiss which is based only on the allegations in the
complaint, a summary judgment motion is based on all
of the evidence gathered during discovery. A request
for summary judgment may be led by either party.
In ruling on a motion for summary judgment, the court
must determine, based on the information gathered
through documents, interrogatories, and depositions,
whether one party is entitled to judgment as a matter
of law.
As with motions to dismiss, the standard for obtaining
summary judgment is difcult to meet. Still, the
process gives all of the parties an opportunity to
“preview” what likely will be presented at trial and
to weigh the risks of going forward. This, too, can
present additional opportunities for settlement.
Trial
In reality, very few cases actually proceed to trial
in the U.S. Most cases are resolved by motions or
by settlement. This is because trial in the U.S. is
expensive, and carries with it tremendous uncertainty
for both sides. Many trials are held before a jury of
citizens with no legal background who must decide the
outcome of the case based on the evidence presented
and instructions provided by the judge. Usually, the
burden is on the plaintiff to prove to the jury that it is
more likely than not, based on the evidence presented,
that the defendant should be held liable. The jury then
determines the amount of damages to be awarded.
Trials can vary substantially in length based on
the complexity of the case. All trials, however, are
governed by comprehensive rules of evidence that
determine what information may be presented during
the proceedings. It is extremely important that these
evidentiary rules be understood and considered when
preparing the case. The outcome of a case may hinge
on whether a particular document or piece of evidence
may be seen or heard by the judge or jury. These sorts
of questions further add to the uncertainty that may
factor into the decision whether to settle in advance
of trial or go forward with the case.
APPEALS
Even a completed trial may not mean the end of the
litigation. Appeal rights in the U.S. are quite liberal and
parties may have multiple opportunities to challenge
the decisions of the courts or juries that nd against
them. This process adds to the length, expense, and
uncertainty of litigation. Some cases are settled even
at this late stage in order to avoid any further
proceedings (normally at a discount for the party that
won the trial). It is important from the very outset of
the case, and at all stages throughout, to consider
how long and difcult a complete litigation can be.
All of this information must be balanced carefully
before proceeding to each successive step of the case.
ENFORCING JUDGMENTS IN THE U.S. AND ABROAD
The nal step in any litigation is the enforcement of a
judgment. In most cases, where a U.S. court enters
a judgment for money damages against a party, that
party will go ahead and pay the judgment. Should the
party refuse to comply and pay the sum specied, the
prevailing party may seek to enforce that judgment
by ling a “writ of attachment” and seizing assets of
the losing party located in the U.S. The Full Faith and
Credit Act provides that judgments in the courts of one
state of the U.S. may be enforced in courts of all other
states. The procedures and requirements for executing
judgments in the various states in most cases depend
on the law of the forum state. In most cases, they
involve submission of a “writ of attachment” which
directs an ofcer of the court to seize the debtor’s
property or income. A party seeking to attach assets
may also request discovery if deemed necessary to
determine whether the attachment is appropriate
under the law.
U.S. courts not only have authority to enforce U.S.
court judgments, they may also enforce judgments
issued by foreign courts and arbitral tribunals. Most
courts recognize and enforce foreign court judgments
pursuant the Uniform Foreign Country Money-
Judgment Recognition Act (adopted by most states
pursuant to state statutes). The enforcement of a
foreign judgment is more challenging than that of a
U.S. court judgment, and various defenses can be
raised, including lack of notice, fraud, and public
policy concerns.
U.S. courts also may recognize and enforce certain
foreign arbitral awards under the United Nations
Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (known as the “New York
Convention”) to which the U.S. is a signatory. The
New York Convention prescribes very limited narrow
grounds for refusing to recognize and enforce such
awards, including incapacity of a party, illegality of
agreement, lack of due process in the arbitration,
award outside the scope of arbitration, improper
arbitration panel, and vacated or not-yet-binding
award. In addition, the U.S. is a signatory to the
Convention on the Settlement of Investment
Disputes between States and Nationals of Other
States (the Washington Convention), and the Inter-
American Convention on International Commercial
Arbitration (the Panama Convention), both of which
allow for enforcement in U.S. courts of arbitral
awards made under those respective conventions.
Enforcement of arbitral awards under the New York
Convention generally is easier than enforcing a
foreign court judgment.
Where a judgment is entered against a company that
is majority-owned or controlled by a foreign state, the
attachment of the company’s assets is governed by the
Foreign Sovereign Immunities Act, which provides that
the property of state agencies and instrumentalities are
immune from attachment unless one of the specied
exceptions applies (including, e.g., where the agency
conducts business in the U.S. or contractually waives
attachment immunity). In addition, the assets of a
state-owned company may be attached to enforce a
judgment against the foreign state, at least where the
company is subject to “extensive control” by the state.
A U.S. court judgment also may be enforced by
courts abroad. The requirements for recognition and
enforcement of U.S. judgments vary from country
to country. Companies seeking to enforce a U.S.
judgment abroad should consult not only U.S. counsel,
but also local counsel in the country in which judgment
is sought to be enforced.
responding to a lawsuit
in the United States
The most important thing to do when you receive
notice that you have been sued in the U.S. is to
contact experienced counsel—both in the U.S. and
in the jurisdiction where you are located. Especially
in cross-border disputes, there often are strategies
that you will need to consider that are impacted
by the laws of multiple jurisdictions. The best
opportunities for early resolution, dismissal, or
transfer to a more favorable jurisdiction come at
the outset of litigation and it is important to identify
those opportunities immediately.
When providing information to your attorneys, also
remember to disclose all relevant information regarding
the subject matter of the lawsuit. You never know what
information may open additional doors for you in the
context of the litigation. The greater the information
available, the better the opportunity for your attorneys
to provide the best guidance possible.
Finally, once you have contacted counsel, it is
important that you follow their advice. Your attorneys
are experienced in handling these issues, especially
at the delicate preliminary stages of the case. What
you do during these rst days and weeks often will
set the tone for the entire litigation and your attorneys
will know how best to direct you toward the path of
greatest success.
This guide identifies some of the basic issues and considerations a non-U.S. business may face when
contemplating litigation in the U.S. It is clear that companies engaged in commercial activity in the
U.S. or with U.S. counterparties may be subject to litigation in U.S. courts. U.S. litigation is complex
and presents many risks, especially for companies not familiar with the legal process. It is important to
make sure you have competent U.S. legal counsel available to assist you in the event a problem arises.
We close this guide with a series of practical tips for any non-U.S. litigant that has received notice
that it is being sued in the U.S. This list is not comprehensive, and you will need to consult your legal
representatives to develop a litigation strategy that considers all of the risks and available options.
CONTACT U.S. AND LOCAL COUNSEL
CONTACT YOUR INSURANCE COMPANY
In many cases, companies have insurance coverage
that will help with the cost of litigation as well as any
potential judgment in the case. To avoid the possibility
of lost or diminished coverage, it is important
to contact each of your insurance companies
immediately, and notify them of the claims asserted
against your company.
PRESERVE DOCUMENTS
Courts in the U.S. are particularly hostile to the deletion
or destruction of documents after notice of a lawsuit
has been received. This includes hard-copy materials,
electronic les, and even emails. It is important that
you send notice to all relevant employees that they
must preserve all documents relevant to the lawsuit.
Your attorneys can help you draft an appropriate “hold
order” to send to your workforce that will accomplish
your purposes without creating unnecessary panic.
You also will need to shut down any “auto-delete”
functions for emails or other electronic materials.
Depending on the scope of the case, you may need
to retain a forensic vendor to help you extract relevant
information from your company’s servers. Make sure
to keep a detailed record of all actions taken to
preserve documents in case your opponent tries to
argue at some future point that you have taken
actions to obstruct the case.
BEGIN A CASE FILE
As soon as you receive the rst document or pleading
in a lawsuit, begin to compile a litigation le. In
particular, you should make sure to keep copies of
all pleadings, and record how and when they were
delivered, who delivered them, and to whom they
were delivered. Especially in cross-border disputes
where international service requirements may be
an issue, you want to preserve every opportunity to
challenge the lawsuit for failure to follow applicable
procedural rules.
IDENTIFY ALTERNATIVE DISPUTE
RESOLUTION MECHANISMS
It is possible that you have a contractual right to
have the dispute resolved in some forum other than
the one noticed in the lawsuit. For example, many
contracts have clauses requiring the parties to submit
disputes to arbitration or to litigate the disputes in
a particular forum. You will want to determine at the
very beginning of the lawsuit—and especially before
you respond—whether there is a way you can get the
lawsuit dismissed or transferred to a more favorable
jurisdiction because it should have been brought
somewhere else.
BE REALISTIC
It seems obvious, but it is important that you consider
seriously all of the risks, strategies, and possible
outcomes in the case from the outset. You should
never assume that you will win or lose a case until you
have had the opportunity to analyze carefully all of the
circumstances with the assistance of your counsel.
It also is important to assume that your opponent
similarly has retained experienced and competent
counsel and is devising strategies of its own. By
remaining realistic, diligent, and open-minded, you
will provide yourself the greatest opportunity to place
yourself in the best possible situation from the very
beginning of the litigation.
WASHINGTON, DC
NEW YORK
SAN FRANCISCO
LOS ANGELES
ORANGE COUNTY
ANCHORAGE
LONDON
BRUSSELS
WWW.CROWELL.COM
© Crowell & Moring LLP, 2008
