Discovery - a Powerful U.S. Litigation Tool - Sometimes Even in Germany

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U.S. rules of civil procedure governing litigation address how, and the extent to which, a party to a lawsuit can obtain evidence related to a claim that is within the control of another party or a third party.

In Germany, a party must state in detail all facts necessary to fully support its claim. If the plaintiff fails to do so, the complaint will be dismissed. If a defendant contests relevant facts, the plaintiff must offer evidence to support its version of the facts in question. Often, the specific relevant facts in question are crystallized only following an exchange of a series of briefs between the parties. Evidence is admissible only with respect to the specific relevant facts that have been contested, and it is upon the party bearing the burden of proof for such facts to obtain that evidence. Generally (albeit with certain limited exceptions), another party or a third party does not have an obligation to produce documents as evidence. Witnesses have an obligation to testify, but only in trial, not before.

The situation in the United States is fundamentally different. A lawsuit can generally be commenced with a “Notice Pleading,” containing only a very general description of the facts (a short and plain statement of the claim). Based on such broad description of facts, the parties in litigation can obtain evidence from another party during a pre-trial phase called “discovery” with respect to any facts that may be related to the complaint or answer. In other words, the broad nature of the pleadings allows for (compared to Germany) broad “fishing expeditions” for facts, and a party is obligated (subject to limited privileges) to surrender documentation and present witnesses for depositions to the extent possibly relevant for the litigation. German companies doing business in the United States or otherwise subject to U.S. jurisdiction can become subject to this procedure in a U.S. litigation. Because no comparable procedures exist in Germany and, in our experience, German clients are often surprised by the “intrusiveness” of discovery, this Newsletter explains some of the principles of U.S. discovery.

Basic Concepts of Discovery

The goal of discovery is to give a party to a litigation the possibility to obtain evidence from the opposing party to prove facts relevant to a party’s allegations after a complaint is filed but before the trial in court begins. Means of discovery include (i) requests for written answers (interrogatories), (ii) requests for productions of documents (including electronic documents and e-mails) and (iii) requests for admissions and depositions (a testimony of a party or witness before trial). If the requested party does not comply with such requests, the requesting party can ask the court for an enforcement order.

Advantages and Disadvantages of Discovery

Undoubtedly, the discovery procedure is very advantegeous for a party that cannot prove relevant facts without obtaining evidence from the opposing party. While in Germany the filing of a complaint is almost always futile if all the evidence to support a claim is in the hands of the defendant, in the United States, the plaintiff can obtain the necessary evidence from the defendant or third parties through discovery, which is also available to the defendant. Discovery can be a helpful tool to reveal the true facts underlying a dispute.

However, discovery can be very burdensome and costly for all parties involved. For example, at a deposition usually both parties bring their lawyers, and there are a videographer and a court reporter present, all of whom need to get paid. In many cases, a deposition will take various days. Including fees, travel and further expenses, deposition costs can be very significant. And generally, each party has to bear its own expenses.

Abuse of Discovery

Because of the high costs of discovery and the related nuisance value, there is a potential for abuse. For instance, the prospect of having a third party, such as an important customer or supplier, involved in discovery, may be disconcerning for a party to a dispute. As a result, a party may be willing to settle a complaint that would have been without merit, only to avoid jeopardizing the relationship with the third party.

Discovery to Obtain Proof for Use in U.S. Lawsuits

U.S. subsidiaries of German companies that become a party of a lawsuit in a U.S. court, have the same obligations as U.S. companies with respect to discovery. Moreover, under limited circumstances, they may even be obligated to produce documents or witnesses of the German parent company (even if the German parent company is not subject to U.S. jurisdiction). This is a complicated area of discovery law, and compliance with existing U.S., international and German rules can be crucial for the outcome of the litigation.

Discovery to Obtain Proof for Use in Lawsuits in Germany

Sometimes in a lawsuit in a German court (mostly with one U.S. party, but even if solely involving German parties), it can under certain circumstances be possible to obtain discovery in the United States. United States Code §1782(a) authorizes U.S. courts to allow discovery if the three following conditions are met:

1. The application must be filed with the U.S. court in whose jurisdiction the party subject to discovery is located or residing. Courts consider it sufficient when a party has a subsidiary within the court’s jurisdiction. Even continuous business activity may be sufficient.
2. The evidence sought has to be for use in the German judicial proceeding.
3. The application must be filed by a person interested in the German judicial proceeding.

Although case law has amplified the above, in general, once these conditions are met, the U.S. court has discretion to allow discovery to support the non-U.S. proceeding.

Discovery is a procedure aimed to help reveal the truth in a litigation, but can also be misused as a tool to put pressure on a party in a legal dispute. It can even be authorized by a U.S. court for lawsuits which take place in Germany.