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IN RE APPLICATION OF SCHMITZ

April 24, 2003

IN THE MATTER OF THE APPLICATION OF MICHAEL SCHMITZ, CHRISTIAN BÖHLING, KATRIN HÖWE, PETER HÖWE, THOMAS OSTERMANN, CLAUDIA MALM-OSTERMANN, ANNE SCHIECKEL, CHRISTINE SCHIECKEL, WERNER SCHMITZ, IRENE SCHULZE, RALF SCHULZE, ROLF KEEVE, HELGA ZECHMEISTER, BERND COLLIN, ANDREAS LANGE, GABRIELE THOMAS, ANNA WALDMANN, EWALD WALDMANN, BODO DOBBERKAU, IRMTRAUT DOBBERKAU, JOSEF MESSERER, DR. HELMUT CULLMANN, ACHIM BREIDENSTEIN, DR. OLAF KNOBLICH, DR. GUDRUN BRÄU, KELLER MANFRED, ÜBELHÖR OTTO, GERGELY KATALIN, PETITIONERS.


The opinion of the court was delivered by: Sidney Stein, District Judge.

OPINION

Petitioners, plaintiffs in certain lawsuits pending in the Federal Republic of Germany against Deutsche Telekom AG, seek documents produced by Deutsche Telekom in connection with a securities class action currently pending before this Court. Even though the statutory prerequisites of 28 U.S.C. § 1782 have been met, this Court exercises its discretion to deny the petition on the grounds that the twin aims of the statute — providing efficient means of assistance to participants in international litigation in our federal courts and encouraging foreign countries by example to provide similar means of assistance to our courts — would not be furthered if the petition were granted.

I. Background

Petitioners are individual plaintiffs in four lawsuits currently pending in the Federal Republic of Germany against Deutsche Telekom, a German telecommunications company. (Braun Decl. in Support of the Petition ¶ 2 n. 1). Those lawsuits allege that Deutsche Telekom "misled [plaintiffs] when [Deutsche Telekom] disseminated false statements in its prospectus and overstated the value of its real estate assets." (Stone Decl. in Support of the Petition ¶ 3; Braun Decl. ¶ 2). In addition, a consolidated securities class action litigation is currently pending in this Court entitled In re Deutsche Telekom AG Securities Litigation, 00 Civ. 9475(SHS) (the "American Action"). Petitioners contend that the allegations in the American Action are "substantially identical" to the allegations in the German actions. (Stone Decl. ¶ 4). Deutsche Telekom is represented in the American Action by Cravath, Swaine & Moore, while the class action plaintiffs' lead counsel are Milberg, Weiss, Bershad, Hynes & Lerach LLP and Bernstein, Liebhard & Lifshitz, LLP. During the course of the American Action, approximately 300,000 documents (the "Documents") have been produced by Cravath to the class action plaintiffs' lead counsel pursuant to a confidentiality order. (See Stone Decl., Ex. C — Stipulation and Order Governing the Production and Use of Confidential Material dated October 19, 2001). Those Documents are currently located in the Southern District of New York in the possession of Cravath; Milberg, Weiss; and Bernstein, Liebhard (collectively, "respondents"). By Order to Show Cause filed January 21, 2003, petitioners now seek production of the Documents from respondents pursuant to 28 U.S.C. § 1782.

At a February 18, 2003 oral argument before this Court sitting in Part I, Cravath opposed that application. Milberg, Weiss and Bernstein, Liebhard stated that they were taking no position as to the production of the Documents.

II. Discussion

A. Petitioners Meet the Statutory Requirements of Section 1782

This petition is brought pursuant to 28 U.S.C. § 1782, which governs under what conditions U.S. courts may provide assistance to foreign and international tribunals and litigants before those tribunals. The statute "affords access to discovery of evidence in the United States for use in foreign proceedings." In re Edelman, 295 F.3d 171, 175 (2d Cir. 2002). 28 U.S.C. § 1782 provides, in pertinent part, that,

"[t]he district court of the district in which a person resides or is found may order him to . . . produce a document . . . for use in a proceeding in a foreign or international tribunal. . . . To the extent that the order does not prescribe otherwise, . . . the document . . . [shall be] produced, in accordance with the Federal Rules of Civil Procedure."
The U.S. Court of Appeals for the Second Circuit has identified three requirements in section 1782 as follows,
"(1) that the person from whom discovery is sought reside (or be found) in the district of the district court to which the application is made, (2) that the discovery be for use in a proceeding before a foreign tribunal, and (3) that the application be made by a foreign or international tribunal or `any interested person.'"
Edelman, 295 F.3d at 175-76 (citing In re Esses, 101 F.3d 873, 875 (2d Cir. 1996) (per curiam)).

All these requirements are met here. Cravath argues that the first requirement — that the person from whom discovery is sought be found in the Southern District of New York — is not satisfied since the documents are only in Cravath's "temporary custody . . . solely for the purposes of the U.S. Litigation." (Baron Decl. In Opposition to the Petition ¶ 3). That argument is creative, but sails far wide of the mark. Application of section 1782 does not involve an analysis of the duration of residency of the documents or even why a respondent has the documents. It is sufficient that respondents reside in this district, as they concededly do. See Edelman, 295 F.3d at 179-80 (section 1782 permits depositions "without regard to whether the deponent is `residing' in the district or only sojourning there") (citations omitted). The parties concede that the second and third requirements are met. Accordingly, petitioners have met the three requirements of section 1782.

B. The Court's Discretion Should Not Be Exercised In Favor of Petitioners

Simply because the facial requirements of section 1782 have been met does not end the inquiry, for Congress and decisional law have given district courts "broad discretion" over the issuance of discovery orders pursuant to section 1782(a). See Edelman, 295 F.3d at 181. The Second Circuit has instructed the district courts to exercise their discretion "in light of the twin aims of the statute: `providing efficient means of assistance to participants in international litigation in our federal courts and encouraging foreign countries by example to provide similar means of assistance to our courts. . . .'" In re Metallgesellschaft, 121 F.3d 77, 79 (2d Cir. 1997) ...


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