Friday, April 04, 2014

Discovery in Classification Cases

It is unusual to hear about a discovery dispute in a tariff classification case at the Court of International Trade. The one at the center of FDK America, Inc. v United States is, even as discovery disputes go, a strange one.

The underlying case has to do with the classification of optical isolators, whatever those are. Apparently, at some time prior to this case, Customs ruled on the classification of similar products for Nortel, a company that is not involved in this litigation and is currently in joint U.S.-Canadian bankruptcy proceedings.

One thing you need to know is that prior to presenting a case to the Court for resolution, the parties engage in discovery. Discovery is the process of requesting and reviewing information from the other side or from non-parties to help support your case, refute the other side's case, etc. The scope of what can be discovered is very wide and includes anything that might eventually lead to something that is both relevant and admissible. But, the information requested in discovery need not be either.

Here, the plaintiff requested that Customs and Border Protection turn over documents Nortel submitted to CBP in conjunction with the ruling issued on its product. Customs has refused citing privacy laws and the fact that the request seeks the release of business proprietary information. The government says FDK should go to non-party Nortel with a discovery request to turn over the documents. FDK has at least approached Nortel, but Nortel seems either too busy with the bankruptcy or far enough along in the process to not care. It has not responded.

Having not succeeded in getting the information, FDK proposed to the Court that it will enter into a voluntary protective order if Customs turns over the information. That should protect Nortel's interests, if it continues to have any. To succeed, FDK needs to show "good cause." To show good cause, FDK points out that Nortel is unavailable and that the requested information is so old that it can no longer be particularly valuable in the fast-moving telecom industry.

Taking up the issue, the Court of International Trade weighed the need for the disclosure against the potential hard to Nortel. Noting concerns that disclosure might theoretically infringe a fifth amendment right against the taking of private property (including possible trade secrets), the Court focused on the possibility of securing consent from Nortel. Given that the Nortel assets may have been transferred and the current owner may be outside the United States, the Court contemplated how best to give notice to the current owner, whose identity is presently unknown.

Until such time as the unknown owner of the private information can be found or all reasonable efforts to find the owner have been exhausted, the Court will not order the release of the information to the unknown potential detriment of the currently unknown owner. Thus, FDK must use the standard subpoena process to identify someone with knowledge of the owner of the information. If the owner is discovered, the plaintiff can seek the information through normal discovery channels. If that person happens to be out of the country, additional (and more complex) steps will be necessary.

I wonder whether this kind of thing happens all the time in district court litigation and we are just lucky not to see it or whether this is a genuinely strange situation. Either way, I'm glad its not happening in one of my cases.

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