Gary C. Robb
Cases against foreign defendants require special care. By following procedures and avoiding pitfalls, plaintiff lawyers can increase the odds of victory for their clients.
In this era of global economics, the “Made in the USA” label has become a rare sight. Attorneys who represent plaintiffs in products liability cases are increasingly finding that the products at the core of these cases have been manufactured abroad. Whether the product is a car, truck, aircraft engine, cigarette lighter, or household product, the odds are greater than ever that it was designed and manufactured on foreign soil.
Cases against foreign defendants require special consideration. The first step is determining whether the foreign product manufacturer should even be named as a defendant. In view of the time, expense, and effort involved in pursuing a foreign defendant, the lawyer must consider whether full recovery may be obtained from U.S. defendants alone.
If the foreign manufacturer is a peripheral or nominal defendant or if it has a design and manufacturing presence in the United States (as do many motor vehicle manufacturers), the lawyer should consider proceeding against the U.S. defendants only. This would be advisable where the product is advertised, marketed, and sold by a national retail chain like Wal-Mart.
Under the law of most states, liability would attach to the seller/retailer. However, if the injury was clearly caused by the product alone and there are no other obvious potential defendants, suit must proceed against the foreign manufacturer.
Good practice also dictates that even a foreign manufacturer that has U.S. subsidiaries should be named as a defendant if the injury victim suffered catastrophic injuries or died. This is because a subsidiary may not have enough assets or insurance to cover the anticipated judgment in a catastrophic injury or death case.
The foreign parent company should also be named if the product’s primary design and engineering specifications were formulated at the company’s foreign headquarters. Most U.S. subsidiaries do not have access to or possession of engineering design drawings or technical manufacturing data, or so they often claim. All testing and design materials normally remain with the foreign parent company. Also U.S. subsidiaries rarely have access to field data or reports of other substantially similar incidents or accidents involving use of the product outside the United States.
It is a mistake to consider filing suit against the U.S. subsidiary or division in the hope of initiating discovery proceedings against the product manufacturer abroad. Most foreign countries do not permit discovery of evidence within their borders unless the U.S. court has personal and subject matter jurisdiction over the entity in possession of that evidence.
A number of countries have “blocking statutes” that set criminal penalties for obtaining evidence from nonparties to be used in civil proceedings abroad. Therefore, it is preferable to take the time and trouble to bring in the foreign defendant if discovery from that party is desirable or necessary for the case.
The preferred method of service on foreign defendants is through the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters (Hague Convention).1 The purpose of the Hague Convention is to provide a simpler and more uniform method of serving process in foreign countries, ensure that defendants in foreign jurisdictions have timely and proper notice of a lawsuit, and ensure enforcement of a judgment against that defendant in the foreign domicile.
Service under the convention’s terms is expensive, time consuming, and burdensome. It can take between 4 and 12 months. The first step is filling out a series of forms, which may be obtained from most U.S. marshals’ offices. These forms, along with the service of summons and initial complaint, must be translated into the language of the defendant’s country and served on a “designated central authority.”
In some cases involving Japanese corporations, U.S. courts have overlooked this requirement because the corporate officers were all fluent in English.2 Other courts have refused to enforce a judgment because the plaintiffs did not comply with the Hague Convention’s language provisions.3
The basic instructions for service are set out in Memo No. 386, which was issued to all U.S. marshals by the Department of Justice in July 1979. It contains detailed instructions for serving a summons on a foreign litigant. To date, only 47 countries have become signatory nations to the Hague Convention. These include France, Germany, Great Britain, Japan, Sweden, and Switzerland.
Increasingly, plaintiff lawyers are turning to Rule 4(d) of the Federal Rules of Civil Procedure to effect service of process against a foreign defendant in federal court cases. The procedure is simpler than service under the Hague Convention, but service by mail can create problems down the road.
Rule 4(d) permits service by mail with a request that the defendant execute an enclosed waiver of any other “formal” service. Failure to do this subjects the defendant to the costs of effective service in some other fashion. But if the defendant signs the waiver, the ultimate costs to the plaintiff can be steep. Judgments in suits initiated by mail service are not always enforced by the courts of the foreign defendant’s home country. Courts in most Asian countries would find a lack of due process.
Under most state rules and Rule 4(d)(1), a waiver of formal service does not waive any objection by the foreign defendant to the substantive jurisdiction of the U.S. court. This objection may be raised at any time, even while the plaintiff is attempting to enforce the judgment in the defendant’s country.
Several courts have deemed these waivers “voluntary and private.”4 Consequently, they do not rise to the level of the “compulsory process” required to allow foreign enforcement of a judgment.5
In any case involving a Japanese product manufacturer, counsel must be particularly wary. When the Special Hague Commission of April 1989 asked Japan for clarification regarding the effectiveness of mail service within its borders, the response was less than forthcoming.6 Consequently, U.S. litigants who decide to forgo Hague Convention service in favor of easier and cheaper mail service in Japan are likely to encounter great difficulty in enforcing a judgment there.7
In a number of cases, plaintiffs have sued a U.S. subsidiary as the “agent” of a foreign manufacturer for purposes of service of summons.8 If it can be proven that the foreign parent exercises sufficient “dominance and control” over the subsidiary that the two are in reality the same corporate entity, the parent may be amenable to service of process by service on the subsidiary.9 However, most foreign companies that go to the trouble of setting up a U.S. subsidiary go through the necessary paperwork and legal formalities to retain at least the appearance of a “separate and distinct” corporate entity.
Another trap plaintiff counsel should be wary of is the “51 percent ownership rule.” Title 28 of the U.S. Code provides that when a foreign country owns more than 50 percent of a foreign company named as a defendant, that company can seek automatic removal to federal court.10 The most troublesome aspect of this rule is that the entire action, following removal, must be tried before a U.S. district court judge sitting without a jury. Plaintiff counsel must carefully consider this in deciding whether a foreign defendant is truly indispensable to a lawsuit.
Where the foreign country is not a Hague Convention signatory, plaintiff counsel must ascertain what that country will recognize as proper service. Sometimes, the plaintiff must serve summons twice, once according to U.S. rules and once according to the rules of the foreign jurisdiction.
The formal method of taking evidence abroad is under the terms of the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (Evidence Convention).11 Terms of the Evidence Convention are complicated and cumbersome and essentially require all requests for evidence to go through the foreign country’s state department.
Fortunately, once a U.S. court has established it has personal jurisdiction over the foreign defendant, the vast majority of courts have ruled that the defendant must comply with our discovery procedures irrespective of whether the documents or witnesses are located in a foreign country.
Many countries, including Japan and Germany, consider discovery an interference with their sovereign powers. In several countries, it is a crime to be involved in “voluntary disclosure” of information in aid of U.S. civil process.12 Consequently, discovery proceedings, including document productions or depositions, should be initiated only after securing an order from the U.S. court. Of course, the best plan of action is to arrange for depositions on U.S. soil, if at all possible.
If the foreign defendant provides the requested documents (usually only by court order), these are often in the language of the foreign country. This is so even if the defendant has translated the documents into English for its U.S. defense counsel.
Plaintiff counsel should ask the defendant whether the documents have been translated into English and, with the court’s assistance if necessary, acquire the translated versions. But caution is needed.
These translations may strongly favor the defendant’s position and should be independently reviewed by plaintiff counsel’s own translator. Of course, if the documents are not already translated, plaintiff counsel must hire a translator.
Often, plaintiff counsel will have to go to the foreign country to review the documents because there are so many that it would be too burdensome to ship them to the United States. To assist in the document review process, counsel must also bring along at least one translator. A good source for translators is engineering schools, which often enroll students who are native to foreign countries and who understand engineering terminology.
All documents that will be used during depositions should be translated well ahead of the deposition date. There is nothing that can unravel a deposition more quickly than disagreements over the meaning of particular words in a translated document.
Plaintiff lawyers should forward these documents to defense counsel with a request to bring to plaintiff counsel’s attention any objections to or discrepancies found in the translations for possible resolution by the court. Defense counsel then will be hard pressed later to argue that a document’s translation was incorrect.
It is also good practice to show key documents to the person who will translate the deposition testimony. This allows the translator to become familiar with engineering or other technical terms that may be used during the deposition, which can help to avoid disagreement about the proper translation of those terms.
Although opinions are mixed, courts are increasingly requiring foreign defendants to produce key witnesses in the United States, especially if the plaintiff agrees to share the expense. This is good news given how expensive and difficult it is to transport the legal staff, documents and materials, court reporter, and translator needed for a deposition in a foreign country.
Even when the deposition is conducted here and the translator is competent and accurate, the prospects of obtaining useful information from a witness are hampered by the procedure. The plaintiff lawyer asks a question in English, which the translator repeats in the witness’s language.
The defense lawyer raises any objection to the question in English. The objection must then also be translated into the witness’s language (a step which should not be necessary because it is intended only to “coach” the witness). The witness answers the question in the foreign language, and the translator translates that answer into English. It often takes 10 to 15 minutes to get an answer to a simple question.
Consequently, plaintiff counsel should keep questions short and to the point. A long and rambling question, especially with these translation difficulties, often yields a like response.
Some ground rules should be established before the deposition. First and foremost, the parties should agree that only one translator will be present. This will avoid a “battle of the translators” during the deposition. Anyone who has experienced this frustrating exercise knows these battles can be interminable.
If the parties cannot agree on an “official translator” for the deposition, the court should be asked to select one for them. Allowing the defendant to choose a translator creates a great risk that the witness’s answers will be translated in a form that is either favorable to the defendant’s position or wholly indecipherable.
Another alternative is to use a translator selected by the defendant and have another translator present to ensure that the “official” translations are accurate. If plaintiff counsel has to use a translator selected by the defendant, then a backup translator is essential to ensure the translations are accurate. In that case, avoiding the “battle of the translators” may be impossible. It is a mistake to rely solely on the defendant’s translator.
For example, during the deposition of a French executive in a products liability case, an issue arose regarding the English translation of the French word defaut. The word had been used frequently in the French company’s internal documents to describe the product’s failure mechanism.
The witness testified that a default was simply a “problem.” An official French-English language dictionary was produced that said the word was synonymous with the English word “defect.”
Given the difficulty of securing the attendance of witnesses, it is usually advisable to videotape all depositions. This preserves the option at trial of either reading the deposition transcript or playing edited videotape testimony. Sometimes, costs can be minimized with video conferencing by stipulation, but plaintiff counsel should always have an observer present in the room where the deposition is being taken.
An issue that arises with great frequency is whether an executive or an engineering witness of a foreign defendant should be compelled to give testimony in English if the witness is fluent in English. At least one court has so held.13
Any objections to the translation of deposition testimony must be addressed well in advance of trial. The witness’s signing of the deposition should be taken as a waiver of any translation disputes. Plaintiff counsel simply cannot permit any aspect of the trial to degenerate into an unseemly dispute concerning the correct translation of certain words in either a document or a deposition.
The process of obtaining jurisdiction over and conducting discovery from foreign product manufacturers, although tedious and cumbersome, often yields positive results. If a foreign company is the only entity that can produce all relevant engineering and field data by either documentary or testimonial evidence, it usually must be named as a party defendant.
By carefully following the process and discovery rules and avoiding common pitfalls, plaintiff counsel can increase the odds of eventually hearing the five most beautiful words in the English language: We find for the plaintiff.