A district court in Missouri is the latest U.S. court to reject a party’s effort to resist discovery on the basis that a foreign law allegedly prohibits the requested disclosure. In Nidec Motor Corp. v. Broad Ocean Motor, LLC, Case No. 4:13-cv-1895, 2024 WL 4332057 (E.D. Mo. Sept. 27, 2024) the court compelled discovery over defendants’ objection that disclosure of the requested information was barred by China’s recently-enacted Counterespionage Law. The Nidec decision and other similar recent decisions illustrate the difficulties that parties have encountered in attempting to avoid providing discovery in U.S. courts based on allegedly blocking foreign laws.
The Nidec Decision
The Nidec court found several flaws in defendants’ arguments and evidence. First, the court found that defendants presented only “speculation” that they may be subject to penalties if they provided the requested discovery. Id. at *6. Specifically, the court faulted the defendants for failing to demonstrate how the law posed tangible risks of sanctions by the Chinese government if they provided the requested discovery. Id. at *5. Indeed, the court noted that the defendants failed to explicitly identify which sections of the law were allegedly implicated much less how they apply to the facts of the case. Id. at *2 n.4. The court similarly found unconvincing a declaration from a Chinese attorney, submitted by defendants, since that declaration addressed other Chinese laws, namely China’s Data Security Law and China’s Personal Information Protections Law, and not the Counterespionage Law. The court also was unmoved by a letter from a Chinese authority that stated that the defendants are expected to comply with China’s data security laws. Id. at 6.
Second, the court noted that defendants failed to cite a case in which a Chinese individual or entity was sanctioned under Chinese law for complying with their discovery obligations in U.S. court. Id. at *6. On the other hand, the Court cited many instances in which the court rejected arguments similar to those of the defendants. Id. Those cases are mentioned further below.
Third, the court was unmoved by the defendants’ argument that they were in a position of either complying with their discovery obligations or subjecting themselves to Chinese sanctions. “No one forced Defendants to market products in the United States,” the court held. Id. at *6. “They chose to, knowing that they could be haled into American courts, where they would be subject to the applicable rules.” Id.
Finally, the court found that the defendants did not show that the Hague Evidence Convention was a viable alternative for the requested discovery. The court noted the lack of progress the defendants made in obtaining relevant guidance from the Chinese authorities in connection with discovery requests that had been propounded much earlier in the case. Id. at *6.
Other Similar Decisions
The Nidec decision follows other recent decisions in which discovery has been compelled over protestations that such disclosure is prohibited by Chinese law. For example, in Motorola Solutions, Inc. v. Hytera Commc’ns Corp. Ltd., Case No. 1:17-cv-1972, 2023 WL 5956992 (N.D. Ill. Sept. 12, 2023), the court ordered the defendant to make its source code available for review in the United States. Although the court found that Article 37 of China’s Cybersecurity Law blocked the production of such information, id. at *5, the Court found that production was nevertheless warranted after considering the comity factors—outlined in Société Nationale Industrielle Aérospatiale v. U.S. Dist. Ct. for S. Dist. of Iowa, 482 U.S. 522, 544 n.28 (1987) and supplemented by the lower courts since. Id. at *9.
Similarly, in Textron Innovations Inc. v. SZ DJI Tech. Co., Ltd., Case No. 2:22-cv-351, 2023 WL 4623881 (E.D. Tex. July 19, 2023), the court rejected the defendants’ efforts to limit the dissemination of its source code to only Chinese nationals lawfully admitted for permanent residence in Chinese mainland. The defendants argued that they had to comply with China’s export control laws, the violation of which can subject the exporter to severe administrative and/or criminal penalties. Id. at *1. The court rejected that argument in part because defendants’ proposed restrictions would exclude all of plaintiff’s counsel and experts and even preclude the limited universe of people that could review the code from discussing the code with plaintiff’s counsel. Id. at *2. The court also noted that defendants failed to identify case law where a court had adopted a similar restriction. Id. at *2.
In Owen v. Elastos Found., 343 F.R.D. 268 (S.D.N.Y. 2023), the court compelled the production of emails, text messages, and other communications over defendants’ objections that such disclosures were barred by China’s Personal Information Protection Law. The court determined that disclosure of the requested discovery would not conflict with that law. Id. at 286. Further, the court found that even if there was a conflict, production would be required under a comity analysis based on the factors outlined in Aérospatiale. Id. at 289.
The court in In re Valsartan, Losartan, and Irbesartan Products Liability Litig., MDL No. 2875, 2021 WL 6010575 (D.N.J. Dec. 20, 2021) reached a similar result. There, the defendant withheld documents on the grounds that their disclosure allegedly would violate the Law of the PRC on Guarding State Secrets. Id. at *1. The court also anticipated that defendant would invoke China’s Data Security Law and China’s Personal Information Privacy Law. Id. at *7. The defendant did not provide the contested documents to the court for in camera review, believing that even that disclosure would violate Chinese law. Id. at *11. Without being able to review the documents, the court was unable to determine whether the documents were indeed protected by the Chinese laws. Id. at *11. Nevertheless, the court engaged in a comity analysis and determined that many of the disputed documents must be produced even if they were covered by the Chinese laws. Id. at *18. An important point in the court’s analysis was “the legal uncertainty as to what is a PRC state secret and in getting a definitive, final confirmation [which] creates a blocking statute that is a textbook example of how to limit / avoid discovery of relevant information that may evidence a PRC defendant’s liability to U.S. plaintiffs.” Id. at *18.
Still further, last year, the same Nidec court rejected a similar effort by the defendants to withhold sales data of the accused products. Nidec Motor Corp. v. Broad Ocean Motor, LLC, Case No. 4:13-cv-1895, 2023 WL 346027 (E.D. Mo. Jan. 20, 2023). At that time, the defendants relied on other Chinese laws, namely China’s Data Security Law, Cybersecurity Law, and Personal Information Protection Law. The court weighed the Aérospatiale comity factors and concluded that the plaintiff was not required to pursue the discovery it sought through the Hague Evidence Convention and thus compelled defendants to produce the requested discovery. Id. at *4.
In view of the Nidec decision and the other similar decisions mentioned above, parties contemplating whether to resist discover on the basis of a foreign blocking statute should be prepared to show that both (1) the blocking statute indeed prohibits the disclosure of the requested discovery and (2) the Aérospatiale comity factors (as supplemented by regional case law) weigh against production.