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In re Application for Discovery for Use in Foreign Proceeding Pursuant to 28 U.S.C. & 1782

United States District Court, D. New Jersey

January 10, 2019



          Kevin McNulty United States District Judge.

         Before the Court is the Report and Recommendation ("R&R") of Magistrate Judge James B. Clark, III, (DE 25) regarding (1) the application (DE 2) of petitioner Michael Page do Brasil Ltda. ("Page") pursuant to 28 U.S.C. § 1782 for judicial assistance in obtaining evidence located in the United States from respondent Robert Half International Inc. ("International"); (2) Page's request to seal all docket entries that disclose its identity and to permit the parties to use pseudonyms (DE 1); and (3) International's motion to strike certain exhibits that were attached to Page's judicial assistance application (DE 16).

         The R&R of the Magistrate Judge disposed of the second and third applications thus: Page's application to seal and proceed anonymously was denied (DE 1); and International's motion to strike was granted in part and denied in part (DE 16). As to those two rulings, neither party has filed an objection. This Court, having conducted an independent review of the recommendation, adopts and affirms the Magistrate Judge's R&R.

         The R&R also recommended denial of the first application, Page's application for judicial assistance in obtaining discovery in the United States pursuant to § 1782. As to that portion of the R&R, Page has filed a timely objection. The remainder of this Opinion is confined to that issue.

         Overall, I adopt and affirm the R&R and endorse the Magistrate Judge's thorough and well-reasoned opinion. In particular, I agree with the Magistrate Judge's analysis of the first, third, and fourth discretionary factors that guide the § 1782 analysis under Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247, 124 S.Ct. 2466, 159 L.Ed.2d 355 (2004). I disagree with the Magistrate Judge's resolution of the second factor, finding that weight must be given to Brazil's signatory status to the Hague Convention. In re O'Keeffe, 646 Fed.Appx. 263, 265-66 (3d Cir. 2016). Nevertheless, like the Magistrate Judge, I find that the balance of all four factors mandates the denial of Page's application. This denial is without prejudice to a subsequent application, in the event, for example, that the circumstances change in the underlying Brazilian action.

         I. Background[1]

         Page is an employment recruitment firm, located in Sao Paulo, which places candidates with employer-clients throughout Brazil. (App. at ¶l 1). International is a professional recruitment firm based in the United States that operates internationally. (App. at ¶12). International's subsidiary, Robert Half Trabalho Temporario Ltda. ("Robert Half Brazil") operates in Brazil and is Page's direct competitor. (App. at ¶¶3, 13).[2]

         Page alleges that Alexandre Arima, an employee who had unrestricted access to Page's network and servers, left Page to work for Robert Half Brazil in December of 2007. (App. at ¶¶ 19-20). Sometime between 2006 and 2008, Arima allegedly planted malware that manipulated the source code of Page's website and permitted third parties to gain access to Page's confidential business information. (App. ¶¶ 19-24; Obj. at 5).

         Page learned of the malware when Juan Pablo Correa Santa, an employee who had formerly been employed by Robert Half Brazil, told Page that Robert Half Brazil employees had "accessed confidential information through Petitioner's website by using special computer command codes." (App. at ¶21). Santa disclosed that the "confidential identities" of Page's clients were discovered, allowing Robert Half Brazil to target those clients and "offer competing services." (Id.).

         Page commenced an internal investigation to determine whether its website had been compromised. (App. at ¶22). That investigation determined that someone had altered the source code of Page's website in a manner that permitted third parties to access the identities of Page's clients through certain computer command codes. (App. at ¶¶22, 24). The investigation further revealed "an unusually high number of visits to its website originating from multiple IP addresses registered to Respondent," i.e., Robert Half Brazil. (App. at ¶24). Those visits, the investigation determined, "targeted and consulted webpages where [Page's] confidential data was being improperly revealed." (App. at ¶25).

         Page contracted with an outside computer forensics firm, which ultimately confirmed its internal findings. (App. at ¶24). The computer forensics firm determined that the visits originating from IP addresses owned by Robert Half Brazil had targeted webpages where Page's confidential data was stored. (App. at ¶25).

         In January 2009, Page commenced a legal proceeding against Robert Half Brazil and Arima in Sao, Paulo Brazil for the "anticipatory production of evidence" (the "Search and Seizure Action"). (DE 2-7; App. at ¶27). Page sought the procurement of evidence that would substantiate its claims against Robert Half Brazil. (Id.).

         The Brazilian court appointed an independent information technology expert, Dr. Raul Spiguel, to seize and evaluate computers and other devices that belonged to Robert Half Brazil and Arima. (DE 2-5; App. at ¶28). On February 6, 2009, investigators executed warrants at the offices of Robert Half Brazil and at Arima's home. (DE 2-5, at 4-5). At the offices, investigators located seventy-two computers and two servers. (DE 2-5, at 6). Investigators accessed the computers, and determined that the computers were connected to the network and were configured to connect with servers located at the parent company, International, in the United States. (DE 2-5, at 8). This particular configuration eliminated the use of local hard drives; all the data and user files were recorded on hard drives located on the servers in the United States. (DE 2-5, at 8, 10). As a result, this data was not accessible to the expert. (Id.). The investigators were nonetheless able to determine that the computers at Robert Half Brazil connected to the internet using two IP addresses that were identified by Page in its Search and Seizure complaint. (DE 2-5, at 9).

         After completing their search of the office computers, investigators accessed and searched Arima's laptop computer. (DE 2-5, at 10). Arima's laptop, too, was configured to store certain data on International's main server located in the United States, but Arima also utilized a local hard drive. (DE 2-5, at 10-12). As a result, investigators were able to copy Arima's data and remote files that were located on the main server in the U.S. (DE 2-5, at 12). In addition to Arima's laptop, the investigators seized a second laptop that was found in the company director's room. At Arima's home, investigators seized a desktop computer and external hard drive, as well as a laptop and internal hard drive. (DE 2-5, at 17).

         After the searches were completed, the Brazilian court appointed a second expert, Dr. Dante Grasso Junior, who examined the data that was collected during the search. (App. at ¶33; DE 2-6). Dr. Grasso prepared a report, dated March 13, 2013. (App. at ¶34; DE 2-6). The report concluded that Arima visited Page's website and reviewed a job advertisement. (DE 2-6, at 26, 31-32, 36-37). It further noted that after reviewing the job advertisement, Arima searched for "SGD Brasil" and visited that company's website. (DE 2-6 at 27-32). This, asserts Page, was a search for one of Page's non-public, confidential clients. (Obj. at 9). Nonetheless, Dr. Grasso's report did not conclude that that search improperly attained confidential information. (See DE 2-6). The expert also concluded that there was "no truly positive evidence" that Page or Arima had installed the malware or accessed confidential information. (DE 2-6, at 60-61). The Brazilian Court accepted Dr. Grasso's findings, and the Search and Seizure Action was dismissed on August 17, 2015. (DE2-7).

         On May 18, 2017, Page commenced a second action in Sao Paulo, Brazil against Arima, Robert Half Brazil, and International. This action asserted claims for unfair competition and customer misuse based upon allegations similar to those set forth in the earlier Search and Seizure Action. (DE 2-2).[3]On June 13, 2017, Page filed an application pursuant to 28 U.S.C. § 1782 with this Court, seeking discovery for its second action. (DE 2-1).

         On January 19, 2018, the Magistrate Judge issued his Report and Recommendation, which addressed (1) Page's application pursuant to 28 U.S.C. § 1782 to serve discovery requests on International (DE 10); (2) Page's motion to seal certain documents and to proceed anonymously (DE 1); and (3) International's motion to strike certain exhibits that were attached to Page's reply brief in support of its application for discovery (DE 16). The Magistrate Judge denied Page's application for discovery and its motion to seal and proceed anonymously, but granted in part and denied in part International's motion to strike. (DE 25).

         On February 20, 2018, Page filed objections to the Report and Recommendation. (DE 29). Page's objections are limited to its application for judicial assistance in obtaining discovery in the United States under 28 U.S.C. § 1782.

         II. Legal Standard

         A Magistrate Judge's authority to "hear and determine" matters is derived from 28 U.S.C. § 636(b)(1).[4] See EEOC v. City of Long Branch, 866 F.3d 93, 99 (3d Cir. 2017) (citation omitted). The standard of review of a Magistrate Judge's decision is determined by whether the ruling is dispositive or non-dispositive. If the ruling is dispositive, the Magistrate Judge may enter a report and recommendation, which this Court reviews de novo. Fed. R. Civ. P. 72 (b). If non-dispositive, the Magistrate Judge is to enter an order, which the District Court reviews for clear error. Fed.R.Civ.P. 72 (a).

         Courts are divided as to whether decisions on discovery applications under § 1782 are dispositive or non-dispositive. See In re Macquarie Bank Ltd., 2015 U.S. Dist. LEXIS 72544, at *6 (D. Nev. May 28, 2015) (collecting cases and noting that "most courts have found that ruling on a § 1782 motion is a non-dispositive matter within the province of a magistrate judge's authority"), reconsideration denied, 2015 U.S. Dist. LEXIS 155186 (D. Nev. Nov. 17, 2015). Courts that have held § 1782 decisions are non-dispositive have focused on the Magistrate Judges' core role in resolving procedural and discovery disputes. See, e.g, In re Macquarie Bank Ltd., 2015 U.S. Dist. LEXIS 72544, at *7. On the other hand, the sole relief sought in a standalone § 1782 proceeding is the obtaining of discovery, so in that sense, a Magistrate Judge's ruling either way would dispose of the entire case. See 12 Wright 85 Miller, Federal Practice and Procedure § 3068.2 (3d ed. 2014) ("The sole purpose of the [§ 1782] proceeding is to obtain discovery, and accordingly, a motion to compel such discovery is a final, dispositive matter.").[5]

         Neither party in this case directly addresses the standard of review. The Magistrate Judge's decision is styled as a report and recommendation, however, and both parties seem to assume that the standard of review is de novo. (Obj. at 10; Oppo. at 8). Out of caution, then, and to avoid unfair surprise, I review the matter de novo. See In re Cohen, 2016 U.S. Dist. LEXIS 169622, at *7 n.3 (E.D.N.Y. Dec. 6, 2016) (treating § 1782 application as dispositive "in an abundance of caution," without resolving the "unsettled question" of whether motions under § 1782 are dispositive), adopting R&R, 2016 U.S. Dist. LEXIS 177418 (E.D.N.Y. Dec. 22, 2016).

         III. Discussion

         The purpose of 28 U.S.C. § 1782[6] is "to provide federal-court assistance in gathering evidence for use in foreign tribunals." Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247, 124 S.Ct. 2466 (2004). "Congress enacted 1782 to further the following goals: facilitating the conduct of litigation in foreign tribunals, improving international cooperation in litigation, and putting the United States into the leadership position among world nations." Bayer AG v. Betachem, Inc., 173 F.3d 188, 191 (3d Cir. 1999) (internal citations omitted).

         "However, these goals do not in turn mean that a parry to foreign litigation is entitled to unbridled and unlimited discovery under the statute." Id. "Section 1782 vests district courts with discretion to grant, limit or deny discovery .... [A] district court may refuse to grant a discovery request, or may impose various conditions and protective orders attendant to the production of requested documents." Id.

         In deciding whether to grant a § 1782 application for the production of discovery for use in a foreign tribunal, the Court (1) determines whether the statutory requirements are met; and then (2) evaluates whether to exercise its discretion to grant the application. In re O'Keeffe, 646 Fed.Appx. 263, 265-66 (3d Cir. 2016).

         The initial statutory prerequisites to § 1782 relief are as follows:

(1) the person from whom discovery is sought resides or is found in the district of the district court to which the application is made,
(2) the discovery is for use in a proceeding before a foreign tribunal, and (3) the application is made by a foreign or international tribunal or any interested person.

In re Bayer AG, 146 F.3d 188, 193 (3d Cir. 1998) (citing In re Esses, 101 F.3d 873, 875 (2d Cir. 1996)). Here, the Magistrate Judge determined that Page's application satisfied the statutory prerequisites. (DE 25, at 6 (concluding that (1) International is a Delaware Corporation with eight offices in New Jersey; (2) the discovery was sought for use in the second Brazilian action; and (3) Page, as a party to the second Brazilian action, is an interested party)). These conclusions are clearly correct, and neither party objects to them.

         The second step, and the one at issue here, requires the analysis of four discretionary "Intel factors." Even if a court is authorized to grant discovery under § 1782, it is not required to do so. Intel, 542 U.S. at 264 (providing that "a district court is not required to grant a § 1782(a) discovery application simply because it has the authority to do so." (citation omitted)). A discovery request may be denied on a discretionary basis if the relevant factors do not weigh in favor of it. A court acts within its discretion only if it "fashions its order in accordance with the 'twin aims' of § 1782, [1] 'providing efficient means of assistance to participants in international litigation in our federal' courts and [2] encouraging foreign countries by example to provide similar means of assistance to our courts.” In re Esses, 101 F.3d at 876 (quoting In re Malev Hungarian Airlines, 964 F.2d 97, 100 (2d Cir.), cert, denied, 506 U.S. 861, 113 S.Ct. 179, 121 L.Ed.2d 125 (1992)).

         In Intel, the Supreme Court identified the considerations that should guide a court considering whether to exercise its discretion to grant a § 1782(a) request. The court must consider four factors: (1) whether the person from whom discovery is sought is a participant in a foreign proceeding; (2) the nature of the foreign litigation, the character of the proceedings already underway, and the foreign country's receptivity to court assistance from the U.S.; (3) whether the petitioner is attempting to circumvent proof-gathering restrictions in foreign or American courts; and (4) whether the request for discovery is unduly intrusive or overly broad. Intel, 542 U.S. at 264-65; see Heraeus Kulzer GmbH v. Esschem, Inc., 390 Fed.Appx. 88, 91 (3d Cir. 2010) (citation omitted).

         Page takes issue with the Magistrate Judge's analysis of each of the four Intel factors. I address them in turn.

         A. First Intel Factor

         The first Intel factor focuses on whether the person from whom discovery is sought is a participant in the foreign proceeding. Intel, 542 U.S. at 264-65; see Esschem, Inc., 390 Fed.Appx. at 91. Although International is indisputably a party to the action in Brazil, the ...

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