Page 9 - Litigation

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Litigation | MONDAY, APRIL 13, 2015 | S9
non-parties to intervene for the sole purpose of obtaining discovery, even if they have no stake in the litigation itself.1 Courts, particu- larly courts outside the Second Circuit, have adopted “generous interpretations” of Rule 24(b) to allow these motions to proceed, cit- ing the need for “an effective mechanism for third-party claims of access to information generated through judicial proceedings.”2
Courts generally require an intervenor to show: “(1) an independent ground for jurisdic- tion; (2) a timely motion; and (3) a common question of law and fact between movant’s claim or defense in the main action.”3 How- ever, when the intervenor is seeking discovery rather than to join the case as a party, some courts ignore elements of the standard, con- cluding that the first element is “not required” because the intervenors do not seek to litigate a claim on the merits (and so there is no need for the court to have jurisdiction over that claim),4 and the third element only requires a small degree of factual overlap.5 For example, in Beckman Industries, the Ninth Circuit found that documents related to interpretation of similar insurance policies were sufficient enough to raise a “common question of law or fact.” The court reasoned that “there is no reason to require such a strong nexus of fact or law,” when the intervenor seeks only discovery.6 Some courts have gone so far as to hold that the issue of the validity of the confidentiality order that prevents interve- nors from obtaining access to discovery is itself a sufficiently common question of law or fact to support a motion to intervene.7 This standard makes it difficult for parties opposing intervention for discovery.
The Second Circuit, however, has phrased the test in a way that is less sympathetic to intervenors. Here, an applicant for per- missive intervention must “(1) timely file an application, (2) show an interest in the action, (3) demonstrate that the interest may be impaired by the disposition of the action, and (4) show that the interest is not protected adequately by the parties to the action.”8 Analysis of these elements is “fact- intensive,” and even if the elements of the
Budgeting
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the client their value beyond legal expertise. There are lots of good lawyers who can do the legal work. There is real value in knowing the players and their predilections and explaining these to the client to set expectations.
Poor scoping of work. Mastering your own historical data and taking the time to closely analyze the task at hand improves scoping of the work. Budgeting well is time-consuming, but the management benefits on the back end of the engagement far outweigh the additional effort on the front end. Clients and lawyers benefit from an investment in tools to assist in consistent and disciplined scoping.
Once a draft budget has been created, the lawyer and client need to review in detail the implications of the choices made in the budget. This is the time to agree on strategy and tactics—at least so far as can be done at this stage of the engagement. In some sense,
test are fulfilled, the trial court retains broad discretion9 to grant or deny a motion to inter- vene.10 By requiring intervenors to show an interest in the litigation—an element which is not required in other circuits—the Second Circuit has made it harder for intervenors to obtain discovery.
Opposing the Motions
Courts have ample discretion in consider- ing motions for permissive intervention. None of the elements is rigidly applied, and courts in the Second Circuit have placed a particu- lar emphasis on the effect that intervention would have on each proceeding.
Courts are sometimes reluctant to take action that would undermine foreign courts’ discovery rules. If the defendant can show that a “limitation on discovery in the collater- al litigation would be substantially subverted by allowing access to discovery material,” the court “should be inclined to deny modifica- tion.”11 For example, in AT&T v. Sprint, the court denied a motion to intervene because it appeared to be “an attempt to circumvent the close of discovery” in the foreign action.12 Similarly, in In re Silvercorp Metals, the court noted that the foreign plaintiff’s motion was an attempt to “bypass the ordinary Canadian discovery procedures” because the Canadian system specifically disallowed production at that early point in the case.13 In a legal framework ruled largely by judicial discre- tion, pointing out that the intervenor’s motion is a tactical ploy to obtain an unfair advan- tage in the foreign litigation resonates with courts. U.S. counsel should collaborate with foreign counsel to investigate factual bases for arguments that intervention will disrupt the proceedings abroad.
In the Second Circuit, prejudice to a party is the “principal consideration” when ruling on a motion for permissive intervention.14 Because intervenors who seek discovery are typically trying to modify a protective or con- fidentiality order entered in the main action, parties are likely to have relied on this order in some way, and therefore may be prejudiced
a client is investing (perhaps not voluntarily) in an expensive business process—the litiga- tion. Like many investments, this one won’t be easy to get out of. The client needs to be clear-eyed about the cost and the potential “return on investment.” The lawyer needs to help them get there. We find it useful to pre- pare for this discussion in a comprehensive way. While the budget may present the mat- ter’s parameters in summary fashion, as the budget is reviewed, there needs to be detailed discussion about the reasons for the choices and the implications of each of them in isola- tion and in aggregate. This is also the time to confirm scope and exclusions from scope, define business goals for the litigation, clarify lines of communication and understand each stakeholder’s role. Sometimes these topics can be uncomfortable or unstated. Reviewing the budget and seeking consensus on it forces these necessary conversations.
An agreed-upon, well-designed budget or work plan is more powerful than a financial estimate. It is a road map to executing the
by its modification. In cases in which there has already been a settlement approved by a court, courts consider “the extent to which the order induced the party to allow discov- ery or to settle the case” when evaluating whether that order should be modified.15 This is most common when a confidentiality order is granted as part of a settlement. Where inter- vention would prejudice the U.S. parties by threatening to “unravel” or “undermine” the settlement, courts sometimes deny motions to intervene.16 Parties facing litigation in the United States and elsewhere, and settling their U.S. litigation, should be mindful of making such a record when negotiating settlement agreements and related confidentiality orders, if applicable and appropriate to the case, by including: (1) text in the settlement agreement that confidentiality is an important part of the consideration for the settlement; (2) explicit prohibitions on the parties distributing dis- covery from the case to third parties; and (3) language that the confidentiality provi- sions may only be overridden by the court on a showing of good cause.
Parties should take advantage of a require- ment found in Second Circuit jurisprudence, but not other circuits: the requirement that the intervening plaintiff has a “direct, sub- stantial, and legally protectable” interest in the lawsuit that may be impaired by its resolution.17 Although very few discovery cases have been decided on this element, its presence opens the doors for many potential arguments. Notably, the fact that the defen- dant will likely have an obligation to preserve (and potentially hand over) documents in the foreign litigation provides an interesting argu- ment that the intervenor’s interest will not be impaired absent intervention—the intervenor can wait and obtain the documents in the for- eign litigation, through the normal discovery available in that jurisdiction. In the only case dealing with intervention for discovery we have found where this argument was made, the court found that the intervening foreign defendant “clearly failed to meet his burden to demonstrate an ‘interest’ in this action” because he failed to show that the documents
engagement and monitoring progress to plan. How many lawyers when asked for a budget create a document, send it to the client with- out discussion and file it, never to be seen again unless or until the client screams about cost? The budget as historical artifact lies dor- mant, buried in the file like a land mine waiting to explode in the lawyer’s face when it finally resurfaces, inevitably, at a discussion about cost. The client will remember or be reminded of the number, even if the lawyer has forgotten about it. Circumstances will have changed, but the artifact did not. The client will jus- tifiably ask, “Why didn’t we discuss this?”
The budget/work plan as a living man- agement tool, on the other hand, provides a ready vehicle for communicating with the client about developments and their impact on the merits and costs of the engagement. Expectations are continuously tuned and changed circumstances factored in. Ancil- lary management tools like a communica- tion protocol, standard budget to actual reporting and workflow monitoring tools
would not be available when the foreign pro- ceeding reached the discovery stage.18
Conclusion
Any company that transacts business internationally, or is traded on multiple stock exchanges, could potentially have to deal with foreign parties intervening to obtain discovery in the United States. Given the flex- ible and highly discretionary inquiry courts undertake in analyzing motions to intervene, reliance on bright-line rules is misplaced, and attorneys should craft their arguments to the facts of their case. Coordinating with foreign defense counsel to understand the nature and procedural posture of the foreign case and highlighting the need for a strong confi- dentiality order in agreements with opposing counsel can prove helpful in prevailing if and when a motion to intervene is made.
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1. EEOC v. National Children’s Ctr., 146 F.3d 1042, 1045 (D.C. Cir. 1998).
2. Public Citizen v. Liggett Group, 858 F.2d 775, 783 (1st Cir. 1988).
3. Beckman Indus. v. International Ins., 966 F.2d 470, 473 (9th Cir. 1992); see also EEOC, 146 F.3d at 1046.
4. See EEOC, 146 F.3d at 1046.
5. Beckman, 966 F.2d at 474-74.
6. Id.
7. Pansy v. Borough of Stroudsburg, 23 F.3d 772, 777-78
(3d Cir. 1994). 8.Floydv.CityofNewYork,770F.3d1051,1057(2dCir.2014). 9. Appellate review of a motion for permissive inter-
vention is “particularly deferential” and such a deter- mination “has virtually never been reversed.” AT&T v. Sprint, 407 F.3d 560, 561 (2d Cir. 2005).
10. Floyd, 770 F.3d at 1057.
11. AT&T v. Sprint, 407 F.3d 560 (2d Cir. 2005) (citing 8 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure Civil 2d §2044.1 (2d ed. 1994)).
12. Id. at 562.
13. In re Silvercorp Metals Securities Litigation, No. 12- cv-9456, Dkt. 80, at 3 (S.D.N.Y. Feb. 6, 2015).
14. U.S. Postal Serv. v. Brennan, 579 F.2d 188, 191 (2d Cir. 1978). However, a simple desire to make it more bur- densome to pursue collateral litigation does not consti- tute prejudice. United Nuclear v. Cranford Ins., 905 F.2d 1424, 1428 (10th Cir. 1990).
15. See Beckman, 966 F.2d at 475-76 .
16. See Griffith v. Univ. Hosp., 249 F.3d 658, 663 (7th Cir. 2001); Empire Blue Cross & Blue Shield v. Janet Greeson’s A Place for Us, 62 F.3d 1217, 1219 (9th Cir. 1995).
17. Bridgeport Guardians v. Delmonte, 602 F.3d 469, 473 (2d Cir. 2010).
18. Silvercorp Metals, No. 12-cv-9456, Dkt. 80, at 3.
are additional keys to unlock the power of the budget. The combination of these tools creates a managed process in which issues are raised and resolved with the client in a disciplined fashion.
We have found that this approach to mat- ter management delivers true value to our clients. It provides a level of predictability that aids and enhances the working relationships between our attorneys and our clients, and those between our clients’ in-house attorneys and their CFOs or GCs. It is a smarter way to handle engagements and shows our clients that we are responding to the pressures they are experiencing in their own businesses. And, it is increasingly becoming a required skill in a rapidly changing legal market. To finish the stanza:
Your old road is
Rapidly agin’
Please get out of the new one
If you can’t lend your hand
For the times they are a-changin’.
—Bob Dylan