Photo: Open Source
The shield of limited liability may not necessary protect foreign corporations from discovery obligations in American litigation.
An American subsidiary, which may incorporate as a self-standing business entity, may not only face the obligation to produce its own documents but also those held by its parent corporation in Germany (or elsewhere). Courts may impose this obligation regardless of the parent’s strictly legal right to withhold information from the subsidiary.
Under Federal Rule of Civil Procedure 26 and its equivalent in every state, a litigant in the United States must be prepared to disclose not only documents and information that are admissible as evidence but also those which “appear reasonably calculated to lead to the discovery of admissible evidence.”
In consequence, the scope of American discovery is broad and its costs are onerous. These costs can far exceed the value of a case and may fall disproportionately on the pocketbook of one party or the other.
This has been recognized for decades as part of a German-American Justice Conflict.
In addition to other strategic concerns, any client should discuss discovery and its costs with counsel as soon as possible. This should include targeting the most important information, anticipating your opposing party’s discovery requests and their costs, and developing a cost-effective discovery plan.