Pre-trial discovery: French judges do not have to take into account the protection conferred to some correspondences under foreign laws (Civ. Cass., 1st, 3 November 2016, RG n°15-20495)

Article 145 of the French Code of Civil Procedure gives litigants the possibility to request a judge to order – before any legal proceedings on the merits – investigations in order to preserve or establish “the evidence of facts upon which the resolution of a dispute might depend”.

When justified by circumstances, that request may be made by non-adversarial process, subject to the parties wishing to – subsequently – challenge these investigations to file a petition with the same judge to obtain an interim order to rescind.

In order to obtain that the judge orders the investigations being requested, the claimant must show that there is legitimate cause to collect said evidence, that the investigations being requested are legally permissible and are not excessive.

Such legitimate cause is basically established by the existence of a potential lawsuit on the merits, assuming the investigations should provide the evidence being sought.

In particular, the claimant must demonstrate that a lawsuit on the merits would not be manifestly doomed to fail.

Recently, the Court of Cassation has been called to rule on the extent of the investigations which could be ordered under this procedure.

The court has been called to rule in particular on the opportunity to collect correspondences drafted by an in-house counsel which might be admissible under French law but is privileged under US law, the latter seeming applicable on the merits of the dispute.

            1.         Facts of the case

In 1999, a US company (Metabyte) founded a subsidiary, MNI, in charge of developing a given technology which was protected by patents.

The Technicolor Group, consisting of companies incorporated under US law, subsequently became a majority shareholder in the capital of MNI, and then decided to sell the assets of MNI.  Although Metabyte made an offer, the assets – among which the patents – were finally sold to Thomson Licensing.

Metabyte and Technicolor Group are in conflict about the terms of this sale.

At Metabyte’s request, and pursuant to the provisions of Article 145 of the French Code of Civil Procedure, the President of Nanterre Commercial Court ordered a bailiff to obtain and temporarily place in escrow various documents dealing with the management strategy and subsequent sale of the patents which belonged to MNI.

The President of the Commercial Court granted this request. Exchanges of correspondences were collected.  Among them, correspondences exchanged between in-house and outside counsels of Technicolor companies.

The Technicolor companies had summons served on Megabyte to appear before the same judge to obtain that the order allowing the investigations be rescinded.

The Technicolor companies were, in particular, opposed to the disclosure of some correspondences, stating that according to them they were covered by the attorney client privilege according to US law under which they had been exchanged.   They were requesting that these exchanges be placed under escrow until such time as a decision would be taken by the court that may be called upon to rule on the merits, and in compliance with the law applicable to the merits of the case.

By way of a counterclaim, Metabyte requested the disclosure of the documents in escrow.

The President of the Commercial Court dismissed both the rescission claim and Metabyte’s counterclaim on the grounds, with regard to the latter, that the documents on deposit could be covered by US public policy statutes.

The Technicolor companies subsequently lodged an appeal against that decision.  The Versailles Court of Appeal upheld the order issued by the President of the Commercial Court in that he refused to rescind his first order, but overturned it with regard to Megabyte’s counterclaim.  In particular, the Court of Appeal ordered the disclosure of the documents in escrow, except for exchanges between attorneys and exchanges between attorneys and clients, as covered by Act n°71-1130 of 31 December 1971.

Therefore, all exchanges that would have been protected according to US law but that were not under French law, such as documents drafted by in-house counsels, had to be disclosed to Metabyte.

            2.         Order issued by the Court of Cassation

The Technicolor companies lodged an appeal with the Court of Cassation.

The Court of Cassation was called upon to rule on a specific question: Should the documents still be kept in escrow as ordered so long as the case was not referred to the trial judge, and therefore leave it to that judge to rule, in compliance with the law applicable to the substance of the case, on the opportunity of disclosing the collected documents insofar as they might be protected under a foreign law?

To begin with, the Court of Cassation repeated that investigations ordered pursuant to Article 145 of the French Code of Civil Procedure are only governed by French law and there is no need to justify of a legitimate cause with regard to the law that may apply to the merits of the case.

Furthermore, the Court of Cassation found that considering French law and fundamental freedoms protected by French law, only exchanges between attorneys or between attorneys and their clients are protected, so that exchanges between in-house lawyers who are not acting in the capacity of attorneys according to French law are not protected.

On these grounds, the Court of Cassation dismissed the appeal.

            3.         Conclusion

We already knew that private life and business secrecy were not considered as impediments to the disclosure of collected documents in connection with pre-trial discovery.

In the present state of French law, we must draw everyone’s attention to the fact that the protection conferred under foreign laws (US law in this instance) to exchanges with in-house lawyers is ineffectual under French law in the context of the process provided for at Article 145 of the French Code of Civil Procedure.

It is clear that the lack of protection in France of documents considered confidential under foreign laws creates an opportunity so long as it now appears possible to collect and obtain communication in France of documents which might prove of particularly great importance for the purpose of a forthcoming dispute.

However, this opportunity should be put into perspective since a doubt remains on whether the collected documents could be subsequently used within the trial on the merits should the matter be referred to a foreign jurisdiction or judged according to a foreign law.  Besides, in the event such documents were to be found admissible by the court ruling on the merits, a new problem might arise at the time the court decision has to be recognized and enforced in another State.