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Sun Group U.S.A. Harmony City, Inc. v. CRRC Corporation Ltd

United States District Court, N.D. California

November 19, 2019

SUN GROUP U.S.A. HARMONY CITY, INC., Plaintiff,
v.
CRRC CORPORATION LTD, Defendant.

          ORDER REGARDING APPLICATION OF HAGUE CONVENTION REGARDING DOCKET NOS. 132, 135, 144

          SALLIE KIM United States Magistrate Judge

         Defendant CRRC Corporation Ltd (“Defendant”) argues that Plaintiff Sun Group U.S. A. Harmony City, Inc. (“Plaintiff”) must submit its request for documents located in China in accordance with the procedures proscribed by the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (“Hague Convention”). Plaintiff argues that Defendant must provide documents pursuant to the Federal Rules of Civil Procedure and that the Hague Convention does not apply here.[1]

         The Court may regulate the conduct of discovery and require the use of the Hague Convention procedures. See St. Jude Med. S.C., Inc. v. Janssen-Counotte, 104 F.Supp.3d 1150, 1160 (D. Or. 2015) (citing Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court for S. Dist. of Iowa, 482 U.S. 522, 546 (1987)); see also Autodesk, Inc. v. ZWCAD Software Co., 2015 WL 1928184, at *1 (N.D. Cal. Mar. 27, 2015) (“When a conflict exists between the discovery authorized under the Federal Rules of Civil Procedure and sovereign interests implicated by such discovery, a court may direct parties to conduct discovery under the Hague Convention. . . .). In determining whether to require a party to follow the Hague Convention protocol to obtain discovery requires “scrutiny in each case of the particular facts, sovereign interests, and likelihood that resort to those procedures will prove effective.” Aerospatiale, 482 U.S. at 544.

         The parties agree that the determination of whether to require the application of the Hague Convention procedures involves a two-step inquiry. First, Defendant must prove that Chinese law bars it from producing the discovery that Plaintiff seeks. EFG Bank AG v. AXA Equitable Life Ins. Co., 2018 WL 1918627, at *1 (S.D.N.Y. Apr. 20, 2018). Second, Defendant must demonstrate that the particular facts of this case, including the sovereign interests at stake, warrant the requiring the application of the Hague Convention. Aérospatiale, 482 U.S. at 544.

         A. Whether Chinese Law Prohibits Defendant from Providing Documents Located in the People's Republic of China.

         Defendant argues that Article 277 of the Chinese Civil Procedure Law bars it from collecting and producing documents located in the People's Republic of China (“PRC” or “China”) unless it complies with the procedures under the Hague Convention.

         Article 277 provides the following:

Request for and to provide judicial assistance shall be made through channels prescribed by international treaties concluded or acceded to by the People's Republic of China; or in the absence of such a treaty, shall be made through diplomatic channels.
A foreign embassy or consulate to the People's Republic of China may serve process on and investigate and collect evidence from its citizens but shall not violate the laws of the People's Republic of China and shall not take compulsory measures.
Except for the circumstances in the preceding paragraph, no foreign authority or individual shall, without permission from the competent authorities of the People's Republic of China, serve process or conduct investigation and collection of evidence within the territory of the People's Republic of China.

(Dkt. 132-12 (Declaration of Xiaoyi Chen), ¶ 5.) Defendant's Legal Expert, Jinhua Wei, is a lawyer who has practiced law in the PRC since 2004, and he opines that parties requesting evidence for civil litigation in the United States must proceed through the Hague Convention procedures for documents located in the PRC and no person, organization or institution may provide evidence at his, her or its own volition for use in civil proceedings abroad. (Dkt 132-13 (Declaration of Jinhua Wei), ¶¶ 1, 8(b). 8(c).) Wei explains that Article 277 prohibits foreign entities or individuals from serving documents, investigating and/or conducting discovery in the PRC. (Id., ¶ 10.)[2] Defendant states that because the Chinese government has a controlling ownership interest in Defendant, Defendant does not have the discretion to violate Chinese law. (Dkt. 132-12, ¶ 4.)

         Defendant wrote to the Chinese Ministry of Justice and asked the following question:

Since you are the central organ designated by China under the Hague Evidence Convention, CRRC would like to learn from your office that whether [sic] CRRC can directly produce the above-mentioned CRRC's documents located in the territories of China to the U.S. Court and [Plaintiff] Sun Group without abiding by the stipulated path(s) in the Hague Evidence Convention?

(Dkt. 134-2 (Reply Declaration of Teresa H. Michaud, Ex. A).) In response, the International Legal Cooperation Center of the People's Republic of China Ministry of Justice stated in a letter dated August 16, 2019:

As provided by the Civil Procedure Law of the People's Republic of China, any foreign judicial department(s) under international treaties to collect evidence within Chinese territories shall be conducted through channels ...

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