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In re Application for an Order for Judicial Assistance in a Foreign Proceeding in the Labor Court of Brazil

December 6, 2006

IN RE APPLICATION FOR AN ORDER FOR JUDICIAL ASSISTANCE IN A FOREIGN PROCEEDING IN THE LABOR COURT OF BRAZIL
MARCEL FLEISCHMANN, AND EDUARDO V. MORTARI, JR., PETITIONERS,
v.
MCDONALD'S CORPORATION, RESPONDENT.



The opinion of the court was delivered by: Magistrate Judge Morton Denlow

MEMORANDUM OPINION AND ORDER

Pursuant to 28 U.S.C. § 1782(a), Petitioners Marcel Fleischmann and Eduardo V. Mortari, Jr. applied for discovery from McDonald's Corporation for use in two Brazilian lawsuits. McDonald's objects. In addition, McDonald's moved to seal the application. For the reasons stated herein, the application for discovery is granted, the motion to seal is denied, and discovery shall proceed under the limitations imposed by this order.

I. BACKGROUND FACTS

A. BRAZILIAN LITIGATION

McDonald's Comercio de Alimentos Ltda. ("McCal") is a Brazilian, wholly-owned subsidiary of McDonald's Corporation ("McDonald's") whose headquarters are in the Court's district. Until May 2005, McCal employed Marcel Fleischmann ("Fleischmann") as its Chief Executive Officer and Eduardo V. Mortari, Jr. ("Mortari") (collectively, "Petitioners") as its Financial Director.

Before Petitioners were fired, McCal hired a consulting company, RPN Consultoria, Comercio e Representacoes, Ltda., ("RPN"), to help McCal with a tax issue. McCal allegedly used RPN to bribe the Secretário of the Brazilian Internal Revenue Service ("Brazilian IRS") for a favorable tax ruling. The Office of the Federal Prosecutor of the Federal District of Brasilia sued McCal, Fleischmann, Mortari, the Secretário, and other persons, but not McDonald's, over the alleged bribe ("Federal Lawsuit").

Shortly after the Federal Lawsuit was filed, McCal fired Petitioners "for cause," claiming that Petitioners obstructed and lied to McCal investigators and the Brazilian IRS. Petitioners contend, however, that McCal fired them to shield McCal and McDonald's from Brazilian and American authorities. Because Petitioners were fired "for cause," McCal denied them severance pay and other benefits.

Fleischmann sued McCal in the 68th Labor Court of the Capital of São Paulo and Mortari sued McCal in the 72nd Labor Court of the Capital of São Paulo (singularly, or collectively, the "Labor Court"). They are each seeking a declaration that they did not commit a serious offense justifying their dismissals for cause. They also seek damages from McCal including severance pay and other benefits. In their claims, Petitioners contend that McDonald's approved the hiring of RPN and that McDonald's has hired other consulting companies to lobby and bribe the governments of Brazil and other Latin American countries.

At Fleischmann's request, the Labor Court issued a Confidentiality Order in his case on February 22, 2006. After Petitioners filed their Application for Discovery in this Court, McCal sought a Confidentiality Order for Mortari's case in the Labor Court. The Labor Court denied McCal's request on September 25, 2006. Fleischmann's trial is in the latter stages and the parties anticipate a ruling soon; Mortari's trial is scheduled to begin before 2007.

B. PROCEDURAL POSTURE

On August 18, 2006, Petitioners filed in this Court an Application for an Order for Discovery for Use in Proceedings in a Foreign Tribunal (the "Application"). The Application seeks discovery under 28 U.S.C. § 1782(a). Specifically, it seeks interrogatories, document production, and depositions of McDonald's employees. The subject matter it seeks to discover is wide, and includes personnel files, the decision to fire Petitioners, McDonald's termination policies, franchise issues, policies concerning hiring consulting companies or lobbying firms, the scope of authority that McDonald's delegated to Petitioners, tax issues, employee benefits, compliance with specific American laws, accounting audits, insurance claims, and the retention of RPN. The Application includes a declaration, translated from Portuguese, by José Augusto Rodrigues Júnior ("Rodrigues"), the Brazilian attorney representing Petitioners in the Labor Court, which contains facts about the cases and legal analysis of Brazilian law.

McDonald's included in its response a declaration, translated from Portuguese, by Arnaldo Pipek ("Pipek") and Jose Cassio de Barros Penteado Filho ("Cassio"), the attorneys representing McCal in the Labor Court; it contains facts about the cases and legal analysis of Brazilian law. McDonald's also included the translated and untranslated Labor Court orders related to the confidentiality requests. When Petitioners replied to the response, they included a second declaration and translation from Rodrigues that contained additional facts and legal analysis. Petitioners also attached a sworn affidavit from Keith S. Rosenn, a University of Miami School of Law professor, which described Professor Rosenn's expertise on Brazilian law and contained an analysis of Brazilian laws in the context of Brazilian history.

On October 11, 2006, McDonald's filed a brief in support of its Motion to Seal Petitioner's Application and to File Further Documents Under Seal with this Court. McDonald's included a second declaration and translation from Pipek and Cassio, which contained additional facts and legal analysis. Petitioners filed a response opposing the motion. In addition to its reply brief, McDonald's provided the declaration, translated from Portuguese, by Marcelo Pimental ("Pimental"), an attorney in Brazil, and third declarations from Pipek and Cassio, which analyze Brazilian law.

Oral arguments were heard by the Court on October 31, 2006, and November 15, 2006.

II. APPLICATION FOR AN ORDER FOR DISCOVERY

Petitioners' Application for an Order for Discovery was made pursuant to 28 U.S.C. § 1782(a). The Court will examine the purpose and history of the statute, the statutory requirements the Application must meet before a court may grant discovery, and the factors a court should consider when deciding whether to use its discretion to grant the Application. The statutestates:

The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court. By virtue of his appointment, the person appointed has power to administer any necessary oath and take the testimony or statement. The order may prescribe the practice and procedure, which may be in whole or part the practice and procedure of the foreign country or the international tribunal, for taking the testimony or statement or producing the document or other thing. To the extent that the order does not prescribe otherwise, the testimony or statement shall be taken, and the document or other thing produced, in accordance with the Federal Rules of Civil Procedure.

A person may not be compelled to give his testimony or statement or to produce a document or other thing in violation of any legally applicable privilege.

28 U.S.C. § 1782(a).

A. PURPOSE AND HISTORY OF THE STATUTE

The statute's twin aims are "providing efficient assistance to participants in international litigation and encouraging foreign countries by example to provide similar assistance to our courts." Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 252 (2004) (internal quotation marks and citation omitted).

Through legislative changes, the statute has allowed more liberal discovery over time. See, e.g., S. Rep. No. 1580 (1964), as reprinted in 1964 U.S.C.C.A.N. 3782, 3788 ("The proposed revision of section 1782 . . . clarifies and liberalizes existing U.S. procedures for assisting foreign and international tribunals and litigants in obtaining oral and documentary evidence in the United States."). The first version of the statute, in 1855, authorized a foreign court to send a letter rogatory through diplomatic channels to ask an American court to examine a witness. Intel, 542 U.S. at 247. Through a series of at least five legislative changes, those requirements morphed into the statute we have today: the form of the request may now be a letter rogatory or an application; the assistance sought expanded from examination of a witness to include tangible evidence and taking testimony; the request may now come from a tribunal or an interested party; and, the scope of covered proceedings was expanded to include any foreign or international tribunal, including criminal investigations. Id. at 247-49.

B. STATUTORY REQUIREMENTS

There are four required elements in 1782(a): (1) the requestor is a foreign tribunal, international tribunal, or an interested party; (2) the discovery is sought from a person residing or found in the district of the district court; and (3) the discovery is for use in a proceeding (4) in a foreign or ...


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