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Financialright GmbH v. Robert Bosch LLC

United States District Court, E.D. Michigan, Southern Division

February 12, 2018

financialright GmbH, Katharina Prinzessin zu Hohenlohe, Hartmut Bäumer, and Eithne Higgins, Applicants,
Robert Bosch LLC, Respondent.

          District Judge, David M. Lawson



         I. Introduction

         The Applicants in this case - financialright GmbH (“financialright”), [1]Katharina Prinzessin zu Hohenlohe, Harmut Bäumer and Eithne Higgins - ask this court to exercise its discretionary authority to assist in the production of evidence for use in a foreign tribunal pursuant to 28 U.S.C. § 1782. Applicants claim that they “are current or potential litigants seeking relief in German and Irish courts in connection with Volkswagen AG … and Bosch GmbH's...well-known ‘clean- diesel' fraud.” (DE 1 at 9.) More precisely, each of the Applicants is now, or on the date this petition was filed was allegedly on the brink of becoming, a plaintiff against Volkswagen AG, Volkswagen Group of Ireland Ltd and/or Audi AG and “possibly Bosch GmbH.” (DE 1 at 11-12.) These actions are now pending in Germany and Ireland (collectively the “European Litigation”), but, as explained below, the history of these lawsuits or of related lawsuits gives reason to question whether any of them will proceed to a conclusion on the merits. Applicants assert that this Court should order Respondent to produce documents for use in the European Litigation. The documents at issue, or the categories thereof, are listed in the proposed nonparty subpoena, which is attached as Exhibit 2 to the petition. The proposed subpoena seeks not only specified categories of documents, but also the broad category of “[a]ll Documents and Communications that [Bosch] produced to the plaintiffs” in the civil multidistrict litigation (MDL) in In re Volkswagen ‘Clean Diesel' Marketing, Sales Practices, & Products Liability Litigation, No. 3:15-md-02672-CRB (N.D. Cal.). (DE 1-1, 1-2.)

         II. Factual Background

         This application emerges from the recent criminal prosecution, related MDL, and ongoing scandal revolving around Volkswagen Group of America's (“VOA”) and Volkswagen AG's well-documented efforts to feign compliance with United States environmental protection laws by installing technology that would yield doctored vehicular emissions readings on diesel powered vehicles. Judicial notice is taken of the recent criminal convictions of Volkswagen AG and some of its executives in this very Court. See Case No. 2:16-CR-20394-SFC-APP (E.D. Mich.). Accused of similar acts designed to contravene European environmental laws, Volkswagen AG and Volkswagen Group of Ireland Ltd. are now the targets of consumer actions in the European Litigation. Although Audi AG was also apparently named as a defendant in Germany, neither Respondent Robert Bosch LLC (“Bosch” or “Respondent”) nor its European affiliate, Robert Bosch GmbH, are named as a parties in the European Litigation. (Rother Decl., DE 10-3 at 2, ¶ 4; O'Dwyer Decl. DE 10-5 at 4-5, ¶¶ 7-12). In fact, Applicants' counsel told the Court that he does not believe that the European Litigation includes any “Bosch-related entity with the name Bosch in it.” (DE 20 at 23.) However, the Applicants do claim that Bosch is the inventor of the “defeat devices” which VOA used to mask the true emissions generated by its vehicles in the United States and that this same technology was in play on the other side of the Atlantic. Identifying themselves as “European citizens who purchased diesel vehicles under the false impression that they were ‘clean diesel' vehicles that met European standards for Carbon Dioxide and Nitrogen Oxide (NOx) emissions and were thus lawfully approved for sale by their respective countries[, ]” (DE 1 at 11), Applicants accordingly argue that the discovery sought from Bosch here is highly relevant to the issues now pending before the German and Irish courts.

         A. The German Litigation

         1. The Test Case

         As explained in the declaration of German attorney Henning Bälz, in early 2017, a “test case” was filed by counsel for the Applicants in the Braunschweig District Court in Germany. This lawsuit alleged that Volkswagen AG installed a defeat device in its European vehicles in violation of European regulation (EC) No. 715/2007. (DE 10-2 at 3-4, ¶¶ 5, 6, 11; DE 10 at 15.) The test case was filed “on behalf of financialright representing the interests of a single assignee[, ]” based upon “the unique theory that under the European Union (“E.U.”) Law, the Certificate of Conformity…VW issued to the car owner was incorrect as a result of the emissions manipulation and was therefore invalid.” (DE 14-2 at 5, ¶ 10.) The lawsuit “raised a number of claims based on tort and breach of contract.” (DE 10-2 at 5, ¶ 10.) These claims were rejected, along with the plaintiff's request to produce certain specified documents, finding that “‘the production of the respective documents is not relevant for the decision in this litigation.'” (DE 10-2 at 5-6, ¶¶ 11-12; see also, the German court's opinion in German and certified as translated into English, DE 10-2 at 10-70, including ¶ 235 therein.) As set forth in the summary of its holding found on the first page of the opinion, the court dismissed the case and held that the “plaintiff bears the costs of the proceeding.” Significantly, this dismissal occurred notwithstanding the court's finding that “Plaintiff's vehicle contains an illegal defeat device” under EC Reg. No. 715/2007. (DE 10-2 at 48, ¶ 67; see also, DE 10-2 at 5, ¶ 11.) Notably, the court made clear that the “questions formulated by Plaintiff” were not being referred to the European Court of Justice (ECJ). (DE 10-2 at 68, ¶ 231; DE 20 at 37-38.) Thus, the test case “has so far failed.” (DE 10-2 at 6, ¶ 14.)

         As Applicants' own German attorney explains, the Braunschweig District Court's “decision is currently on appeal to the Higher Regional Court of Braunschweig.” (DE 14-2, ¶10.) The Application had little to say about this test case, although Respondent Bosch helpfully provided the Court with the test case's procedural history. At oral argument, Applicants conceded that the German court had dismissed the test case after finding that there was no viable claim, and that it remains on appeal. (DE 20 at 19, 13.)

         2. The Applicants' Litigation

         The application represents that, “Applicant Katharina Prinzessin zu Hohenlohe intends to file a lawsuit in the coming months against Volkswagen AG, and possibly Robert Bosch GmbH, in the District Court of Braunschweig in Germany. On March 16, 2017, Applicant Hartmut Bäumer filed a lawsuit against Volkswagen AG and Audi AG in the District Court of Berlin in Germany.” (DE 1 at 11) (emphases added).

         The application further represents that, “Financialright intends to bundle claims from European Volkswagen owners to pursue similar legal actions in Europe against Volkswagen and possibly Bosch GmbH.” (Id. at 11 (emphasis added)). Applicants filed a reply brief, which was several days tardy. (DE 14.) Meanwhile, on November 6, 2017, the date their reply brief was due, [2] and perhaps pressured by Respondent's arguments that all but one of the Applicants had no litigation then actually pending in Germany and that these Applicants have been sitting on the fence about commencing litigation for way too long, a new “bundled” lawsuit was filed in Germany by financialright “on behalf of 15, 374 individuals.” (DE 14-2 at 4-5, ¶ 9; DE 18 at 2.) Applicants' attorney informed the Court at the December 8, 2017 oral argument that Ms. Hohenlohe's case has been bundled into this new case. (DE 20 at 12.) The Applicants further represent, through the declaration of German attorney Christopher Rother, that this new lawsuit brings “claims under a different legal theory” than the test case, including “intentional infliction of harm under section 826 of the German Civil Code.” (DE 14-2 at 5.) They additionally claim that this new theory is based “on the act of the installation of engines containing the Bosch software algorithm (‘defeat device')….” (Id.) The declaration is noticeably vague in identifying the defendant or defendants in this new German lawsuit, but, in the context of its characterization of the new lawsuit as an improved version of the test case under a different legal theory, and, in light of the demand letter to Volkswagen AG which is attached to the declaration, it appears that Volkswagen AG may be the only defendant. (DE 14-2, ¶¶ 10-12; DE 14-2 at 20-22.) When pressed at oral argument, however, Applicants' attorney clarified that none of the participants in any of the German Litigation is a Bosch-related entity, i.e., neither Robert Bosch LLC nor Robert Bosch GmbH. (DE 20 at 23.)

         B. The Irish Litigation

         The application explains that, “[o]n November 18, 2015, Applicant Eithne Higgins filed a lawsuit against Volkswagen AG and Volkswagen Group of Ireland Ltd. in the District Court of Castlebar in Ireland.” (DE 1 at 11; see also, DE 14-3.) Bosch has endeavored to distinguish this lawsuit from the Volkswagen-related emissions scandal in the United States by pointing out that Ms. Higgins's lawsuit, as originally filed, was about CO2 emissions, not the NOx emissions that have been at issue in the Volkswagen MDL. (See DE 10 at 12, fn. 3.) However, the Court is not persuaded by this distinction, for two reasons. First, Ms. Higgins's claim was subsequently amended (on June 7, 2016) to include NOx. (O'Dwyer Decl., DE 14-3 at 3, ¶ 4-5; see also, Irish court order, DE 14-3 at 52, ¶ 1.) According to Ms. Higgins's retained expert, “[t]he Volkswagen defendants consented to the application[, ] as it was the Volkswagen defendants that raised the issue of NOx affecting their EA 189 engines, including that of Mrs. Higgins.” (O'Dwyer Decl., DE 14-3 at 3, ¶ 4.) Second, the Court is not convinced that a technology designed to thwart emissions readings for NOx could not be used for the same or a closely related purpose with respect to CO2.

         Nevertheless, it was acknowledged at oral argument that, as of now, the Irish Litigation consists of one claim by one person for a maximum of €15, 000. (DE 20 at 26.)[3] Although Applicants argue that the eventual success of Ms. Higgins's claim will have a collateral estoppel effect upon future litigation to the benefit of other would-be plaintiffs (DE 20 at 24), this Court has been shown no definitive legal authority to that effect and finds that such an argument is grossly speculative, particularly in light of the current “limbo” status of Ms. Higgins's lawsuit, as described below. Further, it must be noted that Ms. Higgins's claim is actually capped at €15, 000, as is acknowledged in her Castlebar pleading. (DE 14-3 at 39, “General Damages not exceeding €15, 000.00” and “to recover against the Respondent damages not exceeding €15, 000 (Fifteen Thousand Euro Only)….” (emphasis in original).) (See also, DE 10 at 12.) Perhaps even more importantly, the Irish Litigation was successfully appealed on jurisdictional grounds and, on December 5, 2017, was remanded to a new judge in the trial court to explore the question of jurisdiction. (DE 20 at 27, 40-41.) As of now, the Irish Litigation is hardly thriving, if it is even past the starting line.

         III. Procedural Background

         This application returns to this Court through an oddly circuitous route. A substantially equivalent application under 28 U.S.C. § 1782 was first filed by these Applicants on March 17, 2017 in the District of New Jersey in Case No. 17cv1818. The application was considered by Magistrate Judge Steven C. Mannion and granted on June 19, 2017. (DE 10-10.) Judge Mannion granted leave to issue a subpoena to VOA, Audi, and Bosch, requiring them to produce documents in Washington, D.C. or any other mutually agreeable location. He further ordered the subpoenaed entities and the applicant to meet and confer before filing any motions regarding the subpoena. The Applicants served the subpoena on Bosch on June 30, 2017. The parties met and conferred and were apparently unable to agree with respect to Bosch's objections to the subpoena.

         Then, on August 1, 2017, Bosch filed in this District a motion to quash the subpoena, which was assigned to District Judge Arthur J. Tarnow and Magistrate Judge David R. Grand and given case number 2:17-mc-51049-AJT-DRG. (See DE 10-12.) The parties subsequently stipulated to have the subpoena withdrawn, that Bosch would preserve “any and all arguments made in its Motion to Quash and supporting brief[, ]” and that the applicants would have to file a new application if they were to seek discovery from Bosch under the statute in the future. The Court entered an order implementing that stipulation on August 18, 2017. (Id.)

         A little over a month later, on September 29, 2017, the instant application was filed and assigned to District Judge David M. Lawson, who in turn referred it to the assigned and undersigned Magistrate Judge for a hearing and determination. (DE 11.) Oral argument was held on December 8, 2017, and, upon inquiry from the bench, the parties explained that, in essence, the District of New Jersey's order granting the application needs to be revisited here because Bosch's North American headquarters is in Farmington Hills, Michigan, i.e., in this District. In other words, Bosch's jurisdictional challenge to the subpoena previously issued by the District of New Jersey was likely to succeed, or at least, “had some teeth to it.”

         IV. Legal Framework:

         A Two Step Inquiry A. Statutory Factors/Requirements

         The present application is governed by 28 U.S.C. 1782(a), which reads as follows:

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.

         As one court has summarized these threshold requirements for exercising authority under the statute:

A district court has the authority to grant an application for judicial assistance if the following statutory requirements in § 1782(a) are met: (1) the request must be made “by a foreign or international tribunal, ” or by “any interested person”; (2) the request must seek evidence, whether it be the “testimony or statement” of a person or the production of “a document or other thing”; (3) the evidence must be “for use in a proceeding in a foreign or international tribunal”; and (4) the ...

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