Philips Med. Sys. (Cleveland) v. Buan

PHILIPS MEDICAL SYSTEMS (CLEVELAND), INC., et al., Plaintiffs, v. JOSE BUAN, et al., Defendants.

No. 19 CV 2648

United States District Court, N.D. Illinois, Eastern Division

March 1, 2022

MEMORANDUM OPINION AND ORDER

Young B. Kim, United States Magistrate Judge.

Before the court is Defendants Kunshan Yiyuan Medical Technology Co., Ltd.'s (“Yiyuan”) and Kunshan GuoLi Electronic Technology Co., Ltd.'s (“GuoLi”) (together, “Defendants”) motion for reconsideration of this court's orders regarding Plaintiffs' Requests for Production of Documents (“RPD”) Nos. 1-60. Specifically, Defendants challenge the court's ruling regarding the impact of Chinese law on their discovery obligations. For the following reasons, the motion is denied:

Background

This trade secrets case involves medical x-ray tubes developed and manufactured by Plaintiffs Philips Medical Systems (Cleveland), Inc. and Philips Medical Systems DMC, GmbH. Defendants Jose Buan and Sherman Jen worked for Plaintiffs until December 2019, when they left to take jobs with the newly-formed company GL Leading Technologies, Inc. (“GL Leading”), ^[1] and thereafter allegedly used the trade secrets they gained from their employment with Plaintiffs to engineer x-ray tubes for GL Leading's and Defendants' benefit. According to Plaintiffs, GuoLi orchestrated the formation of GL Leading and-through its subsidiary Yiyuan-continues to control GL Leading's operations, including its x-ray tube business.

On October 22, 2021, Defendants sought a protective order from the court to reduce the breadth of Plaintiffs' document requests. (R. 315, Defs.' Mot. for Protective Order.) Defendants argued in that motion, among other things, that “under Chinese law, any documents [they produce] will first have to be reviewed by state authorities to ensure they do not contain state secrets, which will further lengthen the process of producing documents.” (Id. at 7.) The court denied the motion but issued a schedule to work through Defendants' objections to Plaintiffs' 213 RPDs in batches of 30 requests at a time. (R. 334.)

In responding to RPD Nos. 1-30, Defendants objected that certain requests were unduly burdensome because they either: (1) asked for the search of employees' personal mobile devices in violation of Chinese privacy law; or (2) required the collection, copying, and storing of GuoLi information that may include state secrets in violation of Chinese state secrets law. (See, e.g., R. 350, Resp. to RPD Nos. 1-30 at 62.) In support of these objections, Defendants attached the “expert opinions” of Professor Xiaoguang Shan regarding Chinese law. (See Id. Ex. 2.) The court overruled these objections, stating that Defendants had “failed to demonstrate that Plaintiffs are seeking state secrets or that state secrets are involved in this case, ” and that “neither the court nor Plaintiffs are requiring Defendants to violate any domestic laws in China.” (R. 361 at 2 (“the January 5 Order”).)

Defendants lodged the same objections based on China's state secrets and privacy laws to RPD Nos. 31-60, (see R. 356, Resp. to RPD Nos. 31-60), and asked the court to order additional briefing regarding the impact of Chinese law on discovery, (R. 357 Defs.' Mot. for Leave to File Reply). The court again overruled the objections and denied the request for additional briefing, finding that “[t]here is no need for further briefing . . . unless and until Defendants are withholding responsive documents because those documents are considered state secrets under Chinese laws or are seeking additional time to produce them because they must submit those documents for government review.” (R. 363 (“the January 10 Order”).) The court reiterated that it “will not require Defendants to violate any of their domestic laws.” (Id.) On January 12 2022, Defendants filed the present motion asking the court to reconsider portions of these rulings regarding Chinese law. (See R. 367, Defs.' Mot.)

Analysis

Defendants now contend that the court's January 5 and 10, 2022 orders compel them to violate Chinese law and that January 26 and 31, 2022 production deadlines are “impossible to comply with” in light of approval procedures they must follow in China. (R. 367, Defs.' Mot. at 9.) As such Defendants ask the court to reconsider its previous orders so that they may have time to comply with Chinese law. (Id.) However, and as explained below, Defendants have failed to satisfy the requirements necessary for granting a motion for reconsideration. The court therefore declines to modify its earlier decisions, except for resetting the deadline by when Defendants must produce responsive documents.

A. Standard for Reconsideration

“Motions for reconsideration serve a limited function: to correct manifest errors of law or fact or to present newly discovered evidence.” Publishers Res., Inc. v. Walker-Davis Publ'ns, Inc., 762 F.2d 557, 561 (7th Cir. 1985). A manifest error occurs “when a district court has patently misunderstood a party, or has made a decision outside the adversarial issues presented to the Court by the parties, or has made an error not of reasoning but of apprehension.” Ford v. City of Rockford, No. 18 CV 50151, 2019 WL 2011104, at *1 (N.D. Ill. May 7, 2019); accord Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990). In the Seventh Circuit, motions for reconsideration are “particularly disfavored when they raise facts or evidence that could have been previously presented.” SFG, Inc. v. Musk, No. 19 CV 2198, 2021 WL 972887, at *1 (N.D. Ill. Feb. 10, 2021) (citing Publishers Res., 762 F.2d at 561).

Here, Defendants contend that the court committed manifest error by “mistakenly assert[ing] that none of its rulings will require [them] to violate Chinese law.” (R. 367, Defs.' Mot. at 3.) Yet in so arguing, Defendants improperly treat their motion for reconsideration as an opportunity to develop new arguments by raising China's Data Security Law for the first time, (id. at 7-8), and submitting new supporting declarations, (id. Exs. 1 (“the Huang Decl.”), 5 (“the Ying Decl.”), 6 (“the Zhou Decl.”)). Defendants make no representations that any of this evidence is newly discovered, and they had ample opportunity to develop these arguments when raising their Chinese law objections in their Motion for Protective Order, (R. 315, Defs.' Mot. for Protective Order), and their responses to RPD Nos. 1-60, (R. 350, Resp. to RPD Nos. 1-30; R. 356, Resp. to RPD Nos. 31-60). But Defendants opted to keep those objections brief and offered only minimal analysis to support their arguments. (See, e.g., R. 350, Resp. to RPD Nos. 1-30 at 62.) While Defendants may now have buyer's remorse after having their objections overruled, a motion for reconsideration is not a proper vehicle for rearguing those objections with greater specificity and detail. See SFG, 2021 WL 972887, at *1; Fed.R.Civ.P. 34(b)(2)(B) (objections to document production requests must “state with specificity the grounds for objecting to the request, including the reasons”). To be sure, this court disfavors a trial-and-error approach to litigation.

Accordingly, to prevail on their motion, Defendants must demonstrate that the court has “patently misunderstood” or “made an error not of reasoning but of apprehension” regarding their arguments about China's state secrets and personal privacy laws as those arguments were originally expressed. Ford, 2019 WL 2011104, at *1. And as explained below, they cannot.

B. Foreign Blocking Laws

Foreign laws that block the production of discoverable material do not automatically excuse a party from its Rule 26 obligations. As the Supreme Court has explained, “[i]t is well settled that [foreign blocking] statutes do not deprive an American court of the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate that statute.” Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Ct. for S. Dist. of Iowa, 482 U.S. 522, 544 n.29 (1987). Even “[t]he fact that foreign law may subject a person to criminal sanctions in the foreign country if he produces certain information does not automatically bar a domestic court from compelling production.” United States v. First Nat'l Bank of Chi., 699 F.2d 341, 345 (7th Cir. 1983). However, in recognition of the potential liability a party fulfilling its discovery obligations could face for violating foreign law, courts “should exercise special vigilance to protect foreign litigants from the danger that unnecessary, or unduly burdensome, discovery may place them in a disadvantageous position.” Aerospatiale, 482 U.S. at 546.

The threshold question, therefore, is “whether [foreign] law actually bars the production at issue.” Republic Techs. (NA), LCC v. BBK Tobacco & Foods, No. 16 CV 3401, 2017 WL 4287205, at *1 (N.D. Ill. Sept. 27, 2017). This is a mixed question of fact and law. As for fact, the party relying on foreign law to block production bears the burden of “provid[ing] the Court with information of sufficient particularity and specificity to allow the Court to determine whether the discovery sought is indeed prohibited by foreign law.” Id. On the other hand, determining the meaning of the foreign statute or court decision is a question of law. See Fed. R. Civ. P. 44.1. To make this determination, courts may “consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence.” Id. The Seventh Circuit directs the trial courts to “use the best of the available sources, ” even when this means engaging in their own independent research. Bodum USA, Inc. v. La Cafetiere, Inc., 621 F.3d 624, 628 (7th Cir. 2010).

Thus, while expert declarations...