Opinion
22-mc-80036-KAW
08-01-2022
IN RE EX PARTE APPLICATION OF SUNGROVE CO., LTD.,
ORDER REASSIGNING CASE TO A DISTRICT JUDGE; REPORT AND RECOMMENDATION TO GRANT DISCOVERY PURSUANT TO 28 U.S.C. § 1782 RE: DKT. NOS. 1, 5
KANDIS A. WESTMORE, United States Magistrate Judge.
On February 1, 2022, Applicant Sungrove Co., Ltd. filed an ex parte application for an order to obtain discovery for use in a foreign proceeding, pursuant to 28 U.S.C. § 1782(a). (Mot., Dkt. No. 1.) Applicant sought information from Automattic, seeking personal identifying information regarding an anonymous blog author, “sagimetsu.” (Mot. at 3.) After the Court denied Applicant's ex parte application, Applicant filed a motion for reconsideration. (See Denial Order, Dkt. No. 4; Mot. for Reconsideration, Dkt. No. 9.) Having reviewed Applicant's motion for reconsideration, the Court REASSIGNS this case to a district judge, and RECOMMENDS that Applicant's request for discovery pursuant to § 1782 be granted.
I. BACKGROUND
Applicant is a Japanese corporation, whose primary business is providing clients with website creation and search engine optimization services. (Hayashi Decl. ¶¶ 1, 3, Dkt. No. 1-1.) Applicant asserts that an anonymous blog author, using the pseudonym “sagimetsu,” created a WordPress website titled “In Regard to Sungrove.” (Hayashi Decl. ¶¶ 7, 9.) WordPress is owned by Automattic. (Mot. at 2.) In sagimetsu's first post, entitled “Sungrove Fraud Sales Reputation Black Employment-Benefits Annoyance Telephone-Calls Harm,” sagimetsu states: “I intend to deal with Sungrove on this website.” (Hayashi Decl. ¶ 10.) On July 14, 2021, sagimetsu published a post (“Subject Post”) that linked to an article: “This is how I was ‘lawfully defrauded' by a business targeting sole proprietors, although the business agreed to refund, if I disclose information I will be charged 1,000,000 Yen” (“Subject Article”). (Hayashi Decl. ¶ 8; Katsurada Decl., Exh. A, Dkt. No. 1-3.)
The Subject Article does not name Sungrove. (Hayashi Decl. ¶ 14.) Rather, it concerns “Company S,” an agent of “[C]ompany R, which provides members only benefit programs.” (Katsurada Decl, Exh. B (“Subject Article”) at 1.) The Subject Article interviews Mr. A, who asserts Company S (whose primary business was to create websites for stores or companies) solicited him by telling him: “if you register, you can expect at least five new customers a month.” (Id.) Mr. A signed a contract with Company S because he wanted to join Company R's benefits program but received no benefits. (Id. at 2.) The Subject Article also interviews Mr. B, who made accusations against Company S on social networking sites and his website. (Id.) Mr. B asserts that Company S offered a refund if he signed an agreement and deleted his accusatory posts. (Id.) The agreement required that the signer “not damage Company S whatsoever in the future,” and that violation of this agreement would obligate the signer “to pay 1,000,000 yen for breach of contract.” (Id. at 3.)
Applicant contends that Mr. A's assertion in the Subject Article that he was told “if you register, you can expect at least five new customers a month” is false because Applicant and its employees have never engaged in such sales activities. (Katsurada Decl. ¶ 13; Kanda Decl. ¶ 17, Dkt. No. 1-2.) Thus, Applicant asserts that sagimetsu has committed defamation by publishing a blog post that includes links to the Subject Article, which in turn contains this allegedly false statement. (Kanda Decl. ¶ 17.)
On March 9, 2022, the undersigned denied Applicant's ex parte application. The undersigned found that Plaintiff had satisfied § 1782's threshold requirements, as well as the four non-exhaustive, discretionary factors (“Intel factors”). (Denial Order at 3-5.) The undersigned, however, explained that “[e]ven if the applicant satisfies the discretionary Intel factors, a request should be denied if the court suspects that the request is a fishing expedition or a vehicle for harassment.” (Id. at 5 (internal quotation omitted).) The undersigned explained that it “cannot ascertain whether linking to an article that contains an allegedly false statement by a third-party would state a viable claim for defamation under Japanese law,” and raised concerns that “Applicant is far more likely to use the subscriber information to intim[idate] and harass sagimetsu into taking down the website, rather than filing a lawsuit. The undersigned is also concerned about the potentially chilling effect on speech should courts begin granting requests for subscriber information in cases involving blog posts that link to news articles that may contain a false statement by an interviewee, even if the bulk of the news article is true.” (Id.)
On April 8, 2022, Applicant filed a motion for reconsideration, providing additional information addressing the Court's concerns. (Mot. for Reconsideration at 6.) Specifically, Applicant explained that it believed that sagimetsu was Masaki Kato, the husband of a former customer of Applicant. (2d Hayashi Decl. ¶¶ 8, 12, Dkt. No. 5-1.) Applicant previously brought suit against Mr. Kato regarding an article published by Mr. Kato. (2d Hayashi Decl. ¶ 9.) The court determined that Mr. Kato's article was unlawful. (2d Hayashi Decl. ¶ 10.) Sixteen days after the court's decision in favor of Applicant, sagimetsu published its first post on its WordPress website. (2d Hayashi Decl. ¶ 12.) Twenty-one days after the court's favorable decision, the Subject Post linking the Subject Article was published. (2d Decl. ¶ 12.) Further, Applicant explains that the Mr. Kato has admitted that he is the Mr. B in the Subject Article. (2d Hayashi Decl. ¶¶ 15(iv).)
On April 14, 2022, the undersigned denied Applicant's motion for reconsideration based on the failure to file a motion for leave. (Dkt. No. 7.) On May 11, 2022, Applicant filed a motion for reconsideration of the April 14, 2022 order, explaining that it was not required to file a motion for leave. (2d Mot. for Reconsideration, Dkt. No. 9.) Applicant also provided further information, including that Applicant believes that Mr. A in the Subject Article was made up by Mr. Kato, as it has no customer with Mr. A's facts and Mr. B incorporated Mr. A's situation by saying his wife was deceived in a similar way as Mr. A. (3d Hayashi Decl. ¶¶ 15(iii), (ix), Dkt. No. 6.) Applicant also explains the falsities of Mr. B's story. (3d Hayashi Decl. ¶¶ 15(v)-(vii), (x).) Finally, Applicant explains that it has suffered damages from the Subject Post. For example, Applicant lost prospective customers who informed Applicant of their concerns because of the Subject Post. (3d Hayashi Decl. ¶ 6.) Employees have also resigned, raising the Subject Post as their reason for resigning. (3d Hayashi Decl. ¶ 6.) Further, potential new hires have declined job offers, raising the Subject Post. (3d Hayashi Decl. ¶ 6.)
On May 13, 2022, Applicant filed a notice of appeal. (Dkt. No. 10.) In light of the appeal, the Court terminated Applicant's May 11, 2022 motion for reconsideration because the Court lacked jurisdiction over the case due to the appeal. (Dkt. No. 12.) Applicant subsequently moved to voluntarily dismiss the appeal, which the Ninth Circuit granted. (Dkt. No. 13.)
On June 13, 2022, Applicant filed: (1) a motion for an extension of time to file an objection to the Court's March 9, 2022 order for de novo review by the district court, and (2) a motion to renew the May 11, 2022 motion for reconsideration. (Dkt. Nos. 14, 15.) On June 17, 2022, the Court granted Applicant's motion to renew the May 11, 2022 motion for reconsideration, and granted Applicant's May 11, 2022 motion for reconsideration. (Dkt. No. 16 at 1.) The Court stated that it would review Applicant's April 8, 2022 motion for reconsideration, and issue a report and recommendation. Because Applicant would then have an opportunity to object to the report and recommendation, the undersigned denied Applicant's motion for an extension of time to file an objection to the Court's March 9, 2022 order. (Id. at 1-2.)
On May 18, 2022, the Ninth Circuit issued its decision in CPC Patent Technologies PTY Ltd. v. Apple, Inc., which found that § 1782 applications were dispositive matters that required consent to magistrate judge jurisdiction by all parties. 34 F.4th 801, 808 (9th Cir. 2022). PostCPC Patent Technologies PTY Ltd., the Court would not ordinarily issue a report and recommendation. Given the unusual procedural history of this case, including the Court's previous ruling and the motions for reconsideration, the Court found that a report and recommendation was appropriate in this particular instance.
II. LEGAL STANDARD
28 U.S.C. § 1782 “is the product of congressional efforts . . . to provide federal-court assistance in gathering evidence for use in foreign tribunals.” Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247 (2004). Under § 1782, a district court may order a person residing or found within its district to produce documents or testimony for use in a foreign legal proceeding, unless the disclosure would violate a legal privilege. 28 U.S.C. § 1782(a); Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 246-47 (2004). The statute may be invoked where: (1) the discovery sought is from a person or entity residing in the district of the district court to which the application is made; (2) the discovery is for use in a proceeding before a foreign tribunal; and (3) the applicant is a foreign or international tribunal or an “interested person.” See In re Republic of Ecuador, No. 10-mc-80225-CRB (EMC), 2010 WL 3702427, at *2 (N.D. Cal. Sept. 15, 2010).
Even if these three factors are met, the court is not required to grant the application. In re Ex Parte Apple Inc., Case No. 12-mc-80013-JW, 2012 WL 1570043, at *1 (N.D. Cal. May 2, 2012); see also In re Application of Joint Stock Co. Raiffeinsenbank (“In re Raiffeinsenbank”), Case No. 16-mc-80203-MEJ, 2016 WL 6474224, at *3 (N.D. Cal. Nov. 2, 2016). Instead, the court considers the following non-exhaustive factors:
(1) whether the “person from whom discovery is sought is a participant in the foreign proceeding”; (2) “the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance”; (3) whether the discovery request is an “attempt to circumvent proof-gathering restrictions or other policies of a foreign country or the United States”; and (4) whether the discovery requested is “unduly intrusive or burdensome.”In re Ex Parte Apple Inc., 2012 WL 1570043, at *1 (quoting Intel Corp., 542 U.S. at 264-65.) The court must exercise its “discretion with the ‘twin aims' of § 1782 in mind: (1) ‘providing efficient assistance to participants in international litigation' and (2) ‘encouraging foreign countries by example to provide similar assistance to our courts.'” In re Raiffeinsenbank, 2016 WL 6474224, at *3 (quoting Intel Corp., 542 U.S. at 252).
III. DISCUSSION
A. 42 U.S.C. § 1782 Threshold Requirements
The Court again finds that Applicant satisfies § 1782's threshold requirements.
First, the discovery is sought from a resident in this district, as Automattic is located in San Francisco, California. (Mot. at 5.)
Second, while there is no pending foreign proceeding, Applicant claims that once sagimetsu's identity is ascertained, Applicant intends to file a civil lawsuit in Japan to claim tort damages. (Mot. at 6.) Indeed, Applicant has previously filed (and won) a defamation suit based on similar claims. (See 2d Hayashi Decl. ¶¶ 9-10.) “So long as a future proceeding is ‘within reasonable contemplation,' it satisfies the statute's requirement.” Khrapunov v. Prosyankin, 931 F.3d 922, 925 (9th Cir. 2019) (citing Intel, 542 U.S. at 259).
Third, Applicant is an “interested person” because it is the anticipated plaintiff in the anticipated litigation. (Mot. at 6.)
Since the threshold requirements are satisfied, discovery may be authorized under § 1782.
B. Discretionary Factors
Additionally, there are four, non-exhaustive, discretionary factors that must be considered in deciding whether to authorize discovery under § 1782. The first factor considers whether “the person from whom discovery is sought is a participant in the foreign proceeding.” Intel Corp., 542 U.S. at 264. This factor generally weighs against authorizing discovery if the person from whom it is sought is a participant in the foreign proceeding because the “foreign tribunal has jurisdiction over those appearing before it and can itself order them to produce evidence.” Id. Here, Automattic is not a participant in the foreign proceeding, so this factor weighs in favor of granting the application.
The second factor considers “the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign . . . court . . . to U.S. federal-court judicial assistance.” Intel Corp., 542 U.S. at 264. “This factor considers whether the foreign tribunal is willing to consider the information sought.” In re Raiffeinsenbank, 2016 WL 6474224, at *5 (internal quotation omitted). In reviewing this factor, the district court looks at whether “there is reliable evidence that the foreign tribunal would not make any use of the requested material,” in which case “it may be irresponsible for the district court to order discovery, especially where it involves substantial costs to the parties involved.” In re: Ex Parte Appl. Varian Med. Sys. Int'l AG (“In re Varian”), Case No. 16-mc-80048-MEJ, 2016 WL 1161568, at *4 (N.D. Cal. Mar. 24, 2016) (internal quotation omitted). The Japanese tribunal would make use of sagimetsu's identity if they are a named defendant in a civil lawsuit, so this factor also weighs in favor of discovery. (See Mot. at 7-8.)
The third factor looks at “whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering limits or other policies of a foreign country or the United States.” Intel Corp., 542 U.S. at 265. “Although courts need not determine if an applicant has exhausted its discovery attempts abroad, a perception that an applicant has side-stepped less-than-favorable discovery rules by resorting immediately to §1782 can be a factor in a court's analysis.” In re Raiffeinsenbank, 2016 WL 6474224, at *6 (internal quotation omitted). Here, the Court has no reason to believe that the instant application is an attempt to circumvent foreign proof-gathering restrictions or policies of Japan. This factor weighs in favor of authorizing § 1782 discovery.
The fourth factor reviews whether the requested discovery is “unduly intrusive or burdensome.” Intel Corp., 542 U.S. at 265. “The proper scope of discovery arising out of a § 1782 application is generally determined by the Federal Rules of Civil Procedure.” In re Raiffeinsenbank, 2016 WL 6474224, at *6. As such, the granting of the subpoena does not preclude sagimetsu from filing a motion to quash before the information is provided. Thus, this factor also weighs slightly in favor of granting the application. See id.
Finally, the Court finds that its concerns that the purpose of discovery is to harass and intimidate, rather than file a lawsuit, have been addressed. Applicant does not merely seek to discover the identity of an individual who has made negative statements; rather, Applicant has adequately demonstrated why it believes the Subject Post is part of a campaign by Mr. Kato to defame Applicant. Applicant has successfully filed suit against Mr. Kato based on Mr. Kato's false representations, further supporting the conclusion that Applicant will file suit. (2d Hayashi Decl. ¶¶ 9-10.) Moreover, Applicant has explained that hyperlinks to articles containing unlawful statements is a basis for a reputational tort claim under Japanese law, thus demonstrating that it likely has a claim against sagimetsu. (2d Kanda Decl. ¶ 8, Dkt. No. 5-2 (explaining that the High Court of Tokyo has found, in the context of a reputational tort, that by intentionally hyperlinking an article, the linked article was incorporated).) Finally, Applicant has demonstrated that it has been harmed by the Subject Post, further demonstrating that it intends to file a lawsuit against sagimetsu.
Accordingly, the Court finds that Applicant has satisfied the § 1782 threshold requirements and the Intel discretionary requirements.
IV. CONCLUSION
For the reasons stated above, the Court RECOMMENDS that the application for discovery under § 1782 be granted.
Any party may file objections to this report and recommendation with the district judge within 14 days of being served with a copy. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); N.D. Civil L.R. 72-3. The parties are advised that failure to file objections within the specified time may waive the right to appeal the District Court's order. IBEW Local 595 Trust Funds v. ACS Controls Corp., No. C-10-5568, 2011 WL 1496056, at *3 (N.D. Cal. Apr. 20, 2011).
IT IS SO ORDERED.