MEDIA

December 8, 2000

On Discovery In Foreign Tribunals And IRA Beneficiary Designation

Published in: New York Law Journal | volume 224
Written by: Peter R. Schlam and Harvey M. Stone

This column reports on several significant, representative decisions handed down recently in the U.S. District Court for the Eastern District of New York; the major issues addressed include discovery by foreign tribunals and the designation of beneficiaries of an IRA.

Discovery: Foreign Tribunals

In Application of Ishihara Chemical Co., Ltd. for an Order to Take Discovery of Shipley Company, LLC, Pursuant to 28 U.S.C. 1782, 99 Misc 232 (EDNY, Nov. 15, 2000), Judge Frederic Block quashed a subpoena insofar as it sought interrogatories and requests for admissions from a party to a foreign proceeding pursuant to 28 U.S.C. 1782. The court otherwise allowed discovery to proceed. Judge Block addressed the issues (1) whether 1782 authorizes discovery from a party to a foreign proceeding and, if so, (2) whether such discovery may encompass requests for admissions and interrogatories.

In a proceeding pending before the Japanese Patent Office, Ishihara claimed that a Japanese patent acquired by Shipley for tin-alloy electroplating was invalid because, prior to the filing of the patent application, Shipley had offered for sale in Japan electroplating products that are the subject of the patent. Seeking to avoid royalty payments, Ishihara asserted that such offers for sale invalidated the patent under Japanese law. In its application in the Eastern District, Ishihara noticed one deposition from Shipley and sought permission to issue 69 requests to admit, 12 interrogatories and four document requests.

Section 1782 provides that "upon application of any interested person" the district court may order a person within the district "to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or other international tribunal." As Judge Block noted, the two aims of 1782 are to assist participants efficiently in international litigation and, by example, encourage foreign countries to assist United States courts. After examining the legislative history of 1782 and its amendments, Judge Block commented that the trend had been to broaden the statute’s scope by expanding its reach from court proceedings to tribunals. The discovery sought, moreover, need not be available under foreign law and should be denied only upon authoritative proof that the foreign tribunal would reject any evidence obtained.

The foreign "tribunal," Judge Block also noted, must engage in impartial adjudication – i.e., there must be some separation between the prosecutorial and adjudicative functions. Pursuant to Federal Rule of Civil Procedure 44.1, the court had independently researched Japanese law and determined that the Japanese Patent Office (JPO) acts as a tribunal within the meaning of 1782 when it conducts invalidation proceedings. In such matters the JPO performs judicial functions overseeing adversary proceedings that courts in the United States would perform as neutral adjudicators.

In determining that 1782 authorizes discovery from a "party" to a foreign proceeding, Judge Block pointed to the plain language of the statute which refers to "persons" residing or found in the district. Including parties within the term "person" conforms to the statutory purpose to lend effective assistance to international litigants by providing judicial overview to resolve any disputes that might arise. Slip op. 17.

Finally, Judge Block interpreted the authorization in 1782 to require a person "to give his testimony or statement" as excluding requests for admissions and interrogatories.

In enacting and amending 1782, Congress contemplated testimony and statements taken under oath. As the court noted, the term "statement" made the statute ambiguous, but this term may have been a carryover from a prior statute. And, since interrogatories and requests for admissions may be directed only to parties and 1782 discovery requests may be directed to "persons" within a district, inclusion of these discovery vehicles would overly broaden the reach of 1782. Judge Block distinguished the evidence gathering purpose of 1782 from the trial preparation function of interrogatories and requests to admit. In conclusion, Judge Block stated: "it seems improvident to read into the statute discovery devices which are truly foreign to foreign courts." Slip op. 30.

IRA Beneficiary Designation

In Freedman v. Freedman, 99 CV 2652 (EDNY, Sept. 27, 2000), Judge Arthur D. Spatt held that a husband’s will eliminating all bequests to his wife did not nullify a prior designation of her as beneficiary on his IRA account, where the will did not specifically name a new IRA beneficiary.

Plaintiffs, relatives of the husband (Robert), commenced this diversity action against the wife (Estelle) and the executor of the husband’s estate to recover his IRA proceeds under various theories of equity. Robert married Estelle in 1974. His 1993 will bequeathed most of his estate to her. In 1994 he rolled over his pension and retirement fund into an IRA account naming her as beneficiary.

Estelle began divorce proceedings in 1997. Robert then executed a new will eliminating all bequests to her. He failed to inform his attorney that Estelle was named as his IRA beneficiary. At Robert’s death in 1998, his IRA account – worth about $693,000 – passed to Estelle.

Plaintiffs claimed here that the mistake of fact and law by Robert and his attorney unjustly enriched Estelle, because Robert intended, by his new will, to exclude Estelle from receiving anything other than her statutorily elective share of his estate.

As Judge Spatt observed in granting defendant’s motion Rule 12(c) for judgment on the pleadings, 13-32 of New York’s Estate Powers and Trust Law states that a named IRA beneficiary is entitled to payment so long as the designation is in writing and signed by the person making the designation. Here, plaintiffs alleged no more than general testamentary statements to support their position that Robert intended to name a new IRA beneficiary. Such allegations do not suffice under New York law. Rather, to prevail, plaintiffs would have to show that the new will specifically disposed of the earlier IRA beneficiary designation. This, the court noted, they admittedly failed to do.

State, Federal Action

In Island Online, Inc. v. Network Solutions, Inc. (EDNY, Nov. 13, 2000), Judge David G. Trager addressed issues of "state action" and federal standing in the context of a dispute concerning defendants’ refusal to register certain assertedly obscene internet domain names sought by plaintiffs.

Defendant Network Solutions, Inc. (NSI) is a private entity that contracted with defendant National Science Foundation (NSF), an agency of the U.S. government, to register certain internet domain names. Plaintiff brought a 1983 action complaining, inter alia, that its First and Fifth Amendment speech and due process rights had been violated by the denial of its applications to register several sexually explicit domain names. NSI denied registration pursuant to its policy of restricting domain names that include six of the seven well-known "dirty words" prohibited by the Federal Communications Commission and major television networks.

Plaintiff sought money damages for its loss of the domain names at issue, and a declaration invalidating NSF’s obscenity policy as unconstitutional. However, fourteen to fifteen attempts by others to register the domain names at issue had been rejected by NFS before plaintiff’s efforts were rejected. By the time of the court’s decision, moreover, the domain names at issue had been registered to non-parties through domain name registrars, other than NSF, that did not have policies banning such names. These factors complicated plaintiff’s claim

As Judge Trager observed, no causal connection could be established between the complained-of policy and plaintiff’s injury. Indeed, had the policy never existed, plaintiff still would not have been able to register the domain names at issue, since those names would have been registered to one of the earlier applicants rejected under the same policy. Slip op. 15-16. The court reviewed the standing issues in depth, id. 14-31, and concluded that, where a constitutional deprivation is alleged, plaintiff may pursue nominal damages even where causation is absent, in order to "recognize[] the importance to organized society that those rights be scrupulously observed." Id. 19-21, quoting Carey v. Piphus, 435 U.S. 247, 266 98 S. Ct. 1042, 1054 (1978).

These same principles, Judge Trager found, necessarily sufficed to confer standing upon plaintiff for purposes of its claim for declaratory relief, but that claim had been mooted by the registration of the names at issue by third parties through other domain name registrars. Slip op. 28-31.

Wholly apart from these standing considerations, Judge Trager dismissed the complaint in its entirety for lack of federal jurisdiction. Plaintiffs had sued under 1983, which requires state action. But plaintiffs offered no theory by which state action could be found, as the only purported government actor they identified – NSF – is a federal entity. Slip op. 31-33. Plaintiffs attempted to cure this deficiency by moving to amend their complaint to allege a Bivens claim, which is the analogue to 1983 for federal actors. The court found that such amendment would be futile, concluding that the NSI’s obscenity policy "is purely private conduct" that was "in no way undertaken at the behest of, under the influence of or for the financial benefit of" NSF. Slip op. 40-41.

ADEA: Retaliation

In Gordon v. Kings County Hospital Center, 95 CV 3006 (EDNY, Oct. 25, 2000), Judge I. Leo Glasser, granting defendant’s motion for summary judgment, held that plaintiff had failed to make out a prima facie case of either age discrimination in employment or retaliation for filing an age discrimination suit.

In 1986 plaintiff, then aged 49, was hired by defendant Kings County Hospital Center (KCHC). She brought this suit under the Age Discrimination in Employment Act in 1995, claiming that KCHC failed to promote her from a part-time to a full-time housekeeping position. She later expanded her complaint to allege several retaliatory incidents in 1996 and 1997.

After finding insufficient evidence of discriminatory intent, Judge Glasser concluded that the evidence of retaliation was deficient in at least two respects. First, as the court observed,

[w]hile the hospital entity must have known about this action upon receipt of a summons and complaint, the hospital itself could not retaliate against [plaintiff]. Only persons with knowledge of the complaint could engage in retaliation. [Plaintiff] has no evidence, other than speculation, that any of her supervisors were aware of this suit between 1996 and 1998. Slip op. 12-13

Second, plaintiff could not demonstrate a nexus between concededly protected activity (filing her 1995 complaint) and the purported retaliation. the alleged retaliatory incidents occurred between nine months and three years after plaintiff filed her claim. as Judge Glasser noted, "[a] mere temporal connection without more is insufficient to establish the requisite causal connection." Slip. op. 13.

Peter R. Schlam and Harvey M. Stone are partners at Schlam Stone & Dolan. Bennette D. Kramer, a partner of the firm, assisted in the preparation of the article.

[Reproduced with permission from New York Law Journal Volume 224, Friday, December 8, 2000.  Copyright 2000 ALM Properties, Inc.  All rights reserved.]