What if ... I was subject to a U.S. proceeding without document management

Japanese companies may be involved in US proceedings

There are three patterns in which a Japanese parent company is involved in a US lawsuit: defendant / third party / plaintiff.

The typical pattern of cases in which the Japanese parent company is involved is that of a defendant. Specifically, it is possible to analyze cases in which: 1) executives and employees of the Japanese parent company are deeply involved in the decision-making and business of the U.S. subsidiary; or 2) the business of the Japanese parent company is closely related to that of the U.S. subsidiary. In reality, however, there are many cases where a Japanese parent company is forcefully included as a defendant in addition to the U.S. subsidiary simply because 3) it appears to have money. Aside from 1) and 2), it is typical for Japanese companies to sue their subsidiaries in order to get the parent company, which seems to have the money, to become a defendant and to force the subsidiary to produce inconvenient documents to settle the case, as in 3).

The FY2018 figures show that as many as 99.1% of civil actions in federal district courts were terminated without waiting for a full court hearing (18.5%: terminated after the complaint was filed and without judge involvement; 69.1%: terminated after discovery and before the start of pre-trial; 11.4%: terminated after pre-trial and before the start of trial). terminated before the start of the trial. Source:https://www.uscourts.gov/sites/default/files/data_tables/jff_4.10_0930.2018.pdf). The basic strategy is to negotiate with the other party and settle the case quickly, because the other party's and your own documents that come out in discovery will tell you whether you are likely to win the case or not. If the case proceeds to a trial, i.e., a trial by jury, the conclusion could go either way, and the cost of preparing for a jury would be tremendous, so we would aim to settle as soon as possible to prevent this from happening.

What to do with discovery

Regarding the flow of US civil lawsuits, one typical image is that after filing a lawsuit, the complaint is served and the answer is submitted, and then the discovery procedure starts in about three months, for example.The process includes consultation by the parties, initial disclosure by both parties, submission of a discovery plan, sending of written questions and requests for submission of documents by the parties, and sending of written responses and documents. And there can be settlement negotiations and conclusions at any of these stages.

At the same time, on the enterprise side, internal work related to discovery will proceed. In other words, they will proceed with data preservation, collection, and examination.

When it comes to litigation, the company first issues an internal notice called litigation hold. At the stage of "Proceedings" or "Proceedings from now on", they will instruct the people concerned in the company not to destroy, hide or change the documents. Failure to hold this proceeding properly can result in serious sanctions and disadvantages. Discarding or deleting materials that may be related to the proceedings may impose a serious penalty on the company, so the materials related to the proceedings should be properly preserved in-house and the database. A task called "review" is to collect materials related to proceedings, put them in a database, arrange them, and consider them. Data related to the proceedings and data not related to the proceedings are sorted, and the data that is subject to the confidentiality privilege and the data that is not subject to the confidentiality are sorted and submitted to the other party. The amount of documents and data covered by this review is so large that the attorney's fees for this are very high.

A big exception to discovery: Privilege

The privilege is the idea that although the principle of discovery is that plaintiffs and defendants should disclose to each other documents and data that may be relevant to the substance of the case, they are not obligated to do so exceptionally due to the attorney-client privilege and the work-product doctrine.The attorney-client privilege protects candid communications between attorney and client, and confidential exchanges for legal advice are protected. The work product doctrine is the legal doctrine that if a document is prepared by an attorney in preparation for litigation, it is an attorney-prepared document, and this too is not obligated to be disclosed to the opposing party. Both are extremely important as a major exception to discovery.

Japanese companies and discovery

For Japanese companies, the first and most important part of the discovery process is the litigation hold. It may be humane to want to erase it if there is a document saying that this is not good even if it is said that it should not be deleted, but it is often technically recoverable and really Even if it is erased cleanly, some traces of it usually remain.It is determined that the item was deleted because it was inconvenient, and serious sanctions will be imposed. Therefore, it is important to properly preserve the materials and submit what should be submitted firmly so that such a situation does not occur.

A common question is whether you have to submit materials that include personal information and trade secrets.In this regard, in discovery, the protection of personal information and trade secrets is not treated as a general exception, so it is important to obtain a court secret protection order and have the relevant part protected by blackening it. is.

Also, a common problem with Japanese companies is the presence of large amounts of emails and materials.Old data often remains in Japanese companies, and collecting it and putting it in a database for consideration costs an unimaginable amount of money.Moreover, the larger the amount, the greater the risk of including problematic expressions.In that respect, many US companies set their inboxes, outboxes, and deleted trays to be automatically deleted after 3 months (it is recommended to keep important ones separately), and anyway, data is stored. The basic idea is to keep it compact.

In addition to accumulating a large amount of documents, Japanese companies often make mistakes such as sharing the risk situation widely within the company, using assertive expressions, and legal concepts (illegal, problems). There are things like writing about (there is, etc.), and reporting to the company or the parent company about the content of the proceedings or disputes.In US companies, there is an in-house lawyer and all legal analysis is done with the involvement of the lawyer, and information is protected by confidentiality privileges and work products, but in Japanese companies, legal analysis is often done by lawyers. I will do it in-house without the involvement of.It is necessary to give due consideration to the preparation of materials, keeping in mind that once a proceeding is filed, all such information will be released outside the company.

Grasp the image by simulation

In general, unlike Japanese proceedings, which only come to a settlement after one or two years of proceedings, there is always a possibility of settlement in a US proceeding.Discovery work begins as soon as the trial begins, but when very unfavorable material comes out in-house, it is a little more advantageous than continuing to fight and being held extremely heavy responsibility. You will be negotiating with the other party for an early settlement.As a lawyer, if you know the situation of your client (the emails are well organized and the number is not very large, etc.), you can discuss the discovery policy with the other lawyer on the premise of that. You can negotiate.To that end, it is important to imagine how the proceedings will work, how to work with lawyers, and where and what kind of materials are available.

Documents cannot be organized in time after the proceedings are held.When a proceeding is filed, there is no choice but to follow the flow, and the scope of what can be done is narrowed.For that reason, it is recommended to perform a discovery simulation at the normal stage and establish document management / disposal rules.

What to do at a Japanese company

• Daily data management, document management

While many US companies automatically delete emails after a period of time, there is, of course, some internal backlash, especially from business units.Even so, the risk and cost far outweigh the repulsion is incurred in proceedings and discovery, so the trend is to "disappear after a certain period of time."

Japanese civil lawsuits do not have the burden of discovery as in the United States, so if Japanese companies are only aware of Japanese civil lawsuits, it is not always necessary to deal with US companies, but the global business of Japanese companies In light of the increasing trend, it may be better to be more aware of document deletion and efficient data management.It is true that many people write or leave with little awareness of the problem of increasing in-house materials (especially emails).Of course, Japanese companies also have document management rules that set the storage period for each document, but if you say that you are disposing of each document just because it has expired, you usually keep it.It's a good idea to change from here first.

The culture of leaving documents on paper still remains strong, but the transition to digital data is also progressing.However, even with document management rules, there are many companies whose digital data management rules are not clear.In the case of a proceeding, not only the final version of digital data will be a problem, but all the draft exchanges and comments up to that point will be a problem.With that in mind, we recommend that you check in-house how to manage and operate digital data.

In the case of Japanese companies, for example, if there is a branch office in the United States, departments and group companies that are strongly related to US business will set document management rules that are more conscious of US proceedings, and departments that are not will be closer to Japan. There is also.

Finally, who will take the initiative, which is a surprisingly difficult question.Since it is a company-wide story, legal affairs should be done originally, but it is not so conscious as a legal affairs job, and when trying to do it, it is often difficult to decide who should take the initiative.Considering the risks of US proceedings, I think it would be good to have legal affairs become a control tower, have the officer in charge understand it, including other departments, and proceed in collaboration with the IT department.

• Utilization of confidentiality privileges

This is ideal because all transactions that pose a risk within the company include a lawyer, and if you consult with a lawyer, you will be protected with confidentiality privileges, but in reality, there are many in-house lawyers like in the United States. There are not many companies in Japan, and it is often unrealistic to have a lawyer in every exchange.However, just because you can't do that, you don't want to put risk information on paper or share it internally, which is an option that companies can't take.If you want to share risk information early, or if you want to do legal analysis and risk assessment in-house, it is recommended to include a lawyer.

• Points of in-house training

It is very important for anyone involved in business related to US litigation, as well as legal affairs, to understand the basics of discovery and confidentiality privileges.In the sense of a U.S. company, even if you are not a legal affairs or a lawyer, "There is a discovery, and a huge amount of materials will come out when it comes to proceedings", "I received a proceeding hold", "Confidential privilege" Even ordinary employees have a certain degree of feeling that "there is good communication with lawyers, but I do not know where and how other communication will be a problem later."With that in mind, even in Japanese companies, if they understand the basics of proceedings, risks, and confidentiality privileges in the form of training for business divisions, the expressions in documents and emails will change to some extent.Training for business travelers and expatriates is common.When I go on a business trip, I sometimes send a risk-filled email to Japanese legal staff as a business trip report, which becomes a problem later.From the perspective of a US subsidiary, I would like more engineers to be informed about the basics and risks of US proceedings at the Japanese headquarters.After that, if the IT department does not know anything, the initial action will be confused, so if you create some key persons in the IT department and create documents and data maps, the initial action will change significantly.

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