Anti-Suit Injunctions

• Author: International Law Group

Klynveld Peat Marwick Goerdeler Bedrijfsrevisoren (KPMG-B) (defendant) is a Belgian company that served as the auditor of the now bankrupt company, Lernout & Hauspie Speech Products, N.V. (hereinafter "L&H"). Several plaintiffs filed securities fraud actions against KPMG-B and others in the U.S., including the present one. KPMG-B, however, refused to produce auditing records and other documents, contending that revelation would violate Belgian law. A magistrate judge in Massachusetts, however, ordered KPMG-B to produce the documents.

Defendant then requested a Belgian court to levy penalties of $1 million EURO for each violation by those who "take any step of a procedural or other nature in order to proceed with the discovery- procedure." When the Massachusetts district court issued an anti- suit injunction to prevent plaintiff from pursuing the Belgian action, KPMG-B appealed. The U.S. Court of Appeals for the First Circuit affirms.

The extension of the U.S. legal system beyond U.S. territorial borders is most controversial where a party seeks the production of documents for investigations and litigation in the U.S. The sensitivity of an international anti-suit injunction justifies a heightened level of appellate review, i.e., just short of plenary.

Federal appellate courts have developed two contrasting approaches in this area. The Fifth, Ninth and Seventh Circuits seem to prefer a "liberal" approach. Their doctrine is that an international antisuit injunction is appropriate whenever there is a duplication of parties and issues, and the court finds that carrying out simultaneous proceedings would frustrate the speedy and efficient determination of the U.S. case.

On the other hand, the "conservative" method of the Second, Third, Sixth and D.C. Circuits is narrower. It demands that the lower court find out whether a party's pursuit of the foreign lawsuit either (1) imperils the jurisdiction of the forum court or (2) threatens some strong national policy. The "conservative" approach thus gives more weight to international comity.

The First Circuit here rejects the "liberal" philosophy. "We stop short, however, of an uncritical acceptance of the conservative approach. The recent expositions of that approach have come to regard the two main rationales upon which international antisuit injunctions may be grounded - preservation of jurisdiction and protection of important national policies - as exclusive. ... We are uncomfortable with this...