Thu, Feb. 26, 2004

Client Records and Transatlantic Practice

CK - Washington.   Influential German daily Frankfurter Allgemeine Zeitung alerted German business readers with an article by Gleiss Lutz partner Stephan Wilske to the risk of foreign business releasing data to U.S. law firms in light of growing tendencies by U.S. courts to order the release of client data to third parties. In Ratliff v. Davis Polk & Wardwell, a foreign CPA firm sent business records of a Dutch business for a voluntary submission to the SEC into the custody of a U.S. law firm. A third party unsuccessfully attempted to obtain the data from the SEC and the CPA firm and then to subpoena the data from the law firm. Because attorney client privilege would likely not apply, the law firm refused compliance on the basis of recent case law that would protect such data as not falling within the jurisdiction of American courts.

The Second Circuit ordered compliance [PDF], however, on the basis of the law firm being subject to its jurisdiction. Wilske cautions in his commentary that non-U.S. companies retain custody of business records outside of the jurisdiction of the United States when such records require examination for voluntary submissions to U.S. agencies. As a practical solution, he suggests that U.S. law firms review such records while they remain in the custody of firms outside of the United States.

The Ratliff ruling may ultimately exclude American law firms and their foreign branches as well as foreign law firms with U.S. branches from taking custody of foreign business records, although Wilske does not necessarily dictate that conclusion.

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