Updated 4:22 p.m.
A federal appeals court in Richmond has refused to nullify two grand jury subpoenas in a criminal trade secret theft investigation, saying the U.S. Justice Department did not collude with a private company in obtaining documents in a parallel civil case.
The Korean synthetic fiber manufacturer Kolon Industries had urged the U.S. Court of Appeals for the 4th Circuit to force prosecutors to return or destroy the documents the government obtained through grand jury subpoenas from rival E.I. DuPont de Nemours & Co.
Federal prosecutors in Richmond issued subpoenas in 2009 and 2010 targeting documents Kolon provided to DuPont through discovery requests in the related civil suit in federal district court. The documents were transmitted from overseas.
DuPont sued Kolon in early 2009, alleging trade secret theft. The suit was based in part on the prosecution of a former DuPont engineer who was charged with passing on confidential information to Kolon.
Kolon’s lawyers at Paul, Hastings, Janofsky & Walker and Richmond’s LeClairRyan argued in the appeals court that the government shirked traditional means of obtaining foreign documents, including through the use of mutual legal assistance treaties. Kolon’s attorneys alleged prosecutors unfairly piggybacked on DuPont in the civil suit, scooping up documents that would have been outside the scope of the grand jury.
A three-judge appeals court panel said in a unanimous ruling today the government’s “substantial interaction” with DuPont does not reveal that prosecutors were directing the company’s civil discovery.
“[T]he cooperation between the parties reflects the fact that the government and [Dupont] were assisting one another in advancing their independent but shared interests,” the appeals court said. (Senior Judge Ronald Gilman of the U.S. Court of Appeals for the 6th Circuit, sitting by designation, wrote the opinion for the court. Judges Andre Davis and Paul Niemeyer joined.)
The court noted that the interests of DuPont and the Justice Department are “generally aligned” in trying to stop and punish Kolon’s alleged theft of trade secrets.
DuPont, represented by McGuireWoods and Crowell & Moring, delayed filing its civil suit in deference to the government’s criminal investigation, according to court papers. A prosecutor said in a January 2009 e-mail to DuPont that the government’s investigation was “dead.”
Last July, Senior Judge Robert Payne of the U.S. District Court for the Eastern District of Virginia ruled the government’s interaction with DuPont was not improper. Payne said the subpoenas trumped the civil protective order that guided the sharing of information in the litigation.
Paul Hastings partner Stephen Kinnaird in Washington, who argued for Kolon in the appeals court, said this afternoon Kolon is studying the decision. Kinnaird, co-chair of the firm’s appellate practice, declined further comment.
DuPont’s lawyers, including Kent Gardiner, Crowell’s chairman, were not immediately reached for comment.
The appeals court today pointed to a similar dispute that was resolved recently in favor of the Justice Department in the U.S. Court of Appeals for the 9th Circuit. The appeals court ruled in an antitrust case that the government’s grand jury subpoenas trump a civil protective order.
White & Case, representing Toshiba Corp. in the antitrust proceedings, have asked the U.S. Supreme Court to review the appellate court decision. The petition is pending before the high court.
Several groups, including the U.S. Chamber of Commerce, the National Association of Criminal Defense Lawyers and DRI—The Voice of the Defense Bar filed friend of the court briefs in support of White & Case.