Sun Group U.S.A. Harmony City, Inc. v. CRRC Corporation LTD, 3:17-cv-02191

Background

Plaintiff Sun Group U.S.A. Harmony City, Inc. seeks documents located in China from Defendant CRRC Corporation Ltd in U.S. litigation.
CRRC (a state-controlled Chinese company) contends Chinese law (Article 277 of the Civil Procedure Law) bars voluntary production of evidence in China except through the Hague Evidence Convention.
The Chinese Ministry of Justice responded that foreign discovery in the PRC must proceed through Hague Convention channels.
The court applied the two-step Aerospatiale framework: (1) whether Chinese law bars production; and (2) a case-specific comity/balancing analysis (Richmark factors).
Court concluded Article 277, supported by expert declaration and the Ministry letter, bars direct production of physical documents located in China and ordered Hague procedures for such materials, but reserved the right to revisit if necessary documents prove unobtainable.
The court held that electronically stored information accessible from the U.S. must be produced under the Federal Rules, and declined to compel production of subsidiary CRRC MA documents absent a showing of Defendant’s legal control.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Chinese law (Article 277) prohibits Defendant from producing documents in China absent Hague procedures	Article 277 only bars non-Chinese actors from physically conducting discovery; Defendant can voluntarily comply with U.S. orders	Article 277 forbids foreign discovery activity in China and requires Hague Convention channels; CRRC, as state-controlled, cannot disobey Chinese law	Court: Article 277, supported by expert declaration and MOJ letter, bars direct production; step one satisfied
Whether Hague Convention must be used (comity balancing / Richmark factors)	Federal Rules govern; Hague is unnecessary and would delay discovery	Sovereign interests and Article 277 warrant Hague procedures for China-located materials	Court: Balancing favors Hague for physical China-located documents (but neutral on national interests now and may revisit if Hague is ineffective)
Whether electronically stored information (ESI) “located” in China is governed by Hague procedures	Hague should govern ESI stored on servers in China	ESI accessible from the U.S. is virtually located in the U.S.; producing it does not implicate Article 277	Court: ESI accessible from U.S. must be produced under the Federal Rules; server location is largely virtual and not a bar
Whether Defendant must produce documents held by subsidiaries (e.g., CRRC MA)	Defendant controls subsidiaries and must produce their documents	Defendant lacks legal right to obtain subsidiary documents on demand; no present proof of control	Court: Declines to compel CRRC MA documents from Defendant now; Plaintiff may pursue third-party discovery and later show control to revisit compulsion

Key Cases Cited

Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court for S. Dist. of Iowa, 482 U.S. 522 (1987) (establishes comity-based framework for foreign discovery and factors for Hague analysis)
Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468 (9th Cir. 1992) (applies Aerospatiale balancing and lists five factors for foreign discovery disputes)
Matter of Warrant to Search a Certain E-Mail Account Controlled & Maintained by Microsoft Corp., 855 F.3d 53 (2d Cir. 2017) (discusses virtual nature of electronic data; relevant to ESI location analysis)
Matter of Warrant to Search a Certain E-Mail Account Controlled & Maintained by Microsoft Corp., 829 F.3d 197 (2d Cir. 2016) (concurring/dissenting opinions on extraterritorial reach of electronic-data orders)
In re Citric Acid Litig., 191 F.3d 1090 (9th Cir. 1999) (possession/custody/control standard for compelling documents)
United States v. Int'l Union of Petroleum & Indus. Workers, 870 F.2d 1450 (9th Cir. 1989) (defines "control" as legal right to obtain documents on demand)
St. Jude Med. S.C., Inc. v. Janssen-Counotte, 104 F. Supp. 3d 1150 (D. Or. 2015) (district court example requiring Hague procedures when foreign sovereign interests implicated)
Salt River Project Agric. Improvement & Power Dist. v. Trench France SAS, 303 F. Supp. 3d 1004 (D. Ariz. 2018) (treats Hague procedure as a potentially substantially equivalent alternative)