17 March 2014
Three recent US federal court decisions provide additional insight into the scope of permissible discovery under 28 U.S.C. § 1782. These decisions from the Second and Eleventh Circuits continue to sharpen the boundaries of Section 1782 discovery and should improve predictability for practitioners.
Section 1782 is a vehicle for conducting discovery in the United States for use in a foreign proceeding. The applicable legal framework is well-established. A district court is authorized to grant a Section 1782 request when:
- The person from whom discovery is sought resides (or is found) in the district,
- The discovery is for use in a proceeding before a foreign tribunal, and
- The application is made by a foreign or international tribunal or any interested person.1
Once these threshold elements are met, the district court may, in its discretion, grant discovery after considering the four factors presented in Intel Corp. v. Advanced Micro Devices, Inc.:
First, when the person from whom discovery is sought is a participant in the foreign proceeding … the need for § 1782(a) aid generally is not as apparent as it ordinarily is when evidence is sought from a nonparticipant in the matter arising abroad …
Second, a court presented with a § 1782(a) request may take into account the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance …
[Third], a district court could consider whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering limits or other policies of a foreign country or the United States … [and]
[Fourth], unduly intrusive or burdensome requests may be rejected or trimmed.2
In one recent case, In re Kreke Immobilien KG, the petitioner, Kreke, was in litigation in Germany against Oppenheim and applied to the Southern District of New York for Section 1782 discovery from Oppenheim’s parent, Deutsche Bank. Kreke asserted that Deutsche Bank (a non-party to the German case) had control over Oppenheim’s documents, all of which were located in Germany.
In its Section 1782 application, Kreke argued that “as a practical matter, German-style discovery is limited to gaining access to documents whose contents are already known to the applicant in great detail”3 and that a US application was the only “conceivable” approach to obtain documents that “generally pertain” to the subject matter of the German case.
Despite finding that Kreke satisfied the threshold statutory requirements, Judge Buchwald concluded that Kreke could not use Section 1782 to obtain documents that are located abroad. Although one other court from the Southern District has found that the location of the documents is, at most, a discretionary factor, Kreke concluded that “the bulk of authority in this Circuit suggests that a § 1782 respondent cannot be compelled to produce documents located abroad.”
According to the Kreke court, “Given that this case arose out of conduct that took place in Germany, that the parties are all located in Germany, that all physical documents are in Germany, and that all electronic documents are accessible just as easily from Germany as from Deutsche Bank’s offices in New York, the connection to the United States is slight at best and the likelihood of interfering with foreign discovery policy is substantial.” By that reasoning, the foreign location of the documents is a “categorical bar” to Section 1782 assistance.
In another case, In re Application of Mare Shipping Inc. and Apostolos Mangouras,4 a party to litigation in Spain served subpoenas under Section 1782 calling for discovery from the Kingdom of Spain’s New York-based counsel, Squire Sanders. Judge Castel denied petitioner’s motion to compel compliance with the subpoenas. This case raised several interesting issues.
The district court rejected the law firm’s argument that the true target of the subpoena was the Kingdom of Spain. This could have deprived the court of subject matter jurisdiction, because Spain enjoys sovereign immunity. Or, it could have meant that one of the threshold elements for Section 1782 was not satisfied, because Spain does not “reside” in the Southern District of New York. As to both points, the court observed that the subpoena was directed only at the law firm, which is not an agency or instrumentality of the Spanish government.
Nonetheless, the motion to compel was denied. Applying the Intel discretionary factors, the court observed that Spain was the ultimate target of the discovery. That was relevant, not because of sovereign immunity or venue, but because Spain was a party to the foreign case. The court also emphasized that the petitioner’s failure to seek the materials in the Spanish proceedings, despite ample opportunity to do so, implied an attempt to circumvent Spanish discovery rules.
In a third recent case, the Eleventh Circuit Court of Appeals took the unusual step of revising its own prior decision on a Section 1782 appeal. In Application of Consorcio Ecuatoriano de Telecomunicaciones S.A.,5 the plaintiff had filed a Section 1782 request seeking evidence relating to a foreign shipping contract dispute.
The central issue on appeal was whether the discovery related to a “proceeding in a foreign or international tribunal.” The court upheld the district court’s ruling that, although no foreign proceeding was yet pending, it was enough that a foreign proceeding was “within reasonable contemplation.” In addition, while the court stopped short of deciding whether foreign arbitrations meet the statutory requirements, it noted in dicta that they probably do.
The use of an unfiled proceeding to satisfy Section 1782 is supported by Supreme Court precedent. It is unusual, however, and the court provided a useful example of the evidentiary showing required to demonstrate that a proceeding is within “reasonable contemplation.” The applicant stated that its auditor had informed it of potential liability in connection with the shipping dispute. The applicant’s legal and compliance director provided a declaration also conveying the results of the audit and expanding further on the potential private civil action available after the likely criminal proceeding.
It is noteworthy that the court approved the use of Section 1782 for pre-suit discovery that exceeds the discovery available under Federal Rule 27. That rule allows pre-suit discovery, but only depositions of adverse parties, if necessary to “perpetuate testimony,” and if, among other things, the applicant can show that it plans to bring a suit “but cannot presently bring it or cause it to be brought.” Under the Eleventh Circuit’s reasoning, however, if the potential litigation is abroad, Section 1782 might allow more discovery with less of a showing.
Given the nature of the Intel factors and the tone of recent decisions, targets of Section 1782 discovery demands should strongly consider eliciting the views of the foreign tribunal on the discovery requests in order to include them in opposition to the request. Although not formally a factor in the Intel analysis, input from the foreign tribunal may serve two functions. First, it can aid a US court that lacks knowledge about foreign discovery rules and about the particular litigation. Second, it can demonstrate to the US court that the Section 1782 application is not merely an end-run around less-generous foreign discovery rules.
While not dramatically altering existing jurisprudence, these three cases illustrate an increasingly clear delineation of the limits of Section 1782. For the targets of Section 1782 discovery demands, these cases represent a welcome acknowledgment that discovery is not limitless, especially in light of last year’s Second Circuit ruling that the admissibility of Section 1782 discovery material in the foreign litigation forum is irrelevant to a district court’s evaluation of the merits of the application.6 Kreke adds further support for the proposition that Section 1782 cannot be used to obtain documents located outside the United States. These cases also underscore the point that, despite many courts’ willingness to entertain cross-border discovery—even when inconsistent with foreign law—in American litigation, they do not view Section 1782 as a tool to export US discovery standards to cases in foreign courts.
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1 See Schmidt v. Bernstein Liebhard & Lifshitz, LLP 376 F.3d 79, 83 (2d Cir. 2004).
2 Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004).
3 Kreke, No. 13 Misc. 110 (NRB) (S.D.N.Y. Nov. 8, 2013) at 5.
4 13 Misc. 238 (S.D.N.Y. Oct. 23, 2013).
5 No. 11-12897 (11th Cir. Jan. 10, 2014).
6 See “Section 1782 Discovery: A Back Door for Foreign Litigants” (March 2012) at https://www.mayerbrown.com/Section-1782-Discovery-A-Back-Door-for-Foreign-Litigants-03-30-2012/.