For decades, 28 U.S.C. § 1782 has offered a powerful tool for parties to obtain discovery through U.S. courts for use in foreign proceedings. Courts have differed, however, on the statute's application and reach—that is, which court has the power to grant a 1782 discovery request and what materials that request may seek. The Second Circuit recently provided some answers.1 A unanimous three-judge panel held that (1) a court's jurisdiction to issue and enforce 1782 requests extends to the limits of due process and (2) a court may use Section 1782 to compel the production of documents held outside the United States. The ruling has significant implications for the international business community.
28 U.S.C. § 1782 is designed to provide a straightforward method to obtain discovery by way of U.S. courts for use in non-U.S. proceedings. There are four statutory prerequisites for the application of the statute: (i) the person from whom discovery is sought must reside or be found in the district of the court proceeding; (ii) the discovery must be sought in connection with a foreign proceeding; (iii) the evidence sought must be "for use" in the foreign proceeding; and (iv) the applicant must be an "interested person."
In addition to the statutory requirements, the Supreme Court has detailed four "discretionary" factors for courts to consider when weighing 1782 applications: (i) whether the person from whom the evidence is sought is a party to the foreign proceeding and within the foreign tribunal's jurisdiction; (ii) the nature of the foreign tribunal and its receptivity to U.S. judicial assistance; (iii) whether the request is an attempt to circumvent the foreign proof-gathering restrictions or other policies of the foreign country or the United States; and (iv) whether the request is unduly intrusive or burdensome.2
As we have previously explained, there are nuances to Section 1782 discovery. Courts differ on which "foreign proceedings" are covered by the statute, for example, and the four discretionary factors allow for a variety of unique situations to be considered. Likewise, the requirement that any discovery be "for use" in a foreign proceeding is subject to interpretation. But ultimately, the statute is intended to provide "efficient assistance to participants in international litigation and encourag[e] foreign countries by example to provide similar assistance to our courts."3
In re del Valle Ruiz
This appeal is the latest salvo in a long-running discovery dispute between a foreign bank and former investors in another foreign company. The investors claim to have lost more than one billion euros as a result of a government-mandated sale to the bank and have brought legal challenges before the Court of Justice of the European Union and in other legal proceedings outside the United States. In connection with this litigation, the investors filed petitions for Section 1782 discovery, including from the foreign bank and its New York-based affiliate, in the Southern District of New York. Local rules did not permit compelling third-party discovery, the investors argued, leaving Section 1782 as their only option.4 In a ruling that we previously addressed in a legal update, the district court denied a number of these petitions on jurisdictional grounds but held that the New York affiliate had to produce relevant documents, including those not held in the United States. An appeal ensued.
Section 1782 targets are "found" where they are subject to personal jurisdiction.
The Second Circuit (the "Court") began its analysis by noting that while Section 1782 permits discovery from an entity which "resides or is found" in the district in which proceedings are brought, the term "found" is not defined in the statute. The foreign bank argued that a 1782 target "is found" only where it is subject to general personal jurisdiction. The investors, on the other hand, argued that Section 1782 extends as well to courts in which the target is subject to specific personal jurisdiction, and that courts should afford nonparties less due process than parties.
The Court agreed with the investors that Section 1782 applies to parties subject to specific jurisdiction. Although it discussed some support for a limited interpretation in Section 1782's legislative history, it concluded that "Congress's intent [is] that § 1782 be interpreted broadly" and that "the statute has, over the years, been given increasingly broad applicability."5 It thus held that "§ 1782's 'resides or is found' language extends to the limits of personal jurisdiction consistent with due process."6
Finally, the Court set out to "translate" these personal jurisdiction principles in order to apply them to nonparty targets of Section 1782 discovery. In the party context, specific jurisdiction lies where an "individual or entity has purposefully directed his activities at the forum and the litigation arises out of or relates to those activities," and "the assertion of personal jurisdiction would comport with fair play and substantial justice."7 For nonparties, the Second Circuit stated, a modified approach is required. Courts should assess the nexus between the nonparty, the discovery material sought, and the forum in which the Section 1782 application is brought. Specific jurisdiction is established, wrote the Court, when the materials "proximately resulted from the respondent's forum contacts"; if a respondent has even "broader and more significant" contacts, a petitioner need only show but-for causation between the forum and the documents sought. And it held that to establish due process, courts should "decide whether exercising jurisdiction for the purposes of the order would comport with fair play and substantial justice."8 That this holding will require fact specific briefings, wrote the Court, "is a feature, not a flaw."9
Section 1782 applies to documents located overseas.
After determining the applicable standard for jurisdiction, the Court agreed with the district court that it had jurisdiction over the New York affiliate but not over the foreign bank. It then turned to the district court's holding that Section 1782 applies to evidence held overseas, concluding that there is no per se bar under Section 1782 to extraterritorial discovery.
The Court primarily relied on the plain text of Section 1782, which does not purport to set any territorial limitation. Although it cited a "presumption against extraterritoriality," the Court found this most relevant for statutes imposing liability; Section 1782, it said, "is simply a discovery mechanism and does not subject a person to liability."10 And at any rate, the Court declared, "[o]nly if an attempt to discern plain meaning fails because the statute is ambiguous, do we resort to canons of construction."11
Finally, the Second Circuit turned to a similar ruling of the Eleventh Circuit, which reasoned that Section 1782 was meant to authorize discovery analogous to that available under the Federal Rules of Civil Procedure.12 These rules, in turn, authorize the discovery of documents within the "possession, custody, or control" of a person, regardless of where they are stored.13
The Second Circuit thus affirmed the district court. It did note, however, that district courts deciding Section 1782 requests in the future should consider the location of the documents and consider tailoring their orders accordingly.
In re del Valle Ruiz has potentially broad implications for the types of discovery that foreign litigants can seek in the United States—and that U.S. entities may have to turn over for use in foreign litigations. It also appears to create an avenue for obtaining discovery of materials that have a close nexus with the forum, even when the nonparty from which discovery is sought does not.
Some of the more dire projections concerning the extraterritorial application of Section 1782 are unlikely to be borne out. One such view, expressed by a drafter of Section 1782, suggested that "if Section 1782 could be used for [extraterritorial discovery], American courts would become clearing houses for requests for information from courts and litigants all over the world in search of evidence to be obtained all over the world."14 But the Supreme Court has already instructed courts to be wary of unduly burdensome requests and attempts to circumvent foreign proof-gathering restrictions, and as the Second Circuit noted here, courts should consider curtailing their orders as appropriate.
Nonetheless, the ruling certainly clarifies the scope of Section 1782 discovery. At a minimum, Section 1782 applicants are likely to begin asking for more expansive discovery. The Second Circuit, after all, did not suggest that overly expansive requests would be denied; it merely instructed courts to issue "a closely tailored discovery order rather than . . . simply denying relief outright."15 Thus, Section 1782 litigants may now become more aggressive in the scope of their discovery requests.
In addition, tying specific personal jurisdiction over nonparty discovery targets to the relationship between the discovery sought and the Section 1782 forum presents a fact-specific inquiry with which litigants and courts must now grapple. As we wrote when the district court decision was issued, demonstrating traditional jurisdiction, be it general or specific, may be difficult or impossible in many cases. Here, the Second Circuit has left these traditional avenues largely intact, while creating an avenue for foreign litigants to compel discovery over materials that are closely tied to the forum, even if the third party is not.
Entities that are subject to jurisdiction in the United States should understand that this decision may affect the discoverability of their materials held abroad; likewise, they should understand that even if they do not have a close relationship with a forum, they may still be subject to specific jurisdiction in certain cases. Parties to foreign proceedings, meanwhile, should note that by coming to the United States, they may be able to obtain both U.S.-based and non-U.S.-based discovery. And for a party embroiled in a Section 1782 dispute, In re del Valle Ruiz is a reminder of the many unique arguments that may be brought to a court's attention under the "discretionary" factors guiding Section 1782 interpretation.
5. In re del Valle Ruiz, 939 F.3d at 528 (quotation marks omitted) (first quoting In re Edelman, 295 F.3d 171, 180 (2d Cir. 2002), then quoting Brandi-Dohrn v. IKB Deutsche Industriebank AG, 673 F.3d 76, 80 (2d Cir. 2012)).
14. In re del Valle Ruiz, 939 F.3d at 532 n.16 (quoting Hans Smit, American Assistance to Litigation in Foreign and International Tribunals: Section 1782 of Title 28 of the U.S.C. Revisited, 25 Sʏʀᴀᴄᴜꜱᴇ J. Iɴᴛ'ʟ L. & Cᴏᴍᴍ. 1, 11 (1998)).
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