Second Circuit Affirms the Extraterritorial Discovery Reach of 28 U.S.C. § 1782
The increasingly popular federal statute concerning cross-border judicial assistance, 28 U.S.C. § 1782, enables a District Court to order a “person” that “resides or is found” within its jurisdiction to produce evidence for use in a proceeding in a foreign or international tribunal. The Second Circuit recently addressed two questions concerning the application of this unique legislation: (1) on what bases does a District Court have personal jurisdiction over a non-party for purposes of the statute (how does a court interpret and apply the “resides or is found” criteria in jurisdictional terms); and (2) can the District Court order such a person to produce evidence that it maintains outside of the U.S.? See In re del Valle Ruiz, 2019 U.S. App. LEXIS 30002 (2d Cir. Oct. 7, 2019).
The Court’s thumbs up decision concerning the latter (“extraterritoriality”) issue has gotten the principal if not exclusive coverage in the legal press. (But its decision concerning the jurisdiction issue is likely to have a more regular impact on the utilization of the § 1782 discovery mechanism, and it is, at least in part, a bit of a head scratcher. The Second Circuit’s test for specific personal jurisdiction over a non-party for purposes of discovery is, at its extreme, arguably murky, difficult to apply, and inequitable. In another article, we will propose a test that is simpler, more easily applied and more consistent with due process fairness.)
Concerning the effective geographic reach of the statute, the Court adopted the earlier reasoning of the Eleventh Circuit and decided simply that a District Court “is not categorically barred from allowing discovery under § 1782 of evidence located abroad.” Id. at *24. In effect, the Federal Rules of Civil Procedure (“Federal Rules”) on discovery will control.
Here is the context. In del Valle Ruiz, investors in Banco Popular Español (“BPE”) were contesting the legality of a government-forced fire sale of BPE to Banco Santander (“Santander”) in certain foreign proceedings. The investors sought discovery, under 28 U.S.C. § 1782, in New York from Santander and its New York-based affiliate, Santander Investments Securities, Inc. (“SIS”), “concerning the financial status of BPE.”
Santander is a Spanish banking company with its principal place of business in Madrid, while SIS is a Delaware corporation with its principal place of business in New York City. Id. at *7 n.4. Santander argued in the District Court that it was not “found” within the Southern District, for purposes of § 1782, and that although SIS resided or was found in the Southern District, it was “not involved with the acquisition of BPE.” Id. at *7-*8.
The District Court determined that it had general personal jurisdiction over SIS, and that finding was not challenged on appeal. (The Court noted that the parties apparently assumed that the term “resides,” for these purposes, refers to the place where an individual is “essentially at home,” thereby establishing general personal jurisdiction. Id. at *9 n.6.) Santander was not subject to such general personal jurisdiction, however, and so the court considered whether it had specific personal jurisdiction. It held that it did not.
The District Court ultimately denied the application vis-à-vis Santander for lack of personal jurisdiction, but granted discovery from SIS and in that regard “rejected [the] argument that § 1782 does not allow for extraterritorial discovery.” Id. at *3-*4. The Second Circuit affirmed.
The Circuit Court reviewed de novo the district court’s decision under § 1782 that it could compel a person (in this case, SIS) to produce discovery material held overseas. See id. at *21. The Court first noted the statutory construction doctrinal presumption against extraterritoriality in the application of a federal statute (“absent clearly expressed congressional intent to the contrary, federal laws will be construed to have only domestic application”). See id. But the Court found that “this presumption has no role to play here.” Id. at *22. Instead, the Court cited approvingly the reasoning of the Eleventh Circuit in a 2016 decision, and joined the Eleventh Circuit in holding that a district court is not barred from allowing discovery under § 1782 of evidence located abroad. See id. at *23-*24.
The Eleventh Circuit had noted that discovery pursuant to § 1782 would, by its terms, generally follow the Federal Rules of Civil Procedure, which in turn authorized extraterritorial discovery “so long as the documents to be produced are within the subpoenaed party’s possession, custody or control.” Id. at *23. Hence, it concluded that § 1782 likewise allows extraterritorial discovery of responsive materials. Id. at *23-*24. The Second Circuit agreed.
(As a grace note, however, the Second Circuit instructed that a district court should consider the location of documents and other evidence when deciding whether to exercise its discretion under § 1782 to authorize discovery. Id. at *24.)
The headline grabber has been the Second Circuit’s opening of the door there to access via 28 U.S.C. § 1782 not only to evidence within the territory of the United States, but also to evidence held elsewhere that is within the reach of the Federal Rules concerning discovery. Limits may be placed case-wise by the courts, in their discretion, but the opportunity for more extensive and effective discovery is clearly there.