Eaton & Van Winkle LLP ADVISORY REPORT

A RECENT APPELLATE DECISION SERVES AS AN IMPORTANT REMINDER THAT INTERNATIONAL ATTORNEYS AND LITIGANTS SHOULD CONSIDER THE AVAILABILITY OF UNITED STATES DISCOVERY IN AID OF FOREIGN PROCEEDINGS

A recent decision by the United States Court of Appeals for the Second Circuit serves as an important reminder that US federal law provides a statutory device by which parties engaged in foreign legal proceedings can seek discovery in the United States in order to aid their claims or defenses.

In that regard, it should first be noted that the United States has a statute which provides a procedural mechanism for readily seeking such information gathering support. More specifically, 28 U.S.C. § 1782 provides, in pertinent part, that:

The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal . . . The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person (emphasis added). . .

28 U.S.C. § 1782 (emphasis added to indicate the statute’s “for use” requirement and to indicate that applications made pursuant to the statute can be brought – not only by overseas tribunals issuing letters rogatory – but also by private persons who independently apply to a US court).

The recent appellate decision in Mees v. Buiter, 2015 WL 4385296 (2d Cir. Jul. 17, 2015), considered the extent to which discovery in the United States can be made available to private persons – prior to the commencement of foreign proceedings. We believe that this decision should be of considerable interest to attorneys and others in nonUS jurisdictions who might want to avail themselves of the benefit of obtaining pre-action discovery from US entities and individuals.

In Mees, the party opposing discovery argued that, prior to commencement of a foreign proceeding, a prospective litigant may only obtain US discovery under 28 U.S.C. § 1782 if the applicant demonstrates that they would be unable to initiate the foreign action without first obtaining the discovery sought in the US. Mees, 2015 WL 4385296, *5 (explaining that the party opposing discovery argued that “where no foreign proceeding is pending an applicant [for discovery can only satisfy its burden] by showing that she could not commence such a proceeding without” first obtain the discovery sought in the US).

The district court had agreed with that argument. Id. at *1 (“The district court denied the [discovery] application on the ground that the materials sought . . . were not necessary for [the applicant] to draft an adequate complaint” in the Netherlands). In essence, the district court determined that the concerned discovery was “not ‘for use’ in the Dutch proceeding, as required by” section 1782. Id.

On appeal, the Second Circuit Court of Appeals reversed that decision and remanded the case for further proceedings. The Second Circuit explained that section 1782 solely requires that an applicant satisfy three statutory requirements pursuant to which:

A district court has authority to grant a § 1782 application where: “(1) the person from whom discovery is sought resides (or is found) in the district of the district court to which the application is made, (2) the discovery is for use in a foreign proceeding before a foreign [or international] tribunal, and (3) the application is made by a foreign or international tribunal or any interested person.”

Id. at *3 (quoting Brandi–Dohrn v. IKB Deutsche Industriebank AG, 673 F.3d 76, 80 [2d Cir.2012]). The appellate court further held that the district court erred in its understanding of the statutory “for use” requirement because “discovery sought pursuant to § 1782 need not be necessary for the party to prevail in the foreign proceeding” nor does such discovery need to be essential to the applicant’s ability to draft a claim. Id. at *4-5. Instead, “[t]he plain meaning of the phrase ‘for use in a proceeding’ indicates something that will be employed with some advantage or serve some use in the proceeding.”

Id. at 4.

The appellate court also emphasized that, in accordance with Supreme Court authority, “‘[i]t is not necessary for the [foreign] proceeding to be pending at the time the evidence is sought [through US discovery], but only that the evidence is eventually to be used in such a proceeding.’” Id. at 5 (quoting Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 259 [2004]).

Importantly, the Mees Court proceeded to explain that satisfaction of the three statutory requirements referenced above (including the “for use” requirement) establishes the district court’s authority to grant a foreign discovery application. Whether to exercise that authority is then subject to the district court’s discretion which is guided by factors enumerated by the Supreme Court’s decision in Intel. The principal discretionary factor is whether granting the application would advance the concerned statute’s dual objectives of “providing efficient means of assistance to participants in international litigation in our federal courts and encouraging foreign countries by example to provide similar means of assistance to our courts.” Id. at *4. Additional discretionary factors are:

(1) whether “the person from whom discovery is sought is a participant in the foreign proceeding,” in which case “the need for § 1782(a) aid generally is not as apparent”; (2) “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”; (3) “whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States”; and (4) whether the request is “unduly intrusive or burdensome.”

Id. (quoting Intel, 542 U.S. at 264-65).

After ruling that the applicant in Mees had met the “for use” requirement, the appellate court remanded the case to the district court for, amongst other things, consideration of the foregoing, discretionary factors. Therefore, the appellate court did not technically make any rulings regarding those discretionary matters. Nonetheless, the court’s observations concerning factor 3 (circumvention of foreign proof-gathering restrictions) and factor 4 (undue intrusiveness or burdensomeness) should be noted.

In particular, the court’s comments regarding both of those factors underscored that limitations on the breadth of discovery in foreign jurisdictions should not necessarily be determinative with respect to a US court’s decision on a section 1782 application. Id. at 6- 7 (“whether a request is intrusive . . . should not be assessed based on the ‘discovery scope’ available in the foreign proceeding . . . [because] [f]ew if any foreign jurisdictions permit the scope of discovery available in our courts”) (section 1782 “contains no foreigndiscoverability requirement . . . [while] ‘district judges may well find that in appropriate cases a determination of discoverability under the laws of the foreign jurisdiction is a useful tool in their exercise of discretion’ . . . that observation does not authorize denial of discovery . . . solely because such discovery is unavailable in the foreign court.”)

In light of the foregoing, we believe that foreign litigants and prospective litigants, together with their foreign counsel, should be aware that they may be able to readily obtain discovery in the United States to assist with both: (i) the investigation and development of contemplated claims; and (ii) the prosecution of claims – or defenses – in actions which are already pending.

Seeking such discovery may be particularly useful where foreign procedures demand that relatively detailed factual information (which might be unavailable absent preaction discovery) must be included at the pleading stage of an action. It may also be helpful where discovery from non-parties to a foreign action cannot be obtained in the primary jurisdiction because the tribunal lacks any coercive power over the non-party holding the desired information.

Furthermore, where a foreign litigant has obtained a freezing injunction which compels the enjoined party to produce information concerning its assets on a global basis, but the enjoined party fails to adequately respond or purports to lack access to some such information, discovery under 28 U.S.C. § 1782 might serve as a means for obtaining the needed asset information. See In re Platebright Limited, 2014 WL 341568 (U.S.V.I Jan. 30, 2014) (individual subject to an English freezing order which called for production of information concerning a corporate co-defendant’s assets at a bank in the US Virgin Islands reportedly signed an authorization for the bank to disclose the required information, but the bank apparently refused on the grounds that the signature on the authorization did not match the signature in the bank’s files) (court granted, in part, an application under 28 U.S.C. § 1782 requiring the bank to produce relevant account information).

Overall, foreign parties and their counsel ought to keep in mind that the US provides private parties – not just foreign tribunals – with a statutory device by which they can seek discovery in the United States in aid of foreign proceedings. If you have questions regarding 28 U.S.C. § 1782 or other matters concerning the US approach to international disputes, please feel free to contact the authors of this EVW Advisory Report (Edward W. Floyd and Alan Van Praag), any members of our Litigation & Arbitration Group, or your regular EVW attorney.

©Eaton & Van Winkle LLP 2015. All rights reserved. This memorandum was prepared as a service to clients and other friends of Eaton & Van Winkle to report on recent developments that may be of interest to them. The information in it is therefore general, and should not be considered or relied on as legal advice. Throughout this memorandum, “Eaton & Van Winkle” and the “firm” refer to Eaton & Van Winkle LLP. If you have not received this publication directly from us, you may obtain a copy of past or future EVW publications by emailing Charmaine Chester at cchester@evw.com and requesting to be placed on our firm mailing list for publications.