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Originally Published in the April 2014 Issue of TerraLex Connections

Introduction

United States courts famously provide for broad and permissive discovery. What’s less well known is that they also provide broad and permissive discovery in support of litigation that occurs outside the United States (U.S.). Foreign (non-U.S.) entities in fights with U.S. entities before a tribunal in another country should familiarize themselves with this provision, known as 28 U.S.C. § 1782. U.S. entities should also be aware that they face the real possibility of having to fight foreign entities with one hand tied behind their backs.

Nearly all U.S. jurisdictions, state and federal, allow for wide-ranging discovery. A party litigating a case in the U.S. federal court system, for instance, has the right to force its opponent to turn over any material that is even potentially relevant to the dispute, so long as it is not covered by a small set of privileges (such as communications between an attorney and client). See e.g., Fed. R. Civ. P. 26(c). A U.S. litigant has extensive tools to obtain that material: it can send unlimited document requests, compel ten people to attend depositions, and send twenty-five interrogatories—all without permission from the court. Moreover, any U.S. person or entity “reasonably anticipat[ing] litigation” is legally required to preserve any potentially relevant documents and information, whether in paper or electronic form.

Litigants in other countries, by contrast, often have very limited opportunities to seek information from their opponents in litigation. For example, a party to a German lawsuit can only demand specific documents that it can individually identify—it cannot demand entire categories of documents. Thus, while U.S. discovery allows a litigant to require his opponent to turn over “all documents relating to” a patent or contract at issue in the dispute – potentially leading to the production of thousands of documents – German civil procedure lets a litigant force production only of the handful of documents that he knows about but does not possess.[1] And because Germany does not require a litigant or potential litigant to preserve documents relevant to the dispute, the opponent may destroy the few relevant documents that could be compelled. Even more problematic are European Union data protection laws, which generally prohibit the processing or transfer of a natural person’s personal data in any form. Some countries—such as Italy, Austria and Denmark—have even extended this protection to certain business entities, making discovery onerous if not impossible.[2]

Many international companies overlook a powerful tool that allows them to avoid discovery restrictions in their own countries and seek American-style discovery in support of a foreign action. Under 28 U.S.C. § 1782, a party involved in litigation outside the U.S. can file a petition in a U.S. district court to obtain broad discovery from a company with a presence in the U.S. This allows the petitioning company to seek any relevant document under the custody or control of the U.S. entity. Several U.S. courts have also minimized any risk in this procedure by holding that the company seeking such documents does not expose itself to “reciprocal discovery” from the U.S. company, though the issue is not yet settled. This article gives a general overview of Section 1782, discusses the procedure and considerations required to file a petition, and briefly discusses potential future developments.

Section 1782 Provides Broad Discovery In Support of A Foreign Litigation

Section 1782 is “the product of [U.S.] congressional efforts, over the span of nearly 150 years, to provide [U.S.] federal-court assistance in gathering evidence for use in foreign tribunals.”[3] In recent years, the U.S. Congress has modernized the statute, allowing entities involved in foreign litigation to file a Section 1782 petition privately, without the assistance of diplomatic officials, and indeed without any notice to foreign governments.

Congress enacted the statute for two reasons. First, it wanted to provide “equitable and efficacious” discovery “for the benefit of tribunals and litigants involved in litigation with international aspects.”[4] Second, it wanted to “encourage foreign countries by example to provide similar means of assistance to our courts.”[5] Due to the breadth of these twin aims, courts have given § 1782 “increasingly broad applicability.”[6] At least one U.S. federal appellate court has encouraged district courts to readily accept petitions under the statute: “the statute’s underlying policy should generally prompt district courts to provide some form of discovery assistance.” Euromepa S.A. v. R. Esmerian, Inc., 51 F.3d 1095, 1102 (2d Cir. 1995).

Even though U.S. district courts are encouraged to grant the petitions, petitioners must meet three threshold requirements.

First, the petitioner must file the §1782 petition in the U.S. federal district court where the target – the person from whom information is sought – is located. The best practice is to file a petition where the company has its principal place of business or, failing that, where the target has a substantial and systematic presence. Alternatively, a petitioner can file the petition in the jurisdiction where the corporate parent of the target is located, as U.S. courts have consistently held that a parent must turn over documents in the possession of its wholly-owned subsidiary.[7] In some circumstances, petitioners may also file where the target’s subsidiary is located; on occasion, courts have ordered a subsidiary to turn over documents in the possession of its parent.[8]

Second, the discovery must be “for use” in a foreign “proceeding” before a “foreign tribunal.” For years, many courts thought that the requirement that information be “for use” in the foreign proceeding meant that §1782 discovery was only available if the documents would have been discoverable under the foreign jurisdiction’s rules had the documents been located there. This interpretation severely limited the information that a foreign litigant could receive via Section 1782. The U.S. Supreme Court rejected this foreign-discoverability requirement in a landmark case, Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247 (2004), holding that documents had to be turned over under Section 1782 even if they would not have to be turned over if located in the foreign jurisdiction.[9] Lower courts had also imposed a foreign-admissibility requirement, which required that any documents sought by the petitioner had to be admissible in the foreign tribunal where the dispute was pending. But after the Intel case, most lower courts considering the issue have concluded that if the foreign jurisdiction is generally receptive to the types of evidence sought in the petition, the U.S. court will grant the request and let the foreign court wrestle with questions of admissibility.

The second requirement also mandates that the discovery be for use in for a “proceeding” before a “foreign tribunal.” In § 1782, Congress eliminated the requirement that the tribunal be “judicial,” thereby permitting discovery in support of civil, administrative, or criminal investigations by foreign administrative bodies or commissions. Moreover, the proceeding need not even be “pending” or “imminent.” Instead, a dispositive ruling by the investigating body must merely be “within reasonable contemplation.”[10] This means that a litigant seeking discovery need not wait until a formal action is filed; it need only reasonably contemplate such an action.

Third, the application must be made by a foreign or international tribunal or by any “interested person.” The Supreme Court has held that “interested person” covers not only persons that are actually embroiled in a foreign litigation, but also complainants to administrative bodies, so long as the complainant has an active role in the proceedings.[11]

If these statutory requisites are met, the district court still retains discretion to deny or grant the petition, though that discretion is tightly circumscribed by case law. The Supreme Court has laid out a non-exclusive list of factors that district courts must consider in exercising their discretion. First, discovery is less likely to be granted if the target is a party to the foreign proceeding. In that situation, the Supreme Court explained, “the need for § 1782(a) aid generally is not as apparent” because the foreign tribunal “can itself order them to produce evidence” (even if the foreign tribunal is unlikely to do so). Second, courts try to gauge the foreign court’s receptivity to the discovery: “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, the district court is encouraged to determine whether the petitioner is attempting to circumvent foreign proof-gathering restrictions: “a district court could consider 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.” Fourth, courts consider the breadth of the discovery requested: “unduly intrusive or burdensome requests may be rejected or trimmed.”[12]

Section 1782 Proceedings Are Relatively Simple Yet Can Yield Significant Results

Filing a section 1782 petition is straightforward. After determining the proper court in which to file, the petitioner pays a filing fee and submits the appropriate documents. Typically, the petition details the jurisdictional basis for seeking the discovery, describes the underlying foreign action and factual background, and briefly recites how it meets the statutory and discretionary requirements of the statute. Petitioners often also file a memorandum in support of the petition as well as a draft subpoena and protective order. The target of the petition will have the opportunity to respond to the filing. The district judge will then conduct a hearing and determine whether to grant the discovery.

If the petition is granted, the petitioner may seek the same discovery as would have been available if the foreign dispute had been filed in a U.S. court. In certain cases, a petitioner may choose to file more than one petition. The most extensive use of §1782 petitions occurred in relation to a $17.2 billion judgment rendered in an Ecuadorian court against a U.S. oil company in connection with the company’s drilling activities in Ecuador. See, e.g., Chevron Corp. v. Naranjo, 667 F.3d 232 (2d Cir. 2012). For three decades, a Chevron subsidiary explored for and extracted oil in Ecuador. A group of Ecuadorians sued Chevron, alleging that the company had cause widespread pollution. The suit was dismissed by U.S. courts, but the Ecuadorians filed suit in Ecuador and won $17.2 billion. Chevron suspected that a lawyer for its opponent had improperly controlled a supposedly independent expert in Ecuador and corrupted the Ecuadorian judicial process by applying external political pressure. Seeking evidence to support its theory, Chevron filed “dozens” of Section 1782 proceedings across the United States. The company ultimately obtained the lawyer’s files and hundreds of hours of footage from a documentary filmmaker covering the case. This evidence prompted the Ecuadorian court to modify the judgment.

Courts also sometimes permit companies to file simultaneous, coordinated §1782 petitions to ensure the petitioner receives complete discovery. For example, a German manufacturer of bone cement accused a U.S. manufacturer of misappropriating trade secrets. See Heraeus Kulzer, GmbH v. Biomet, 633 F.3d 591 (7th Cir. 2011) and Heraeus Kulzer, GmbH v. Esschem, Inc., 390 F. App’x 88 (3rd Cir. 2010). The German company filed simultaneous §1782 petitions against the U.S. manufacturer and against a third-party chemical supplier, to whom the U.S. manufacturer had provided some of the German trade secrets. The third party was required to turn over discovery as well as confidential documents that contained its own trade secrets. In so ordering, the court took into account the fact that the parallel petition against the U.S. manufacturer had been partially denied, proving that the German company had “substantial need” for the confidential documents.

However, district courts do retain an inherent power to dismiss petitions that are duplicative See Lufthansa Technik AG v. Astronics Corp., No. 11–4116, 2014 WL 259643 (2d Cir. Jan. 24, 2014) (summary order). The petitioner in Lufthansa filed simultaneous petitions against a parent and its wholly-owned subsidiary in different courts. The court affirmed the dismissal of the petition against the parent because the subsidiary was the primary target of the foreign litigation, the petitions sought the same documents, and the parent’s documents were available through the subsidiary in the parallel action. This case emphasized that courts can view the petitions in a comprehensive, cross-jurisdictional manner to ensure that discovery is granted efficiently as well as broadly.

Although the Supreme Court has not determined whether § 1782 discovery may be conditioned on reciprocal discovery of a foreign company’s documents, several lower courts have held that such reciprocity is not required. “Congress purposefully engineered section 1782 as ‘a one-way street. It grants wide assistance to others, but demands nothing in return.'”[13] As one court noted, “[g]rants of discovery under §1782 are not contingent on the requesting party’s acquiescence to reciprocal discovery.”[14] Some courts have also held that § 1782 does not extend to documents located outside of the United States, even if those documents are within the control of a U.S. entity. It thus may be unlikely that a litigant without a U.S. presence will be required to provide any reciprocal discovery to the target corporation.

The Streamlined Section 1782 Process is More Efficient Than Discovery Under the Hague Convention

The United States is a signatory to the Hague Evidence Convention, the terms of which are widely known by international law practioners. The Convention follows the historical “letter rogatory” process (now known as a Letter of Request), in which a litigant asks the foreign court in which the action is pending to issue a request to the U.S. Department of Justice, which in turn forwards the request to the appropriate U.S. court. Section 1782, by contrast, permits a litigant to proceed directly to appropriate U.S. court without first filing in the foreign court. This streamlined process can be particularly important where the foreign entity needs discovery quickly. Moreover, while discovery under the Hague Convention requires that a foreign action already be pending, section 1782 only requires that the action be “reasonably contemplate[d],” enabling petitioners to obtain discovery in the nascent stages of an investigation or after an administrative complaint. Finally, the Hague Convention only applies to litigation filed in a country that is a signatory to the convention. Section 1782 applies to information sought in connection with disputes arising in both signatory and non-signatory countries.

Conclusion

Since the landmark Intel decision a decade ago, U.S. courts have continued to expand the role played by §1782 in transnational litigation. As foreign entities have increasingly turned to §1782, new questions have arisen. One question not yet resolved by the U.S. Supreme Court is whether §1782 allows discovery in support of international commercial arbitration. Lower U.S. federal appellate courts have divided on the issue, with one holding that an arbitration panel is a “tribunal” under the statute, so that §1782 applies,[15] and another holding that the U.S. Congress did not contemplate the then-nascent field of international commercial arbitration when enacting the statue.[16] However that split ends up being resolved, it is clear that U.S. courts as a whole have continued to give §1782 an “increasingly broad application.” Litigants finding themselves in disputes outside the United States would be well-advised to consider the possibility of bringing §1782 petitions in the U.S., and U.S. entities would be well-advised to bear in mind the risks of facing one-sided discovery if they file suits abroad, rather than in the U.S.