At the end of 2019, the Second Circuit finally weighed in on an issue that has divided federal courts considering applications for discovery pursuant to 28 U.S.C. § 1782, through which a litigant can obtain an order from a federal court for discovery to be used in a foreign proceeding. (You can read more about Section 1782 here and here). Federal courts have split over whether Section 1782 allows a party to obtain documents controlled by an entity in the United States but that are held overseas—for example, records held in the London office of a corporation headquartered in New York.1 In a pair of recent decisions, the Court of Appeals for the Second Circuit joined the Eleventh Circuit in holding that Section 1782 does permit discovery of documents held outside the United States and that are within the control of a US individual or entity.
In In re del Valle Ruiz, the petitioner sought documents from a number of entities, including Santander Investment Securities (known as “SIS”), in connection with proceedings in Europe.2 The Second Circuit considered whether SIS could be compelled to produce documents within its control but located overseas. The Court acknowledged that there is a presumption against the extraterritorial application of a federal statute absent express language to that effect. But the Court nonetheless agreed with the Eleventh Circuit’s reasoning in Sergeeva.3 Specifically, because Section 1782 permits discovery pursuant to the Federal Rules of Civil Procedure, which itself allows for extraterritorial discovery, Section 1782 extends to extraterritorial discovery, including documents held abroad.4 In so holding, the Second Circuit explicitly rejected dicta in one of its own prior decisions suggesting that Congress intended Section 1782 to apply only to documents held in the United States.5
The Second Circuit quickly confirmed this holding in a separate case in which the petitioner in the United States sought discovery from the auction house Sotheby’s for use in proceedings in Switzerland and Monaco.6 There, the district court permitted Section 1782 discovery, including as to documents held abroad. Relying on its recent decision in Valle Ruiz, the Second Circuit affirmed, holding that Section 1782 “does have extraterritorial reach.”7
The Second Circuit’s recent decisions should allow litigants to seek Section 1782 discovery of documents held abroad from individuals or entities in New York, Connecticut, or Vermont, as long as those individuals or entities have possession, custody, or control over the overseas documents. Moreover, although not explicitly addressed by the Court, its reasoning could be extended to other forms of discovery, including depositions of employees working abroad for a US-based entity. The Second Circuit joins the Eleventh Circuit and a growing number of district courts in construing Section 1782 broadly, expanding the ability of foreign litigants to obtain US-style discovery for use in foreign proceedings.
But US courts may still balk at providing discovery where the law of the foreign country in which the documents are maintained bars their disclosure. For example, prior to the Second Circuit’s decisions in Valle Ruiz and Accent Delight, a magistrate judge in the Southern District of New York8 found that although Section 1782 can be used to seek documents held abroad, discovery was not appropriate where the laws of the country in which the documents were held (there, Russia) might bar their disclosure under local law or on confidentiality and privilege grounds, as discussed further here and here. Similarly, some countries, such as France and Switzerland, have “blocking statutes” that specifically prohibit entities in their respective jurisdictions from disclosing certain documents in response to subpoenas. As with confidentiality and privilege laws, these provisions could lead a US court to deny Section 1782 discovery or prevent the target of discovery from complying with a Section 1782 order. In those cases, parties may need to seek discovery through other means: for example, if the discovery target is willing to cooperate, it could turn over the documents at, or bring the deposition witness to, the US embassy or consulate in the foreign country, under the fiction that the discovery would be taken on US soil.
In short, the Second Circuit’s decisions open the door to broader discovery under Section 1782. Those decisions, however, are only the beginning, rather than the end, of any analysis as to whether discovery materials held abroad are available under Section 1782.
Footnotes
1. Compare In re Godfrey, 526 F. Supp. 2d 417, 423 (S.D.N.Y. 2007) (finding that Section 1782 does not allow discovery of documents overseas and collecting cases) and Norex Petroleum Ltd. V. Chubb Ins. Co. of Can., 384 F. Supp. 2d 45, 50-53 (D.D.C. 2005) (same) with Sergeeva v. Tripleton Int’l Ltd., 834 F.3d 1194 (11th Cir. 2016) (Section 1782 has extraterritorial application) and In re Hulley Enterprises, 358. F. Supp. 3d 331, 343-45 (S.D.N.Y. 2019) (same).
2. In re del Valle Ruiz, 939 F.3d 520, 523 (2d Cir. 2019).
3. Sergeeva v. Tripleton Int’l Ltd., 834 F.3d 1194 (11th Cir. 2016).
4. Valle Ruiz, 939 F.3d at 533.
5. Id. at 532-33 and n.16.
6. In re Accent Delight Int’l, __ F. App’x ___, 2019 U.S. App. LEXIS 33785, 2019 WL 5960348 (2d Cir. Nov. 13, 2019).
7. 2019 U.S. App. LEXIS 33785 at *6.
8. In re Hulley Enters., 358 F. Supp. 3d 331 (S.D.N.Y. 2019), aff’d, 400 F. Supp. 3d 62 (S.D.N.Y. 2019).
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