Scope of Section 1782
In the case of Intel Corp. v. Advanced Micro Devices, Inc. (“Intel”) the US Supreme Court clarified the scope of the US' § 1782 such that there are no implied limitations regarding the Court’s power under § 1782. [1] The statute alone provides the sole criteria defining the scope of the court’s power. This, in turn, leads parties to argue mainly about the court’s discretion to grant an application made under § 1782 in certain proceedings. That power of a US District Court is discretionary in that the Court can permit discovery if an application is made by an interested person for discovery in the US for use in a proceeding before a foreign or international tribunal and that application is properly made in a district where the person from whom evidence is sought resides or “is found.”
Consistent efforts are made to impose limitations on the execution of the Court’s powers under § 1782. The Second Circuit Court has previously rejected arguments that the power can only be executed in cases where the evidence is necessary to plead its case or to show that the evidence will be admissible in a foreign court. In 2014, the § 1782 statute was extended to criminal proceedings abroad and, in 2017, the Second Circuit Court rejected the argument that there must be a possibility of recovering damages in the case pending abroad for the application of the statute.
Resident of the District
One of the essential elements that is taken into consideration by the District Court in assessing a § 1782 application is whether the respondent resides in the district where the application is made. This implication includes persons who are just passing through the district. It is easier to ascertain this aspect in relation to individuals. In the case of corporations, it is somewhat more difficult. In 2014, in Daimler AG v. Bauman, the US Supreme Court found that where there is a presence of the corporation in multiple districts, the corporation should be normally subject to general jurisdiction – meaning that it can be sued on any claim, even if it is not connected to the place the court sits – only where it is incorporated or headquartered.
Use in a Proceeding
An application made under § 1782 must be for use in a “proceeding.” In the case of Intel it was held that a person could obtain evidence in the absence of an actual lawsuit if there is reasonable contemplation of litigation arising soon. This suggests that applicants must provide a concrete basis to conclude that a proceeding is reasonably contemplated. An internal investigation, retention of legal counsel to conduct a substantial review of documents and an articulation of the basis for a claim, an affidavit setting out the basis of recovery coupled with the reason the evidence is needed for the anticipated litigation or a track record of pursuing claims in connection with the matter for which the evidence is sought, have been regarded by the lower courts as sufficient in this regard. However, merely retaining legal counsel and discussing the possibility of litigation has been viewed as insufficient to grant a § 1782 application for evidence. Each assessment will depend on the facts of the case.
Evidence Kept in the US
Some pre-Intel case law in the lower courts limited the scope of § 1782 documents kept in the US, so that discovery under § 1782 could not reach evidence located abroad. This came under scrutiny following the case of Intel, in which the Supreme Court tracked closely the language of the statute, which contains no such restriction. The language of the section requires that the person from whom the evidence is sought must “reside” or be “found” in the district but does not require that the person’s evidence must be in that district. In 2016, the Eleventh Circuit Court of Appeals held that, because a subpoena under Rule 45 requires production of all evidence in the witness’ control no matter where it is kept, a § 1782 subpoena requires the applicant to produce documents that are also kept abroad. [2] This decision took on even more significance in October 2019 when the Second Circuit, which covers New York – the largest American commercial centre – followed the Eleventh Circuit. Being the world’s largest economy, US companies do business all over the world. In the case of a dispute with a foreign based company, relevant documents may very well be situated abroad. In these circumstances, since § 1782 covers evidence kept anywhere, its discovery procedures have the potential of infiltrating legal systems of countries across the globe. No doubt persons resisting applications to compel production of documents kept outside the US will appeal to the courts’ discretion to keep the scope of discovery in bounds.
Litigation in Foreign Courts, Tribunals & Private Arbitrations
The scope of § 1782 has also been scrutinised on the basis of whether it can be used to gather evidence for private arbitrations that have been initiated abroad. Longstanding precedent in two Circuits (Second and Fifth) holds that the section can be used for forums created by or pursuant to acts of a government, which excludes purely private arbitrations conducted pursuant to a contract, would not be within the scope of the section. [3] The Sixth Circuit in Abdul Latif Jameel Transp. Co. Ltd. v. FedEx Corp. then expanded the scope of the section in September 2019, holding that a foreign or international tribunal under § 1782 included purely private arbitration panels. The courts in different parts of the country thus are in disagreement, which suggests a need for an authoritative decision from the United States Supreme Court.
Current Circumstances
There is no doubt that the scope of US Federal Court power under § 1782 has expanded. Following the Second Circuit’s ruling in In re Application of Del Valle Ruiz, US District Courts are now empowered to issue subpoenas anywhere in the world, on the condition that it is in harmony with due process to do so. That means that US District Courts have significantly broad power in such applications.
The scope has also broadened to cover private arbitration proceedings and documents located in a foreign country. This may result in an increase in § 1782 applications finding their way to courts in the Sixth Circuit. However, there does remain a restriction on the application of § 1782 for private arbitrations abroad in the Second Circuit Court. But because the Second Circuit’s broadened district courts’ ability to issue subpoenas by extending it to the limits of due process, New York, famously known as both the commercial circuit and main nexus for a huge amount of overseas transactions, may expect a sizable increase in the number of § 1782 motions.
The Del Valle case enables litigants to use the US court system to request documents situated abroad. Litigants seeking an evidentiary advantage may approach the US to pursue evidence for use in their cases in their home jurisdiction. However, the legal systems of such home jurisdictions may impose limitations on the application of the section to protect their own sovereign structures.
US District Courts are now burdened to use their power responsibly. Their application of discretion plays an important role in this respect. The intrusiveness of American style document discovery must be kept within reasonable bounds, particularly given the likely increase in these § 1782 applications.
The Australian Position
Australian litigants seeking to make use of § 1782 must consult the Australian court where proceedings are pending to avoid any suggestion that such an application is an attempt to circumvent the case management and supervision of the litigation, especially in relation to discovery. Australian superior courts have, on a number of occasions, issued anti-suit injunctions on parties from proceeding with § 1782 or similar applications.
The Federal Court of Australia in Lavecky v Visa Inc [2017] FCA 454 ("Lavecky") held that the following considerations are likely to be relevant to the endorsement of an application made under international discovery procedures such as § 1782:
- the importance of the sought-after material to the applicant's case;
- whether there are other methods available for obtaining the material;
- whether the sought-after material impinges upon, or undermines, some important procedural limitation in Australia, such as the unwillingness of the court to permit fishing expeditions;
- the costs involved in the process for the parties before the Australian court;
- whether that cost is a proportionate burden in relation to the significance of the material;
- whether the proposed proceeding under § 1782 in the US District Court is frivolous or obviously doomed to fail;
- how long the applications might take to resolve and what impact they might have upon the timely preparation of the matter before the Australian court for trial; and
- whether there is any need to impose conditions upon the endorsement of the proposed application so as to address any issues arising from (1) to (7) above.
In Lavecky, the Court satisfied itself of each of these matters and approved the making of the application, subject to one condition. The Court required the applicants to provide the respondents with the proposed application and supporting material prior to filing in the US District Court. This requirement placed the respondents in a similar position to the one they would be in if the Court made orders for discovery from a third party under its own rules (Federal Court Rules 2011 (Cth), r 20.23).
The Court in Lavecky, however, limited the scope of the discovery in that it authorised applicants to seek the production of documents only (no oral testimony or depositions). Whether future applicants will be able to successfully request authorisation to take depositions under § 1782 in Australian proceedings remains to be seen.
The Full Court of the Federal Court of Australia in Jones v Treasury Wine Estates Ltd [2016] FCAFC 59; (2016) 241 FCR 111 ("Jones") restrained the lead applicant in a class action from proceeding with his § 1782 application because, amongst other reasons, he had begun the application without the Australian court's prior approval. In doing so, the applicant in Jones was held to have sought to undermine the court's supervisory and case management functions.
Further Considerations for the Use of Section 1782
The following further points are essential to consider prior to looking to use § 1782 to gather evidence for disputes abroad:
- Ensure that the overseas / home forum’s procedural rules permit the use of § 1782 evidence. Some courts forbid the use of the section and sometimes the prior permission of the court is required (as it is in Australia).
- An application for § 1782 orders should be initiated immediately to reduce the opponent’s ability to argue against it.
- Mild forum-shopping in order to choose a district before making an application should be considered. Deciding the most favourable law and location under which an application is made is likely to help in obtaining orders in favour of the applicant.
- Applications should be drafted carefully and narrowly to explain the exact requirements of the applicant and how the application is relevant to the case abroad. Asking for evidence that is kept abroad is equally important as it includes electronically stored records that can be retrieved from anywhere in the world. Courts are more likely to endorse narrowly drawn and tightly focused requests, especially where they are addressed to non-parties.
Our grateful thanks and credit to Stuart Riback of Wilk Auslander in New York for his contributions in preparation of this article. Our thoughts and hearts are with our New York friends during the COVID-19 crisis.
At Burke Lawyers, we, together with our partners, assist in Australian, US and international commercial dispute resolution. To discuss or for any further information, please contact Meghan Warren or Rosy Dean (nee Rosy Roberts), Principals on mwarren@burkelawyers.com.au, rroberts@burkelawyers.com.au respectively, or by calling +61 3 9822 8588.
[1] 28 U.S.C. § 1782[2] Sergeeva v. Tripleton Int'l Ltd., No. 15-13008 (11th Cir. 2016)
[3] National Broadcasting Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999) &
Republic of Kazakhstan v. Biedermann, 168 F.3d 880 (5th Cir. 1999)
See our previous publication regarding US § 1782 here
