September 21, 2020
World Intellectual Property Review
By Lionel M. Lavenue; R. Benjamin Cassady; Joseph M. Myles
For 72 years, the US has permitted foreign parties access to US discovery procedures for use in foreign proceedings. Through 28 USC §1782, parties with an interest in foreign proceedings can seek documents and testimony from entities located in the US “in accordance with the federal rules of civil procedure”—that is, the same rules that govern discovery in US district courts (and the case law interpreting them). However, despite the availability of this procedure for more than 70 years, courts differ about the basics of scope and procedure for approaching section 1782 discovery. For example, one important question, especially for foreign parties who may take advantage of 1782 discovery, is what kind of discovery can actually be obtained under section 1782?
Several circuits agree that section 1782 discovery is just as broad as discovery under the Federal Rules of Civil Procedure, but this question is not settled. Examination of the rulings that apply under section 1782, with an eye towards those that address the purpose and history of the statue, informs what discovery different courts will permit under section 1782.
Section 1782 of Title 28 of the US Code (28 USC §1782), first codified in 1948, enables parties with an interest in foreign litigation to access the broad discovery procedures in US courts. Interpreting the then six-decade-old statute, the Supreme Court in Intel Corp v Advanced Micro Devices (2004), found that section 1782 was designed to assist litigants in gathering evidence, through discovery, for use in foreign tribunals.
And, according to Federal Rule of Civil Procedure 26(b)(1), parties in US courts “may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defence and proportional to the needs of the case”.
Despite the appeal of getting information from an adversary which would not typically be available in more restrictive non-US courts, section 1782 jurisprudence remains unsettled. US courts differ about the basics of scope and procedure for taking 1782 discovery, with some agreeing that 1782 discovery is just as broad as discovery under the federal rules, with others taking more restrictive views.
For example, the Ninth Circuit, which includes the State of California, where many non-US companies have US locations, found in In re Letters Rogatory from Tokyo Dist. Prosecutor’s Office, Tokyo, Japan (1994) that “the clear language of §1782(a)” binds those interpreting it to the federal rules.
However, that same court in United States v Sealed 1 (2004) indicated that although section 1782 “authorises” discovery, the district court does not have to allow it. Ultimately, in the Ninth Circuit, even though section 1782 discovery can be as broad as the federal rules, judges have discretion to restrict that discovery, within reason.
The Northern District of California, a district court in the Ninth Circuit, insinuated in In re Varian Med. Sys. Int’l AG (2016) that a judge’s discretionary decision should tend to “err on the side of permitting discovery”.
Further examining the scope and history of section 1782, the Second Circuit, which includes New York, has also set some reasoned guidelines on the otherwise broad discretion of individual judges.
Specifically, in Schmitz v Bernstein Liebhard & Lifshitz (2004), the court said that judges “must exercise their discretion under section 1782 in light of the twin aims of the statute”: (1) assisting foreign litigants in US courts, and (2) encouraging foreign countries to assist US courts by reciprocal example.
These “twin aims” however, still leave individual judges broad discretion on how much US-style discovery to allow foreign applicants under section 1782.
For instance, the Southern District of New York, a second circuit court, denied section 1782 discovery into a foreign company’s documents in In re Kreke Immobilien KG (2006), even though those documents were accessible in the US by a US-based subsidiary.
In In re del Valle Ruiz (2019), however, the Second Circuit noted that the federal rules allow for extraterritorial discovery, and a district court would be within its discretion to allow discovery of non-US documents under section 1782.
The Second Circuit’s decision in In re del Valle Ruiz was based in part on the Eleventh Circuit’s finding in Sergeeva v Tripleton Int'l (2016) that, because section 1782 allows discovery commensurate with the federal rules, and the rules authorise extraterritorial discovery, section 1782 does too.
The Sixth Circuit likewise confirmed in JSC MCC Eurochem v Sandeep Chauhan (2018) that the district court judges have discretion in the authorisation of section 1782 discovery.
Almost uniformly, an “abuse of discretion” requires one of (1) a clearly erroneous finding of fact; (2) an improper application of the law; or (3) applying an erroneous legal standard.
These cases confirm that, in US courts, discovery under section 1782 can be as broad as any discovery in US litigation, but whether it will be is a matter of the judge’s discretion. This means foreign litigants seeking or responding to 1782 discovery (or their affiliated subsidiaries in the US) must be prepared for full American-style discovery, including its potentially invasive obligations to provide responsive documents and deposition testimony.
However, individual courts and judges are generally empowered to use their discretion as to whether to allow discovery commensurate with the full scope of the federal rules or not (eg, they may consider whether the party seeking discovery is a plaintiff in a foreign action trying to obtain extra information from a defendant by circumventing limited foreign discovery rules, or a defendant in a foreign action seeking primarily information for its defence).
In view of this, parties involved in such proceedings would be well served to study the discovery tendencies of the individual district court and judges before preparing or responding to section 1782 discovery applications.
Originally printed in World Intellectual Property Review on September 21, 2020. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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