Update on U.S. Discovery for Use in Foreign Proceedings – Extraterritorial Effect
By: Karen E. Clarke, Of Counsel
As discussed in our June 8, 2016 article, 28 U.S.C. § 1782 is a helpful U.S. statute that enables foreign litigants to obtain documentary or testimonial evidence from U.S. persons for use in a proceeding in a foreign or international tribunal. The statute authorizes a U.S. District Court to order discovery from a person who “resides or is found” within the court’s jurisdiction. However, as the Eleventh Circuit has recently held, the evidence itself need not be found in the United States; it need only be within the “control” of a U.S. resident to be obtainable under § 1782.
Sergeeva v. Tripleton Int’l Ltd., 2016 WL 4435616 (11th Cir. Aug. 23, 2016), concerned a Russian proceeding in which an ex-wife contended that her ex-husband was concealing and dissipating assets, for which she sought documentary evidence from a financial planning company located in Atlanta, Trident Atlanta. The order required production of documents within the “possession, custody, or control” of Trident Atlanta and its agents, representatives, and attorneys. Id. at *1. Trident Atlanta objected to the extent that the requested documents were in the possession of a non-U.S. affiliate, Trident Bahamas, and was held in contempt when it failed to comply with an order requiring the production of the Trident Bahamas material. Trident Atlanta argued that the court’s orders were invalid because § 1782 does not have extraterritorial scope and may not be used to reach documents located in foreign countries.
Calling this extraterritoriality argument “a question of first impression in this Circuit,” the Eleventh Circuit held that § 1782 does permit a court to require production of documents located outside the United States. Id. at *4. The extraterritorial “location of responsive documents and electronically stored information – to the extent a physical location can be discerned in this digital age – does not establish a per se bar to discovery under § 1782” and should not serve to “categorically restrict the discretion Congress afforded federal courts” in § 1782. Id.
The Court focused on § 1782’s provision that discovery is to be produced “in accordance with the Federal Rules of Civil Procedure” unless otherwise ordered. Federal Rule 45 requires subpoenaed parties to produce items in their “possession, custody, or control,” and its only geographical limitation concerns the location of the act of production and not the location of the documents or information to be produced. Therefore, the District Court could, consistent with the Federal Rules, require that Trident Atlanta produce responsive documents and information located outside the United States so long as Trident Atlanta had “possession, custody, or control” of such material. Id.
Noting that “control” for discovery purposes means “the legal right to obtain the documents requested upon demand,” the Eleventh Circuit endorsed the District Court’s determination that such a legal right may be established where affiliated corporate entities “have actually shared responsive information and documents in the normal course of their business dealings.” Id. at *5. The evidence showed that Trident Atlanta and Trident Bahamas were affiliates within an international financial planning group and had indeed shared the requested information in servicing their mutual clients. Accordingly, the § 1782 discovery order and contempt order were proper.
This appears to be the first circuit court decision squarely addressing the extraterritoriality issue. Pre-Intel, the Second, Seventh, and Ninth Circuits had suggested in dicta that § 1782 may not authorize discovery of material located in foreign countries. See Kestrel Coal Pty. Ltd. v. Joy Global Inc., 362 F.3d 401, 404 (2004); Four Pillars Enters. Co. v. Avery Dennison Corp., 308 F.3d 1075, 1079 (9th Cir. 2002); Chase Manhattan Corp. v. Sarrio S.A., 119 F.3d 143, 147 (2d Cir.1997). More recent district court decisions reflect a split of authority. Compare, e.g., In re Gemeinschaftspraxis Dr. Med. Schottdorf, No. Civ. M19-88 (BSJ), 2006 WL 3844464, *5 (S.D.N.Y. Dec. 29, 2006) (ordering production of documents in control of U.S.-based entity but located abroad, as the statute “requires only that the party from whom discovery is sought be ‘found’ here; not that the documents be found here”), and In re Applic. of Republic of Kazakhstan, 110 F. Supp. 3d 512, 515 (S.D.N.Y. 2015) (permitting discovery from law firm’s New York office of documents located in the firm’s London branch, because the two entities “operate as a single law firm”), with In re Godfrey, 526 F. Supp. 2d 417, 423-24 (S.D.N.Y. 2007) (discussing congressional intent and policy rationales for limiting § 1782’s reach to documents located within the U.S., and declining to order production of documents located in Russia “because the connection to the United States is slight at best and the likelihood of interfering with Dutch discovery policy is substantial”), and In re Kreke Immobilien KG, No. 13 Misc. 110 (NRB), 2013 WL 5966916, *4 (S.D.N.Y. Nov. 8, 2013) (following Godfrey analysis and denying application seeking documents from Deutsche Bank in Germany for use in German suit). It will be interesting to see which line of authority the other circuit courts adopt.
Category: Business Transactions | Commercial Litigation | Discovery Practice
