For over 70 years, Section 1782 of the U.S. Judicial Code, 28 U.S.C. § 1782, has authorized U.S. district courts to compel non-parties to foreign proceedings to provide discovery – i.e., production of documents, data, and even deposition witnesses – for use abroad. On October 7, 2019, the U.S. Court of Appeals for the Second Circuit in New York issued an important decision that expands the scope of Section 1782, including by authorizing courts to order non party recipients of requests under Section 1782 to produce documents and electronically stored information (ESI) held outside the United States.

The discovery sought in In re Del Valle Ruiz

The petitioners in In re Del Valle Ruiz were Mexican and U.S. investors in BPE, a Spanish bank that failed in 2017. Alleging that they sustained losses following the Spanish banking regulator’s resolution (and government-forced sale) of BPE, these investors challenged the resolution in the European Court of Justice, among other forums. In the Spanish resolution procedure, Banco Santander S.A. (Santander) acquired BPE. The petitioners filed applications under Section 1782 in the U.S. District Court for the Southern District of New York, seeking to obtain, from Santander and certain of its subsidiaries, documents about BPE’s sale to Santander for use in the European proceedings. The district court denied the petition, except to the extent that it allowed one group of petitioners to obtain discovery – including of documents and ESI held abroad – from a U.S. subsidiary of Santander (SIS).

The issues on appeal

Section 1782 provides that the “district court for the district in which a person resides or is found may order him to give testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal.” (Emphasis added). The first issue on appeal in Del Valle Ruiz was whether the statutory phrase “is found” was coextensive with the outer limits of personal jurisdiction consistent with the U.S. Constitution’s due process clause; the second was whether the district court, to the extent it had personal jurisdiction, could order a Section 1782 respondent to produce materials located outside the U.S.

The second circuit’s ruling

Interpreting Section 1782 expansively, the Second Circuit answered both questions in the affirmative. But the court also held that Santander was not subject to New York personal jurisdiction in the Del Valle Ruiz matter, and therefore affirmed the lower court’s denial of the petition as to Santander, and made clear that district courts need not always allow extraterritorial discovery.

“Found in” = “subject to personal jurisdiction.”

Section 1782 does not define the term “found.” Some commentators have argued that it was intended to be equivalent to “presence” in the sense required to support general personal jurisdiction; that reading would place beyond the statute’s reach corporations that are not “at home” in the district (or in the U.S.), even if their contacts with the district in a particular case were substantial or might suffice to support the exercise of specific personal jurisdiction. The Second Circuit rejected this narrow reading of “found,” and – as the first appellate court to address this point – held that Section 1782 relief is available against a person to the extent the court can exercise any kind of personal jurisdiction over that person, consistent with the constitutional limits of due process.

Specific personal jurisdiction in the Section 1782 context requires a causal relationship between the respondent’s forum contacts and the discovery material sought.

Although the Second Circuit construed “found” broadly, it nonetheless ruled against the petitioners in substantial part, applying to the Section 1782 context a series of precedents requiring “some causal relationship between an entity’s in-forum contacts and the proceeding at issue.” Translating the rationale of recent decisions such as Waldman v. Palestine Liberation Org., 835 F.3d 317, 331 (2d Cir. 2016) and SPV Osus Ltd. v. UBS AG, 882 F.3d 333, 344 (2d Cir. 2018) to the Section 1782 context, the Second Circuit in Del Valle Ruiz held that at a minimum, a petitioner must show that “the evidence sought would not be available but for the respondent’s forum contacts.” And where the respondent’s contacts with the forum are narrower, the causation requirement is stricter still: the respondent’s purposeful availment of the forum then “must be the proximate or primary reason that the evidence sought is available at all.” Applying these principles, the Second Circuit held that the Del Valle Ruiz petitioners had failed to establish the requisite causal relationship as to Santander. Most of the discovery the petitioners sought from Santander post-dated the bank’s acquisition of BPE, and such after-the-fact conduct could not logically have caused the availability of the evidence the petitioners were after. And although Santander used two New York firms to conduct due diligence on BPE for a proposed private sale that fell through before Spanish banking authorities forced BPE into resolution, those contacts were not a proximate cause of the creation of documents relating to the eventual “forced sale of BPE.” The Second Circuit therefore held that the district court correctly ruled that Santander was not subject to personal jurisdiction in New York with respect to the subject of the Section 1782 petition.

Section 1782 authorizes – but does not mandate – extraterritorial discovery.

The remaining issue concerned Section 1782 discovery sought from SIS, a local subsidiary that unquestionably was subject to general personal jurisdiction, and therefore was “found in,” New York. SIS argued that Section 1782 did not authorize discovery of materials outside the U.S., invoking the statutory presumption that statutes do not apply extraterritorially. The Second Circuit in Del Valle Ruiz rejected that argument. Following the reasoning of the Eleventh Circuit Court of Appeals in Sergeeva v. Tripleton Int’l Ltd., 834 F.3d 1194 (11th Cir. 2016), the court relied on the fact that the Federal Rules of Civil Procedure “authorize extraterritorial discovery so long as the documents to be produced are within the subpoenaed party’s possession, custody, or control.” Accordingly, a district court with jurisdiction over a Section 1782 respondent has the authority to order that person to produce documents and ESI held abroad, as well as those located in the U.S. That does not mean, however, that extraterritorial discovery is automatic once personal jurisdiction is established. While affirming the order requiring SIS to provide discovery, the Second Circuit specifically cautioned district courts to exercise their discretion whether to authorize such discovery and emphasized that the foreign location of evidence is a factor that they may properly consider in resolving Section 1782 applications.

Conclusion

Del Valle Ruiz represents a liberal interpretation of Section 1782 in two regards: the Second Circuit (1) held “found in” to be coterminous with the outer limits of constitutionally permissible personal jurisdiction; and (2) rejected the argument that Section 1782 did not authorize production of documents and data located outside the U.S. That said, the Second Circuit also reiterated its restrictive view of specific personal jurisdiction, applying the causation tests it has used in other contexts to Section 1782 applications. The court, moreover, reemphasized that the statute’s extraterritorial reach is subject to the exercise of discretion by the district courts, and that courts could and should still limit discovery to domestic sources where appropriate.