On July 10, 2018, in Kiobel v. Cravath, Swaine & Moore LLP, No. 17-424-cv (2d Cir.), the United States Court of Appeals for the Second Circuit reversed a district court order granting a petition under 28 U.S.C. 1782 ("Section 1782") directing Cravath, Swaine & Moore LLP ("Cravath") to produce documents for use in the plaintiff's planned proceeding in The Netherlands against one of that firm's clients, Royal Dutch Shell ("Shell"). Although the reversal limits the circumstances in which Section 1782 may be used to obtain discovery in the United States in aid of a foreign proceeding, the Second Circuit's decision highlights the potential that delivery of materials to counsel in the United States in connection with a request for legal advice could subject the underlying documents to disclosure in litigation either in the United States or abroad.
Section 1782 permits "any interested person" to petition a federal district court for discovery (including testimony or documents) from persons located in that district for use in a foreign proceeding. In Kiobel, a potential plaintiff in Dutch litigation filed a Section 1782 petition against Cravath, counsel for Shell, to obtain documents in Cravath's possession that Shell had provided to Cravath in connection with an earlier action in New York involving the same plaintiff.1 In the earlier action, the documents had been produced to the plaintiff pursuant to a stipulated confidentiality order restricting use of the documents produced during discovery in that case "solely for purposes" of that prior litigation. In Kiobel, the plaintiff argued that she required the materials to satisfy the high pleading standards for her contemplated separate litigation in The Netherlands. The plaintiff did not seek the documents (and apparently could not have obtained all of them) from Shell outside the United States, but instead subpoenaed them from Cravath. The district court ordered Cravath to produce the documents, directing Cravath and the plaintiff to enter into a new confidentiality stipulation limiting use of the documents to the contemplated Dutch proceeding. Cravath appealed the district court's order to the Second Circuit.2
The Second Circuit first rejected Cravath's argument that the district court lacked jurisdiction to order production of documents held by an agent in the United States when the principal was not within the jurisdiction of the court. The court found no room for such an exception in the statutory language, which provides for discovery when the person from whom discovery is sought "resides or is found" in the district.3
Nonetheless, the Second Circuit held that the existence of jurisdiction to compel discovery under Section 1782 does not end the analysis because the determination of whether to grant such discovery is a matter of discretion, reviewable on appeal under an abuse of discretion standard. In applying that standard, the court relied on the factors set forth by the Supreme Court in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). The court concluded that two of those factors counseled against ordering production: first, that "the real party from whom documents are sought (here, Shell) is involved in foreign proceedings," making the need for Section 1782 assistance less apparent; and second, that plaintiffs were attempting to circumvent more restrictive discovery practices in The Netherlands.4
The Second Circuit went on to observe that the Intel factors "are not to be applied mechanically" and that the district court should consider as well "other pertinent issues arising from the facts of the particular dispute."5 In particular, the court concluded that allowing discovery in the circumstances here would (i) discourage open communication with counsel, (ii) undermine confidence in confidentiality orders, and (iii) upset the balance between a client's right to the return of its documents and a lawyer's right to retain a copy of the client file for his or her protection. The court stated that "[i]f foreign clients have reason to fear disclosing all pertinent documents to U.S. counsel, the likely results are bad legal advice to the client, and harm to our system of litigation."6
The Second Circuit's decision is noteworthy in three ways. First, the decision appears to recognize a kind of privilege to deliver documents to counsel in connection with a request for legal advice without increasing exposure to Section 1782 discovery. The court had suggested such a doctrine in dicta in two prior opinions, but had not previously relied on it to deny a Section 1782 petition.7 Second, the Second Circuit's opinion reinforces the benefits and need for reliability of the types of confidentiality orders routinely sought and granted in federal court litigation. Third, the court's opinion emphasizes that the four Intel factors are not exclusive, and that other policies should be considered--and, indeed, may be paramount--in considering Section 1782 petitions.
While the Second Circuit's order could therefore be seen as reducing the circumstances in which discovery may be compelled under Section 1782, the decision reconfirms that Section 1782 remains a powerful means by which persons outside the United States can use the broad discovery devices available under U.S. law to obtain access to documents and information to which they may not be entitled under the law of the forum. In particular, although the Kiobel court wrote relatively expansively about the risk that legal advice could be curtailed if the requested discovery were permitted, the court provided no safe harbor. The court emphasized, for example, that it regarded the case to be "possibly unique": "The decision to alter the confidentiality order without Shell's participation, and without considering the costs of disclosure to Shell, makes this case exceptional, and mandates reversal."8 It is unclear whether the court would bar Section 1782 discovery of documents placed in the hands of counsel if there were no need to modify a protective order.
Kiobel thus highlights the risks of providing documents to counsel in the United States to obtain legal advice or representation in connection with litigation or investigations. This consideration is particularly relevant because the attorney-client privilege and work product doctrines generally do not protect from discovery most ordinary-course business documents delivered to counsel to obtain legal advice.9 Parties in jurisdictions in which discovery is limited should consider whether delivering documents for review by counsel in the United States--as opposed, for example, to having them reviewed outside the United States--increases the potential exposure to document discovery in the United States.