The increasingly popular federal statute concerning cross-border judicial assistance, 28 U.S.C. § 1782, enables a District Court to order a “person” that “resides or is found” within its jurisdiction to produce evidence for use in a proceeding in a foreign or international tribunal. The Second Circuit recently addressed two questions concerning the application of this unique legislation: (1) on what bases does a District Court have personal jurisdiction over a non-party for purposes of the statute (how does a court interpret and apply the “resides or is found” criteria in jurisdictional terms); and (2) can the District Court order such a person to produce evidence that it maintains outside of the U.S.? See In re del Valle Ruiz, 2019 U.S. App. LEXIS 30002 (2d Cir. Oct. 7, 2019).

The Court’s thumbs-up decision concerning the latter (“extraterritoriality”) issue has gotten the principal if not exclusive coverage in the legal press. But its decision concerning the jurisdiction issue is likely to have a more regular impact on the utilization of the § 1782 discovery mechanism, and it is, at least in part, a bit of a head scratcher. That is, the Second Circuit’s test for specific personal jurisdiction over a non-party for purposes of discovery is, at its extreme, arguably murky, difficult to apply, and inequitable. We propose a test that is simpler, more easily applied, and more consistent with due process fairness.

1. Overview

The Second Circuit held that the statute’s “resides or is found” requirement “extended § 1782’s reach to the limits of personal jurisdiction consistent with due process;” hence, either general personal jurisdiction (“resides”) or specific personal jurisdiction (“is found”) over a person is sufficient. See id. at *10-*11. SCOTUS has not prescribed a test or analysis for either basis for jurisdiction over a non-party “witness,” so the Second Circuit went on to fashion its own. But in seeking to extend the reach of personal jurisdiction over a non-party witness in parallel with the reach of personal jurisdiction over a defendant, the Court arguably produced an impractical test of questionable due process fairness to the non-party.

Here is the context. In del Valle Ruiz, investors in Banco Popular Español (“BPE”) were contesting the legality of a government-forced fire sale of BPE to Banco Santander (“Santander”) in certain foreign proceedings. The investors sought discovery, under 28 U.S.C. § 1782, in New York from Santander and its New York-based affiliate, Santander Investments Securities, Inc. (“SIS”), “concerning the financial status of BPE.”

Santander is a Spanish banking company with its principal place of business in Madrid, while SIS is a Delaware corporation with its principal place of business in New York City. Id. at *7 n.4. (It was not contended that Santander has a branch or rep office in New York.) Santander argued in the District Court that it was not “found” within the Southern District, for purposes of § 1782, and that although SIS resided or was found in the Southern District, it was “not involved with the acquisition of BPE.” Id. at *7-*8.

The District Court determined that it had general personal jurisdiction over SIS, and that finding was not challenged on appeal. (The Court noted that the parties apparently assumed that the term “resides,” for these purposes, refers to the place where an individual is “essentially at home,” thereby establishing general personal jurisdiction. Id. at *9 n.6.) Santander was not subject to such general personal jurisdiction, however, and so the court considered whether it had specific personal jurisdiction. It held that it did not.

The District Court ultimately denied the application vis-à-vis Santander for lack of personal jurisdiction (but granted discovery from SIS). Id. at *3-*4. The Second Circuit affirmed.

2. The Second Circuit’s Close Analogy Test re Specific Personal Jurisdiction Over a Non-Party Witness

Lacking guidance from SCOTUS, id. at *16, the Court of Appeals was in effect called upon to establish tests for personal jurisdiction over a non-party company for purposes of discovery. One part of the solution was obvious -- a District Court’s general personal jurisdiction over a company according to the Daimler rule would suffice. But lacking such general personal jurisdiction over Santander, the Court decided that the scope of the statutory term “found” extends “to the limits of personal jurisdiction consistent with due process,” id. at *11, *14-*15; therefore, “specific” personal jurisdiction would suffice as well.

For purposes of determining whether a federal court has specific jurisdiction over a non-party witness, the Second Circuit chose to adapt the established two-prong test for whether a court has specific personal jurisdiction over a party defendant -- i.e., (i) has the party purposefully directed activities at or in the forum that gave rise to or related to the claim(s) in question; and (ii) does the assertion of personal jurisdiction over that party “comport with fair play and substantial justice.” See id. at *15-16.

In that regard, the Court reached back to its own earlier formulation, in Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 137 (2d Cir. 2014), of a closely analogous test regarding non-parties in connection with a Fed. R. Civ. P. 45 subpoena: (i) has the non-party had contacts with the forum that relate to the discovery order in question, and (ii) does exercising jurisdiction over the non-party for purposes of that order “comport with fair play and substantial justice.” See del Valle Ruiz at *16.

Then the Court sought to clarify its new test for present purposes. (And here is where things got murkier.) First, it indicated that the “due process” to which such a non-party would be entitled, for jurisdiction purposes, is not “categorically lower” than that to which a party is entitled, but that it was enough that the non-party’s contacts with the forum “go to the actual discovery sought rather than the underlying cause of action.” See id. at *18.

Second, the Court sought to elucidate the meaning of the “arising out of or relating to” requirement -- i.e., the requisite connection of the discovery materials to the forum -- opining that those phrases should be interpreted flexibly according to the scope of the non-party’s contacts with the forum. That is, generally,

“where the discovery materials sought proximately resulted from the respondent’s forum contacts, that would be sufficient to establish specific jurisdiction for ordering discovery. That is, the respondent’s having purposefully availed itself of the forum must be the primary or proximate reason that the evidence sought is available at all.” Id. at *19.

However, where the non-party’s contacts with the forum were broader and more significant,

“a petitioner need demonstrate only that the evidence sought [by way of § 1782] would not be available but for [the non-party] respondent’s forum contacts.” Id.

The Court’s prescription was not a model of clarity or simplicity. Neither was the Court’s application of its test(s) vis-à-vis Santander. See id. at *19-*21. Ultimately, the petitioners were required to show (i) that Santander had had contacts with the district in question that were “connected to the discovery sought,” and (ii) that such contact “was the proximate reason the evidence sought was available, not merely that the evidence would not have been available but for the contact.” Id. at *20 (emphasis in original). (They did not make that showing. See id. at *20-*21.) Simply put, the thought of having to litigate any of this seems likely to produce considerable head-scratching.

3. Toward a Simpler and More Equitable Test for Specific Personal Jurisdiction Over a Non-Party Witness

3.1 A Non-Party Witness is Arguably Entitled to Due Process for Purposes of Personal Jurisdiction

State and federal courts have asserted broadly varied positions and tests regarding personal jurisdiction over non-party witnesses generally. Several state courts, for example, consider that due process limitations on personal jurisdiction applicable to a defendant do not apply at all with respect to the court’s subpoena power over a non-party. The majority of federal courts that have considered the issue, however, have sought to formulate some sort of minimum contacts due process test for personal jurisdiction over a non-party for subpoena enforcement purposes. Strong rationales for those tests have been lacking, however.

The Fifth and Fourteenth Amendments of the U.S. Constitution guarantee due process to “persons,” not “parties,” and so non-party witnesses are not apparently excluded from those thus protected. Moreover, the Due Process Clause “is the only source of the personal jurisdiction requirement….” Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703 n.10 (1982). It gives a “degree of predictability to the legal system” so as to enable persons to anticipate where their conduct will render them subject to legal process. Cf. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980). There is no obvious reason why the same foreseeability/fairness consideration should not apply with respect to personal jurisdiction over a non-party concerning discovery.

Granted, personal jurisdiction to enforce discovery rules -- procedural matters that are rarely if ever appealable -- is arguably different from personal jurisdiction to adjudicate the liability and substantive rights of a defendant. However, due process essentially concerns procedural fairness. Hence, it is reasonable to require that a court’s personal jurisdiction over a non-party should be consistent with due process principles.

3.2. Problems With the Second Circuit’s Close Analogy Test for Specific Personal Jurisdiction Over a Non-Party

Personal jurisdiction is, in principle, a measure of the territorial limit of the power of a court. It is essentially a function of the relationship (e.g., by contacts, consent, etc.) of a person with the forum. Generally, a court has specific personal jurisdiction over a non-resident defendant when (i) a claim “arises out of or relates to” that defendant’s contacts with the forum, and (ii) “the maintenance of [a] suit [in that forum] does not offend traditional notions of fair play and substantial justice.” del Valle Ruiz at *15, citing Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 134 (2d Cir. 2014), quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

The Second Circuit’s closely analogous test concerning a non-party witness requires that the evidence/discovery material sought must “arise out of or relate to” the contacts of that non-party with the forum. The problems with that test -- impracticality and unfairness -- stem largely from the requirement of an ill-defined connection between the evidence and the forum.

Impracticality

For example, first, what aspect of the evidence sought must “relate” to the non-party’s forum contacts? Is it the evidence’s (a) subject matter, (b) genesis, or (c) location that is important?[1]

Second, how does one show that the pertinent aspect of the demanded discovery “arises out of or relates to” the non-party’s contacts with the forum? For example, if a petitioner must show that the discovery materials sought (a) “proximately resulted from the respondent’s forum contacts,” or (b) “would not be available but for respondent’s forum contacts,” what does that mean?

Third, at what point would a petitioner be able to make the requisite showing? The close analogy test in effect hinges on the relationship of the evidence sought to the forum. But how can a court evaluate such a possible relationship before examining the documents and information that are demanded?

In adjudicating specific personal jurisdiction over a defendant, the court may rely first on allegations in the complaint concerning the defendant’s contacts with the forum and the claim(s). A plaintiff must provide, and is likely to have, sufficient information to support long-arm jurisdiction, at least prima facie, when commencing suit. On the other hand, a party seeking discovery typically demands documents and information by categories based solely on their perceived relevance to identified claims or defenses. How likely is it that a petitioner invoking 28 U.S.C. § 1782 will be able to show in advance a satisfactory connection between the subpoenaed non-party’s contacts with the forum and each category of documents demanded and/or each category of information sought in a deposition? Not very. Alternatively, could the litigant seeking discovery add a qualifier to the descriptions of the categories of documents and information demanded from a non-party -- i.e., “that arise from or relate to your contacts with the captioned forum” -- and place the burden on the subpoenaed non-party to figure things out? That seems unacceptable.

Unfairness

Furthermore, does a jurisdictional test that hinges on an ill-defined relationship between the discovery sought and the witness’s contacts with the forum serve the cause of “fair play and substantial justice” for the witness? It is unlikely to make the non-resident non-party’s obligation in that forum more foreseeable and therefore more reasonable.

Concerning a defendant, specific personal jurisdiction may be based on its contacts with a forum comprising conduct that allegedly was unlawful and/or resulted in cognizable injury within the forum. Personal jurisdiction over a defendant in that forum in those circumstances seems reasonably foreseeable and fair.

On the other hand, specific personal jurisdiction over a non-party witness based on a closely analogous formula would justify compelling a non-party to litigate and produce discovery in a distant forum if its contact(s) with the forum “gave rise to or related to” information and/or materials sought by litigating parties with whom the witness may have no relationship, concerning matters regarding which the witness may have no interest. The witness has not acted unlawfully. Its contacts with the discovery forum are very likely irrelevant to the merits of the litigation. The information or documents that “relate” in some way to its past contact(s) with a particular forum might “relate” as well to its contacts with other fora. And the information -- whether printed, in electronic form, or in brain cell synapses – is most likely held by the non-resident non-party somewhere outside the forum. All of this diminishes the foreseeability, and therefore the fairness, of compelling a non-party witness to produce evidence in a forum with which it has had minimal or sporadic contacts, as opposed to in a forum in which the non-party is present.

The case is no stronger from the enforcing court’s perspective. In World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980), SCOTUS described a test of reasonableness that considered balancing multiple factors in evaluating the “fair play and substantial justice” element of due process. Among the factors to be considered were the forum’s interest in adjudicating the dispute in question. Id. at 292. But the forum has no comparable interest as regards a non-resident non-party who is only a possible source of discovery, especially when that discovery serves litigation that is being conducted elsewhere. According to SCOTUS’s analysis, that argues for requiring more substantial contacts of the witness to the forum.

In sum, we submit that a test for jurisdiction that is founded on an ill-defined connection between the discovery sought and the forum via the witness’s minimum contacts is not only impractical, but, in due process terms, unfair to the non-party witness. A simpler, fairer test for specific personal jurisdiction over a non-party company for purposes of discovery would clearly be preferable, and is certainly conceivable.

3.3 A Simpler Test: Specific Jurisdiction to the Extent of Presence

The Second Circuit acknowledged that the “due process” to which a non-party witness is entitled is different, not “categorically lower,” than that to which a party defendant is entitled. See del Valle Ruiz at *11-*12, *18. And case law concerning specific personal jurisdiction as a basis for § 1782 discovery from a non-party is still “sparse” and largely “unsettled”. Cf. Australia and New Zealand Banking Group Ltd. v. APR Energy Holding Ltd., 2017 U.S. Dist. LEXIS 142404 (S.D.N.Y. Sept. 1, 2017) at *14.

We propose that the limit of specific personal jurisdiction over a non-party for purposes of discovery should be to the extent of the person’s “presence” in the forum jurisdiction. That is, we submit that more substantial contact(s) to a forum should be required to establish personal jurisdiction over a mere witness for purposes of discovery than over a defendant for purposes of litigation. Hence, the reach of specific personal jurisdiction should be less extensive as concerns a non-party with respect to discovery than its reach vis-à-vis a defendant with respect to a claim in litigation. On the other hand, a company that is “present” in the forum should be subject to the court’s jurisdiction for purposes of discovery of all materials and information in the witness’s possession, custody or control.

The Second Circuit implicitly accepted that a person “resides,” for purposes of the statute, where that person (individual or entity) is “essentially at home,” and thus is subject to general personal jurisdiction. In that case, according to the canons of statutory construction, where a person “is found” must mean something different. One is “found” where one is located. Cf. Webster’s Encyclopedic Unabridged Dictionary of the English Language (1996) at 756, 719. We suggest, then, that a person “is found” simply where that person (individual or entity) is “present.”

A company would be deemed “present” if it is regularly conducting business (commercial or otherwise) from or in the forum area; that is, to the extent of (a) its physical presence (when the entity is resident, e.g., it has a place of “business” in the jurisdiction) or (b) its electronic (including telephonic) presence (when the non-resident entity regularly solicits and conducts business electronically with persons physically present in the jurisdiction). Jurisdiction would obtain to the extent of that presence. (For example, the local branch of a bank would be required to comply, but not all branches everywhere, etc.) But no showing would be required, for purposes of jurisdiction, of a connection between the discovery sought and the witness’s presence in the forum.

Why should the reach of specific personal jurisdiction be less extensive concerning a non-party with respect to discovery than concerning a defendant with respect to litigation? Beyond the consideration of the practicalities of formulating a workable test, it is a matter of foreseeability and fairness. (Isn’t it most foreseeable that documents and information will be sought where their holder is present?)

This proposed test is both practical and fair. First, it relies solely on a company’s most readily ascertainable contact(s) with a forum. Analogously, the Second Circuit indicated that tag jurisdiction is sufficient with respect to a non-party individual witness.[2] See del Valle Ruiz at *11-*12. No relationship is required between the evidence sought and an individual witness’s transient “contact” with the forum. Surely, then, the non-transient presence in the jurisdiction of a non-party entity, such as a corporation, should suffice for purposes of establishing specific personal jurisdiction for purposes of discovery.

The proposed test is also fairer to the witness. Presence itself reasonably gives rise to expectations in a company of certain responsibilities within that jurisdiction -- to comply with the laws, to pay taxes, etc. These are foreseeable, indeed expected, responsibilities, however “burdensome”. Historically, the obligation of a non-party witness to provide evidence for use in a judicial proceeding has been considered a civic duty rather than a liability. The public has a “right to every man’s evidence.” It seems eminently fair to presume, for due process purposes, that a company must reasonably expect that its civic duties in a district in which it is present include the obligation to provide evidence that is within its possession, custody, or control.

The proposed test also enables all concerned to organize their conduct accordingly. One of the rationales for the sufficiency of “tag” or “transient” jurisdiction over individual defendants, see Burnham v. Superior Court, 495 U.S. 604 (1990), is that the physical presence of a person in a jurisdiction implies some purposeful availment of the benefits of the forum. Id. at 637-638 (Brennan, J., concurring). (Justice Brennan opined moreover that the transient presence of a defendant in the forum also indicates that it would suffer only slight if any inconvenience from being sued there. Id. at 638.) In Burnham, the court was considering the transient presence of a defendant, rather than the purposeful regular presence of a non-party witness. The same considerations hold true, albeit with greater force, in the latter case.

Finally, in the past, the Second Circuit seemingly endorsed tag jurisdiction as sufficient with respect to a non-party business organization witness as well. See First Am. Corp. v. Pricewaterhouse LLP, 154 F.3d 16 (2d Cir. 1998) (documents subpoena enforced against a UK partnership; one of the partners served with subpoena while physically present in New York on a business trip); cf. In re Edelman, 295 F3d 171, 179 (2d Cir. 2002). It would not be a stretch for the Second Circuit also to accept “presence” as a fair basis for specific personal jurisdiction over any business organization for purposes of discovery under 28 U.S.C. § 1782.

4. Conclusion

The Second Circuit’s decision regarding the reach of and test for specific personal jurisdiction, for § 1782 purposes, over a non-party company “found” within the relevant geographical jurisdiction is important. We can only hope that it and the other Courts of Appeals eventually give the matter a rethink and establish a simpler, clearer and fairer test in that regard so that personal jurisdiction does not become a confusing barrier to access to the statute’s benefits.[3]

A version of this article was published in Law360 on Nov. 8, 2019.