From: Jenner & Block at www.jenner.com
Lawrence S. Schaner

USA
March 5 2007

“United States courts recently have issued a number of decisions expanding the reach of 28 U.S.C. §1782, a federal statute that permits parties to use U.S. discovery mechanisms to obtain evidence for foreign and international legal proceedings. In a departure from prior rulings, two district courts have held §1782 may be used to secure documents and deposition testimony for international arbitrations. Other courts have continued the trend of liberally interpreting §1782 to obtain evidence for court cases. Parties to non-U.S. legal proceedings should be aware of the opportunities and challenges presented by these developments.

Section 1782 Background

The origins of §1782 date back to the mid-19th Century, at which time aid to foreign tribunals was extremely limited. Over the years, Congress substantially expanded the reach of the provision. In 2004, the U.S. Supreme Court issued the seminal decision interpreting §1782, construing the language liberally in favor of allowing discovery. Among other things, it rejected the notion that §1782 was limited to the discovery of evidence that could be discovered in a foreign jurisdiction if the evidence was located there. Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004).

Currently, §1782 may be used to obtain both documents and deposition testimony. A party seeking §1782 discovery proceeds by filing an application with a federal district court requesting authorization to issue subpoenas for documents, deposition testimony or both. A foreign or international tribunal may also issue a letter of request.

Following Intel, courts have adopted a two-part analysis for determining whether §1782 may be used. A party must first satisfy the statutory requirements: (1) the person or entity from whom the discovery is sought must “reside” or be “found” in the judicial district in which the application is made; (2) the requesting party must be a foreign or international tribunal or an “interested person”; and (3) the requested discovery must be “for use in a proceeding in a foreign or international tribunal.”

If the statutory requirements are satisfied, courts may allow the requested discovery, but are not required to do so. In exercising their discretion, courts look to various factors set forth by the Supreme Court in Intel, such as whether the person from whom discovery is sought is a participant in the foreign proceeding, whether the foreign government, court or agency would be receptive to U.S. federal-court judicial assistance, whether the application conceals an attempt to circumvent foreign proof-gathering restrictions, and whether the requested discovery is unduly intrusive or burdensome.

The Expansion to International Arbitration

In two pre-Intel decisions, federal appellate courts held §1782 could not be used to obtain evidence for private commercial arbitrations. Republic of Kazakhstan v. Beidermann Int’l, 168 F.3d 880 (5th Cir. 1999) (denying application for discovery for use in Stockholm Chamber of Commerce arbitration); National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999) (affirming decision to quash subpoenas in aid of ICC arbitration in Mexico).

Recent cases, however, have approved of the use of §1782 for international arbitrations. In In re Oxus Gold, PLC, 2006 WL 2927615 (D.N.J. Oct. 11, 2006), a federal district court in New Jersey authorized the use of §1782 to permit a United Kingdom company to issue a subpoena for documents and deposition testimony in aid of an investor-state arbitration in London. The arbitral proceeding was being conducted pursuant to a bilateral investment treaty (“BIT”) between the United Kingdom and the Kyrgyz Republic. The court distinguished the pre-Intel decisions on the basis that the arbitration was not the result of a private agreement but rather was “authorized by the sovereign states of the United Kingdom and the Kyrgyzstan Republic for the purpose of adjudicating disputes under the [BIT].” Id. at *6.

Two months later, a district court in Atlanta, Georgia took the next step, holding §1782 could be used to obtain evidence for a private international commercial arbitration. In re Roz Trading Ltd, 2006 WL 3741078 (N.D. Ga. Dec. 19, 2006). In the case, a Cayman Islands company sought documents from Coca-Cola for use in an arbitration before a panel of the International Arbitral Centre of the Austrian Federal Economic Chamber in Vienna. The court held private arbitral panels are “tribunals” for purposes of §1782 and ordered Coca-Cola to produce documents. The court found the contrary decisions of the Second and Fifth Circuits invalidated by the Supreme Court’s ruling in Intel. The Roz Trading decision is now on appeal.

Continued Liberal Approach for Foreign Court Cases

U.S. district courts have continued in the wake of Intel to interpret §1782 liberally in favor of permitting discovery in aid of foreign litigation. In Fleischmann v. McDonald’s Corp., 2006 WL 3530582 (N.D. Ill. Dec. 6, 2006), an Illinois district court ordered McDonald’s to produce documents for use in actions pending in Brazilian labor courts. The actions had been brought by former employees of McDonald’s Brazilian subsidiary. In granting the §1782 application, the district court rejected McDonald’s contention that the discovery should be refused because the materials would not be admissible in Brazil. The court held that §1782 “does not impose a foreign-admissibility rule.” Id. at *4.

In a further example of this trend, a district court in New York ordered McKinsey Company, the global consulting firm, to produce documents requested by a German litigant in aid of a lawsuit in Munich. In re Gemeinschaftspraxis Dr. Med. Schottforf, 2006 WL 3844464 (S.D.N.Y. Dec. 29, 2006). McKinsey argued §1782 did not apply because the documents were located outside of the United States. The district court disagreed, holding “Section 1782 requires only that the party from whom discovery is sought be ‘found’ here; not that the documents be found here.” Id. at *5. The court also rejected the argument that the production would be unduly burdensome because the documents would have to be translated from German into English so they could be reviewed by McKinsey’s non-German-speaking U.S. counsel. Id. at *8.

Conclusion

Recent decisions confirm that following Intel, §1782 has become an increasingly potent tool for obtaining documents and testimony for foreign legal proceedings. If Roz Trading is affirmed and followed in other circuits, §1782 has the potential to play a major role with respect to international arbitrations. In any event, the possibility of using §1782 should be considered carefully by parties to non-U.S. legal proceedings whenever persons or entities possessing relevant evidence may be found in the United States.”