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Inconsistent Case Law on 28 U.S.C. § 1782 Continues to Confuse Litigants and District Courts

Related Lawyers: Sarah R. LaFreniere
Related Practice Areas: Antitrust / Competition
Authors: By Sarah LaFreniere*

Two recent federal circuit court decisions highlight a growing divergence among the Supreme Court, circuit courts, and district courts’ applications of decisions interpreting 28 U.S.C. § 1782 (“§ 1782”). Section 1782 is “the product of congressional efforts, over the span of nearly 150 years” to allow foreign litigants to obtain evidence through the U.S. federal courts.[1] The provision has been “substantially broadened” after numerous amendments.[2] When Congress amended § 1782 in 1958, it emphasized the statute’s dual goals: “providing efficient means of assistance to participants in international litigation in our federal courts and encouraging foreign countries by example to provide similar means of assistance to our courts.”[3] The two goals have been confused by a sea of conflicting decisions, many erroneously focusing on foreign discoverability rather than U.S. discovery rules.

The statute itself provides three requirements: “(1) that the person from whom discovery is sought reside []or be found[] in the district of the district court to which the application is made, (2) that the discovery be for use in a proceeding before a foreign tribunal, and (3) that the application be made by . . . ‘any interested person.’” [4]

In addition to the three requirements, the Supreme Court’s Intel decision interpreting § 1782 articulated four discretionary factors a district court should consider when determining to grant or deny a § 1782 discovery request:

  1. Whether the person from whom discovery is sought is a participant in the foreign proceeding;
  2. The nature of the foreign tribunal, the character of the proceeding underway abroad, and the receptivity of the foreign government or the court abroad to U.S. federal-court judicial assistance;
  3. Whether the § 1782 request conceals an effort to circumvent foreign proof gathering restrictions or other policies of a foreign country or the United States; and
  4. Whether the discovery requests are unduly intrusive or burdensome.[5]

Recently, the Second Circuit, in Kiobel v. Cravath, Swaine & Moore, LLP, absconded from over two decades of liberal interpretation of § 1782, holding in a well-publicized opinion that applicants could not obtain discovery from a foreign-litigant’s U.S. counsel.[6] The Second Circuit reasoned that a protective order in the United States and discoverability restrictions in the Netherlands weighed against the petition. Only one month later, the Third Circuit’s decision in In re Biomet Orthopaedics Switzerland GmBh took no issue with applicants seeking discovery from U.S. counsel, remanding to the district court for further evaluation of the discretionary factors.[7] In addition to creating a circuit split on that issue, both opinions’ reversal of the lower courts decisions highlight some of the most common misconceptions and erroneous applications of § 1782. This article examines this divergence, along with the more common issues that seem to plague recent § 1782 jurisprudence.

Although the respondents in both cases challenged the applications under the first required factor (that the person from whom discovery is sought is found in that district), which is generally a jurisdictional analysis,[8] both courts held that an attempt to obtain documents from legal counsel was not a jurisdictional issue and instead should be analyzed under the discretionary factors.

Both Kiobel and Biomet had a long and complex litigation history, each spanning over a decade. This article does not attempt to summarize that history. What is key for § 1782 purposes is that first, in Kiobel, the petitioner was initially a plaintiff in U.S. litigation against defendant Shell under the Alien Tort Statute. That case was eventually dismissed for lack of jurisdiction, and the petitioner brought litigation against Shell in the Netherlands. Petitioner then sought documents in a § 1782 application from Shell’s U.S. counsel, Cravath, Moore, and Swaine, LLP (“Cravath”), which had possession of the documents by virtue of the defunct U.S. litigation. Applying the § 1782 discretionary factors, the Second Circuit held that the petitioner could not obtain the documents from Cravath.[9]

In Biomet, foreign plaintiff Heraeus had successfully obtained discovery from its competitor Biomet through a prior § 1782 application.[10] Heraeus used that discovery in a two-stage German patent dispute. Following its success in the first stage of the German proceeding, Heraeus sued Esschem, an affiliate of Biomet located in the Eastern District of Pennsylvania, for similar patent infringement claims. To defend itself against the second stage of the German proceedings, Biomet brought a § 1782 application against Esschem’s outside counsel. Biomet’s application sought to obtain the discovery Esschem received from Heraeus in the Pennsylvania litigation. Heraeus intervened in the § 1782 proceedings to prevent the disclosure of the discovery Heraeus produced. Vacating and remanding to the district court for full consideration of the Intel factors, the Third Circuit ruled that seeking § 1782 discovery from Esschem’s outside counsel did not violate the statute, and strongly suggested that seeking discovery from outside counsel was not improper under the discretionary factors.[11]

The key factual distinction between Kiobel and Biomet is that the Kiobel petitioner sought discovery directly from its foreign adversary’s U.S. counsel, whereas in Biomet the petitioner sued its affiliate’s outside counsel. But crucially, in both cases, the documents at issue had already been produced in U.S. litigation by the petitioner’s foreign adversary, and the documents were subject to a protective order in the United States.

The first and third discretionary factors (whether the person from whom discovery is sought is a participant in the foreign proceeding, and whether the application is an attempt to circumvent foreign proof gathering restrictions) are those that have been most apt to misinterpretation, as the facial language of the factors does not belie the detailed meaning the Supreme Court articulated in Intel. Indeed, it is on the interpretation of these two factors that the Second and Third Circuits differed. According to the Supreme Court, the first Intel factor favors applications being made against non-parties to the foreign litigation.[12] But there is considerable authority involving this factor that considers not only whether the respondent is a participant in the foreign proceeding, but also the foreign court’s ability to compel production of the documents sought.[13] Thus, § 1782 favors applications from foreign litigants whose home discovery systems are less robust than those in the United States. A respondent to a § 1782 application who is a participant in a foreign proceeding in a country without developed disclosure procedures, therefore, is as equally positioned as a respondent who is not a participant. Further, even when there are existing mechanisms in a foreign court to obtain discovery, § 1782 applicants are not required to exhaust those mechanisms.[14]

The third discretionary Intel factor has been confusing the judiciary in that a lack of foreign-discovery mechanisms does not suggest that an applicant is attempting to “circumvent” foreign proof-gathering restrictions. This factor really is asking about bad faith, and not foreign admissibility.[15] Some federal courts, including the Second Circuit, have held that § 1782 relief is appropriate under this factor unless the party opposing discovery presents authoritative and affirmative proof that the foreign tribunal would reject evidence obtained with the aid of § 1782.[16] In fact, denying an application because the documents would not be discoverable in the foreign country likely is an impermissible use of the court’s discretion.[17] The Ninth Circuit has reversed the burden, requiring the applicant to show that the discovery would be accepted in the foreign jurisdiction.[18] The use of § 1782 to obtain evidence that cannot be sought in a foreign jurisdiction, however, seems to be precisely the type of assistance that the statute was designed to afford.[19]

Given over two-decades of § 1782 authority urging courts to ignore foreign discoverability restrictions, the Second Circuit’s reasoning in Kiobel is puzzling. The court denied the Kiobel application largely under the first and third discretionary Intel factors, expressing concern about the “combination of the confidentiality order and the more restrictive Dutch discovery practices” that made the documents undiscoverable in the Netherlands. The court held that providing the documents in the U.S. “would be perilous for multiple reasons, a feature of this case that makes it extraordinary and possibly unique.”[20] The Second Circuit also declared under the third discretionary Intel factor that the applicant was seeking to circumvent foreign discovery due to the “Netherlands’ more restrictive discovery practices.”[21] The Second Circuit ultimately concluded: “when the real party from whom documents are sought . . . is involved in foreign proceedings, the first Intel factor counsels against granting a Section 1782 petition seeking documents from U.S. counsel for the foreign company.”[22]

While the Third Circuit in Biomet remanded the petition due to the district court’s incomplete analysis of the discretionary Intel factors, it instructed the district court to consider that “Biomet ‘cannot obtain the discovery it needs in the legal system in which it [was] sued.’”[23] Given its citation to the Seventh Circuit view that the first discretionary Intel factor weighs in favor of applicants when the foreign court cannot compel production of the documents sought,[24] this seems to be a clear direction to the district court that directly conflicts with the Second Circuit’s position in Kiobel.

The Second Circuit’s reasoning in Kiobel, that foreign discovery restrictions should weigh against a § 1782 application, represents a common misinterpretation of the meaning of the first and third discretionary Intel factors. Respondents frequently raise the lack of foreign discovery mechanisms in their oppositions to § 1782 petitions despite the Supreme Court’s clear instruction to ignore such inquiries.[25] The Second Circuit itself has counseled district courts to avoid “avoid speculative foray[s] into legal territories unfamiliar to federal judges.”[26] But this isn’t the only factor as to which courts have been issuing contradictory decisions. To raise one example, those seeking to quash § 1782 petitions have raised numerous arguments under the “modest” statutory factor that the documents be sought “for use” in foreign litigation. The Supreme Court explicitly rejected any requirement that a case must be “imminent—very likely to occur and very soon to occur,” in favor of a simple standard that the action must be “within reasonable contemplation” of the litigants at the time of filing.[27] Thus, the failure of litigants to file the case in the foreign court, or unfavorable but non-binding precedents in other foreign cases, should not weighed against an applicant. Nevertheless, courts are dismissing cases on these grounds.[28]

Given the increasingly trans-national nature of litigation, a 150 year Congressional history supporting the use of federal courts to help foreign litigants under § 1782, and the critical interests of parties in both protecting and obtaining such evidence, it is likely time for the federal courts to provide some uniform interpretation of this statute.

Footnotes

[1] Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247 (2004) (“Intel”).

[2] Id. at 247–48.

[3] Application of Malev Hungarian Airlines, 964 F.2d 97, 100 (2d. Cir. 1992).

[4] Application of Esses, 101 F.3d 873, 875 (2d Cir. 1996) (internal citation omitted).

[5] See, e.g., In re Premises Locate at 840 140th Ave. NE, Bellevue, Wash., 634 F.3d 557, 563 (9th Cir. 2011).

[6] Kiobel v. Cravath, Swaine & Moore, LLP., 895 F.3d 238 (2018). (“Kiobel”).

[7] In re Biomet Orthopaedics Switzerland GmBh, 2018 WL 3738618 (3d. Cir. 2018) (“Biomet”).

[8] In re Edelman, 295 F.3d 171, 179 (2d Cir. 2002).

[9] Kiobel, 895 F.3d at 248.

[10] Heraeus Kulzer GmbH v. Esschem, Inc., 390 F. App'x 88, 93 (3d Cir. 2010); Heraeus Kulzer, GmbH v. Biomet, Inc. (Heraeus Kulzer I), 633 F.3d 591, 597–99 (7th Cir. 2011).

[11] In re Biomet Orthopaedics Switzerland GmBh, 2018 WL 3738618 at *5.

[12] Intel, 542 U.S. at 264 (“[N]onparticipants in the foreign proceeding may be outside the foreign tribunal’s jurisdictional reach; hence, their evidence, available in the United States, may be unobtainable absent § 1782(a) aid.”).

[13] Intel, 542 U.S. at 264; see, e.g., Heraeus Kulzer, GmbH, 633 F.3d at 594 (granting an application under such circumstances serves § 1782’s purpose of “setting an example to encourage foreign countries to enlarge discovery rights in their own legal systems”); In re Application of Gemeinshcaftspraxis Dr. Med. Schottdorf, No. Civ. M19-88, 2006 WL 3844464 (S.D.N.Y. Dec. 29, 2006) ( request for discovery only available in the U.S. “is not an ‘impermissible’ use of § 1782 because, in some respects, that is precisely the type of assistance that the statute was designed to afford.”).

[14] In re O'Keeffe, 646 F. App'x 263, 268 (3d Cir. 2016); In re Application for an Order Permitting Metallgesellschaft AG to take Discovery, 121 F.3d 77, 79 (2d Cir. 1997); In re Bayer AG, 146 F.3d 188, 196 (3d Cir. 1998), as amended (July 23, 1998); In re IPC Do Nordeste, No. 12-50624, 2012 WL 4448886, at *8 (E.D.Mich. Sept. 25, 2012).

[15] See Intel, 542 U.S. at 264–65; Brandi-Dohrn v. IKB Deutsche Industriebank AG, 673 F.3d 76, 82 (2d Cir. 2012) (“While Intel concerned the discoverability of evidence in the foreign proceeding, we see no reason why it should not extend to the admissibility of evidence in the foreign proceeding.”).

[16] In re Imanagement Servs. Ltd., No. Misc. 05-89, 2005 WL 1959702 (E.D.N.Y. Aug. 16, 2005) (noting that the Second Circuit in Euromepa adopted an “authoritative proof” standard) (citing In re Application of Euromepa, 51 F.3d 24, 29 (2d Cir. 1998.)). In Bioment the Third Circuit declined to adopt such a standard. In re Biomet Orthopaedics Switzerland GmBh, 2018 WL 3738618 at *6 n. 9.

[17] In re Application for an Order Permitting Metallgesellschaft AG to take Discovery, 121 F.3d 77, 80 (2d. Cir. 1997).

[18] In re Cathode Ray Tube ( CRT ) Antitrust Litig, MDL No. 1917, 2012 WL 6878989 at *2 (N.D. Cal. Oct. 22, 2012).

[19] In re Application of Gemeinshcaftspraxis Dr. Med. Schottdorf, No. Civ. M19-88, 2006 WL 3844464 (S.D.N.Y. Dec. 29, 2006); In re Ex Parte Apple Inc., No. MISC 12-80013, 2012 WL 1570043, at *2 (N.D. Cal. May 2, 2012) (rejecting the argument that the applicant was attempting to circumvent German proof-gathering restrictions by seeking discovery not available under German procedural rules).

[20] Kiobel, 895 F.3d at 246-47.

[21] Id. at 245.

[22] Id.

[23] In re Biomet Orthopaedics Switzerland GmBh, -- Fed. Appx. –, 2018 WL 3738618 at *5 (citing Heraeus Kulzer I, 633 F.3d at 596).

[24] Intel, 542 U.S. at 264; see, e.g., Heraeus Kulzer, GmbH v. Biomet, Inc., 633 F.3d 591, 594 (7th Cir. 2011) (“Heraeus Kulzer”) (granting an application under such circumstances serves § 1782’s purpose of “setting an example to encourage foreign countries to enlarge discovery rights in their own legal systems”); In re Application of Gemeinshcaftspraxis Dr. Med. Schottdorf, No. Civ. M19-88, 2006 WL 3844464 (S.D.N.Y. Dec. 29, 2006) ( request for discovery only available in the U.S. “is not an ‘impermissible’ use of § 1782 because, in some respects, that is precisely the type of assistance that the statute was designed to afford.”).

[25] See supra note 15.

[26] In re Application for an Order Permitting Metallgesellschaft AG to take Discovery, 121 F.3d 77, 80 (2d Cir. 1997) (reversing denial of § 1782 application, and noting that asserted privilege under German law was “far from clear”); accord Ecuadorian Plaintiffs v. Chevron Corp., 619 F.3d 373, 378 (5th Cir. 2010).

[27] Intel 542 U.S. at 259; Mees v. Buiter, 793 F.3d 291, 299 (2nd Cir. 2015).

[28] See e.g. Financialright GmBH et. al., v. Robert Bosch LLC, 294 F. Supp. 3d 721, 729-32 (E.D. Mich. 2018).

*Sarah LaFreniere is an associate in the Washington, D.C. office.