Obtaining evidence from US-connected entities - US court widens the scope

The US Court of Appeals for the Second Circuit has handed down a decision that potentially increases the scope for parties in non-US legal proceedings to use the US courts to access evidence held by US-connected entities, even if that evidence is not located in the US: Re Application of Antonio Del Valle Ruiz 18-3226 (L)

The decision concerns the US process known as a "section 1782 application" (under section 1782 of Title 28 of the United States Code).  Broadly, that provision enables a litigant in a non-US legal proceeding to ask a US District Court to order an individual or entity in the relevant federal district to provide testimony or disclosure of documents for use in that foreign proceeding.

The scope of section 1782 has been the subject of conflicting authority amongst different US federal district courts.  Probably the most controversial of the unsettled issues is whether the procedure can be used in aid of commercial arbitrations (see our recent update here for the latest position on this issue). However, there has also been much uncertainty as to the extent to which the provision operates extraterritorially, including (i) what degree of connection with the US district is needed to satisfy the statute's requirement that the target of the order "resides or is found" there; and (ii) whether the provision extends to documents located outside the US.

This latest decision addresses both those issues:

• Who can be the subject of a section 1782 order ?

The court held that, in addition to cases where the US court has general jurisdiction over an entity based on residence, a section 1782 order can be made whenever the court has specific jurisdiction over an entity because of the entity's contact with the district (not just in cases where a non-resident individual is personally served within the district).  In the context of a section 1782 application, such specific jurisdiction may be established where the target entity's contacts with the relevant US district were "the primary or proximate reason" that the requested evidence existed.

• Documents located outside the US

The court held that there is no per se bar to section 1782 being used to obtain disclosure of documents located outside the US.  The general presumption against extraterritorial operation of US statutes does not apply here given that section 1782 is a purely jurisdictional mechanism, rather than one giving rise to substantive liability.  This ruling concurs with a 2016 finding to the same effect by the Eleventh Circuit.

Aside from the importance of the Second Circuit as a jurisdiction (encompassing New York), the decision is likely to be particularly influential because, as the court noted, most of the decisions in other districts that have refused to apply section 1782 to documents outside the US have been based on earlier Second Circuit authority.  That earlier authority is now considerably weakened by this decision, leaving the door open for other jurisdictions to follow suit in ordering disclosure of documents located outside the US.

It is important to bear in mind that, even where the statutory requirements are met, a US court considering such an application has a wide discretion as to whether to grant it, and to what extent.  The range of factors it may take into account include whether the request is unduly intrusive; whether the applicant could have pursued other means of obtaining the information (including within the foreign proceeding itself); the possibility that the foreign court/tribunal might reject the evidence obtained; and whether the application can be seen as an attempt to circumvent or undermine the foreign country's processes or policies.  These factors may be applied differently in different US federal districts.  It will therefore be important, when considering whether to make (or resist) such an application, to take local advice in the relevant US district as to both how the statutory provision will be interpreted and how the discretionary factors might be applied in the particular case.  It will also be necessary to take local advice in the country where the foreign proceedings are based, to assess the court's likely attitude to the section 1782 process and to the particular evidence sought to be obtained.

Click here to read our New York office's report on the recent decision.

For more on section 1782 applications generally, see the article from our Cross-Border Litigation publication series: "Section 1782 – A surprisingly underused tool in cross-border litigation".