Comity and Discovery Requests in Cross-Border Litigation

, New York Law Journal

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Edward M. Spiro and Judith Mogul
Edward M. Spiro and Judith Mogul

International comity—the broad discretionary doctrine under which courts in one territory seek to avoid intruding into matters touching on the laws and interests of other sovereign states—arises in a variety of contexts. We discuss below three recent decisions from the U.S. District Court for the Southern District of New York that explore this doctrine in connection with requests for discovery in aid of foreign litigation, and in assessing the impact of a foreign insolvency proceeding on litigation in this district.

28 U.S.C. §1782 Applications

The provision 28 U.S.C. §1782 permits a federal district court to order discovery from a person or entity residing or found within its district for use in a proceeding before a foreign tribunal. Inasmuch as §1782, by its very nature, injects U.S. courts into the legal proceedings of other countries, the extensive body of case law surrounding its interpretation and application relies on principles of comity to define the line between assisting foreign proceedings and interfering with them.

Southern District Judges Naomi Reice Buchwald and P. Kevin Castel each issued decisions this fall illustrating the central role of comity in this aspect of international litigation. Both noted the two-tiered approach to assessing a §1782 application set forth by the Supreme Court in Intel v. Advanced Micro Devices.1 Under that approach, the court first determines whether the mandatory statutory factors for a §1782 application are satisfied and then, whether certain additional factors warrant exercise of the court's discretion to order the requested discovery.

The statutory factors are that (1) the person from whom discovery is sought resides or is found in the district; (2) the discovery is for use in a foreign proceeding; and (3) the application is made by the foreign tribunal or an interested party.

If the statutory factors are met, Intel instructs the court to weigh certain additional discretionary factors, including (1) if the respondent is a party to the foreign proceeding (which cuts against granting the application); (2) the receptivity of the foreign tribunal to receiving the fruits of U.S. judicial assistance; (3) whether the §1782 application conceals an attempt to circumvent foreign proof-gathering limits or other policies; and (4) if the application is unduly burdensome or intrusive—in which case the requests can be appropriately trimmed.2

Threshold Issues

Castel and Buchwald each found that the statutory factors were readily met in their cases, but each confronted a threshold issue not addressed in the statute or by Intel. In In re Mare Shipping,3 before getting to the statutory factors, Castel first considered whether the court had subject matter jurisdiction to hear an application seeking documents and testimony from U.S. lawyers for the Kingdom of Spain or whether the Foreign Sovereign Immunities Act (FSIA)4 provided them immunity from the court's jurisdiction. He concluded that although FSIA immunity extends to "agencies and instrumentalities" of a foreign state, lawyers and law firms do not fall within the statutory definition of "agency or instrumentality" and thus could not assert Spain's immunity.5

Buchwald's decision was issued in In re Application of Kreke Immobilien KG.6 In that case, Kreke, a German limited partnership involved in litigation in Germany against Oppenheim, a German private bank, sought document discovery from Deutsche Bank for use in the German litigation. Deutsche Bank had acquired Oppenheim following the events at issue in the litigation. Kreke sought 16 categories of documents that Kreke asserted were in Deutsche Bank's possession as a result of due diligence Deutsche Bank conducted in connection with the acquisition, or that Deutsche Bank now controlled by virtue of its parent-subsidiary relationship with Oppenheim.

Kreke candidly acknowledged that it could not obtain these documents through "German-style discovery," which restricts discovery to documents the requesting party already knows about in great detail. Indeed, it predicated its application on the assertion that §1782 was the only "conceivable" way to gain access to the requested documents that "generally pertain[ed]" to Oppenheim's alleged wrongdoing.

Buchwald found that Kreke's application satisfied the statutory requirements inasmuch as Deutsche Bank operates in the Southern District of New York and the information was sought for a German proceeding by a party to that proceeding.

She held, however, that an additional threshold issue—and one on which the courts in the Southern District are split—required denial of the application even before consideration of the discretionary factors. Specifically, she held that because the physical documents sought were all located in Germany, they could not be obtained through §1782.

Buchwald observed that although the statute itself does not contain an express ban on extraterritorial discovery, the U.S. Court of Appeals for the Second Circuit has suggested in dicta that "there is reason to think that Congress intended to reach only evidence located within the United States."7 Noting that at least one court has held that the location of documents outside the jurisdiction should be at best a discretionary consideration,8 Buchwald found more compelling those decisions holding that §1782 does not authorize discovery of documents held abroad.9 On this basis, she denied the application, concluding that where the conduct at issue took place in Germany, the physical evidence is in Germany, and the electronic documents are as accessible there as from Deutsche Bank's offices in New York, the "connection to the United States is slight at best and the likelihood of interfering with foreign discovery policy is substantial."10

Although she found the location of the documents dispositive, "for the sake of completeness" Buchwald went on to consider the Intel discretionary factors. First, she found that because Oppenheim was a wholly-owned subsidiary of Deutsche Bank, discovery was "fundamentally being sought from a participant in the German proceedings." That factor, coupled with the fact that the documents sought were located in Germany, cut against allowing discovery.

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