A Typical 1782 Case

“Gerardo Germano da Silva harvesting agroecological cotton in Ceará, Brazil” by Pedro Jorge Lima, CC BY-NC-SA 2.0

28 U.S.C. § 1782 allows a federal court to order discovery for use in a foreign or international tribunal. After the Supreme Court’s first § 1782 decision in 2004, Intel Corp. v. Advanced Micro Devices, Inc., the number of § 1782 petitions increased dramatically, more than quadrupling between 2005 and 2017.

In re Petition of Bureau Veritas is a typical example of how federal courts apply this important provision. A federal district court for the Northern District of California (Judge Edward Davila) granted an ex parte petition to depose two employees of a Delaware corporation for use in court proceedings in Brazil. The court ran through the three required statutory factors, finding them satisfied, and then ran through Intel’s four discretionary factors, finding that they favored granting the petition. The court analyzed the case without hearing opposing arguments. This is also typical, and it raises questions about whether district courts are getting the information they need to make fully informed decisions.

Background

The Petitioner Bureau Veritas is a Brazilian company that sells testing and inspection services. In 2016, it agreed to buy Kuhlmann Monitoramento Agrícola (KMA), a company providing services to the cotton industry, from the Kuhlmanns. Mr. Kuhlmann agreed to help develop KMA’s business and not to compete with KMA. After the purchase, Bureau Veritas learned that Kuhlmann diverted clients, employees, and business opportunities to Gaivota, a competitor of KMA in which Kuhlman had invested. Bureau Veritas started legal proceedings against Kuhlmann in Brazil and an arbitration at the International Chamber of Commerce. It sought discovery under § 1782 from Gaivota and two of its employees in California for use in these proceedings.

Statutory Factors

The district court began, as most do, by considering three factors required by the statute itself. Section 1782 provides in relevant part:

The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court.

The Ninth Circuit has distilled three required factors from this text: (1) the person from whom discovery is sought must reside or be found in the district; (2) the discovery must be for use in a proceeding before a foreign or international tribunal; and (3) the person seeking discovery must be an “interested person.”

In Bureau Veritas, the court found that the first factor was satisfied with respect to Gaivota’s two employees, who live in the Northern District of California, but not with respect to Gaivota itself. Gaivota is a Delaware corporation, and there was no evidence that it did business in the Northern District of California. Bureau Veritas may, of course, file another § 1782 petition in the District of Delaware, which presumably has statutory authority to order the discovery it seeks.

The second required factor was also satisfied. Although the U.S. Supreme Court has recently held that commercial arbitration does not fall within the scope of § 1782 (see TLB’s roundup of commentary on the decision in ZF Automotive), there were three ongoing proceedings between Bureau Veritas and Kuhlmann in Brazilian courts, which plainly qualify as foreign tribunals.

Finally, Bureau Veritas was an “interested person” within the meaning of the statute. Although the district court noted Intel’s holding that one need not be a party to foreign litigation to be an “interested person,” being an actual litigant like Bureau Veritas certainly satisfies this requirement.

Discretionary Factors

In Intel, the Supreme Court articulated four factors to guide a district court’s discretion under § 1782: (1) whether the person from whom discovery is sought is a participant in the foreign proceeding, in which case the foreign court could order discovery itself; (2) the receptivity of the foreign court to U.S. judicial assistance; (3) whether the discovery request seeks to circumvent foreign restrictions on discovery; and (4) whether the request is unduly intrusive or burdensome.

In Bureau Veritas, the district court first noted that Gaivota and its employees were not parties to the Brazilian proceedings. It relied on Bureau Veritas’s assertions that they were beyond the jurisdiction of the Brazilian courts and not subject to its discovery orders.

Second, the court found “nothing to suggest that the Brazilian civil or criminal courts would reject evidence obtained with U.S. federal-court assistance.” It relied on Bureau Veritas’s assertions that evidence legally obtained abroad was admissible and that judicial assistance treaties between Brazil and the United States indicated a willingness to accept such evidence.

Third, the court found no “evidence that Petitioners are attempting to circumvent foreign proof-gathering restrictions.” Again, it relied on Bureau Veritas’s assertions that the information it sought would be discoverable in Brazil if Gaivota’s employees had a presence there.

Fourth, the court found that the request was not unduly intrusive or burdensome. It simply asked to depose two employees of Gaivota about information that was relevant to the Brazilian proceeding. Because all four factors weighed in favor of granting the petition, the court ordered the employees to sit for depositions.

Ex Parte

The district court decided the petition ex parte, without seeking input from the defendants in the Brazilian proceeding or the parties from whom discovery was sought. This is common in § 1782 cases. In an important study of decisions between 2005 and 2017, Professor Andrea Wang found that only 37% of requests by foreign parties (as opposed to foreign tribunals) were contested. This goes a long way towards explaining the fact that 90% of these petitions were granted.

One can see the impact of this practice in the district court’s reasoning. For each of the first three discretionary factors, the court relied entirely on Bureau Veritas’s assertions. It should not be surprising that there was “nothing to suggest” lack of receptivity by the Brazilian courts and no evidence of an attempt to circumvent foreign limits on discovery, when no one was arguing on the other side. It may well be that the Gaivota employees were beyond the reach of the Brazilian courts, that those courts would be receptive to U.S. evidence, and that the evidence would have been discoverable in Brazil. But how is a court to know this for sure without giving the other side a chance to respond?

Gaivota’s employees could seek to quash the subpoena after it is served, giving the court an opportunity to hear arguments on the other side. But Gaivota’s employees are not the defendants in the Brazilian actions and may not be willing to spend the time and money necessary to resist discovery in the same way as the Brazilian defendants. Moreover, by issuing the subpoena, the judge has committed himself, at least tentatively, to a position. It may be harder to convince a judge to reverse himself and quash a subpoena than it would have been to convince the judge not to issue the subpoena in the first place.

Professor Wang suggests that U.S. courts faced with § 1782 petitions should notify the foreign tribunals of the discovery request and should give the opposing party in the foreign proceeding a chance to intervene. Some district courts have started to do these things. But Bureau Veritas demonstrates that such practices are certainly not universal.