Venequip 1782 Case
November 1, 2023
Section 1782, which authorizes judicial assistance to foreign and international tribunals, is a staple of transnational litigation. In a recent decision, the Seventh Circuit reviewed a lower court decision to deny a 1782 application. This case is in many ways a “typical” 1782 case, although its discussion of choice-of-forum clauses is of note.
Very briefly, Venequip, S.A., a Venezuelan heavy-equipment supplier, served as a dealer for the products of Caterpillar Inc., an Illinois manufacturer of industrial equipment and machinery. Venequip’s legal relationship, though, was with Caterpillar Sàrl (“CAT Sàrl”), a Swiss subsidiary of Caterpillar.
A dispute ensued, and pursuant to a choice-of-forum clause selecting Switzerland, Venequip sued CAT Sàrl in Geneva. As the Seventh Circuit put it, “[i]n the months that followed, Venequip filed a flurry of applications in federal district courts across the United States seeking broad discovery under 28 U.S.C. § 1782(a) from Caterpillar and its employees, dealers, and customers.” In particular, Venequip sought broad discovery from Caterpillar, the parent, in a Section 1782 application filed in the Northern District of Illinois. The district court denied the application. Venequip appealed.
On appeal, the Seventh Circuit rejected a claim of mootness and then turned to its review of the district court’s 1782 decision, a review that the court characterized as deferential.
Stepping back, Section 1782 authorizes U.S. courts to provide judicial assistance to foreign and international tribunals. The statute provides:
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 Seventh Circuit quickly confirmed that Caterpillar was “found” in the district, that Venequip was an “interested person,” and that it sought evidence for use in a proceeding in the Swiss court.
In Intel Corp. v. Advanced Micro Devices, Inc. (2004), the Supreme Court explained that federal courts are not required to grant 1782 applications that meet the statutory criteria. Instead, they should exercise discretion guided by four factors: (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.
The Seventh Circuit essentially credited the district court’s analysis of these factors. The district court concluded that the first factor pointed slightly toward Venequip because Caterpillar was not a party to the Swiss proceeding, but it noted that Caterpillar was the parent to a party and Caterpillar had committed to cooperate with Swiss discovery. The second and fourth factors tipped slightly against, because the discovery requests were quite broad and the Swiss court might look skeptically at such broad uses of U.S. discovery. On the third factor, the district court found it significant that Venequip was in a Swiss court—applying Switzerland’s more restrictive discovery rules—because of a forum-selection clause that it had signed. This reality meant that Venequip was trying to circumvent foreign discovery restrictions of its own making.
The application of the third factor garnered additional attention from the Seventh Circuit. In Intel, the Supreme Court rejected the so-called foreign discoverability rule—the notion that a U.S. court should not allow discovery that would not have been permitted in the foreign court. Venequip suggested that the judge’s discussion of the forum-selection clause resurrected the foreign discoverability rule. The Seventh Circuit rejected this argument. The court affirmed a prior decision suggesting that forum-selection clauses may be relevant to the exercise of discretion in 1782 cases because the clauses “might indicate the parties’ preference for a court system that doesn’t contemplate the level of compulsory process available in America.” Moreover, the court observed that the district court did not apply a per se rule (like the rejected foreign discoverability rule), but instead considered the forum-selection clause among the factors relevant to its discretionary balancing. This was, in the Seventh Circuit’s view, entirely appropriate.
The appeal ended with an affirmance of the district court’s denial of the 1782 request. The opinion itself ended with a final plaudit to the district court’s decision to deny the application but to invite Venequip to come back if proceedings in Switzerland did not go as Caterpillar had promised. “The judge’s careful wait-and-see approach is especially appropriate as an expression of respect for the prerogatives of the Swiss court—the forum freely and intelligently chosen by the parties—and the deference owed to its views about the scope of discovery needed to resolve this dispute. ‘After all, the animating purpose of § 1782 is comity.’” (quoting ZF Automotive US, Inc. v. Luxshare, Ltd. (2022)).