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Second Circuit: Discovery Statute Reaches Documents Held Overseas by U.S. Entities

Multinational corporations with U.S. operations may be forced to produce documents located abroad in aid of foreign proceedings.

The U.S. Court of Appeals for the Second Circuit recently ruled that a New York-based affiliate of a global financial institution could be forced to produce documents for use in foreign proceedings even if those documents were held overseas. The court held that 28 U.S.C. § 1782, a statute authorizing discovery in aid of foreign proceedings, applies extraterritorially and can be used to seek discovery from any entity over which the district court has personal jurisdiction.

In In re Application of Antonio Del Valle Ruiz ("Ruiz"), a group of Mexican nationals and two U.S.-based investment management firms petitioned for discovery in the Southern District of New York from Banco Santander S.A. ("Santander"), a Spanish bank, and its New York-based affiliate, Santander Investment Securities ("SIS"), pursuant to Section 1782. These petitions sought documents in support of ongoing foreign litigation regarding Santander's acquisition of Banco Popular Español, including documents held outside the United States. The district court granted discovery against SIS, but denied discovery against Santander on the ground that the court lacked personal jurisdiction over it.

The Second Circuit affirmed, holding that Section 1782 could be used to obtain documents held outside the United States as long as the entity from which the documents were sought had sufficient links to the forum to comport with constitutional due process. The Second Circuit reasoned that the presumption against extraterritoriality did not apply to "strictly jurisdictional" statutes like Section 1782, and that Section 1782's incorporation of the Federal Rules of Civil Procedure (which have long been interpreted to allow for extraterritorial discovery) further demonstrated that it was not intended to categorically bar discovery of evidence located abroad. The court reiterated that district courts must scrutinize a Section 1782 petition under the Supreme Court's Intel factors, and instructed district courts to specifically consider the location of documents before determining whether to grant discovery that could potentially be overly burdensome.

Although the Second Circuit is just the second Court of Appeals to interpret Section 1782 in this manner, Ruiz may embolden other litigants in foreign proceedings to seek similar overseas discovery from global corporations with a sufficient U.S. presence, including international corporations in New York, leading to the significant costs and burdens associated with U.S.-style discovery.

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