How to Obtain Discovery in the US for Use in Foreign Litigation

When an international transaction becomes the subject of litigation, significant evidence is often in the hands of non-parties in the US.

Because foreign discovery rules are frequently limited, offshore litigants increasingly turn to 28 U.S.C. § 1782, which permits production of documents and testimony in the US for use in foreign litigation.

Navigating the legal landscape of Section 1782 can be challenging. A recent decision granting a Section 1782 application lays out legal hurdles and how to overcome them. Once granted, Section 1782 subpoenas have the full scope and authority of domestic discovery, providing a powerful tool in foreign litigation.

The Statute Explained

Section 1782 is a federal statute that allows US district courts to compel a person or entity “found” in the US to produce discovery in connection with a foreign proceeding. A court analyzes a Section 1782 application in two phases.

First, there are three statutory prerequisites. The discovery must be sought from a person or entity that resides in the district where the application is made. The discovery must be “for use” in a foreign litigation. The applicant needs to be an “interested party” to the foreign case—typically a party in the non-US matter. The court then weighs four discretionary factors:

Whether the discovery is sought from a “nonparticipant in the matter arising abroad.” Whether the foreign court is likely to be receptive to US judicial assistance Whether the request attempts to “circumvent foreign proof-gathering restrictions” Whether the request is “unduly intrusive or burdensome.”

A Successful Application

Analysis of every Section 1782 application begins with an assessment of the foreign action. The court will review the substance and procedural status of the foreign proceeding, parties to the action, and the law in the foreign jurisdiction.

The foreign action at issue in a recent 1782 application is a Cayman appraisal proceeding involving a company originally formed as a special-purpose acquisition company vehicle in 2018.

Just two years after its de-SPAC merger, the company’s board and senior management orchestrated a take-private, squeeze-out merger. Alpine Partners (BVI), LP invoked its statutory right to dissent from the merger and have the fair value of its shares determined in an appraisal.

Alpine filed a Section 1782 application in the US District Court for the Northern District of California seeking discovery from Vivo Capital LLC. Vivo funded the company’s de-SPAC merger and was part of the buyer group that took the company private.

Vivo’s key role at the company meant that obtaining documents and testimony from it could be of critical value in the appraisal proceeding. This discovery, however, was not available directly in the Cayman proceeding, thus making the Section 1782 application very important.

Vivo opposed the application, asserting that Alpine failed to meet the necessary elements. Though Vivo’s arguments appeared persuasive, Vivo did not accurately describe the law concerning the legal factors. The court accepted Alpine’s analysis, and rejected virtually every argument Vivo made.

The court rejected Vivo’s argument that the discovery sought was not “for use” in the appraisal proceeding because Alpine failed to explain how the evidence would be used. The court acknowledged, as Alpine has argued, that a Section 1782 application does not need to prove that the discovery sought is discoverable nor admissible in the foreign proceeding.

The court rejected Vivo’s claim that Alpine should have waited until after party discovery in the appraisal proceeding before pursuing non-party discovery through a Section 1782 application. As Alpine had argued, Vivo cited “no authority that Alpine must wait to issue third-party subpoenas until a particular moment in the underlying proceeding.”

The court rejected Vivo’s assertion that the proposed subpoenas were “overly burdensome.” The court noted that Alpine sought relevant discovery and the requests were tailored to elicit that evidence. The court also granted Alpine a deposition, over Vivo’s strong objection.

Takeaways

The court’s decision provides valuable guidance on several best practices to successfully launch a Section 1782 application:

Timing. Recent decisions confirm the importance of filing at the earliest opportunity.

Preparation. Detailed research into the discovery targets—including their role, where they are subject to jurisdiction, and identifying potential deponents—are all critical steps to undertake before filing a Section 1782 application.

Credibility. Strategy and credibility weigh into a court’s decision. That is especially true in a Section 1782 application, where the court has broad deference in weighing the discretionary factors.

Section 1782 may help foreign litigants obtain valuable information from US companies and individuals. However, the complexities of the statute require careful planning and execution for a successful court outcome.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Lori Marks-Esterman is a partner at Olshan Frome Wolosky.

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