On October 7, 2019, the US Court of Appeals for the Second Circuit extended litigants’ ability to seek discovery under 28 U.S.C. §1782. Parties typically pursue discovery as part of the litigation process; however, Section 1782 is unique because it creates a process by which entities may pursue discovery without first filing a complaint. Under Section 1782, litigants seek discovery to obtain information for use in a legal proceeding outside of the United States. The Second Circuit’s decision broadened the scope of Section 1782, so litigants may seek discovery from any entity over which the district court has personal jurisdiction and may also seek discovery of documents located outside of the United States.¹

Section 1782 provides that “[t]he 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.” The term “resides” has been interpreted to refer to general jurisdiction, but district courts within the Second Circuit have been divided over the breadth of the term “found.”

In 2017, Banco Santander (Santander) purchased Banco Popular Español, S.A. (BPE) for a token €1 in a government-ordered sale, which resulted in investor losses. On June 6, 2017, the European Central Bank found that BPE was “failing or likely to fail” due to ongoing liquidity issues. That same day, Spain’s national banking supervisory authority invited several banks, including Santander, to submit bids to purchase BPE by midnight. Santander was the only bank that submitted a bid because, according to Santander’s CEO, it had previously done due diligence on BPE in relation to a potential private sale.

Two US-based investment and asset management firms and a group of 55 investors filed a Section 1782 application in the Southern District of New York (SDNY) seeking discovery from Santander and its New York-based affiliate for use in European litigation and arbitration. The Second Circuit reviewed whether Santander, a Spanish banking company with its principal place of business in Spain, “resides or is found” within the SDNY for the purpose of Section 1782 and whether the parties could seek discovery of documents located outside of the United States under Section 1782.

The Second Circuit had previously interpreted the term “found” to extend Section 1782’s application beyond those subject to general jurisdiction to include individuals who are served while physically present in the forum or “tag” jurisdiction.² In that decision, the Court reasoned that tag jurisdiction is consistent with due process, so allowing discovery, which does not subject a person to liability, from those who are served within the forum is also consistent with due process.

The Court used that rationale, in this case, to find that Section 1782 may apply to companies that are not headquartered or do not have their principal place of business in the United States. The Court held that the term “found” as used in Section 1782 is sufficiently broad and covers individuals and entities subject to personal jurisdiction in the forum, including specific personal jurisdiction. However, the Court then found that Santander did not have sufficient contacts with the forum to subject it to personal jurisdiction in SDNY, so discovery pursuant to Section 1782 was inappropriate.

The Second Circuit also found that there is no per se bar to extraterritorial application of Section 1782, rejecting the argument that the presumption against extraterritoriality applies. Under that doctrine, statutes are construed to have only domestic application unless Congress has clearly expressed a contrary intent. The Second Circuit dismissed arguments that the doctrine applied here, finding that the presumption against extraterritoriality does not apply to “strictly jurisdictional” statutes. It agreed with the Eleventh Circuit’s reasoning in Sergeeva v. Tripleton International Limited³ that the text of Section 1782 authorizes discovery to the bounds of the Federal Rules of Civil Procedure (FRCP), which permit litigants to seek extraterritorial discovery if the documents are within the subpoenaed parties’ possession, custody or control.

The Second Circuit’s ruling expands litigants’ opportunities to obtain evidence that may be used in or may result in litigation abroad. Litigants can seek discovery from non-US entities if the district court has personal jurisdiction over them and can obtain documents located outside of the United States. This construction of the Section 1782 discovery mechanism has the potential to result in even more burdensome discovery and to increase litigation exposure for multinational companies.

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