tuesday, 17 december of 2019

The step-by-step guide to section 1782 discovery for brazilian lawyers

Jessica Ortiz, Lauren M. Weinstein, Rafael C. Savastano

Attorneys from outside the United States often marvel at our discovery process. It is party-driven, rather than tightly managed by the courts. It can be quite expensive, with most complex commercial cases costing millions of dollars in electronic discovery alone. And it is extensive—to say the least. Under the Federal Rules of Civil Procedure, a party need only show that the discovery sought is not covered by privilege and that it is somehow “relevant” to its claim or defense.

Given that broad scope, United States discovery mechanisms—document requests and depositions of key witnesses or entities, among others—are powerful tools for proving your case. And many attorneys outside of the United States (particularly on the plaintiff or claimant side) often wish they had similar tools at their disposal. Section 1782 of title 28 of the United States Code grants that wish.

That section provides that a U.S. federal district court (i.e., a federal trial court) “may order” a person or entity that “resides” within the court’s jurisdiction “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.”

Section 1782 Discovery for Use in Proceedings in Brazil

Section 1782 has been a particularly powerful tool to obtain discovery for use in cases in Brazil. Such discovery has been ordered for use in a range of cases, from labor disputes to criminal prosecutions and bankruptcy proceedings, among others.

In In re Application for an Order for Judicial Assistance in a Foreign Proceeding in the Labor Court of Brazil, for example, a federal trial court in the Northern District of Illinois (in Chicago) granted a petition seeking section 1782 discovery for use in proceedings in the 68th and 72nd Labor Courts of the Capital of São Paulo. That case concerned a wrongful termination suit by the former CEO and former Financial Director of McDonald’s Comercio de Alimentos Ltda., a Brazilian, subsidiary of McDonald’s Corporation. The officers sought very broad discovery under section 1782: interrogatories, documents, and depositions of McDonald’s em¬ployees, covering a wide range of subjects, including personnel files, the decision to fire them, McDonald’s termination policies, franchise issues, tax issues, employee benefits, compliance with American laws, accounting audits, insurance claims, and other topics. The court granted the discovery, with only a few, specific limitations.

United States courts have also ordered discovery under section 1782 for use in probate cases in Brazil. In In re Application of Jurema Dimas de Melo Pimenta and Dimas de Melo Pimenta Filho, for example, a federal trial court in Miami granted an application seeking discovery relating to concealment of assets distributed in probate. Dimas de Melo Pimenta passed away, leaving a will that was probated and contested in the 7th Court of Family and Successions of the Central Courthouse of São Paulo. The parties, Mr. Pimenta’s widow and her two children and Mr. Pimenta’s children from his first marriage, settled that dispute in an agreement that provided that if any of the heirs concealed assets, those assets should be distributed among Mr. Pimenta’s children. The children from his first marriage filed an application for section 1782 discovery to obtain information about assets they claimed his widow had concealed, seeking documents and depositions of persons and entities believed to be involved in that concealment. The court granted their request.

Section 1782 discovery has also been granted for use in Brazilian family-law cases. For example, in In re Lopes, a federal trial court in Miami granted a section 1782 petition seeking discovery of documents for use in divorce proceedings in São Paulo. Ms. Lopes sought information about any accounts or other financial assets held in her husband’s name to dispute his claim before the Brazilian court that he did not have any accounts in the United States. The court granted her request, allowing her to obtain discovery from two United States banks. And the United States Court of Appeals for the Eleventh Circuit affirmed.

Courts have also granted discovery under section 1782 for use in criminal proceedings in Brazil. In Medeiros v. International Game Technology, which was filed in federal trial court in Nevada in 2016, for example, Mr. Medeiros sought an order under section 1782 seeking discovery for use in criminal proceedings in Brazil relating to the allegedly illegal possession of certain gaming devices. More specifically, Mr. Medeiros sought documents from International Game Technology to bolster his defense in the Brazilian proceedings that the devices he possessed were imported into Brazil before they were declared illegal. The court agreed with Mr. Medeiros that the discovery was relevant to his defense and granted his request.

How to Conduct Discovery Under Section 1782

Section 1782 allows parties to foreign proceedings to use the United States courts and their discovery mechanisms to obtain documents or testimony from a resident of the United States by filing an application showing: (1) that the target of the discovery either resides or is found in the United States jurisdiction where the application was filed, (2) that the discovery sought is for use in foreign “proceeding[s],” and (3) that the party seeking discovery is an “interested person.”

Step One: Identify the U.S. Jurisdiction Where the Party with the Discovery Resides

Determining whether a person or entity “resides or is found” in the United States is very similar to determining whether a court has personal jurisdiction over that individual or entity. For a natural person, residence is usually determined by looking at the person’s domicile, i.e., where that person lives. For corporations and other entities, the inquiry is a little more complicated, but their residence is typically the jurisdiction where they are incorporated or maintain their principle place of business.

To satisfy the residence requirement, all the party seeking discovery must do is make sure to file the section 1782 application in the jurisdiction where the target resides. For most persons or entities, a simple public-records search should suffice to identify the proper jurisdiction. But sometimes it is more complicated than that.

In In re Application of Fernando Celso De Aquino Chad, for example, a judicial administrator of a bankruptcy proceeding before the 9th Civil Court of São Bernardo do Campo, SP, Brazil, filed a request under section 1782 seeking to compel certain U.S. banks to produce transaction records, which, he argued, would provide proof that the entities had dissipated assets in anticipation of their bankruptcy filing. The court granted the petition, but limited it to banks that were headquartered in New York, where the petition was filed. Jurisdiction could not be exercised over the other banks, the court explained, because, although they operated in New York, none of those banks’ alleged conduct in New York was connected to the dissipation of assets that formed the basis for the 1782 application.

Step Two: Establish That the Discovery Is for Use in a Foreign or International Proceeding

The party seeking discovery must also establish that the documents or testimony sought are “for use in a proceeding in a foreign or international tribunal.” Note that the statute does not say anything about the proceeding being ongoing or already initiated. The party must only identify objective indicia suggesting that the filing or initiation is being contemplated if the proceeding is not yet underway.

Some courts have held that to count as a “proceeding,” there must be some dispute that the foreign or international tribunal must resolve—imposing a requirement that the proceedings be “adjudicative” in nature. Thus, for example, in Jiangsu Steamship Co. v. Success Superior Ltd., a federal trial court in New York held that section 1782 did not authorize discovery for use in pre-judgment attachment or post-judgment execution proceedings because there was no dispute as to liability at those stages.

Other courts have disagreed. For example, the United States Court of Appeals for the Eleventh Circuit, which covers Florida, among other states, has taken a different approach. In In re Clerici, that court held that section 1782 does authorize discovery for use in post-judgment proceedings where liability has already been established.

Another significant unresolved question regarding the “proceeding” requirement is whether private foreign arbitrations count as “proceeding[s] in a foreign or international tribunal.” At least the Second and Fifth Circuit Court of Appeals (covering, most significantly, New York and Texas) have held that private arbitrations are not “proceeding[s]” under section 1782 because arbitral panels established by private parties are not “foreign or international tribunal[s].” Accordingly, under those decisions, section 1782 cannot be used to obtain discovery for use in a foreign private arbitration.

But, Intel Corp. v. Advanced Micro Devices, a 2004 United States Supreme Court opinion, called those decisions into doubt. In that case, the Court cited approvingly an article by Hans Smit, one of the drafters of the 1964 amendment to section 1782, stating that arbitral tribunals are “tribunals” within the meaning provided in section 1782. The Supreme Court has not weighed in on the issue since, and the federal courts remain split on the question.

For example, just a few months ago, Judge Rakoff of the Southern District of New York held in In re Petrobras Securities Litigation, that, notwithstanding the Supreme Court’s Intel decision, section 1782 does not authorize discovery for use in a private arbitration. But just days before Judge Rakoff’s decision, a federal trial court in Rhode Island ruled in In re CMPC Celulose Riograndense LTDA., that foreign arbitral panels did constitute “tribunals,” authorizing section 1782 discovery for use in an arbitration in Brazil.

Since then, the United States Court of Appeals for the Sixth Circuit, which covers part of the American South and Midwest, has agreed with the Rhode Island court, holding in Abdul Latif Jameel Transportation Company Ltd. v. FedEx Corp., that section 1782 authorizes discovery in private commercial arbitrations. And, even more recently, a federal trial court in Miami granted an application seeking section 1782 discovery for use in an arbitration pending in São Paulo. Whether section 1782 authorizes discovery for use in private arbitrations is currently at issue in Servotronics, Inc. v. Rolls-Royce PLC, which is pending before the United States Court of Appeals for the Seventh Circuit, which covers Illinois, among other Midwestern states.

Apart from showing that the proceeding actually counts as a “proceeding,” the party seeking section 1782 discovery must also show that the documents or testimony can actually be used in the foreign or international proceeding. The party does not have to show that it will in fact use the discovery. Nor need it show that the documents or other discovery are particularly important. The party must simply show the ability to use the discovery. Thus, if the documents or testimony are subject to exclusion under a foreign rule or privilege, the section 1782 application may not be successful.

Step Three: Show That the Party Seeking Discovery is an “Interested Person”

A party to a foreign or international proceeding is clearly an “interested person” under section 1782. But a person or entity with a mere financial or ideological stake in the proceeding is not.

The space between those two extremes, however, is a little fuzzy. Where a nonparty is seeking section 1782 discovery, courts typically assess whether the person has a right to provide evidence that the party or tribunal would consider, whether the person has an established relationship (i.e., agent-principal or employee-employer) with a party, and whether the person is a creditor.

Step Four: Overcome Discretionary Factors

Even where a party has met all three statutory requirements, the section 1782 application may nonetheless fail because the decision to grant such an application is left to the district court’s discretion.

In deciding whether to exercise that discretion to grant a section 1782 application, courts typically consider (1) whether the foreign or international tribunal could order the discovery itself, (2) the nature of the tribunal, (3) the character of the foreign or international proceedings, (4) whether the tribunal would be receptive to U.S.-court assistance, (5) whether the party seeking discovery is attempting to circumvent proof-gathering restrictions imposed by the foreign country or international body, and (6) whether the request is unduly burdensome. The party opposing discovery bears the burden of showing that any of those discretionary factors (or other factors) warrant denial of the application.

For example, in In re Postalis, a federal trial court in New York exercised its discretion to deny Postalis’ application for an order pursuant section 1782. Postalis, the court explained, was seeking discovery from Bank of New York Mellon for use against that bank’s subsidiaries in proceedings in Brazil. In light of the parent-subsidiary relationship, the court held 1782 discovery was unnecessary because the movant could obtain the documents in the Brazilian litigation. However, the court suggested that in other circumstances, including, for example, where the foreign tribunal would not permit discovery into the opposing party’s affiliates, a section 1782 application could be used to obtain that discovery.

When crafting 1782 applications, it is important to consider the nature of the proceedings in which the discovery is to be used. For example, a section 1782 application filed to obtain discovery in aid of a proceeding in an adversary system may be more likely to succeed than an application filed to obtain discovery in aid of a proceeding in an inquisitorial system. In the latter situation, the 1782 application may be perceived as an end-run around foreign discovery restrictions.

It is also important to ensure that the 1782 application is narrowly tailored. A broad discovery request may be perceived as an unduly burdensome fishing expedition.


Section 1782 discovery requests, if properly pursued, can be of enormous assistance to Brazilian attorneys looking to bolster their discovery efforts and, ultimately, their chances of success.


*Jessica Ortiz is a partner in the MoloLamken office in New York.

*Lauren Weinstein is an associate at the MoloLamken office in Washington, D.C.

*Rafael Savastano is an associate at Pinheiro Neto Advogados in São Paulo and a visiting foreign associate at MoloLamken in New York (licensed to practice law only in Brazil).

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