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December 2019: Precedent-Setting Victory in the Second Circuit

December 2019

Quinn Emanuel achieved a precedent-setting victory in the United States Court of Appeals for the Second Circuit on October 7 in a case resolving uncertainty over the scope of discovery available in American courts in support of litigation and arbitration proceedings in other jurisdictions.  Following the forced sale of Banco Popular de Español, S.A. (“BPE”) to Banco Santander, S.A. in June 2017, various interested parties (including some represented by the firm) initiated or intervened in civil and criminal proceedings in a number of European and private forums.  In support of those proceedings, Quinn Emanuel filed discovery applications in New York under a federal statute, 28 U.S.C. § 1782, that allows discovery from persons who “reside” or are “found” in the United States for use in proceedings outside of the United States.  Although the district court denied the application with respect to Banco Santander itself, it permitted discovery from the bank’s U.S. affiliate, Santander Investment Securities, Inc., and it rejected the argument that such discovery should be limited to documents located in the United States.

On appeal, the Second Circuit was asked to decide (1) whether Banco Santander “resides or is found” within the judicial district for purposes of discovery under Section 1782, and (2) whether Section 1782 permits discovery of documents physically located outside of the United States.  On the first question, the Second Circuit ruled that Section 1782 reaches “to the limits of personal jurisdiction consistent with due process,” rejecting Banco Santander’s attempt to narrow the statute’s applicability and instead formulating a new test to be applied when discovery is sought from corporations that are neither incorporated nor headquartered in a U.S. judicial district.  Although the Court went on to decide on the facts before it that Banco Santander itself was not subject to discovery under the newly-announced standard, its decision provides a roadmap for future discovery applications.

On the second question—whether Section 1782 allows discovery of documents located abroad, even if the responding entity itself “resides or is found” in the United States—the Court accepted Quinn Emanuel’s position that the statute’s express reference to the Federal Rules of Civil Procedure defined the territorial scope of available discovery, permitting access to all documents within a responding party’s possession, custody or control, regardless of physical location.  At Quinn Emanuel’s urging, the Court also rejected Banco Santander’s argument that such discovery was barred by the so-called “presumption against extraterritoriality,” a presumption that Congress ordinarily does not mean for its legislation to have effect outside of the United States, as well as its argument that the legislative history and prior non-precedential appellate and lower court decisions supported a categorical bar to the discoverability under Section 1782 of documents located abroad.

The Second Circuit’s decision clarifies both the standard for obtaining discovery in the United States for use in foreign proceedings, as well as the scope of discovery available in such circumstances from corporations that are present in the United States but that maintain relevant documents elsewhere.  The decision thereby reaffirms the importance of Section 1782 as a discovery device for litigants in judicial and arbitral proceedings around the globe.