Often, the discovery a party really needs is found in the US. Multinational companies trade with US counterparties. Financial transactions clear through Wall Street. Electronic data traverse servers in Silicon Valley. Parties to US litigation can obtain all of this information to further their cases.
Participants in disputes outside the US can access this information, too. Under a little-known US law, 28 USC, section 1782, parties to “foreign proceedings” can obtain documents and testimony from third parties in the US.
The statute can give an informed party a decisive advantage. Take, for example, the recent dispute in Hong Kong between casino magnate Sheldon Adelson and a reporter from The Wall Street Journal who described him unflatteringly in an article.
Adelson sued the reporter for libel. To defend the suit, the reporter brought section 1782 applications to take discovery from a rabbi whom Adelson had allegedly berated and “reduced to tears”, and from the director of the Brookings Institute, whom Adelson allegedly yelled at for “hosting terrorists” at its events. The Hong Kong libel case settled earlier this year with no payment from either party.
Using Hong Kong as an example, this article explains how parties to disputes outside the US can use the powerful US discovery system, what elements parties must show under section 1782, and practical considerations for executing an effective cross-border discovery plan.
Unique scope of US system
The US discovery system is unique in terms of its breadth and invasiveness. It allows parties to take extensive party and third-party discovery before trial. In complex cases involving large amounts in dispute, the scope of discovery can appear virtually limitless.
Parties can command documents and testimony from parties and third parties without prior court permission. The US system prioritizes exhaustiveness over efficiency, based on a belief that the truth is more likely to be found if no stone is left unturned. Parties can meticulously test evidence to eliminate any risk of “trial by surprise”.
This is not the case in civil law jurisdictions, where parties typically must only produce helpful evidence that they intend to use in the proceedings. Further discovery is extremely limited and at the court’s discretion.
Discovery in private commercial arbitrations is typically similarly limited. Hong Kong and other former English common law jurisdictions strike a middle ground. Pretrial discovery is available but tempered by the interests of achieving efficient resolution of disputes.
After exchange of “lists of documents” at the start of a litigation, further discovery is subject to court screening for “necessity”. This curtails the “fishing expeditions” common in US litigation. Practically speaking, the scope of the discovery is dramatically more limited than in the US.
Using section 1782 and cross-border discovery
The English common law system can leave material evidence undiscovered by relying (unrealistically) on good-faith self-disclosure between litigation adversaries. Litigants can use the US discovery system to turn this flaw into a strategic advantage.
Section 1782 allows “any interested person” in a “proceeding in a foreign or international tribunal” to bring an application in US district court where “a person resides or is found” to give evidence for use in the foreign proceedings. Through section 1782, Hong Kong litigants can “obtain as much discovery as it could if the lawsuit had been brought in [the US] court rather than abroad”.
Obtaining discovery using section 1782
Litigants can use section 1782 to compel a third party to “give his testimony or statement or to produce a document or thing”.
Once a section 1782 application is granted, the applicant serves a subpoena on the third party under the Federal Rules of Civil Procedure. The subpoena can compel document production as long as the documents: (1) bear “some relevance” to the subject matter of the foreign dispute; (2) are not protected by the attorney-client privilege or by another privilege; and (3) are within the respondent’s “possession, custody or control”. The information requested need not be “admissible” or “discoverable” in the foreign proceedings to be discovered. Courts have interpreted “possession, custody or control” broadly to include any document that a party has the “legal right to obtain on demand”. Thus, some courts have ordered respondents to produce documents kept outside of the jurisdiction (including, in some instances, documents maintained outside of the US entirely).
The subpoena can also be used to compel the recipient to testify, under oath and on the record, for up to seven hours. The deposition duration can be lengthened or shortened by application to the court. Because the testimony is under oath, witnesses can be punished for perjury if they do not tell the truth.
Elements required to obtain discovery under section 1782
Section 1782 discovery is discretionary. Even if an applicant meets every criteria within the statute and case authorities, the court may still deny the application for any reason.
An applicant must show three mandatory requirements to be eligible to take section 1782 discovery. If the elements are met, the court will consider four discretionary factors to decide whether discovery should be granted.
The mandatory factors
The statute provides that the application must show that the discovery is sought: (1) by an “interested person” in the foreign dispute; (2) from a “person” who “resides” or is “found” in the district where the court sits; and (3) that the discovery is “for use” in a proceedings before a “foreign or international tribunal”.
- The discovery is requested by an “interested person”. Those with “participation rights” in foreign proceedings are “interested persons”. Parties to the foreign proceedings obviously meet this definition. But others who are, for example, entitled to submit evidence or to appeal the decision in the foreign case (such as the victim in a criminal case) also constitute interested persons who can take discovery in the US. Someone with only a financial interest in the outcome of the case, however, is not an interested person who can bring an application.
- The discovery is requested from a person “found” in the district. The person must “reside” or be “found” in the district the court sits in. A person is found in a district where he or she is physically present, even temporarily. So a person can be tagged with a subpoena while passing through a district with which he or she otherwise has no connection. The person must then respond, or risk contempt of court. In addition, the application can be taken against a human being or a corporation, but not a government. Thus, courts have rejected applications to collect evidence from the US Central Intelligence Agency or the Federal Bureau of Investigation to identify confidential informants who testified against them in a non-US trial.
- The discovery is for use in a “foreign or international tribunal”. These foreign or international tribunals include “investigating magistrates, administrative tribunals and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal and administrative courts”. Some courts have held previously that private commercial arbitral tribunals also qualify as foreign tribunals. Section 1782 can also be used to take discovery for use in proceedings within “reasonable contemplation”. Practically, the courts will only grant discovery for proceedings in “contemplation” if the possible claim is very clearly spelled out in the application.
The discretionary factors
If an applicant proves these elements, the court will consider four factors in determining whether to grant the application:
- Whether the discovery is also within the foreign tribunal’s jurisdiction. US courts are less willing to grant assistance with tasks the foreign tribunal can do itself, such as compel discovery from parties over whom it has
- The foreign tribunal’s “receptivity” to assistance. US courts will reject the discovery if there is “authoritative proof” that the foreign tribunal would not be “receptive” to it, for example, a letter from a legal body saying the discovery would compromise the foreign proceedings. (The risk of this would not be high in Hong Kong, for example, where courts routinely welcome section 1782 assistance.)
- Whether the discovery attempts to “circumvent” the foreign tribunal’s policies. US courts ask whether the application is brought in “bad faith”. Accordingly, courts have rejected applications when the foreign tribunal has already repeatedly denied identical requests. The applicant is not required to show, however, that the same evidence is discoverable or admissible in the foreign tribunal.
- Whether the discovery would be unduly burdensome. Finally, the discovery should not place an “undue burden” on the respondent. So a court may reject a request for thousands of documents, some of which date back 30 years. It is more likely to grant an application targeting a set of documents limited by date and subject matter. The court will typically abide by these factors and grant discovery when they are met. However, it still has the discretion to deny the application and will do so if it perceives the application or the applicant as bullying or unfair.
Taking cross-border discovery
Litigants should comply with a number of additional tacit criteria when designing and executing an effective cross-border discovery plan:
- Document requests should be laser-focused. Even though litigants bring section 1782 applications ex parte in the first instance, courts regularly reject unfocused applications that request nebulous categories of documents, or that are not solidly anchored to the facts of the foreign dispute. Applications should carefully spell out how the discovery will advance the foreign case. It is not enough to say that the documents are relevant.
- Use emotion to win over the court. The key to section 1782 is that the court has ultimate discretion. Craft a narrative that shows the application is “just” and “equitable”. Judges do not want to grant section 1782 applications to bullies. Even if you meet the legal test, you must show upfront that your client is the “good guy”.
- Assemble a legal team that understands the nuances of both jurisdictions. Your US legal team must understand the nuance of the tribunal and proceedings in Asia to execute an effective cross-border discovery plan. US lawyers without an understanding of the non-US tribunal can alienate decision-makers and get counter-productive results. Plan and execute the two cases in close concert so the discovery is collected at the right time and in the right way.
John Han is a principal and Jason Kang is an associate at Kobre & Kim in Hong Kong