Petitioners Seek Discovery in the U.S. for Foreign Litigation
A complex series of legal actions in Monaco, France, and Singapore followed. The Monaco and France proceedings were only criminal actions against Bouvier. The BVI companies sought damages in the Singapore proceeding, but that case was stayed as a result of Bouvier's objection to venue. The BVI companies filed a petition under 28 U.S.C. § 1782, seeking documents from Sotheby's in connection with the sale of the artworks. Section 1782 authorizes a district court to order a person to provide testimony, a statement, or documents for use in a foreign proceeding when (1) the person from whom discovery is sought resides in the district; (2) the discovery is "for use" in a foreign proceeding before a foreign tribunal; and (3) the applicant is either a foreign tribunal or an "interested person."
Bouvier intervened and objected to the document request to Sotheby's on the grounds that the discovery would not be "for use" in the French and Monaco proceedings because the BVI companies were not seeking affirmative relief there. The district court granted the petition as it related to the two Picasso paintings at issue in the French case, but delayed ruling on whether to permit discovery from Sotheby's for the proceeding in Monaco.
The BVI companies then obtained a letter from the magistrate in the Monaco case, which stated that they were civil parties in that case and were permitted to submit documents they deemed useful for the investigation. Relying on this letter, the district court ultimately granted the application for discovery for the proceeding in Monaco. Bouvier appealed both rulings. He also moved for a stay, which the court granted, but not before the documents had already been produced in Monaco.
Discovery Not Dependent on the Relief Sought in a Foreign Proceeding
Bouvier argued that because the BVI companies did not seek damages in Monaco, they could not meet the statute's "for use" requirement. The Second Circuit disagreed, reasoning that the statute allows discovery to aid "criminal investigations conducted before formal accusation." Further, "the applicant must establish that he or she has the practical ability to inject the requested information into a foreign proceeding." The court also held that the district court did not err in permitting the discovery for the Monaco proceeding to be used in the French case also, even without determining whether the French action independently met the statute's requirements.
Section 1782 Is Broad, But with Practical Limits
The decision is in line with the ABA Section of Litigation leaders' expectations. "The statute by its terms is pretty broad. It doesn't really limit the situations in which you can use it for discovery," observes Kenneth M. Klemm, New Orleans, LA, cochair of the Section of Litigation's Pretrial Practice & Discovery Committee. But coordination with foreign counsel can help shape the scope of permissible U.S. discovery. "You need a lot of coordination with counsel where the case is pending because they have a better sense of what they need for the foreign case and can advise on how the evidence could be used," says Stuart M. Riback, New York, NY, cochair of the International Litigation Subcommittee of the Section's Commercial & Business Litigation Committee.
The statute does have some practical limitations. "Litigators need to be aware of the potential for the discovery request under the statute becoming moot if you need documents more quickly. The developments in the foreign case can moot the need for the discovery depending on how long it takes to get the documents," says Klemm. "Ask for discovery under Section 1782 as early in the process as you can," urges Ribak, "because there can be a lot of procedural wrangling."
Practitioners should also consider the consequences of ongoing discovery during the pendency of an appeal. "In normal discovery proceedings, a party is not entitled to an appeal," notes Klemm. "This statute is unique because the decision itself terminates the action and allows you to take an immediate appeal. For the party resisting discovery, you may need to request a stay at the district court and the court of appeal," advises Klemm.
Andrew J. Kennedy is an associate editor for Litigation News.