International Discovery via 28 USC § 1782 and Proportionality
The Third Circuit recently addressed the interplay between the Federal Rules of Civil Procedure and 28 USC §1782. Although non-precedential as it impacts only those parties before it, the case provides insight into the scope of international discovery.
Global, a party to a foreign proceeding, sought, and was granted pursuant to 28 USC §1782, discovery from Sheridan, a non-party to the foreign case. Global issued a subpoena seeking communications between Sheridan’s 400-450 employees and a non-party plus financial documents related to oil & gas production technology. The relationship between Sheridan and the non-party was described as “tenuous.”
The case was filed pursuant to Section 1782 which provides an avenue to obtain discovery of information located in the applicable US jurisdiction of evidence (testimonial or documentary) for use in a qualified foreign proceeding (anticipated or existing) by an interested person or foreign/international tribunal. The Court set forth the relevant factors in assessing whether discovery would be granted: “(1) whether the discovery sought is within the foreign tribunal’s jurisdictional reach and therefore accessible without aid under § 1782; (2) the nature of the foreign litigation and the foreign jurisdiction’s receptivity to court assistance from the United States; (3) whether the § 1782 request conceals an attempt to circumvent foreign proof-gathering limits or other policies of the foreign country; and (4) whether the subpoena includes unduly intrusive or overly burdensome requests.”
The only issue on appeal was the last – the scope of the information sought. Because Section 1782 incorporates the Federal Rules of Civil Procedure, the Court examined Rule 26 (Duty to Disclose; General Provisions Governing Discovery) and Rule 45 (Subpoena) which prohibits imposing undue burden or expense on a subpoenaed party.
Notably, Rule 26 was recently amended (effective 12/1/15, after the district court’s order) to include, among other factors, a stated proportionality requirement to the scope of discovery that permits production of non-privileged information when “proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” The amendment replaces the prior version that permitted discovery of non-privileged relevant information “reasonably calculated to lead to discoverable evidence,” and will likely serve to reduce the cost and burden of US discovery.
In assessing Global’s subpoena, the Court noted that Sheridan already had complied with earlier requests over a period of years at substantial time and expense and that compliance with the latest request would likely cost hundreds of thousands of dollars and cause significant disruption to Sheridan’s business. Despite Global’s offer to share costs, the time and expense of compliance was outweighed by the limited value of the requested information. As a result, the Third Circuit affirmed the lower court’s denial of Global’s request for the documents and agreed with its decision not to modify the subpoena.
The case highlights the connection between international discovery and the limitations imposed by the federal rules of civil procedure. Had Global served a more tailored subpoena directed to relevant issues and coordinated its efforts instead of serving multiple requests over a period of years, the Court may have been more inclined to grant, or modify, its request. Moving forward, by imposing an express proportionality element into the rule, US courts will have significant discretion to rein in the expense and burden of discovery in connection with domestic and international litigation while still permitting access to non-privileged probative evidence in appropriate cases. The case is In Re: Ex Parte Application of Global Energy Horizons Corporation, No. 14-3180 (3d Cir. April 26, 2016). The opinion is here.
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Ava Borrasso is the Principal of Ava J Borrasso, P.A., a Miami-based law firm that concentrates on business and international arbitration and litigation.