Federal Courts Should Rethink The Personal Jurisdiction Requirement Of 28 U.S.C. § 1782

Author:Mr Gilbert Samberg

The increasingly popular federal statute concerning cross-border judicial assistance, 28 U.S.C. § 1782, enables a District Court to order a "person" that "resides or is found" within its jurisdiction to produce evidence for use in a proceeding in a foreign or international tribunal. The Second Circuit recently addressed two questions concerning the application of this unique legislation: (1) on what bases does a District Court have personal jurisdiction over a non-party for purposes of the statute (how does a court interpret and apply the "resides or is found" criteria in jurisdictional terms); and (2) can the District Court order such a person to produce evidence that it maintains outside of the U.S.? See In re del Valle Ruiz, 2019 U.S. App. LEXIS 30002 (2d Cir. Oct. 7, 2019).

The Court's thumbs-up decision concerning the latter ("extraterritoriality") issue has gotten the principal if not exclusive coverage in the legal press. But its decision concerning the jurisdiction issue is likely to have a more regular impact on the utilization of the § 1782 discovery mechanism, and it is, at least in part, a bit of a head scratcher. That is, the Second Circuit's test for specific personal jurisdiction over a non-party for purposes of discovery is, at its extreme, arguably murky, difficult to apply, and inequitable. We propose a test that is simpler, more easily applied, and more consistent with due process fairness.

  1. Overview

    The Second Circuit held that the statute's "resides or is found" requirement "extended § 1782's reach to the limits of personal jurisdiction consistent with due process;" hence, either general personal jurisdiction ("resides") or specific personal jurisdiction ("is found") over a person is sufficient. See id. at *10-*11. SCOTUS has not prescribed a test or analysis for either basis for jurisdiction over a non-party "witness," so the Second Circuit went on to fashion its own. But in seeking to extend the reach of personal jurisdiction over a non-party witness in parallel with the reach of personal jurisdiction over a defendant, the Court arguably produced an impractical test of questionable due process fairness to the non-party.

    Here is the context. In del Valle Ruiz, investors in Banco Popular Español ("BPE") were contesting the legality of a government-forced fire sale of BPE to Banco Santander ("Santander") in certain foreign proceedings. The investors sought discovery, under 28 U.S.C. § 1782, in New York from Santander and its New York-based affiliate, Santander Investments Securities, Inc. ("SIS"), "concerning the financial status of BPE."

    Santander is a Spanish banking company with its principal place of business in Madrid, while SIS is a Delaware corporation with its principal place of business in New York City. Id. at *7 n.4. (It was not contended that Santander has a branch or rep office in New York.) Santander argued in the District Court that it was not "found" within the Southern District, for purposes of § 1782, and that although SIS resided or was found in the Southern District, it was "not involved with the acquisition of BPE." Id. at *7-*8.

    The District Court determined that it had general personal jurisdiction over SIS, and that finding was not challenged on appeal. (The Court noted that the parties apparently assumed that the term "resides," for these purposes, refers to the place where an individual is "essentially at home," thereby establishing general personal jurisdiction. Id. at *9 n.6.) Santander was not subject to such general personal jurisdiction, however, and so the court considered whether it had specific personal jurisdiction. It held that it did not.

    The District Court ultimately denied the application vis-à-vis Santander for lack of personal jurisdiction (but granted discovery from SIS). Id. at *3-*4. The Second Circuit affirmed.

  2. The Second Circuit's Close Analogy Test re Specific

    Personal Jurisdiction Over a Non-Party Witness

    Lacking guidance from SCOTUS, id. at *16, the Court of Appeals was in effect called upon to establish tests for personal jurisdiction over a non-party company for purposes of discovery. One part of the solution was obvious -- a District Court's general personal jurisdiction over a company according to the Daimler rule would suffice. But lacking such general personal jurisdiction over Santander, the Court decided that the scope of the statutory term "found" extends "to the limits of personal jurisdiction consistent with due process," id. at *11, *14-*15; therefore, "specific" personal jurisdiction would suffice as well.

    For purposes of determining whether a federal court has specific jurisdiction over a non-party witness, the Second Circuit chose to adapt the established two-prong test for whether a court has specific personal jurisdiction over a party defendant -- i.e., (i) has the party purposefully directed activities at or in the forum that gave rise to or related to the claim(s) in question; and (ii) does the assertion of personal jurisdiction over that party "comport with fair play and substantial justice." See id. at *15-16.

    In that regard, the Court reached back to its own earlier formulation, in Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 137 (2d Cir...

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