Eleventh Circuit Allows Extraterritorial Discovery for Foreign and International Disputes

28 U.S.C. § 1782 provides federal-court assistance in gathering evidence for use in foreign tribunals, but how far does its reach extend? In an opinion published on August 23, 2016, Sergeeva v. Tripleton International, 2016 WL 4435616, the Eleventh Circuit addressed the use of Section 1782 to achieve discovery of documents outside U.S. territorial limits and possessed by a related entity, rather than the direct subject of the federal claim.  The court affirmed the district court’s grant of discovery under Section 1782 as it related to documents actually held by an associated Bahamian corporation, and it also affirmed contempt sanction awards that the district court had ordered against the U.S. entity, one compensatory and another coercive.

The underlying foreign lawsuit related to a divorce and division of marital assets in Russia. Ms. Sergeeva claimed that Mr. Dubin, her now ex-husband, was concealing and dissipating marital assets through and with the assistance of foreign corporations.  The dispute extended to numerous foreign jurisdictions, including Cyprus, Latvia, Switzerland, the British Virgin Islands, the Commonwealth of the Bahamas, and the United States.  Ms. Sergeeva filed a claim under Section 1782 in the Northern District of Georgia seeking discovery from Trident Corporate Services, Inc. (“Trident”) that Ms. Sergeeva believed would reveal her ex-husband’s beneficial ownership of an associated Bahamian corporation, Tripleton International Limited.  A magistrate judge granted an ex parte application and authorized service of subpoenas, including demands for documents located outside the United States.  The district court then overruled Trident’s objections and approved the magistrate’s orders.  While appealing the district court’s order, Ms. Sergeeva moved for sanctions against Trident, which refused to comply despite the denial of requested stays pending appeal from both the district court and the Eleventh Circuit.  The district court then ordered compensatory sanctions for Ms. Sergeeva’s attorney’s fees and costs, amounting to $234,983.58, as well as a coercive sanction of $500 a day for up to 60 days of any continued non-compliance with the subpoenas.

The Eleventh Circuit addressed whether the district court had abused its discretion in resolving the applications for assistance under Section 1782. The Eleventh Circuit imposes four prima facie prerequisites that must be established for a Section 1782 claim, including (1) a request from a foreign or international tribunal or interested person before such a tribunal, (2) the request seeks evidence (testimony or productions), (3) the evidence is sought for use in the foreign or international tribunal, and (4) the person from whom the evidence is sought resides or is found in the district of the district court ruling on the application.  These prerequisites were not challenged on appeal.

Once these prerequisites are established, the district court must review the four factors established by the Supreme Court in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264–65 (2004).  These include (a) whether person from whom the evidence is sought is a participant in the foreign proceeding, (b) the nature of the foreign tribunal, character of its proceeding, and receptivity to U.S. federal-court judicial assistance, (c) whether the applicant is using Section 1782 to circumvent foreign proof-gathering restrictions or policies of the foreign or U.S. governments, and (d) whether the requests are unduly intrusive or burdensome.

First, the court reviewed de novo whether Section 1782 contained an extraterritorial limitation, as the appellants claimed. This was an issue of first impression in the Eleventh Circuit.  Noting that Section 1782 expressly authorizes discovery “pursuant to the Federal Rules of Civil Procedure unless otherwise limited” and that the Federal Rules “authorize extraterritorial document productions,” the court affirmed that there is no per se extraterritorial limitation on the discovery available through Section 1782.

The court then reviewed whether the district court had either applied the wrong legal standard or made factual findings without sufficient record evidence in finding that Trident had sufficient “control” over the requested documents to order their production. The court again affirmed the district court’s finding.  The court found that despite the Atlanta entity’s denial of any “legal right” to documents or information from its associated foreign entity in the Bahamas, “it is apparent that [the entities] could not possibly perform their intended functions for . . . clients absent the ability to obtain information and documents from [other] members.”  This the court affirmed was “significant ‘circumstantial evidence’ [that] established that Trident Atlanta had ‘control’ over responsive documents in the physical possession or custody of Trident Bahamas.”  The court also affirmed the contempt orders.

Posted by Danny Wells.

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