On October 7, 2019, the Second Circuit Court of Appeals issued an opinion that stands to significantly broaden the scope of discovery available to foreign litigants seeking evidence from persons or entities located within the U.S. With this increase in scope comes an increase in the potential burden domestic entities must bear when responding to discovery requests in aid of foreign proceedings.
In In re Application of Antonio del Valle Ruiz ("In re del Valle Ruiz"), the Second Circuit upheld a district court decision to grant a Section 1782 discovery application made by foreign litigants seeking evidence from a New York banking affiliate. Addressing issues of first impression in the Second Circuit, the three-judge panel (Barrington, J., Hall, J. and Droney, J.) refused to limit the scope of available discovery to evidence located within the U.S., finding that the presumption against extraterritoriality does not apply to Section 1782 discovery applications.
Section 1782 of the U.S. Code has become a useful tool to assist foreign litigants in their efforts to obtain discovery from a person or entity located in the U.S. in aid of a foreign proceeding. As a general matter, Section 1782 permits a district court, on application by a foreign tribunal or any interested party, to order discovery against a person or entity that either "resides" or "is found" in the district where the application is made. Following the Second Circuit's recent decision in In re del Valle Ruiz, the applicability of Section 1782 discovery has significantly broadened to reach evidence located not only inside but also outside U.S. borders. No. 18-3226, 2019 WL 4924395, at *8 (2d Cir. Oct. 7, 2019).
In re del Valle Ruiz stems from the demise of Banco Popular Español, S.A. ("Banco Popular"), the sixth largest bank in Spain. In 2017, Spanish bank regulators invited several banks to bid on the failing Banco Popular through a forced sale process directed by the European Union's Single Resolution Board. The sole bidder was Banco Santander, S.A. ("Santander"), which purchased the bank for one euro.
The petitioners - Pacific Investment Management Company LLC and Anchorage Capital Group, LLC (the "PIMCO Investors") – are two former investors in Banco Popular that claim to have lost over one billion euros as a result of the forced sale. After commencing legal actions before multiple foreign tribunals, including the General Court of the Court of Justice in the European Union, the PIMCO Investors filed Section 1782 applications in the Southern District of New York (SDNY) seeking discovery from Santander and three of its affiliates for use in those foreign proceedings.