by Andrew Flake
We try to take advantage of great opportunities when they come along; if work takes us to Rome, and we have extra time, we might head to the Colosseum, take a stroll in the Forum, or at least, find some great espresso.
In the same way, I find appellate courts will sometimes spend extra time in their opinions to remind readers of important principles, even if not strictly necessary to deciding an argument. The opportunity to explain or clarify a useful area of law is there.
Just so with Second Circuit in an opinion last week, Federal Republic of Nigeria v. VR Advisory Services, Ltd., and a discussion of how international parties can and cannot use documents obtained under 28 U.S.C. Section 1782, a very special U.S. statute. As a reminder, Section 1782 allows interested parties to foreign legal proceedings, whether civil or criminal, to obtain discovery from United States sources. That such a resource is available will often surprise both foreign and U.S. lawyers.
To focus on just the essentials, the Nigerian government was involved in legal proceedings in two different jurisdictions, one of them Nigeria, and the other England. In the Nigerian proceeding, the country’s Attorney General was prosecuting a claim of fraudulent procurement of a public contract by P&ID, a company partly owned by VR.
In the English proceeding, Nigeria had been hit with a massive judgment in arbitration, in favor of P&ID, and was trying to challenge it on grounds of fraud.
Invoking Section 1782, Nigeria went to district court in New York, filing an application for discovery from various banks and financial entities, including VR. Emphasizing how the information would be used to support its criminal investigation at home, Nigeria obtained initial permission to take the discovery, but VR went back to court, crying foul. Nigeria, it claimed, has pulled a fast one. Nigeria also planned to use the documents in the English proceeding, and, VR claimed, such a use was improper.
Specifically, VR objected that Nigeria sought to “circumvent” restrictions that existed concerning the English proceedings. There are some basic requirements to use Section 1782, and then some discretionary factors, considerations our Supreme Court outlined in its 2004 Intel decision. One of those is whether, by coming to court in the U.S., a party is trying to “circumvent” foreign restrictions, the international litigation equivalent of getting a “no” from one parent, and then going to the other instead. If a German court would not a allow a deposition, a U.S. court would not likely wish to authorize the same deposition in a proceeding here.
The Second Circuit disagreed with Nigeria, finding not only that Nigeria could have properly requested the documents it sought solely for the English proceeding, but also — and here is where the Court took the opportunity for that useful extra reminder — pointed out that nothing in Section 1782 prohibits using documents obtained for one proceeding in another legal proceeding or, for that matter, any other purpose. No invisible restriction attaches to them:
Of course, Nigeria did not state in the present application that it sought discovery for use in the English Proceeding – it stated that it sought discovery for use in the Nigerian Proceedings. But we have held that “Section 1782 does not prevent an applicant who lawfully has obtained discovery under the statute with respect to one foreign proceeding from using the discovery elsewhere.” …While that holding concerned the statutory “for use” requirement, it necessarily follows that the possibility of use in a different but independently qualifying proceeding does not constitute an attempt to “circumvent” a proof-gathering restriction or policy of the United States or a foreign state.
In an interesting case I had the pleasure of arguing, the Eleventh Circuit reasoned in similar fashion, when it determined, in a matter of first impression, that Section 1782 also did not prohibit later use of documents obtained from a 1782 application in a U.S. civil suit:
And even when no evidence of deception exists, nothing prevents a party from seeking to negotiate a protective order precluding the evidence from being used in United States civil litigation, particularly if the party has reason to believe that it risks exposure to United States litigation based on the evidence produced. Should negotiations fail, a party, for good cause, may also ask the § 1782 court to enter a protective order prohibiting use, in United States proceedings, of documents obtained under the statute. See Fed.R.Civ.P. 26(c)(1). The judge can then decide whether, under the particular circumstances of the case, she believes the entry of such an order to be appropriate. Just as courts have substantial experience controlling discovery abuse in domestic litigation, we have no doubt that district courts can similarly root out sham applications under § 1782.
The important practical implication here is this: If a party is concerned that documents relevant in one proceeding would be used to its disadvantage in another, the remedy is to seek a protective order. That is true where the concern is over a later U.S. lawsuit, as the Eleventh Circuit determined, or whether, as the Second Circuit later determined, it is for another foreign proceeding.
[The Second Circuit case is Federal Republic of Nigeria v. VR Advisory Services, Ltd., 2022 WL 557575 (2d Cir., decided Feb. 24, 2022).