January 07, 2019

Obtaining Jurisdiction Over a Foreign Corporation for Section 1782 Discovery is Becoming Extremely Difficult

Authored by Eric (Rick) Rein

 in International Asset Recovery

Pursuant to 28 U.S.C. Section 1782, a party may apply to conduct discovery in the U.S. for use in foreign proceedings. In a recent decision from the U.S. District Court for the Southern District of New York, In re Ruiz, 2018 U.S. Dist. Lexis 180262, the court considered whether former investors in Banco Popular could conduct discovery against Banco Santander in New York for use in foreign proceedings before the General Court of Justice of the European Union. Banco Santander is incorporated and has its principal place of business outside of New York.

The court first focused on whether there was general jurisdiction over Santander. With respect to foreign corporations, such as Santander, that required the contacts to be so "continuous and systematic to render it essentially at home in the forum." The Ruiz court noted that the U.S. Supreme Court in BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549 (2017), reasoned that 2,061 miles of railroad track and 2,100 employees in Montana were not contacts that were systematic and continuous and the Second Circuit in Gucci Am., Inc. v. Li, 768 F. 2d 122 (2d. Cir. 2014), determined that two bank branches in New York were not enough to render it essentially "at home." The Ruiz court decided that the maintenance of branches in New York, being listed on the New York Stock Exchange, holding some meetings in New York, listing its New York branch as a "process agent," and having its chief executive LinkedIn profile listing his location as New York City were not enough contacts to render Santander "at home" in the district. The Ruiz court held it did not have general jurisdiction.

The Ruiz court then considered whether there was specific jurisdiction over Santander. To obtain specific jurisdiction, there must be a connection between the non-party's contacts with the forum and the discovery at issue and if these minimum contacts exist, determine if exercising jurisdiction comports with fair play and substantial justice. The Ruiz court noted that Santander's activities took place after the alleged complained about activity affecting the investment. Thus, the litigation abroad did not arise out of or relate to Santander's activities in New York. The court concluded that for Section 1782 a corporation cannot be "found" in a district merely because it maintains offices or conducts business in that district. The threshold inquiry is whether the corporation's affiliations are so continuous and systematic to render it "at home" in New York. Personal jurisdiction could not be shown because petitioners failed to establish that Santander conducts anything other than some level of systematic and continuous business in its offices in New York. Thus, discovery under Section 1782 for use in foreign proceedings was denied.

This decision raises a fundamental question as to where and whether Section 1782 discovery can be obtained from any foreign party doing business in the US. Reaching the high bar of "systematic and continuous business" to be found "at home" in the forum district appears to be a herculean task.


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