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Supreme Court Validates Use of Broad U.S. Discovery in Aid of Foreign Proceedings

Client Advisory

June 22, 2004
Section 1782(a) and Intel Corp. v. Advanced Micro Devices, Inc.

The Supreme Court ruled yesterday that U.S. discovery procedures may be used to obtain access to relevant information for foreign legal proceedings, even if such broad discovery is not available in the forum where those legal proceedings are pending. This may apply to both civil and criminal proceedings in foreign jurisdictions, and may even apply to foreign investigations, before actual litigation has been initiated. Construing Section 1782 of Title 28, United States Code, the Court held that access to US discovery may be obtained by “interested persons” who may or may not be litigants in an actual pending action.

Background

Advanced Micro Devices (“AMD”) had filed an antitrust complaint against Intel Corp. with the Directorate-General for Competition of the Commission of the European Communities, alleging violations of European antitrust laws. The DG-Competition declined to follow AMD’s recommendation that it seek documents which Intel had produced in a civil antitrust case in Alabama. AMD then sought discovery on its own under Section 1782(a) of Title 28 of the U.S. Code, which, as amended in 1964, provides that a U.S. federal District Court “may order” a person residing or found in the district to testify or produce documents “for use in a proceeding in a foreign or international tribunal . . .upon the application of any interested person.” The U.S. District Court for the Northern District of California denied AMD’s petition for discovery as not authorized by the statute.

On appeal, the Ninth Circuit reversed, observing that the 1964 revision of Section 1782 eliminated the requirement for a “pending” judicial proceeding and included matters before quasi-judicial or administrative bodies, such as the DG-Competition investigation. The Court of Appeals observed that a proceeding judicial in character was likely to follow the DG-Competition investigation. The Ninth Circuit rejected Intel’s logically attractive “foreign-discoverability” argument, i.e. that discovery the Commission would not order for its own investigation should not be ordered by a court in the U.S.

Yesterday’s Decision

In Intel Corp. v. Advanced Micro Devices, Inc., the U.S. Supreme Court held, 6-1, with one concurrence and one recusal, that Section 1782(a) authorized, but did not require, the discovery sought by AMD.

Writing for the majority, Justice Ginsburg first reviewed the somewhat circuitous route taken by a typical European Commission antitrust case. The DG-Competition may act on a complaint, or may proceed itself, to investigate a possible anti-competitive situation. If it decides not to proceed, that decision is subject to review by the EC “Court of First Instance and then by the European Court of Justice.”

If the DG-Competition decides to recommend a decision finding an antitrust violation, then the target is entitled to a hearing, and if the DG-Competition then recommends further action, the Commission may dismiss the complaint or may hold the target liable and impose penalties. That action in turn is reviewable by the Court of First Instance and the European Court of Justice.

Throughout these proceedings, the complaining party may submit information and may seek review of the Commission’s disposition of the case. Therefore, the Supreme Court concluded that complainants such as AMD were “interested persons” as contemplated by Section 1782(a), and that the words “may order” in Section 1782(a) meant that the statute authorizes but does not require discovery assistance to a complainant in a European Commission proceeding that leads to a dispositive ruling.

Intel had argued that Section 1782 extended only to litigants, foreign sovereigns, and sovereign agents, as stated in the Section’s caption. But, said the Court, the Section’s caption cannot undo or limit the plain meaning of its text.

The Supreme Court noted that the Commission, acting through the DG-Competition, was the first-instance decision maker, and the only forum where proof of facts could be made. If AMD could not introduce relevant evidence at this stage, it could not produce it later in the process. So the 1964 revisions clearly contemplated U.S. judicial discovery assistance in foreign administrative and quasi-judicial proceedings such as these before the Commission.

Nor, said the Court, did the foreign proceeding need be “pending,” or “imminent,” but only within reasonable contemplation. Otherwise, the 1964 deletion of this prior requirement would have been without real effect, and the Court observed that a later amendment of Section 1782(a) in 1996 specifically covered criminal investigations “conducted before formal accusation.”

The Supreme Court, as noted above, held that Section 1782(a), while it expressly preserves legally applicable privileges, does not impose any “foreign-discoverability” requirement. The law simply doesn’t say that, and the legislative history did not suggest any such blanket rule. Intel had argued that comity and parity policies argued for such a requirement, but the Court said that, while this might affect the District Court’s exercise of discretion, it was not a hard and fast rule. Furthermore, a foreign nation might have its own practices regarding local discovery which would not be offended by discovery in the U.S. under Section 1782(a). So much for comity.

Regarding parity, the Court observed that a District Court in a Section 1782(a) hearing could order parity itself, and the foreign tribunal could also condition receipt of the evidence on whatever grounds it thought necessary to maintain parity. So much for parity.

Nor did the Court accept Intel’s argument that discovery should only be permitted if the case, had it been brought in the U.S., would have allowed equivalent discovery, since the statute required no such comparative analysis, and such a comparison would be fraught with danger -- for example, in the European case, AMD was only a complainant and had no status as a formal party to the case, which might well have been a predicate to U.S.-style discovery.

Justice Breyer dissented from the Court’s decision, and would have required, at least by exercising the Court’s supervisory powers, that a foreign “tribunal” in the classic sense be involved in the case. He also would have accepted the “foreign-discoverability” argument, and Intel’s point that discovery should only be permitted under Section 1782(a) if it would have been permitted in an equivalent case in the U.S. In addition, Justice Breyer would have anticipated some active participation by the foreign tribunal or prosecutor before granting Section 1782(a) assistance. In this case, the Commission had said itself that it was not a “tribunal,” and DG-Competition, as noted above, said that it didn’t want the requested discovery.

How Petitions for Discovery under Section 1782 Will Be Addressed

Because the Supreme Court only ruled that discovery in aid of foreign legal proceedings may be ordered, but is not required, it left to the trial courts the hard work of determining when it may be appropriate to order discovery under Section 1782. However, in remanding the case, the Supreme Court did offer guidance to the District Court to assist in the exercise of its discretion:

First, if the discovery target is a participant in the foreign proceeding, Section 1782(a) assistance generally is not as apparent as it might be if the target was not a participant abroad and possibly not subject to the foreign tribunal’s orders.

Second, the District Court could consider the nature of the foreign tribunal, the sort of proceedings, and the receptiveness of the foreign body to Section 1782(a)-type assistance. (In this case, for example, the Commission had filed an amicus brief saying that it did not need or want the District Court’s assistance).

Further, the District Court could consider “foreign-discoverability” practices and policies in deciding whether to order testimony or document production in the U.S. And unduly intrusive or burdensome requests could be rejected or trimmed.

While the Supreme Court declined Intel’s suggestion that it adopt supervisory rules barring discovery in this specific case, pending further proceedings at the District Court level, the Court acknowledged that issues of disclosure of confidential information and possible “fishing expeditions” could arise in a Section 1782(a) application, even though the target has the usual protections available under Rules 26(b)(2) and 26(c) of the Federal Rules of Civil Procedure.

Conclusion


Intel Corp. v. Advanced Micro Devices, Inc. ratifies the availability of Section 1782(a) as a potentially valuable device in appropriate foreign proceedings. The Supreme Court’s guidelines are carefully structured to remind the District Courts to take special care in applying the statute in gray areas, or where they suspect that mischief might be afoot. But the key is that the Court construed the statute broadly, ruling that the extent of the discovery available under Section 1782(a) may exceed that permitted in the foreign jurisdiction and that, in certain cases, discovery may even precede institution of the foreign litigation.

Further information regarding the substance of and procedures under Section 1782 is available from Robert A. McTamaney (mctamaney@clm.com), Gary D. Sesser (sesser@clm.com), Jeffrey S. Boxer (boxer@clm.com), or Gerald W. Griffin (griffin@clm.com) of our New York Office.

Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2017 Carter Ledyard & Milburn LLP.
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