Case of the Day: Application of Del Valle Ruiz

The case of the day is In re Application of del Valle Ruiz (2d Cir. 2019). I’ve written about the case twice before, first in a October 2018 post on the district court decision, and then in an April 2019 post after oral argument. This is the latest in a line of recent important § 1782 decisions. Today’s decision addresses two important points: how the Due Process Clause applies to personal jurisdiction challenges in § 1782 cases, and whether the statute permits extraterritorial discovery, i.e., whether the documents sought have to be within the United States.

Banco Popular Españl, S.A., was a large Spanish bank that by 2016 was in distress. Seeking a purchaser, it created a “virtual data room” for interested buyers, including Santander. Santander hired UBS and Citibank, both in New York, to advise on its bid. Santander was prepared to bid billions of euros, but in 2017, the European Central Bank determined that the bank was likely to fail and the Spanish government solicited same-day bids. Santander bid € 1 and won. “Yes, really,” the court noted, “One Euro.” Santander said that it would not have been able to bid but for its prior due diligence. A group of BPE investors challenged the sale in the EU Court of Justice, and del Valle Ruiz brought an international arbitration against Spain.

Del Valle Ruiz brought a § 1782 application seeking discovery from Santander, a Spanish company, and another investor brought a § 1782 application seeking discovery from Santander and from Santander Investment Securities, Inc., which has its principal place of business in New York.

Santander argued that it was not “found” in New York for purposes of the statute. Its offices were in Spain, and it was clear that it was not subject to general jurisdiction in New York on an ordinary jurisdictional analysis. Santander said that should be the end of the inquiry—a business could only be “found” in a district where it was subject to general jursidiction. But the court rejected this view, holding that the statute’s jurisdictional reach extends to the far reaches of the due process clause. What does that mean in a 1782 case? In my prior post I suggested that the traditional “minimum contacts” approach might be the wrong approach here, because no one was seeking to hold Santander liable. Santander made this argument, too. But the court didn’t accept this (somewhat radical) argument. Instead, it applied the usual concepts. But what does it mean to have minimum contexts in a discovery action? Ordinarily we determine minimum contacts by asking whether the defendant’s contacts with the forum that were relevant to the claims against it are sufficient. But here there are no claims against the target.

The court’s answer was to say that the relevant contacts are the contacts that concern the discovery rather than the contacts that concern the underlying foreign litigation. More specifically, the respondent’s purposeful availment of the forum “must be the primary or proxmiate reason that the evidence sought is available at all.” Here, most of Santander’s contacts with New York came after the acquisition of BPE and so the contacts could not have been the cause of the availability of the evidence. True, Santander would not have been able to submit its same-day bid “but for having conducted [its] due diligence.” But this contact, while a “but for cause,” was not a proximate cause. I have to say that this reasoning seems problematic and runs the risk of spawning ancillary litigation about how it is that the target came to have the discoverable information. That’s a battle that the applicant is going to have to fight with one hand behind it’s back. Should it be entitled to discovery on the proximate causation issue? Time will tell.

So Santander was off the hook. But SIS’s principal offices were in New York, so there was no personal jurisdictional question. Instead, the issue was whether SIS could be required to produce documents kept outside the United States. SIS argued the statute had a per se bar on extraterritorial application. But here the court focused on the distinction it ignored in the personal jurisdiction discussion: the statute does not impose liability on anyone, and (it argued, without holding) the presumption against extraterritoriality applies only to statutes that regulate conduct or provide a cause of action. In the alternative, the court held that the presumption against extraterritoriality would have been overcome, because the FRCP allow extraterritorial discovery and Congress incorporated the usual discovery rules into the statute. The court went on to approve the district court’s decision to order discovery against SIS, holding that the Intel factors favored discovery, though without giving much analysis.

What do we make of this decision? I think the point about extraterritoriality was clearly correct. But it seems to me that there is a little bit of tension between that point and the point about personal jurisdiction. The policy behind the court’s second argument on extraterritoriality is that Congress intended the scope of discovery under § 1782 to be like the scope of discovery in an ordinary domestic lawsuit, because in both cases the FRCP apply. Others may have different experiences, and I have not litigated the issue, but in my own experience it is routine, in domestic litigation, to serve subpoenas on a company if it has a registered agent for service of process in a state, and at least where the company is a US company, I have never seen a personal jurisdiction argument raised in litigation about such a subpoena. This may be because, when the target is a domestic company, raising a personal jurisdiction argument just delays the inevitable (in federal court, anyway, because subpoenas can be served anywhere in the US). I hope that the new decision does not open a gap in the jurisdictional analysis that courts apply in the domestic context and the analysis in the 1782 context. But I also regret that the court stuck with the traditional jurisdictional framework—I am sympathetic to the applicant’s argument that minimum contacts just isn’t the right way to look at due process in these cases.

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