Case of the Day: In re Venequip

A Caterpillar frontloader working on a pile of dirt.

The case of the day is In re Venequip (7th Cir. 2023). Venequip, a Venezuelan firm, had a contract with Caterpillar Sàrl, a Swiss subsidiary of Caterpiller, Inc. to sell and service Caterpillar equipment. Caterpillar Sàrl terminated the contract, and Venequip sued in Switzerland; a choice of forum clause in the contract required that all disputes be resolved in Swiss courts under Swiss law. Venequip brought several Section 1782 applications in the United States, including the one that led to today’s case of the day. The district court weighed the Intel factors and decided, in its discretion, to deny the application, and on appeal, the Seventh Circuit affirmed.

The interesting point in the decision is the discussion of circumvention. The district focused on the choice of forum clause, noting that “the parties were sophisticated international companies and were undoubtedly aware of the differences between Swiss and U.S. procedural and substantive law when they negotiated these multimillion-dollar contracts.” I would like to think that the judge’s “undoubtedly” is justified, and maybe in this case it is, but my own experience tells me that very often choice of forum and choice of law clauses are treated as boilerplate and to the extent there is negotiation, it does not necessarily focus on issues such as evidence-gathering. In any event, the judge concluded that the circumvention factor was strongly against the application.

What to make of this reasoning? If a contract requires me to bring an action in US state A, and I take discovery in US state B, ordinarily the procedural, evidentiary, and conflicts rules of state B govern any issues that arise. See Uniform Interstate Depositions and Discovery Act, § 6 & cmt. So on the one hand, the reasoning seems at odds with the approach generally adopted domestically in the United States. But on the other hand, there is not as much difference between the law of any two US states with regard to discovery as there is between the law of the United States and the law of Switzerland! So a comparison with the approach in domestic cases is not that enlightening.

It’s not clear to me that even if parties choose a particular forum, they are choosing to disallow ancillary actions in other jurisdictions in aid of the main action, even if the ancillary action makes use of procedures not available in the forum. If parties negotiated explicitly about this, I’m not sure that we should think that there is a single, broadly applicable, default answer to the question of whether they would want Section 1782 to be available to them. Suppose two Swiss companies made a contract and did not include a choice of forum clause. They simply assumed (correctly) that any litigation would have to be heard in Switzerland. I assume no one would say that by failing to choose the US as a forum, they had indicated a preference not to permit resort to Section 1782, and if they did include a Swiss choice of forum clause, it’s hard to see why that should be read as making any statement about the possibility of ancillary proceedings. This case involved a contract between a Venezuelan company and a Swiss company, so the purpose of the choice of forum clause was probably to ensurer that litigation would be in the Swiss courts rather then the Venezuelan courts. Why would that decision have any bearing on the availability of Section 1782?

I think the case the judge made would be stronger when the contract is between an American company and a company in a jurisdiction with very limited discovery. But it seems pretty weak to me in the circumstances of the case at hand. That’s not to say the district court abused its discretion: its discretion is pretty broad. But I don’t think the rational for the first instance decision was strong.

Photo credit: Matthew T. Rader (CC BY-SA)

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