The Securities and Exchange Commission

[thepennyking]

Discovery . Scope And Reach Of Domestic Discovery For Use In Foreign Proceedings. Section 1782 of Title 28 authorizes a federal district court to grant discovery to an "interested person" "in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation." 28 U.S.C. § 1782. The Supreme Court granted certiorari in Intel Corp. v. Advanced Micro Devices, Inc., No. 02-572, to address the scope of this provision, and in particular to determine (1) whether under this provision the district court may grant discovery seeking information that the foreign jurisdiction itself would not allow the party to obtain through discovery, and (2) whether the provision authorizes the district court to grant discovery to a non-litigant in connection with a foreign investigation, or instead grants discovery only to litigants involved in an actual judicial or quasi-judicial proceeding.

Advanced Micro Devices ("AMD") filed a complaint with the European Commission ("Commission") in October 2000, alleging that Intel was violating European Union ("EU") competition laws. AMD’s filing automatically triggered a "preliminary investigation" . which remains ongoing . at the conclusion of which the Commission will decide whether to undertake formal prosecutorial action. AMD urged the Commission to demand from Intel documents that Intel had produced in a private antitrust dispute in the United States, but the Commission declined. Under EU law, AMD has no right to compel Intel to provide these documents either to the Commission or to AMD itself. Undeterred, AMD applied to the United States District Court for the Northern District of California for discovery under 28 U.S.C. § 1782, and asked the court to order Intel to produce these same documents to AMD, with the intention of forwarding the documents to the Commission. The district court denied AMD’s application, finding that the Commission’s preliminary inquiry was not adjudicative and, thus, not a "proceeding" within the meaning of Section 1782.

The Ninth Circuit reversed. See Advanced Micro Devices, Inc. v. Intel Corp., 292 F.3d 664 (9th Cir. 2002). The court began its analysis by noting that Section 1782’s language is "broad and inclusive." Id. at 667. While the court implicitly agreed that the Commission’s preliminary inquiry was not itself adjudicative, it held that the inquiry was "at minimum, one leading to quasi-judicial proceedings" (id. at 667) and, thus, covered by Section 1782. Noting that Congress had specifically removed from Section 1782 the requirement that the foreign proceeding be "pending," furthermore, the court held that a quasi-judicial proceeding need not be "imminent" for a district court to order discovery. Id. Finally, the Ninth Circuit determined that nothing in the text or legislative history of Section 1782 required a party seeking discovery to make a threshold showing that "what is sought" would be "discoverable in the foreign proceeding." Id. at 669.

The Ninth Circuit’s ruling deepens a well established circuit split regarding the breadth of discovery permissible under Section 1782. Several courts, including the First and Eleventh Circuits, have construed the statute to permit discovery only of material that would be subject to discovery in the foreign proceeding itself. See In re Application of Asta Medica, S.A., 981 F.2d 1, 5-7 (1st Cir. 1992); In re Request for Assistance from Ministry of Legal Affairs of Trinidad & Tobago, 848 F.2d 1151, 1156 (11th Cir. 1988). As the First Circuit explained, a "foreign discoverability" requirement would avoid one party receiving a discovery advantage over the other, and would prevent offense to foreign tribunals. Asta Medica, 981 F.2d at 5-6. In contrast, the Second, Third, and Ninth Circuits have focused on the plain text of Section 1782, and have held that the provision contains no such limitation. See In re Bayer AG, 146 F.3d 188, 191-96 (3d Cir. 1998); In re Metallgesellschaft AG, 121 F.3d 77, 79 (2d Cir. 1997).

The Ninth Circuit’s decision also raises two other, related, questions about the scope of Section 1782. First, the parties dispute whether the Commission’s investigation is, or is sufficiently close to being, "a proceeding in a foreign or international tribunal" under 28 U.S.C. § 1782. Intel asserts that the Commission’s preliminary investigation is non-adjudicative, and that any eventual judicial proceeding reviewing the Commission’s investigative determination is insufficiently "imminent" to qualify as a "proceeding." Joined by the Solicitor General, AMD argues that Section 1782 is not limited only to imminent proceedings. Second, Intel argues that because AMD is merely a complaining witness . rather than a litigant in an ongoing proceeding . AMD does not qualify as an "interested person" authorized to seek discovery under Section 1782. AMD, again joined by the Solicitor General, argues that there is no textual basis for limiting discovery only to litigants.

The Solicitor General, however, objects to the Ninth Circuit’s decision on a separate ground from those raised by Intel. According to the Solicitor General, the court of appeals erred by failing to acknowledge that district courts have discretion whether to authorize discovery under Section 1782. Thus, although taking the position that Section 1782 contains no statutory bar on the discovery sought by AMD, the Solicitor General argues that the district court should use its discretion to refuse to order Intel to produce that material.

This case is of significant importance to every company that does business in foreign countries. Foreign agencies and regulatory bodies entertain thousands of complaints each year. If each of those complaints could be used to impose onerous discovery obligations in federal court, companies could be overwhelmed with such requests. Such a system also would invite abuse by allowing companies to gain access to their competitors’ sensitive business information, or to engage in "fishing expeditions" for possible future United States litigation, by filing a complaint in a foreign company and seeking related discovery in federal court.