2015 Year-End Transnational Litigation Update

February 17, 2016

Our 2015 Year-End Transnational Litigation Update addresses key legal developments of interest to United States practitioners working domestically and across the globe.  2015 featured a continuation of the trends we saw emerging in 2014 and discussed in last year’s Year-End Update, as well as important new developments.  For ease of reference, we have included hyperlinks to each Part of the Review in this Executive Summary.

Part I: Key Transnational Jurisdiction Developments.  The game-changing decision in Daimler AG v. Bauman continues to ripple through American courts.  As The American Lawyer noted in its January 2016 feature naming Gibson Dunn Litigation Department of the Year, the decision succeeded in "dramatically reducing the number of venues where a company can be sued without a link between injury and forum," which has been seen as "eliminating the U.S. as a venue for hauling foreign companies into court in scenarios like the one Daimler faced."  Over the past year, the lower courts, heeding the Supreme Court’s instruction in Daimler, have continued to limit the circumstances where a foreign corporation is subject to general personal jurisdiction in the United States.

Part II:  Vindicating the Rule of Law When Transnational Fraud Targets United States Companies.  As also noted by The American Lawyer, Chevron Corporation’s successful RICO suit against the purveyors of what the Wall Street Journal called the legal "fraud of the century" remained pending on appeal before the Second Circuit.  And 2015 saw continued developments in the Chevron-related cases, including in the courts of Canada, Brazil, and before an arbitral tribunal hearing Chevron’s claims against the Republic of Ecuador pursuant to the U.S.-Ecuador Bilateral Investment Treaty.

Part III: The Evolution of Extraterritoriality.  Whether and when United States law can be applied extraterritorially (and what that means) continues to be the focus of significant litigation.  2015 saw important developments in courts’ treatment of Morrison v. National Australia Bank Ltd., which continues to guide United States courts determining when Unites States law is applied extraterritorially. 

Part IV: Transnational Supply Chain Liability: An Emerging Threat.  2015 was a big year for transnational supply chain liability and disclosures.  More than 20 major multinational corporations faced lawsuits based on theories of transnational supply chain liability (including ATS suits, consumer class actions and common law tort claims).  2016 is likely to bring even more transnational supply chain litigation, particularly in light of the Supreme Court’s recent denial of certiorari in Nestlé U.S.A., Inc. v. Doe, and given of the increasing number of supply chain disclosure laws (e.g., the U.K. Modern Slavery Act and California’s Transparency in Supply Chain Act).  Plaintiffs and courts unfortunately have seized upon companies’ social-responsibility programs and their corporate disclosures and policies as a basis for bringing supply chain litigation against multinational companies for alleged harm happening overseas in their supply chains, despite the fact that the companies are typically more than 5-10 times removed from their independent suppliers, which are not subject to their direction and control. 

Part V: Cross-Border Discovery Developments.  2015 also saw the continued use of 28 U.S.C. § 1782 ("Section 1782") by global litigants to deploy United States discovery tools in support of foreign disputes.  In response, federal courts issued important rulings for transnational practitioners to take note of in eight different areas of Section 1782 law, including the types of proceedings to which Section 1782 applies, a court’s power to compel production of documents stored outside the United States, and the emergence of the Northern District of California as the prime location for obtaining Gmail data located outside U.S. borders. 

Part VI: Arbitral Award Enforcement in Federal Courts.  Expanding upon the 2014 Update, this section addresses recent key developments related to the conversion of arbitral awards into federal court judgments. 

Part VII: Transnational European Legal Developments.  This year’s significant developments also featured changes in European law, including the 2015 amendments to the Brussels I Regulation[1] on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters in the 28 European Union Member States (the "Recast Brussels Regulation.")  This Part also addresses the Lugano Convention of October 30, 2007 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (the "Lugano Convention").  Like the Brussels I Regulation, the Lugano Convention also governs jurisdiction and the enforcement of judgments.  2015 saw significant case law developments related to the Convention.

Part I:  Key Transnational Jurisdiction Developments–Daimler AG v. Bauman Continues to Prevent Improper Forum Shopping By Limiting General Personal Jurisdiction Over Foreign Corporations

Nearly two years ago the United States Supreme Court in Daimler AG v. Bauman ruled that the Due Process clause of the United States Constitution did not permit a California state court to exercise general personal jurisdiction over Daimler-Chrysler AG, a German company, notwithstanding the substantial contacts with California of Daimler’s indirect subsidiary, Mercedes-Benz USA.  Since the decision, early predictions that Daimler would result in "dramatic" limitations on forum shopping by plaintiffs and quick dismissals on personal jurisdiction grounds of claims against foreign defendants largely have come true. 

Further analysis of lower courts’ treatment of Daimler two years later reveals other important trends.  For example, while the Supreme Court declined to reach the Ninth Circuit’s "agency" theory of imputed contacts for jurisdictional purposes, the Court’s unambiguous rejection of that theory in dicta evidently was fatal to its vitality–no court has since followed the "agency" approach.[2]

Meanwhile, lower courts have not made significant progress towards resolving another open question after Daimler–whether and under what circumstances a corporation can be subjected to general personal jurisdiction outside of the forums where it is incorporated and where its principal place of business lies.  The Supreme Court left open the possibility that such circumstances may arise, but no lower court has yet performed such an analysis.  This subject was the basis for Justice Sotomayor’s sharp concurring opinion in which she asserted that the Court departed from precedent in arriving at Daimler‘s outcome.  As a result, Justice Sotomayor’s prediction–that foreign corporations would not be haled into courts even in jurisdictions where they have substantial operations–has thus far proven true. 

Nevertheless, the clarity and predictability foreseen in the Daimler opinion likewise has come to fruition–the jurisdictions in which foreign corporate defendants likely are subject to personal jurisdiction remain limited to their places of incorporation and principal places of business.  This has limited the opportunities for improper forum shopping and provided guidance and protection to foreign corporations with significant domestic operations.

A.                The Daimler Decision

In Daimler, plaintiffs brought suit in the United States District Court for the Northern District of California against Daimler, a German company.  The plaintiffs asserted jurisdiction over Daimler on the basis that its indirect subsidiary, Mercedes-Benz USA ("MBUSA"), did substantial business in California.[3]  In overturning the Ninth Circuit Court of Appeals, seven justices joined the opinion by Justice Ginsburg, with Justice Sotomayor concurring in the result.  The justices emphasized the "all-purpose" character of general personal jurisdiction, which would have subjected Daimler to lawsuits in California for any cognizable claim by any party arising out of events anywhere in the world.  The justices invoked the Due Process clause of the United States Constitution to dismiss the case for lack of personal jurisdiction over Daimler, specifically holding that "[e]xercises of personal jurisdiction so exorbitant . . . are barred by due process constraints[.]"[4] 

At the core of the Court’s due process analysis is the "at home in the forum State" language from its 2011 opinion in Goodyear Dunlop Tires Operations, S.A. v. Brown.[5]  The Court considered whether, under Goodyear, Daimler was "at home" in California–ultimately finding that it was not.  But in its analysis, it did not go so far as to say that a corporation can have only one "home," but observed that "a corporation that operates in many places can scarcely be deemed at home in all of them," suggesting that likely rare is the case where a corporation has more than the two paradigmatic residences.[6]  Thus, despite the Court’s pains to frame Daimler as the application of existing precedent, it appeared to be signaling to lower courts that general jurisdiction had theretofore been applied too loosely, and that future findings of general personal jurisdiction over foreign corporations should be limited to the "paradigm all-purpose forums" of place of incorporation and principal place of business.  As a result, applications of general jurisdiction outside those jurisdictions are disfavored by the Court.

B.                 Daimler Sharply Limits the Availability of General Personal Jurisdiction Over Foreign Corporate Defendants

Since Daimler nearly every effort to impose general jurisdiction over a foreign corporation has failed.  The year after Daimler was particularly restrictive.  As discussed in our 2014 Transnational Litigation Year-End Review, the first year after Daimler saw nearly every effort to assert general jurisdiction over a foreign corporation fail.

In 2015, the Ninth Circuit again appeared at the fore of Daimler-related litigation, adopting the Supreme Court’s restrictive approach to forum shopping by finding that the "agency" theory of general personal jurisdiction did not lie.[7]  In Ranza v. Nike, the plaintiff was a former Nike employee and United States citizen living abroad.  The plaintiff brought suit against Nike’s European subsidiary and the Nike parent corporation, asserting wrongful termination claims based on alleged discriminatory conduct that occurred in The Netherlands.  The United States District Court for the District of Oregon dismissed the action for want of personal jurisdiction over the parent corporation, Nike, Inc. 

The Ninth Circuit affirmed the dismissal and certiorari review has since been denied.[8]  Centrally, the court held that Daimler invalidated the Ninth Circuit’s prior jurisprudence concerning the "agency" theory of general personal jurisdiction.  Theretofore under the agency theory the contacts of a parent corporation’s subsidiary could be imputed to the parent for purposes of jurisdiction where the subsidiary "performed services that were sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation’s own officials would undertake to perform substantially similar services."[9] 

C.                Daimler Significantly Curtails the Circumstances Where General Jurisdiction Over a Foreign Corporation Will Be Recognized

Subsequent to Daimler, in 163 of 174 cases, courts (mostly federal) have held that they lacked general personal jurisdiction over the defendant.  Of the eleven cases where general jurisdiction was found to lie, five involved foreign defendants.  And of those eleven cases in which courts upheld general jurisdiction, only one–a bankruptcy court–did so because the foreign company was "at home" in the jurisdiction.[10]  The remaining ten cases either involved uncontroversial applications of general jurisdiction[11] or were based on consent jurisdiction.

Notably, Daimler did not address how its more stringent due process requirements affect jurisdiction by consent–that is, whether subjecting a company to general jurisdiction solely on the basis of registering to do business or designating an agent for service of process violates due process.[12]  After Daimler, it remains unclear whether consent by registration is adequate.  Several courts have answered that general jurisdiction upon consent does not violate due process, holding that Daimler applies only to foreign companies that have not consented to suit in the forum.[13]  But other courts have held the opposite, finding that registering to do business is by itself insufficient to establish jurisdiction post-Daimler.[14]  And in at least one case, the court held that state law determines whether consent may be a basis for general personal jurisdiction.[15]  The bottom line with respect to consent jurisdiction is that there continues to be substantial variation across jurisdictions on whether consent by registration and designation of an agent for in-state service of process is sufficient to establish general jurisdiction post-Daimler.

D.                Daimler Also Limits General Jurisdiction Over Third-Party Subpoena Targets, But Specific Jurisdiction May Still Lie

One recent case highlights the shift caused by Daimler with respect to third-party subpoenas upon foreign corporations.  The case Gucci America, Inc. v. Li,[16] involved trademark counterfeiting claims brought by Gucci, represented by Gibson Dunn, against the owners and operators of websites who sold counterfeit items bearing Gucci’s trademarks and transferred the profits of their counterfeit sales to accounts in China at the Bank of China ("BOC").  Gucci moved to compel nonparty BOC to comply with subpoenas requesting the production of account documents relating to defendants’ bank accounts.  The district court had previously granted a pre-Daimler motion to compel compliance with Gucci’s subpoenas over BOC’s objection that doing so would violate Chinese bank secrecy law, and held BOC in contempt for its failure to comply. 

On appeal, the Second Circuit affirmed the district court’s conclusion that ordering BOC to comply with the subpoenas accorded with principles of comity.[17]  But in light of the Supreme Court’s intervening decision in Daimler, the Court of Appeals vacated the district court’s order to compel compliance with the subpoenas, holding in pertinent part that the parties’ assumption that general personal jurisdiction was inconsistent with Daimler.  The Second Circuit remanded the case with instructions to determine (among other things) whether the district court could exercise specific personal jurisdiction over BOC to compel compliance with Gucci’s subpoenas.  The Second Circuit suggested that, because Federal Rule of Civil Procedure 45(b)(2) permits service of a subpoena at "any place within the United States," the district court might consider BOC’s contacts nationwide in evaluating personal jurisdiction.

On remand, the district court concluded that it could exercise specific jurisdiction over BOC based on its ties to New York alone, and that the exercise of such jurisdiction was proper under comity principles.  It therefore ordered BOC to comply with the subpoenas.  After BOC refused, the district court held BOC in civil contempt, imposed a daily coercive sanction of $50,000, and awarded attorneys’ fees to Gucci. 

In reaching its conclusion that it had specific jurisdiction over BOC, the district court looked to New York’s long-arm statute and a recent New York Court of Appeals case, Licci ex rel. Licci v. Lebanese Canadian Bank, SAL,[18] and analyzed "(1) whether the defendant transacts any business in New York and, if so, (2) whether this cause of action arises from such a business transaction."[19]  The district court found the first prong satisfied by, among other things, BOC’s repeated and deliberate use of New York correspondent accounts to effectuate wire transfers for its U.S. clients, including the defendants.[20]  The district court found the second prong satisfied by the "strong relationship between BOC’s New York conduct and Gucci’s subpoena requests" because Gucci alleged that defendants’ use of BOC’s New York account "to effectuate wire transfers between the United States and China were crucial components of the counterfeiting operation, and the subpoenas seek information about these very transfers."[21]  The district court further concluded that the exercise of jurisdiction comported with due process because "the selection and repeated use of New York’s banking system . . . constitutes ‘purposeful availment of the privilege of doing business in New York.’"[22]

BOC promptly sought a stay of the district court’s order from the Court of Appeals for the Second Circuit.  After briefing by the parties, a Second Circuit panel rejected BOC’s motion to stay, and BOC subsequently agreed to withdraw its appeal with prejudice.

In sum, the Second Circuit’s vacatur of the district court’s compulsion order demonstrates the reach of Daimler in limiting general jurisdiction over foreign corporate defendants.  And the district court’s subsequent finding of specific personal jurisdiction underscores the potential for jurisdiction over foreign defendants with extensive ties to the forum state, particularly when the cause of action is related to those purposefully directed activities, and the exercise of personal jurisdiction is reasonable and fair under the circumstances.[23] 

Part II:  Vindicating the Rule of Law When Transnational Fraud Targets United States Companies–The Chevron Litigations Continue

Beginning in October 2013, Chevron’s RICO and common law fraud claims against attorney Steven Donziger and others were heard during a seven-week trial before Judge Lewis A. Kaplan in the Southern District of New York.  On March 4, 2014, Judge Kaplan issued a nearly 500-page decision in Chevron’s favor, imposing a constructive trust on any assets of the defendants traceable to the corrupt Lago Agrio judgment and barring enforcement of that judgment in the United States.  The defendants appealed Judge Kaplan’s decision to the United States Court of Appeals for the Second Circuit, where a decision is still pending.  Chevron is currently defending against several recognition and enforcement actions based on the Lago Agrio judgment; actions are pending in Canada, Brazil, and Argentina. 

On September 4, 2015, the Canadian Supreme Court issued a decision holding that, although the enforcement action against Chevron and its Canadian subsidiary could proceed on jurisdictional grounds, the defendants could advance "any one of the available defences to recognition and enforcement," including fraud and denial of justice.  The enforcement action in Canada is currently pending in the Ontario Superior Court of Justice. 

 In early 2015, the Brazilian Superior Court of Justice referred the enforcement action to the Brazilian Federal Public Prosecutor’s Office ("MPF Office") to opine on the exequatur request.  On May 11, 2015, the MPF Office–an independent branch of government that investigates fraud and corruption in Brazil–recommended that the Brazilian courts reject the Lago Agrio judgment for largely the same reasons cited by Judge Kaplan.  The MPF Office’s opinion focused on the fact that the Lago Agrio Judgment was procured through fraud and "deplorable acts of corruption", and "rendered under the cloak of criminality."  Thus, "the recognition of the foreign sentence [the Lago Agrio Judgment] is not viable" because it violates Brazilian and international public order.

Separately, Chevron has been pursuing claims against the Republic of Ecuador pursuant to the U.S.-Ecuador Bilateral Investment Treaty based on many of the same facts established in the S.D.N.Y. RICO proceedings.  The tribunal heard testimony and evidence over several weeks in April and May of 2015, and a decision on the merits is still pending.   

Part III:  The Evolution of Extraterritoriality–Morrison v. National Australia Bank Ltd. Continues to Provide the Extraterritorial Limit of Federal Statutes and Common Law

Throughout 2015, courts continued to apply and interpret the Supreme Court’s landmark decision in Morrison v. National Australia Bank Ltd. to curtail the extraterritorial application of federal statutes and common law, including the Alien Tort Statute, RICO, the Securities Act, federal criminal laws, bankruptcy laws, claims brought under European Union laws, and common law claims.  Analyzing claims brought under Section 10(b) of the Securities Exchange Act of 1934, Morrison held that the extraterritoriality analysis is governed by the statutory text which must be interpreted based on the presumption against extraterritoriality.  Applying Morrison‘s edict: "[w]hen a statute gives no clear indication of an extraterritorial application, it has none,"[24] courts have grappled with the extraterritorial reach of both federal statutes and common law.

A.                Developments in the Extraterritorial Reach of the Alien Tort Statute

In 2015, circuit courts continued to rely on the Supreme Court’s 2013 Kiobel v. Royal Dutch Shell Petroleum Co. decision to dismiss actions based on the Alien Tort Statute ("ATS").  The Second Circuit has issued a number of decisions clarifying its position on jurisdictional bases of corporate liability and extraterritoriality for dismissing ATS claims.  With respect to the jurisdictional basis for dismissing ATS claims asserting corporate liability, the Second Circuit in In re Arab Bank, PLC Alien Tort Statute Litigation, analyzed its decision in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010) ("Kiobel I").[25]  Kiobel I construed the ATS as not permitting suits against corporate entities, and the Supreme Court’s decision in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (2013) ("Kiobel II"), affirmed the Second Circuit’s Kiobel decision on extraterritoriality grounds without reaching a decision on the corporate liability question.  The U.S. District Court for the Eastern District of New York had dismissed all claims by U.S. and foreign nationals who brought suit against Arab Bank for allegedly financing and facilitating activities of terrorist organizations on the basis of Kiobel I.  The Second Circuit affirmed, concluding that Kiobel I remains the law of that circuit, notwithstanding the Supreme Court’s decision affirming Kiobel II on presumption of extraterritoriality grounds.[26]  The court stated that because Kiobel II suggests that the ATS may allow for corporate liability and there is a growing consensus among other circuits to that effect, Kiobel I "now appears to swim alone against the tide."[27]  Nevertheless, after a thorough analysis of the relationship between Kiobel I and Kiobel II, the court explicitly affirmed on the basis of the holding of Kiobel I.

In 2015, the Ninth Circuit declined an opportunity to address the extraterritorial application of the ATS.  In Doe v. Nestle, alleged former child slaves asserted child labor and aiding and abetting in enslavement claims under the ATS and TVPA. The district court for the Central District of California granted the defendants’ motions to dismiss plaintiffs’ claims.[28]  After ruling for the plaintiffs on other issues, a panel of the Ninth Circuit declined to decide whether plaintiffs’ ATS claim sought an extraterritorial application of federal law that was barred by the Supreme Court’s Kiobel decision.[29] The panel directed the district court to grant the plaintiffs leave to amend their complaint in light of Kiobel to assert additional allegations with respect to the defendants’ conduct that occurred in the United States.[30]

1.                  Further Analysis of the Presumption of Extraterritoriality in Kiobel‘s "Touch and Concern" Standard

In 2015, the Eleventh Circuit in Doe v. Drummond Co. analyzed the "touch and concern" standard and determined that Kiobel‘s presumption of extraterritoriality is displaced if the "claims have a U.S. focus and adequate relevant conduct occurs within the United States."[31]  Addressing plaintiffs’ ATS claims alleging that defendants aided and abetted and conspired with foreign terrorist groups to carry out extrajudicial killings and war crimes in Colombia, the court held that there was inadequate domestic conduct to displace the presumption.[32]  General allegations that "[d]efendants made funding and policy decisions in the United States" were insufficient to overcome the presumption, especially in light of plaintiffs’ additional allegations that the agreements between the defendants and the perpetrators of the killings, the planning and execution of the killing and war crimes, the collaboration between defendants’ employees and the perpetrators, and the actual funding all took place in Colombia.[33]

District courts likewise relied on the Supreme Court’s Kiobel decision to dismiss actions based on the ATS.  In Doe v. Exxon Mobil Corp., the district court for the District of Columbia interpreted the Kiobel presumption against extraterritoriality, noting that in cases of conduct occurring in the United States and abroad, it is "[i]n accord with the Eleventh and Fourth Circuits" that "a defendant’s U.S. citizenship or corporate status is a relevant consideration," but that "the location of the relevant conduct is the fundamental criterion," and a "defendant’s citizenship can only operate to push across the finish line, so to speak, an ATS claim that alleges enough relevant conduct in the United States."[34]  The court held that while a "defendant’s United States citizenship is insufficient on its own to displace the presumption" against extraterritoriality, it will be overcome in the context of claims sufficiently touching and concerning the United States "by virtue of some combination of (1) substantial and specific domestic conduct relevant to the ATS claims, (2) United States citizenship or corporate status of the defendant, and (3) the presence of important national interests."[35]  Likewise, in Adhikari v. Daoud, the district court for the Southern District of Texas on a rehearing reaffirmed its prior conclusion that the defendant’s U.S. corporate status and its "domestic conduct" was insufficient to rebut the Kiobel presumption against extraterritoriality, because "all relevant conduct [by the defendants] occurred outside the United States."[36]

B.                 Developments in the Extraterritorial Reach of RICO

As discussed in the 2014 Year-End Transnational Litigation Update, courts continue to grapple with the application of Morrison‘s presumption against extraterritoriality to claims brought under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968.  RICO provides both criminal and civil liability for "enterprise[s]" engaged in a "pattern of racketeering" involving the violation of certain federal or state criminal laws.[37]  In 2014, the Second Circuit held in European Community v. RJR Nabisco, Inc. that, notwithstanding Morrison, RICO applies extraterritorially where RICO liability is based on the violation of criminal statutes that themselves have extraterritorial reach, such as money laundering or providing material support to foreign terrorist organizations.[38]  In a subsequent opinion denying panel rehearing, the Second Circuit further held that RICO applies even when the cognizable injury is entirely sustained extraterritorially.[39]  In April 2015, the Second Circuit denied a petition for en banc review in a narrow vote that resulted in five written opinions–one in support of the original panel opinions and four dissenting from the denial of rehearing.

In October 2015, the United States Supreme Court granted RJR Nabisco’s petition for a writ of certiorari and it will hear the case in the spring of 2016.  The Supreme Court is expected to address the nature and extent of a connection to the United States necessary to sustain a civil RICO claim.  The Court may choose from two tests already developed and applied by lower courts, a third test introduced by the Solicitor General, or it may introduce a new standard. 

The Ninth Circuit developed a rule that has been followed by courts in the District of Columbia and other district courts and has explained that "the heart of any RICO complaint is the allegation of a pattern of racketeering."[40]  Under this test, the location of the enterprise is irrelevant so long as the pattern of racketeering activity is conducted in or directed at the United States.[41]  In United States v. Xu, the defendants were high-level employees at the Bank of China and were convicted under RICO for engaging in a scheme to divert funds from the Bank to a holding company in Hong Kong for personal use, such as real estate purchases and gambling trips.  Each of the defendants also entered into a fraudulent marriage with someone who had valid United States immigration status, and used falsified immigration documents to flee to the United States after the Bank discovered the fraud.  The Ninth Circuit held that the foreign conduct–including the fraud on the Bank of China–could not be considered for the purposes of RICO, but that the convictions were based on sufficient domestic racketeering activity centered on the immigration fraud.

Other district courts have adopted United States District Judge for the Southern District of New York Jed Rakoff’s "enterprise" approach to analyzing the domestic applicability of RICO, concluding that RICO applies only to domestic enterprises, but can extend to foreign racketeering activity.  Judge Rakoff articulated the test in Cedeno v. Intech Group, Inc., holding that the "focus of RICO is on the enterprise as the recipient of, or cover for, a pattern of criminal activity," and thus, "RICO does not apply where . . . the alleged enterprise" is foreign.[42]  Accordingly, he dismissed civil RICO claims based on an enterprise located in Venezuela, although the complaint alleged several predicate acts conducted in the United States.  Although the Second Circuit’s decision in RJR Nabisco superseded Cedeno within the Southern District of New York, district courts elsewhere have followed it.[43]

Finally, the United States Solicitor General argued, in an amicus brief filed with the Second Circuit, that "[i]n light of RICO’s focus on enterprises and patterns of racketeering, a RICO claim is territorial either if the enterprise is located or operating in the United States or if a pattern of racketeering activity occurs within the United States."[44]  Thus far, no court has adopted this view, and in the amicus brief submitted to the Supreme Court, the Solicitor General’s office has revised that position.[45]  First, the Solicitor General argues that the Supreme Court should affirm the Second Circuit’s primary holding that RICO applies extraterritorially to the extent that the charged predicate acts apply extraterritorially.[46]  Second, the Solicitor General contends that RICO can apply to foreign enterprises, so long as "the conduct constituting the racketeering happens within the United States."[47]  Nevertheless, the Solicitor General urges vacatur of the Second Circuit’s opinion on the ground that "Congress did not clearly indicate an intent to permit foreign injuries to give rise to private RICO actions," and that, in order to promote international accord, the Supreme Court should hold that RICO has a "domestic injury" requirement.[48]  It remains to be seen how much weight the Supreme Court will give to these arguments.

C.                Developments in the Extraterritorial Reach of Section 10(b) Securities Act Claims

While Morrison undoubtedly limited the extraterritorial effect of U.S. securities laws, in January 2015, the Third Circuit issued a precedential decision recognizing a particular type of "domestic transaction" under Morrison‘s second prong.  In United States v. Georgiou, a defendant was convicted of conspiracy, securities fraud, and wire fraud for making fraudulent transactions designed to manipulate prices of stocks traded on U.S. over-the-counter securities markets.[49] On appeal, the defendant argued that his convictions were improperly based on the extraterritorial application of the securities and wire fraud statutes, because his transactions did not involve American stock exchanges and were executed using brokerage accounts that had been opened outside of the United States.[50]

After agreeing that the over-the-counter securities markets at issue were not "American stock exchanges" for purposes of the Securities Exchange Act,[51] the Third Circuit turned to whether the transactions at issue were "domestic transactions" under Morrison‘s second prong.[52]  As the Morrison Court wrote, the "location of the transaction . . . establishes (or reflects the presumption of) the [Security Exchange] Act’s inapplicability."[53]  The Third Circuit further explained that the location of the transaction "turns on where, physically, the purchaser or seller committed him or herself to pay for or deliver a security."[54] Accordingly, it held that "the point of irrevocable liability" determines the location of a securities transaction under Morrison.[55]  The Panel cited factors relating to the "formation of the contracts, the placement of purchase orders, the passing of title, or the exchange of money" as relevant considerations in demonstrating irrevocable liability.[56]

Applying these principles to the defendant’s conduct, the Third Circuit found that the defendant incurred "irrevocable liability" in the United States when he used U.S.-based market makers to facilitate transactions on the U.S. over-the-counter securities market.[57]  In addition, the court noted that the defendant had directed specific instances of fraudulent trades from entities within the United States.[58]  Based on these two considerations, it affirmed the district court’s finding that Morrison did not preclude application of federal securities laws to the defendant’s transactions.[59]

D.                Developments in the Extraterritorial Reach of Federal Criminal Laws

Following the Supreme Court’s key decisions in Morrison and Kiobel, lower courts have continued to analyze the extraterritorial reach of various federal criminal laws.

1.                  Wire Fraud Statutes

The federal wire fraud statutes continue to be a point of litigation.  For example, in United States v. Georgiou (as discussed above), the Third Circuit also addressed whether the defendant’s wire fraud conviction rested on an improper extraterritorial application of the statute.[60]  The court first noted that, as Morrison explained, the federal wire fraud statute "prohibits ‘any scheme or artifice to defraud,’ . . . without any requirement that it be ‘in connection with’ any particular transaction or event."[61]  Thus, unlike the Securities Exchange Act, the court found that the wire fraud statute applied extraterritorially, provided that the jurisdictional requirement of use of the interstate wires was satisfied.  Given the ample evidence that the defendant used e-mail and bank wire transfers in connection with his fraud, the Third Circuit affirmed the district court’s application of the wire fraud statute.[62]

In contrast to the Third Circuit’s wire fraud analysis in Georgiou, the United States District Court for the Northern District of California reached a somewhat different conclusion in United States v. Sidorenko.[63]  In Sidorenko, the U.S. government brought charges under the federal wire fraud and bribery statutes against three non-U.S. citizens for having bribed a Canada-based United Nations official using wires that neither reached nor passed through the United States in order to secure lucrative contracts for their businesses.[64]  The defendants moved to dismiss the indictment, claiming that the wire fraud and bribery statutes did not apply extraterritorially and that the charges violated constitutional due process.[65]

The district court granted the defendants’ motion to dismiss based on both arguments.  The court first addressed the defendants’ extraterritoriality argument.  Without clear Ninth Circuit precedent, the court began with Morrison‘s holding that "[w]hen a statute gives no clear indication of an extraterritorial application, it has none."[66]  After examining the text of the wire fraud and bribery statutes, the court concluded that neither statute contained clear language indicating that Congress intended for those statutes to apply extraterritorially.[67]

Next, the court also addressed the defendants’ due process argument, holding that the indictment ran afoul of constitutional due process since there lacked a sufficient domestic nexus between the defendants and the United States.[68]  The court noted the only such nexus was that the United States contributed funds to the United Nations agency for which one of the defendants worked.[69]  This, the court found, did not provide a sufficient basis for which the defendants could reasonably anticipate being haled into a U.S. court.[70]

2.                  Arms Trafficking Laws

In another case, United States v. Ahmed, the United States District Court for the Eastern District of New York also considered the application of Morrison to federal arms trafficking laws.[71]  In Ahmed, the American defendants were arrested by Djiboutian authorities while travelling in the Middle East to allegedly join a terrorist organization.[72]  After being turned over to U.S. authorities, the defendants were charged, among other things, under a federal firearms trafficking statute, 18 U.S.C. § 924(c), for supporting a foreign terrorist organization.[73]  The defendants moved to dismiss the charges, arguing that they had no extraterritorial effect.[74]

The court rejected the argument, relying on a post-Morrison Second Circuit decision in United States v. Siddiqui.[75]  In Siddiqui, the Second Circuit found that the presumption against extraterritoriality "has no application to criminal statutes,"[76] and ultimately held that the firearms trafficking statutes’ jurisdiction was "coextensive with the underlying crime of violence or drug trafficking offense to which it refers."[77]  Although the district court recognized that the Supreme Court’s subsequent Kiobel decision made clear that the presumption applied equally to civil and criminal statutes alike, it nonetheless found that Siddiqui‘s narrower holding regarding the firearms statute’s co-extensive jurisdiction was still consistent with Morrison and Kiobel.[78]  Thus, for federal criminal statutes with predicate offenses, the district court concluded that the test remains whether Congress intended for the predicate offense to have extraterritorial reach.[79]  Since the defendants’ predicate offenses related to crimes of violence and international terrorism, which Congress clearly and explicitly had given extraterritorial effect, the court held that the extraterritorial application of the firearms statute was proper.[80]

3.                  Maritime Drug Law Enforcement Act

The Maritime Drug Law Enforcement Act ("MDLEA") creates criminal liability for anyone who possesses a controlled substance on board a vessel subject to United States jurisdiction with the intention of manufacturing or distributing it.  By its terms, the MDLEA can apply to several types of foreign vessels, including "vessels without nationality," "a vessel registered in a foreign nation where the flag nation has consented or waived objection to the enforcement of United States law by the United States," and a "vessel in the territorial waters of a foreign nation if the nation consents to the enforcement of United States law by the United States."[81]  In 2015, the Court of Appeals for the District of Columbia addressed the reach of the extraterritorial application of the MDLEA in two cases.

In United States v. Miranda, two Colombian citizens brought a challenge to their convictions for conspiracy to violate the MDLEA, which were entered pursuant to guilty pleas.[82]  The defendants contended that the MDLEA does not apply to extraterritorial conduct and that the ships used by the conspiracy were not vessels subject to the jurisdiction of the United States.  Citing Morrison, the D.C. Circuit held that the extraterritoriality challenge to the MDLEA was waived by the guilty plea because it is a merits issue, and not a question of subject-matter jurisdiction.[83]  However, the court agreed that the question of whether the vessels were "subject to the jurisdiction of the United States" as defined by the statute is a matter of subject-matter jurisdiction and may not be waived.[84] 

The court affirmed the convictions, rejecting the contention that a vessel is "without nationality" "only when on the high seas," but not when located in territorial waters.  Rather, the court concluded that there was sufficient evidence that the vessels at issue were stateless, because they were not entitled to fly the flag of any nation.  The court concluded that this is the proper test for statelessness, and that holding otherwise would suggest that a vessel "venture[s] in and out of statelessness depending on where it happened to be located when seized," which would "create a perverse incentive for vessels to race to a foreign nation’s territorial waters before submitting to interdiction."[85] 

In July 2015, only four months after the Miranda decision, the D.C. Circuit issued an opinion ruling on MDLEA’s extraterritorial reach in United States v. Ballestas.[86]  The defendant in Ballestas, also a Colombian citizen, argued on appeal that his conviction for conspiracy to violate the MDLEA violated the presumption against extraterritorial application.  The court concluded that "the extraterritorial reach of the MDLEA’s substantive provisions is clear," since Section 70503(b) provides that the substantive provisions of the law "appl[y] even though the act is committed outside the territorial jurisdiction of the United States."[87]  The court further concluded that because the substantive offense applies extraterritorially, any "conspiracy to commit that substantive offense . . . also has extraterritorial reach," rejecting the defendant’s efforts to draw a distinction between a substantive offense and "ancillary" offenses such as conspiracy.[88] 

E.                 Developments in the Extraterritorial Reach of the Investment Advisers Act of 1940

In Lay v. United States, the defendant, convicted of fraud under Section 206 of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-6, sought to vacate his conviction on the ground that Section 206, by its terms, cannot be applied extraterritorially in light of the Supreme Court’s Morrison decision, because the investment fund he advised was based in Bermuda.[89]  The Sixth Circuit first evaluated the defendant’s claim that his conduct was not sufficiently "domestic" in light of Morrison, and determined that all aspects of the case, besides the fact that the investment fund in question was based in Bermuda, were centered in the United States.[90]  The Sixth Circuit then evaluated the text and the regulatory structure of Section 206 of the Investment Advisers Act in light of the Morrison analysis of Section 10(b) and Rule 10b-5 of the Securities Exchange Act, to hold that the Morrison extraterritoriality reasoning does not apply to the defendant’s criminal prosecution brought pursuant to the Investment Advisers Act.[91]  The court noted that in Morrison, the Supreme Court based its interpretation of the relevant statutory provision on the fact that "the focus of the Exchange Act is not upon the place where the deception originated, but upon purchases and sales of securities in the United States."[92]  In contrast, the Court noted that the text and regulatory structure of the Investment Advisers Act focus clearly on the conduct of the investment adviser, not the nature of the transaction.[93]  The Court stated that no court has extended Morrison‘s "domestic" requirements to include the Investment Advisers Act and affirmed the judgment of the lower court.[94]

F.                 Developments in the Extraterritorial Reach of the Bankruptcy Code’s Section 546(e) Safe Harbor

In In re Hellas Telecommunications (Luxembourg) II SCA,[95] a bankruptcy court addressed whether the safe harbor provisions in section 546(e) of the Bankruptcy Code had extraterritorial effect.[96]  Plaintiffs had brought an action against several private equity companies, alleging the companies had been unjustly enriched for amounts they received in connection with a fraudulent debt redemption.[97]  The defendants moved to dismiss the complaint, arguing in part that the transactions at issue were covered by the safe harbor in section 546(e) of the Bankruptcy Code, which prohibits the bankruptcy court from avoiding settlement payments made by debtors in certain securities transactions.

The bankruptcy court denied the motion to dismiss, finding that it was "unclear whether section 546(e) applies extraterritorially to the transfers underlying the Plaintiffs’ unjust enrichment claim."[98]  Citing to Morrison, the court found that the section 546(e) safe harbor would only have extraterritorial effect if there was a clear congressional intent that it apply extraterritorially.[99]  But as the court noted, the initial transfer "at the heart of this case" was a "purely foreign transaction with no New York nexus" and "it seems doubtful that Congress intended section 546(e) to apply to these predominantly foreign transfers."[100]  Given these doubts over the applicability of the safe harbor provisions to the defendants’ conduct, the court denied the motion to dismiss.

G.                Morrison‘s Effect on Common Law Claims

Cases applying Morrison generally involve questions of statutory construction.  In June 2015, a federal district court in the Central District of California addressed the propriety of extraterritorial application to common law claims.[101]  The dispute in Leibman v. Prupes arose from the plaintiff’s retention of the defendant to open a new medical clinic in Kiev, Ukraine in August 2013.  Because of the geopolitical unrest in the Ukraine, the clinic failed by February 2014.  The defendant was fired and subsequently moved to New Jersey.  The plaintiff initially sued the defendant for blackmail and extortion, but those claims were largely dismissed.  The defendant subsequently brought numerous counterclaims for breach of contract, breach of the covenant of good faith and fair dealing, promissory estoppel, fraud in the inducement and intentional misrepresentation, wrongful termination, and violation of California Labor Code Section 1102.5.  The plaintiff moved to dismiss the counterclaims on the basis of the presumption against extraterritoriality.

The court held that the presumption against extraterritoriality is limited to statutes and does not extend to common law claims.[102]  The court further held that, even if the presumption applied to common law claims, there were sufficient contacts with California in this case because "the actions which gave rise to liability–that is, the alleged breach–occurred in California."[103]  "Put another way, the alleged ‘core decision’ to wrongfully terminate [the cross-complainant] and breach the contract was made in California."[104]  For the same reason, the court denied the motion to dismiss the sole statutory claim, holding that "the alleged decision to retaliate against [the cross-complainant] . . . occurred in California," thus creating a sufficient nexus.[105]

Part IV:  Transnational Supply-Chain Liability: An Emerging Threat

Because U.S.-based multinationals sometimes source from foreign countries facing environmental and social challenges, including forced labor and other human rights problems, many corporations have launched programs to supply safer agrochemicals, on-the-ground training, education initiatives and other social responsibility programs.  These companies frequently conduct supply chain audits and adopt robust codes of ethics designed to help address global environmental and human rights challenges. 

But the plaintiffs’ bar has started using these programs against the adopting companies–arguing that the programs designed to improve overseas conditions actually evidence knowledge and control of human rights abuses.  Plaintiffs have also argued that sourcing from countries suffering from social problems violates corporate policies.  They have also claimed consumer fraud on the theory that the companies know that there are human rights abuses in their supply chains but fail to disclose these abuses to their consumers, who believe that the products are being produced legally and fairly.  The plaintiffs’ bar made significant headway advancing these theories in 2015. 

2015 also saw more jurisdictions trend toward supply-chain disclosure regimes that compel companies to publish on their websites what they are doing to identify and address unlawful labor practices and other global social issues that may exist in their supply chains.  Most notably, the UK Modern Slavery Act of 2015 requires many companies to either (1) disclose what they are doing to ensure that there is no slave labor in their organization and their supply chains or (2) file a public statement representing that they are doing nothing in this regard.  Depending on the financial year end for each company subject to the Act, companies will have to start publishing these disclosures on a rolling basis over 2016-2017.  Some companies have already published similar disclosures under the California Transparency in Supply Chains Act, which took effect in 2012. 

While lawmakers may be motivated to help bring about positive social change, unfortunately the increase in supply-chain litigation and the passage of these disclosure laws likely means that companies may dial back on certain programs to mitigate risk of potential liability; companies will be incentivized to put as much risk as possible on third party auditors, and will have to rethink their relationships with suppliers.  The unfortunate end result may be that less happens to address these global social challenges.  And, in the short-term, companies will need to think carefully about what they say in their disclosures and other public facing statements.

Two recent supply-chain cases illustrate the tension emerging in this area:

First, in Doe v. Nestlé U.S.A., Inc., a class of alleged former child laborers from the Ivory Coast sued three corporations under the ATS for aiding and abetting unlawful labor practices, in violation of international law.[106]  The plaintiffs did not claim that any of these three companies engaged in forced labor practices themselves.  Rather, plaintiffs alleged that the companies should be liable for aiding and abetting alleged forced child labor committed by unaffiliated foreign actors.  The plaintiffs’ theme was that the companies knew there were labor problems in the Ivory Coast (based on, inter alia, public reports, the companies’ on-the-ground social-responsibility programs in the region and the companies’ public commitment to help address labor challenges in the region), and that the companies supposedly had sufficient control to fix the labor problems, but failed to do so because they wanted to purchase inexpensive cocoa.[107]  In support of their case, the plaintiffs asserted that the companies "control such [forced labor] conditions by providing local farmers and/or farmer cooperatives with inter alia ongoing financial support, including advance payments and personal spending money . . . ; farming supplies, including fertilizer, tools and equipment; training and capacity building in particular growing and fermentation techniques and general farm maintenance, including appropriate labor practices, to grow the quality and quantity of cocoa beans they desire."[108]  The district court dismissed these claims.[109]  But, on appeal, the Ninth Circuit gave the complaint new life.[110] 

Relevant here was the Ninth Circuit’s explanation of the mental state required to support allegations of aiding and abetting.  The parties had disputed whether the relevant standard was acting with the "purpose" of furthering the forced labor at issue, or whether the standard was merely acting with "knowledge" that conduct might facilitate forced labor.[111]  The Ninth Circuit did not resolve this dispute.  Claiming that it was applying the stricter "purpose" standard, the court found that the defendants were alleged to have acted "to support child slavery."[112]  To support its conclusion, the Court pointed to several allegations in the complaint: defendants allegedly "obtained a direct benefit from the commission of the violation of international law,"[113] defendants allegedly had a significant presence in the Ivory Coast cocoa market, and purportedly could have used that control to stop the use of child labor, [114] and defendants purportedly lobbied against federal legislation that would have required chocolate manufacturers and importers to certify and label their products "slave free."[115]  Based on this reasoning, the Ninth Circuit reversed and vacated the district court’s order dismissing the complaint, and remanded for further proceedings.[116]  Though the defendants sought en banc and Supreme Court review, they were unsuccessful. 

A second decision–from the Delaware Chancery Court–linked ATS liability and benefit programs even more explicitly than did the Nestlé decision.  In Louisiana Municipal Police Employees’ Retirement System v. Hershey Co., the plaintiff sought access to Hershey’s books and records under Section 220 of Delaware’s Corporate Code[117] to investigate alleged "wrongdoing or mismanagement" tied to Hershey’s alleged support of child labor on cocoa farms.[118]  The Chancery Court denied Hershey’s motion to dismiss, citing the Ninth Circuit’s decision to reverse the district court’s decision in the Nestlé case.[119]  Opining on Hershey’s alleged mens rea, the Chancery Court expressly tied Hershey’s social-responsibility programs to alleged knowledge of child labor:  "I think you can draw the inference of knowledge from [Petitioner’s] cocoa sustainability efforts, which include its eight ‘on-the-ground programs’ through which [Petitioner] has contact with farmers in West Africa and high-level visits, such as visits by [Petitioner’s] chairman."[120]

The risks posed by this new breed of litigation will only be compounded by developing supply chain disclosure laws.  For example, section 54 of the U.K.’s Modern Slavery Act of 2015 requires each company subject to it to provide annual reports stating "the steps [it] has taken during the financial year to ensure that slavery and human trafficking is not taking place (i) in any of its supply chains, and (ii) in any part of its own business"[121] unless the company publishes a disclosure saying "that the organization has taken no such steps."[122]  In practice, this obligation will apply to any company providing goods or services operating a business in the U.K. and with turnover over £36 million (approximately $52 million).

Similarly, California’s Transparency in Supply Chain Act effectively requires mid-size and large retailers and manufacturers to disclose their efforts to eradicate human slavery and human trafficking from their supply chains.[123]  The law requires companies to disclose, among other things, whether they verify if their supply chain implicates these human rights abuses, whether they audit their suppliers, and whether they require certifications from suppliers that the products do not implicate human rights abuses.[124] 

These disclosures are certain to be one of the key weapons used by plaintiffs’ attorneys as they launch their transnational supply chain lawsuits.  Indeed, the plaintiffs in Hershey expressly referenced the California law as a basis for their Section 220 document request.[125]

Like an SEC registration statement or periodic report, these disclosures provide ample fodder for plaintiffs’ lawyers, who are likely to point to them as alleged misstatements that affected consumers’ decisions to purchase the disclosing company’s products.  Looking at Hershey, they may also be used as grounds to open corporate books and records.  Disclosures may also be used to show an alleged closeness/relationship between companies and their suppliers.  Companies should be especially cautious when they are operating in industries.

Companies wishing to avoid this new breed of supply-chain litigation should take a hard look at their internal practices and disclosures in light of this developing body of law.  This is particularly true for companies that operate in countries or industries with documented histories of human-rights challenges and global social problems.[126]  Observation of corporate formalities becomes even more important to ensure that foreign conduct cannot be improperly attributed to U.S. entities subjected to such suits.  In the end, every company is different, and each transnational supply chain presents its own litigation risks.  But what is clear is that the recent court decisions have exacerbated the already challenging conditions in which many companies find they must operate. 

Part V:  Cross-Border Discovery Developments

Section 1782 enables litigants to use the United States’ broad discovery process to obtain evidence for use in foreign proceedings.  See 28 U.S.C. § 1782.  Although there are limits to the availability of Section 1782 discovery, 2015 saw the continued expansion of those limits. 

Since 2010, Section 1782 has increasingly become an essential tool as litigants pursue transnational lawsuits.[127]  But as the chart below illustrates, 2014 may have been the peak in the filing of Section 1782 Applications with 202 filings across all District Courts.  2015 saw a return to 2013 levels and a near 25% decline in the number of Applications filed from the 2014 peak.

Applications "Pursuant to 28 U.S.C. Section 1782" Across All District Courts*


*Data collected also includes entries for applications "pursuant to 28 U.S.C. § 1782"

Somewhat surprisingly, 2015 also saw the continued dominance of the Southern District of New York as the location for the filing of Section 1782 applications.  And, consistent with the reduction in filings between 2014 and 2015, the Southern District of New York also saw a substantial reduction in filings in 2015, returning largely to 2013 levels.  Given the sheer number of applications resolved by the Southern District of New York, practitioners across the country bringing Section 1782s in other districts should look to the Southern District of New York for persuasive authority for use in their matters.  For those practitioners for whom the target of Section 1782 discovery is "found in" the Southern District of New York, they will be well served by counsel with experience in the district and, specifically, experience with Section 1782 applications brought in this district and before the Second Circuit.

Top 5 District Courts Where Section 1782 Applications Were Filed


Federal courts this year addressed six specific Section 1782 issues about which practitioners and litigations should be aware.  First, the Fifth Circuit joined other circuits in holding that a court must articulate reasons for denying Section 1782 applications to provide litigants with a basis on which to appeal.  Second, courts continued to disagree on what constitutes a "foreign tribunal" within the meaning of Section 1782.  Third, some courts in 2015 denied discovery applications that sought documents located overseas.  Fourth, courts remained divided as to whether participants in foreign proceedings must first exhaust discovery options in foreign courts.  Fifth, the Northern District of California emerged as the prime location for obtaining Gmail data located outside the United States.  Sixth, courts further developed the law that compliance with Section 1782 alone may not result in a favorable application–petitioners must still satisfy the limitations of the Federal Rules of Civil Procedure. 

1.                  Need For Reasoned District Court Opinions

At the outset, one important development for practitioners is a case from the Fifth Circuit that may influence the manner in which courts deny Section 1782 applications and, as such, the basis for appeal of a denial.  The Fifth Circuit’s decision in Bravo Express Corp. v. Total Petrochemicals & Refining U.S., 2015 WL 3466085 (5th Cir. June 2, 2015) held that a court must articulate reasons for denying Section 1782 applications to provide litigants with a basis on which to appeal.  Specifically, the Fifth Circuit held that a district court abuses its discretion by failing to provide reasons for its denial of a request for judicial assistance pursuant to Section 1782, providing litigants with another argument to successfully challenge losing Section 1782 applications.

2.                  "Foreign ‘Tribunal’" Under Section 1782

Courts remain divided over which foreign arbitral tribunals may serve as the basis for a Section 1782 application.  The Supreme Court’s opinion in Intel Corp. v. Advanced Micro Devices, Inc. clarified Section 1782’s mandatory requirements and set forth several discretionary factors courts should consider.[128]  Since Intel, most federal courts have found that investor-state arbitral bodies–which arise from treaty obligations contained in bilateral investment treaties or multilateral investment treaties–constitute "tribunals" under Section 1782.[129]

With respect to private commercial arbitration, however, appellate courts have not provided clear guidance on whether Section 1782 assistance is available.  The Eleventh Circuit initially seemed open to the idea and held, in In re Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., that Section 1782 applied to a private commercial arbitration because the tribunal was a "first-instance decision-maker whose judgment was subject to judicial review."[130]  However, in January 2014, the Eleventh Circuit vacated the decision–in part because it did not have a sufficiently developed record on the nature of the arbitration tribunal–and issued a new decision that did not reach the issue because two lawsuits in Ecuadorian courts had been filed, thus obviating the need for the Eleventh Circuit to go further.[131]

As a result, the only appellate rulings on the issue are from the Courts of Appeals for the Fifth[132] and Second[133] Circuits, which do not recognize foreign private arbitral bodies (as opposed to investor state arbitration) as "tribunals" for Section 1782 purposes.  Notwithstanding these appellate rulings, a number of federal district courts have ruled to the contrary, and have allowed the use of Section 1782 to collect evidence for use in purely private foreign arbitrations.[134]

In re Grupo Unidos Por El Canal, S.A., 2015 U.S. Dist. LEXIS 50910 (D. Colo. Apr. 17, 2015) refused to recognize private arbitral tribunals as within the meaning of Section 1782.  The District Court denied a 1782 application by Grupo Unidos in connection with an arbitration pending in Miami, Florida because the arbitration at issue did not qualify as a "tribunal" within the meaning of 1782.  Grupos Unidos had initiated the arbitration under the Rules of Arbitration of the International Chamber of Commerce ("ICC") related to its work on the Panama Canal expansion project and sought 1782 discovery from another contractor on the project, CH2M Hill.  The District Court held that a purely private arbitration under the rules of the ICC does not qualify as a "tribunal" within the meaning of Section 1782, noting that such an arbitration is functionally different than a state-sponsored body like that at issue in Intel v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004).  The court also noted that "construing § 1782 to apply to private contractual arbitrations would defeat the timeliness and cost-effectiveness of arbitration, and would place a heavy burden on the federal courts to determine discovery requests."  Because its ruling on the first issue was dispositive, the District Court declined to address whether an arbitration pending in Miami, Florida qualified as "international" for the purposes of Section 1782.  But the District Court did note that all other cases addressing private arbitrations under Section 1782 "addressed arbitration held in a foreign country."  Finally, and again as dicta, the District Court held that even if the arbitration here qualified under Section 1782 it would not have ordered the discovery of the 89 boxes of documents Grupos Unidos sought from CH2M Hill because those documents were in the possession of a foreign subsidiary and were physically located in Panama, though CH2M Hill could have accessed them electronically from the United States.  The court noted that "there is reason to think that Congress intended to reach only evidence located within the United States."  The District of Colorado thus followed the Middle District of Florida in holding that ICC arbitrations do not qualify as "tribunals" under section 1782.[134] 

At least one court has addressed whether Section 1782 assistance is available for use in a pre-arbitration attachment proceeding.  In Jiangsu S.S. Co. v. Success Superior, 2015 U.S. Dist. LEXIS 13387 (S.D.N.Y. Jan. 30, 2015), Jiangsu Steamship Co. sought Section 1782 discovery for use in a pre-arbitration attachment proceeding.  The court denied the petition, and Jiangsu sought reconsideration.  In the original decision, the court applied the rule set forth in Euromepa, S.A. v. R. Esmerian, Inc., 154 F.3d 24 (2d Cir. 1998), in which the Second Circuit held that a petitioner could not obtain 1782 discovery for use in a French bankruptcy proceeding because in that proceeding "the already extant judgment [wa]s merely being enforced" and "nothing [wa]s being adjudicated."  Jiangsu argued that Euromepa did not apply because a pre-arbitration attachment proceeding was not an action to enforce a judgment.  The court disagreed, holding that a pre-arbitration attachment proceeding was no more "adjudicative" in nature than an action to enforce a judgment, because "[a]ll that happens is that identified property becomes security for the enforcement of a judgment that may be entered somewhere down the pike.  That is no more ‘adjudicative’ than an action to obtain enforcement of a judgment."  The court also noted that Jiangsu’s failure to commence an arbitration confirmed its suspicion that Jiangsu actually wanted to use the documents to determine if the defendant had any assets worth pursuing.

In Akebia Therapeutics, Inc. v. FibroGen, Inc., the Ninth Circuit ruled that proceedings before the Japanese and European Patent Offices are "’tribunals’ to which Section 1782 applies."[136]   It reasoned that both of the foreign patent offices "conduct quasi-judicial proceedings" that "carry many of the hallmarks of traditional justice proceedings."[137]   These hallmarks include "serving as first-instance decision-makers tasked with resolving patent validity disputes," "collecting and reviewing evidence in order to resolve those disputes," and "permitting their decisions to be appealed and become subject to further review."[138]   Accordingly, the court saw "’no warrant" to exclude the foreign patent proceedings "from the ambit of" Section 1782.[139]   

3.                  "Reasonable Contemplation" of Foreign Proceedings

While U.S. courts continue to grant Section 1782 discovery even where the foreign proceedings have not yet commenced, but are within "reasonable contemplation," at least one court denied Section 1782 after petitioners did not offer sufficient specifics for the contemplated action.

The Southern District of New York in In re MT BALTIC SOUL Produktentankschiff-Ahrtsgesellschaft mgH & Co. KG took a restrictive approach in denying Section 1782 discovery regarding recognition and enforcement actions in England.[140]  The court held that the petition failed to satisfy the statutory requirements of Section 1782 because it concluded that the English post-judgment action was not a "foreign proceeding" within the meaning of the statute.

As to "reasonable contemplation," the court found that the petitioners had identified no such proceeding that was within reasonable contemplation because "[p]etitioners appear only to be ‘discussing the possibility of initiating litigation’" and "do not identify with particularity the types of proceedings they expect to bring against the purported alter ego companies, nor the countries or tribunals in which they may take action (aside from cursory references to England and Anguilla)."[141]

In the alternative, the court held that the Intel factors weighed against granting the discovery request, mainly because of "the significant breadth of the requested discovery."  The court stated that "[p]etitioner’s request has every indication of being an archetypal fishing expedition designed to locate assets to satisfy the English court judgment, rather than a bona fide attempt to develop evidence substantiating their alter ego contentions."

4.                  Section 1782 and Documents Located Abroad

Whether documents located outside the United States can be obtained through Section 1782 discovery from a corporation with a presence in the United States continues to be the subject of dispute.  Where the target is "found" in the district and has "control" over the documents under the Federal Rules of Civil Procedure, courts have been wrestling with whether Section 1782 permits discovery of documents located overseas.

In 2014, several courts denied discovery applications that sought documents located overseas.  In In re Slawomir Kaczor and Tomasz Rogucki,[142] the Southern District of Ohio denied a Section 1782 application for discovery in aid of Polish proceedings because, among other issues, the discovery sought was located in Poland and "courts have read into § 1782 a threshold requirement that the material sought be located in the United States."[143]  The court also stated that the legislative history of Section 1782 establishes that it "was intended to aid in obtaining oral and documentary evidence in the United States . . . and was not intended to provide discovery of evidence maintain[ed] within a foreign district."[144]  Likewise, in In re Certain Funds, Accounts, and/or Investment Vehicles Managed by Affiliates of Fortress Investment Group LLC,[145] the Southern District of New York stated that "courts have read into § 1782 a threshold requirement that the material sought be located in the United States," though the court denied the discovery application on other grounds."  The Southern District’s decision was affirmed in 2015.[146]

The District Court of Colorado in Campos-Alvarez v. Newmont Mining Corp. granted in part and denied in part a Section 1782 discovery application brought in connection with Peruvian criminal and civil actions related to the shooting of a farmer who was protesting a gold mining project.[147]  The applicant was the shooting victim who had filed a civil suit against various governmental agencies in Peru and the target of the discovery application was a Colorado mining company that operated the gold mining project that the shooting victim was protesting.  The District Court, in a brief order, found that the Section 1782 requirements were all satisfied, but limited the scope and breadth of the discovery requests to only those documents and information held by the mining company in the District of Colorado, expressly excluding documents held in Peru because there was no "indication that information in Peru cannot be obtained via the Peruvian proceedings."  The District of Colorado thus followed those cases finding "reason to think that Congress intended to reach only evidence located within the United States" and limiting the extraterritorial reach of the statute where the petition has not sufficiently demonstrated that access to foreign documents was unavailable through a foreign discovery proceeding.  In re Kreke Immobilien KG, No. 13 Misc. 110(NRB), 2013 WL 5966916 (S.D.N.Y. Nov. 8, 2013).

            Similarly, in Fuhr v. Deutsche Bank, AG, 615 Fed. App’x 699 (2d Cir. 2015), the Second Circuit affirmed a decision rejecting an individual’s Section 1782 petition seeking evidence from Deutsche Bank AG for use in a defamation action in Germany.  The court held that the individual’s petition named Deutsche Bank AG as respondent, but the individual was actually seeking information from Deutsche Bank (Suisse).  Even assuming that Deutsche Bank AG could be "found in" the Southern District, the Circuit Court held that it was not an abuse of discretion to deny the individual’s petition because there was no evidence to suggest the information sought was located in the Southern District.

5.                  Exhaustion of Discovery in Foreign Proceedings

Courts continue to be split on whether participants in foreign proceedings must first exhaust discovery options in the foreign proceedings.  In In re Application of Gilead Pharmasset LLC, the District Court denied a Section 1782 application made by pharmaceutical giant Gilead Pharmasset LLC in connection with litigation in Germany, Sweden, Austria, and Switzerland.[148]   The decision is significant because it appears to find a foreign exhaustion requirement where the discovery target is also a party to the foreign proceeding.[149]  In the foreign proceedings, Gilead brought claims against AbbVie to establish its rights to certain patents related to an innovative treatment for the Hepatitis C virus.  The District Court concluded that Section 1782’s statutory factors were satisfied, but found that the discretionary factors weighed in favor of denying the application.  AbbVie’s status as a party to the foreign litigation made the District Court’s involvement less necessary and Gilead’s failure to pursue the discovery abroad suggested an attempt to circumvent foreign proof gathering restrictions, the District Court found.  Noting that "the factors do not heavily favor one conclusion over the other," the court held that the balance of factors weighed in favor of denying the discovery application. 

Other courts have reached an opposite conclusion.  In Mees v. Buiter, the Second Circuit vacated and remanded a Section 1782 decision for erroneously holding that the petitioner had not satisfied the "for use" requirement of the statute.[150]   In dicta, it observed that the lower court was wrong to suggest that there is an "exhaustion requirement" in Section 1782.[151]  The petitioner was not required to have first "tried and failed to obtain the discovery" in the foreign court because the Second Circuit had previously rejected such a "’quasi-exhaustion’" rule, concluding that it had "’no support in the plain language of the statute and runs counter to its express purposes.’"[152]  

Similarly, in HT S.R.L. v. Velasco, the court granted an Italian LLC’s motion to compel compliance with a Section 1782 subpoena and denied a consultant’s motion to quash the subpoena even though the petitioner had not exhausted discovery options in the foreign court.[153]  Respondent argued that the petitioner was attempting to circumvent the foreign court’s discovery procedure both because the requested information was not discoverable in the foreign court and because it did not "first mak[e] any effort to obtain a discovery order from the court in Milan[.]"  Disagreeing, the court held that the discoverability of the material in the foreign tribunal was irrelevant and, even if it was discoverable, the petitioner was not required to seek discovery from the foreign tribunal.

6.                  Obtaining Gmail Data from Accounts Located Abroad in the Northern District of California

The Northern District of California has become a hotbed for Section 1782 applications requesting discovery of Gmail data.[154]  For instance, in In re Request for Int’l Judicial Assistance,  the U.S. Government, as the petitioner, filed an ex parte application to take 1782 discovery upon a request from the National Court Administration of the Republic of Korea.[155]  Specifically, the information sought related to a particular Gmail user and was requested in connection with a private lawsuit pending in Korea.  The court found that the statutory requirements of Section 1782 had been met, and also found "good cause to exercise its discretion to authorize the requested discovery" because, among other things, the Korean court was receptive to the discovery, it was not an attempt to circumvent foreign proof-gathering restrictions, and would not impose an undue burden.

Likewise, in In re Ex Parte Application of Global Energy Horizons Corp., 2015 WL 1325758 (N.D. Cal. Mar. 25, 2015), Global Energy Horizons Corp. sought an order authorizing a subpoena to Google Inc. for documents in connection with a lawsuit adjudicated in the English High Court of Justice, Chancery Division in the United Kingdom.  The District Court held that Global Energy had satisfied the statutory requirements of Section 1782.  The District Court then applied the Intel factors and determined they weighed in favor of granting the discovery request.  Google was not a party to the foreign proceeding or a resident in the UK.  There was no authority that the English government would be hostile or otherwise reject discovery obtained through a Section 1782 subpoena.  Global Energy’s request was also narrowly tailored and sought information that only Google would be able to recover.

7.                  Compliance with Section 1782 May Not Be Enough to Obtain Discovery–Subpoenas Must Still Adhere to the Federal Rules of Civil Procedure

At least one court has held that complying with Section 1782 will not save a subpoena that violates the Federal Rules of Civil Procedure.  In In re Application of Kate O’Keeffe, to Issue a Subpoena for the Taking of a Deposition and the Prod. of Documents for Use in a Foreign Proceeding, the court granted a motion to quash a Hong Kong reporter’s Section 1782 application and accompanying subpoena for a nonparticipant’s documents and testimony, finding it to be "the classic improper fishing expedition."[156]  The reporter sought information for use in defending a Hong Kong libel suit filed by Sheldon Adelson.  The court held that the Section 1782 statutory requirements were met and that the Intel factors weighed in favor of granting the application.  However, the court also held that the subpoena did not comply with the requirements of the Federal Rules of Civil Procedure because it was irrelevant, an improper fishing expedition, a vehicle for harassment, and a cumulative request.[157]

Part VI:  Developments in Foreign Judgment Recognition and Enforcement:  A Clash Over the Conversion of ICSID Awards to U.S. Judgments

The 2014 Update addressed the uptick in the number of foreign judgment recognition and enforcement suits, including foreign litigants seeking to domesticate foreign judgments.  While 47 out of 50 states have adopted some version of the Uniform Enforcement of Foreign Judgments Act, there is not uniformity among district courts in determining whether to recognize an International Centre for Settlement of Investment Disputes ("ICSID") award under state law recognition procedures in the first instance.[158]  Recently the District Court for the Southern District of New York and the District Court for District of Colombia addressed that issue and considered the process by which arbitral awards issued by the ICSID should be converted into federal court judgments.  Practitioners will be interested in the different results reached by each court.  As a result of these decisions, going-forward practitioners seeking to convert an award to a judgment will likely have their award converted more efficiently if they move before a court of the Southern District of New York.

A.                Procedural Background For Enforcement of ICSID Awards

Article 54(1) of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States ("ICSID Convention") requires that each contracting state "shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State." 

The implementing statute provides that awards rendered under the ICSID Convention create "a right arising under a treaty of the United States" and that "pecuniary obligations imposed shall be enforced and given the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several States."  22 U.S.C. § 1650a ("Section 1650a").  Federal district courts have exclusive jurisdiction over "actions and proceedings" relating to ICSID awards.  22 U.S.C. § 1650a(b) ("Section 1650a(b)"). 

B.                 Two District Courts; Two Conflicting Outcomes

In Mobil Cerro Negro Ltd. v. Bolivarian Republic of Venezuela, ExxonMobil entities ("Mobil") brought an ex parte petition in the Southern District of New York to recognize a $1.6 billion award against Venezuela.[159]  Following precedent, the court granted the petition and entered a final judgment pursuant to Section 5403 of the New York Civil Practice Law and Rules.[160]  Venezuela moved to vacate the judgment, arguing that (1) 22 U.S.C. § 1650a does not permit a federal court to borrow New York State’s ex parte recognition procedure to enter a judgment recognizing an ICSID award, and (2) the ex parte procedure used did not comply with requirements of personal jurisdiction, service of process, and venue set forth in the Foreign Sovereign Immunities Act (the "FSIA"), 28 U.S.C. §§ 1330, 1602 et seq.[161]

Rejecting Venezuela’s argument, the court held that Section 1650a is silent as to the procedure for enforcing an ICSID award and that borrowing the New York State ex parte recognition procedure was proper.[162]  Importantly, the Mobil court found that the New York State law procedure did not abridge the foreign sovereign’s rights either to challenge the award substantively before ICSID or to resist attachment or execution of the sovereign’s assets in the United States. 

The court also rejected Venezuela’s arguments that ex parte recognition is inconsistent with the FSIA’s requirements as to personal jurisdiction, service of process, and venue.[163]  The court noted that two provisions of FSIA have been held by the Second Circuit to confer subject matter jurisdiction over actions arising out of ICSID awards:  28 U.S.C. § 1605(a)(6)(B) (actions arising out of an arbitration award governed by a treaty in force for the United States calling for the recognition and enforcement of arbitral awards) and § 1605(a)(1) (waiver of immunity by the sovereign).[164]  The court found that it had subject matter jurisdiction under both exceptions.  In addition, the court held that the FSIA does not require a plenary civil action to convert an ICSID award to a federal court judgment.

In reviewing the history and purposes of the ICSID Convention, the court found that "Venezuela’s claim that the FSIA should be read to require an award creditor to bring a plenary lawsuit to recognize an ICSID award . . . would bring the FSIA into grave tension with the objectives of the ICSID Convention and of Congress . . . because the history and terms of the ICSID Convention unavoidably reveal that the contracting states to the ICSID Convention intended to put in place an expedited and automatic recognition procedure."[165]  The court noted that other jurisdictions permit recognition on an ex parte basis, including Australia, England and France.[166]  A plenary action would lead to substantial delays, especially in light of the FSIA’s requirements for service of process.[167]  The court emphasized that the streamlined recognition procedure would not interfere with Venezuela’s right to challenge the award within ICSID (the court stayed enforcement of the judgment pending Venezuela’s application to ICSID to revise the award), and that the FSIA would afford Venezuela further protections at the execution and attachment phase. 

In Micula v. Romania, the District Court for the District of Colombia rejected the court’s approach in Mobil, concluding that Section 1650a does not permit the use of an ex parte state procedure to recognize an ICSID award.[168]  Rather, the party seeking recognition of an ICSID award must bring a plenary action and, if the award-debtor is a foreign sovereign, must comply with service of process pursuant to the FSIA.

The claimants in Micula filed a petition in the D.C. District Court seeking confirmation of a $116 million ICSID award against Romania on an ex parte basis and entry of judgment of the award after its conversion into U.S. dollars.  Claimants argued that the court should look to the most analogous state law, namely the District of Columbia Uniform Enforcement of Foreign Judgments Act, D.C. Code §15-352.  Like the New York Convention (codified in New York State at Civil Practice Law and Rules § 52) relied on in Mobil, the D.C. statute allows for confirmation of foreign judgments on an ex parte basis. 

The court recognized that Section 1650a "does not address precisely how a court should go about ‘enforcing’ and ‘giving full faith and credit’ to an ICSID award."[169]  The court focused on the statutory text providing that federal courts should "enforce" an ICSID award in the same manner as a final state court judgment, observing that "there is no federal statutory mechanism akin to the Uniform Enforcement of Foreign Judgments Act that enables a federal court to register, recognize or confirm a state court judgment."[170]  The court found that the statutory reference in 1650a(b) to "actions" and "proceedings" evidences Congress’s intent to require commencement of an action by the filing of a complaint and service of summons, rather than through an ex parte procedure.[171]  The court concluded that under Section 1650a, an ICSID award is intended to be enforced by a plenary action.[172]  Finally, the court found that its interpretation does not conflict with the United States’ obligation under the ICSID Convention, which "anticipates that a Contracting State with a federal constitution, such as the United States, can elect to treat an ICSID award as a final judgment of a constituent state court."[173]

Following the decision of the D.C. District Court in Micula, the same award creditors sought and obtained a judgment against Romania recognizing the ICSID award in the Southern District of New York, using the same ex parte confirmation procedure approved in the Mobil Cerro Negro case.  Denying Romania’s motion to vacate the judgment, the court approved the reasoning set forth in Mobil Cerro Negro and rejected the D.C. District Court’s rationale.[174]

*          *          *

Practitioners attempting to convert an arbitral award to a judgment will still face hurdles to execution and attachment of sovereign property under the FSIA, irrespective of whether they bring their action in the Southern District of New York or the D.C. District.  But the ex parte recognition procedure permitted by the Southern District makes conversion of an award into a judgment much easier and, as a result, should be expected to speed-up the enforcement process significantly.  Under the Southern District of New York procedure, once the 30-day statutory waiting period expires, the award creditor can immediately seek an order of execution against the sovereign.  The approach taken by the D.C. District will likely require significant time to convert an ICSID award against a foreign sovereign to judgment, as service of process alone could take six months or more under the FSIA, the sovereign has 60 days to respond once served with the summons and complaint, and motion practice on personal jurisdiction and other issues may ensue. 

Part VII:  Transnational European Legal Developments[175]

On January 10, 2015, the Brussels Regulation[176] on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters in the 28 EU Member State was significantly amended (the "Recast Brussels Regulation").  This Part addresses the Recast Brussels Regulation’s clarification to the rules relating to jurisdiction clauses in commercial agreements, including the simplification of the recognition and enforcement of judgments of courts of European Union member states by other member states.  This Part also addresses the Lugano Convention of October 30, 2007 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (the "Lugano Convention").  Like the Brussels I Regulation, the Lugano Convention also governs jurisdiction and the enforcement of judgments.  The Lugano Convention extends the principals and objectives of the Brussels I Regulation to European Free Trade Association ("EFTA") Member States and is applicable between the EU Member States and the EFTA Member States, notably, Iceland, Switzerland and Norway.[177]

A.                The Recast Brussels Regulation

Regulation 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) (the "Recast Brussels Regulation")[178] amends Council Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the "Brussels I Regulation"),[179] which governed jurisdiction and enforcement in civil and commercial matters in the courts of the EU Member State.

The Recast Brussels Regulation applies to any case brought on or after January 10, 2015.  The Brussels I Regulation will continue to apply to any cases initiated prior to that date.  Civil and commercial matters coming before all courts and tribunals of the European Union, save for those proceedings expressly excluded from its scope (and it should be noted that some of those exclusions are highly significant, such as those for insolvency matters, social security and arbitration) are subject to either the Brussels I Regulation or the Recast Brussels Regulation.

1.                  Jurisdiction Clauses (Article 25)

Under the Brussels I Regulation, an agreement between parties to a civil or commercial dispute to litigate in the courts of an EU Member State would be enforceable as long as one of the parties was domiciled in a European Union Member State.  Article 25 of the Recast Brussels Regulation eases this requirement and allows parties, regardless of their domicile, to designate any EU Member State the exclusive jurisdiction over resolution of any dispute.[180]  Such an agreement will be upheld in the courts of any EU Member State.

The Recast Brussels Regulation also provides that the substantive validity of an exclusive jurisdiction clause will be determined by the law of the Member State to which the parties allocate jurisdiction.[181]  This avoids the result sometimes seen under the Brussels I Regulation wherein a court would have to ascertain the validity of a jurisdiction clause under a law different from its own.

Article 25(5) of the Recast Brussels Regulation introduces a new rule not found in the Brussels I Regulation, the effect of which is that parties may agree that one Member State’s laws govern the location of the court in any dispute relating to that agreement is to be heard, while simultaneously agreeing that the laws of a second Member State govern the substantive terms of the agreement.[182]

Consequently, it is possible for the terms of a contract to be governed by Japanese law save that the exclusive jurisdiction clause in that contract allocates jurisdiction to, for example, Italy, and is therefore to be determined in accordance with Italian law.  The practical impact of this is that parties may be deterred from claiming that an exclusive jurisdictional clause is invalid solely on the grounds that the contract is void because, given that, even if that were the case, the validity of the jurisdictional clause will have to be adjudged separately.

2.                  Disarming the "Italian Torpedo" (Article 31)

One criticism of the Brussels I Regulation resolved by the Recast Brussels Regulation was the abuse of the Brussels I Regulation lis pendens rule through the use of the so-called "Italian torpedo," a device that had come to be deployed, inter alia, in cartel damages cases and patent infringement cases.  The lis pendens rule governs which Member State’s courts will have jurisdiction when two (or more) actions are filed in parallel in the courts of other (different) Member States.  The "Italian torpedo" was (or is) a defensive action filed in Italy by a party anticipating litigation in another Member State (although similar torpedoes could be launched in any other Member State, known for its slow-moving courts), regardless of whether the party had any chance of success on the merits and regardless of any contrary exclusive jurisdiction agreement between the parties, typically seeking a declaratory relief to the effect that the litigant "launching" the torpedo had not breached the relevant provision of law.  Upon filing the action in an EU Member State, the courts of that Member State were "seised of" (to use the expression contained in the Regulation itself) the dispute between the parties.  As long as the Courts of an EU Member State were so seised, in theory, the courts of any other  Member State, including courts specified in an exclusive jurisdiction agreed between the parties, would be required to stay any proceedings before then until the first court determined whether it rightfully had jurisdiction.  While in practice, the Italian torpedo has seen only limited success, such filings sought to take advantage either of the significant delays common in certain Member States’ domestic civil court system or of variations in the availability of certain procedural mechanisms across the EU, such as, for example, the absence in the courts of civilian legal systems of common law-style disclosure.  The purpose of the "torpedo" was to seek to prevent imminent litigation being filed in a Member State which might otherwise naturally have jurisdiction, and where the courts would deal with complex commercial claims more efficiently, or where an undesirable procedural advantage for the anticipated opponent was available.

Article 31(2) of the Recast Brussels Regulation addresses the problem of such "torpedoes" (whether Italian or otherwise) by clearly establishing that when proceedings are initiated in a court of a Member State on which an agreement confers exclusive jurisdiction and either party’s attempts to bring an action in a different Member State, the latter’s court shall stay its proceedings until such time as the court identified in the agreement has ruled on its jurisdiction.

3.                  New International lis pendens Rule (Articles 33 and 34)

The Brussels I Regulation was silent on all matters regarding non-European Union ("Third State") courts but, in the case of Owusu v. Jackson,[183] the Court of Justice of the European Union ("CJEU") held that, if a court of a Member State had been seised of an action, that court could not stay its proceedings in favor of a Third State’s court even if it found the Third State’s court was a more appropriate jurisdiction.  The Recast Brussels Regulation now explicitly addresses this point in Articles 33 and 34.  Those Articles confer on the courts of an EU Member State a discretionary power to stay proceedings properly on foot before them and to defer to Third State courts in limited circumstances.  This discretion only applies if all of the following are satisfied:

(1)  Proceedings are already on foot in the Third State court;

(2)  A judgment in the Third State would be capable of recognition and, where applicable, enforcement in the EU Member State whose court is considering whether to grant a stay; and

(3)  The EU Member State considers that a stay is "necessary for the proper administration of justice."[184]

If this test is not met, the Member State does not have jurisdiction to stay the action. 

Practitioners should consider the possibility that these Articles could trigger a race to the courts:  if an EU Member State court is first seised of the action, then Article 33(1) will not apply or, conversely, if a Third State court is first seised, then the provision in question will apply. 

The new Articles could also be used as a way to bypass Third State jurisdiction agreement between the parties.  For example, potential judgment debtors, in breach of a Third State jurisdiction agreement, could initiate a declaratory judgment action in an EU Member State.  Without there being any proceeding in the Third State, the potential judgment debtor could argue that the EU Member State court has no jurisdiction to enter a stay.

4.                  Enforcement and Recognition of Judgments (Articles 36 to 57)

Under the Brussels I Regulation (Article 38(1)), the recognition and enforcement of EU Member State judgments in other Member States was encumbered by the requirement, prior to enforcement of a judgment, to obtain a "declaration of enforceability" from the courts of the Member State in which enforcement was sought–in some Member States, this was referred to as the exequatur procedure.[185]  This process could be both time consuming and costly.  Under Article 39 of the Recast Brussels Regulation, this requirement has been abolished such that to enforce a judgment given by the courts of one EU Member State in the courts of another, the party seeking enforcement need only present to the latter a copy of the judgment and a certificate in the prescribed form from the courts of the former.[186]  When these documents are presented to the courts of the Member State where the judgment is sought to be enforced, it will be enforced as though it were a local judgment.

However, the grounds for refusal of recognition and enforcement of judgments provided for in Article 45 of the Recast Brussels Regulation remain largely similar to those set forth in the Brussels I Regulation.

One ground on which a court can refuse to recognize and enforce a default judgment is that the defaulting defendant was not served with the proceedings within sufficient time and in such a way to enable him to bring a defense.[187]  In Reeve v. Plummer, [2014] EWHC 362 (QB), decided last December, the court considered whether to enforce a default judgment entered by a Belgian court against three defaulting defendants in England.  After unsuccessful attempts to serve the three defendants with the Belgian proceedings, under Belgian law, service was deemed effected through the Belgian prosecutor.  A hearing was held, which the defendants did not attend, and judgment was entered against them. 

The claimant sought to have the judgment recognized in England pursuant to the Brussels I Regulation.  Defendants challenged, arguing they had not been served with the proceedings in a manner that allowed them to mount a defense.  The first defendant argued he did not know of the Belgian proceedings until he received the default judgment, which he subsequently sought to challenge.  The second and third defendants also received the default judgment but did not seek to challenge the judgment. 

Despite service having been deemed effective under Belgian law, the High Court found that none of the defendants had an opportunity to mount a defense as provided for by Article 34 of the Brussels I Regulation.  It then set aside recognition of the judgment as to the first defendant.  However, because even after they became aware of the judgment, the second and third defendant made no effort to challenge it, the court found they were not entitled to challenge recognition.

For practitioners, this means that even if the requirements of service are formally met in the Member State in which the judgment is entered, the defaulting defendant may still get a second bite of the apple before the court of a different Member State following the Brussels I Regulation may still deny recognition of a default judgment.

5.                  Clarified Arbitration Provision (Recital 12)

Like the Brussels I Regulation, the Recast Brussels Regulation excludes arbitration from its scope.  However, the new Recital 12 provides additional clarity as to the scope of the exclusion.  Of particular interest to practitioners is the provision that a ruling from a Member State’s court as to whether or not an arbitration agreement is null and void, inoperative, or incapable of being performed, should not be subject to the Recast Brussels Regulation’s rules of recognition and enforcement.  As a result, parties may have less incentive to bring proceedings in a Member State solely to obtain an order on the validity of an arbitration agreement, because such an order will not necessarily be capable of recognition in other Member States.

In sum, the Recast Brussels Regulation should be welcomed by practitioners for its revisions to the lis pendens rules.  It is a positive development that exclusive jurisdiction clauses will be enforced without the added "race to court" issue which has been used tactically to delay proceedings.  To take advantage of the new rule, parties may consider amending their dispute clauses.  But not all problems raised by the Brussels I Regulation have been solved.  The new international lis pendens rules could lead to an increase in tactical litigation among parties with Third State jurisdiction agreements.

B.                 Developments Related to the Lugano Convention

Like the Brussels I Regulation, a fundamental principle of the Lugano Convention is to limit the possibility of concurrent proceedings in different jurisdictions, thereby reducing the risk of irreconcilable judgments. 

Articles 27 and 30 of the Lugano Convention address competing jurisdiction issues arising from related actions.  Article 27 provides that where proceedings involving the same cause of action between the same parties are brought in the courts of different states bound by the Lugano Convention, any court other than the court first seized shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.  Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favor of that court.  Article 27 will only apply if the proceedings are still pending in the court first seised when the proceedings are commenced in the court second seised.

Article 30 does not define "court" or "proceeding," but provides that a court is deemed seised either when the document instituting the proceedings is lodged with the court or, when the document is received by the authority responsible for service, provided the claimant subsequently takes the required steps to lodge the document with the court.

1.                  An Expansive Definition of "Court" Under Article 30:  Lehman Bros. Fin. AG v. Klaus Tschira Stiftung GmbH

In late 2014, the English High Court in Lehman Brothers Finance AG v. Klaus Tschira Stiftung GmbH, considered whether Switzerland had been first seised when "conciliatory proceedings" had been commenced in Switzerland but before Swiss court proceedings had begun.  Conciliatory proceedings are a mandatory attempt at reconciliation that, pursuant to Swiss civil procedure, must be undertaken before any civil or commercial dispute can be brought to a Swiss court.  Because such proceedings are outside the Swiss court system, plaintiffs argued they did not fall within the definition of "court" or "proceedings" in Article 30, and as such, under Article 27, the Swiss court was not yet "seised" of the action.  In a matter of first impression, the High Court rejected this interpretation and broadly interpreted "proceedings" and "court" to include such proceedings:  "In circumstances where conciliation proceedings are, or may arguably be, mandatory it is unrealistic not to regard them as part of the proceedings which will or may lead to an enforceable judgment."  As a result, Switzerland was found to have been first seised when a written request for conciliation was lodged and properly retained jurisdiction over the matter.

2.                  Narrowing of Asymmetrical Jurisdictional Clauses Through Article 23: Danne Holding Patrimoniale v. Crédit Suisse, F-PB, Case No. 13-27264 and eBizzcuss v. Apple Sales International, FS P +B+I, Case No 14-1-898

On March 25, 2015, France’s highest court, the Cour de cassation, limited the application of "asymmetrical" choice-of-jurisdiction clauses.  In Danne Holding Patrimoniale v. Crédit Suisse, F-PB, Case No. 13-27264, the Cour de cassation found that an asymmetrical jurisdiction clause in a credit agreement between a bank and a borrower–a provision that is common in financial agreements–was unenforceable because it gave one side an unlimited choice of court before which it could pursue claims.  The one party’s unlimited choice of forum violated the objectives of foreseeability and predictability underlying Article 23 of the Lugano Convention.

To finance work on its estate and to pursue its agricultural endeavors, on August 23, 2007 and October 27, 2008, Danne Holding Patrimoniale ("Danne"), a French company, entered into two credit agreements with Credit Suisse, a Swiss bank ("Credit Agreements").  Each Credit Agreement contained an asymmetrical choice of jurisdiction clause.  The choice of jurisdiction clause provided that if Danne brought an action, its choice of jurisdiction was limited to the exclusive jurisdiction of the Swiss courts.  In contrast, the choice of jurisdiction clause gave Crédit Suisse the choice of "all other competent jurisdictions." 

Contrary to the choice of jurisdiction clause that limited actions brought by Danne to Swiss Courts, ICH, Danne’s successor, brought a tort action against Crédit Suisse and other parties before the French courts.  Crédit Suisse contested the jurisdiction of the French Courts–arguing that based on the choice of jurisdiction clause in the Credit Agreements, the French Courts did not have jurisdiction over the dispute.  Crédit Suisse also relied on Article 23(1) of the Lugano Convention,[188] which provides, in relevant part, that:

If the parties, one or more of whom is domiciled in a State bound by this Convention, have agreed that a court or the courts of a State bound by this Convention are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction.  Such jurisdiction shall be exclusive unless the parties have agreed otherwise.[189]

The Cour d’appel refused jurisdiction based on the terms of the jurisdiction clause.

The Cour de cassation overruled the appellate court’s decision, finding the choice of jurisdiction clause void for giving one side an unlimited and unspecified choice of jurisdiction contrary to the policies of foreseeability and predictability that underlie Article 23 of the Lugano Convention.[190]  The Cour de cassation held that to validly derogate from the jurisdictional regime established by the Lugano Convention, parties must specifically designate the tribunal or the tribunals of a state or set objective criteria for the alternative jurisdictions.

Pursuant to a later decision dated October 7, 2015, this predictability and foreseeability conditions are met when the choice-of-jurisdiction clause provides that a party is entitled, contrary to the other, to choose among jurisdictions determined based on various criteria, even if these criteria do not allow to determine a fixed list of jurisdictions as of the date the contract is entered into, but that such list is only determinable as of the day a dispute arises. In this case, the clause entitled Apple Sales International, the provider, to choose between (i) Irish courts, (the only option opened to its contracting party, the distributor), (ii) the courts within the jurisdiction of which the registered seat of the distributor is located and (iii) "the courts of countries in which [Apple Sales International] suffered a loss".

The Cour de cassation‘s decisions confirm and extend the jurisprudential trend of invalidating unilateral jurisdiction clauses by requiring that precise and objective criteria be set forth in a choice of jurisdiction clause in order for it to be valid.[191]  Parties seeking to benefit from the presence of an asymmetrical choice of jurisdiction clause should carefully draft their clauses to improve the chances of them being enforced by French courts.[192]  It remains to be seen whether other Member State courts will follow France’s lead.

   [1]   Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

   [2]   Our analysis reveals two cases in which courts predicated general jurisdiction upon the agency theory.  In one, the District of Nevada court did so prior to the Ninth Circuit’s ruling in Ranza v. Nike, Inc. (discussed infra), which invalidated the agency theory in the Ninth Circuit.  In the other, Commissioning Agents, Inc. v. Long, the court did not engage in a meaningful analysis of Daimler.  Accordingly, we believe these two cases to be outliers.

   [3]   134 S. Ct. 746, 752 (2014). 

   [4]   Id. at 751.

   [5]   131 S. Ct. 2846, 2851 (2011).

   [6]   134 S. Ct. at 758 n.11. 

   [7]   Ranza v. Nike, Inc., 793 F. 3d 1059 (9th Cir. 2015).

   [8]   Ranza v. Nike, Inc., 577 U.S. ___, No. 15-756 (Jan. 19, 2016).

   [9]   Id. at 1071 (citations omitted).

[10]   See In re Hellas Telecomms. (Lux.) II SCA, 524 B.R. 488, 507–08 (Bankr. S.D.N.Y. 2015).  In In re Hellas Telecomms., the court held that it could evaluate a foreign company’s nationwide contacts because Bankruptcy Rule 7004(f) allowed nationwide service of process.  Id. at 507.  The court then held that the company was "at home" in the United States because the company had a regional head office in New York, where it had $5 billion in assets, a 1.6 million square foot office, 1,600 personnel, and 1,000 executives.  Id. at 508.  The court reasoned that the company "maintain[ed] a substantial, long-term presence in the U.S. and in New York; [the company’s] contacts with the U.S. are not limited to the in-state operations of its affiliate as in Daimler."  Id.

[11]   See Yacovella v. Apparel Imps., Inc., Civ. Act. No. 14–5484 (KM), 2015 WL 5098009, at *6 (D.N.J. Aug. 31, 2015) (holding that a transferee court would have general jurisdiction over a domestic corporation); Chanel, Inc. v. Matos, Civ. Act. No. 14–3509 (JBS/KMW), 2015 WL 4773072, at *3 (D.N.J. Aug. 13, 2015) (upholding general jurisdiction over an individual domiciled and properly served in-state).

[12]   The only reference to consent jurisdiction in Daimler was in passing: "[t]he Court’s 1952 decision in Perkins v. Benguet Consol. Mining Co. remains the textbook case of general jurisdiction appropriately exercised over a foreign corporation that has not consented to suit in the forum." Daimler AG, 134 S. Ct 746 at 756 (emphasis added).

[13]   Numerous courts have upheld jurisdiction where companies had registered to do business and designated agents for in-state service of process.  See, e.g., Perrigo Co. v. Merial Ltd., No. 8:14–CV–403, 2015 WL 1538088, at *8 (D. Neb. Apr. 7, 2015) (holding that a company had consented to jurisdiction by registering to do business and designating an agent for in-state service of process); Otsuka Pharm. Co. v. Mylan Inc., No. 14–4508 (JBS/KMW), 2015 WL 1305764, at *12 (D.N.J. Mar. 23, 2015) (holding that two companies consented to jurisdiction "by registering to do business in New Jersey, by appointing an in-state agent for service of process in New Jersey, and by actually engaging in a substantial amount of business in this State"); Forest Labs., Inc. v. Amneal Pharms. LLC, No. 14–508 –LPS, 2015 WL 880599, at *3, 14–15 (D. Del. Feb. 26, 2015) (holding that a company had consented to jurisdiction by registering to do business and designating an agent for in-state service of process, but also stating in dicta that the decision did not render the company "essentially at home" in the state).

        At least one court has also upheld jurisdiction where there was actual in-state service.  In Senju Pharm. Co., Ltd. v. Metrics, Inc., 96 F. Supp. 3d 428, 436–40 (D.N.J. 2015), the court held that a company had consented to personal jurisdiction by accepting service of process in the same state.  The court emphasized that it upheld jurisdiction based on in-state service of process, though the court stated in dicta, "it may also be correct that registering to do business alone (particularly where registration also requires the entity to appoint an agent for service of process) may be sufficient as a basis for personal jurisdiction . . . ."  Id. at 439–40.

        And in another case, a court held that a foreign bank was subject to jurisdiction requiring it to comply with Information Subpoenas because it registered with and obtained a license from the Department of Financial Services, and appointed an agent for in-state service of process.  Vera v. Republic of Cuba, 91 F. Supp. 3d 561, 570–71 (S.D.N.Y. 2015), appeal filed, No. 15-1147 (2d Cir. April 13, 2015).

[14]   See, e.g., Chatwal Hotels & Resorts LLC v. Dollywood Co., 90 F. Supp. 3d 97, 105 (S.D.N.Y. 2015) ("After Daimler, with the Second Circuit cautioning against adopting an ‘overly expansive view of general jurisdiction,’ the mere fact of [the company’s] being registered to do business is insufficient to confer general jurisdiction in a state that is neither its state of incorporation or its principal place of business."); Fiduciary Network, LLC v. Buehler, Civil Action No. 3:15–cv–0808, 2015 WL 2165953, at *6–7 (N.D. Tex. May 8, 2015) (holding that "registration to do business and the appointment of a registered agent were afforded no special weight"); Neeley v. Wyeth LLC, No. 4:ll–cv–00325–JAR, 2015 WL 1456984, at *3 (E.D. Mo. Mar. 30, 2015) (holding that registration in state and designation of a local registered agent was insufficient for general jurisdiction because "every foreign corporation transacting business in the state of Missouri would be subject to general jurisdiction [in Missouri].  Daimler clearly rejects this proposition.");

[15]   Lanham v. Pilot Travel Ctrs., LLC, No. 03:14–cv–01923–HZ, 2015 WL 5167268, at *7 (D. Or. Sept. 2, 2015).

[16]   No. 10 Civ. 4974 (RJS), 2015 WL 5707135, — F. Supp. 3d — (S.D.N.Y. Sept. 29, 2015).

[17]   Gucci Am., Inc. v. Bank of China, 768 F.3d 122 (2d Cir. 2014).

[18]   20 N.Y.3d 327 (2012).

[19]   Gucci, 2015 WL 5707135, at *3. 

[20]   Id. at *4. 

[21]   Id. at *5. 

[22]   Id. at *8 (quoting Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 171 (2d Cir. 2013)). 

[23]   See also NML Cap., Ltd. v. Rep. of Argentina, 14-cv-492, Dkt. 101 at 20 (D. Nev. Mar. 16, 2015) (exercising personal jurisdiction over a non-party Panamanian corporate entity in a judgment enforcement action).

[24]   561 U.S. 247, 255, 261 (2010).

[25]   In re Arab Bank, PLC Alien Tort Statute Litigation, Docket No. 13–3605, 13 3620, 13–3635, 13–4650, 13–4652, 2015 WL 8122895 (Dec. 8, 2015 2d. Cir.). 

[26]   In re Arab Bank, 2015 WL 8122895, at *4.

[27]   Id.

[28] Doe v. Nestle, 748 F. Supp. 2d 1057, 1111 (C.D. Cal. 2010).

[29] Doe I v. Nestle USA, Inc., 766 F.3d 1013 (9th Cir. 2014).

[30] Id. at 1028.

[31]   Doe v. Drummond Co., 782 F.3d 576, 596 (11th Cir. 2015).

[32]   Id. at 598.

[33]   Id.

[34]   Doe v. Exxon Mobil Corp., 2015 U.S. Dist. LEXIS 91107, at *20 (D.D.C. Jul. 6, 2015).

[35]   Id. at *26.

[36]   Adhikari v. Daoud, 95 F. Supp. 3d 1013, 1021 (S.D. Tex. Mar. 24, 2015).

[37]   18 U.S.C. §§ 1961-1968.

[38]   European Cmty. v. RJR Nabisco, Inc., 764 F.3d 129 (2d Cir. 2014).

[39]   European Cmty. v. RJR Nabisco, Inc., 764 F.3d 149, 151 (2d Cir. 2014).

[40]   United States v. Xu, 706 F.3d 965, 977 (9th Cir. 2013).  See also Mitsui O.S.K. Lines, Ltd. v. SeaMaster Logistics, Inc., No. 11 Civ. 2861, 2015 WL 5782349, at *6 (Oct. 5, 2015) (dismissing civil RICO claim because "the domestic acts [alleged] did not execute or perpetuate the racketeering enterprise in any meaningful way" or "consummate the purpose of the enterprise such that the [extraterritorial] activity would have otherwise been a failure"); Borich v. BP, P.L.C., 904 F. Supp. 2d 855, 861-62 (N.D. Ill. 2012) (holding that "[f]oreign racketeering activity will not be considered" in determining whether a plaintiff has stated a valid RICO claim); United States v. Philip Morris USA, Inc., 783 F. Supp. 2d 23, 29 (D.D.C. 2011) (holding that "isolated domestic conduct," including communications between foreign and domestic individuals and visits to the United States, "does not permit RICO to apply to what is essentially foreign activity"); CGC Holding Co., LLC v. Hutchens, 824 F. Supp. 2d 1193, 1209 (D. Colo. 2011) (denying motion to dismiss a class action civil RICO claim where "the racketeering activity . . . was directed at and largely occurred within the United States"), aff’d on other grounds 774 F.3d 1076,1099 (10th Cir. 2014) (declining to reach the merits issue of extraterritoriality on an interlocutory appeal of class certification).  In a pre-Morrison decision, the Eleventh Circuit held that "RICO may apply extraterritorially if conduct material to the completion of the racketeering occurs in the United States, or if significant effects of the racketeering are felt here."  Liquidation Comm’n of Banco Intercontinental, S.A. v. Renta, 530 F.3d 1339, 1351–52 (11th Cir. 2008).

[41]   See Xu, 706 F.3d at 977.

[42]   733 F. Supp. 2d 471, 474 (S.D.N.Y. 2010). 

[43]   See Sorota v. Sosa, 842 F. Supp. 2d 1345, 1350 (S.D. Fla. 2012) (holding that a RICO claim must be dismissed where a plaintiff "alleges a foreign – not a domestic – RICO enterprise . . . regardless of where the predicate acts of racketeering occur"); In re Le-Nature’s, Inc. v. Krones, Inc., No. 09 Civ. 1445, 2011 WL 2112533, at *3 (W.D. Pa. May 26, 2011) (holding that where "the alleged enterprise is domestic" it is "within the ambit of RICO").

[44]   United States Amicus Br., RJR Nabisco, Inc. v. EU Community, No. 11-2375, Dkt. 63 (2d Cir. Oct. 7, 2011), at 12.

[45]   United States Amicus Br., RJR Nabisco, Inc. v. EU Community, No. 15-138 (Dec. 18, 2015).

[46]   See id. at 10-20.

[47]   Id. at 22.

[48]   Id. at 30.

[49]   777 F.3d 125, 130 (3d Cir. 2015).

[50]   Id.

[51]   Id. at 135.

[52]   Id. at 135-37.

[53]   Id. at 135 (quoting Morrison, 561 U.S. at 268).

[54]   Id. at 136 (quoting United States v. Vilar, 729 F.3d 62, 77 n.11 (2d Cir. 2013)).

[55]   Id. at 136 (quoting Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 68 (2d Cir. 2012)).

[56]   Id. (quoting Absolute Activist, 677 F.3d at 69, 70).

[57]   Id. at 136-37.

[58]   Id. at 136.

[59]   Id. at 136-37.

[60]   Id. at 137-38.

[61]   Id. at 137 (quoting Morrison, 561 U.S. at 271-72).

[62]   Id. at 138.

[63]   No. 3:14-CR-00341-CRB, 2015 U.S. Dist. LEXIS 52452 (N.D. Cal. Apr. 21, 2015).

[64]   Id. at *2-5.

[65]   Id. at *6.

[66]   Id. at *6, *7 (alteration in original) (quoting Morrison, 561 U.S. at 255).

[67]   Id. at *9, *10.

[68]   Id. at *19-20.

[69]   Id. at *20.

[70]   Id. at *23-24.

[71]   94 F. Supp. 3d 394 (E.D.N.Y. 2015).

[72]   Id. at 404.

[73]   Id.

[74]   Id. at 411.

[75]   See id. at 411–12 (citing United States v. Siddiqui, 699 F.3d 690 (2d Cir. 2012)).

[76]   Id. at 412 (quoting Siddiqui, 699 F.3d at 700).

[77]   Id. (citing Siddiqui, 699 F.3d at 700).

[78]   Id. at 412–13.

[79]   Id. at 413.

[80]   Id.

[81]   46 U.S.C. § 70502(c)(1)(A), (C), (E). 

[82]   780 F.3d 1185 (D.C. Cir. 2015). 

[83]   Id. at 1191. 

[84]   Id. at 1196. 

[85]   Id. at 1197-8.

[86]   795 F.3d 138 (D.C. Cir. 2015). 

[87]   Id. at 144 (citing 46 U.S.C. §70503(B)). 

[88]   Id.

[89]   Lay v. United States, 2015 U.S. App. LEXIS 14534, at *4 (6th Cir. Aug. 17, 2015).

[90]   Id. at *14–15.

[91]   Id. at *17.

[92]   Id. at *16 (citing Morrison v. National Australian Bank Ltd., 561 U.S. 247, 266 (2010)).

[93]   Id.

[94]   Id. at *17.

[95]   No. 12-10631(MG), 2015 WL 1029921 (Bankr. S.D.N.Y. Mar. 9, 2015).

[96]   See 11 U.S.C. § 546(e).

[97]   Id. at *2-3.

[98]   Id. at *10.

[99]   Id. at *10–11.

[100]   Id. at *11.

[101]   Liebman v. Prupes, No. 14. Civ. 9003, 2015 WL 3823954 (C.D. Cal. Jun. 18, 2015).

[102]   Id. at *6.

[103]   Id. at *7.

[104]   Id.

[105]   Id. at *8.

[106]   Doe v. Nestle USA, Inc., 766 F.3d 1013, 1016 (9th Cir. 2014), cert. denied, No. 15-349, 2016 WL 100380 (U.S. Jan. 11, 2016).  Plaintiffs originally sued additional companies.  

[107]   Id. at 1024-26.   

[108]   1st Am. Class Action Compl. for Injunctive Relief & Damages at ¶ 34, Doe v. Nestlé, S.A., 748 F. Supp. 2d 1057, 1145 (C.D. Cal. 2010) (No. 05-cv-5133(SVW)).

[109]   Doe v. Nestlé, S.A., 748 F. Supp. 2d 1057, 1145 (C.D. Cal. 2010), rev’d and vacated sub nom. Doe v. Nestle USA, Inc., 766 F.3d 1013 (9th Cir. 2014), cert. denied, No. 15-349, 2016 WL 100380 (U.S. Jan. 11, 2016).

[110]   Doe, 766 F.3d at 1016.

[111]   Id. at 1023.

[112]   Id. at 1024.

[113]   Id.

[114]   Id. at 1024-25.

[115]   Id. at 1025.  In reality the proposed legislation would merely have provided the Food and Drug Administration with $250,000 to fund development of an FDA label certifying chocolate as "slave free."  H. Amend. 142 H.R. 2330 (2001) (in 147 Cong. Rec. H3781 (daily ed. June 28, 2001)).

[116]   Id. at 1028-29.

[117]   8 Del. C. § 220.

[118]   See Master’s Report at 1, La. Mun. Police Emps.’ Ret. Sys. v. Hershey Co., No. 7996-ML (Del. Ch. Nov. 8, 2013). 

[119]   Oral Ruling, Hr’g Tr. 76:24, La. Mun. Police Emps.’ Ret. Sys. v. Hershey Co., No. 7996-ML (Del. Ch. Mar. 18, 2014).   

[120]   Id. at 77:15-20.

[121]   Modern Slavery Act 2015, part 6(1)-(4). 

[122]   Id., part 6(4)(b).

[123]   Cal. Civ. Code § 1714.43.

[124]   Ibid.

[125]   See Master’s Report at 7, 10, La. Mun. Police Emps.’ Ret. Sys. v. Hershey Co., No. 7996-ML (Del. Ch. Nov. 8, 2013).

[126]   U.S. Dep’t of Labor, Bureau of Int’l Labor Affairs, List of Good Produced by Child Labor or Forced Labor 4-5 (2014), available at http://www.dol.gov/ilab/reports/pdf/tvpra_report2014.pdf.

[127]   It is widely recognized that discovery obtained in a Section 1782 proceeding can be used in U.S. civil litigation.  See, e.g., Glock v. Glock, Inc., 797 F.3d 1002, 1010 (11th Cir. 2015) ("[W]e find that § 1782 does not preclude, as a matter of law, the use of evidence procured pursuant to it in subsequent United States civil litigation.").

[128]   542 U.S. 241 (2004).

[129]   See, e.g., In re Appl. of Mesa Power Group, LLC, 2012 WL 6060941 (D.N.J. Nov. 20, 2012); In re Appl. of Chevron Corp., 2012 WL 3636925 (S.D. Fla. June 12, 2012); but see El Paso Corp. v. La Comision Ejecutiva Hidroelecctrica Del Rio Lempa, 341 F. App’x 31 (5th Cir. 2009) (holding that private commercial arbitral body not a "tribunal" under Section 1782.

[130]   685 F.3d 987, 997 (11th Cir. 2012).

[131]   Application of Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 747 F.3d 1262 (11th Cir. 2014).

[132]   The Fifth Circuit, in El Paso Corp. v. La Comision Ejecutiva Hidroelecctrica Del Rio Lempa, issued an unpublished opinion that Section 1782 did not apply to a private commercial arbitration conducted pursuant to an agreement under the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules.  341 F. App’x 31 (5th Cir. 2009).

[133]   The Second Circuit held, in a pre-Intel decision that Section 1782 did not apply to a private foreign arbitration held by the ICC International Court of Arbitration.  NBC v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999).

[134]   See, e.g., In re Owl Shipping, LLC & Oriole Shipping, LLC, 2014 WL 5320192 (D.N.J. Oct. 17, 2014) (finding that the London Maritime Arbitrators Association constituted a Section 1782 tribunal).

[135]   See In re Operadora DB Mexico, S.A. DE C.V., No. 09-cv-383-Orl-22GJK, 2009 WL 2423138 (M.D. Fla. Aug. 4, 2009).

[136]   Akebia Therapeutics, Inc. v. FibroGen, Inc., 793 F.3d 1108, 1111 (9th Cir. 2015)

[137]   Id.

[138]   Id. (citing Intel, 542 U.S. at 257).

[139]   Id. (quoting Intel, 542 U.S. at 258).

[140]   No. 15 MISC 319(LTS), 2015 WL 5824505 (S.D.N.Y. Oct. 6, 2015)

[141]   Id. at *2.

[142]   2014 WL 4181618 (S.D. Ohio Aug. 21, 2014) (quoting In re Certain Funds, Accounts, and/or Inv. Vehicles Managed by Affiliates of Fortress Inv. Grp. LLC, 2014 WL 3404955, at *2 (S.D.N.Y. July 9, 2014)).

[143]   Id. at *3.

[144]   Id.

[145]   In re Certain Funds, 2014 WL 3404955, at *4 (S.D.N.Y. July 9, 2014), aff’d, Certain Funds, Accounts and/or Inv. Vehicles v. KPMG, L.L.P., 798 F.3d 113 (2d Cir. 2015).

[146]   Id.

[147]   2015 WL 1228262 (D. Colo. Mar. 16, 2015).

[148]   2015 U.S. Dist. LEXIS 48720 (D. Del. Apr. 14, 2015). 

[149]   2015 U.S. Dist. LEXIS 48720 (D. Del. Apr. 14, 2015); cf. In re Imanagement Servs., No. Misc. 05-89(FB), 2005 WL 1959702, at *3 (E.D.N.Y. Aug. 16, 2005) ("Section 1782 does not contain an exhaustion requirement that would impose upon an applicant a duty to first seek the requested discovery from the foreign court."). 

[150]   Mees v. Buiter, 793 F.3d 291, 301 (2d Cir. 2015).

[151]   Id. at 303.

[152]   Id. (quotingMetallgesellschaft AG v. Hodapp, 121 F.3d 77, 79 (2d Cir.1997)).

[153]   Misc. Action No. 1:15–mc–00664–RBW–AK, 2015 WL 5120980 (D.D.C. Aug. 28, 2015).

[154]   The Northern District of California has dealt with similar applications concerning blogs.  In In re Int’l Judicial Assistance, 2015 U.S. Dist. LEXIS 81550 (N.D. Cal. June 22, 2015), the United States brought a Section 1782 application for an order authorizing a U.S. Attorney to obtain discovery requested in a letter rogatory from a Turkish court adjudicating trademark infringement claims against an online blogger and seeking to determine the defendant’s identity and contact information via the blog’s owner, Automattic, Inc.  The court granted the petition, holding that the statutory requirements were met and that the Intel factors weighed in the applicant’s favor.

[155]   No. C15-80069 MISC LB, 2015 U.S. Dist. LEXIS 29962 (N.D. Cal. Mar. 11, 2015).

[156]   Case No. 15–mc –80651–MARRA/MATTHEWMAN, 2015 WL 5092806 (S.D. Fla. Aug. 27, 2015).

[157]   This case also shows that courts are not receptive to obvious examples of forum shopping.  The same petitioner had previously sought discovery under Section 1782 in Nevada and New Jersey.  Id. at *10.

[158]   Mobil, 2015 WL 631409, at *9.

[159]   Mobil Cerro Negro Ltd. v. Bolivarian Republic of Venezuela, 87 F. Supp. 3d 573 (S.D.N.Y. 2015).

[160]   Section 5403 permits ex parte recognition of an out-of-state judgment that is entitled to full faith and credit, provided that the judgment debtor receives notice within 30 days.

[161]   Id. at *1.

[162]   Id.

[163]   Id. at *24.

[164]   Id. at *12–13.

[165]   Id. at *21.

[166]   Id. at *22.

[167]   Id.

[168]   Micula v. Romania, 104 F. Supp. 3d 42 (D.D.C. May 18, 2015).

[169]   Id. at *4.

[170]   Id. at *5.

[171]   Id. at *6.

[172]   Id. at *5.

[173]   Id. at *7.

[174]   Micula v. Gov’t of Romania, No. 15 Misc. 107, 2015 WL 4643180, at *3 (S.D.N.Y. Aug. 5, 2015) (LGS).

[175]   Legal developments concerning data privacy,Foreign Corrupt Practices Act, andantitrust, are addressed more fully in the Gibson Dunn year-end updates for those specific practice groups.

[176]   Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

[177]   Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, 2007 O.J. (L 339), at pp. 3 ff, available at http://ec.europa.eu/world/agreements/downloadFile.do?fullText=yes&treatyTransId=13041.  For more information on the history of the scope of history of the Lugano Convention, see:  http://ec.europa.eu/world/agreements/prepareCreateTreatiesWorkspace/treatiesGeneralData.do?redirect=true&treatyId=7481.

[178]   Regulation No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, 2012 O.J. (L 351), 1–32, available at http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32012R1215 [hereinafter, "Recast Reg."].

[179]   Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, 2001 O.J. (L 12),  1–23, available at http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32001R0044 [hereinafter, "Brussels I Reg."].

[180]   Article 25 of the Recast Brussels Regulation states as follows:

        If the parties, regardless of their domicile, have agreed that a court of the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State. Such jurisdiction shall be exclusive unless the parties have agreed otherwise."

[181]   Recast Reg., supra n.1 at art. 25.

[182]   Article 25(5) of the Recast Brussels Regulation provides:

        An agreement conferring jurisdiction which forms part of a contract shall be treated as an agreement independent of the other terms of the contracts.

        The validity of the agreement conferring jurisdiction cannot be contested solely on the ground that the contract is not valid."

[183]   Case C-281/02 Owusu v. Jackson, 2005 E.C.R. I-1383.

[184]   Recast Reg., supra n.1, at arts. 33-34; see also New Square Chambers "Recasting the Runes, Part 1: An Overview of the Brussels Regulation Recast" (20 Nov. 2014) at para. 38, available at http://www.newsquarechambers.co.uk/files/Publications/Brussels%20Regulation%20Recast%20Article%20Part%20I.pdf.

[185]   Although a more straightforward regime applied in the United Kingdom, per Article 38(2) of the Brussels I Regulation.

[186]   Article 39 provides:

        A judgment given in a Member State which is enforceable in that Member State shall be enforceable in the other Member States without any declaration of enforceability being required.

[187]   See Brussels I Regulation, Article 34(2); Recast Brussels Regulation, Article 45(1)(b).

[188]   The Lugano Convention of October 30, 2007 governs the jurisdiction and recognition and enforcement of judgments in civil and commercial matters between the European Union, Iceland, Switzerland and Norway. 

[189]   Id. at art. 23(1) of the Lugano Convention dated October 30, 2007.

[190]   Cour de cassation, First Civ. Chamber, Sept. 26, 2012, Bull. Civ. I, No. 176, Mrs. X. v. Compagnie Financière Edmond de Rotschild, Case No. 11-26022.

[191]   This trend stems from previous rulings of the European Court of Justice ("CJEU") and Cour de cassation in connection with provisions that were similar to Article 23 of the Lugano Convention–specifically Article 17 of the Brussels Convention dated September 27, 1968 and Article 23 of the Brussels I Regulation. More specifically, the CJEU Case C-387/98, Coreck Maritime GmbH v. Handelsveem B.V. 2000 E.C.R. I-9337.

[192]   Who have referred, notably, e.g., to a CJEC ruling dated June 24, 1986, based on Article 17 of the Brussels Convention: "Since article 17 of the Convention embodies the principal of the parties’ autonomy to determine the court or courts with jurisdiction, the third paragraph of that provision must be interpreted in such a way as to respect the parties’ common intention when the contract was concluded. The common intention to confer an advantage on one of the parties must therefore be clear from the terms of the jurisdiction clause or from all the evidence to be found therein or from the circumstances in which the contract was concluded. Clauses which expressly state the name of the party for whose benefit they have agreed and those which, whilst specifying the courts in which either party may sue the other, have one of them a wider choice of courts must be regarded as clauses whose wording shows that they were agreed for the exclusive benefit of one of the parties."  Case C-22/85, Anterist v. Crédit Lyonnais 1986 E.R.C. 1951.

The following Gibson Dunn lawyers assisted in preparing this client update:  William Thomson, Robert Weigel, Patrick Doris, Anne Champion, Perlette Jura, Michael Walther, and Mary Beth Maloney, as well as Anne Coyle, Tiaunia Bedell, Michael Lee, Pablo Figueroa, Victoria Orlowski, Dylan Mefford, Christopher Leach, Mark Doerr, Doug Watson, Caroline Ziser Smith, Ilias Georgiopoulos, Gregory Bok, Richard Dudley, Audrey Paul, Alejandro Herrera, Jason Neal, Ester Murdukhayeva, Wesley Sze, Kamola Kobildjanova, Amy Chmielewski, and Marc Epstein.

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Philip Rocher – London (+44 20 7071 4202, [email protected])
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