Court Has Federal Question Jurisdiction to Entertain Applications for Discovery in Foreign Proceedings by Virtue of 28 U.S.C. § 1782 — Neither Diversity nor Independent Federal Question Jurisdiction Required

From Rusal v. Trafigura, A.G., 2011 U.S. Dist. LEXIS 26897 (D. Conn. Mar. 16, 2011):

United Company Rusal, PLC and United Company Rusal Investment Management, LLC (collectively "Rusal") filed an emergency order to permit discovery for use in aid of foreign litigation pursuant to 28 U.S.C. §1782. 1 Trafigura A.G. ("Trafigura"), the party from whom discovery is sought, opposed Rusal's motion on a number of grounds and challenged the court's subject matter jurisdiction to consider the application. Trafigura argued, what appears to be a matter of first impression, that section 1782 is a procedural mechanism only and does not provide the court with subject matter jurisdiction to hear applications made thereunder. Trafigura maintains that section 1782 does not create an independent federal cause of action and that because it and Rusal are both foreign citizens, the parties are not diverse. Accordingly, in Trafigura's view, this court has no subject matter jurisdiction to consider Rusal's application. ***

Trafigura did not cite and I could not unearth any case in which a district court held that it could consider the merits of a section 1782 request only if the parties were diverse or if their foreign dispute arose out of federal law. Indeed, every court that has expressed any view with regard to its jurisdiction to entertain a section 1782 application remained notably silent on any requirement that a basis, other than the federal statute itself, was necessary. See In re Chevron Corp., 2011 WL 322380, *4-5 (3d Cir. 2011) ("The District Court had jurisdiction under 28 U.S.C. § 1782 . . . ."); United States v. Devine, 208 F.3d 215 (6th Cir. 2000) (unpublished opinion) (rejecting appellant's contention that 28 U.S.C. § 1782 did not give district court jurisdiction to honor letters rogatory); Bayer AG v. Betachem, Inc., 173 F.3d 188, 189-90 (3d Cir. 1999) ("The District Court had jurisdiction [to consider a section 1782 application] under 28 U.S.C. § 1331 and 1782."); In re Letters Rogatory from Local Court of Ludwigsburg, Federal Republic of Germany in Matter of Smith, 154 F.R.D. 196, 199 (N.D. Ill. 1994) (faced with a challenge to its subject matter jurisdiction to consider an application brought under 1782, the court concluded that it had such jurisdiction because Congress expressly authorized courts to consider section 1782 requests); In re Letters Rogatory from Supreme Court of Ontario, Canada, 661 F. Supp. 1168, 1169 (E.D. Mich. 1987) ("The Court's jurisdiction is grounded on 28 U.S.C. § 1782.").

To the extent that courts have more thoroughly explored their jurisdiction to hear section 1782 applications, those courts focused the inquiry on whether the application satisfied the statute's requirements.***

Footnote 2. A district court has the authority to grant an application for judicial assistance if the following statutory requirements are met: (1) the person from whom discovery is sought must reside or be found in the district of the district court ruling on the application for assistance; (2) the request must seek evidence that is either the "testimony or statement" of a person or the production of "a document or other thing;" (3) the evidence must be "for use in a proceeding in a foreign or international tribunal;" and (4) the request must be made by "an interested person." 28 U.S.C. § 1782.

A. The Court has Subject Matter Jurisdiction to Grant the Application

An action "arises under" federal law within the meaning of section 1331 if either (1) federal law creates the cause of action, or (2) the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law. Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 27-28 (1983).

The first inquiry concerns the source of law from which Rusal's claim is derived. The operative pleading, Rusal's motion for discovery, seeks only to obtain discovery in aid of three foreign proceedings and raises no other cause of action. Trafigura has not identified, nor have I come across any law, state or federal, other than 28 U.S.C. § 1782 under which Rusal could pursue the relief it seeks; rather, the sole source of law for Rusal's application is section 1782. Section 1782, therefore, creates the right underlying the claim for discovery. Second, there is no dispute that resolution of Rusal's application turns solely on whether it meets section 1782 prerequisites to relief. *** Accordingly, an application for discovery in aid of a foreign proceeding made pursuant to 28 U.S.C. § 1782 is a right to discovery that exists solely by operation of federal statute. Because the application arises under federal law, 28 U.S.C. § 1331 explicitly vests the court with subject matter jurisdiction to consider the application.

Footnote 4. Trafigura concedes that Rusal's claim derives from federal law, but argues that section 1782 does not itself create a federal cause of action. In support of the argument Trafigura relies on Matos v. Reno, 1996 U.S. Dist. LEXIS 11748 (S.D.N.Y. Aug. 16, 1996). The holding in Matos is inapplicable to the circumstances of Rusal's application and does not in any way suggest that a district court must first find that it has another independent basis for jurisdiction before considering an otherwise proper application for section 1782 assistance. In Matos the court considered only whether section 1782 created a private right of action under which a party could enjoin the United States government. The court did not take up the question whether section 1782 provided the court subject matter jurisdiction over an application for discovery. The plaintiff in Matos, the purported ex-lover of the President of Venezuela, initiated an action to enjoin various entities, including the Attorney General and the U.S. Attorney for the Southern District of New York, from cooperating with a criminal investigation she believed the government of Venezuela was conducting. Matos brought her claim under section 1782 and argued that it provided the court subject matter jurisdiction over her claim. Quite properly, the court held that section 1782 authorized the district courts to assist in taking evidence, but that the limited right did not create a basis for a cause of action to preemptively challenge discovery that had not yet been sought.

B. No Other Basis of Jurisdiction is Required

Trafigura, comparing section 1782 to the Declaratory Judgment Act and the Federal Arbitration Act, maintained that Congress crafted section 1782 as merely a procedural device for obtaining discovery and not a grant of jurisdiction to courts to consider such applications. Although Trafigura properly recites the widely accepted proposition that not every federal law acts as a gateway to federal court, Giba v. Int'l Union of Electrical, R. &M. Workers, 205 F. Supp. 553, 555 (D. Conn. 1962) (holding that the mere fact that the Constitution or a federal law must be interpreted or applied in the course of a case does not give rise to federal question jurisdiction), Trafigura overlooks that jurisdiction is found where the right or immunity itself is federally created. Id. Moreover, where Congress promulgates a law but intends to limit the reach of the court's subject matter jurisdiction with respect to that statute, it does so explicitly. Verizon Maryland, Inc. v. Public Service Com'n of Maryland, 535 U.S. 635, 644 (2002) (holding that a federal statute's silence on the topic of subject matter jurisdiction leaves intact section 1331's jurisdictional grant and that courts shall not infer an intent to withdraw federal jurisdiction under 1331). Indeed, if Congress intended to specify in each statute the scope of the district court's jurisdiction to consider claims arising thereunder, 28 U.S.C. § 1331's explicit grant of subject matter jurisdiction over claims arising under "the laws of the United States" would be rendered entirely superfluous.

Trafigura's reliance on the Declaratory Judgment Act and Federal Arbitration Act does not bolster its argument that jurisdiction vests only where Congress explicitly provides it. Rather, reliance on those acts cuts the other way and is wholly consistent with the Supreme Court's discussion in Verizon that a court shall presume section 1331's federal question jurisdiction applies to a given statute unless the statute provides otherwise.

C. Congress Intended to Grant Jurisdiction

A review of the statute's legislative history demonstrates that Congress intended a section 1782 application to arise under federal law and that requiring any additional jurisdictional basis would frustrate the statute's stated purpose.

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