In re Aso, 2019 U.S. Dist. LEXIS 120873 (S.D.N.Y. July 19, 2019):

MEMORANDUM ORDER

JAMES L. COTT, United States Magistrate Judge.

On April 12, 2019, Petitioner applied for an order to conduct discovery for use in foreign proceedings pursuant to 28 U.S.C. § 1782, Dkt. No. 2, which this Court granted on June 3, 2019. Dkt. No. 24. On July 3, 2019, Petitioner filed a letter seeking discovery from ten additional entities, as a supplement to her original application. Dkt. No. 39. On July 10, 2019, Respondent filed a letter opposing Petitioner's supplemental request. Dkt. No. 40, and on July 12, 2019, Petitioner filed a letter in reply. Dkt. No. 41. For the reasons that follow, Petitioner's supplemental § 1782 application as to these ten additional entities is granted in part and denied in part.

I. BACKGROUND

In the original § 1782 application to this Court, Petitioner sought leave to conduct discovery in connection with divorce proceedings between her and Respondent now pending in the Tokyo High Court. Dkt. No. 3 at 1. On March [*2]  4, 2019, the Tokyo Family Court had granted Respondent's request for divorce and ordered Respondent to pay Petitioner a lump sum of 10 million Japanese Yen (approximately $900,000.00). Id. at 4. Petitioner timely appealed to the Tokyo High Court, contending that the lower court's judgment was made based on an incomplete record of Respondent's net worth. Id. at 5. Petitioner's § 1782 application sought discovery from Respondent's employer and financial institutions located in this District to fill the alleged gaps in the record. Dkt. No. 2 at 1-2.

To be entitled to § 1782 discovery, an applicant must first satisfy three statutory requirements: "(1) the person from whom discovery is sought resides or is found within the district; (2) the discovery is for use in a proceeding before a foreign or international tribunal; and (3) the application is made by a foreign or international tribunal or any interested person." Kiobel v. Samkalden v. Cravath, Swaine & Moore, LLP, 895 F.3d 238, 243 (2d Cir. 2018) (citation omitted). Assuming each of these three statutory elements have been established, a court must then weigh the following discretionary factors—the so-called Intel factors—to determine whether to grant the application: (1) whether "the person from whom the discovery is sought is a participant in the [*3]  foreign proceeding"; (2) "the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance"; (3) "whether the § 1782 request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States"; and (4) whether the § 1782 application contains "unduly intrusive or burdensome" discovery requests. Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264-65 (2004). This Court found that as to the entities upon whom Petitioner originally sought to serve subpoenas, each of the three statutory prerequisites had been satisfied and all four discretionary factors weighed in favor of granting Petitioner's application. Dkt. No. 24 at 21.

With respect to the current supplemental application for additional § 1782 discovery, Petitioner posits—and Respondent does not contest—that "[t]he second and third [statutory] requirements do not need to be addressed anew as the underlying facts remain unchanged and [the] application has already been found to meet those requirements." Dkt. No. 39 at 1. The Court agrees. Similarly, Petitioner maintains that "[t]he second and third Intel factors [*4]  do not need to be addressed anew because the pertinent facts remain unchanged since the June 3, 2019, and [the] application has already been found to meet those requirements." Id. Respondent does not oppose on these grounds, and the Court accepts this position. Thus, given that the only pertinent change between Petitioner's original and supplemental § 1782 applications are the entities from whom discovery is sought, only the first statutory prerequisite ("the person from whom discovery is sought resides or is found within the district") and the first and fourth Intel factors ("whether the person from whom the discovery is sought is a participant in the foreign proceeding" and "whether the § 1782 application contains unduly intrusive or burdensome discovery requests") must be reconsidered.

Because Petitioner alleges that none of the additional entities is a party to the foreign proceeding, id. at 2, and because the discovery requests are substantially similar to those requests approved in the original application, compare id., Exhibit 1, with Declaration of Matthew Presseau dated April 11, 2019, Exhibit 2, Dkt. No. 4-2, the Court finds that the first and fourth Intel factors, along with the remaining Intel [*5]  factors, collectively weigh in favor of granting Petitioner's § 1782 supplemental application. The present dispute therefore hinges on the first statutory requirement, that is, whether the additional entities reside or are found within this District.

II. DISCUSSION

In this supplemental § 1782 application, Petitioner seeks to serve subpoenas on ten additional entities, six of which—J.P. Morgan Securities, LLC, HSBC Bank N.A., E*Trade Financial Corp., Merrill Lynch, Pierce, Fenner & Smith Inc., Goldman Sachs & Co. LLC, and AXA Financial Inc.—Petitioner alleges are headquartered in this District. Dkt. No. 39 at 2. The remaining four—namely, Charles Schwab Corporation ("Charles Schwab"),¹ Fidelity Investments Inc. ("Fidelity"), TD Ameritrade, Inc. ("TD Ameritrade"), and LPL Financial LLC ("LPL Financial")—do not appear to be headquartered in the District but rather "[m]aintain[] numerous retail branch locations in the Southern District . . . ." Id. Respondent challenges the subpoenas addressed to these four recipients on the grounds that they do not reside in this District for purposes of § 1782. Dkt. No. 40 at 1. Petitioner, however, suggests that Charles Schwab, Fidelity, and LPL Financial (collectively, [*6]  the "Subject Entities")²—while neither headquartered nor incorporated in New York—are registered to do business in the state. Dkt. No. 41 at 2.³ Petitioner appears to imply that because a corporation that registers to do business in New York consents to the general jurisdiction of its courts, the Subject Entities should be deemed to reside or be found in this District. Id. at 1.⁴

"Section § 1782 does not define what it means for an entity to reside or be found in a district." In re Sargeant, 278 F. Supp. 3d 814, 819 (S.D.N.Y. 2017). While parties in other § 1782 discovery disputes have quarreled over whether the phrase refers to personal jurisdiction, "[i]t is unclear whether § 1782's statutory prerequisite that a person or entity reside or be found in a district is coextensive with whether a court has personal jurisdiction over that party or entity." Id. at 820. Several courts in this District, however, have recognized that "[a]t minimum, [] compelling an entity to provide discovery under § 1782 must comport with constitutional due process." Id.; see also In re Fernando Celso De Aquino Chad, No. 19-MC-261 (WHP), 2019 WL 2502060, at *2 (S.D.N.Y. June 17, 2019) (quoting Sargeant, F. Supp. 3d at 820); In re Del Valle Ruiz, 342 F. Supp. 3d 448, 453-54 (S.D.N.Y. Oct. 19, 2018) ("constitutional due process principles apply to an applicant's request for [§ 1782] discovery"); Matter of Fornaciari for Order to Take Discovery [*7]  Pursuant to 28 U.S.C. § 1782, No. 17-MC-521 (WHP), 2018 WL 679884, at *2 (S.D.N.Y. Jan 29, 2018) (quoting Sargeant, F. Supp. 3d at 820); Australia & New Zealand Banking Grp. Ltd. v. APR Energy Holding Ltd., No. 17-MC-216 (VEC), 2017 WL 3841874, at *3 (S.D.N.Y. Sept. 1, 2017) ("Regardless of what section § 1782 requires, the Constitution's due process protections apply.").

Petitioner acknowledges that the Supreme Court's decision in Daimler AG v. Bauman, 571 U.S. 117 (2014) "tightened the scope of the federal district court's general jurisdiction on constitutional due process grounds." Dkt. No. 41 at 1.⁵ Specifically, "the Supreme Court cast doubt upon prior decisions in which it upheld the exercise of general personal jurisdiction based merely upon a corporation 'doing business' or having a local office within a particular forum." Del Valle Ruiz, 342 F. Supp. 3d at 453 (citing Daimler, 571 U.S. at 138 n.18). The Supreme Court "instead clarified that, with respect to foreign corporations [], the touchstone of general personal jurisdiction is 'whether that corporation's affiliations with the State are so continuous and systematic as to render [it] essentially at home in the forum.'" Id. (quoting Daimler, 571 U.S. at 138-39). "While '[t]he paradigm forums in which a corporate defendant is at home . . . are the corporation's place of incorporation and its principal place of business,' in 'an exceptional case, a corporate defendant's operations in [*8]  another forum may be so substantial and of such a nature as to render the corporation at home in that State.'" Sargeant, 278 F. Supp. 3d at 820 (quoting BNSF Ry. Co., 137 S. Ct. at 1558).

In Gucci, the Second Circuit applied Daimler to hold that the lower court did not have general jurisdiction over a nonparty foreign bank in order to enforce a subpoena served on the bank. 768 F.3d at 135, 141. The Second Circuit reasoned that the mere fact that the bank had branch offices in New York did not comport with federal due process. Id. Gucci is on all fours with the case at hand. That the Subject Entities "maintain[] numerous retail branches" in this District "does not render [them] essentially at home in New York, nor do exceptional circumstance[s] exist that would otherwise support general jurisdiction." Australia and New Zealand Banking Grp., 2017 WL 3841874, at *3-4 (analogizing to Gucci); see also Sargeant, 278 F. Supp. 3d at 821 ("Burford is clearly not incorporated or formed under the laws of New York, and the mere fact that it maintains an office in New York City—even a 'primary office, whatever that may mean—from which it conducts business does not establish that its principal place of business is its midtown Manhattan location. Nor is the bare allegation that Burford conducts business in New York sufficient to establish that its operations in that [*9]  office are 'so substantial and of such a nature' as to render Burford at home in New York."); Fornaciari, 2018 WL 679884, at *2 ("[T]o the extent that [the applicant] premises general jurisdiction on the mere existence of Royal Bank's offices in this District, such argument is foreclosed by Daimler AG v. Bauman."); Del Valle Ruiz, 342 F. Supp. 3d at 455-56 ("Santander's New York offices, activities, and chief executive's LinkedIn profile[, inter alia,] are not enough contacts to render Santander essentially 'at home' in this District."). "Such allegations are insufficient to allege 'that due process is satisfied on the basis that they are at home in the Southern District of New York . . . .'" Fernando Celso De Aquino Chad, 2019 WL 2502060, at *3 ("For the remainder of the Banks, the Applicant merely states that they conduct business and maintain branch offices in New York.") (quoting Fornaciari, 2018 WL 679884, at *2).

Petitioner argues that the Subject Entities have nevertheless consented to jurisdiction in New York because they registered to do business in the state and such registration requires consent to the general jurisdiction of New York's courts. Dkt. No. 41 at 1.⁶ While the Second Circuit has rejected a nearly identical argument, it expressly declined to rule on this precise issue, indeed, signaling hesitation to rule in favor of the [*10]  position that Petitioner is advocating. In Brown v. Lockheed Martin Corp., the Second Circuit concluded that a foreign corporation did not consent to general jurisdiction merely by registering to do business and appointing an agent under the Connecticut business registration statute: "the more demanding 'essentially at home' test enunciated in Goodyear and Daimler [] suggests that federal due process rights likely constrain an interpretation that transforms a run-of-the-mill registration and appointment statute into a corporate 'consent'—perhaps unwitting—to the exercise of general jurisdiction by state courts, particularly in circumstances where the state's interests seem limited.'" Brown v. Lockheed Martin Corp., 814 F.3d 619, 637 (2d Cir. 2016) (footnote omitted). The Second Circuit cautioned that interpreting a foreign corporation's compliance with the Connecticut business registration statute as consent to jurisdiction "would risk unravelling the jurisdictional structure envisioned in Daimler and Goodyear based on a slender inference of consent pulled from routine bureaucratic measures that were largely designed for another purpose entirely." Brown, 814 F.3d at 639.

Petitioner points to dicta in Brown that suggests a distinction whereby inclusion of express [*11]  language in New York's business registration statute would support a finding that the Subject Entities consented to general jurisdiction when they registered to do business in the state. Dkt. No. 41 at 1; see Brown, 814 F.3d at 636 (no consent to general jurisdiction pursuant to the Connecticut registration statute in part because the statute does not "contain express language alerting the potential registrant that by complying with the statute and appointing an agent it would be agreeing to submit to the general jurisdiction of the state courts."). However, the Second Circuit not only declined to address this issue head-on but expressed skepticism that such a position would prevail:

Were the Connecticut statute drafted such that it could be fairly construed as requiring foreign corporations to consent to general jurisdiction, we would be confronted with a more difficult constitutional question about the validity of such consent after Daimler. Though a defendant may ordinarily, through free and voluntary consent given (for example) in a commercial agreement, submit to jurisdiction a court would otherwise be unable to exercise, we decline to decide here whether consent to general jurisdiction via a registration [*12]  statute would be similarly effective notwithstanding Daimler's strong admonition against the expansive exercise of general jurisdiction. Jurisdictions other than Connecticut have enacted registration statutes that more plainly advise the registrant that enrolling in the state as a foreign corporation and transacting business will vest the local courts with general jurisdiction over the corporation. [For example, t]he registration statute in the state of New York has been definitively construed to accomplish that end, and legislation has been introduced to ratify that construction of the statute. . . . From these sources, it could be concluded that a carefully drawn state statute that expressly required consent to general jurisdiction as a condition on a foreign corporation's doing business in the state, at least in cases brought by state residents, might well be constitutional.

But as the Supreme Court recognized in Goodyear, "A state court's assertion of jurisdiction exposes defendants to the State's coercive power, and is therefore subject to review for computability with the Fourteenth Amendment's Due Process Clause." The reach of that coercive power, even when exercised pursuant to a corporation's purported "consent," [*13]  may be limited by the Due Process Clause. We need not reach that question here, however, because we conclude that the Connecticut business registration statute did not require Lockheed to consent to general jurisdiction in exchange for the right to do business in the state.

Brown, 814 F.3d at 640-41 (emphasis added) (citations omitted). Petitioner is correct that the Second Circuit has not yet ruled whether consent to general jurisdiction via statute comports with constitutional due process. Dkt. No. 41 at 1. However, Petitioner fails to offer any substantive justification for its position other than that the issue has not been resolved. With "Daimler's strong admonition against the expansive exercise of general jurisdiction" for guidance, the Court declines to bridge the crucial gap between New York's business registration statute and the Subject Entities' consent to general jurisdiction of state's courts. See also Motorola Credit Corp. v. Uzan, 132 F. Supp. 3d 518, 521-22 (S.D.N.Y. 2015) ("[T]o find that satisfaction of requirements mandatory for operation of a branch in New York signal[s] consent to jurisdiction would directly contradict Gucci. Gucci stands for the proposition that mere operation of a branch office in a forum—and satisfaction of any attendant licensing requirements—is not constitutionally [*14]  sufficient to establish general jurisdiction.").⁷

Even if dicta in Brown were the law, New York's business registration statute does not contain the express language upon which Petitioner's argument must rely. Petitioner assumes that the statute currently contains such express language. See N.Y. Bus. Corp. Law § 1301. However, not only is this reading inaccurate but there is also no evidence that a proposed amendment to make consequences for registering to do business in New York will pass. See Tanya J. Monestier, Registration Statutes, General Jurisdiction, and the Fallacy of Consent, 36 Cardozo L. Rev. 1343, 1344-45, n.2 (2015) ("If the bill passes, New York will be one of only two states to explicitly codify that registration to do business confers general jurisdiction over a corporation."). More importantly, Petitioner does not address whether such purported consent to general jurisdiction is consistent with federal due process, which "at minimum" must be satisfied for § 1782 purposes. Petitioner therefore has not established that the Subject Entities reside or are found in this District.

Petitioner's failure to satisfy the first statutory prerequisite dooms her application with respect to the Subject Entities. However, in light of this [*15]  Court's prior decision on Petitioner's original application and because Petitioner alleges that the non-Subject Entities are headquartered in this District, the Court has statutory authority under § 1782 to grant the supplemental application as to those entities and Respondent does not oppose the Court from doing so. Furthermore, because the non-Subject Entities are not participants in the foreign proceeding—coupled with findings made in the earlier ruling—granting Petitioner's supplemental application is an appropriate exercise of discretion based on the considerations expounded by the Supreme Court in Intel. Accordingly, Petitioner's supplemental application for § 1782 discovery from the non-Subject Entities is granted.

III. CONCLUSION

For the foregoing reasons, Petitioner's supplemental application is granted in part and denied in part. Subpoenas in substantially the same form as Exhibit 1 to Petitioner's letter request (Dkt. No. 39) may be directed to the non-Subject Entities. This Court retains jurisdiction as is necessary to effectuate the terms of the Subpoenas. With respect to the Subject Entities, the application is denied.

 

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¹ Petitioner indicates in her reply letter that she wanted to substitute Charles Schwab Corporation with Charles Schwab & Co., Inc., Dkt No. 41 at 2, and the Court hereinafter refers to the latter as "Charles Schwab."

² Petitioner attached a printout from the Secretary of State indicating that TD Ameritrade is a New York corporation. Dkt. No. 41, Exhibit 1. Because the Court construes Respondent's opposition as relating only to foreign corporations, TD Ameritrade is excluded from the definition of Subject Entities.

³ Petitioner only adduced evidence of business registration status for Charles Schwab. Id., Exhibit 2. Petitioner fails to offer any evidence that Fidelity and LPL Financial are also registered to do business in New York. However, because the Court ultimately finds Petitioner's argument premised on New York's registration statute unavailing, the Court will assume all Subject Entities are registered for purposes of analysis.

⁴ As discussed below, Petitioner's argument is entirely based on whether a foreign corporation's consent to general jurisdiction via statute is effective. Petitioner does not once connect this premise to the first statutory requirement for § 1782 discovery, a significant assumption in and of itself.

⁵ In analyzing personal jurisdiction, the Supreme Court has long distinguished between "specific or case-linked jurisdiction and general or all-purpose jurisdiction." BNSF Ry. Co. v. Tyrrell, 137 S.Ct. 1549, 1558 (2017). General or "all-purpose jurisdiction permits a court to hear 'any and all claims' against an entity. Specific jurisdiction, on the other hand, permits adjudicatory authority only over issues that 'arise[] out of or relat[e] to the [entity's] contacts with the forum.'" Gucci Am., Inc. v. Li, 768 F.3d 122, 134 (2d Cir. 2014) (alterations in original) (citations omitted). Petitioner makes no argument for the exercise of specific personal jurisdiction.

⁶ Petitioner arguably waived this argument by raising it for the first time in her reply letter, affording no opportunity for response from Respondent. Though arguments raised in a reply brief for the first time are generally not considered, the Court exercises its discretion to do so here. See, e.g., Wells Fargo Advisors, LLC v. Mercer, 735 F. App'x 23, 24 n.2 (2d Cir. 2018).

⁷ In an effort to distinguish the two cases upon which Respondent primarily relies, Petitioner simply notes that the bank in Del Valle Ruiz was not registered to do business in New York while the registration status of the foreign corporation in Sargeant was not considered. Dkt. No. 41. This attempt by Petitioner to advance her consent-by-registration argument falls flat.