Sarrio, S.A., Application of, 1543

• Citation: 119 F.3d 143
• Decision Date: 15 July 1997
• Docket Number: D,No. 1543,1543
• Parties: In re APPLICATION OF SARRIO, S.A., for Assistance before Foreign Tribunal. CHASE MANHATTAN CORPORATION, Respondent-Appellee, Kuwait Investment Authority, Grupo Torras S.A., Torraspapel S.A., Torras Hostench London, Ltd., Movants-Appellees, v. SARRIO S.A., Applicant-Appellant. ocket 95-9157.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 143

119 F.3d 143

In re APPLICATION OF SARRIO, S.A., for Assistance before

Foreign Tribunal.

CHASE MANHATTAN CORPORATION, Respondent-Appellee,

Kuwait Investment Authority, Grupo Torras S.A., Torraspapel

S.A., Torras Hostench London, Ltd., Movants-Appellees, v. SARRIO S.A., Applicant-Appellant.

No. 1543, Docket 95-9157.

United States Court of Appeals,

Second Circuit.

Argued May 28, 1996.

Decided July 15, 1997.

William R. Stein, Washington, DC (Alan G. Kashdan, Roberta Koss, Hughes, Hubbard & Reed, Washington, DC, of counsel), for Applicant-Appellant.

David Zaslowsky (Lawrence W. Newman, Baker & McKenzie, New York City, of counsel), for Movants-Appellees.

Before: VAN GRAAFEILAND, WALKER and LEVAL, Circuit Judges.

LEVAL, Circuit Judge:

Sarrio S.A. appeals from a protective order of the United States District Court for the Southern District of New York (Patterson, J.) denying discovery of certain documents subpoenaed from Chase Manhattan Bank, N.A. ("Chase"), in a proceeding instituted by Sarrio under 28 U.S.C. § 1782. The district court's view was that § 1782 permits discovery only of documents in the United States and that, where Chase had sent documents maintained abroad to the United States to be reviewed by counsel for determination whether they were required to be produced, the attorney-client privilege sheltered those documents from discovery under § 1782. Because on appeal Chase has withdrawn its assertion of attorney-client privilege, removing the basis upon which the district court quashed the subpoena, we remand to the district court for further proceedings to determine whether Sarrio is entitled, either upon its prior subpoena or under a new subpoena, to disclosure of the documents.

Background

Sarrio is a Spanish company engaged in a contract dispute in the Spanish courts against the Kuwait Investment Authority ("KIA") and a group of KIA's subsidiaries, here collectively referred to as Grupo Torras. In the Spanish litigation, Sarrio is seeking to assert KIA's responsibility for a liability of its subsidiaries, in reliance on a theory akin to our doctrine of "piercing the corporate veil." In support of this effort, Sarrio asked Chase, a lender to Grupo Torras, to produce commercial agreements, which might reveal aspects of the relationship between KIA and Grupo Torras that could justify piercing the corporate veil. Chase is headquartered in New York City. In seeking Chase's production in New York, Sarrio proposed to rely on *145s 1782, which provides that a "district court of the district in which a person resides or is found may order him ... to produce a document ... for use in a proceeding in a foreign ... tribunal." ¹

In February 1994, Sarrio's counsel notified Chase's New York counsel that Sarrio planned to apply to the United States District Court in the Southern District of New York for discovery of the documents under § 1782. Sarrio's counsel provided Chase with an informal draft of the proposed subpoena. It was apparent to Chase's counsel from the text of the draft subpoena that the requested documents related to transactions of Chase branches in England and Spain. Chase's counsel directed those branch offices to send the pertinent transaction files to New York so that he could examine and, if appropriate, produce the documents covered by the anticipated subpoena.

In April 1995, Sarrio's attorney wrote to Chase's counsel, inquiring about the documents. Chase's counsel replied on April 26 that he was in possession of documents covered by the draft subpoena and would produce them "upon receipt of a subpoena."

Sarrio then instituted a proceeding in the district court against Chase and Grupo Torras seeking permission to serve a subpoena on Chase under § 1782. The court granted permission on May 23, 1995, and Sarrio proceeded to serve its subpoena on Chase. The subpoena served differed from the previously delivered draft in that it sought only documents "located within the United States." ²

KIA and Grupo Torras moved for a protective order barring the disclosure. Chase also objected to the subpoena on various grounds, including

that it calls for the production of documents protected from discovery by reason of the attorney-client privilege. This request would call for documents that are only present in the United States for an attorney's review of the documents and could not have been in the United States otherwise and not subject to this subpoena.

The district court sustained Chase's claim of privilege. It ruled that Chase was not obligated to produce documents that were held abroad by Chase but delivered to New York to be reviewed by counsel. Sarrio appeals.

Discussion

The district court found that Chase properly invoked the attorney-client privilege. The court reasoned that § 1782 authorizes discovery through United States courts only of materials found in the United States. Accordingly, Sarrio could not use § 1782 to obtain documents held by Chase in foreign countries. Because the documents came to the United States within reach of § 1782 only because Chase brought them here for review by its counsel so he could provide legal advice about compliance with a discovery demand the court ruled that the documents were protected by the attorney-client privilege. The court reasoned that, without exposing the client to otherwise unavailable discovery,

[a] lawyer should be able to provide advice to his client with respect to the potential discoverability of documents without having to travel to where the documents are located.... Public policy favors open and frank communications between a lawyer and his or her client and prompt review of a client's documents by a lawyer are a goal of federal discovery consonant with this policy.

In re Application of Sarrio SA, No. 9-372, 1995 WL 598988, at * 3 (S.D.N.Y. Oct. 11, 1995).

Assuming, without deciding, that the district court was correct that discovery under § 1782 may reach only evidence located in the United States, Chase had a substantial claim that the documents subpoenaed here were protected by the attorney-client privilege. The Supreme Court's discussion in Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976), seems to provide principled authority, although in dicta, for recognizing attorney-client privilege here. In Fisher, a taxpayer under investigation by the IRS transferred pertinent documents to his attorney for legal advice. The IRS issued process to the attorney for production of the documents, and the taxpayer sought to bar production on grounds of his Fifth Amendment privilege against self-incrimination. The Court held that the Fifth Amendment privilege did not apply because a demand for production directed to the taxpayer's attorney would not compel the taxpayer to incriminate himself. Id. at 414, 96 S.Ct. at 1582. The Court went on, however, to consider whether compelling production in these circumstances would violate the attorney-client privilege. The Court reasoned that "[t]he purpose of the privilege is to encourage clients to make full disclosure to their attorneys." Id. at 403, 96 S.Ct. at 1577. If discovery of documents could be obtained more easily from attorneys than from their clients, clients would hesitate to show their documents to their attorneys and "it would be difficult to obtain fully informed legal advice." Id. at 403, 96 S.Ct. at 1577. Accordingly, where documents unobtainable by subpoena while in the possession of the client are transferred to a lawyer to obtain legal advice, making the documents available to process would defeat the purposes of the attorney-client privilege. Quoting Wigmore, the Court concluded that "[w]hen the client himself would be privileged from production of the document, either as a party at common law ... or as exempt from self-incrimination, the attorney having possession of the document is not bound to produce." Id. at 404, 96 S.Ct. at 1578 (italics omitted, ellipsis in original); cf. Colton v. United States, 306 F.2d 633, 639 (2d Cir.1962), cert. denied, 371 U.S. 951, 83 S.Ct. 505, 9 L.Ed.2d 499 (1963) (stating, prior to Fisher, that "if the client could have refused [on fifth-amendment grounds] to produce such papers ... the attorney may do so when they have passed into his possession"). Although the Court ultimately ruled in Fisher that the documents held by the attorney were not privileged because they would not have been protected in the hands of his client, the Court's underlying reasoning appears to bear on Chase's transfer of its documents to New York to obtain its attorney's advice as to their discoverability.

The principle articulated in Fisher was expressed in terms of documents that would have been protected in a client's possession under some form of common law or constitutional privilege. Nevertheless, its reasoning would seem to apply also where the documents are not amenable to subpoena duces tecum because they lie outside the statutory limits of the court's power to compel production. Fisher 's rule arose from the policy of promoting open communications between lawyers and their clients. That policy would be jeopardized if documents unreachable in a foreign country became discoverable because the person holding the documents sent them to a lawyer in the United States for advice as to whether they were subject to production.

Of course, if § 1782 authorizes discovery outside the territorial boundaries of the United States, the documents Sarrio seeks were never out of reach and could not become privileged simply by virtue of their transfer to Chase's New York lawyer. As the Court cautioned in Fisher, "pre-existing documents which could have been obtained by court process from the client when he was in possession may also be obtained from the attorney by similar process following transfer by the client in order to obtain more informed legal advice." 425 U.S. at 403-04, 96 S.Ct. at 1577. On its face, § 1782 does not limit its...