In re: Application of SPS Corp I v.

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 22-3331
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SPS CORP I,
FUNDO DE INVESTIMENTO EM DIREITOS
CREDITORIOS NAO PADRONIZADOS,
Appellant
v.
GENERAL MOTORS CO.
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On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 1-21-mc-00565)
District Judge: Honorable Colm F. Connolly
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Argued: December 11, 2023
Before: BIBAS, PORTER, and FREEMAN
Circuit Judges.
(Filed: July 31, 2024)
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Gabriela M.B. Scanlon [ARGUED]
MB Scanlon
4301 50th Street NW
1st Floor, Suite 102
Washington, DC 20016
Counsel for Plaintiff-Appellant, SPS Corp.
Amitav Chakraborty
Lewis R. Clayton [ARGUED]
Darren W. Johnson
Paul Weiss Rifkind Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Daniel A. Mason
Paul Weiss Rifkind Wharton & Garrison
1313 N Market Street
P.O. Box 32, Suite 806
Wilmington, DE 19899
Counsel for Defendant-Appellee, General Motors Co.
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OPINION OF THE COURT
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PORTER, Circuit Judge.
The Brazilian subsidiary of General Motors (“GM
Brazil”) sued the Brazilian government to recover tax
overpayments paid by Brazilian car dealerships. After securing
2
the right to recover, GM Brazil filed a claim with Brazil’s tax
collection agency, the Receita Federal do Brasil (“RFB”), to
confirm the precise amount of the overpayments. At the same
time, SPS Corp I – Fundo de Investimento em Direitos
Creditórios Não Padronizados (“SPS”), the assignee of thirty-
five dealerships, commenced an action in Brazil seeking to
recover the value of the tax overpayments from GM Brazil.
After receiving adverse decisions from Brazilian courts
relating to standing and preliminary discovery, SPS filed an
application in the District Court for the District of Delaware
seeking discovery against General Motors (“GM”). The Court
denied SPS’s request. Finding no abuse of discretion, we will
affirm.
I
The Imposto sobre Produtos Industrializados (“IPI”) is
a Brazilian tax paid by car manufacturers when they sell
vehicles and parts to dealerships. The IPI was originally
calculated based on the sticker price of the vehicle or parts sold,
irrespective of any discounts given by the manufacturer to the
dealer. In 1989, Brazil changed the IPI calculation so that the
tax was based on the actual price paid to manufacturers by
dealers. This change reduced the tax obligations of
manufacturers. From June 1, 1990, to July 31, 1991, GM Brazil
continued to pay the IPI based on sticker prices. But it passed
the cost of the tax through to dealerships, so ultimately they
incurred the higher, sticker-based IPI tax payments.
On behalf of the dealerships, GM Brazil successfully
sued the Brazilian government to recover the tax
overpayments. Under Brazilian law, to recover after obtaining
such a decision, taxpayers must file a proof of claim with the
RFB. GM Brazil retained an auditor to prepare a spreadsheet
3
documenting the tax calculations and the reimbursement credit
owed to each dealership. GM Brazil’s proof of claim triggered
a five-year RFB review period to approve and finalize the
overpayment calculations. RFB’s review is set to expire on
July 30, 2024.
SPS’s claims1 against GM Brazil have been stymied by
judicial decisions holding that it lacks standing to sue while the
RFB review is ongoing. See App. 231–35; 244–58 (Brazilian
standing decisions). For example, on March 10, 2020, the 1st
Civil Court of São Caetano do Sul held:
[I]t is necessary to wait for the [RFB] to
determine the amount to be reimbursed, so that
only then may the plaintiffs judicially claim the
amount due to them, if the automaker [GM
Brazil] does not pass on the credit or if the
dealerships disagree with the value offered to
them. It is important to emphasize that the
plaintiffs have a mere expectation of right as a
result of the favorable sentence to the defendant
against the National Treasury, and there is no
reason to speak, for now, of a jurisdictional
provision capable of satisfying it.
App. 234–35. On appeal, the São Paulo court agreed with GM
Brazil that SPS’s litigation was an attempt to “shortcut” the
RFB investigation and held that recovery may not be pursued
until the approval process is complete. App. 255.
1
The car dealerships assigned to SPS their rights to collect the
tax credits. See Poppa Declaration ¶ 4, App. 73.
4
Despite the standing decisions, SPS attempted to pursue
discovery in aid of its litigation strategy. Beginning in March
2020, SPS began informally requesting information from GM
Brazil “so that SPS [could] assess the scope and timing of any
payment obligation that GM Brazil owes to SPS, by virtue of
SPS’s status as successor to the dealerships’ claims.” Opening
Br. 10–11.
In February 2021, SPS initiated a Preliminary
Discovery Proceeding against GM Brazil in a Brazilian court.
See App. 318–20. The parties’ accounts of what happened next
differ, but GM Brazil ultimately provided SPS with the
spreadsheet submitted to the RFB and filings from GM Brazil’s
action against the Brazilian government. SPS contends this
document production was inadequate.
On December 23, 2021, SPS filed an application under
28 U.S.C. § 1782 with the U.S. District Court for the District
of Delaware, seeking authorization to propound discovery on
GM and its auditors. The District Court denied the request,
holding that the factors provided by the Supreme Court in Intel
weighed against SPS. See App. 9–13; Intel Corp. v. Advanced
Micro Devices, Inc., 542 U.S. 241 (2004). In the District
Court’s view, respect for the São Paulo court and the goal of
efficient litigation counseled against allowing § 1782
discovery while SPS’s discovery proceedings were pending in
São Paulo. App. 11.
Two days after the District Court’s decision, the
Brazilian court presiding over the Preliminary Discovery
Proceeding denied SPS’s requests for more documents. App.
319–20. The court criticized SPS for attempting to “transform
the nature of the preliminary discovery lawsuit action into . . .
5
an action to compel evidence,” and refused to evaluate the
“sufficiency” of GM Brazil’s document production. Id. at 320.
Whether further production might be appropriate, the court
said, “is a subject to be examined in any main action.” Id.
SPS then asked the District Court to reconsider its
denial of the § 1782 application, arguing that the Brazilian
decision constituted “new evidence” supporting its application.
App. 306. The District Court denied the motion for
reconsideration. App. 14–16. SPS appeals the District Court’s
denial of its § 1782 application.2
II
The District Court had jurisdiction under 28 U.S.C.
§§ 1331 and 1782. We have jurisdiction under 28 U.S.C.
§ 1291.
District Court rulings on § 1782 discovery requests are
reviewed for abuse of discretion. In re Chevron Corp., 633
F.3d 153, 161 (3d Cir. 2011). Review is plenary if the district
court “‘misinterpreted or misapplied the law,’ or . . . ‘relied on
inappropriate factors in the exercise of its discretion.’” Id.(quoting In re Bayer AG, 146 F.3d 188, 191 (3d Cir. 1998)).
2
Though SPS initially claimed that it appealed the District
Court’s denial of its § 1782 application and the Court’s denial
of its motion for reconsideration, it later admitted that “it is true
that SPS has not pursued an appeal of the district court’s denial
of its motion to reconsider.” Reply Br. 12. Accordingly, SPS
waived any challenge to the Court’s denial of its motion for
reconsideration.
6
III
A
28 U.S.C. § 1782 gives federal district courts the
discretion to order discovery for foreign litigants, subject to
three conditions: (1) the person from whom discovery is sought
“resides or is found” within the district; (2) the discovery is
“for use in a proceeding in a foreign or international tribunal”;
and (3) the application is made by an “interested person.” See
28 U.S.C. § 1782(a). Before a court can evaluate the
discretionary Intel factors, it must ensure that the applicant
meets these statutory requirements. See Schmitz v. Bernstein
Liebhard & Lifshitz, LLP., 376 F.3d 79, 83–84 (2d Cir. 2004).
So we will first address the statutory elements before turning
to the discretionary factors.
GM argues that SPS does not satisfy the first two of the
§ 1782(a) statutory requirements. First, GM contends that it is
not the actual person from whom the discovery is sought.
That’s because SPS acknowledged that GM Brazil holds the
requested information, and GM Brazil does not reside and is
not found in the District of Delaware.
We disagree. SPS’s application seeks discovery from
GM, which is found within the District of Delaware. That is all
the statute requires. That GM Brazil also possesses the
requested information is immaterial for purposes of the first
statutory requirement.
Second, GM argues that SPS’s § 1782 application
should be denied because the requested discovery is not “for
use in a proceeding in a foreign or international tribunal.” See
7
§ 1782(a) (emphasis added). Specifically, because the
Brazilian proceeding will not commence until completion of
the RFB review, any discovery obtained under § 1782 cannot
be “for use” in an extant Brazilian tribunal.
This argument is similarly unavailing. To comply with
the “for use” requirement, a foreign proceeding related to the
§ 1782 application must be “within reasonable contemplation.”
Intel, 542 U.S. at 259. “It is not necessary . . . for the . . .
proceeding to be pending at the time the evidence is sought,
but only that the evidence is eventually to be used in such a
proceeding.” Id. (citations and internal quotation marks
omitted). “The future proceedings must be more than
speculative, however, and a ‘district court must insist on
reliable indications of the likelihood that proceedings will be
instituted within a reasonable time.’” Application of Consorcio
Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding
(USA), Inc., 747 F.3d 1262, 1270 (11th Cir. 2014) (quoting In
re Letter of Request from Crown Prosecution Service of United
Kingdom, 870 F.2d 686, 692 (D.C. Cir. 1989)).
SPS’s § 1782 request is “for use” in a reasonably
contemplated foreign proceeding. While Brazilian courts have
held that SPS lacks standing, those decisions acknowledged
that the RFB investigation remains ongoing. SPS suspects that
GM Brazil has profited from tax credits related to the
overpayments during the pendency of the RFB investigation.
This allegation is unproven, but it portends future litigation in
Brazil. See, e.g., App. 76–79. SPS’s § 1782 application
therefore complies with the “for use” statutory requirement.
Finally, SPS meets the “interested person” requirement.
SPS would be a litigant in the contemplated merits proceeding,
8
and litigants are the quintessential interested party. See Intel,
542 U.S. at 256 (“No doubt litigants are included among, and
may be the most common example of, the interested persons
who may invoke § 1782.” (cleaned up)). So SPS meets all three
of the statute’s threshold requirements.
We now turn to the Intel factors.
B
In Intel, the Supreme Court enumerated “factors that
bear consideration in ruling on a § 1782(a) request.” Id. at 264.
They are:
1. Whether the evidence sought is within the
foreign tribunal’s jurisdictional reach, and
thus accessible absent section § 1782 aid. Id.
2. “[T]he nature of the foreign tribunal, the
character of the foreign proceedings
underway abroad, and the receptivity of the
foreign government or the court or agency
abroad to U.S. federal-court judicial
assistance.” Id.
3. “[W]hether the . . . request conceals an
attempt to circumvent foreign proof-
gathering restrictions or other policies of a
foreign country or the United States.” Id. at
265.
4. Whether the request is “unduly intrusive or
burdensome.” Id.
The first Intel factor asks whether the discovery sought
is “unobtainable” in the foreign forum because it is outside the
9
foreign tribunal’s jurisdictional reach. Id. at 264. But SPS has
said that GM Brazil possesses the documents it seeks. App. 29,
74. The discovery sought here is also in Brazil, in the
possession of a party subject to the Brazilian courts’
jurisdiction, so it is obtainable there without § 1782(a) aid. The
only sense in which it is “unobtainable” stems from SPS’s
repeated litigation defeats, not because of geographic and
jurisdictional barriers. App. 231–35; App. 244–58 (Standing
Decisions); 318–20 (Preliminary Discovery Proceeding). So
Intel factor one does not help SPS.
SPS argues that factor-one scrutiny should focus
narrowly on whether the party “from whom discovery is sought
is a participant in the foreign proceeding.” Opening Br. 28
(citing Intel, 542 U.S. at 264). But the focus of Intel’s first
factor is not simply whether the party from whom discovery is
sought is a participant in the foreign proceeding. Intel
articulates factor one as follows:
[W]hen the person from whom discovery is
sought is a participant in the foreign proceeding
. . . the need for § 1782(a) aid generally is not as
apparent as it ordinarily is when evidence is
sought from a nonparticipant in the matter
arising abroad. A foreign tribunal has
jurisdiction over those appearing before it, and
can itself order them to produce evidence . . . . In
contrast, nonparticipants in the foreign
proceeding may be outside the foreign tribunal’s
jurisdictional reach; hence, their evidence,
available in the United States, may be
unobtainable absent § 1782(a) aid.
10
Intel, 542 U.S. at 264. Accordingly, in Chevron, we held that
factor one supported granting § 1782 discovery because it
would have been “fruitless” for the Ecuadorian court to order
production of documents that were outside of Ecuador’s
jurisdictional reach. Chevron, 633 F.3d at 162. Here, by
contrast, it is undisputed that the discovery is within Brazilian
courts’ jurisdictional reach.
SPS says the District Court’s analysis of the first Intel
factor implicitly and improperly imposed an exhaustion
requirement. Indeed, we have rejected the argument that an
application should be denied because the applicant must
exhaust discovery options in the foreign forum before invoking
§ 1782 in the United States. See Bayer, 146 F.3d at 196 (citing
In re Malev v. Hungarian Airlines, 964 F.2d 97, 100 (2d Cir.
1992)); see also John Deere Ltd. v. Sperry Corp., 754 F.2d 132,
136 (3d Cir. 1985). But the District Court did not impose an
exhaustion requirement on SPS. SPS chose to litigate in Brazil,
raising the possibility that an adverse decision might be
examined by a U.S. District Court adjudicating a parallel §
1782 discovery request. App. 16 (“Having caused two courts
to review and rule on its discovery requests, SPS must now live
with the consequences of that decision.”). The Brazilian court
decisions are relevant to the § 1782 analysis, and the District
Court did not abuse its discretion by considering them. Intel,
542 U.S. at 264.
Intel’s second factor asks whether the foreign
government, court, or agency is receptive to U.S. federal-court
judicial assistance. Intel, 542 U.S. at 264. Closely related to
this factor is the third Intel factor: When evaluating foreign
receptivity, the district court may “consider whether the §
1782(a) request conceals an attempt to circumvent foreign
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proof-gathering restrictions or other policies of a foreign
country or the United States.” Id. at 265.
The District Court concluded that Intel’s receptivity
factor favored GM because “respect for the São Paulo court
and the goal of efficient litigation caution that I should wait
until the pending discovery proceeding concludes.” App. 11.3
SPS contends the District Court erred by focusing too narrowly
on the Brazilian court adjudicating SPS’s request to take
preliminary discovery. Instead, SPS argues, the District Court
should have focused on the receptivity of the Brazilian legal
system generally to U.S. federal-court judicial assistance.
Opening Br. 29–31.
The District Court did not err by considering the
Brazilian court proceedings as part of its receptivity analysis.
The Supreme Court articulated the second Intel factor in the
disjunctive: “a court presented with a § 1782(a) request may
take into account . . . the receptivity of the foreign government
or the court or agency abroad to U.S. federal-court judicial
assistance.” Intel, 542 U.S. at 264 (emphasis added). So the
District Court did not abuse its discretion by evaluating
Brazilian courts’ receptivity to discovery obtained under §
1782. Given the procedural history of the parties’ dispute, it is
unclear what other Brazilian tribunal or agency evidence the
3
The District Court initially weighed the second Intel factor in
favor of GM because of the possibility that the Sao Paulo court
might deny the discovery sought by SPS. Within days, that
court in fact denied SPS’s request to take the essentially same
discovery that it sought under § 1782. The District Court then
denied SPS’s motion for reconsideration. See App. 14–16.
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District Court should have considered as part of its receptivity
analysis, and SPS has not suggested any.4
Our caselaw suggests that district courts may consider
receptivity generally or specifically. In Chevron, our factor-
two analysis in part examined “receptivity” narrowly. See
Chevron, 633 F.3d at 162–63. Because the record was unclear
whether the Ecuadorian court had denied the applicant’s
requests for documents, the party opposing the § 1782
application did not meet its “burden of demonstrating offense
to the foreign jurisdiction.” Id. at 162 (internal quotation marks
and citation omitted). Similarly, the party opposing the § 1782
application failed to show that an Ecuadorian arbitration panel
would not be receptive to the evidence. Id. at 163. We affirmed
the district court because the appellant could not demonstrate
offense to specific tribunals in the foreign jurisdiction. Id.
Our opinion included dicta cautioning that a foreign
court’s refusal to allow parallel discovery does not necessarily
4
SPS does emphasize that a party opposing § 1782(a)
discovery bears the burden of persuading a U.S. District Court
that the application would offend the foreign jurisdiction.
Indeed, we have said that “[t]he party opposing discovery
[under § 1782] has the ‘burden of demonstrating offense to the
foreign jurisdiction, or any other facts warranting the denial of
a particular application.’” Chevron, 633 F.3d at 162 (quoting
Bayer AG v. Betachem, Inc., 173 F.3d 188, 190 (3d Cir. 1999)).
But GM has carried this burden by invoking the Brazilian
standing and Preliminary Discovery decisions. See Chevron,
633 F.3d at 163 (party opposing § 1782 discovery can show
offense to the foreign jurisdiction by adducing foreign court
orders denying requests for the same documents).
13
mean that it would reject “relevant evidence tendered to it if
procured without its assistance.” Id. True enough, but that
possibility does not mean the District Court abused its
discretion by concluding the Brazilian courts are not receptive
to extraterritorial discovery from SPS, whose requests for
substantially the same discovery they have rejected. See App.
319–20. Unlike the party opposing § 1782 discovery in
Chevron, GM has shown that the Brazilian court presiding over
the parties’ discovery dispute rebuffed SPS’s effort to take the
requested discovery. Beyond that, we do not require GM to
prove a negative, i.e., that those courts or Brazil’s legal system
generally would under no circumstances be receptive to the §
1782 discovery sought here.
The District Court’s treatment of Intel’s second factor
(receptivity) dovetailed with its consideration of the third
factor (circumvention). It reasoned that if the São Paulo court
were to rule in favor of GM Brazil and deny SPS’s request to
take discovery in Brazil, allowing substantially the same
discovery against GM would likely circumvent foreign proof-
gathering restrictions because it would undercut the São Paulo
court’s decision. But because the São Paulo court had not yet
ruled at the time of the District Court’s August 30, 2022, order,
the District Court found the third factor did not weigh in favor
of either party. App. 11–12.
Two days later, the São Paulo court denied SPS’s
preliminary discovery request. App. 318–20. When apprised of
that development, the District Court reasonably viewed the
third factor differently. Allowing § 1782 discovery at that
juncture, it said, would undermine finality, encourage parties
to attempt to circumvent adverse foreign rulings, and generate
inefficiency. App. 14–16.
14
SPS acknowledges that the circumvention factor applies
“when the foreign tribunal has already rejected requests for the
same documents.” Opening Br. 34 (quoting In re Ex Parte
Application of Eni S.p.A., 2021 WL 1063390 at *4 (D. Del.
Mar. 19, 2021)). The São Paulo court’s September 1, 2022,
ruling satisfied that condition. App. 318–20. Particularly when
that decision is viewed in the context of the other Brazilian
rulings against SPS, we cannot say that the District Court’s
cautious response was an abuse of discretion.
Adverse discovery rulings by foreign courts are not
necessarily fatal for § 1782 applicants. See Intel, 542 U.S. at
253 (holding that § 1782 does not impose a foreign-
discoverability requirement). Indeed, sometimes foreign courts
signal receptivity to discovery obtained under § 1782. See, e.g.,
Heraeus Kulzer GmbH v. Esschem, Inc., 390 F. App’x 88, 92
(3d Cir. 2010) (nonprecedential) (noting that a German Court
postponed German proceedings “specifically for the purpose
of permitting [the § 1782 applicant] extra time to pursue its
discovery requests in [the United States]”). Here, however,
Brazilian courts have thus far erected a solid wall against SPS’s
attempts to pursue GM Brazil and none have indicated
receptivity to American discovery. On this record, the District
Court did not abuse its discretion in analyzing the Intel
discretionary factors.5
5
We agree with the District Court that the fourth Intel factor
favors SPS: its discovery requests are not “unduly intrusive or
burdensome.” See App 12; Intel, 542 U.S. at 265. But that
consideration is outweighed by factors one through three, all
of which favor GM in this case.
15
***
We will affirm the District Court’s order denying SPS’s
motion for reconsideration of the Court’s original denial of the
§ 1782 application.
16