Case of the Day: In re Application of Ruiz

The case of the day is In re Application of Ruiz (S.D.N.Y. 2018). In 2017, European and Spanish banking regulators sold Banco Popular Español, a bank they thought failing, to Banco Santander for € 1. Investors in Banco Popular then sued in the EU’s Court of Justice, and some of them also brought investor-state arbitrations against Spain under the Mexico/Spain BIT. Finally, some of the investors sought to join Spanish criminal proceedings against Banco Popular and its former managers. The investors applied to the court under § 1782 for leave to take discovery of Santander (including the Spanish bank itself, which had a US branch, and some US subsidiaries) for use in the foreign proceedings. Although the judge framed the issue as whether the investors had satisfied the first statutory element under § 1782—the requirement that the target “reside” or be “found” in the district—in fact the real issue, in the judge’s view, was constitutional. Would the exercise of jurisdiction over Banco Santander S.A. (the Spanish entity) or Santander Bank N.A. (a national banking association with its headquarters in Delaware) consistent with due process? The court held that discovery from both entities was improper (though it did allow discovery from another US-based Santander entity—an issue I don’t discuss here).

As an initial matter, let’s observe that the due process issue here is a Fifth Amendment issue, not a Fourteenth Amendment issue. The reason I say this is that what’s at stake is not whether the exercise of jurisdiction by a court in New York would be consistent with due process, but rather whether the exercise of jurisdiction by a court in the United States would be consistent with due process. It’s true that in an ordinary civil lawsuit, the district court’s jurisdiction ordinarily is limited to the jurisdiction that a state court could exercise. But this is because of FRCP 4(k)(1)(A), a rule designed to ensure basic parity between the state and federal courts. In other words, the limitation of personal jurisdiction to state boundaries is not constitutional here.

The reason I raise this is that it seems to me there is no constitutional reason why the court could not exercise jurisdiction over Santander Bank N.A., even though that bank’s headquarters are outside of New York. If the investors had brought a lawsuit against Santander Bank, then of course FRCP 4(k)(1)(A) would apply, and they would have, perhaps, to sue in Delaware, unless they could show that a New York court would have general or specific personal jurisdiction. But there are no limitations on where in the United States a subpoena may be served. Contrast FRCP 45(b)(2) with FRCP 4(k). So it seems to me that as to Santander Bank N.A., the judge should have focused on the statutory issue, and in particular the word “found,” rather than on the question of due process.

The issue is a little more difficult with respect to Banco Santander S.A., because it’s a foreign entity that may not be “at home” anywhere in the United States, as it would have to be in order to establish general personal jurisdiction if it were a defendant. The precedents make it pretty clear that the presence of branch offices in New York is insufficient to vest a court with general personal jurisdiction over a foreign bank.

I don’t have a definitive view on the decision yet. There may be some case-specific facts having to do with New York contacts relevant to the case itself that may become important on appeal but that I won’t cover here. For what it’s worth, here are a few big-picture thoughts:

  • I wonder if a typical personal jurisdiction analysis is the right way to look at non-party subpoenas, whether in aid of foreign litigation or even domestically. Under New York law, when you have a foreign judgment and you seek recognition and enforcement in New York, you don’t need to show personal jurisdiction. Why? Because the case is an ancillary proceeding to enforce a judgment that has already been reached. I might qualify the rule so as to say that you don’t need to show jurisdiction to the extent of the judgment debtor’s assets in New York. In any case, it seems to me that similar reasoning suggests a fortiori that you shouldn’t have to make a showing of personal jurisdiction in a subpoena case. After all, you’re not trying to impose liability on the target of the subpoena, and so perhaps you could say that the target isn’t really deprived of life, liberty, or property in the constitutional sense.
  • I think the decision, if followed, is a big deal in subpoena practice generally, not just in § 1782 cases, because it’s common practice to serve subpoenas on New York branches of banks. The rationale of the court’s decision is constitutional and thus not limited to § 1782 cases. In terms of the overall effect on § 1782 practice, it seems to me there are two big buckets of § 1782 cases: “money” cases, brought mostly in New York, and “tech” cases brought mostly in California. Because the tech firms have their headquarters in California, the effect of the decision will be limited in those cases.

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