SPS CORP I, FUNDO DE INVESTIMENTO EM DIREITOS CREDITORIOS NAO PADRONIZADOS v. GENERAL MOTORS CO.
No. 22-3331
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
July 31, 2024
PRECEDENTIAL
Argued: December 11, 2023
Before: BIBAS, PORTER, and FREEMAN Circuit Judges.
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.
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 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 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
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
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 . . . 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
II
The District Court had jurisdiction under
District Court rulings on
III
A
GM argues that SPS does not satisfy the first two of the
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
This argument is similarly unavailing. To comply with the “for use” requirement, a foreign proceeding related to the
SPS’s
Finally, SPS meets the “interested person” requirement. SPS would be a litigant in the contemplated merits proceeding, 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
We now turn to the Intel factors.
B
In Intel, the Supreme Court enumerated “factors that bear consideration in
- Whether the evidence sought is within the foreign tribunal’s jurisdictional reach, and thus accessible absent section
§ 1782 aid. Id. - “[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.
- “[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.
- 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 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
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.
Intel, 542 U.S. at 264. Accordingly, in Chevron, we held that factor one supported granting
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
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
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
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
Our opinion included dicta cautioning that a foreign court’s refusal to allow parallel discovery does not necessarily
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
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
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
* * *
We will affirm the District Court’s order denying SPS’s motion for reconsideration of the Court’s original denial of the
PORTER
Circuit Judge