Intermediary Banks in NYC – A Great Source of Information to Find A Debtor’s Assets

The following article was recently published by law firm Chalos & Co. regarding discovery requests on intermediary New York banks allowing a claimant to trace information regarding assets belonging to his debtor.

In Shipping Corporation of India Ltd. v. Jaldhi Overseas PTE Ltd. 585 F.3d 58 (2d Cir. 2009), the Second Circuit Court of Appeals held that defendants’ electronic funds transfers passing through intermediary banks in the United States could no longer be attached under Rule B.

Nevertheless, 28 U.S.C. 1782 allows a claimant to obtain judicial authorization to serve pre-litigation discovery requests on intermediary banks or other entities found in the jurisdiction of the district court. 28 U.S.C. 1782 embodies a longstanding Congressional policy favoring the liberal grant of assistance to foreign proceedings in hopes of providing efficient assistance to participants in international litigation and encouraging foreign countries to provide similar assistance to the courts of the United States.

The basic statutory requirements to be met, as set forth in 28 U.S.C. 1782, are:

(1) the person/entity from which disclosure is sought must reside or be found in the district where the discovery request is made;
(2) the party making the discovery request must be an interested person; and
(3) the information being produced is for use in a foreign or international tribunal.

Based on the prevailing case law, each of the above requirements are construed very liberally and District Courts have extremely broad authority to grant requests for discovery assistance under 28 U.S.C. 1782. Under the first requirement, the entity from whom discovery is sought need only be present in the district where the request for discovery is made. Notably, as long as an intermediary bank (through which wire transfers pass) is located in the district where the discovery request is made, this statutory requirement is satisfied.

The second and third factors are similarly construed broadly. The “interested party” element of § 1782 includes aggrieved interests that are not even parties to the foreign proceeding for which discovery assistance is sought. It includes any petitioner who “possess[es] a reasonable interest in obtaining [judicial] assistance.” See, e.g. Intel Corporation v. Advanced Micro Devices, Inc., 542 U.S. 241, 256-257 (2004). Further, the “foreign tribunal” element of §1782 includes investigative, quasi-judicial, administrative, or arbitral proceedings, which need not even be pending at the time a 1782 petition is submitted. It is sufficient that litigation is “within reasonable contemplation,” at the time the discovery request is presented.

Once the statutory requirements have been satisfied, the Court may consider the following discretionary factors in deciding whether to permit discovery:

(1) whether the person from whom discovery is sought is a participant in the foreign proceeding;
(2) the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government, court, or agency to federal-court judicial assistance;
(3) whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering limits or other policies of a foreign country or the United States; and
(4) whether the discovery requests are unduly intrusive or burdensome.
Significantly, discovery under § 1782 is available even where the type of discovery sought is not permissible in the foreign jurisdiction (i.e. – there is no foreign discoverability requirement). Intel, at 253.

In summary, 28 U.S.C. 1782 is an important tool for obtaining information concerning a debtor’s assets through, inter alia, intermediary banks found in New York City.

For more information concerning this matter, please do not hesitate to contact the Claims department.