United States: Sixth Circuit Allows Discovery In Private International Commercial Arbitrations

Last Updated: October 1 2019
Article by Sabrina N. Jiwani, Paul M. Levine and Gonzalo S. Zeballos

28 U.S.C. § 1782 is a powerful tool that permits foreign litigants to obtain broad U.S. discovery in aid of their foreign court litigation. Bank records and key documents can be obtained and witnesses can be deposed – all with a subpoena, just like in any federal litigation. But whether this discovery could be used in private commercial international arbitration was an unresolved question. Indeed, the appellate courts that had addressed this issue previously had essentially prevented litigants from using § 1782 to aid their international arbitrations.

Therefore, the recent ruling from the Sixth Circuit Court of Appeals in Abdul Latif Jameel Transportation Company Ltd. v. FedEx Corporation, 2019 WL 4509287 (6th Cir. Sept. 19, 2019) was significant. The Sixth Circuit has issued the first appellate ruling that expressly holds § 1782 does apply to private international arbitrations.

Litigants involved with private commercial arbitrations can now seek evidence in the Sixth Circuit – and potentially others – using this detailed opinion as justification. Anyone contemplating or engaged in a contract with an international arbitration clause should think carefully about whether they should (or should not) contract around U.S. discovery or, at the very least, address the point during the early stages of an arbitration. And persons holding yet-to-be-confirmed arbitration awards can consider taking § 1782 discovery sooner rather than later in an effort to recover assets.

Prior Landscape of § 1782

Section 1782 enables foreign litigants to use the United States’ broad discovery process to obtain documents and evidence which may be otherwise unavailable within the confines of a foreign proceeding. The statute provides that “any interested person” involved in proceedings before a “foreign or international tribunal” may obtain evidence from any person or entity located in the United States. In addition to its aid in litigation, § 1782 is extremely powerful tool to that allows judgment creditors to use the U.S. discovery to locate assets.

But prior attempts to use § 1782 in private international commercial arbitrations have led to mixed results. The Second and Fifth Circuits both stated that the word “tribunal” did not include private foreign arbitrations and, instead, would apply only to governmental tribunals and other state-sponsored adjudicatory bodies.1 In addition, most (but not all) district courts found that § 1782 was inapplicable to private commercial arbitrations.2

The Intel Decision

In 2004, the Supreme Court rendered its opinion in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). That opinion is the seminal decision in all § 1782 litigation, providing the key test in how to obtain evidence under the statute. The Supreme Court required that all applicants under § 1782 meet the three mandatory factors in the statute, which requires that the applicant is an “interested person” seeking discovery from a person or entity located in the judicial district for use before a “foreign or international tribunal.” If so, four more discretionary factors were weighed:

  1. Is the person from who discovery is sought an entity to the foreign proceeding where discovery could be had?
  2. The nature of the foreign tribunal, the character of that proceeding and the receptivity of the foreign tribunal to U.S. court assistance.
  3. Is the § 1782 discovery an attempt to circumvent foreign proof gathering restrictions?
  4. Whether the discovery sought is unduly burdensome.

In addition, the Supreme Court hinted, without expressly deciding, that § 1782 evidence could be obtained for foreign commercial arbitrations. The Supreme Court looked to a functional test – was the foreign tribunal a “first instance decisionmaker” that gathers and weighs evidence to resolve a dispute – to determine a quasi-judicial body could be a tribunal under § 1782.

After Intel, the Eleventh Circuit revisited the meaning of “tribunal” under § 1782. The Eleventh Circuit was initially receptive to applying § 1782 to private international arbitrations, stating that Intel provided substantial guidance in favor of adopting a broader definition of “tribunal” to include arbitration proceedings.3 This decision was short-lived, as two years later the Eleventh Circuit sua sponte vacated its 2012 opinion and replaced it with a narrower one (that still authorized the discovery).4

The Abdul Latif Decision

The Sixth Circuit’s decision arose from two arbitrations: (1) one pending in Dubai pursuant to the rules of the Dubai International Financial Centre-London Court of International Arbitration; and (2) the other in Saudi Arabia. The § 1782 applicant sought documents related to the contract negotiations and performance of two contracts between it and the foreign subsidiary of the respondent (a U.S. corporation). The United States District Court for the Western District of Tennessee in Memphis, where the respondent is located, denied the application because private international commercial arbitrations were not “foreign or international tribunals” and the statute did not encompass the foreign arbitration because § 1782 does not define “tribunal.”

The Sixth Circuit reversed. “We hold that this provision permits discovery for use in the private commercial arbitration at issue.” The court examined the word “tribunal” according to both dictionary definitions and use of the word “tribunal” in legal writing. A review of United States sources showed that American lawyers and judges have long understood the word “tribunal” to include privately contracted-for arbitrations. The Second and Fifth Circuits’ decisions, based largely on an interpretation of the legislative history, got that history wrong and, in any event, ignored the plain terms of the statute. The variety of policy considerations argued against § 1782 discovery could not overcome the plain terms of the statute. And the Sixth Circuit made clear that the discretionary factors enunciated in Intel could still limit or deny discovery, just as in every § 1782 application.

Future Considerations

The Sixth Circuit’s opinion can be used powerfully. Most obviously, discovery can be obtained within the Sixth Circuit for a foreign commercial arbitration. Litigants engaged in foreign commercial arbitrations now have a direct vehicle to expand their discovery options in foreign arbitrations (subject to any restrictions in those foreign arbitrations).

This decision will have ramifications in other circuits. The Eleventh Circuit had previously adopted this approach, only to change its mind later on. Other circuits have yet to reach the issue. And the Second and Fifth Circuits may need to look anew to their prior pre-Intel decisions.

Anyone with an international arbitration clause must consider the ramifications of this opinion. Did you assume that an international arbitration would not lead to U.S. discovery? That may not be the case. Parties, of course, can contract around this eventuality if they so desire and, at a minimum, can address the possibility of § 1782 discovery in an early procedural hearing with the arbitrators.

Holders of arbitration awards typically had to wait for confirmed judgments, which sometimes took years to resolve before foreign vacatur proceedings. Those parties should consider moving forward with § 1782 discovery in the United States to start locating assets.

Footnotes

1 Republic of Kazakhstan v. Biederman Int’l, 168 F.3d 880, 881 (5th Cir. 1999) (holding that there was no evidence of congressional intent to extend § 1782’s reach to international commercial arbitration); NBC v. Bear Stearns & Co., 165 F.3d 184 (2nd Cir. 1999). These private commercial arbitrations are different than international investment arbitrations involving foreign governments, which have consistently been held to be “tribunals” for the purposes of § 1782. E.g., In re Application of Chevron Corp., 709 F. Supp. 2d 283, 291 (S.D.N.Y. 2010).

2 Compare In re Winning (HK) Shipping Co. Ltd., 2010 WL 1796579 (S.D. Fla. Apr. 30, 2010) (concluding that a private international arbitration conducted by the London Maritime Arbitrators Association constituted a § 1782(a) tribunal because the arbitration arose pursuant to a private agreement and could collect evidence and issue a decision on the merits) with In re Operadora DB Mexico, S.A. DE C.II., 2009 WL 2423138 (M.D. Fla. Aug. 4, 2009) (concluding that the ICC International Court of Arbitration was not a § 1782(a) tribunal because it issued decisions that were not judicially reviewable, derived power from a private agreement and was tasked with resolving disputes independently of state-sponsored tribunals).

3 In re Consorcio Ecuatoriano de Telecomunicaciones S.A., 685 F.3d 987 (11th Cir. 2012).

4 In re Consorcio Ecuatoriano de Telecomunicaciones S.A., 2014 WL 104132 (11th Cir. Jan. 10, 2014).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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