Sixth Circuit Acknowledges the Broad Scope Of 28 USC § 1782, Authorizing Discovery For Use In Foreign Private Commercial Arbitration

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Sixth Circuit Acknowledges the Broad Scope of 28 USC § 1782, Authorizing  Discovery for Use in Foreign Private Commercial Arbitration

The Sixth Circuit, in a matter of first impression, allowed discovery of evidence (i.e., documents and deposition testimony) for use in foreign private commercial arbitration, establishing a helpful precedent for anyone who may seek evidence in the US for use in a foreign tribunal. (Abdul Latif Jameel Transportation Company Ltd. v. Fedex Corporation, case number 19-5315 (6th Cir., Sept. 19, 2019). The decision marks a significant departure from the U.S. federal courts’ general reluctance to authorize discovery under 28 USC Section 1782 (“§ 1782”) for use in private international arbitration tribunals.

Section 1782 has become the weapon of choice for international litigants seeking discovery in US federal courts in aid of foreign proceedings. The statute allows an “interested person” (e.g., an individual or an entity) to obtain discovery from US non-parties to a foreign action “found” in the U.S. “for use” in that foreign action.  It is a useful tool to consider when you seek to add pressure on participants before a foreign tribunal or their related US-based parties who could effectively help resolve your dispute.  It could lead to the development of facts needed in a foreign action or to form the evidentiary foundation to pursue other actions in the US or abroad.

Federal district courts have broad discretion to fashion a discovery order under § 1782. The United States Supreme Court identified four discretionary factors that a district court must consider when ruling on a § 1782 application: (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 or the court or agency abroad to U.S. federal court assistance; (3) whether the discovery request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States; and (4) whether discovery would be unduly intrusive or burdensome.[i]

Since then, many litigants have successfully invoked § 1782, giving rise to a rich jurisprudence on application of the four discretionary factors. At the same time, whether or not a private arbitration tribunal is synonymous with “foreign or international tribunal,” remains an open and highly contested question.  Before discussing the Sixth Circuit’s decision, we briefly summarize four different approaches as to whether an arbitration panel can be considered a “tribunal” under § 1782.

The Four Approaches

Intel established that § 1782 permits discovery in the US not only in connection with court cases but also in connection with regulatory and administrative proceedings. In Intel, the United States Supreme Court has not addressed whether private arbitral tribunals fall within the scope of § 1782. Before Intel, the Second and Fifth Circuits held that § 1782 did not permit discovery in aid of proceedings in a private arbitral tribunal because § 1782 was designed to aid only governmentally sponsored tribunals. There are at least four different approaches developed by federal courts as to whether arbitration panels can be considered “tribunals” under § 1782.

  1. Second and Fifth Circuits concluded that permitting § 1782 discovery in aid of private arbitrations would lead to a situation where arbitrations abroad could have broader discovery than domestic arbitrations governed by the Federal Arbitration Act. These courts found that permitting § 1782 discovery in aid of a private arbitration would undermine the utility of arbitration as a quick, efficient method of resolving disputes.
  2. Many federal district courts, nonetheless, have determined that Intel authorizes § 1782 discovery in aid of private arbitrations. Relying on the approving reference to “arbitral forums” in Intel, these courts have approved § 1782 discovery for use in foreign proceedings before private bodies, such as the International Chamber of Commerce, the Austrian Economic Chamber, and even panels created purely by contract. The general theory of these courts’ decisions is that under Intel, any “first instance decisionmaker” is a “tribunal.”
  3. A third group of courts apply a “functional analysis” that looks at each arbitral panel on a case by case basis to see whether it functions as the sort of tribunal, subject to judicial supervision, that Intel endorsed. The Eleventh Circuit pioneered this approach. Judicial supervision is a crucial element: even if the panel was created solely by contract, the arbitration may be a tribunal if its decisions can be appealed to a court. Under this approach, presumably most private arbitrations in developed countries would qualify.
  4. A fourth approach was enunciated in 1994, when the district court for the Southern District of New York held that § 1782 requests could be made in support of private arbitration overseas, but only with the approval of the arbitrators. In re Technostroyexport, 853 F. Supp. 695 (S.D.N.Y. 1994). This approach, however, has not been followed by other courts and is probably no longer tenable after Intel.[ii]

Summary of the Sixth Circuit’s Decision

Background 

The underlying dispute between FedEx’s subsidiary, FedEx International, and Abdul Latif Jameel Transportation Company Limited (“ALJ”), a Saudi corporation, arises from two logistics contracts.  Under the first contract, providing for ALJ to deliver international shipments in Saudi Arabia, the parties agreed to arbitrate their disputes in Dubai in the United Arab Emirates, under the rules of the Dubai International Financial Centre-London Court of International Arbitration (“DIFC-LCIA”). Under the second contract, providing for FedEx International to extend certain supporting services to ALJ, the parties agreed to arbitrate their disputes in the Kingdom of Saudi Arabia, under the rules of that country.  Each of the contracts became the subject of a commercial arbitration. The arbitration pending in Dubai is relevant to the Sixth Circuit’s decision, while the arbitration in Saudi Arabia was dismissed.

While the arbitrations were pending, ALJ filed an application for discovery under § 1782 against FedEx Corp. in the U.S. District Court for the Western District of Tennessee, the federal district where FedEx Corp. is headquartered. In its application, ALJ sought to obtain documents from FedEx Corp. and deposition testimony of its corporate representative relating to FedEx’s role in the contract negotiations and the company’s knowledge of the contracts’ termination. Denying ALJ’s application, the district court determined that neither the Saudi arbitration nor the Dubai arbitration constituted a “foreign or international tribunal” within the meaning of § 1782. Therefore, the district court held that ALJ could not, as a matter of law, obtain discovery for use in the private arbitration proceedings under § 1782. ALJ appealed the district court’s decision to the Sixth Circuit.

Analysis

The Sixth Circuit reversed and remanded the district court’s decision, after carefully considering the statutory text, context, structure, and history of § 1782.  The Sixth Circuit concluded that the Dubai arbitration, a privately contracted-for arbitral body, qualifies as a “foreign or international tribunal” under § 1782.  The court determined that its holding is supported by the United States Supreme Court’s Intel Corp. v. Advanced Micro Devices, Inc. decision, applying § 1782 in non-judicial proceedings.  The court also relied on the United States Supreme Court’s Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth decision,[iii] using the phrase “international arbitral tribunal” to describe a proceeding before a private arbitral body, as evidence of the common usage of the word “tribunal” to describe privately constituted arbitral bodies.

The Sixth Circuit rejected FedEx Corp’s argument that only “state-sponsored” arbitration proceedings fall within § 1782’s scope, disagreeing with the prior decisions of the Second and Fifth Circuit[iv]. The Sixth Circuit found that based on the legislative history of § 1782, the word “tribunal” does not require the United States to be a party to an international agreement under which a foreign proceeding takes place.  The court also acknowledged the breadth of § 1782 discovery (compared to discovery available under the Federal Arbitration Act) and noted the district courts’ power to limit or reject “unduly intrusive or burdensome” discovery requests under § 1782.  The Sixth Circuit concluded that the word “tribunal” in § 1782 encompasses private commercial arbitrations.

Conclusion

The transnational world of business frequently requires parties to resort to litigation or alternative dispute resolution and to seek evidence located across borders.  For foreign litigants, this often means seeking evidence located in the US.  The Sixth Circuit has now established a helpful precedent for anyone who may seek evidence (documents and deposition testimony) in the US for use in foreign proceedings, including private arbitration tribunals.  While some will view the development with Luddite-like scorn, increased transparency and fact-finding possibilities in the US federal courts in aid of international arbitral proceedings are likely to outweigh any concerns for abuse.

With decades of combined experience and a track record of success, our team is uniquely positioned to assist foreign litigants with their application for, or defense against, discovery under § 1782.

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George Benaur is a US-based lawyer and founder of Benaur Law LLC. George has developed a network of trusted counsel around the world, especially in Russia and the United Kingdom to offer global solutions to his clients. George has extensive experience representing individuals and international corporations in corporate transactions, investments, compliance matters, as well as complex litigations, pre-litigation dispute resolution, investigations, and contract drafting and negotiation, both domestically and internationally.

George Utlik is a US-based lawyer and founder of Utlik Law Firm LLC, specializing in insolvency, complex commercial litigation, asset recovery, and international judgment enforcement. Born and raised in Belarus, George is a native Russian speaker and is often asked to assist in matters arising out of the Russian Federation and the Commonwealth of Independent States. Before starting his own practice, George practiced law at Kobre & Kim LLP and at Arent Fox LLP. 

Ben Rozenshteyn is in his 3L year at the Benjamin N. Cardozo School of Law, where he serves as a Coach/Editor of the Alternative Dispute Resolution Competition Honor Society. Ben has experience interning at Klishin & Partners in Moscow, Russia, and is interested in international commercial arbitration.

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[i]   See Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264-65 (2004).

[ii] https://www.americanbar.org/groups/business_law/publications/blt/2014/05/06_riback/

[iii] See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985),

[iv] See Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880, 883 (5th Cir. 1999)National Broadcasting Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999).

 

 

 

 

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