Sixth Circuit Permits U.S.-Style Discovery in Aid of International Commercial Arbitration Under Section 28 U.S.C. § 1782
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On September 19, 2019, the United States Court of Appeals for the Sixth Circuit rendered a landmark decision which recognized that district courts within the Sixth Circuit can order discovery under 28 U.S.C. § 1782 for use in proceedings before a private arbitral tribunal. While courts had long recognized that interested parties could resort to 28 U.S.C. § 1782 to request evidence in support of either regulatory (or administrative),1 'state-sponsored',2 or even treaty arbitration,3 this novel ruling – holding, in conflict with the decisions of other Circuits, that 28 U.S.C. § 1782 may be used to obtain evidence in private international arbitration – greatly extends the scope of U.S.-style discovery to parties residing or found within the Sixth Circuit. The effects of this ruling could come at great cost, if participants in arbitration are not aware of them.
Under 28 U.S.C. § 1782(a), a federal district court may order discovery "for use in a proceeding in a foreign or international tribunal" upon application by "any interested person." The text of § 1782 has been at the center of many debates, notably since the United States Supreme Court's decision in Intel Corp. v. Advanced Micro Devices Inc., permitting a foreign litigant to obtain discovery in the U.S. if certain discretionary factors are met. While this statute may appear to apply broadly in all foreign proceedings, including arbitrations, a number of U.S. courts, including the Second and Fifth Circuits, have limited the application of § 1782 to "state-sponsored" arbitration and have thus refused to extend judicial assistance to obtain evidence for use in private international arbitration proceedings. Specifically, these other courts have held that a "foreign or international tribunal" does not include a privately constituted international arbitration tribunal.4 While lower courts have been split on this issue – with some courts allowing recourse to § 1782 in support of private commercial arbitration and others refusing to do so,5 – the Sixth Circuit's recent decision in Abdul Latif Jameel Transportation Co. v. FedEx Co. marks a clear change at the federal appellate level.6
In ALJ Transportation v. FedEx,7 the dispute related to a service provider contract pursuant to which Abdul Latif Jameel Transportation Company Limited ("ALJ") – a Saudi Arabian Corporation – agreed to be FedEx International's delivery-services partner in Saudi Arabia. Critically, the parties entered into two set of agreements, providing for DIFC-LCIA8 arbitration in Dubai and ad hoc arbitration in Saudi Arabia. When the dispute arose, ALJ initiated arbitration in Saudi Arabia, but the proceeding was later dismissed. For its part, FedEx International commenced arbitration under the DIFC-LCIA arbitration rules.
In that context, ALJ filed an application for discovery under 28 U.S.C. § 1782(a) against FedEx Corp., a non-party to the arbitration, in the United States District Court for the Western District of Tennessee – the jurisdiction in which FedEx Corp. is headquartered. The request sought to compel the production of documents and subpoena testimonies regarding FedEx's role in the underlying negotiations and its subsidiary's decision to terminate the service provider contract. The district court denied ALJ's request.
ALJ appealed the lower court's decision and the Sixth Circuit thus considered whether a privately contracted-for commercial arbitration constituted under the DIFC-LCIA arbitration rules could constitute "a foreign or international tribunal" within the meaning of 28 U.S.C. § 1782(a).9 The appellate Court's answer was a definitive yes.
Despite finding that neither the phrase "foreign or international tribunal" nor the word "tribunal" is defined in the text of § 1782 itself, the Sixth Circuit reached its conclusion based on the "ordinary meaning" of the phrase, with resort to several dictionary definitions of the words, the use of the word "tribunal" in legal writing, and an examination of the statute's "text, context, and structure."10 Finding that the phrase "foreign or international tribunal" was not ambiguous, the Court noted that legislative history and policy considerations were not necessary to resolve the question, but nevertheless supported its holding as well.11
Significantly, the Sixth Circuit reasoned that American jurists and lawyers, as well as courts – including the United States Supreme Court – have long used the word 'tribunal' "to encompass privately contracted-for arbitral bodies with the power to bind the contracting parties."12 The Court concluded that its reading of the Statute did not conflict with the Supreme Court's ruling in Intel; rather, it found that "Intel contains no limiting principle suggesting that the ordinary meaning of 'tribunal' does not apply here."13 The Court further reasoned that, in any event, Congress intended to expand the scope of § 1782 when it amended the text of the statute in 1964 to include proceedings before a "foreign or international tribunal."14 The Court acknowledged that this decision conflicted with prior rulings of the Second and Fifth Circuits – decisions which the Court characterized as relying too greatly on legislative history and policy concerns.15
In ALJ, the Sixth Circuit thus reversed the district court's denial of ALJ's application for discovery and remanded the matter to the district court to determine whether ALJ's application should be granted under the four discretionary factors laid out by the United States Supreme Court in Intel.
This decision is noteworthy as it provides an appellate-court ruling in line with the decisions of many lower courts that a privately contracted-for international tribunal constitutes a "foreign tribunal" within the meaning of § 1782.16 But, given the split it has created with the Second and Fifth Circuits, the decision now leaves substantial uncertainty for participants in arbitration proceedings, as the likelihood of success for a § 1782 application in international commercial arbitration cases now depends on whether the applicant can show that the respondent resides or can be "found" in the Sixth Circuit—i.e., in Michigan, Ohio, Kentucky, and Tennessee.17 This is because the statute allows a § 1782 applicant to bring its request in any district court in a district where the respondent "resides or is found."18 The Sixth Circuit's decision also makes a future Supreme Court case on the issue all but certain, although it still may be years until the Supreme Court provides the necessary guidance.19
- Interested Parties To An International Commercial Arbitration Can Now Seek Discovery Under § 1782 In The Sixth Circuit: The scope of the ALJ decision is far reaching because it broadens the scope of "tribunal" to encompass private arbitrations. Typically, such discovery is sought from witnesses or experts that are non-parties to the underlying arbitration. While it is possible that the ALJ decision may persuade other appellate courts and lead to changes in their position, the United States Supreme Court has yet to address the issue directly.
- Parties Residing Or Found Within The Sixth Circuit Can Now Be Subject To U.S.-Style Discovery, Even When The Dispute Is A Private Commercial Arbitration Dispute: The ALJ decision is binding on the Courts of the Sixth Circuit, which includes the states of Kentucky, Michigan, Ohio, and Tennessee. As such, persons residing or found within these states should carefully consider their choice to resolve their contractual disputes before a private arbitral panel as they may be put at a significant disadvantage if the other parties involved in the arbitration are either foreign, or a non-resident, of that Circuit. Indeed, U.S.-style discovery is both lengthy and costly and can now be used to build a case against person residing or found within the Sixth Circuit. In light of the above, efficiency and cost saving mandates that Sixth Circuit residents involved in commercial arbitration be represented by counsel familiar with U.S.-style discovery, so as to make sure that the pleadings used before U.S. Courts and international tribunals are consistent and do not adversely affect a party in the pending arbitration.
In addition, parties to a private commercial arbitration with some connection to the Sixth Circuit should consider including contractual provisions that expressly exclude the possibility of resort to U.S. discovery in the event of an arbitrated dispute. Though it is not predictable what view the Supreme Court will take if it ultimately addresses the question in ALJ, one may note the Supreme Court's prior decision in Stolt-Nielsen20 in which the court concluded (in the context of considering the Federal Arbitration Act) that parties to international arbitration proceedings may obtain only what they have expressly bargained for.
- The Sixth Circuit Was Not Convinced By Policy Considerations Showing that A Party Residing, Or Found, Within That Circuit Will Be Put At A Significant Disadvantage Against A Party Who is Not: Relying on Intel, the Sixth Circuit rejected policy considerations highlighting that foreign parties in arbitration seated overseas may be granted broader discovery than United States parties in arbitration located domestically.21 This is because, according to the Sixth Circuit, "the Supreme Court has made clear that district courts enjoy substantial discretion to shape discovery under § 1782(a)."22 As such, district courts in the Sixth Circuit now are bound to consider that a privately constituted arbitral tribunal satisfies the requirement of 28 U.S.C. § 1782.
- Courts Within The Sixth Circuit Are Still Bound By The Intel Ruling: District courts within the Sixth Circuit are still bound by the Intel factors. These factors include (1) whether the person from whom the discovery is sought is a participant in the foreign proceeding; (2) the nature of the foreign tribunal, character of the proceeding underway, and receptivity of the foreign government to U.S. federal court judicial assistance; (3) whether the request is an attempt to circumvent foreign proof gathering limitations or other policies of a foreign country or the U.S.; and (4) whether the discovery sought is unduly burdensome. As such, although a privately-constituted arbitral tribunal is to be considered a "tribunal" for purposes of 28 U.S.C. § 1782, a district court may still refuse to compel discovery based on its discretionary authority.
1 See Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004).
2 See Nat'l Broad. Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184, 190 (2d Cir. 1999) (holding that § 1782 only applies to "governmental or intergovernmental arbitral tribunals and conventional courts and other state-sponsored adjudicatory bodies"); Rep. of Kazakhstan v. Biedermann Int'l, 168 F.3d 880, 883 (5th Cir. 1999).
3 See, e.g., In re Application of Mesa Power Group, LLC, 878 F. Supp. 2d 1296, 1307 (S.D. Fla. 2012) (granting § 1782 application for use in a NAFTA arbitration); In re Application of Veiga, 746 F. Supp. 2d 8, 22-23 (D.D.C. 2010) (allowing § 1782 discovery in aid of arbitration tribunal convened under a bilateral investment treaty and UNCITRAL Rules).
4 See, e.g., El Paso Corp. v. La Comision Ejecutiva Hidroelectrica Del Rio Lema, 341 F. App'x 31, 33-34 (5th Cir. 2009) (deciding not to extend § 1782 to private Swiss arbitration tribunals); Nat'l Broad. Co., Inc., 165 F.3d at 191 (2d Cir. 1999) (holding that a private commercial arbitrations administered by the International Chamber of Commerce does not fall within the scope of § 1782); Biedermann Int'l, 168 F.3d at 883 (5th Cir. 1999) (finding that arbitrators in proceeding administered by the Stockholm Chamber of Commerce do not constitute a ''tribunal'' for purposes of § 1782).
5 See, e.g., In re Application of Owl Shipping, LLC & Oriole Shipping LLC, No. 14-5655, 2010 WL 1796579, at *10 (D.N.J. Oct. 17, 2014) (holding that an arbitration constituted under the rules of the London Maritime Arbitrators Association (LMMA) satisfied the statutory requirement of 28 U.S.C. § 1782); In re Babcock Borsig, 583 F. Supp. 2d 233, 238-40 (D. Mass. 2008) (holding that a private arbitral tribunal instituted under the International Chamber of Commerce (ICC) is a ''tribunal'' under § 1782). But see Norfolk Southern Corp. v. Gen. Sec. Ins. Co., 626 F. Supp. 2d 882, 884-86 (N.D. Ill. 2009) (finding that a private arbitration held in London did not fall within the scope of § 1782); In re Application of Operadora DB, 2009 WL 2423138, at *8-12 (M.D. Fla. Aug. 4, 2009) (declining to apply § 1782 to a private arbitration conducted under the International Chamber of Commerce).
6 Abdul Latif Jameel Transp. Co. v. FedEx Corp., No. 19-5315, 2019 U.S. App. LEXIS 28348 (6th Cir. Sept. 19, 2019).
7 Abdul Latif Jameel Transp. Co. v. FedEx Corp., No. 19-5315, 2019 U.S. App. LEXIS 28348, *1-47 (6th Cir. Sept. 19, 2019).
8 Dubai International Financial Centre-London Court of International Arbitration.
9 The Sixth Circuit did not consider the Saudi Arbitration when making its decision because the arbitral tribunal seated in Saudi Arabia dismissed ALJ's claims, hence rendering "the interpretive question moot with respect to that arbitration." Id. at *10.
10 Id. at *11-27.
11 Id. at *38-47.
12 Id. at *23-24.
13 The Sixth Circuit also noted that the Supreme Court did not address the particular question at issue in this case, and considered "the scope of § 1782 (a)'s use of 'tribunal' in a different factual context." Id. at *25, *32.
14 Id. at *28 (noting that, before 1964, 28 U.S.C. § 1782 "solely empowered district courts to order discovery 'in any judicial proceeding pending in any court in a foreign country'").
15 Id. at *32-39.
16 See, e.g., In re Application of Owl Shipping, LLC & Oriole Shipping LLC, No. 14-5655, 2010 WL 1796579, at *10 (D.N.J. Oct. 17, 2014) (holding that an arbitration constituted under the rules of the London Maritime Arbitrators Association (LMMA) satisfied the statutory requirement of 28 U.S.C. § 1782); In re Babcock Borsig, 583 F. Supp. 2d 233, 238-40 (D. Mass. 2008) (holding that a private arbitral tribunal instituted under the International Chamber of Commerce (ICC) is a ''tribunal'' under § 1782). But see Norfolk Southern Corp. v. Gen. Sec. Ins. Co., 626 F. Supp. 2d 882, 884-86 (N.D. Ill. 2009) (finding that a private arbitration held in London did not fall within the scope of § 1782); In re Application of Operadora DB, 2009 WL 2423138, at *8-12 (M.D. Fla. Aug. 4, 2009) (declining to apply § 1782 to a private arbitration conducted under the International Chamber of Commerce).
17 Careful observers may recall that the Eleventh Circuit's 2012 decision in Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., was the first federal appellate court to conclude affirmatively that 28 U.S.C. § 1782 could be used in support of privately constituted arbitration. The effect of that decision, however, remained limited; in 2014, the Court vacated its earlier opinion sua sponte, and declined to address whether § 1782 discovery could apply to proceedings before privately-constituted arbitral tribunals. Interestingly enough, on the same day, the Fourth Circuit noted that a German panel conducting a private arbitration "might be considered" a "tribunal" under § 1782. See Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 747 F.3d 1262, 1274 (11th Cir. 2014); GEA Group AG v. Flex-N-Gate Corp., 740 F.3d 411, 419 (4th Cir. 2014); Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 685 F.3d 987, 1000 (11th Cir. 2012).
18 28 U.S.C. § 1782(a).
19 The same question also has been raised in a case pending before the Seventh Circuit. See Servotronics, Inc. v. Rolls-Royce PLC, et al, Docket No. 19-01847 (7th Cir. Apr 30, 2019). Whichever way the Seventh Circuit rules will only now deepen the circuit split.
20 Stolt-Nielsen S.A. v. AnimalFeeds Int'l Co., 559 U.S. 662 (2010).
21 Abdul Latif Jameel Transp. Co. v. FedEx Corp., No. 19-5315, 2019 U.S. App. LEXIS 28348, *39-42 (6th Cir. Sept. 19, 2019).
22 Id. at *42.
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