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Calling SCOTUS: Sixth Circuit Re-Establishes Circuit Split Re U.S. Discovery In Aid of Foreign Commercial Arbitration (28 U.S.C. § 1782)

The U.S. Supreme Court may at last get the opportunity to determine definitively whether a foreign or international private commercial arbitration proceeding constitutes a “tribunal” under 28 U.S.C. § 1782(a), which affords U.S. discovery “for use in a proceeding in a foreign or international tribunal . . . .”  The Sixth Circuit recently ruled that it does, see Abdul Latif Jameel Transp. Co. v. FedEx Corp., No. 19-5315, 2019 U.S. App. LEXIS 28348 (6th Cir. Sept. 19, 2019) (the “ALJ Case”), thus cementing a split with the Second and Fifth Circuits on the issue.  (Previously, the Eleventh Circuit too had adjudicated the issue in the affirmative, but it later withdrew its decision in that regard.)

The ALJ decision may be good news for certain commercial arbitration parties seeking evidence from within the geographic bounds of the Sixth Circuit.  The rest of us may have to await further developments, including an adjudication of the issue by SCOTUS.  However, SCOTUS might not be keen to embrace the opportunity to resolve the current split should it be presented in a petition for certiorari concerning the ALJ Case.  Among other things, the contrary 1999 holdings of the Second and Fifth Circuits are “old” jurisprudence, as they pre-date SCOTUS’s landmark 2004 decision concerning the statute in question.  Nevertheless, the issue is of growing significance, and the apex court is unlikely to resist for very long.

In the ALJ Case, the Sixth Circuit had little difficulty in reaching its decision that 28 U.S. C. § 1782(a) “permits discovery for use in the private commercial arbitration at issue.”  It relied primarily on the plain meaning of the terms in the statute’s text, and to a lesser extent the legislative history and oft-cited, if arguably ambiguous, dictum from SCOTUS’s 2004 decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 258 (2014), which quoted approvingly a law review article by Hans Smit, a draftsman of the legislation in question.

Generally, 28 U.S.C. § 1782(a) was intended as a generous offer to the world to make U.S. judicial discovery processes available as a means to obtain evidence for use in foreign and/or international dispute resolution proceedings.  Congress sought to lead by example with regard to such cross-border cooperation; reciprocity by another country is not a prerequisite to the utilization of this mechanism.

A policy-based criticism has frequently been raised in opposition to the extension of such judicial cooperation to private commercial arbitrations, however, most recently by the Seventh Circuit Court of Appeals during oral argument in mid-September in Servotronics Inc. v. Rolls Royce PLC, No. 19-1847.  That is, if a commercial arbitration is deemed to be a “tribunal” for such purposes, parties in a foreign/international commercial arbitration would arguably have broader access to discovery from non-parties under 28 U.S.C. § 1782, with the Federal Rules of Civil Procedure likely governing, than would participants in a domestic commercial arbitration, whose limited means of such “discovery” are in effect governed by the Federal Arbitration Act.  (As a practical matter, considering SCOTUS’s guidance in Intel, 28 U.S.C. § 1782 is to be used for the most part to obtain evidence in the U.S. from non-parties to the dispute resolution proceeding in question.)  However, the Sixth Circuit addressed that policy argument, drawing on SCOTUS’s analysis in Intel, and found it unavailing.

Pertinent History of 28 U.S.C. 1728

Congress enacted 28 U.S.C. § 1782 in 1948 to enable U.S. discovery to be obtained in aid of litigation in foreign courts.  In 1964, Congress revised Section 1782(a), apparently expanding the availability of such U.S. judicial assistance by, among other things, altering the identification of the fora that might benefit from (a) “any judicial proceeding pending in any court in a foreign country” to (b) any “proceeding in a foreign or international tribunal.” 

See Intel, 542 U.S. at 248 (emphasis added).

The ALJ Case

ALJ is a Saudi corporation that contracted with FedEx International Inc. (“FedEx Int’l”) to serve as its delivery-services partner in Saudi Arabia.  ALJ and FedEx Int’l agreed to arbitrate their disputes in Dubai under the rules of the Dubai International Financial Centre-London Court of International Arbitration (“DIFC-LCIA”).  ALJ commenced arbitration against FedEx Int’l in March 2018, asserting breach of contract.  In connection with that arbitration, ALJ sought discovery under Section 1782(a) from FedEx Corporation (“FedEx”), an American company (headquartered in Tennessee) that is not a party to the ALJ-FedEx Int’l services contract.

The U.S.D.C. for the Western District of Tennessee denied ALJ’s application on the ground that the commercial arbitration in question did not constitute a “foreign or international tribunal” within the meaning of Section 1782(a) because it was not an administrative or “state-sponsored” arbitral proceeding.  ALJ appealed to the Sixth Circuit, which reversed.

The Sixth Circuit’s Decision

There being no dispute as to the “foreign or international” nature of the pertinent arbitration proceeding in Dubai, the Sixth Circuit focused on whether the commercial arbitral body in question could properly be considered a “tribunal” for purposes of Section 1782(a).  The statute itself does not define the term.  The Sixth Circuit therefore engaged in ordinary statutory construction, ultimately concluding that the term “tribunal” does include private commercial arbitration panels.  See ALJ, 2019 U.S. App. LEXIS 28348, at *44.

a.         “Plain Meaning”

First, the Sixth Circuit sought the ordinary meaning of the word “tribunal” at the time (1964) the term was introduced into Section 1782(a) by amendment.  It examined (i) definitions in standard and legal dictionaries in use near that time, concluding that they were inconsistent, id. at *15-*18; (ii) legal writing at the relevant time, which evidenced that “tribunal” was used by jurists, lawyers, and legal scholars in a broad sense that encompassed private commercial arbitration panels, id. at *18-*23; and (iii) the use of “tribunal” in 28 U.S.C. § 1782 as a whole, finding that the statute’s other references to the term did not compel an interpretation that would exclude private arbitral bodies, id. at *23-*26.

b.         Intel

The Sixth Circuit also relied on SCOTUS’s decision in Intel, which concerned a request for U.S. discovery in relation to a proceeding of a treaty-based commission charged with antitrust enforcement in the European Union.  In determining whether the petitioner had a right to U.S. discovery, SCOTUS had to decide whether the commission was a “foreign or international tribunal” within the meaning of Section 1782(a).  Intel, 542 U.S. at 257.  It concluded that, by its 1964 amendment, Congress expanded Section 1782(a)’s scope to include administrative and quasi-judicial proceedings abroad, including the E.U. antitrust commission.  ALJ, 2019 U.S. App. LEXIS 28348, at *28.  Although SCOTUS had not needed to decide in Intel if Section 1782(a) extends to private commercial arbitrations, SCOTUS’s relatively expansive construction of the statute’s language figured prominently in the Sixth Circuit’s analysis in the ALJ Case.  See id. at *30-*32.

c.         Contrary Decisions of Sister Circuits

The Second and Fifth Circuits had both determined earlier that Section 1782(a) does not afford assistance to parties in private commercial arbitrations abroad.  See NBC v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999); Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880 (5th Cir. 1999).  Notably, both decisions were rendered prior to SCOTUS’s decision in Intel.

The Sixth Circuit disagreed with those decisions because (a) it did not find the term “tribunal,” as used in Section 1782(a), to be ambiguous, so as to justify its sister circuits’ purported reliance on the statute’s legislative history, ALJ, 2019 U.S. App. LEXIS 28348, at *34; and (b) it disagreed with their assessment of Congress’s intent, id. at *35-*36.  

d.         Policy Arguments

Finally, albeit seemingly in dicta, the Sixth Circuit addressed the policy arguments advanced by FedEx, and found them unpersuasive.

i.          Proportionality with Federal Arbitration Act

The Sixth Circuit found unavailing the argument that U.S. discovery made available to parties arbitrating commercial disputes abroad could not be more extensive than the discovery available to parties in domestic commercial arbitrations (i.e., as afforded by FAA), and that Section 1782(a) therefore could not be construed to include private commercial arbitral bodies.  See id. at *42.  Rather, the Court opined, only Congress has the prerogative to bring the FAA and Section 1782(a) into alignment with respect to the discovery they permit.  Id. at *38.

ii.         Efficiency of Arbitration

The Sixth Circuit also rejected FedEx’s argument that allowing arbitrating parties abroad to utilize Section 1782(a) would violate an asserted U.S. policy favoring “efficient” arbitration procedures that conserve resources and time.  See id. at *42.  The Court pointed out that it could not assume that discovery requests under Section 1782(a) “will inevitably become unduly burdensome,”  id. at *42, and noted that district courts have considerable discretion in ordering discovery under Section 1782(a), and can limit discovery that is “unduly intrusive or burdensome,” see id. at *42-*43 (quoting Intel, 542 U.S. at 264).

iii.        Policy Aims of Section 1782(a)

Finally, the Sixth Circuit dismissed as irrelevant the argument that Section 1782(a) should not apply to commercial arbitrations held abroad because providing U.S. discovery in such instances would not further the statute’s alleged aim (as identified by FedEx) of enticing foreign governments to provide reciprocal assistance to parties involved in U.S. domestic arbitrations.  Id. at *43.  The Court also rejected FedEx’s contention that permitting U.S. discovery to assist foreign commercial arbitral proceedings would violate the federal policy favoring enforcement of private arbitration agreements according to their terms, at least in cases where an arbitration agreement limits the scope and/or means of discovery.  The Sixth Circuit reiterated that the district court has discretion to consider the terms of the arbitration agreement when specifying discovery to be permitted under Section 1782(a).  See id. at *44.

Conclusion

The Sixth Circuit’s decision in the ALJ Case has created a split among a few Courts of Appeals with respect to the construction of 28 U.S.C. § 1782(a), but the Second Circuit’s decision in NBC and the Fifth Circuit’s decision in Biedermann were rendered pre-Intel, and so may have diminished precedential weight.  SCOTUS may prefer to wait so see if another Court of Appeals issues a decision in conflict with the Sixth Circuit’s before taking up the matter.

In the interim, parties negotiating commercial agreements that designate dispute resolution by arbitration outside the U.S. may wish to consider the prospect of non-party discovery in the U.S. under 28 U.S.C. § 1782.

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Authors

Gilbert A. Samberg is a Mintz litigator with experience in complex international and domestic commercial disputes. He focuses on international arbitration and other cross-border alternative dispute resolution proceedings, drawing on his science background to assist biotech and chemical companies.

Todd Rosenbaum

Associate

Todd Rosenbaum is a Mintz litigator whose practice encompasses general commercial litigation, securities litigation, white collar criminal defense, government enforcement matters, and internal investigations. Todd represents clients at trial and appellate courts as well as arbitration.