US Court of Appeals backtracks from application of §1782 discovery in international commercial arbitration

by DLA Piper
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In a surprising reversal, the United States Court of Appeals for the Eleventh Circuit has vacated its ruling in Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 685 F.3d 987 (11th Cir. 2012) (CONECEL I), in which it granted an application to obtain discovery for use in an Ecuadorian arbitration pursuant to 28 U.S.C. §1782. CONECEL I, previously addressed here, represented the first instance in which a US Court of Appeals endorsed the use of §1782 in connection with commercial arbitration proceedings.

Apparently unprompted by either of the parties, however, the circuit court chose to reconsider the issue in the very same case and issue a revised opinion some two years later. See Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., No. 11-12897, 2014 WL 104132 (11th Cir. Jan. 10, 2014) (CONECEL II).

Although the court reached the same result, it did so on substantially narrower grounds and expressly withheld judgment on the question of whether an arbitral tribunal constituted a "foreign or international tribunal" for purposes of the statute. Whereas the court in CONECEL I substantially advanced the cause of §1782's application in arbitration proceedings - a matter of great controversy - its reversal in CONECEL II injects significant new uncertainty as to the statute's scope.

28 U.S.C. §1782

§ 1782(a) permits any party or other interested person involved in proceedings taking place before a foreign or international tribunal (including proceedings not yet under way, but rather in "reasonable contemplation"), or the international tribunal itself, to make a request to a federal district court for an order compelling discovery from a person or entity that resides or is found in the district in which the court sits.

The court in CONECEL I held that the Ecuadorian arbitral tribunal, before which a dispute was pending, was a foreign tribunal for the purposes of § 1782, thus permitting discovery in the international arbitration to be sought in United States federal courts.

A switch in time

The court in CONECEL I relied on the United States Supreme Court's decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), in which the Court expressly left open the possibility that §1782 could be applied to international arbitration proceedings by referring to the scholarly writings of Professor Hans Smit, a co-author of the statute, in which he stated that "[t]he term `tribunal' ... includes … administrative and arbitral tribunals." Id. at 258.

The Eleventh Circuit in CONECEL I considered Intel as "substantial guidance" in favor of adopting an expansive definition of "tribunal" that included arbitration proceedings. Accordingly, the court concluded that the Ecuadorian arbitral tribunal qualified as a "foreign tribunal" because "it acts as a first-instance decisionmaker; it permits the gathering and submission of evidence; it resolves the dispute; it issues a binding order; and its order is subject to judicial review."

In CONECEL II, however, the court disclaimed its prior position by noting that it now "decline[d] to answer" the "substantial question" of the extension of §1782 to international arbitration.  The court nevertheless sustained its prior decision by relying on "contemplated civil and private criminal suits CONECEL might bring" instead of the arbitration proceedings.

An important reversal

The Eleventh Circuit's decision in CONECEL II represents an important reversal and returns the ongoing debate concerning the application of §1782 to international arbitration proceedings to the status quo ante. The Second and Fifth Circuit Courts of Appeals remain the only circuit courts to have addressed the issue, and both have done so in the negative ( El Paso Corp. v. La Comision Ejecutiva Hidroeclectrica del Rio Lempa, No. 08-20771, 2009 WL 2407189 (5th Cir. Aug. 6, 2009); National Broadcasting Company v. Bear Stearns & Co.), 165 F.3d 184 (2d Cir. 1999).

The question outside the Second and Fifth Circuits – which together cover New York, Connecticut, Vermont, Texas, Louisiana and Mississippi – continues to be an open one. The use of §1782 in international arbitration proceedings, though uncertain, remains a viable strategic option.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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