The Growing Circuit Split About ' 1782 ' Can It Be Used For Private Arbitration?

• Published date: 03 September 2021
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Wilk Auslander
• Author: Mr Stuart Riback

With the uptick in cross-border trade in recent years, the US courts have seen a marked increase in the number of applications under 28 USC ' 1782. Section 1782 permits district courts to authorize certain persons to gather evidence in the United States to use in legal proceedings abroad. But can ' 1782 be used to gather evidence in support of private arbitrations? The circuits are split.

The Second and Fifth Circuits in 1999 said no, and were joined this year by the Seventh Circuit. In these courts' view, ' 1782 applies only in support of tribunals whose source of authority is one or more governments. So it can be used to obtain evidence for proceedings in courts, regulatory agencies, or arbitral panels created by treaties or international agreements (such as NAFTA or bilateral investment treaties), or by international organizations such as the European Union. But these circuits do not permit ' 1782 evidence-gathering in support of arbitration panels whose authority arises from a contract between the parties.

The Fourth and Sixth Circuits, within the past two years, came out the other way. In their view, a private arbitration is a "proceeding in a foreign or international tribunal" every bit as much as a case in court. The Eleventh Circuit in the past has hinted - perhaps more than hinted - that it would permit ' 1782 discovery for use in foreign private arbitrations. And the Ninth Circuit just heard argument on the same issue on September 14, 2020.¹

Because of this circuit split, parties to arbitrations in other countries have a powerful incentive to try their hands at forum-shopping if they want to seek evidence in the United States. Certain parts of the country are more hospitable to such applications than others. True, it may not be possible to select a friendly district in many cases because ' 1782 does limit where applications can be brought. But those limitations may be less restrictive than they first appear, because other case law has broadened each district court's reach.² In short, it should surprise no one that the Supreme Court has now granted certiorari to decide whether ' 1782 can be used to obtain evidence for private arbitrations abroad.³ After all, because ' 1782 applications have become so common, the current situation - different rules in different parts of the country - is not sustainable for long.

So what is the right answer? Let's have a look at how this issue came about and the various approaches courts have taken to resolving it. Once we understand the variables, we may be able to offer some tentative guesses.

I. THE SUPREME COURT'S ONE AND ONLY PRONOUNCEMENT ON ' 1782: THE 2004 DECISION IN INTEL v. AMD

In Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), the United States Supreme Court held that ' 1782 conferred broad discretion on district judges to permit foreign litigants to obtain evidence in the United States, subject to certain statutory and prudential guidelines. By its terms, under ' 1782 an "interested person" may request that a district court authorize discovery in the United States "for use in" foreign litigation even without the foreign tribunal's knowledge or involvement.⁴

In Intel, AMD had filed a complaint in Europe with the European Commission's Directorate-General for Competition ("D-G"), claiming that Intel was engaging in various kinds of anticompetitive activity. The D-G enforces the European antitrust laws; it investigates and provides a recommendation to the European Commission ("EC"), whose decisions as to liability are then reviewable in the European court system. In those proceedings, complainants such as AMD have certain rights to participate in the proceeding and to seek judicial review. AMD suggested to the D-G that, in the course of its investigation, the D-G should seek certain documents produced in litigation against Intel in the United States. The D-G declined to do so.

AMD decided that if the D-G wouldn't ask for the documents, AMD would. AMD applied for an order under ' 1782, claiming it was an "interested person" entitled to seek discovery in the United States in aid of the antitrust proceeding in Europe. The district court held that ' 1782 did not authorize the discovery and denied the application. The Ninth Circuit reversed. The Supreme Court granted certiorari.

Before the Supreme Court were a number of issues. First, whether a person seeking discovery under ' 1782 could seek only discovery that would be permitted in the foreign jurisdiction. The circuits had split on that issue.⁵ The Supreme Court also addressed whether there had to be an actual legal proceeding pending before ' 1782 could be invoked (circuits had split on this issue as well); what kinds of foreign tribunal proceedings could be the subject of proper ' 1782 applications; ⁶ and whether a complainant in an administrative proceeding could be an "interested person" entitled to invoke ' 1782.

On each of these issues the Supreme Court came down in favor of permitting the district court discretion to allow discovery. It held that, under ' 1782: (a) AMD was an "interested person" even though not a formal party litigant; (b) a D-G investigation is a "proceeding" in a "foreign or international tribunal" for which discovery can be sought under ' 1782, even at the investigative, pre-decisional stage, so long as decisional proceedings are "within reasonable contemplation;" and (c) ' 1782 does not require that the discovery materials sought in the United States also be discoverable in the foreign proceeding.

The discussion relevant here pertains mainly to the second issue: was the D-G a "tribunal" for purposes of ' 1782? It certainly wasn't a court, but the Supreme Court held it didn't have to be. The 1964 amendments had come about as a result of Congress establishing a Rules Commission in 1958 to "recommend procedural revisions 'for the rendering of assistance to foreign courts and quasi-judicial agencies.'"⁷ When Congress enacted the Commission's recommendations in 1964, it removed the prior requirement in ' 1782 that the foreign proceeding be "judicial," which meant that investigative or regulatory tribunals were covered as well.⁸ The Court concluded "[w]e have no warrant to exclude the European Commission, to the extent that it acts as a first-instance decisionmaker, from ' 1782(a)'s ambit.⁹

Notably, the Court's analysis also quoted from the Senate Report for the 1964 amendments, which in turn quoted a law review article by the Rules Commission's reporter, Professor Hans Smit of Columbia Law School. That quote reads as follows: ""[t]he term 'tribunal' . includes investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts."¹⁰ There is no explanation of which sorts of "arbitral tribunals" Professor Smit had in mind. It might turn out to be significant that this reference was in the quoted Senate Report, not in the text of the statute, because Justice Scalia's concurrence in the case objected to using legislative history. He would have decided Intel exactly the same way, from the face of the statute alone.¹¹

Intel thus clarified that the statutory limits on discovery under ' 1782 are actually quite narrow. The Court expected that the district court's discretion would fill in the gaps to ensure fairness on a case-by-case basis, and it identified several factors to guide the district courts' discretion.¹² These factors should be applied in support of ' 1782's "twin aims of 'providing efficient assistance to participants in international litigation and encouraging foreign countries by example to provide similar assistance to our courts.'"¹³

The bottom line is that a district court has power to order Section 1782 discovery where "(1) the person from whom discovery is sought reside[s] (or [is] found) in the district of the district court to which the application is made, (2) the discovery [is] for use in a proceeding before a foreign tribunal, and (3) the application [is] made by a foreign or international tribunal or 'any interested person.'" Schmitz v. Bernstein Liebhard & Lifshitz, LLP, 376 F.3d 79, 83 (2nd Cir. 2004) (quoting In re Application of Esses, 101 F.3d 873, 875 (2d Cir. 1996)).

Each of these three elements must be shown in a ' 1782 application. Each raises unique issues. For current purposes, though, the focus is on the second factor: is a private arbitration panel in a foreign country ever a "foreign or international tribunal" for which discovery can be sought under ' 1782? If a private arbitration panel can be a "tribunal" under ' 1782, what characteristics must it have?

II. DIFFERENT VIEWS WHETHER PRIVATE ARBITRATIONS ARE ' 1782 "TRIBUNALS"

A. Section 1782 is available only for government-sponsored arbitrations

1. The Second and Fifth Circuits

The issue first came up in 1999, five years before Intel. In National Broadcasting Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999), NBC sought to obtain evidence from Bear Stearns for use in a private arbitration in Mexico. The district court held that the private arbitration was not a "foreign or international tribunal," and the Second Circuit affirmed.

The Second Circuit's analysis...