May 22, 2014 Articles

Eleventh Circuit Flip-Flops in Consorcio Ecuatoriano

By Leigh-Ann A. Buchanan

As litigation becomes more complex, disputes among parties often extend beyond the territorial jurisdiction of U.S. courts. Increasingly, international arbitration tribunals have become the go-to mechanism for the resolution of conflicts with distinct international elements. Be it an international arbitration arising from a bilateral investment treaty or a private arbitration conducted in accordance with the International Chamber of Commerce rules, arbitration―the new norm―has turned the notion of "alternative" dispute resolution on its head. 

The breadth of discovery in U.S. courts is typically more expansive than what is permissible in many international forums. Accordingly, sophisticated litigants recognize that there are methods of sidestepping the inherent disadvantages in obtaining discovery imposed by foreign proceedings. One often overlooked and necessary piece of the arsenal is the use of 28 U.S.C. § 1782 to obtain documents or depositions of individuals located within the United States in connection with a foreign proceeding.

Under section 1782, a federal district court possesses broad discretion to grant an application or request seeking discovery where (1) the person from whom discovery is sought is found or resides in the district, (2) the discovery is for use in a proceeding in a foreign or international tribunal, and (3) the request is made by an interested person. See 28 U.S.C. § 1782(a). In addition to the aforementioned mandatory factors, a district court may also examine discretionary considerations, including the nature and character of the foreign tribunal or proceeding for which discovery is sought. Intel Corp. v. Advance Micro Devices, Inc., 542 U.S. 241, 264–47 (2004). 

In 2004, the U.S. Supreme Court's breakthrough decision in Intel broadened the definition of foreign tribunal under section 1782. The Intel Court reasoned that a tribunal qualifies for discovery assistance under section 1782 so long as it functions as a first-instance decision maker and judicial review of its rulings is within "reasonable contemplation." Id. at 264–65.  Thus Intel expanded the scope of section 1782 to include "investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts." 542 U.S. at 258.  Intel, however, did not resolve whether private international arbitral fora qualify as "foreign tribunals" under section 1782.

Earlier this year, in Application of Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 2014 WL 104132, at *1 (11th Cir. Jan. 10, 2014), the U.S. Court of Appeals for the Eleventh Circuit pulled a striking about-face when it sua sponte vacated its 2012 ruling that international arbitrations are "foreign tribunals" for purposes of discovery under 28 U.S.C. § 1782.

There, the petitioner, Consorcio Ecuatoriano de Telecomunicaciones (CONECEL), filed an ex parte section 1782 application in the Southern District of Florida seeking discovery of information in defense of a private arbitration proceeding seated in Ecuador that arose from a billing dispute with its foreign shipping service provider, Jet Air Service Equador S.A. (JASE).

CONECEL advanced two theories to justify its entitlement to discovery of JASE's Miami, Florida, affiliate. First, CONECEL sought information related to an alleged internal investigation that was necessary to support its defense in the Ecuadorian private arbitration proceeding. Second, CONECEL asserted that discovery was necessary to fully substantiate its prospective civil and criminal actions in the Ecuadorian courts against two of its former employees for collusion and in the alleged fraudulent billing scheme.

Interestingly, the Eleventh Circuit adopted the same reasoning advanced by the district court in its revised ruling. The Eleventh Circuit held that CONECEL's pre-suit investigation to develop potential criminal and civil claims was "within reasonable contemplation" of the Ecuadorian courts and therefore discovery in the United States was permissible under the post-Intel interpretation of section 1782.  When faced with the prime opportunity to clarify the reach of section 1782 with respect to private international arbitrations, the Eleventh Circuit declined and instead opted to "leave the resolution of the matter for another day."

The Eleventh Circuit's flip-flop in Consorcio Ecuatoriano is indicative of the confusion among federal courts concerning the proper application of section 1782 to petitions for discovery in aid of international arbitral tribunals. Notwithstanding, other federal circuit courts have exercised less hesitancy to define the parameters of section 1782's reach in this regard. Indeed, the Fifth Circuit in El Paso Corp. v. La Comision Ejecutive Hidroelectrica Del Rio Lempa, 341 F. App'x 31, 34 (5th Cir. 2009), went one step further than the Eleventh Circuit. There, the court affirmed the denial of a section 1782 petition in aid of private commercial arbitration in Geneva, Switzerland.  Id. at 32. The court emphatically refused to extend the statutory definition of tribunal and made clear that, at least in the Fifth Circuit, section 1782 cannot be used to obtain discovery in connection with foreign private arbitration proceedings. Id. Similarly, the pre-Intel Second Circuit decision inNational Broadcasting Co., Inc. v. Bear Stearns & Co., reached the same conclusion.165 F.3d 184, 189–90 (2d Cir. 1999) (holding foreign arbitral panels are not "tribunals" for purposes of section 1782).

Notably, federal district courts remain split on this issue. For example, the court in In re Dubey, 2013 WL 2896799, at *1 (C.D. Cal. June 7, 2013), premised its wholesale denial of a section 1782 request on the ground that a private arbitration did not qualify as a tribunal under the statute.  Id. at *2.

Yet, other federal district courts have followed Intel's broad reading of what constitutes a tribunal under section 1782, yielding a definition that encompasses foreign arbitration proceedings.  See, e.g., In re Application of Mesa Power Group, LLC, 2012 WL 2886827, at *4 (holding an North American Free Trade Agreement (NAFTA) arbitration qualifies as a tribunal under section 1782); In re Winning (HK) Shipping Co., 2010 WL 1796579, at *7 (S.D. Fla. Apr. 30, 2010) (finding enforceable an arbitration agreement that delineated which arbitral body constituted  a foreign tribunal under section 1782); OJSC Ukrnafta v. Carpatsky Petroleum Corp., 2009 WL 2877156, at *4 (D. Conn. Aug. 27, 2009) (holding that arbitrations conducted under the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules are tribunals under section 1782); In re Roz Trading Ltd., 469 F. Supp. 2d 1221, 1224–25 (N.D. Ga. 2006) (holding private commercial arbitration seated in Vienna was a tribunal for the purposes of section 1782 because it would result in dispositive rulings that would be reviewable by a court).

Litigants that are aware or anticipate that the United States is home to potentially helpful information should examine several practical considerations. First, litigants should pay careful attention to the jurisdiction in which discovery is sought, particularly given the lack of uniformity among U.S. courts that are receptive to requests in aid of private arbitral proceedings.  Additionally, if practicable, existing arbitration agreements with foreign arbitral seats should be evaluated to weigh the risk and potential benefits associated with including an advance consent or prohibition of the use of section 1782 discovery. Finally, parties to a private international arbitration already under way may consider seeking a ruling from the tribunal limiting the geographic scope of permissible discovery.

In short, the Eleventh Circuit's recent retreat from its prior ruling sends an important message to litigants pursuing or defending claims in private international arbitral tribunals; the law construing scope of section 1782 remains unsettled, and thus the ability to obtain U.S.-based discovery is no guarantee. 

Keywords: litigation, minority trial lawyer, international arbitral tribunals, foreign proceedings, section 1782, discovery, Intel, Consorcio Ecuatoriano, Eleventh Circuit


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