In the United States, some jurisdictions permit discovery using 28 U.S.C. § 1782 (“Section 1782”) in support of private commercial arbitrations seated outside the United States, and some do not. Notably, the Second Circuit Court of Appeals and the Fifth Circuit Court of Appeals have long held that Section 1782 cannot be used in connection with foreign-seated private commercial arbitrations (in contrast to treaty-based arbitrations); whereas last year, the Sixth Circuit Court of Appeals became the first federal circuit court to disagree.

The Ninth Circuit Court of Appeals, which covers California, Oregon, Washington, and other western states, has not yet weighed in on this important question. Until recently, federal district courts in California had uniformly followed the reasoning of the Second and Fifth Circuits in rejecting requests for Section 1782 discovery in aid of foreign-seated private commercial arbitration.

Taking the opening offered by the Sixth Circuit, a California district court, however, recently rejected prior California district court decisions and allowed discovery in aid of a private commercial arbitration pending in China. The case is already on appeal, with the Ninth Circuit potentially positioned to address the important question of whether Section 1782 discovery is available in aid of private commercial arbitration abroad. The decision highlights that the views of U.S. courts on the availability of Section 1782 discovery in aid of foreign-seated arbitration are still evolving, and that it may increasingly be available as a tool for parties to private commercial arbitrations abroad.

Section 1782 Discovery

Section 1782 empowers federal district courts to grant an applicant the authority to issue subpoenas in the United States to obtain documents and/or testimony in aid of foreign proceedings. Specifically, an applicant pursuing Section 1782 discovery must establish that (a) the discovery is for use in an actual or contemplated proceeding in a “foreign or international tribunal”; (b) the applicant is an “interested person” in that proceeding; and (c) the person from whom the discovery is sought resides or is otherwise found in the district of the court where the application is filed.[1]

If the applicant satisfies all of these statutory requirements, a district court has the discretion to grant or deny the application after considering the following factors established by the U.S. Supreme Court in Intel Corp.v. Advanced Micro Devices, Inc.:

• whether the discovery sought is within the foreign tribunal’s jurisdictional reach and, thus, accessible without resort to Section 1782;
• the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal court judicial assistance;
• whether the applicant’s request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States; and
• whether the request is unduly intrusive or burdensome.[2]

The main issue here is whether a tribunal constituted in a foreign-seated private commercial arbitration is a “foreign or international tribunal” within the meaning of Section 1782. The statute does not define the term, and federal courts of appeals have split over the correct interpretation.

The Sixth Circuit Rejects the Second and Fifth Circuit Longstanding Views on the Availability of Section 1782 Discovery in Aid of Foreign-Seated Private International Arbitration

Both the Second and Fifth Circuits considered this question in 1999—before the Supreme Court’s 2004 decision in Intel—and ruled that Section 1782 does not apply to privately constituted tribunals in foreign-seated commercial arbitrations. In reaching its decision, the Second Circuit pointed out that (a) the ordinary meaning of the phrase “foreign or international tribunal” is ambiguous; (b) the legislative history of Section 1782 reveals that Congress “intended to cover governmental or intergovernmental arbitral tribunals and conventional courts and other state-sponsored adjudicatory bodies”; and (c) allowing discovery under Section 1782 for use in international arbitration “would be at odds with the efficiency and cost-effectiveness of arbitration.”[3]

Similarly, the Fifth Circuit ruled that private commercial arbitration was outside the scope of Section 1782 discovery. Echoing the Second Circuit’s policy considerations, the Fifth Circuit noted, “[e]mpowering arbitrators, or worse, the parties, in private international disputes to seek ancillary discovery through the federal courts does not benefit the arbitration process. Arbitration is intended as a speedy, economical, and effective means of dispute resolution.”[4] Further, the Fifth Circuit agreed with the Second Circuit that Congress drafted Section 1782 to facilitate “discovery for international government-sanctioned tribunals” but “[t]here is no contemporaneous evidence that Congress contemplated extending [it] to the then-novel arena of international commercial arbitration.”[5]

For two decades, no other federal court of appeals conclusively decided the issue.[6] Then, in September 2019, in Abdul Latif Jameel Transp. Co. Ltd. v. FedEx Corp., the Sixth Circuit held that Section 1782 permits discovery for use in private commercial arbitrations.[7] After examining the dictionary meaning of “tribunal” and the term’s legal usage, the Sixth Circuit concluded, “American lawyers and judges have long understood, and still use, the word ‘tribunal’ to encompass privately contracted-for arbitral bodies with the power to bind the contracting parties.”[8] The Sixth Circuit also relied on the Supreme Court’s Intel decision for guidance. According to the Sixth Circuit, the Intel Court’s approval of Section 1782 discovery in a non-judicial proceeding conducted by the Directorate-General for Competition of the European Commission supports this broad definition of “tribunal.”[9] With regard to the efficiency arguments advanced by the Second and Fifth Circuits, the Sixth Circuit brushed them aside by emphasizing that the statutory requirements are a bare minimum threshold and that if a discovery request is likely to become unduly burdensome, “district courts enjoy substantial discretion to shape discovery under § 1782(a).”[10]

The Northern District of California’s Decision Adopting the Sixth Circuit View

In HRC-Hainan Holding Co., LLC v. Yihan Hu, a group of Delaware and Chinese companies (“Applicants”) entered into a Collaboration Agreement with a Chinese hospital.[11] Pursuant to the agreement, Applicants invested $10 million in the hospital to build and equip an in vitro fertilization (“IVF”) center in Hainan, China and to obtain a highly valuable government license to provide for IVF services.[12] Applicants allege that after obtaining the license, the hospital took possession of the IVF center and the license and unilaterally terminated the agreement.[13] Based on the hospital’s alleged breach of contract, Applicants initiated arbitration against the hospital administered by the China International Economic and Trade Arbitration Commission (“CIETAC”).[14] Further alleging that Yihan Hu, who resides in the Northern District of California, signed the agreement on the hospital’s behalf, Applicants also initiated ex parte Section 1782 proceedings in that district court seeking leave to serve document and deposition subpoenas on non-parties to the arbitration, namely, Ms. Hu, her mother, and her father, and three entities that Ms. Hu managed in California (“Respondents”) and others.[15] The district court granted the applications; Respondents then moved to quash the subpoenas which had been served.

Faced with the question of whether Section 1782’s “foreign or international tribunal” language extends to a private arbitral tribunal, such as constituted in the CIETAC proceeding, the district court parted ways with other district courts in the Ninth Circuit[16] and expressed its agreement with the Sixth Circuit’s approach.[17] The district court agreed with the Sixth Circuit that (a) the ordinary meaning of “tribunal” is unambiguous; (b) the legislative history does not indicate Congressional intent to exclude private arbitral tribunals; and (c) policy concerns raised by the Second Circuit are unpersuasive because “§ 1782(a) merely allows a district court to authorize discovery under certain circumstances; it does not require the foreign or international tribunal to accept evidence produced by that discovery.”[18] Accordingly, the district court largely denied Respondents’ motions to quash and compelled Respondents to provide documents and deposition testimony.[19]

Looking Ahead to the Ninth Circuit and Beyond

Respondents in Hu filed an appeal, so the Ninth Circuit likely will have an opportunity to clarify the relation between Section 1782 and foreign-seated private commercial arbitration in the near future.[20] Regardless of the Ninth Circuit’s take on the issue, the existing circuit split leaves open the possibility that the Supreme Court may provide definitive guidance on the meaning of “foreign or international tribunal.”

In any event, it is important to keep in mind that, depending on the state in which the discovery is sought, Section 1782 discovery may be a viable avenue for obtaining U.S. discovery in aid of private commercial arbitrations seated abroad.

[1] 28 U.S.C. § 1782(a).

[2] 542 U.S. 241, 264–65 (2004) (internal quotations and citations omitted).

[3] Nat’l Broad. Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184, 188, 190–91 (2d Cir. 1999).

[4] Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880, 883 (5th Cir. 1999).

[5] Id. at 882–83.

[6] But see In re Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 685 F.3d 987 (11th Cir. 2012) (finding as a matter of first impression in circuit that arbitral panel was a “tribunal” under Section 1782), vacated by Application of Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 747 F.3d 1262 (11th Cir. 2014).

[7] Abdul Latif Jameel Transp. Co. Ltd. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019). For a more in-depth discussion of the case, our prior client alert is available at https://www.mofo.com/resources/insights/191002-international-commercial-arbitration.html.

[8] Id. at 722.

[9] Id. at 723–26.

[10] Id. at 729–30.

[11] No. 19-mc-80277-TSH, 2020 U.S. Dist. LEXIS 32125, at *2 (N.D. Cal. Feb. 25, 2020).

[12] Id. at *2–3.

[13] Id. at *3.

[14] Id. at *4.

[15] Id. at *3–5.

[16] See, e.g., In re Dubey, 949 F. Supp. 2d 990 (C.D. Cal. 2013); In re Grupo Unidos Por El Canal S.A., No. 14-mc-80277-JST, 2015 U.S. Dist. LEXIS 52358 (N.D. Cal. Apr. 21, 2015).

[17] Id. at *21.

[18] Id. at *21–25.

[19] In England, Section 44(2)(a) of the English Arbitration Act read together with Section 2(3)(b) expressly provides that the English courts have the same power to take the evidence of witnesses for the purpose of and in relation to arbitral proceedings as in relation to legal proceedings, even where the seat of arbitration is outside England and Wales or Northern Ireland, or where no seat has been designated. However, in a recent decision in A and another v. C and others [2020] EWHC 258 (Comm), the English High Court clarified that this power does not extend to compelling non-parties to an arbitration to give evidence. The decision is being appealed to the English Court of Appeal. In contrast, the district court in Hu, following Intel, considered that the fact that the Respondents were not participants in the foreign action as a factor in favor of granting the Section 1782 application because nonparticipants would be outside the foreign tribunal’s jurisdictional reach and their evidence available in the United States might otherwise be unobtainable. Id. at *27–28.

[20] Briefing on the appeal is scheduled to finish in June, with oral argument likely to take place in the summer–unless the matter resolves before then. If the district court refuses to stay its order pending appeal, Respondents may be required to comply with the subpoenas, potentially mooting the appeal. If the district court instead stays its order pending appeal, the matter could become moot if CIETAC issues the arbitration award before the appeal is resolved. Deadlines often will be an issue in the relevant foreign proceedings–particularly arbitration proceedings, which often proceed on efficient timelines–illustrating an inherent difficulty in crystalizing Section 1782 issues for appeal.

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