Second Circuit Denies Extending § 1782 Discovery in Private International Commercial Arbitrations

Alerts / July 10, 2020

Access to U.S.-style discovery under 28 U.S.C. Section 1782 in aid of a private, foreign arbitration has long been one of the most contentious areas of dispute under the statute. Until 2004, the law was fairly settled: Section 1782 subpoenas could not be sought for private arbitrations. But that year, the U.S. Supreme Court, in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), hinted in dicta that Section 1782 evidence could be obtained for foreign commercial arbitrations. The Supreme Court looked to a functional test: Was the foreign tribunal a “first instance decisionmaker” that gathers and weighs evidence to resolve a dispute – to determine a quasi-judicial body could be a tribunal under Section 1782. Since Intel, U.S. circuits – which were initially split on the use of 1782 in aid of arbitration – appeared to be coalescing around the principle that the dicta in Intel was correct. For example, the Sixth Circuit in Abdul Latif Jameel Transportation Company Ltd. v. FedEx Corporation, 939 F.3d 710 (6th Cir. 2019) (as we have previously examined) and Servotronics, Inc. v. Boeing Co., 954 F.3d 209 (4th Cir. 2020), recently held that foreign private arbitrations could use Section 1782. But yesterday, the Second Circuit Court of Appeals in In re Application of Hanwei Guo, No. 19-781, 2020 WL 3816098 (2d Cir. July 8, 2020) held otherwise, reviving a significant circuit split emanating from New York – the primary jurisdiction for arbitration and Section 1782 applications.

Pre-Hanwei Guo Landscape

Section 1782 provides foreign litigants access to U.S.-style discovery in aid of a foreign legal proceeding. The statute provides that “any interested person” involved in proceedings before a “foreign or international tribunal” may obtain evidence from any person or entity located in the United States. Section 1782 has been liberally construed and applied, allowing broad discovery in aid of foreign regulatory investigations, enforcement actions and legal proceedings that are reasonably contemplated, even if they have not yet been filed.

Surprisingly, one area where the use of Section 1782 has met judicial resistance is in private international commercial arbitrations. The Second Circuit, in the pre-Intel decision National Broadcasting Co. v. Bear Stearns & Co. (NBC), 165 F.3d 184 (2d Cir. 1999), stated that the word “tribunal” did not include private foreign arbitrations and applied instead only to governmental tribunals and other state-sponsored adjudicatory bodies. That decision relied primarily on the legislative history of Section 1782.

In 2004, that landscape changed when the Supreme Court rendered its seminal opinion in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). Intel’s test is now well-known; an applicant must first satisfy the three mandatory factors in the statute, which requires that the applicant is an interested person seeking discovery from a person or entity located in the judicial district for use before a foreign or international tribunal. If that showing can be met, four more discretionary factors were weighed:

  1. Is the person from whom discovery is sought an entity to the foreign proceeding where discovery could be had?
  2. What is the nature of the foreign tribunal, the character of that proceeding and the receptivity of the foreign tribunal to U.S. court assistance?
  3. Is the Section 1782 discovery an attempt to circumvent foreign proof-gathering restrictions?
  4. Is the discovery sought unduly burdensome?

Following the Supreme Court’s decision in Intel, district courts appeared to be adopting the Supreme Court’s dicta regarding arbitral tribunals. In 2009, a Connecticut district court (which falls within the Second Circuit), in Ukrnafta v. Carpatsky Petroleum Corp., No. 3:09 MC 265(JBA), 2009 WL 2877156, at *4 (D. Conn. Aug. 27, 2009), held that parties to a private commercial arbitration proceeding under UNCITRAL Rules could invoke Section 1782 – suggesting that NBC was no longer binding precedent. The Eleventh Circuit revisited the meaning of “tribunal” under Section 1782, originally finding in favor of including private arbitral tribunals in In re Consorcio Ecuatoriano de Telecomunicaciones S.A., 685 F.3d 987 (11th Cir. 2012), before vacating that part of its opinion sua sponte in 747 F.3d 1262 (11th Cir. 2014). And as previously noted, in 2019 in Abdul Latif, the Sixth Circuit found that the word “tribunal” included private arbitral bodies. The Fourth Circuit reached the same position in Servotronics earlier this year. Appellate courts have begun weighing in.

The Hanwei Guo Decision

The Hanwei Guo case arose from a Section 1782 application filed in the Southern District of New York by an applicant seeking records concerning a U.S. initial public offering. The applicant sought to use the records in a pending arbitration before the China International Economic and Trade Arbitration Commission (CIETAC). The district court denied the application based upon the Second Circuit’s still-binding decision in NBC.

The Second Circuit affirmed. The court revisited its holding in NBC and determined that NBC remains good law. The court reasoned that the question whether “tribunal” includes private arbitral bodies under Section 1782 was not before the Supreme Court in Intel. The Second Circuit read Intel’s references to “arbitral tribunals” to refer solely to state-sponsored arbitral bodies (such as sovereign investment treaty dispute tribunals). Furthermore, the Hanwei Guo court concluded that NBC’s analysis of Section 1782’s legislative history was compatible with the Supreme Court’s review in Intel: “NBC’s thorough analysis, which began with a threshold finding of ambiguity before turning to legislative history and purpose to elucidate the meaning of the statutory meaning, comports with both Intel’s broad principles and its specific analysis of § 1782.”

Future Considerations

Given that district courts in the Second Circuit handle more Section 1782 applications than the courts in any other circuit, the Second Circuit will continue to have a significant impact on these issues. As we have examined previously, the Second Circuit has taken steps to guard against the Southern District of New York presiding over Section 1782 applications that have no nexus to the district. However, the Second Circuit’s decision may have the effect of sending applicants to other circuits while at the same time also leaving a circuit split that may result in the Supreme Court clarifying Intel and ultimately determining whether Section 1782 applies to private commercial international arbitration. The Hanwei Guo case may be the proper vehicle. But until this issue is resolved, parties will need to carefully consider how and where to bring applications in aid of private arbitrations more carefully – for the time being, at least, that avenue appears to be definitively foreclosed in the Second Circuit.

Authorship Credit: Paul Levine, Marco Molina, Oren Warshavsky, Gonzalo Zeballos and Dima Atiya

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