While there are numerous U.S. court decisions holding that federal statute 28 U.S.C. § 1782 may be used to compel discovery in aid of investor-state arbitrations, far fewer have held that § 1782 may be used in aid of private, commercial international arbitrations. A recent decision by the U.S. District Court for the District of New Jersey, In re Owl Shipping, LLC, No. 14-5655 (D.N.J. Oct. 17, 2014), did just that.
Factual Background
Owl Shipping, LLC and Oriole Shipping, LLC (“Petitioners”), the owners of the vessels M/V Owl and M/V Oriole, entered into time-charter agreements with Dalian Suntime International Transportation Company (“Dalian International”). The agreements contained identical arbitration clauses calling for arbitration of all disputes arising out of the contract in London under English law. After Dalian International took delivery but failed to pay certain invoices, Petitioners commenced arbitration before the London Maritime Arbitrators Association (“LMAA”), alleging that Dalian International breached the charter agreements.
Petitioners then brought an ex parte application in the U.S. District Court for the District of New Jersey for the issuance of subpoenas pursuant to 28 U.S.C. § 1782(a) to Dalian Suntime International Transportation (USA), Inc. (“Dalian USA”), Suntime America, Inc. (“Suntime America”), and Ms. Magic Sun (collectively, “Respondents”)—the U.S. affiliates (and employee of a U.S. affiliate) of Dalian International. The proposed subpoenas sought depositions and document production from Respondents for use in the LMAA arbitration. Specifically, Petitioners sought evidence concerning Dalian International’s financial situation, in order to prove in the arbitration that Dalian International entered into the charter agreements in bad faith and knowing it would not be able to make the payments. Petitioners argued that the U.S. affiliates of Dalian International possessed highly relevant financial information that Petitioners would not be able to obtain from Dalian International in the LMAA arbitration.
District Court Had Discretion to Compel Discovery in Aid of LMAA Arbitration
A U.S. district court has discretion to grant an application for discovery in aid of a foreign proceeding under § 1782 if three statutory requirements are met: (1) the person from whom discovery is sought resides or is found within the district; (2) the discovery is for use in a proceeding before a foreign or international tribunal; and (3) the application is made by a foreign or international tribunal or any interested person. The court quickly found all three requirements satisfied here, because (1) Dalian USA and Suntime America had offices in New Jersey and Ms. Sun was a representative for both; (2) the LMAA arbitration constituted a proceeding before a foreign tribunal; and (3) Petitioners qualified as interested persons because they were parties in the LMAA arbitration.
Intel Discretionary Factors Weighed in Favor of Compelling Discovery
Next, the court analyzed the four discretionary factors identified by the U.S. Supreme Court in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) to determine whether to grant the application to compel discovery. The first factor is whether the person from whom the discovery is sought is a participant in the foreign proceeding. Since Respondents were not participants in the LMAA arbitration and thus could be outside the foreign tribunal’s jurisdictional reach, this factor weighed in favor of Petitioners. The second factor is 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. The court held that Petitioners were entitled to the presumption that the LMAA would be receptive to the evidence sought, absent any indication to the contrary. Considering the third factor, whether the § 1782 request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States, the court ruled that there was no such attempt here since Respondents were not participants in the LMAA arbitration and therefore would not be ordered in the arbitration to produce the requested information. Under the final discretionary factor, the court had to consider whether the discovery requests were unduly intrusive or burdensome. Although the court did not consider the subpoenas to be unduly intrusive or burdensome on their face, it also found that it did not have sufficient information to evaluate this factor on an ex parte motion. Still, the court noted that Respondents would have the opportunity to object or to seek to modify or quash the subpoenas.
Finding the statutory factors met and that the discretionary factors weighed in Petitioners’ favor, the court granted Petitioners’ ex parte application to compel discovery for use in the LMAA arbitration pursuant to 28 U.S.C. § 1782(a).
