Legal Issues

ISSUES
I. Has a discovery request submitted by a company to U.S. District Court of the Southern District of New York under statute 28 U.S.C.  1782 to compel discovery of documents related to previous lawsuits in U.S. courts, from a company that resides in the same district as the court where the application was submitted, met the statutory requirements of the statute when the discovery is to be used for a private foreign tribunal proceeding involving both parties

II. If the companys discovery request fulfills the mandatory statutory requirements of 28 U.S.C.  1782, may the district court use its authority to entertain the discovery request when considering the factors surrounding the private foreign tribunal proceedings between the two parties

BRIEF ANSWER
I. Yes, the discovery request submitted by the company to the U.S. District Court of the Southern District of New York under 28 U.S.C.  1782 to compel discovery of documents from a company that resides in the same district as the court where the application was submitted, so that the documents can be utilized in a private foreign tribunal proceeding meets the requirements of the statute.

II. Yes, the district court may use its authority to entertain the discovery request under 28 U.S.C.  1782 since the requirements under the statute have been met and when considering the factors surrounding the private foreign tribunal proceedings between the two companies.

FACTS
Wal-Co is a U.S. company that is incorporated and has headquarters in New York. Wal-Co is a manufacturer of a synthetic material called SyntheWal, which is commonly used in building construction. SyntheWal costs considerably less than similar products. Due to its low cost, Wal-Co sells SyntheWal to construction companies around the world, including to Expert Builders, Inc., a company located in a small European country named Northden.

Two years ago, Expert Builders signed a contract with Wal-Co for ninety tons of SyntheWal. Prior to signing the contract with Wal-Co, Expert Builders used a natural material produced by a competitor of Wal-Co. In an effort to save money, Expert Builders decided to try out SyntheWal. Unfortunately, shortly after Expert Builders started to use SyntheWal, it became apparent that SyntheWal could not withstand the cold winters in Northden, and the buildings with the SyntheWal product began to crack and collapse.

Expert Builders demanded that Wal-Co give them a refund for the cost of the SyntheWal and allow them to return the remaining SyntheWal product. Wal-Co refused to comply with Expert Builderss demands. As stipulated in the arbitration clause signed by both parties, Expert Builders filed a complaint with the International Chamber of Commerce (ICC) in Paris, seeking to resolve the dispute with Wal-Co.

Expert Builderss lawyers learned that Wal-Co has been sued many times in the past in U.S. courts and they want to review information from Wal-Cos prior lawsuits to gain a better understanding of Wal-Cos manufacturing process, product, and sales contracts. The lawyers learned that U.S. statute, 28 U.S.C.  1782, may assist them in obtaining company documents from Wal-Co. Under this statute, Expert Builders has filed a request with the U.S. District Court for the Southern District of New York to obtain all documents related to previous lawsuits against Wal-Co regarding the SyntheWal product, including any communication between Wal-Co and their attorneys with advice regarding potential problems with the sales contract terms. The documents would be submitted to Expert Builders and the ICC for consideration. The ICC has not opposed Expert Builderss discovery request in the U.S. district court. Additionally, the ICC rules on evidence are broad, and the ICC arbitral panel may request additional materials from either party at any time during the proceedings. There are no specific limitations as to what types of evidentiary materials may be requested by the arbitral panel.

The U.S. District Court judge for the Southern District of New York wants an assessment of whether Expert Builderss request for discovery documents meets the statutory requirements of 28 U.S.C.  1782 and if it may be entertained by the Court.

DISCUSSION
I. Expert Builderss Discovery Request to Obtain Wal-Cos Company Documents Meets the Statutory Requirements of 28 U.S.C.  1782.

According to 28 U.S.C.  1782, assistance may be provided to foreign or international tribunals if (1) discovery is sought from a person who resides in or is found in same district as court to which application is made (2) discovery is for use in proceeding before foreign tribunal and (3) applicant is foreign or international tribunal or interested person. In re Application of Babcock Borsig Ag for Assistance Before a Foreign Tribunal, 583 F.Supp.2d 233, 237, 238 (2d Cir. 2008).

A. Wal-Co has Headquarters in New York, Therefore it is Found in the Same District as the Court to Which the Application was Made

One of the statutory requirements that must be met under 28 U.S.C.  1782 is that the person from whom discovery is sought resides in or is found in the same district as the court to which application is made. Id. at 237, 238. Wal-Co is the party from whom discovery is sought based on the discovery request submitted to the District Court of the Southern District of New York by Expert Builders.  According to the facts of the case, neither party is disputing that Wal-Co is headquartered and incorporated in the same district as the court where the application was made.

B. Discovery is for Use in an Arbitration Case filed with the International Chamber of Commerce (ICC) located in Paris, Which Constitutes a Foreign Tribunal

In order for a discovery request to meet the statutory requirements, the discovery must be used for a proceeding in a foreign or international tribunal, as stated in 28 U.S.C.  1782. In National Broadcasting Company, Inc. v. Bear Stearns  Co., Inc., 165 F.3d 184 (3d. Dist. 1999), the Court held that the ICC does not constitute a foreign or international tribunal since it is a private commercial arbitration under the auspices of a non-governmental organization. Id. at 186. NBC entered into an agreement with Azteca, a Mexican television broadcasting company, which stipulated that NBC could purchase up to 10 of Aztecas shares before May 1997 at a preset pricing formula. When NBC sought to purchase 1 of Aztecas shares, Azteca alleged that NBC did not perform under the agreement, and initiated arbitration with ICC, as stipulated in the contract. Id. at 186. NBC submitted a discovery request pursuant to 28 U.S.C.  1782 for authorization to subpoena third-party financial institutions engaged with Azteca. Id. at 186. The appellate court affirmed the lower courts decision to deny NBCs motion to compel discovery. Id. at 186. When referring to the language used in 28 U.S.C.  1782, the Court stated, the absence of any reference to private dispute resolution proceedings such as arbitration strongly suggests Congress did not consider them in drafting the statute. Id. at 189.

Even though the NBC case held that arbitration is not applicable to discovery requests under 28 U.S.C.  1782 due to that Courts interpretation of legislative intent, the Supreme Court in Intel Corporation v. Advanced Micro Devices, Inc., 542 U.S. 241, referenced their interpretation of the legislative intent. According to the Supreme Court, the Senate Report explains that Congress introduced the word tribunal, to ensure that district court assistance extendsto administrative and quasi-judicial proceedings. Id. at 249. In Intel, AMD filed an anti-trust complaint against Intel for violation of European competition law, with the DG-Competition of the European Commission, the European Unions antitrust law enforcer. Id. at 250. The Court held that since the European Commission proceeding would lead to a dispositive ruling i.e. a final administrative action both responsive to the complainant and reviewable in court, it fits within the definition of foreign or international tribunal referenced in 28 U.S.C.  1782. Id. at 255. The ICCs decision in the Expert Builders and Wal-Co case would also lead to a dispositive ruling that would be responsive to the complainant. The ICC is regarded as a legitimate source for dispute resolution among many businesses. The purpose of the statute is to assist foreign judicial and administrative proceedings with discovery in order to expedite the dispute resolution process. The ICC would be an administrative body that is included within the purpose behind the enactment of 28 U.S.C.  1782.

The Court for La Comision Ejecutiva Hidro-Elecctrica del Rio Lempa v. El Paso Corporation, 617 F.Supp.2d 481 (2d Cir., 2008), disagreed with the Supreme Court ruling in Intel by ruling that the discretion to order discovery on behalf of foreign and international tribunals under 28 U.S.C.  1782 does not extend to arbitral tribunals. Id. at 483. La Comision Ejecutiva Hidroelectrica del Rio Lempa (CEL) filed a motion to compel discovery from El Paso so that El Paso could submit documents that would be used in a foreign arbitration between CEL and Nejapa Power Company, L.L.C. (NPC). Id. at 482, 483. The Court stated that the Supreme Court in Intel did not directly address the application of  1782 to arbitral tribunals. Id. at 485. The Court in El Paso applied a narrow interpretation of the Intel decision by stating that the Supreme Court only extended  1782 to include the Directorate-General for Competition of the Commission of the European Communities. Id. at 485. The El Paso Court stated the fact that the D-G Commission acted as a quasi-adjudicative proceeding before review by true judiciary powers makes it an animal of a very different stripe from an arbitral tribunal. Id. at 485.

Even though the Supreme Court did not directly address whether private arbitral tribunals constitute a foreign or international tribunal as designated in 28 U.S.C.  1782, Babcock Borsig Ag for Assistance Before a Foreign Tribunal, 583 F.Supp.2d 233 (2d Cir. 2008), states that the Supreme Court in Intel, strongly indicate that adjudicative bodies also fall within the statute. Id. at 238. In Intel, the Supreme Court referred to the European Commission as a first-instance decisionmaker that conducts proceedings which lead to a dispositive ruling. Id. at 255, 542 U.S. 241. The ICC, which is the arbitrational body that will preside over the Expert Builders and Wal-Co case, is also a first-instance decisionmaker that will make a dispositive ruling. Babcock stated where a body makes adjudicative decisions responsive to a complainant and reviewable in court, it falls within the widely accepted definition of tribunal, regardless of whether the body is governmental or private. Id. at 239. Based on this rationale, the ICC constitutes a foreign or international tribunal for which the statute would be applicable.

C. Expert Builders as the Applicant for the Discovery Request is an Interested Person
In Intel, the Supreme Court states that an interested person, such as a complainant who triggers a European Commission investigation has a significant role in the process. The complainant also prompts the investigation and has the right to submit information for the DG-Competitions consideration. Id. at 256. The Court stated, given these participation rights, a complainant possesses a reasonable interest in obtaining judicial assistance. Id. at 256.

Expert Builders would be considered an interested person under 28 U.S.C.  1782 because Expert Builders is a party to the foreign arbitral tribunal proceeding for which the discovery request would be utilized. As stated in the facts of the case, Expert Builders wants to obtain all documents related to previous lawsuits against Wal-Co regarding the SyntheWal product. Expert Builders would use the documents to possibly assist them in the arbitration. Copies of any documents would also be forwarded to the ICC to consider. Expert Builders has the right to submit documents to the ICC to help their case and can also exercise the right to compel discovery. ICCs non-objection to Expert Builderss discovery request to the U.S. court and the ICCs consideration of the documents implies these rights are endowed to Expert Builders.

II. The Discovery Request May be Entertained by the District Court Based on Consideration of the Discretionary Factors Related to the Instant Case
If a discovery request meets all of the statutory requirements of 28 U.S.C.  1782, the court still can exercise discretion regarding whether it will entertain the request based on a set of discretionary factors. As stated in Intel, a district court is not required to grant a  1782 discovery application simply because it has the authority to do so. Id. at 264. Factors the court should consider include (1) whether the person from whom discovery is sought is a participant in the foreign proceeding (2) the receptivity of the foreign government, court, or agency to federal-court judicial assistance (3) whether the statute request conceals at attempt to circumvent foreign proof-gathering limits. In re Application of Gemeinshcaftspraxis Dr. Med. Schottdorf, 2006 WL 3844464 (S.D.N.Y.), 4.

A. Wal-Co is a Participant in the Foreign Proceedings
Since Wal-Co is a participant in the foreign proceedings, and it agreed to resolve disputes with Expert Builders via arbitration, as stipulated in the contract, Wal-Co is directly invested in the discovery requests. The ICC did not submit a motion to compel discovery to the U.S. courts in order to obtain documents from Wal-Co. It could be assumed that the ICC may not be able to compel discovery of the documents needed based on their own administrative or legal limitations, so Expert Builders was required to submit the request.

B. The ICC Appears to be Receptive to the Receipt of the Documents and Foreign Assistance
Based on the facts of the instant case, the ICC did not oppose Expert Builderss discovery request to the U.S. District Court of the Southern District of New York and the ICC will also consider the documents if they are received. This implies that the ICC is receptive to the discovery request and the possibility of reviewing the documents. The evidence rules for ICC are broad and there are no specific limitations as to the types of evidentiary materials the arbitral panel may request.

C. Based on the Preliminary Facts Presented in this Case, There Does Not Appear to be any Attempts to Conceal or Circumvent Foreign Proof-Gathering Limits
In Babcock, the Court decided to deny the motion to compel discovery since the litigation between the parties had been highly contentious. There were claims of misconduct and accusations that the discovery request was being used to circumvent evidentiary restrictions. Id. at 242. Unlike Babcock, there have been no claims of misconduct or allegations of attempts to circumvent any type of evidentiary or proof-gathering limits.

CONCLUSION
The instant case meets the statutory requirements of 28 U.S.C.  1782. Wal-Co resides in New York where the request was submitted, the discovery will be used in a foreign tribunal, and the applicant, Expert Builders, is an interested person in the proceeding. Based on the discretionary factors involved in this case, the district court could entertain the discovery request.