Section 1782 Subpoenas: Questions May Remain Regarding Foreign or International Arbitrations

Every day, U.S. companies experience a collateral effect of the increasing number of international arbitrations. Parties to these arbitrations are using 28 U.S.C. § 1782 to issue discovery subpoenas to U.S. companies, seeking information that might be pertinent to the underlying dispute.

Using § 1782 for an international commercial arbitration depends on where the targeted U.S. company resides or is incorporated. Two federal circuits allow foreign parties to issue subpoenas to obtain discovery for an international arbitration.¹ Three federal circuits do not.² For the remaining federal courts, the validity of § 1782 subpoenas depends on each particular federal district in which the targeted company resides or is incorporated.

There is no clear trend in the federal circuits about § 1782 subpoenas related to treaty-based arbitrations. Presumably, each federal circuit would treat these subpoenas similarly to those related to international commercial arbitrations. The U.S. Court of Appeals for the Second Circuit recently allowed a § 1782 subpoena related to a treaty-based arbitration, departing from its practice of denying such subpoenas for international commercial arbitrations. Everywhere else, it is up to each federal district court to address these subpoenas according to its jurisprudence.

The root of the courts' disagreement lies in meaning of the phrase, "a proceeding in a foreign or international tribunal" in § 1782.³ As noted in previous alerts, soon the U.S. Supreme Court will have the opportunity to clarify the matter. (See Holland & Knight's previous alert, "Supreme Court to Decide if U.S. Discovery Law Encompasses Private Foreign Arbitrations," March 25, 2021) However, if the court determines that "a proceeding in a foreign or international tribunal" includes international arbitrations, § 1782 will continue to create questions.

The Meaning of "Foreign" or "International"

In ZF Automotive US, Inc. v. Luxshare, Ltd., the arbitration clause established the place of the arbitration as Munich, Germany. That would appear to qualify as "foreign" or "international."

However, in AlixPartners, LLC v. Fund for Protection of Investor Rights in Foreign States, the treaty-based arbitration is ad hoc under the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules with no known place of arbitration. Although the place of the arbitration is not likely the United States, it might matter if it was.

For example, many contracts between non-U.S. parties select a U.S. city as the place for arbitration of any dispute. The performance under these contracts has nothing to do with the United States. As another example, many contracts may have one non-U.S. party where performance is entirely within the U.S. If the arbitration clause in those contracts selects the American Arbitration Association (AAA) to administer the arbitration or agrees to apply its arbitration rules, by default, the AAA will apply its International Centre for Dispute Resolution (ICDR) arbitration rules. It is not clear if these examples would qualify as a "proceeding in a foreign or international tribunal," allowing the parties to invoke § 1782 and issue discovery subpoenas.

Using § 1782 for Pre-Arbitration Discovery

On its facts, the aggrieved party in ZF Automotive US issued a § 1782 subpoena before initiating arbitration. Section 1782 is not clear that the issuer of a subpoena must have a pending "proceeding in a foreign or international tribunal."

Using Ex Parte Applications to Issue a Subpoena

In ZF Automotive US, the applicant sought permission to issue a § 1782 subpoena without prior notice to the targeted company. Section 1782 is silent on whether such ex parte applications are proper.

Holland & Knight Can Help

Holland & Knight will keep you informed as this issue unfolds. For more information or questions regarding § 1782, contact the authors or another member of Holland & Knight's International Arbitration and Litigation Team.

Notes

¹ These federal courts are in Michigan, Ohio, Kentucky, Tennessee, West Virginia, Virginia, North Carolina and South Carolina.

² These federal courts are in New Hampshire, Vermont, New York, Connecticut, Texas, Louisiana, Mississippi, Wisconsin, Illinois and Indiana.

³ In relevant part, § 1782 provides, "The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation."

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.