Matthew T. Nelson of Warner Norcross + Judd.

A recent U.S. Court of Appeals for the Sixth Circuit decision allowing parties in foreign private arbitrations to obtain discovery in federal district courts has created a circuit split, increasing the likelihood that the U.S. Supreme Court will revisit an issue that it last addressed in 2004.

Section 1782 of Title 28 of the U.S. Code allows federal courts to order individuals and companies to provide discovery for use in foreign and international tribunals. The statute was adopted in 1964 and was little used for most of its history. But with the rise of international commerce and the consequent need for processes to resolve international disputes, the statute has gained prominence as a way to obtain broad, U.S.-style discovery against U.S. companies. Until the Sixth Circuit's decision on Sept. 19, the federal appellate courts had ruled Section 1782 could not be used to provide discovery for foreign commercial arbitrations.

In Abdul Latif Jameel Transportation v. FedEx, No. 19-5315, the Sixth Circuit ruled that a Saudi company properly requested discovery under Section 1782 to assist with an arbitration in Dubai against FedEx over a delivery-services agreement that had become acrid.

The parties' contract specified that disputes would be resolved by arbitration under the Rules of the Dubai International Financial Centre-London Court of International Arbitration (DIFC-LCIA). As its name suggests, the DIFC-LCIA was established as a joint project of the London Court of International Arbitration and the Dubai International Financial Centre in 2008, the latter being an independent free zone in Dubai that is subject to a common-law legal framework distinct from the United Arab Emirates legal system. The Sixth Circuit explained that awards from a DIFC-LCIA arbitration may be reviewed in the DIFC court in a manner similar to that provided by the Federal Arbitration Act.

The application of Section 1782 depends on whether the foreign or international proceeding is "in a foreign or international tribunal." And it was on that question that the Sixth Circuit focused. Section 1782 does not define the term "tribunal." The court agreed with the parties that the term was not limited to foreign or international courts, but the parties differed as to whether the term was broad enough to encompass private arbitrations. So the Sixth Circuit examined the use of the term at the time the statute was enacted.

In a contextualist tour de force, the Sixth Circuit reviewed how law and general dictionaries defined "tribunal" both in the 1960s and more recently, how courts used the term before the statute was enacted, and other uses of the same word in Section 1782. The court noted that numerous legal and nonlegal dictionaries defined tribunal broad enough to encompass an arbitration panel, though some definitions were available that were narrow enough to exclude it. Dictionary definitions left the meaning of tribunal unresolved. Turning to legal usage of the term, the Sixth Circuit noted that American lawyers and jurists have long used the term "tribunal" in a broad enough sense to describe private arbitrations. The court then determined that neither the surrounding uses of tribunal, nor the structure of the statute itself, limited the meaning of tribunal to judicial proceedings. The Sixth Circuit resolved that private arbitrations are within the scope of foreign and international tribunals.

In 2004, the Supreme Court interpreted Section 1782 for the first time in Intel v. Advanced Micro Devices, touching on whether the statute allows discovery for international and foreign arbitrations. In the course of holding that Section 1782 allows discovery in support of foreign administrative enforcement agency, the court quoted a law review article that included arbitral tribunals within Section 1782's scope. Although lower courts throughout the country split on whether this reference showed that private arbitrations were included under Section 1782, the Sixth Circuit concluded that it did.

Unlike the Sixth Circuit, the Second and Fifth circuits have both concluded that Section 1782 does not apply to proceedings before private arbitration panels  Both courts reached their conclusion by looking to the legislative history surrounding the enactment of Section 1782. Rejecting legislative history as a useful tool for interpreting statutes and citing a work co-authored by the late-Justice Antonin Scalia, the Sixth Circuit rejected the other circuits' analysis.

Despite concluding that Section 1782 applies to foreign and international private arbitrations, the Sixth Circuit was careful to note that it was not deciding that the Saudi company's requested discovery from FedEx was appropriate. The court emphasized that Section 1782 provides district courts with discretion to determine whether and to what extent discovery should be allowed. And the Sixth Circuit noted that the district court's discretion presumably extends to considering any agreements between the parties as to the availability and scope of discovery in the arbitration.

The 2018 Survey on International Arbitration by Queen Mary University of London suggests that one of arbitration's most valuable characteristics was "avoiding specific legal systems/national courts." That goal is undermined, in part, where foreign and international parties to an arbitration can impose U.S.-style discovery obligations on U.S.-based parties without undertaking comparable obligations. One response to the discovery available for foreign and international arbitrations in the Sixth Circuit is suggested by the court's decision: parties to arbitration agreements may include limitations on recourse to discovery under Section 1782.

In the litigation, FedEx raised the practical argument that parties who agree to arbitrate disputes generally want to avoid extensive discovery. Indeed, in El Paso Corp. v. La Commission Ejecutive Hidroelectrica Del Rio Lempa, the Fifth Circuit decision refusing to apply Section 1782 to international arbitrations, that court noted that arbitration's principal advantage is that it is less costly and speedier than traditional litigation. That benefit is lost "if the parties succumb to fighting over burdensome discovery requests far from the place of arbitration." The Sixth Circuit's decision places the onus on district courts to police Section 1782 discovery to ensure that this result does not occur. Time will tell whether district courts are willing to undertake the effort necessary to actively referee discovery disputes in significant commercial disputes, where the underlying matter is being resolved half a globe away.

It remains to be seen whether the Supreme Court will be willing to revisit the scope of Section 1782 and resolve the split between the circuits.

Matthew T. Nelson is a partner and chair of the appellate and Supreme Court practice at Warner Norcross + Judd resident in the firm's Grand Rapids, Michigan office.