A federal court in the Northern District of California has adopted the reasoning and conclusion of a recent Sixth Circuit decision in holding that 28 U.S.C. § 1782 applies with respect to private foreign/international arbitrations.  See, HRC-Hainan Holding Company, LLC v. Hu, 19-MC-80277, 2020 U.S. Dist. LEXIS 32125 (N.D. Cal. Feb. 25, 2020).  This adds to the split among federal courts concerning the issue of the applicability of this federal “judicial assistance” statute to private commercial adjudicatory proceedings.

The decision concerned subpoenas to obtain discovery for use in a private arbitration in the People’s Republic of China under CIETAC Rules.[1]  The applicants were two Delaware companies and their Chinese subsidiary.  Their claims in China were for breaches of contract by their local counter-party, Ciming, with respect to a hospital project in Hainan Providence, PRC.  The applicants sought discovery against the California-resident owner of Ciming (Hu), her parents, certain California limited liability companies formed by Hu, and Wells Fargo Bank (in California).  The respondents had moved to quash the subpoenas that had been served by that time -- on Hu, on the three California LLCs, and on Wells Fargo -- and that is what the court addressed.  See id. at *2-*8.

The requisites for enforcement of discovery under 28 U.S.C. § 1782(a) are:  (1) that the target of discovery resides or is found in the federal district in which the application is made; (2) that the discovery is for use in a proceeding in “a foreign or international tribunal”; and (3) that the application is made by a foreign or international tribunal or “any interested person.”  See id. at *8-*9.  Upon the satisfaction of those requirements, the District Court has broad discretion regarding the extent and the manner of discovery that is to be permitted.  And, in that regard, the court should bear in mind the dual aims of the statute in question -- i.e., “[1] providing efficient assistance to participants in international litigation and [2] encouraging foreign countries by example to provide similar assistance to our courts.”  Id. at *10, citing Intel Corp. v. Advance Micro Devices, Inc., 542 U.S. 241, 252 (2004).

In addressing the critical question (concerning foundation requirement #2), the District Court noted the split between the Second and Fifth Circuits on the one hand, and the Sixth Circuit on the other.  The Second and Fifth Circuits had held, albeit before the U.S. Supreme Court opined in Intel, that the statutory mechanism did not apply to private international arbitrations.  See id. at *11.  The Sixth Circuit, on the other hand, recently held otherwise.  See id. at *12.  In addition, various district courts have weighed in on one side or the other of the controversy.

The District Court for the Northern District of California in this case found the reasoning of the Sixth Circuit persuasive, and held accordingly.  That is, the Court found that a private arbitration is a “foreign or international tribunal” for purposes of 28 U.S.C. § 1782(a), and that the CIETAC proceeding was indeed before “a foreign or international tribunal”.

The court ultimately narrowed the requested discovery slightly in its discretion, but granted the applicants’ requests to compel compliance otherwise with the issued and served subpoenas.

[1]  The discovery would also be used by the applicants in an ancillary judicial proceeding in the PRC, seeking to preserve assets in connection with the CIETAC arbitration.