Benjamin Stearns

Private Arbitrators Do Not Qualify as a “Tribunal” under 28 U.S.C. § 1782

February 25, 2019 by Benjamin Stearns

Section 1782 allows a district court to order a person who resides in the court’s district to provide testimony or documents to be used in a proceeding before a foreign tribunal. When presented with a section 1782 discovery application, a district court must engage in two inquiries: first, whether the court has authority to grant the application, and second, whether to exercise its discretion to grant the application. As part of the first inquiry, the court must determine whether the foreign body conducting the arbitration qualifies as a “tribunal” under section 1782.

Since the United States Supreme Court decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), courts have split on whether private arbitral bodies qualify as a tribunal for purposes of section 1782. In Intel, the Supreme Court discussed the definition of “tribunal” in dicta. A number of courts have relied on this discussion for the proposition that private arbitrations are covered by section 1782. However, in two pre-Intel cases, the Second and Fifth Circuits held that section 1782 does not apply to private arbitrations. Some district courts have stuck to the pre-Intel rule, noting that Intel does not necessarily extend the reach of section 1782 to purely private arbitrations. Of particular note, the Supreme Court’s discussion in Intel did not actually specify whether the term tribunal, as used, in section 1782, included private arbitrations, in addition to state-sponsored arbitrations, or if it only included the latter.

The District Court for South Carolina recently sided with the courts holding that Intel did not expand the scope of section 1782 to apply to purely private arbitrations. As such, the court relied on the Second and Fifth Circuit opinions, which were squarely on point. Those cases noted that “references in the United States Code to ‘arbitral tribunals’ almost uniformly concern an adjunct of a foreign government or international agency” as well as the “silence” of section 1782’s legislative history with regard to whether Congress intended such a “significant … expansion of American judicial assistance to international arbitral panels created exclusively by private parties. . . .” As a result, the court determined that parties to an arbitration before a foreign, private arbitral body may not utilize section 1782 to obtain testimony or documents for use in the foreign arbitration.

However, the court’s determination has been appealed to the Fourth Circuit, so watch this space for further developments.

In re: Servotronics, Inc., Case No. 2:18-mc-00364-DCN (USDC D.S.C. Nov. 6, 2018) (Order);
In re: Application of Servotronics, Inc., Case No. 2:18-mc-00364-DCN (USDC D.S.C. Nov. 30, 2018) (Notice of Appeal).

DC District Court Permits Vantage Commodities To File Amended Complaint And Denies Reinsurer Defendants’ Motion For Interlocutory Appeal

February 7, 2019 by Benjamin Stearns

The District Court for the District of Columbia issued an order denying a motion to reconsider its prior order allowing Vantage Commodities to file an amended complaint and denying the reinsurer defendants’ motion for interlocutory appeal. In the underlying decision, the court determined that, while Vantage had not stated a claim for breach of contract because it had failed to allege facts showing a contractual relationship, the complaint adequately stated claims for breach of implied contract, promissory estoppel, and unjust enrichment.

The court found that Vantage had alleged enough facts to survive a motion to dismiss, noting that the court was required to draw all reasonable inferences in Vantage’s favor at the motion to dismiss stage. That determination was limited to the specific allegations in Vantage’s amended complaint, and did not “create new law.”

The court refused to exercise its discretion to allow an interlocutory appeal of its non-final order, finding that the questions of law the reinsurers presented were “tied up in the specific facts of this case.” Furthermore, while the reinsurers argued that the court’s prior order “goes against the weight of authority in reinsurance law that an insured cannot maintain a direct action against a reinsurer,” they failed to cite any specific case law showing that the court’s order was in conflict with other authorities. The court concluded that the reinsurer defendants did not meet their burden of showing that the circumstances of this case justified a departure from the basic policy of postponing appellate review until after the entry of final judgment. For more information regarding this case, see our prior posts here and here.

Vantage Commodities Financial Services I, LLC v. Assured Risk Transfer PCC, LLC, Case No. 1:17-CV-01451 (USDC D.D.C. Jan. 17, 2019).

Subject Matter Jurisdiction Under Section 7 Of The FAA – The Diversity, “Amount In Controversy,” And “Place Of Sitting” Requirements

February 5, 2019 by Benjamin Stearns

Presented with an argument that the court lacked subject matter jurisdiction, the Southern District of New York clarified the diversity, amount in controversy, and “place of sitting” requirements under Section 7 of the FAA – which relates to compelling the attendance of witnesses at arbitration.

With regard to diversity, the court held that, when presented with a Section 7 petition to enforce arbitration summonses, the court need not “look through” the petition to the citizenship of the parties to the underlying arbitration, but rather, should look to the citizenship of the parties to the instant enforcement action, to determine whether diversity jurisdiction exists. The court distinguished a Section 7 petition from petitions brought under Section 4 and Section 10, where courts may look through the petition to determine federal question jurisdiction, but are not required to do so. The court noted that Section 7 petitions, unlike Section 4 and 10 petitions, involve different parties than those in the underlying arbitration.

As to the “amount in controversy” requirement, the court recited the well-established principle that the amount is measured by “the value of the object of the litigation.” “The amount in controversy is not necessarily the money judgment sought or recovered, but rather the value of the consequences which may result from the litigation.” The petitioner here sought at least $134 million in damages in the underlying arbitration. The court noted that, even if the documents responsive to the summons pertained to only a small fraction of the amount sought in the arbitration, the $75,000 amount in controversy requirement would nevertheless be satisfied.

Finally, regarding Section 7’s requirement that a party petition a United States district court “for the district in which such arbitrators, or a majority of them, are sitting,” the court refused to look to the arbitrators’ individual business addresses to determine the arbitrators’ “place of sitting.” Rather, the court looked to the location the arbitrators had selected for the Section 7 hearing. Furthermore, the court stated that the arbitrators are not restricted to a single location. Here, the arbitrators had summoned nonparties to appear for hearings in both New York and Philadelphia. Therefore, the court held that the Southern District of New York and the Eastern District of Pennsylvania were the arbitrators’ “place of sitting” for any contest of the respective Section 7 summonses.

Washington National Insurance Co. v. Obex Group, LLC, Case No. 18-CV-9693 (USDC S.D.N.Y. Jan. 18, 2019).

Munich Re Wins Arbitration it Initially Resisted, and Parties Agree to Dismiss Federal Lawsuit Against Munich Re as a Result

January 16, 2019 by Benjamin Stearns

Alabama Municipal Insurance Corporation (AMIC) has agreed to dismiss with prejudice its federal lawsuit against Munich Re after an arbitrator rendered judgment against AMIC in a case we previously wrote about here. Munich Re had resisted arbitration, contending that AMIC’s claim did not arise under a contract which contained an arbitration clause. The district court disagreed, finding that another contract applied to the claim and that contract provided for “final and binding” arbitration of disputes. Despite losing the initial round, Munich Re has emerged victorious from the arbitration it initially sought to avoid, and the court dismissed AMIC’s lawsuit with prejudice on December 7, 2018, pursuant to the parties’ joint request. Alabama Municipal Insurance Corporation v. Munich Reinsurance America, Inc., Case No. 2:16-cv-00948-WHA-SRW (USDC M.D. Ala. Dec. 7, 2018) (final judgment); (Nov. 9, 2018 Joint Status Report Regarding Arbitration).

This post written by Benjamin E. Stearns.

See our disclaimer.

Ninth Circuit Holds that Federal Rules of Civil Procedure Govern How to Calculate the FAA’s Three-Month Filing Deadline to Seek Vacatur of an Arbitration Award

January 14, 2019 by Benjamin Stearns

The Ninth Circuit affirmed the denial of a petition to vacate an arbitration award because the petition was filed one day late. The court determined that whether a petition to vacate is filed within the applicable three-month deadline under the FAA is based upon the method of calculating provided by Federal Rule of Civil Procedure 6(a). That Rule provides a three-step process: (1) exclude the day the arbitrator delivered the final award (in this case, September 14, 2016); (2) calculate three months from the following day (in this case September 15); and (3) include the last day of the period, unless it is on the weekend or a legal holiday, in which case the period concludes at the end of the next weekday that is not a legal holiday. Here, the court focused on Step 2. The court stated that each month began on the 15th day of the month and ended on the 14th day of the following month, just as “the month beginning January 1 concludes on January 31, not February 1.” Because the plaintiffs filed their petition for vacatur on December 15, when the last day for filing within the available three-month window under the FAA was December 14, the Ninth Circuit found that the petition was properly denied as untimely. The Ninth Circuit also addressed the standard for whether a post-judgment motion tolls the time to file an appeal pursuant to Federal Rule of Appellate Procedure 4(a)(4). Stevens v. Jiffy Lube International, Inc., No. 17-15965 (9th Cir. Dec. 27, 2018).

This post written by Benjamin E. Stearns.

See our disclaimer.