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Michael Wolgin

Court Grants Nigeria’s Second § 1782 Application for Discovery in Foreign Proceeding in Dispute Over $10B Arbitration Award Related to Gas Supply Agreement

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The U.S. District Court for the Southern District of New York granted the 28 U.S.C. § 1782 application of the Federal Republic of Nigeria to issue subpoenas on four U.S. entities and two individuals, the respondents, in aid of an upcoming fraud trial against Process and Industrial Developments Ltd. (P&ID) before the English High Court of Justice in London, England. In that proceeding, Nigeria seeks to set aside a $10 billion arbitral award, which arose from a gas supply and processing agreement between P&ID and Nigeria that Nigeria claims was fraudulently procured. According to Nigeria, P&ID is a “shell entity whose only asset” is the arbitration award. Nigeria sought to issue a subpoena to each respondent concerning the acquisition of P&ID, financial records, P&ID’s business operations relating to the agreement and the arbitral award, and other issues.

Under section 1782(a), the “district court 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.” “The order may be made … upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court.”

The court found that it had jurisdiction to grant an application under section 1782 because the respondents reside or are found within the Southern District of New York, the discovery is for use in the proceeding before a foreign tribunal, and the application was made by an interested person.

The court also determined that Nigeria met the Supreme Court’s four-factor test in exercising its discretion to grant the application (the Intel factors): (1) whether the person from whom the discovery is sought is a participant in the foreign proceeding (they are not); (2) the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance (English courts are receptive to section 1782 assistance); (3) whether the section 1782 request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States (it did not); and (4) whether the section 1782 application contains unduly intrusive or burdensome discovery requests (it did not).

Regarding the fourth Intel factor, the court rejected the respondents’ argument that, because Nigeria previously filed a different section 1782 application arising out of a separate criminal case, seeking similar discovery from the same respondents, Nigeria should not be permitted to proceed simultaneously on the two section 1782 applications. The court held that there was no legal basis for the respondents’ contention that successive section 1782 applications related to two different foreign proceedings should be prohibited.

In re Petition of Federal Republic of Nigeria, No. 1:21-mc-00007 (S.D.N.Y. Sept. 14, 2022).

Court Confirms Foreign Arbitration Award, Notwithstanding Pending Action in Foreign Court Seeking Award’s Annulment

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Applying the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a U.S. federal district court confirmed a Lebanese arbitration award in favor of Iraq Telecom Ltd. for $3 million against Intercontinental Bank of Lebanon S.A.L. (IBL).

IBL had argued that the court should refuse to confirm the award because it had brought an annulment action in Lebanon, which, according to IBL, had the effect of rendering the award “nonbinding on the parties” under the primary jurisdiction’s (Lebanese) law. The court found, however, that the Convention did not support IBL’s request because the terms of the underlying agreement between the parties made the award final and not subject to an appeal. The court also found that the award had not been set aside or suspended, and even if it could take into account the fact that the annulment action was pending, there was no showing that the annulment action had a likelihood of success.

After weighing certain factors used by the Second Circuit, the court also rejected IBL’s motion under Article VI of the Convention to stay the confirmation pending the resolution of IBL’s Lebanese annulment action. The court found, in pertinent part, that the award “was entered after three years of proceedings before the Tribunal and is supported by the Tribunal’s lengthy, detailed findings of fact and law. The twin goals of arbitration, ‘settling disputes efficiently and avoiding long and expensive litigation,’ favor expeditious execution of the Award.” The court then granted Iraq Telecom’s request for a declaratory judgment recognizing the findings made in the award.

Iraq Telecom Ltd. v. IBL Bank S.A.L., No. 1:21-cv-10940 (S.D.N.Y. Apr. 8, 2022).

Second Circuit Affirms Order Confirming Arbitration Award Finding No Partiality Related to Arbitrator’s (Attenuated) Personal and Business Relations

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An individual appealed from an order confirming an arbitration award. The appellant argued that the district court erred in refusing to vacate the arbitration award on grounds of “evident partiality.” The appellant contended that this basis for vacatur existed because the arbitrator’s law clerk was the father-in-law of one of the petitioners’ brothers, and the arbitrator had a separate business relationship with the law clerk. The Second Circuit was not convinced. Under the FAA, evident partiality may be found only “where a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration.” Similarly, under applicable New York state law, partiality exists if “the arbitrator and the party or witness have some ongoing relationship” and it is shown that the losing party suffered “prejudice to its rights as a result.” The Second Circuit agreed with the district court that the arbitrator’s relationship to the underlying petitioners was not shown to have “crossed the line.” The court noted that this relationship was “far more attenuated than situations where this Court and New York courts have vacated awards for evident partiality.” And even assuming that the appellant had established partiality, which he had not, the Second Circuit agreed with the district court that, because the appellant had knowledge of the relationship in question during the arbitration proceedings, the “evident partiality” objection was waived.

Magid v. Waldman, No. 20-3216 (2d Cir. Feb. 25, 2022).

Fifth Circuit Dismisses Appeal of Order Denying Motion to Reopen Case, Sever Cost-Splitting Provision, and Impose Costs of Arbitration on Appellee

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The underlying dispute related to a property manager’s limitation of the appellant, Jane Doe, to one pet in her apartment. Doe sued the manager for declaratory relief, injunctive relief, monetary damages, and punitive damages under the Fair Housing Act and the Louisiana Equal Housing Opportunity Act. Doe moved for a preliminary injunction, and the property manager moved to compel arbitration and stay the case pursuant to the lease’s arbitration clause. Doe responded, in relevant part, by arguing that the court should sever the arbitration clause’s cost-splitting provision and require the property manager to pay Doe’s share of the arbitration costs.

The district court granted the motion to compel arbitration, holding that Doe was bound by the arbitration clause. It also declined to rule on Doe’s motion for a preliminary injunction and denied Doe’s request to sever the cost-splitting provision of the arbitration clause and her request that the property manager pay her share of the arbitration costs. The court stayed the case and retained jurisdiction to reopen the case on appropriate written motion. The parties subsequently could not agree on the costs of arbitration, and Doe filed a motion to reopen the case and, again, to sever the cost-splitting provision of the arbitration clause. The district court denied Doe’s motion, holding that, pursuant to the agreement’s delegation clause, disputes regarding the parties’ respective responsibilities for arbitration costs should be addressed by the arbitrator.

On appeal to the Fifth Circuit, the court agreed with the property manager’s arguments that the court lacked jurisdiction. The court held that the district court’s order compelling arbitration and staying and administratively closing the case pending arbitration was interlocutory and unappealable within the meaning of section 16 of the FAA. The court held that Doe’s motion to reopen the case and sever was, in effect, nothing more than a motion to reconsider the merits of part of the district court’s order compelling arbitration. A denial of a motion to reconsider an order compelling arbitration does not possess any more finality than the order compelling arbitration itself. The Fifth Circuit also ruled that the collateral order doctrine did not apply given section 16 of the FAA’s “specific framework for determining whether and when an appeal is proper” and that exercising mandamus jurisdiction, a drastic remedy reserved only for truly extraordinary situations, would be inappropriate.

Doe v. Tonti Management Co., No. 21-30295 (5th Cir. Feb. 1, 2022).

Ninth Circuit Affirms Denial of Motion to Compel Arbitration Against Non-Signatory Spouse of Contracting Party

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In a case brought under the Telephone Consumer Protection Act (TCPA), the Ninth Circuit Court of Appeals affirmed an order denying the defendant corporation’s motion to compel arbitration, which the company filed pursuant to a truck purchase agreement signed by the plaintiff’s husband, but not by her. The company contended that the plaintiff was bound by the arbitration clause because she was designated as her husband’s agent and authorized third party on the subject account, made payments on the account, made substantive changes to the account, called the company regarding the account, and filed a TCPA claim that arose out of the contract containing the arbitration agreement. The Ninth Circuit, however, held that the district court correctly ruled that under Florida law, which governed the contract, the plaintiff was not bound to her spouse’s agreement to arbitrate. The court further held that the plaintiff was not equitably estopped from avoiding the arbitration agreement, observing that, generally, Florida courts do not apply equitable estoppel to estop non-signatories. The court concluded that the plaintiff had not derived sufficient benefit under the contract to warrant application of estoppel.

Canady v. Bridgecrest Acceptance Corp., No. 20-15997 (9th Cir. Nov. 8, 2021).