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In dispute over foreign shipping contract where one party filed for discovery in Florida under 28 U.S.C. Section 1782, Eleventh Circuit affirms that discovery may proceed because the lawsuits contemplated in Ecuador were "within reasonable contemplation".

Consorcio Ecuatoriano de Telecomunicaciones. ("CONECEL") and Jet Air Services Equador ("JASE") were parties to a long-term contract involving the provision of logistics services by JASE to CONECEL for the international shipment of mobile phones and accessories. In 2008, the relationship fractured and CONECEL asserted that it had been overbilled by JASE by millions of dollars, through collusion between JASE and two of CONECEL's former employees. JASE denied the allegations, and asserted that CONECEL had, in fact, missed several payments under the contract. JASE thereafter initiated arbitration proceedings in Ecuador in accordance with an arbitration clause in the logistics services contract.

CONECEL subsequently filed an ex parte application for relief in the United States District Court for the Southern District of Florida, requesting that the court grant it leave to issue a subpoena on JAS USA--a US affiliate of JASE which CONECEL maintained was involved in the processing of the allegedly inflated bills--seeking evidence pertaining to invoice generating and calculation. In addition to use in the private Ecuadorian arbitration initiated by JASE, CONECEL also submitted that it needed the evidence for civil and criminal collusion proceedings it planned to initiate against JASE and the former CONECEL employees in the Ecuadorian commercial courts. CONECEL maintained that it required this evidence before filing the contemplated collusion actions because the courts in Ecuador mandate that all evidence in support of such proceedings be filed with the initial pleadings. The statute upon which CONECEL relied in making its ex parte application was 28 U.S.C. [section]1782. That statute states in the relevant part:

"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. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or 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.... To the extent that the order does not prescribe otherwise, the testimony or statement shall be taken, and the document or other thing proper *1267 in accordance with the Federal Rules of Civil Procedure. 28 U.S.C. [section] 1782(a)."

The district court granted the ex parte application and authorized CONECEL to serve the subpoena upon JAS USA. JASE then sought to intervene in the proceedings to quash the subpoena on the grounds, among others, that (1) the Ecuadorian judicial proceedings had not been commenced and, therefore, the application was not ripe, and that (2) a private foreign arbitration was not a "foreign or international tribunal" within the meaning of [section]1782. The court permitted JASE to intervene but denied its application to quash, finding against JASE on both issues. JASE subsequently appealed to the Eleventh Circuit.

The U.S. Court of Appeals for the Eleventh Circuit affirms the District Court's decision. The key issue here is whether the foreign private arbitration panels are the "foreign or international tribunals" contemplated by 28 U.S.C. [section] 1782(a).

In a de novo review the Court first turned to the language of [section]1782 itself and noted that it had four requirements that must be met before a district court has the authority to accede to a request made pursuant to the statute:

"(1) the request must be made "by a foreign or international tribunal," or by "any interested person"; (2) the request must seek evidence, whether it be the "testimony or statement" of a person or the production of "a document or other thing"; (3) the evidence must be "for use in a proceeding in a foreign or international tribunal"; and (4) the person from whom discovery is sought must reside or be found in the district of the district court ruling on the application for assistance.

In re Clerici, 481 F.3d at 1331-32 (footnote omitted) (quoting 28 U.S.C. [section] 1782(a))."

Applying these criteria to the facts before it, the court noted that JASE did not dispute that three of them were undoubtedly met. Clearly, CONECEL was an "interested person" as a main party to the dispute; it was seeking evidence pertaining to invoice processing and calculation; and JAS USA, the target of the subpoena at issue, had an office in Miami, Florida, within the district in which the court sat. The main dispute was thus distilled to whether the third criteria above--requiring proceedings in a "foreign or international tribunal"--had been met.

CONECEL advanced two theories as to why the present facts mandated a finding that [section]1782 permitted the court to grant the relief requested. First, it argued that the foreign private arbitration satisfied the "foreign or international tribunal" language of the statute. Second, it argued that, regardless of whether or not the Ecuadorian collusion proceedings had yet been initiated, existing U.S. case law supported the proposition that [section]1782 merely required that the proceedings "be within reasonable contemplation", and need not be "pending or imminent". The court, after noting that it need not address the second argument concerning the "reasonable contemplation" standard because it found for CONECEL strictly on the foreign arbitration theory, turned to the guidance of prior U.S. Supreme Court jurisprudence in addressing the question before it.

While not directly on point, the Court relied heavily on the Supreme Court case of Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. at 26465, 124 S.Ct. 2466. There, the Supreme Court was presented with the issue of whether the directorate-general for competition of the European Commission was a "tribunal" under [section]1782. The Supreme Court began by noting that the original language of the statute was amended in 1964 to substitute "tribunal" for "judicial proceeding", and that the Senate report documenting the substitution stated that it was made "to ensure that 'assistance is not confined to proceedings before conventional courts', but extends also to 'administrative and quasi-judicial proceedings'". As the Court states:

"In Intel, the Supreme Court explained that 'Section 1782(a) does not limit the provision of judicial assistance to 'pending' adjudicative proceedings. In 1964, when Congress eliminated the requirement that a proceeding be 'judicial,' Congress also deleted the requirement that a proceeding be 'pending.'" Intel, 542 U.S. at 258, 124 S.Ct. 2466. Instead, the Supreme Court held that section 1782(a) requires only that a proceeding 'be within reasonable contemplation.' Id. at 259, 124 S.Ct. 2466; accord In re Letter of Request from the Crown Prosecution Serv. of the U.K., 870 F.2d 686, 691 (D.C.Cir.1989) (Ginsburg, J.). The future proceedings must be more than speculative, however, and a 'district court must insist on reliable indications of the likelihood that proceedings will be instituted within a reasonable time.' Crown Prosecution Serv., 870 F.2d at 692; see also id. at 691 (describing the 'decisive' question as whether there was 'sufficient indication that a proceeding in court would eventuate in which the evidence gathered can be weighed impartially')."

JASE argued that CONECEL's failure to bring an action demonstrates that any civil or criminal proceeding is not within reasonable contemplation. In response to this argument CONECEL point out that under Ecuadorian law it must submit its evidence with the pleading at the time it commences the civil action, and that it had not yet brought any action against its former employees because it was still waiting for the evidence it seeks pursuant to the instant discovery application.

"The Supreme Court in Intel noted that '[i] n civil law countries, documentary evidence is generally submitted as an attachment to the pleadings or as part of a report by an expert.' 542 U.S. at 262 n. 14, 124 S.Ct. 2466 (quoting Hans Smit, Recent Developments in International Litigation, 35 S. Tex. L.Rev. 215, 235-36 n. 94 (1994)).

Because "a district court is not required to grant a [section] 1782(a) discovery application simply because it has the authority to do so." Intel, 542 U.S. at 264, 124 S.Ct. 2466 (citing United Kingdom, 238 F3d at 1319), JASE also argued, that even if the statutory requirements have been met, the district court abused its discretion in granting CONECELs application anyway.

"'Whether, and to what extent, to honor a request for assistance pursuant to [section] 1782 has been committed by Congress to the sound discretion of the district court,' and 'this court may overturn the district court's decision only for abuse of discretion.' United Kingdom, 238 F3d at 131819. We have made clear that '[t]his deferential standard is identical to that used in reviewing the district court's ordinary discovery rulings.' Id. at 1319; cf. Harris v. Chapman, 97 F3d 499, 506 (11th Cir.1996) ('District judges are accorded wide discretion in ruling upon discovery motions, and appellate review is accordingly deferential')."

"Interpreting the Supreme Court's decision in Intel, a panel of this Court already has spelled out four factors that should be considered by the district court in exercising its discretion:

   Once the prima facie requirements are
   satisfied, the Supreme Court in Intel noted
   these factors to be considered in *1272
   exercising the discretion granted under
   [section] 1782(a): (1) whether 'the person from
   whom discovery is sought is a participant
   in the foreign proceeding,' because 'the
   need for [section] 1782(a) aid generally is not as
   apparent as it ordinarily is when evidence
   is sought from a nonparticipant'; (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';
   (3) 'whether the [section] 1782(a) request conceals
   an attempt to circumvent foreign proof-gathering
   restrictions or other policies of
   a foreign country or the United States';
   and (4) whether the request is otherwise
   'unduly intrusive or burdensome.' The
   Supreme Court in Intel added that 'unduly
   intrusive or burdensome requests may be
   rejected or trimmed.'

In re Clerici, 481 F.3d at 1334 (citation omitted) (quoting Intel, 542 U.S. at 264-65, 124 S.Ct. 2466). JASE's argument that the district court abused its discretion only focuses on the fourth factor. JASE claims that CONECELs request for discovery from JAS USA is overbroad and improperly seeks confidential and proprietary information related to how both JAS USA and JASE price their services."

"The main problem with JASE's claim is that it fails to provide us with any sound basis for overturning the district court's exercise of discretion or for upending the district court's determination that the discovery request was narrowly tailored. This Circuit has held that once the section 1782 factors are met and the district court is therefore authorized to grant the application, 'the federal discovery rules, Fed. R.Civ.P. 26-36, contain the relevant practices and procedures for the taking of testimony and the production of documents.' Weber v. Finker, 554 F.3d 1379, 1384-85 (11th Cir.2009) (quoting In re Clerici, 481 F.3d at 1336). As we explained in Weber:

   Section 1782 does not require that every
   document discovered be actually used
   in the foreign proceeding. Quite the
   opposite. Section 1782 expressly provides
   that the district court should grant
   discovery under the Federal Rules of Civil
   Procedure. Pursuant to Rule 26(b)(1) of
   the Federal Rules of Civil Procedure, '[p]
   arties may obtain discovery regarding any
   nonprivileged matter that is relevant to
   any party's claim or defense--including
   the existence, description, nature,
   custody, condition, and location of any
   documents....' Fed.R.Civ.P 26(b)(1).
   Id. at 1385."

Because CONECEL's application refers strictly to the information related directly to CONECEL, the Court find unpersuasive JASE's claim that JAS USAs compliance with the subpoena would require the disclosure of confidential pricing information that would harm its competitiveness in the marketplace.

"Moreover, JASE does not appear to have taken any steps to meet CONECEL somewhere in the middle or to narrow the discovery request in any particular way; rather, it has taken an allor-nothing approach *1273 seeking to remove JAS USA from the burden of having to produce any documents or deposition testimony, even those that seem unambiguously relevant. We have previously recognized that such an approach is problematic:

Finally, as to the fourth Intel factor--whether the [section] 1782 request is unduly intrusive--the district court's order granting the [section] 1782 application specifically indicated that if Clerici wished to pursue his 'unduly intrusive' argument, Clerici should file a motion to limit discovery. Clerici never did so and instead chose to appeal the grant of any discovery whatsoever. On appeal, as in the district court, Clerici does not identify the terms of the written request that are overly broad or assert how the scope of the request should be narrowed. Thus, we, like the district court, have no occasion to address the scope of the Panamanian Court's discovery request.

In re Clerici, 481 F.3d at 1335."

Furthermore, the Court also looks at the Seventh Circuit's findings related to the all-or-nothing challenges in the course of reversing a district court's complete denial of a section 1782 application as an abuse of discretion:

"Heraeus's discovery demands are broad.... For all we know, they are too broad. But if so, it doesn't follow that Heraeus is not entitled to any discovery. It's not as if its demands were frivolous; it obviously needs a good deal of discovery in order to prepare its case against Biomet. If it's asking for too much, the district court can and should cut down its request, but not to nothing, as it did. That was unreasonable, and therefore reversible.

Heraeus Kulzer, GmbH v. Biomet, Inc., 633 F.3d 591, 597-98 (7th Cir.2011); see also id. at 598 (noting that the district court's denial of any discovery 'was all the more unreasonable because Biomet had refused to meet with Heraeus to negotiate a reduction in the amount of discovery sought' and because of Biomet's 'refusal to present any evidence of the burdens that granting Heraeus's discovery request would impose'). These concerns are persuasive. In this case, JASE has failed to identify which particular discovery requests in CONECEL's application are unduly burdensome or to provide any specific evidence to support its blanket claim that JAS USA should be exempted from having to comply with any and all discovery obligations due to overarching concerns about confidentiality that are stated only at the highest order of abstraction."

The Court also addressed to JASE's claim that the district court erred in denying its motion for reconsideration under Fed.R.Civ.P. 59 and 60 which permits relief from a final judgement, order, or proceeding based on "newly discovered evidence".

"In this Circuit, we employ a five-part test that a movant must meet in order to be entitled to such relief:

(1) the evidence must be newly discovered since the trial [or final judgment or order]; (2) due diligence on the part of the movant to discover the new evidence must be shown; (3) the evidence must not be merely cumulative or impeaching; (4) the evidence must be material; and (5) the evidence must be such that a new trial [or reconsideration of the final judgment or order] would probably produce a new result.

Waddell v. Hendry Cnty. Sheriff's Office, 329 F3d 1300, 1309 (11th Cir.2003) (citing Toole v. Baxter Healthcare Corp., 235 F.3d 1307, 1316 (11th Cir.2000))."

As the Court explained, although JASE's evidence met the first three factors in the Waddell analysis, they fall short under the fourth and fifth Waddell factors. JASE claimed that the suit broth by Egas, one of CONECEL's employees, established that any potential civil action by CONECEL against its former employees would be baseless and without merit, thereby confirming that there were no reasonably contemplated proceedings and that CONECEL's section 1782 application was merely a fishing expedition designed to harass JASE and JAS USA. "But we cannot simply assume that the allegations in Egas's lawsuit are true and the allegations in CONECEL's section 1782 application are false. Like the district court, we are in no position to assess the merits of either CONECEL's potential suit against Egas or Egas's retaliatory suit for slander."

"In short, JASE's newly discovered evidence proffered in its motion for reconsideration was not material evidence nor evidence that would have probably changed the outcome of the district court's decision. See Waddell, 329 F.3d at 1309. Indeed, the bulk of JASE's motion for reconsideration just reiterated JASE's already-rejected arguments. The district court, therefore, acted entirely within its sound discretion in denying JASE's motion for reconsideration. See Richardson, 598 F3d at 740 ('A motion for reconsideration cannot be used 'to relitigate *1275 old matters, raise argument or present evidence that could have been raised prior to the entry of judgment.'" (quoting Michael Linet, Inc. v. Vill. of Wellington, 408 F.3d 757, 763 (11th Cir. 2005))).

The Court affirmed the District Court's denial of JASE's motion to vacate the order granting CONECEL's 28 U.S.C. 28 U.S.C. [section] 1782 application, and the District Court's denial of JASE's motion for reconsideration.

CITATION: Application of CONECEL v. JAS Forwarding (USA), 747 F.3d 1262 (11th Cir. 2014).
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Title Annotation:DISCOVERY
Publication:International Law Update
Date:Jan 1, 2015
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