Free Response to Motion - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE COMISIÓN EJECUTIVA HIDROELÉCTRICA DEL RÍO LEMPA, Plaintiff, v. NEJAPA POWER COMPANY, L.L.C., Defendant. § § § § § § § § § §

Action No. 1:08-MC-00135-GMS

RESPONSE TO NEJAPA POWER COMPANY, LLC'S MOTION FOR RECONSIDERATION OF JULY 18, 2008 ORDER GRANTING ASSISTANCE TO LITIGANT PURSUANT TO 28 U.S.C. § 1782 Nejapa Power Company ("NPC") has provided this Court with no basis to reconsider its July 18th Order ("July 18th Order").1 NPC's arguments are inaccurate and/or moot and the authority cited is inapposite. The Court should, therefore, deny NPC's Motion for Reconsideration ("Motion") for the following reasons: The Comisión Ejecutiva Hidroeléctrica del Río Lempa ("CEL") did not make any factual misrepresentations to this Court in its Section 1782 Application ("Application"); CEL was not required to provide prior notice to NPC of the Application; The Supreme Court's decision in Intel is applicable to private arbitrations, and the cases cited by NPC are inapposite and have been largely overruled by Intel and its progeny; This Court properly weighed the Intel factors when it decided to grant CEL's Application;





1

See Motion for Reconsideration of July 18, 2008 Order Granting Assistance to Litigant Pursuant to 28 U.S.C. § 1782 (July 25, 2008).

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Neither the arbitration agreement nor the applicable arbitral rules prohibit CEL from seeking discovery through 28 U.S.C. § 1782; The Arbitral Tribunal ("Tribunal"), in its July 28th Procedural Order No. 3, refused NPC's request to order CEL to withdraw its document request petitions per 28 U.S.C. § 17822; The Tribunal has acknowledged this Court's jurisdiction to determine the narrow evidentiary issues before it, reasoning that that "it is certainly up to the courts in [...] Delaware to decide whether Section 1782 applies to a foreign arbitration...and whether the measures sought...are admissible and should be granted."3 The Tribunal rejected NPC's request for it to declare that "any documents or testimony that might be obtained by CEL through the Discovery Applications...may not be used in this arbitration[;]"4 instead reserving judgment on the admissibility of any such evidence when, and if, that evidence is produced in the arbitration.5 NPC's complaints about the breadth or scope of the document requests do not provide a basis to reconsider the July 18th Order.







For all of these reasons, this Court should deny both NPC's request to reconsider and to vacate its July 18th Order.6

2

3 4 5

6

Proc. Order No. 3 at ¶ 20, attached hereto as Exhibit A. See also NPC's "urgent request" to the Tribunal, specifically asking the Tribunal to order CEL to "immediately withdraw" its Section 1782 application before this Court at p. 15, attached hereto as Exhibit B. Exhibit A at ¶ 22. Exhibit B at p. 16. Exhibit A at ¶ 31 (emphasis added) (stating that "all documents, including those that might be obtained through the [1782] process...will have to be produced according to the procedural timetable provided for in Procedural Order No. 2."); see also Exhibit A at ¶ 37 (stating that "[t]he Arbitral Tribunal will also retain jurisdiction to admit or reject any documents which are irrelevant, unreasonably burdensome to the proceedings or in breach of the parties' rights."). In light of the Tribunal's ruling in Procedural Order No. 3 prohibiting the deposition of potential witnesses, CEL does not currently intend to depose any potential witnesses, including Mr. Stephen Sutton, in compliance with this ruling.

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1.

CEL did not make any factual misrepresentations to this Court. CEL did not make any factual misrepresentations to the Court in its Application. NPC's

assertions to the contrary are misguided and have been mooted by the Tribunal's Procedural Order No. 3. NPC claims in its Motion that CEL violated the Tribunal's orders by seeking discovery pursuant to Section 1782 and that CEL failed to disclose to the Court certain portions of the Tribunal's orders that conflicted with the discovery that CEL sought through its Application. Those assertions are incorrect. The parties have never discussed, much less restricted, the formal or informal methods the parties might utilize to obtain evidence outside of the ambit of the arbitration. The procedural orders issued before CEL filed its Application did not restrict, or even address, CEL's ability to collect evidence through means outside of the arbitral proceeding. Indeed, in Procedural Order No. 3, the Tribunal confirmed that no such restrictions had been agreed to by the parties and that "it is certainly up to the courts in...Delaware to decide whether Section 1782 applies to a foreign arbitration, whether their orders require leave or consent from the Arbitral Tribunal...."7 Accordingly, CEL's Application does not violate the Tribunal's orders, and CEL did not misrepresent any facts to this Court. As confirmed by the Tribunal, the Application was, and continues to be, within the exclusive domain of this Court. While Nejapa argues that the Tribunal would not have granted the discovery sought by CEL through its Application, that contention is irrelevant. In Intel, the Supreme Court clarified that Section 1782 does not have a "foreign-discoverability requirement."8 The Supreme Court expressly recognized that Section 1782 aid is appropriate even in situations where a tribunal

7 8

Exhibit A at ¶ 22. Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 253 (2004).

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would not order such discovery itself, or might decide not to accept all discovery properly ordered pursuant to Section 1782(a).9 The mere fact that the Tribunal in the Pending Arbitration limited discovery within the arbitration proceeding, does not invalidate CEL's assertion that "[t]here is no indication that the Tribunal in the Pending Arbitration would be unreceptive to the discovery being sought by CEL...."10 Intel does not require this Court to find that the Tribunal will "definitely welcome and accept discovery produced pursuant to § 1782."11 Post-Intel case law confirms that "a foreign court's procedural discovery limitations, as opposed to substantive limits on the admissibility of discovered evidence, should not prevent a district court from enabling a foreign litigant to obtain admissible evidence ... pursuant to Section 1782."12 Here, the discovery limitations imposed by the Tribunal in its procedural orders do not address the admissibility of evidence obtained by the parties through means external to the arbitral proceeding. Moreover, as explained in section 6, infra., the Tribunal has ordered CEL to produce any evidence obtained through Section 1782 in accordance with its procedural orders and it has reserved judgment on the admissibility of that evidence.

9

10

11 12

See id. at 262-63 (explaining that "[t]he foreign tribunal can place conditions on its acceptance of the information to maintain whatever measure of parity it concludes is appropriate."). See NPC Memorandum in Support of Motion for Reconsideration of July 18, 2008 Order Granting Assistance to Litigant Pursuant to 28 U.S.C. § 1782, p. 18 (July 25, 2008) ("NPC Memorandum"). In re Roz Trading Ltd. ("Roz Trading II"), 2007 WL 120844, at *2 (N.D. Ga. 2007). In re Servicio Pan Americano de Proteccion, 354 F. Supp. 2d 269, 275 (S.D.N.Y. 2004).

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2.

This Court correctly granted CEL's Application because CEL is not required to provide notice to NPC under Section 1782. Section 1782 does not require that notice be provided to the party from whom discovery

is being sought at the time an application is filed. The relevant section of the statute provides only that "[t]he 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" and that "[t]he 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."13 Post-Intel case law confirms that Section 1782 does not require notice at the time an application is filed and that "failure to provide notice" is not a basis for dismissal of a Section 1782 application.14 In its Motion, NPC cannot cite to any post-Intel Section 1782 case law to substantiate its flawed assertion that the Order should be reconsidered because CEL did not provide notice to it at the time the Application was filed with the Court. Instead, NPC cites to pre-Intel case law and to a recent case that does not deal with Section 1782.15 NPC fails to provide post-Intel case law to support its claim, because no such precedence exists. The Court should not reconsider its

13 14

15

See generally 28 U.S.C. § 1782(a). See In re Application Pursuant to 28 U.S.C. Section 1782 for an Order Permitting Christen Sveaas to Take Discovery from Dominique Levy, L & M Galleries and other nonparticipants for use in Actions Pending in the Norway, 249 F.R.D. 96, 108 (S.D.N.Y. 2008) (stating that the "claim that a defect in service warrants dismissal of the application simply has no basis in law or fact."). See NPC Memorandum at p. 10 (citing to pre-Íntel cases and a 2007 case that deals with letters rogatory, not Section 1782).

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Order when post-Intel case law and the plain language of the statute itself confirm that notice is not a requirement for court approval of a Section 1782 application.16 3. This Court's Order is valid because the Supreme Court's decision in Intel is applicable to this case and Section 1782 applies to private foreign arbitrations. NPC's assertion that Intel "is inapposite," is erroneous and undermines the very relevant findings of the U.S. Supreme Court with respect to Section 1782. In Intel, the U.S. Supreme Court not only identified several discretionary factors for courts to consider when reviewing applications, but it also clarified that a "tribunal," for the purposes of Section 1782, is a "firstinstance decisionmaker."17 The Pending Arbitration undeniably meets that definition, because the Tribunal is a first-instance decision-making body with respect to the dispute between CEL and NPC, thus qualifying as a "tribunal" for Section 1782 purposes. NPC relies on outdated and overruled circuit court law to assert that Section 1782 does not apply to private arbitrations. Both of the decisions NPC relies upon were made prior to the Supreme Court's examination and affirmation of Section 1782 in Intel.18 The Supreme Court's decision in Intel broadened the concept of "tribunal" from what some courts had previously interpreted, including those relied upon by NPC. The Supreme Court's interpretation of Section 1782 in Intel contradicts the interpretation and application asserted by NPC. Post-Intel case law indicates that Section 1782 can be used to
16

17 18

As a practical matter, no discovery requests have been formally made to NPC in this case. As envisioned by Section 1782, CEL first applied to this Court for leave to seek such discovery. Once granted, as here, the next step is for CEL to provide notice of the authorized discovery requests and order to NPC. This process is currently being executed by the parties. Intel, 542 U.S. at 258. See Nat'l Broad. Co., Inc. v. Bear Stearns & Co., Inc., 165 F. 3d 184 (2d. Cir. 1999); Republic of Kazakhstan v. Biedermann, 168 F. 3d 880 (5th Cir. 1999) (limiting the definition of "tribunal" in Section 1782 to exclude private arbitrations before the Supreme Court's decision in Intel in 2004).

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aid a party in a private, foreign arbitration.19 The court in Roz Trading I found that the "reasoning" of "Nat'l Broad. Co., [and Republic of Kazakhstan was] materially impacted by Intel" and that the "reasoning in Intel demonstrates the structural and analytical flaws in the Second and Fifth Circuits' interpretations of § 1782(a)."20 In Hallmark, the court denied a motion for reconsideration on the grounds of the inapplicability of Section 1782 to private arbitrations and also rejected the pre-Intel reasoning of the Second and Fifth Circuits, finding that the "[Supreme] Court's general approach to Section 1782, as well as that statute's legislative history, makes clear that the statute is best read not to impose any restrictive definitional exclusions that would necessarily preclude assistance to all private arbitral bodies."21 In light of the Supreme Court's decision in Intel and its progeny, this Court should disregard the pre-Intel Second and Fifth Circuit decisions regarding the applicability of Section 1782 to private arbitrations. Moreover, regardless of the questionable value of these pre-Intel circuit court decisions in post-Intel jurisprudence, the Third Circuit has not addressed this issue, and this Court is not bound by non-Third Circuit decisions. 22 4. This Court properly exercised its discretion in granting CEL's Application. This Court properly weighed the Intel factors in granting CEL's Application. The Court concluded, as have other courts considering the issue, that the Application should be granted

19

20 21 22

In re Roz Trading Ltd., 469 F. Supp. 2d 1221, 1226-27 (N.D. Ga. 2006) ("Roz Trading I"); In re Application of Hallmark Capital Corp., 534 F. Supp. 2d 951, 954-55 (D. Minn. 2007). Roz Trading I, 469 F. Supp. 2d at 1226. Hallmark, 534 F. Supp. 2d at 954-55. See In re Oxus Gold PLC, Misc. No. 06-82-GEB 2007 WL 1037387 at *5 n.3 (D. N.J. Apr. 2, 2007) (explaining that "[t]he Court is unaware of-and the parties have not offered-any decision in this Circuit fully addressing the issue.").

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even though NPC is a party to the foreign proceeding.23 Because this Court properly weighed the discretionary Intel factors in granting CEL's Application, its Order will be upheld if it undergoes appellate review.24 Accordingly the Court should confirm its Order and deny NPC's Motion. 5. Neither the arbitration agreement nor the applicable arbitral rules prohibit CEL from seeking discovery through Section 1782. Contrary to NPC's allegations, CEL did not contract away its right to pursue discovery in the United States through Section 1782. Nothing in the arbitration agreement between CEL and NPC precludes or prohibits either party from pursuing discovery through formal external means such as Section 1782, and NPC does not cite to any agreement between the parties that evidences such an understanding. The only agreement the parties came to regarding future arbitral proceedings was that they would be governed by the UNCITRAL Arbitration Rules and Swiss procedural law. 25

23

24

25

See Infineon Tech. AG v. Green Power Tech, Ltd., 247 F.R.D. 1, 2005 WL 5887181 at *4 (D.D.C. 2005) (granting Section 1782 discovery because, despite the fact that the party from whom discovery was sought was a participant in the foreign proceeding, "the final three factors of the Intel test all counsel in favor of the discovery."); see also In the Matter of the Application of the Proctor & Gamble Co., 334 F. Supp. 2d 1112, 1114-15 (E.D. Wis. 2004) (denying a request for a stay pending appeal of the district court's decision to grant a Section 1782 application even when the party from whom discovery was sought was also a party to the international proceeding). See In the Matter of the Application of the Proctor & Gamble Co., 334 F. Supp. 2d 1112, 1117 (E.D. Wis. 2004) (stating that, upon appeal, a district court "decision to grant [a Section 1782] application will be reviewed for an abuse of discretion."). See Letter of M. Baker July 5, 2007, at P. 2 (attaching the relevant provisions of the TCA and stating "Section 7 of the TCA sets out the parties' agreement to resolve all Disputes between them arising out of or relating to the TCA by arbitration in accordance with the current UNCITRAL Arbitration Rules"), included with NPC Memorandum, Declaration of Andrew Price, Tab 4.

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The rules applicable to the Arbitration Proceeding do not preclude discovery pursuant to Section 1782. Specifically, the UNCITRAL Arbitration Rules contain no such prohibition.26 Similarly, Swiss procedural law contains no such restriction. While NPC asserts that Articles 184 and 185 of the 1991 Swiss Loi Fédérale Sur Le Droit International Privé ("SPIL") require the Tribunal's prior consent before a Section 1782 discovery application can be submitted to U.S. courts, that contention is erroneous. Article 184(1) SPIL provides that the arbitral tribunal has the authority to order production of documents from the parties and Article 185(2) SPIL explains that a party, with permission of the arbitral tribunal, or the tribunal itself, may seek legal assistance from state courts in order to enforce the tribunal's document production orders. These articles do not, as NPC contends, require tribunal authorization prior to proceeding with an application for discovery that is independent of and not stemming from an order of the arbitral tribunal. This principle has been confirmed by Dr. Gabrielle Nater-Bass, a well regarded expert within the Swiss arbitration community. Dr. Nater-Bass opined that "neither articles 184 and 185 SPIL, nor any other mandatory Swiss law provisions preclude U.S. pre-trial discoveries in aid of arbitration."27 Simply put, neither the arbitration agreement nor the applicable arbitral or procedural rules prevent CEL from seeking discovery through Section 1782. 6. The Tribunal rejected NPC's request to prejudge the admissibility of any discovery acquired through Section 1782. The Tribunal has acknowledged this Court's jurisdiction to determine the issues before it and refused to prejudge any evidence potentially obtained via Section 1782. NPC specifically
26

27

See In re Oxus Gold PLC, 2007 WL 1037387 at *5 (D.N.J. 2007) (affirming the issuance of a Section 1782 order for a discovery request made with respect to an arbitration governed by the UNCITRAL Arbitration Rules). See Statement of Gabrielle Nater-Bass, attached as Exhibit C (explaining the meaning of Articles 184 and 185 and asserting that no prior consent from the arbitral tribunal regarding Section 1782 applications is required under Swiss law).

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asked both that CEL be required to "immediately withdraw" its Application before this Court and that the Tribunal refuse to admit any evidence obtained via Section 1782.28 Importantly, the Tribunal rejected these requests. Instead, the Tribunal reiterated that "it is certainly up to the courts in [...] Delaware to decide whether Section 1782 applies to a foreign arbitration....and whether the measures sought...are admissible and should be granted."29 The Tribunal also rejected NPC's request to declare that "any documents or testimony that might be obtained by CEL through the Discovery Applications...may not be used in this arbitration," refusing to prejudge any potential evidence before its production.30 Instead, the Tribunal held that "all documents, including those that might be obtained through the [1782] process...will have to be produced according to the procedural timetable provided for in Procedural Order No. 2."31 It further noted that it "will also retain jurisdiction to admit or reject any documents which are irrelevant, unreasonably burdensome to the proceedings or in breach of the parties' rights."32 Thus, NPC's arguments about the Tribunal's reluctance to admit evidence obtained through Section 1782 are misplaced. 7. This Court's Order is appropriate, because the discovery CEL seeks through its 1782 Application is relevant and sufficiently narrow. In reviewing CEL's Application, this Court evaluated the Intel Factors, which include the breadth and scope of the subject discovery. In granting the Application, the Court determined that the requested discovery was not unduly burdensome. NPC seeks to have this Court revisit its determination, citing the Tribunal's views on the scope of discovery within the arbitral
28 29 30 31 32

Exhibit B at p. 15; see also Exhibit A at ¶ 1. Exhibit A at ¶ 22. Exhibit B at p. 16. Exhibit A at ¶ 31 (emphasis added). Exhibit A at ¶ 37.

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proceeding. The Tribunal's views on the scope of discovery are simply not relevant to this Court's determinations under Section 1782. As noted previously, the Tribunal has itself confirmed that it is up to this Court to decide the appropriateness of the discovery requests under Section 1782. CEL's discovery requests specifically target the information CEL needs to present its defenses and counter-claims in the Pending Arbitration. The Court should, therefore, reject NPC's invitation to revisit its prior decision concerning the propriety of CEL's requests. CONCLUSION This Court appropriately exercised its discretion in granting CEL's Application. NPC has provided the Court with no basis to reconsider or vacate that decision. Therefore, this Court should deny NPC's request to reconsider and vacate its July 18th Order. MORRIS, NICHOLS, ARSHT & TUNNELL LLP /s/ Donald E. Reid (#1058) Donald E. Reid (#1058) 1201 N. Market Street P. O. Box 1347 Wilmington, DE 19899-1347 (302) 658-9200 [email protected] Attorneys for Plaintiff OF COUNSEL: David M. Orta ARNOLD & PORTER LLP 555 Twelfth Street, NW Washington, DC 20004-1206 (202) 942-5667 [email protected]

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