In an unpublished opinion, the United States Court of Appeals for the Fifth Circuit held that section 1782 does not apply for a discovery motion for use in a private international arbitration. In El Paso Corporation v. La Comision Ejecutiva, (No. 08-20771) (5th Cir. Aug. 6, 2009), La Comision Ejecutiva Hidroelectrica Del Rio Lempa (“CEL”) is a state-owned utility company in El Salvador and Nejapa Power Company (“NPC”) is a utility company related to El Paso Corporation (“El Paso”), an energy corporation based in Houston, Texas. Currently, CEL and NPC are arbitrating a contract dispute in Geneva, Switzerland, under the arbitration rules of the United Nations Commission on International Trade Law (“UNCITRAL”), El Salvadoran substantive law, and Swiss procedural law. CEL sued to obtain discovery from El Paso, to use it in its international private arbitration proceeding with NPC, pursuant to 28 U.S.C. § 1782 (Assistance to Foreign and International Tribunals and to Litigants Before such Tribunals). The Texas District Court denied CEL’s request for discovery and held that § 1782 did not apply to discovery for use in a private international arbitration. The court also held that, even if it did have the authority under § 1782, “it would not [grant the application], out of respect for the efficient administration of the Swiss arbitration.” The court granted the Rule 60(b) motion for relief from a judgment or order, vacated its ex parte order, and quashed the outstanding discovery requests. CEL now appeals. The Fifth Circuit first considered El Paso’s argument that CEL’s appeal was moot. Because the evidentiary hearing for the arbitration has concluded and the panel has closed the evidence, El Paso argues that “there is no longer a live case or controversy.” The court noted that under UNCITRAL arbitration rules, an arbitral tribunal may reopen the hearings at any time before the award is made. So, if CEL discovered new evidence with a § 1782 application, the court reasoned, that evidence could still be considered if the tribunal reopen the evidentiary hearing. The court concluded that a live controversy still exists and proceeded to address the merits of the appeal. Next, the Fifth Circuit reviewed the granting of the Rule 60(b) motion. The court stated that “[s]uch a motion can be granted for a number of reasons, including mistake, inadvertence, surprise, or excusable neglect” and “any other reason that justifies relief. The law of this circuit permits a trial judge, in his discretion, to reopen a judgment on the basis of an error of law.” The court noted that in Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999), the court held that “a ‘tribunal’ within the meaning of § 1782 did not include a private international arbitral tribunal, and thus § 1782 did not apply to discovery sought for use in such a tribunal.” CEL argued that Biedermann is no longer controlling in light of the Supreme Court’s decision in Intel Corp. v. Advanced Micro Devices, Inc, 542 U.S. 241, 258 (2004). However, the Fifth Circuit was not persuaded by CEL’s argument. The court concluded that the issue of whether a private international arbitration tribunal qualifies as a “tribunal” under § 1782 was not before the U.S. Supreme Court in Intel. In addition, the court, citing Republic of Kazakhstan, explained that “empowering parties in international arbitrations to seek ancillary discovery through federal courts could destroy arbitration’s principal advantage as a speedy, economical, and effective means of dispute resolution if the parties succumb to fighting over burdensome discovery requests far from the place of arbitration.” Accordingly, the court denied El Paso’s motion to dismiss the appeal as moot and affirmed the district court’s grant of the Rule 60(b) motion. Technorati Tags: arbitration, ADR, law, Fifth Circuit, international arbitration, discovery

Part III: Background and Procedural History of the Stolt-Nielsen Case By Philip J. Loree Jr. Introduction Back when the buzz about Stolt-Nielsen focused on how the court breathed new life into the “manifest disregard of the law” standard, the facts of the case were not nearly as important as its discussion of the law. Ordinarily, though, the practice of law is the practice of facts, and as respects the question whether the Second Circuit’s holding was consistent with the Federal Arbitration Act, the facts and procedural history of the case are extremely important, just as they were in Bazzle. In this Part III (See Part I and Part II) we delve into the background and procedural history of Stolt-Nielsen to: (a) show how it differs from that of Bazzle; and (b) help define the key issues that the Supreme Court will face. We also briefly note those issues, setting the background for Part IV, which will discuss and critically analyze them. Stolt-Nielsen: Background and Procedural History The background and procedural posture of Stolt-Nielsen is very different from that of Bazzle. Unlike Bazzle, Stolt-Nielsen: (a) is venued in federal court; (b) involves international maritime contracts, not domestic consumer ones; (c) concerns federal maritime and New York state law, rather than South Carolina arbitration law; (d) features a reasoned, “Class Construction” arbitration award concluding that the pertinent arbitration agreements were silent on class arbitration; and (e) presents no dispute about whether the arbitration agreements are in fact silent on class relief, because the parties are in agreement on that point. Let’s have a look at the pertinent facts and Second Circuit rulings. AnimalFeeds alleged that Stolt-Nielsen, S.A., Stolt-Nielsen Transportation Group Ltd., Odfjell ASA, Odfjell Seachem AS, Odfjell USA, Inc., Jo Tankers, BV, Jo Tankers, Inc. and Tokyo Marine Co. Ltd. (collectively “Stolt-Nielsen”) are engaged in a “global conspiracy to restrain competition in the world market for parcel tanker shipping services in violation of federal antitrust laws.” AnimalFeeds brought an action in the United States District Court for the Eastern District of Pennsylvania, which was subsequently transferred to the District of Connecticut pursuant to an order of the Judicial Panel on Multidistrict Litigation, which consolidated “actions shar[ing] factual questions relating to the existence, scope and effect of an alleged conspiracy to fix the price of international shipments of liquid chemicals in the United States.” Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Co., 548 F.3d 85, 87-88 (2d Cir. 2008), petition for cert. granted June 15, 2009 (No. 08-1198). Stolt-Nielsen moved to compel arbitration because the parties’ transactions were governed by agreements containing arbitration clauses. In light of Bazzle the parties agreed that the determination whether the agreements permitted or precluded class arbitration would be made pursuant to Rules 3 through 7 of the American Arbitration Association’s Supplementary Rules for Class Arbitrations (as effective October 8, 2003) (the “Class Arbitration Rules”) The AAA promulgated these rules in response to the Supreme Court’s plurality decision in Bazzle. They require arbitrators to determine “in a reasoned partial final award on the construction of the arbitration clause, whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class. . . .” They also required the arbitrators to stay the proceedings for at least 30 days “to permit any party to move a court of competent jurisdiction to confirm or to vacate the Class Construction Award. . . .” American Arbitration Association Supplementary Rules for Class Arbitrations, Rule 3 (Eff. October 8, 2003). Pursuant to the parties’ agreement concerning class arbitration, AnimalFeeds and several co-plaintiffs demanded arbitration on behalf of a class consisting of “[a]ll direct purchasers of parcel-tanker transportation services globally for bulk liquid chemicals, edible oils, acids, and other specialty liquids from [Stolt-Nielsen] at any time during the period from August 1, 1998, to November 30, 2002.” 548 F.3d at 87 (citation and quotation omitted) The parties selected an arbitration panel and submitted the class arbitration issue for determination. The District Court and Second Circuit opinions do not explain whether Stolt-Nielsen reserved its rights to argue that: (a) the interpretive question submitted to the arbitrators was one of arbitrability for the court to decide; or, at least, (b) in the event the panel ruled the contracts were silent, the court must decide whether the contracts’ silence meant that class action was permitted or precluded. But Stolt-Nielsen appears to have reserved its rights to raise these arbitrability questions. The agreement to submit the interpretation of the arbitration agreements to arbitration contained the following proviso: [N]either the fact of this Agreement [which included the parties’ submission to arbitration] nor any of its terms may be used to support or oppose any argument in favor of a class action arbitration . . . and may not be relied upon by the [p]arties, any arbitration panel, any court, or any other tribunal for such purposes. (Stolt-Nielsen’s Petition for Certiorari filed March 26, 2009 (copy here), at 6 n.2.) The arbitration agreements between the Stolt-Nielsen petitioners, AnimalFeeds and the putative class members were contained in charter-party agreements, each of which was a form contract based on one of two forms – the Vegoilvoy charter party and the Asbatankvoy charter-party. It is undisputed that the arbitration agreements in both forms “are silent as to whether arbitration is permissible on behalf of a class of contracting parties.” 548 F.3d at 87. The Vegoilvoy charter-party arbitration agreements between Stolt-Nielsen and AnimalFeeds, provide: Any dispute arising from the making, performance or termination of this Charter Party shall be settled in New York, Owner and Charterer each appointing an arbitrator, who shall be a merchant, broker or individual experienced in the shipping business; the two thus chosen, if they cannot agree, shall nominate a third arbitrator who shall be an Admiralty lawyer. Such arbitration shall be conducted in conformity with the provisions and procedure of the United States Arbitration Act, and a judgment of the Court shall be entered upon any award made by said arbitrator. Nothing in this clause shall be […]

The Wall Street Journal reported yesterday that Bank of America will no longer require mandatory arbitration on customers’ credit card disputes (hat tip to our blog contributor Glen M. Wilkerson). Find Bank of America’s letter to Congressman Dennis Kucinich here and press release here. Back in July, JPMorgan Chase suspended mandatory arbitration as well. In case you missed the recent developments in consumer arbitration, here are some of our posts: Testimony from the U.S. Congress Hearing on the Misuse of Arbitration to Collect Consumer Debts (July 24) The American Arbitration Association Confirms Today That It Supends Arbitration of Consumer Debt Collection (July 23) National Arbitration Forum Settles with Minnesota’s Attorney General (July 20) U.S. Congress Hearing on the Misuse of Arbitration to Collect Consumer Debts (July 20) National Arbitration Forum Sued by the Minnesota Attorney General (July 16) Law Journal Article: “Civil Jury Trials R.I.P.? Can it Actually Happen in America?” and the Federal Arbitration Act (July 4) U.S. Dispute Resolution Legislation: Update (June 23) National Arbitration Forum’s Response to NPR Arbitration Story (June 17) Employment and Consumer Arbitration: NPR Article (June 10) Technorati Tags: arbitration, ADR, law, consumer arbitration

By Peter S. Vogel After receiving a Temporary Restraining Order (“TRO”) the Judge ordered a mediation conference between the plaintiff software licensor and their customer in Alabama. The software in dispute was a specialized tax website that the plaintiff had spent many years developing, and after defendant abruptly terminated the license the plaintiff was shocked that the defendant had a competing website providing specialized tax services somewhat a kin to the plaintiff. So the trial judge had no trouble issuing a TRO. As oftentimes happens the Judge ordered me to mediate the case since I was a programmer and have a masters in computer science. My law practice of more than 30 years has always been limited to representing buyers and sellers of IT and Internet services. Step One – In Depth Review of Plaintiff’s Technology Since the defendant was in Alabama I arranged a meeting with the plaintiff licensor’s technical staff at my offices a few days before the mediation conference. Plaintiff’s IT staff demonstrated the construction and schema for their data base, and how the website processed data. This exercise lasted a couple of hours, but provided good insight about their IT solution and web business. Step Two – Review Defendant’s Technology When the defendant arrived from Alabama for the mediation conference I immediately requested that they demonstrate their website, database construction, and schema. It did not take a lot to determine that the database structures and implementation were not related to the plaintiff’s at all. Further that there were no clues that defendant developed their systems with the aid of plaintiff’s technology. Settled at the Mediation The case settled immediately. As a neutral observer of the databases and websites I was certain that the plaintiff’s and defendant’s tax websites were not related. Although on the surface it seemed obvious to most that how else would the developed their website were it not for access and use of plaintiff’s software. Without question my IT experiences saved both parties from expensive litigation, and allowed them to move on. Peter S. Vogel is a trial partner at Gardere Wynne Sewell LLP where he is Chair of the Electronic Discovery Group and Co-Chair of the Technology Industry Team. Before practicing law he worked as a computer programmer, received a Masters in Computer Science, and taught graduate courses in information systems. For 12 years he served as the founding Chair of the Texas Supreme Court on Judicial Information Technology which is responsible for helping automate the Texas court system and putting Internet on the desktops of all 3,200 judges. Peter has taught courses on the Law of eCommerce at the SMU Dedman School of Law since 2000. Many of Peter’s topics are discussed on his blog www.vogelitlawblog.com.