Application v. Deutsche Bank Sec. Inc. (In re)

• Decision Date: 08 July 2020
• Docket Number: No. 19-781,August Term 2019,19-781
• Citation: 965 F.3d 96
• Court: U.S. Court of Appeals — Second Circuit
• Parties: IN RE: Application and Petition of Hanwei GUO for an Order to take Discovery for Use in a Foreign Proceeding Pursuant to 28 U.S.C. 1782 Hanwei Guo, Petitioner-Appellant, v. Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC, Respondents-Appellees, China Publishing Corporation, Ocean Interactive (Beijing) Technology Co., Ltd., Tencent Music (Beijing) Co., Ltd., Ocean Interactive (Beijing) Culture Co., Ltd., Tencent Music Entertainment Group, Aka China Music Corporation, Intervenors-Appellees.

965 F.3d 96

IN RE: Application and Petition of Hanwei GUO for an Order to take Discovery for Use in a Foreign Proceeding Pursuant to 28 U.S.C. 1782Hanwei Guo, Petitioner-Appellant,

v. Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC, Respondents-Appellees,China Publishing Corporation, Ocean Interactive (Beijing) Technology Co., Ltd., Tencent Music (Beijing) Co., Ltd., Ocean Interactive (Beijing) Culture Co., Ltd., Tencent Music Entertainment Group, Aka China Music Corporation, Intervenors-Appellees.

No. 19-781

August Term 2019

United States Court of Appeals, Second Circuit.

Argued: February 28, 2020

Decided: July 8, 2020

Amended: July 9, 2020

For Petitioner-Appellant: Renita Sharma, Peter E. Calamari, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY.

For Intervenors-Appellees: Frances E. Bivens, Jonathan K. Chang, Peter M. Bozzo, Davis Polk & Wardwell, LLP, New York, NY.

For Respondents-Appellees: Pamela A. Miller, Allen W. Burton, Gerard A. Savaresse, O'Melveny & Myers LLP, New York, NY.

Before: Livingston and Park, Circuit Judges, and Underhill, District Judge.¹

Debra Ann Livingston, Circuit Judge:

28 U.S.C. § 1782(a) authorizes federal courts to compel the production of materials "for use in a proceeding in a foreign or international tribunal" upon "the application of any interested person." In National Broadcasting Co. v. Bear Stearns & Co. , 165 F.3d 184 (2d Cir. 1999) (" NBC "), this Court held that the phrase "foreign or international tribunal" does not encompass "arbitral bod[ies] established by private parties," id. at 191. Petitioner-Appellant Hanwei Guo ("Guo") asks us to revisit this holding in light of a subsequent decision of the Supreme Court. See Intel Corp. v. Advanced Micro Devices, Inc. , 542 U.S. 241, 124 S.Ct. 2466, 159 L.Ed.2d 355 (2004) (" Intel "). Because nothing in the Supreme Court's Intel decision alters our prior conclusion in NBC that § 1782(a) does not extend to private international commercial arbitrations, and because the arbitration at issue here is a non-covered, private, international commercial arbitration, we AFFIRM the district court's denial of the petition.

BACKGROUND

I.

From 2012 to 2013, Petitioner-Appellant Hanwei Guo invested nearly CNY 180 million (approximately $26 million) in companies known as Ocean Technology, Ocean Music, and Ocean Culture ("Ocean Entities"), founded by a music executive and lawyer named Guomin Xie ("Xie"). These businesses operated in the Chinese music streaming market. Xie was the head of the Ocean Entities and China Music Corporation, a holding company allegedly created to facilitate the Ocean Entities’ access to foreign equity markets. Through a series of transactions that Guo asserts were misleading, extortionate, and fraudulent, Guo sold his shares in the Ocean Entities for less than they were allegedly worth. Eventually, following a series of mergers, Ocean Music became part of Tencent Music, by some metrics one of the largest music streaming services in the world.

In September 2018, shortly before Tencent Music conducted its American IPO and pursuant to agreements among Guo, Xie, and others, Guo initiated arbitration against Xie, Tencent Music, and several other entities before the China International Economic and Trade Arbitration Commission ("CIETAC"). Guo claimed that Xie and the other respondents had defrauded him and that he was entitled to be paid compensation and to have his equity stake restored. Subsequently, at least one respondent filed counterclaims, and the parties selected an arbitral panel in April 2019. The matter remains pending, with a hearing before the arbitral panel scheduled to proceed on July 21, 2020.

II.

According to declarations submitted by the parties, CIETAC was established by the People's Republic of China in 1954 as part of the China Council for the Promotion of International Trade ("CCPIT"). CIETAC's administrative leadership is appointed by the CCPIT, although the arbitrators who preside over any given case are selected by the parties from a list that is compiled by CIETAC without CCPIT involvement. Potential arbitrators are not required to have any ties to the Chinese government or to undergo screening by any entity other than CIETAC, although Chinese arbitration law does set certain minimum qualifications for arbitrators. CIETAC arbitrations are confidential both during the proceedings and after their completion. Both CIETAC and CCPIT receive at least some funding from the Chinese government.

CIETAC's jurisdiction is restricted to disputes between private parties who have elected CIETAC arbitration through contractual agreement, as well as certain contractual disputes arising between investors and Chinese governmental entities. CIETAC has promulgated two different sets of rules to govern these two varieties of arbitration. This case, as a dispute among private parties, is governed by the rules set out by CIETAC for private arbitration. Under this ruleset, CIETAC's jurisdiction over any particular matter depends entirely on the agreement of the parties.

In any given arbitration, CIETAC operates independently of the Chinese government, with CIETAC arbitrators having the power to issue awards that Chinese law will recognize as "final and binding." Joint App'x 683. Chinese arbitration law, however, provides for certain circumstances in which awards may be set aside as contrary to Chinese law, such as situations involving fraud or bribery of arbitrators or instances in which there was an initial lack of an agreement to arbitrate.

As part of the arbitration process, CIETAC rules provide for discovery, including a mechanism by which the arbitration panel may order parties to produce evidence.

III.

In December 2018, Guo filed this petition for discovery pursuant to 28 U.S.C. § 1782(a) in the United States District Court for the Southern District of New York (Furman, J. ). Guo sought discovery from four investment banks, the Respondents-Appellees here, related to their work as underwriters in the Tencent Music IPO.² Guo alleged that he intended to use the documents in his pending CIETAC arbitration against Xie and the Ocean Entities. Intervenors-Appellees China Publishing Corporation, Ocean Interactive (Beijing) Technology Co., Ltd., Tencent Music (Beijing) Co., Ltd., Ocean Interactive (Beijing) Culture Co., Ltd., and Tencent Music Entertainment Group, A.K.A. China Music Corporation intervened below to oppose the petition. The district court denied Guo's application on February 25, 2019. In re Application of Hanwei Guo for an Order to Take Discovery for Use in a Foreign Proceeding Pursuant to 28 U.S.C. § 1782 , No. 18-MC-561 (JMF), 2019 WL 917076, at *3 (S.D.N.Y. Feb. 25, 2019). The court's determination was based on its conclusions that (1) NBC remained good law in the wake of the Supreme Court's decision in Intel , such that the district court was bound by the Second Circuit's prior determination that § 1782(a) does not apply to private arbitration; and (2) CIETAC was "closer to a private arbitral body than it is to a ‘governmental ... tribunal[ ]’ or ‘other state-sponsored adjudicatory bod[y],’ " such that Guo's application was foreclosed by NBC . Id. at *2–3 (quoting NBC , 165 F.3d at 190 ).

Guo timely appealed, challenging both aspects of the district court's holding. On appeal, Guo contends that private arbitrations are within the scope of § 1782(a) and that, even if they were not, the CIETAC arbitration qualifies as an arbitration under a state-sponsored adjudicatory body.

DISCUSSION

The two questions on appeal are whether private international commercial arbitrations are proceedings for which § 1782 may be invoked and, if not, whether CIETAC arbitration is a private arbitration and therefore outside the scope of § 1782.

I.

28 U.S.C. § 1782 provides for "federal-court assistance in gathering evidence for use in foreign tribunals." Intel , 542 U.S. at 247, 124 S.Ct. 2466. Upon the "application of any interested person," a district court may, in its discretion, "order [a person] 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." 28 U.S.C. § 1782(a).

The statute imposes several mandatory requirements for a § 1782 application, including that "(1) the person from whom discovery is sought resides (or is found) in the district of the district court to which the application is made, (2) the discovery is for use in a foreign proceeding before a foreign [or international] tribunal, and (3) the application is made by a foreign or international tribunal or any interested person." Mees v. Buiter , 793 F.3d 291, 297 (2d Cir. 2015) (quoting Brandi-Dohrn v. IKB Deutsche Industriebank AG , 673 F.3d 76, 80 (2d Cir. 2012) ).³ This Court reviews the district court's ruling "that a petition satisfies [§] 1782's jurisdictional [i.e. statutory] requirements" de novo . Kiobel by Samkalden v. Cravath, Swaine & Moore LLP , 895 F.3d 238, 243 (2d Cir. 2018). If the statutory preconditions are met, district courts exercise discretion to determine whether and to what extent the requested discovery should be permitted, guided by a set of factors outlined by the Supreme Court in Intel . See Mees , 793 F.3d at 297–98 (citing Intel , 542 U.S. at 264–65, 124 S.Ct. 2466 ).

This Court has previously analyzed the contours of the statute's "foreign or international tribunal" requirement with respect to arbitration. In NBC , we considered whether a "private commercial arbitration administered by the International Chamber of Commerce (‘ICC’), a private organization based in Paris, France" was a "proceeding in a foreign or international tribunal" for purposes of § 1782(a). 165 F.3d at 186. We held that it was not. Id. at 191.

Our decision in NBC concluded that: (1) the statutory text, namely the phrase "foreign or...