Petrobras Successfully Defeats Discovery Use Request in Private Foreign Arbitration Proceeding

August 6, 2019

Cleary Gottlieb represented Petróleo Brasileiro S.A. (Petrobras) in a case of first impression, in which it successfully defeated an attempt by a foreign litigant to use 28 U.S.C. § 1782 to obtain copies of discovery produced by Petrobras in the U.S. securities class action against Petrobras in the U.S. District Court for the Southern District of New York for use by that litigant in an arbitration taking place in Brazil.

Petitioner Cornell University (Cornell) was a putative class member in the class-action lawsuit brought against Petrobras arising out of Operation Lava Jato. Its claim was dismissed early in the litigation because it was based on the purchase of securities in Brazil governed by a binding arbitration agreement. After bringing an arbitration in Brazil and while Petrobras’ settlement with the U. S. class was pending review by the U.S. Court of Appeals for the Second Circuit, Cornell brought a petition under 28 U.S.C. § 1782, seeking copies of all documents produced in the U.S. litigation. Section 1782 provides that the court of the district in which a person resides or is found may order production of documents for use in a foreign proceeding. Cornell argued that Petrobras was found in New York because it was defending a lawsuit involving the documents in New York and the documents were located in New York.

Judge Jed S. Rakoff denied the § 1782 request on the basis that Cornell’s request failed to meet two of three statutory requirements: that Petrobras “resides or is found in” the Southern District of New York and that the discovery was requested for use before a foreign or international tribunal within the meaning of § 1782. Judge Rakoff granted in part Cornell’s motion to unseal summary judgment documents filed under seal.

The court held that granting a § 1782 discovery request must, at minimum, comport with constitutional due process and that the statute’s “resides or is found in” language required analysis of personal jurisdiction to ensure that granting the request would do so. The court held that there was no general jurisdiction over Petrobras for the purpose of the § 1782 motion because it is incorporated in and maintains its principal place of business in Brazil and has few business contacts with New York. The court also held there was no specific jurisdiction over Petrobras regarding alleged misconduct that occurred entirely in Brazil in connection with the sale of securities on the Brazilian stock exchange. The court specifically rejected the argument that because Petrobras was being sued in New York on behalf of a class that at one time included Cornell, Petrobras was subject to jurisdiction in New York on a theory of pendent personal jurisdiction.

The court held that the private arbitration chamber facilitating the Brazilian arbitration was not a “foreign or international tribunal” within the meaning of § 1782. In so holding, the court sided with at least one other district court in New York (and differed from two others) in determining that the Second Circuit’s interpretation of § 1782 as set forth in NBC v. Bear Stearns, 165 F.3d 184, 191 (2d Cir. 1999), excluded private arbitral tribunals from the scope of § 1782. Judge Rakoff held that NBC remains good law in the wake of the Supreme Court’s decision in Intel Corp. v. Advanced Micro Devices Inc., 542 U.S. 241 (2004). NBC’s squarely applicable holding that the statutory term “foreign or international tribunal” does not include a private arbitral body controlled the outcome here.

Judge Rakoff limited Cornell’s relief to the unsealing of summary judgment papers previously filed under seal to the extent they no longer included confidential information.