As I write this article, twenty-one container vessels are sitting at anchor at the ports of Long Beach and Los Angeles. Before Covid became widespread one year ago, there were none. This backlog is an inevitable result of Covid’s devastation on terminal labor. Filling skilled labor positions, such as heavy crane operators, on a temporary, short-term basis is impossible. The problem is unlikely to be resolved soon. U.S. terminals expect to see increased wait times as the bottle neck in the Suez Canal cleared with the refloating of the EVER GIVEN.
The problems with delay are not just the costs of vessels sitting at anchor unable to fulfill their delivery obligations. Delay also creates opportunities for other parties to conduct discovery on vessels. U.S. law permits claimants or potential claimants to obtain a court order allowing discovery on vessels, even where the claim is expected to be litigated outside the jurisdiction.
Federal Rule of Civil Procedure 27 allows interested parties to obtain discovery related to claims and potential claims cognizable in any court of the United States, including U.S. courts outside the jurisdiction where the discovery is sought. Similarly, 28 U.S.C. § 1782 allows discovery into matters proceeding or expected to proceed in foreign or international tribunals. Often, especially in the context of a vessel casualty event, interested parties file Rule 27 and § 1782 applications concurrently. Consider a voyage from Manila to Long Beach, California where a large number of containers spill overboard. The bills of lading may designate the Southern District of New York as the exclusive forum where cargo claims may be litigated, rendering Rule 27 applicable. The charter party, on the other hand, may require all disputes to proceed before German courts, triggering § 1782.
In the context of a commercial shipping casualty, Rule 27 and § 1782 applications often are filed by emergency or ex parte application under the precept that a vessel’s inevitable departure from U.S. waters on long voyage over the globe will render the discovery forever lost. The vessel likely will not return to U.S. waters for months or years, witness recollections will deteriorate with time, crew will be replaced, vessel equipment will be repaired, etcetera, wiping out any chance of reconstructing the incident in any meaningful way for use in the prosecution and defense of claims.
Discharge delays provide parties more time to evaluate their options, fashion Rule 27 and § 1782 applications, and meet the statutory notice requirements to adverse parties. If potential claims are anticipated, it is recommended that the Club and correspondent be given notice as soon as possible so they can develop a strategy to handle the claims and potential delay in advance.
I. Rule 27 Discovery
To obtain discovery under Rule 27, the petitioner must (1) show that it expects to be a party to an action cognizable in any U.S. court, but the action cannot be brought presently, (2) set forth the subject matter of the expected action and the petitioner’s interest in it, (3) present facts the petitioner seeks to establish and its reasons for needing testimony at this time, (4) identify the expected adverse parties, and (5) identify the witnesses to be examined and the expected substance of their testimony. Fed. R. Civ. P. 27; see, Petition of Campania Chilena de Navegacion, 2004 AMC 443 (E.D.N.Y. Feb. 6, 2004).
Importantly, the petitioner does not have to prove with absolute certainty that the claim will proceed in a U.S. court. See e.g. Penn Mut. Life Ins. Co. v. United States, 68 F.3d 1371, 1374 (D.C.Cir.1995). In at least one case, the federal district court granted a Rule 27 petition even where a foreign arbitration clause appeared to govern the dispute (although the clause’s validity was the subject of some dispute). See Deiulemar Compania Di Navigazione S.p.A. v. M/V Allegra, 198 F.3d 473, 481 (4th Cir. 1999).
Courts have been particularly receptive to pre-suit discovery under Rule 27 in the context of international shipping because the discovery sought could be lost once the vessel leaves U.S. waters. See, Deiulemar Compania Di Navigazione S.p.A. v. M/V Allegra, 198 F.3d 473 (4th Cir. 1999); Petition of Raffles Shipping Int’l Pte Ltd., No. 10 Civ. 0693, 2010 WL 81920 (Mar. 4, 2010); Petition of Campania Chilena de Navegacion, No. 03 Civ. 5382, 2004 WL 1084243 (E.D.N.Y. Feb. 6, 2004). The policy underpinning the maritime cases where courts have ordered Rule 27 discovery involves potentially lost and unobtainable discovery due to the peripatetic nature of ocean-going vessels.
The scope of the discovery under Rule 27 often is broad, and may include depositions of master and crew, survey and inspection of the vessel and her gear, and disclosure of documents such as vessel logs and maintenance records. It cannot be overstated that Rule 27’s statutory requirements demand specificity in describing the discovery sought to prevent wholesale fishing expeditions for unknown evidence. Often, the vessel owner will dispute the scope of the intended discovery.
The owner also may oppose a Rule 27 petition as an impermissible effort to by-pass the discovery rules of the forum where the litigation is expected to occur. The court where the claim will proceed on the merits should referee the discovery. Disputes involving the scope of depositions, document production, and inspections inevitably will arise, and a court without a role in ultimately resolving the claim should not have authority to rule on these deciding issues. The vessel owner may make some assurance that any documentary and electronic data, such as the deck log book, engine log book, engine alarm logger, bridge bell book, etc. will be preserved as a matter of course, and should be subject to production under the forum’s discovery rules. Thus, the countervailing policy to oppose a Rule 27 petition is deference to the rules of the forum where the dispute will be litigated.
II. § 1782 Discovery
A § 1782 petitioner must satisfy three elements: (1) the persons from whom discovery is sought resides or is found in the judicial district; (2) the petitioner is an interested party in the foreign proceeding; and (3) the discovery is for use in the foreign or international tribunal. Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 256 (2004). The foreign proceedings need not be currently pending, but their likelihood must be more than speculative. See e.g. Okubo v. Reynolds (In re Letters Rogatory from the Tokyo Dist. Prosecutor’s Office), 16 F.3d 1016, 1019 (9th Cir. 1994). There is a split among U.S. federal courts with respect to whether foreign arbitrations constitute “foreign tribunals” under § 1782. Compare In re Dubey, 949 F. Supp. 2d 990, 992 (C.D. Cal. 2013) (arbitration not a foreign tribunal), with Abdul Latif Jameel Transp. Co. v. FedEx Corp. (In re Application to Obtain Discovery for Use in Foreign Proceedings), 939 F.3d 710, 723 (6th Cir. 2019) (foreign arbitration qualifies as foreign tribunal).
Once a petitioner satisfies the three statutory requirements, the district court has discretion to grant the petition. Intel Corp., 542 U.S. at 264. Discretionary factors to consider include, (a) whether the person from whom discovery is sought is a participant in the foreign proceeding; (b) the nature and character of the foreign proceeding, and whether the foreign court is receptive to judicial assistance from the United States; (c) whether the discovery request is an attempt to avoid foreign restrictions on gathering evidence; and (d) whether the discovery request is “unduly intrusive or burdensome.” Id. at 264–66.
While an argument may be advanced that the vessel owner is not “found” in the district merely by its vessel calling in the jurisdiction, there is no express requirement that a company be incorporated or headquartered in the jurisdiction to obtain discovery under § 1782. The presence of the vessel and her Master likely is enough. Typically, disputes surrounding § 1782 petitions in the maritime context involve the discretionary factors, particularly (c) foreign restrictions on evidence gathering and (d) unnecessary burdens resulting from the discovery.
With respect to foreign restrictions on evidence gathering, the same forum deference considerations under Rule 27 apply. This factor requires a careful analysis, especially in the context of foreign arbitrations: the panel likely will not have authority to order the discovery, but there may be avenues for parties to an arbitration to obtain discovery from the courts in the jurisdiction where the arbitration is pending. For example, the United Kingdom Arbitration Act 1996 permits parties to an arbitration to apply to the English High Court to issue a witness summons to appear to give testimony to the arbitrator. On the one hand, the discovery sought may not be foreclosed in the foreign tribunal, but, on the other hand, the fact that a court must oversee the evidence gathering implies there is some level of restriction on obtaining it.
With respect to whether the discovery causes unnecessary burdens, the obvious argument for vessel owners is the discovery will result in unnecessary delays, which, in the context of commercial shipping, will result in exorbitant financial burdens. This argument may be less persuasive in light of the discharge delays noted above. On the opposite side of the coin, vessel owners may have an argument that the risk of Covid exposure from shore-based attorneys and surveyors creates an unnecessary burden such that this factor weighs in favor of denying the application.
Emergency discovery efforts directed at vessels sitting at anchor will continue to increase. Rule 27 and § 1782 provide wide latitude to potential claimants to seek discovery on vessels in U.S. waters, independent of the forum or international tribunal where the claim might be litigated. Thus, the importance of notifying the Club and correspondent of an anticipated claim immediately cannot be overemphasized. The sooner the Club and correspondent become aware of an expected claim, the sooner they can develop a response plan.
Thomas Fedeli | Partner
Cox Wootton Lerner Griffin & Hansen