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In re Campania Chilena De Navegacion

United States District Court, Eastern District of New York

February 6, 2004


The opinion of the court was delivered by: Pollak, Magistrate J.


On October 24, 2003, petitioner Compania Chilena De Navegacion Interoceanica S.A. ("Compania Chilena") filed a petition for an Order to preserve evidence under Federal Rule of Civil Procedure 27 or, in the alternative, to preserve testimony for use in foreign proceedings that were then pending in Ecuador, pursuant to 28 U.S.C. § 1782. The matter was referred to the undersigned for decision.


Petitioner alleges that on September 11, 2003, there was a fire in the engine room of the M/V CCNI AYSEN which caused damage to the engine room and disrupted the operation of the vessel. At the time of the fire, the vessel was under charter to the petitioner through a contract with the respondent, SBT Shipping Company, Limited.

Prior to the filing of this petition on September 15, 2003, petitioner had commenced an action in Ecuador, seeking a court-ordered survey and inspection of the vessel, along with a request for the production of documents and for depositions of various crew members.

On September 16, 2003, the judge in the proceeding in Ecuador appointed a surveyor and ordered that the deposition of the captain of the vessel be taken. Thereafter, depositions were ordered to be taken of the electrician, the chief engineer, and the third engineering officer. Also ordered in the Ecuadorian proceeding was the production of an engine tube believed to be involved in the fire. Although some documents were produced and an inspection was had in compliance with the Ecuadorian court's order, the engine tube was sent back to Germany. Moreover, although petitioner was not able to take depositions of the crew members, certain witnesses were interviewed by the authorities.

While the litigation was pending before the Ecuadorian court, there were other proceedings commenced before the harbormaster in Guayaquil. The harbormaster also requested documents and witnesses. At the same time, a criminal investigation by the District Attorney's Office in Guayaquil was also apparently commenced in which certain individuals were ordered to appear to give testimony.

While these foreign proceedings were pending, and despite orders to provide evidence, the vessel left Ecuador on October 15, 2003 on its way to the United States. It was expected to arrive on October 28, 2003 and to remain here for less than 24 hours.

Anticipating that it may be subject to litigation in the United States as a result of the delay in the delivery of the cargo caused by the fire, Compania Chilena brought this petition in an effort to preserve testimony and evidence while the vessel and crew were in the United States.


As an initial matter, this Court has authority to hear and decide these discovery matters as non-dispositive matters under 28 U.S.C. § 636(b)(1)(A), where "a judge may designate a magistrate [magistrate judge] to hear and determine any pretrial matter pending before the court." See Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir.1990) (noting that "[m]atters concerning discovery generally are considered `nondispositive" ' and thus, a magistrate judge's orders regarding discovery issues are reviewed under the " `clearly erroneous or contrary to law' standard" (quoting 28 U.S.C. § 636(b)(1)(A))).

A. Rule 27 of the Federal Rule of Civil Procedure

Rule 27 of the Federal Rules of Civil Procedure provides a mechanism for perpetuating testimony before trial. The Rule states in relevant part: "A person who desires to perpetuate testimony regarding any matter that may be cognizable in any court of the United States may file a verified petition in the United States district court in the district of the residence of any expected adverse party." Fed.R.Civ.P. 27. It is within the Court's discretion to grant such discovery under certain circumstances. See In The Matter of the Application of Deiulemar Compagnia de Navegazione S.P.A. v. Pacific Eternity, S.A., 198 F.3d 473, 477 (4th Cir.1999) (citing Shore v. Acands, Inc., 644 F.2d 386, 388 (5th Cir.1981); Ash v. Cort, 512 F.2d 909, 912 (3rd Cir.1975), and noting that "[w]e review the district court's grant of a Rule 27 petition for an abuse of discretion").

In order to obtain discovery under this rule, the law provides that petitioner must show the following elements: (1) that it expects to be a party to an action that may be cognizable in any court of the United States but the action is unable to be brought presently; (2) it must set forth the subject matter of the expected action and the petitioner's interest in such an action; (3) it must present facts which the petitioner seeks to establish through the proposed testimony and the reasons for desiring to perpetuate that testimony at this time; (4) it must provide the names or description of the expected adverse parties; and (5) the names and addresses of the witnesses to be examined and the substance of the testimony petitioner expects to obtain from those witnesses. Fed.R.Civ.P. 27(a)(1).

A court may issue an order under Rule 27 "if it is satisfied that a failure or a delay of justice may thereby be prevented." Messeller v. United States, 158 F.2d 380, 382 (2d Cir.1946); see Fed. R. Civ P. 27(a)(3). The Rule has been held to apply in admiralty cases. See Messeller v. United States, 158 F.2d at 382; see also In the Matter of Deiulemar Compagnia de Navegazione S.P.A. v. Pacific Eternity, S.A., 198 F.3d at 479.

Here, petitioner has identified the potential adverse parties-namely, the owners of the cargo who had shipped their items on board the vessel and who may have potential claims against petitioner for delay. Petitioner has also identified the witnesses and general subject matter of the testimony. These are the crew members who were on board the vessel at the time of the fire, who could testify as to the potential cause of the fire, any repairs made to the vessel, and possibly damages as well. As to the nature of the potential action or anticipated litigation, petitioner has indicated its concern that actions will be commenced relating to delay and possible cargo damage.

In opposing the issuance of such an order, respondent argues that the discovery requested by the petitioner in this case is simply a way to avoid the requirements of an arbitration clause under which both parties operate here. According to an affidavit submitted by the respondent, such discovery would not be appropriate under the terms of the London arbitration that is required by the agreement of the parties.

While there are certain limits to discovery when there is an arbitration clause, see, e.g., Comsat Corp. v. National Science Foundation, 190 F.3d 269, 276 (4th Cir.1999), and the "[f]ederal discovery rules typically do not apply to disputes governed by arbitration provisions," In The Matter of the Application of Deiulemar Compagnia di Navegazione S.P.A. v. Pacific Eternity, S.A., 198 F.3d at 479, certain "limited `extraordinary circumstances" ' "may warrant discovery in aid of arbitration." Id. Several cases have addressed the question of whether or not this kind of discovery under Rule 27 is appropriate when there is an applicable arbitration clause and have found discovery warranted " `where a vessel with crew members possessing particular knowledge of the dispute is about to leave port," or where there is a " `special need for information which will be lost if action is not taken immediately." ' In The Matter of the Application of Deiulemar Compagnia di Navegazione S.P.A. v. Pacific Eternity, S.A., 198 F.3d at 473 (citation omitted). In the Deiulemar case, there was also a London arbitration provision that governed. Nevertheless, the court found limited extraordinary circumstances existed to grant discovery in aid of that arbitration under Rule 27. Id. at 479, 481. Several other cases where discovery has been granted despite the existence of an arbitration clause include Ferro Union Corp. v. S.S. Ionic Coast, 43 F.R.D. 11, 14 (S.D.Tex.1967) (allowing depositions, inspection of the vessel and its cargo, and production of requested documents because "[t]o deny discovery here could well mean that the information sought would never be available ..."), and Koch Fuel Int'l v. M/V South Star, 118 F.R.D. 318, 320 (E.D.N.Y.1987) (noting that "[o]ne of the `exceptional circumstances' in which discovery has been deemed proper is where a vessel with crew members possessing particular knowledge of the dispute is about to leave port").

The respondent has argued here that the potential litigation in which this discovery sought is too speculative, in that no one has yet filed an action, and there are no owners of cargo who have complained about the delay. However, in the Deiulemar case, the court held that a petitioner does not have to demonstrate a cognizable action with absolute certainty. Id. at 28-30. The court must simply be satisfied "that the perpetuation of the testimony may prevent a failure or a delay of justice." Id. at 34. The court in Deiulemar, also stated: "A cognizable action only requires `a sufficient, likelihood that the expected litigation will eventuate." ' Id. at 28-29.

Here, given the delay of almost a month, the court finds sufficient basis to believe that there is a potential cognizable action in the United States that would justify the discovery requested here. Certainly, the fact that the vessel with the crew will be leaving the United States within 24 hours, possibly not to return to the United States at any point in the future, is a sufficient basis for this Court to find the extraordinary circumstances necessary to warrant discovery under Rule 27 despite the arbitration provision. Indeed, even under the Fourth Circuit's formulation of the requirement which is "special need and hardship," the Court finds that the facts here justify an order compelling this requested discovery.

Certainly, with respect to the witnesses, they will not only leave with the ship, but, as foreign nationals, they may never again be subject to jurisdiction here in the United States and it may be difficult if not impossible to locate them for deposition elsewhere. While respondent correctly suggests that the petitioner here controls the travel route of the vessel, the Court finds, based on the record, that the witnesses are not subject to the control of the petitioner and there is no way that petitioner can guarantee that their testimony will be preserved for any proceedings here in the United States. Moreover, respondent has failed to show any prejudice in allowing the depositions of the crew members to go forward. Given the respondent's refusal to assure this Court that the crew members would be made available at a date certain, the Court finds that it is appropriate in this case to order their depositions to be taken while they are here.

The court in Koch Fuel Int'l v. M/V South Star, 118 F.R.D. at 320, held that this was exactly the kind of extraordinary circumstances that would justify Rule 27 discovery, even in the context of an arbitration provision. Indeed, it seems that to allow this discovery to proceed would ultimately aid the arbitration and that if this testimony is not perpetuated, there may be a delay or a denial of justice here. Having reviewed the parties' submissions, this Court finds that this case presents the classic example of the extraordinary circumstances that are required where "a vessel with crew members possessing particular knowledge of a dispute is about to leave." In The Matter of Deiulemar Compagnia Di Navegacion v. M/V Allegra, 198 F.3d at 479.

B. 28 U.S.C. § 1782

As an alternative argument, petitioner bases its motion for discovery on the provisions of 28 U.S.C. § 1782. Although this Court finds discovery to be appropriate under Rule 27, the Court will briefly address the petitioner's motion under 28 U.S.C. § 1782.

Section 1782 of Title 28 provides, in relevant part:

The 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, including criminal investigations conducted before formal accusation.

28 U.S.C. § 1782(a). This section permits a Court to order a person to give testimony or produce evidence for use in a foreign proceeding.

Three elements must be satisfied before Section 1782 may be invoked. First, the person from whom discovery is sought must either reside in or be found in the district. Second, the discovery must be for use in a proceeding before a foreign tribunal, and the third element is that the application be made by an interested person. In re Ishihara Chemical Co., 251 F.3d 120, 124 (2d Cir.2001); Euromepa, S.A. v. Esmerian, Inc., 154 F.3d 24, 27 (2d Cir.1998).

In this case, I find that the petitioner has satisfied its burden of showing the existence of all three elements. The first element was met when the vessel arrived in New York with its crew. As to the second element, the Court finds that this discovery has been ordered by a court in Guayaquil in connection with the pending civil proceeding there. Finally, in this instance, the petitioner is the interested party who brought this suit in Guayaquil, and thus has satisfied the third element as well.

The Second Circuit in Euromepa, S.A. v. Esmerian, Inc., held that once the district court is satisfied that the statutory requirements are met, the district court's discretion in deciding whether to grant the petition should be guided by the twin aims of the statute-namely, providing efficient means of assistance to participants in international litigation in federal courts, and encouraging foreign countries by example to provide similar means of assistance to our courts. 154 F.3d at 28; see also In re Ishihara Chemical Co., 251 F.3d at 124. In that same case, the Second Circuit also noted that the district court did not need to determine for itself that the discovery sought in the petition would be of information discoverable under the laws of the foreign jurisdiction in which the proceeding is pending. The Second Circuit made it clear that it is not the job of this Court to review the wisdom of the Guayaquil court's decision ordering discovery; this Court's decision should simply be to determine whether or not the petitioner has met the three elements of the statute and whether or not by ordering discovery, the Court is furthering the aims of the statute. Thus, in this case, it is not necessary for this Court to review the analysis of the Guayaquil court as to its authority to order depositions to proceed despite the London arbitration provision.

Accordingly, finding that petitioner has satisfied its burden under both Fed.R.Civ.P. 27 and 28 U.S.C. § 1782, this Court hereby orders respondent to produce the documents listed in Attachment One to petitioner's papers and to produce for deposition the nine individuals listed therein, including: the master of the vessel, Serge Melihhow; the chief engineer, Sergiy Nazarack; the second engineer, Laurentiu lancu; the third engineer, Ivan Slavyanchuk; the electrician, Yuri Davydov; the first mate, Mariean Popa; the second mate, Dmytro Pokhyl; the third mate, Victor Cupcea; and the superintendent, Gerard Benmoehl.



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