A Massachusetts federal court has denied a party's motion to compel discovery from a non-party for use in a foreign arbitral proceeding, acknowledging its authority to compel discovery but finding the motion "premature."

In In re Babcock Borsig AG, No. 08-mc-10128-DPW, 2008 WL 4748208 (D. Mass. Oct. 30, 2008), Babcock Borsig AG (BBAG) sold certain assets in 2003 to BPI, an American company, and others to Hitachi, a Japanese company. During litigation of a dispute between BBAG and BPI in 2006, BBAG discovered alleged material misrepresentations by Hitachi during the 2003 asset sale.

BBAG contemplated arbitration of its claims against Hitachi, but did not commence arbitration. Instead, it prepared for arbitration by asking the Court to compel discovery of certain documents from BPI for use in arbitration before the International Chamber of Commerce (ICC) in Germany. BPI objected, asserting that it was relieved of any obligation to comply with discovery requests under the terms of a prior settlement agreement with BBAG. The settlement contemplated release from "expenses, rights, and demands of any nature whatsoever."

The Court first determined that the settlement did not forever discharge BPI from any obligation to comply with a discovery order, but only those orders related to the subject matter of the settlement agreement. According to the Court, a general release such as this did not exempt the party from discovery requests, only from further suit in the matter. See, e.g., Sumner-Mack v. City of Cambridge, No. 993284F, 12 Mass. L. Rptr. 243 (Mass. Super. Ct. Aug. 3, 2000).

The Court next decided that it had the authority to order discovery from a domestic party in connection with a private foreign arbitration proceeding under 28 U.S.C. § 1782(a), which requires a showing that (1) discovery is sought from a person residing or found in the same district as the court, (2) it is to be used in a proceeding before a foreign tribunal, and (3) the applicant is the tribunal or an interested person.

The Court found BBAG had carried its burden of showing that the discovery would be used in a foreign tribunal, the only factor contested by BPI. According to the Court, dicta in a recent Supreme Court decision indicated that a private foreign arbitral authority was contemplated by Congress as a quasi-judicial "tribunal" within the scope of the statute. Intel Corp. v. Adv. Micro Devices, Inc., 542 U.S. 241, 257-58 (2004).

However, the Court ultimately denied the motion on discretionary grounds. Specifically, the Court was troubled that the foreign tribunal had not expressed any position on its receptivity to the materials subject to the discovery request. Also, the Court noted the "bad blood" between the parties and BBAG's failure to actually initiate arbitral proceedings, and found BBAG's discovery request premature. Accordingly, the Court dismissed the motion without prejudice.