Salzgitter Mannesmann International (USA), Inc. v. Esmark, Inc. et al
ORDER AND OPINION granted in-part and denied in-part re Dkts. 74 and 77 . Court orders that sworn declarations should be provided to Esmark by close of business on Friday,August 5, 2022. (Signed by Magistrate Judge Andrew M Edison) Parties notified.(rcastro, 4)
Case 3:22-cv-00030 Document 78 Filed on 08/02/22 in TXSD Page 1 of 5
United States District Court
Southern District of Texas
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
INTERNATIONAL (USA) INC.,
SUN STEEL COMPANY LLC d/b/a
ESMARK STEEL GROUP MIDWEST,
LLC, and ESMARK, INC.,
August 02, 2022
Nathan Ochsner, Clerk
CIVIL ACTION No. 3:22-cv-00030
ORDER AND OPINION
Pending before me is a discovery dispute. The parties have outlined their
respective positions in letter briefs submitted to the Court. See Dkts. 74 and 77. I
have also heard oral argument on the various issues in dispute. It is now time for
me to rule.
By way of background, Salzgitter Mannesmann International (USA) Inc.
(“Salzgitter”) brought the underlying action to confirm a $12.7 million arbitration
award. Esmark Inc. and Sun Steel Company LLC d/b/a Esmark Steel Group
Midwest, LLC (collectively, “Esmark”) has moved to vacate that award, arguing it
should be set aside because of the alleged evident partiality of one of the
arbitrators, George Shipley (“Arbitrator Shipley”). An oral hearing on the
competing motions is scheduled for August 10, 2022.
On May 16, 2022, in accordance with the Court’s local procedures, the
parties jointly submitted a letter concerning a post-arbitration discovery dispute.
See Dkt. 57. In a nutshell, Esmark asked for limited discovery to shed light on the
circumstances surrounding Arbitrator Shipley’s supplemental disclosure that his
daughter accepted employment with Vinson & Elkins LLP (“V&E”), the law firm
that represented Salzgitter during the arbitration proceeding. In particular,
Esmark asked to: (1) depose Arbitrator Shipley’s daughter; (2) subpoena relevant
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documents from Arbitrator Shipley’s daughter; and (3) subpoena relevant
documents from V&E. Salzgitter strongly opposed any discovery whatsoever,
asking that I decide the motion to confirm/motion to vacate issues on the record
already before me.
Before I could address the discovery dispute, I first had to determine
whether I possessed subject-matter jurisdiction to decide this case under the 1958
Convention on the Recognition and Enforcement of Foreign Arbitral Awards. In
an Opinion and Order issued on June 24, 2022, I held that I did, indeed, have
subject-matter jurisdiction over this case. See Dkt. 62. I then scheduled a discovery
hearing to address the outstanding discovery issues for July 19, 2022.
At that hearing, I explained that I would allow limited discovery, including
the deposition of Arbitrator Shipley’s daughter. I asked the parties to confer to iron
out the details as to the scope of the limited discovery. A few days later, the parties
submitted a letter with a few outstanding discovery disputes, including the timing
of the deposition and the scope of the subpoenas directed to Arbitrator Shipley’s
daughter and V&E. See Dkt. 68. On July 22, 2022, I held another discovery-related
hearing, at which I ordered the deposition of Arbitrator Shipley’s daughter to
proceed on August 28, 2022, provided parameters for the subpoenas to be issued
to Arbitrator Shipley’s daughter and V&E, and ordered V&E to provide certain
declarations to address whether any V&E partner had recommended that the firm
hire Arbitrator Shipley’s daughter.
The deposition of Arbitrator Shipley’s daughter went off without a hitch. I
actually attended the deposition by video to rule on any objections in real-time. To
unearth the documents I ordered produced, V&E conducted an extensive search.
See Dkt. 77 at 1–3. The firm also provided a total of four declarations: (1)
declarations from the two individuals (Jeffrey Kostelnik and Randi Revisore) who
made the decision to extend an employment offer to Arbitrator Shipley’s daughter;
(2) a declaration from the Human Resources employee at Vinson & Elkins (Emma
Durham) who reviewed and processed Arbitrator Shipley’s daughter’s application;
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and (3) a declaration from Salzgitter’s counsel Patrick Mizell, setting forth the
relevant dates for Arbitrator Shipley’s daughter’s application and employment
with V&E. See Dkt. 74-1 at 1–9.
Now, Esmark has come back to me with a request to conduct additional
discovery. This time around, Esmark asks to take the depositions of three of the
V&E declarants (everyone but Salzgitter’s counsel) in order to: (1) explore how they
went about searching for responsive documents; and (2) further clarify whether
any V&E partner recommended the firm hire Arbitrator Shipley’s daughter.
Esmark complains that the declarations it previously received from V&E do not
squarely address whether any V&E partner recommended Arbitrator Shipley’s
daughter be hired at the firm. In the event any V&E partner did recommend the
firm hire Arbitrator Shipley’s daughter, Esmark further requests that the partner’s
emails be searched for communications with Arbitrator Shipley. Esmark also
requests declarations from two additional individuals who interviewed Arbitrator
Shipley’s daughter for a possible job at V&E, Lauren Alford and Allie Watkins.
These declarations are needed, Esmark argues, to determine whether “anyone at
V&E contacted these individuals before the interview.” Id. at 2. Salzgitter
vehemently objects to any further discovery in this matter, arguing that “Esmark
does not explain how [the requested] information would tend to prove or disprove
any relevant fact issue raised in this proceeding.” Dkt. 77 at 3.
I am fortunate that the Fifth Circuit has clearly explained when a district
court may order discovery in the context of proceedings related to the confirmation
and vacatur of an arbitration award. Just two years ago, the Fifth Circuit explained:
District courts occasionally allow discovery in vacatur and
confirmation proceedings. Previously we have endorsed a flexible
inquiry for district courts to use when assessing discovery requests in
the context of such proceedings: the court must weigh the asserted
need for hitherto undisclosed information and assess the impact of
granting such discovery on the arbitral process. The court should
focus on specific issues raised by the party challenging the award and
the degree to which those issues implicated factual questions that
cannot be reliably resolved without some further disclosure. The party
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seeking discovery bears the burden of showing its necessity.
Moreover, the loser in arbitration cannot freeze the confirmation
proceedings in their tracks and indefinitely postpone judgment by
merely requesting discovery.
Vantage Deepwater Co. v. Petrobras Am., Inc., 966 F.3d 361, 372–73 (5th Cir.
2020) (cleaned up). Given this legal backdrop, I turn to Esmark’s most recent
request for discovery.
First, I am not going to allow Esmark to take the depositions of three V&E
employees to inquire into the steps those individuals took to search for emails
responsive to the V&E subpoena. The declarations provided by the V&E employees
each state that they searched their email accounts and describe what those
searches uncovered. That is sufficient. Allowing Esmark to undertake “discovery
on discovery” without any factual reason to believe that any documents responsive
to the subpoena have been withheld would send us off on a tangent that might
never end. Sedona Principle 61 instructs that “[r]esponding parties are best
situated to evaluate the procedures, methodologies, and technologies appropriate
for preserving and producing their own electronically stored information.” The
Sedona Principles, Third Edition: Best Practices, Recommendations & Principles
for Addressing Electronic Document Production, 19 SEDONA CONF. J. 1, 118 (2018).
The commentary to Principle 6 further explains:
[A]s a general matter, neither a requesting party nor the court should
prescribe or detail the steps that a responding party must take to meet
its discovery obligations, and there should be no discovery on
discovery, absent an agreement between the parties, or specific,
tangible, evidence-based indicia (versus general allegations of
deficiencies or mere “speculation”) of a material failure by the
responding party to meet its obligations.
Id. at 123. Even though I am unwilling to allow so-called “discovery-on-discovery,”
I note that Salzgitter has provided in its most recent letter to the Court a detailed
Created by a leading group of judges, lawyers, and academics, the Sedona Principles are
recognized as a foundational guide for courts and lawyers confronting the challenges
related to e-discovery.
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explanation as to how emails were searched, thus making any further inquiry
completely unnecessary. See Dkt. 77 at 2–4.
Second, I do not think it is necessary for Esmark to take the depositions of
V&E employees to inquire further into whether any V&E partner recommended
the firm hire Arbitrator Shipley’s daughter. Even assuming, for the sake of
argument, the relevance of such information to the ultimate determination that
needs to be made as part of the confirmation/vacatur process, I am convinced that
there are less intrusive and burdensome ways of obtaining such information. Out
of an abundance of caution, I am going to order that Lauren Alford, Allie Watkins,
and the three previous V&E declarants (Emma Durham, Jeffrey Kostelnik, and
Randi Revisore) provide short declarations directly answering the following
Are you aware of any V&E partner recommending that
Arbitrator Shipley’s daughter be hired at the firm?
If the answer to Question No. 1 is yes, please identify the name
of the V&E partner who recommended that Arbitrator Shipley’s
daughter be hired at the firm, as well as when, how (e.g., phone,
email, in person), and to whom the recommendation was made.
The declarations should be provided to Esmark by close of business on Friday,
August 5, 2022. In the event any declarant answers Question No. 1 in the
affirmative, I instruct the parties to inform the Court immediately, and we can, at
that time, address what, if any, additional discovery is appropriate.
Signed on this 2nd day of August 2022.
ANDREW M. EDISON
UNITED STATES MAGISTRATE JUDGE
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