In its September 20, 2020, ruling in Servotronics, Inc. v. Rolls-Royce, the Seventh Circuit has bucked a recent trend in the lower courts holding that parties to private international arbitrations can obtain court-based discovery via 28 U.S.C. § 1782. Under Section 1782, enacted in 1964, a U.S district court “may order a person residing or found in the district to give testimony or produce documents for use in a proceeding in a foreign or international tribunal . . . upon the application of any interested person.” Although both as a linguistic and historical matter, it may be difficult to view a private international arbitration panel as a “foreign or international tribunal” for purposes of Section 1782, that was the holding of the courts in 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. The Seventh Circuit now disagrees, reinforcing a circuit split (along with a recent Second Circuit decision) that may end up in the U.S. Supreme Court.
Servotronics involves an indemnification dispute over an aircraft engine that caught fire during testing in South Carolina. Rolls-Royce manufactured and sold a Trent 1000 engine to the Boeing Company for incorporation into a 787 Dreamliner aircraft. The engine caught fire during testing damaging the aircraft. Boeing sought compensation from Rolls-Royce; the parties settled for $12 million. Rolls-Royce then sought indemnification from Servotronics, Inc., the valve manufacturer. Unable to settle the case, Rolls-Royce initiated arbitration in Birmingham, England (subsequently moved to London) under the rules of the Chartered Institute of Arbiters.
Servotronics then filed an application under Section 1782 in U.S. District Court for the Northern District of Illinois, asking the court to issue a subpoena directing Boeing to produce certain documents for use in the London arbitration. The District Court quashed the subpoena on the ground that Section 1782 does not authorize a court to provide discovery assistance in private foreign arbitration. The Seventh Circuit affirmed.
Noting the issue was one of first impression in the Seventh Circuit, the court observed that while the statutory phrase “foreign or international tribunal” did not necessarily exclude private arbitration, it did not readily connote private arbitration. Canvassing dictionary definitions, the court determined that “[i]n both common legal parlance,” the phrase “can be understood to mean only state-sponsored tribunals, but it also can be understood to include private arbitration panels. Both interpretations are plausible.”
The appeals court derived stronger clues to meaning from statutory context. In 1964, Congress enacted legislation establishing the current version of Section 1782 and dealing with service of process in foreign litigation (28 U.S.C, § 1696) and the “letters rogatory” procedure, a formal request for discovery assistance issued by one court to a foreign court sometimes with diplomatic assistance (28 U.S.C. §1781). All three of the 1964 measures “use the identical phrase ‘foreign or international tribunal’ to describe the object of the district court’s litigation assistance.” The service of process and letters rogatory measures “are matters of comity between governments,” the court observed, which suggests that the same phrase as used in Section 1782 “means state-sponsored tribunals and does not include private arbitration panels.”
The panel adopted its reading of Section 1782 in part to avoid a conflict with the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-15 (amended 1988). The FAA provision for discovery assistance is much narrower than Section 1782. The FAA requires the arbitration panel, not the parties, to decide whether to summon witnesses to testify and produce documents, and to look to enforcement of its summons in the court. Adopting Servotronics’ view of Section 1782 would mean that parties in private foreign arbitrations would enjoy a broader scope of discovery assistance than parties in domestic arbitrations. Moreover, to the extent the FAA applies to some foreign arbitrations, a broad reading of Section 1782 would “create a direct conflict with the [FAA] for this subset of foreign arbitrations.”
The courts that have ruled the other way—holding Section 1782 applicable to private foreign arbitrations—derive some support from the Supreme Court’s statement in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), that “Congress introduced the word ‘tribunal’ to ensure that ‘assistance is not confined to proceedings before conventional courts,’ but extends also to ‘administrative and quasi-judicial proceedings.’” S. Rep. No. 1580, 88th Cong., 2d Sess., p. 7 (1964); see H. R. Rep. No. 1052, 88th Cong., 1st Sess., p. 9 (1963). Needless to say, Intel did not deal with the question whether an international arbitration panel is a “foreign or international tribunal” for purposes of Section 1782.
The Seventh Circuit’s recent decision suggests a possible brake on developments in other circuits where parties to international arbitrations could seek to circumvent the limited discovery available from the arbitration panel by proceeding in federal district court under Section 1782.
Reprinted with permission from the October 22, 2020 edition of the New York Law Journal © 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or email@example.com.