Supreme Court to Decide if U.S. Discovery Law Encompasses Private Foreign Arbitrations
- The U.S. Supreme Court has agreed to take up a dispute over whether 28 U.S.C. § 1782, which governs applications for discovery from a United States court for use in a foreign proceeding, permits discovery for use in a private foreign arbitration.
- The main legal issue is whether a private foreign arbitration is a "tribunal," as required by Section 1782. Five federal appeals courts have issued conflicting decisions on this issue.
- This will be the first Supreme Court decision concerning Section 1782 since 2004, in which the Court expanded the statute to encompass quasi-judicial proceedings in front of regulatory agencies.
- One of the issues the Supreme Court will confront is whether foreign private arbitrations are the result of "government-conferred authority," and thus within the ambit of Section 1782, or if the private foreign arbitrations are excluded from the statute because the proceedings are too far removed from the dispute resolution procedures applied in state-sponsored tribunals.
The U.S. Supreme Court has agreed to take up a dispute over whether 28 U.S.C. § 1782, which governs applications for discovery from a United States court for use in a foreign proceeding, permits discovery for use in a private foreign arbitration. Servotronics, Inc. v. Rolls-Royce PLC, 975 F.3d 689 (7th Cir. 2020), cert. granted, --- S. Ct. ---, 2021 WL 1072280 (Mem.) (March 22, 2021). This will be the first Supreme Court decision concerning Section 1782 since 2004, in which the Court expanded the statute to encompass quasi-judicial proceedings in front of regulatory agencies.
Summary of Section 1782
Section 1782 governs a federal district court's authority to provide discovery assistance for proceedings in foreign and international tribunals. Section 1782 requires an applicant to satisfy three statutory factors: 1) the person from whom discovery is sought resides or is found in the district to which the applicant is made; 2) the discovery is for use in a foreign proceeding before a foreign or international tribunal; and 3) the application is made by an interested person.1
In 2004, the U.S. Supreme Court in Intel Corp. v. Advanced Micro Devices, Inc., held that the Directorate-Generate for Competition of the European Communities qualified as a "tribunal" under Section 1782.2 The Court's decision broadened the scope of Section 1782 to encompass discovery "for use" in a foreign proceeding by a public agency with quasi-judicial authority. Conflicting decisions among the federal circuit courts after Intel show how unsettled the law is on the issue of whether a foreign arbitration qualifies as a "tribunal" under Section 1782.3
The Seventh Circuit's Decision in Servotronics
The disputed legal issues in Servotronics centered on the second Section 1782 statutory factor, and in particular, whether a private foreign arbitration constituted a "proceeding in a foreign or international tribunal."
The background for the Servotronics case is an indemnification dispute over responsibility for losses incurred when an aircraft engine manufactured by respondent Rolls-Royce PLC (Rolls-Royce) caught fire during testing, which damaged the aircraft owned by respondent The Boeing Company (Boeing). Applicant Servotronics Inc. (Servotronics) manufactured the engine valve which contributed to the fire. 4
Boeing demanded repayment from Rolls-Royce, and the parties settled for $12 million. Rolls-Royce sought indemnification from Servotronics. The long-term agreement between these parties required any dispute to be submitted to binding arbitration in England under the rules of the Chartered Institute of Arbitrators (the Institute). After failing to resolve the dispute informally, Rolls-Royce filed a private arbitration (the Arbitration) with the Institute.5 During the pendency of the Arbitration, Servotronics filed an ex parte Section 1782application in the U.S. District Court for the Northern District of Illinois seeking authority to issue a subpoena compelling Boeing to produce documents for use in the Arbitration.6 After initially granting Servotronics' application, the district court reversed course and issued an order granting the motion of Rolls-Royce (supported by Boeing) to vacate its previous order and quash the subpoena to Boeing.7
Servotronics appealed to the U.S. Court of Appeals for the Seventh Circuit, which, in an issue of first impression in that circuit, focused on whether the Institute constituted a "tribunal" under Section 1782. The Seventh Circuit evaluated the statutory and dictionary definition of "tribunal," the statutory context, a potential conflict with the Federal Arbitration Act (FAA), the legislative history of Section 1782 and the Intel decision in holding that the Institute was not a "tribunal" under Section 1782.8 First, the court concluded that in "both common and legal parlance," the phrase "foreign and international tribunal" could be understood to include state-sponsored tribunals and private arbitral panels, so both interpretations were plausible and did not resolve the issue.9
Second, in reviewing the "statutory context" – namely, the instructions to a congressional study group in proposing revisions to Section 1782, the use of the term "foreign or international tribunal" in related statutes concerning service of process in foreign litigation (28 U.S.C. § 1696) and letters rogatory (28 U.S.C. § 1781), and the use of "tribunal" in Section 1782 – the court held that reading Section 1782 as a "coherent whole suggests that a more limited reading of § 1782(a) is probably the correct one[.]"10
Third, the court held that the narrower understanding of "tribunal" foreclosed a "serious" conflict with the FAA. The court contrasted the narrower discovery assistance rights in domestic arbitrations under the FAA with the expansive rights afforded a party seeking Section 1782 discovery. The court found it "hard to conjure a rationale" for affording parties to private foreign arbitrations such far-reaching discovery assistance while precluding domestic parties from this assistance.11
Finally, the court held that the Supreme Court's reference in Intel to a law-review article that defined "tribunal" under Section 1782 to include "arbitral tribunals" did not ipso facto include private foreign arbitral tribunals within the purview of Section 1782. The court considered Servotronics' reliance to be "misplaced" because there was no indication that the Supreme Court, by "quoting a law-review article in a passing parenthetical, was signaling its view that § 1782(a) authorizes district courts to provide discovery assistance in private foreign arbitrations."12
The Fourth Circuit, in another application brought by Servotronics against Boeing, disagreed with the Seventh Circuit, holding that a contractual arbitration is the "product of government-conferred authority" in the United Kingdom and the United States, and thus a "tribunal."13 The Seventh Circuit considered this "view mistaken" on grounds that the "source of a private arbitral panel's adjudicative authority is found in the parties' contract, not a governmental grant of power."14
The Supreme Court's decision is not expected to have an impact on investor-state arbitrations. Generally, courts have upheld the use of Section 1782 in investor-state arbitrations, which routinely entail application of bilateral treaties and therefore are not dependent on an agreement in private contracts.15
The Circuit Split Concerning Whether a Foreign Private Arbitration Is a "Tribunal"
Five federal appeals courts have directly addressed whether a foreign private arbitration is a "tribunal" under Section 1782. In addition to the Seventh Circuit, the Fifth Circuit and Second Circuit do not consider a foreign private arbitration to qualify as a "tribunal" under Section 1782.16
In Guo, the Second Circuit concluded that its pre-Intel jurisprudence holding that Section 1782 did not apply to a foreign private arbitration remained good law.17 According to the Second Circuit, Intel did not cast "sufficient doubt" on NBC, which is necessary under a long-standing Second Circuit rule to overturn a prior panel decision, because Intel did not directly address the question whether foreign private arbitral bodies qualify as tribunals. In fact, the Second Circuit presaged part of the rationale of the Seventh Circuit in holding that the citation to the law-review article was a "passing reference in dicta."18
In addition to the Fourth Circuit's decision, the Sixth Circuit also recently held that a private arbitration was a "tribunal" under Section 1782. The court discussed at length the applicable dictionary definition, the "use of the word tribunal in legal writing," the statutory context and the Intel decision in concluding that, based on a long-held understanding among lawyers and judges, a foreign private arbitration constituted a "tribunal." 19
For questions regarding the decisions discussed in this Holland & Knight alert and Section 1782 proceedings in general, please contact the authors.
1 28 U.S.C. § 1782(a).
2 542 U.S. 241, 257-258 (2004)
4 975 F.3d at 690-691.
5 Id. at 691.
6 See In re Application of Servotronics, Inc., No. 18-cv-7187 (N.D. Ill. April 22, 2019).(Dkt. No. 3).
7 Id. (Dkt. No. 44).
8 Servotronics, 975 F.3d at 692-696.
9 Id. at 694.
10 Id. at 694-95.
11 Id. at 695.
12 Id. at 696 (quoting Intel, 542 U.S. at 258) (citation omitted).
13 Servotronics, Inc. v. Boeing Co., 954 F.3d 209, 213-216.
14 Servotronics, 975 F.3d at 693 n.2.
15 See, e.g., In re Fund for Protection of Investor Rights in Foreign States, 2020 WL 5026586 (S.D.N.Y. Aug. 25, 2020) (arbitration held pursuant to bilateral treaty between the Russian Federation and Lithuania); In re Republic of Kazakhstan v. Lawler, 2019 WL 5558997 (D. Ariz. Oct. 28, 2019) (arbitration proceeding that incorporates bilateral investment treaty between Kazakhstan and the United States); Matter of Gov't of Mongolia v. Itera Int'l Energy, L.L.C., 2009 WL 10712603 (M.D. Fla. Nov. 10, 2009) (arbitration brought pursuant to dispute resolution provisions in bilateral investment treaty between governments of the Russian Federation and Mongolia).
16 In re Guo, 965 F.3d 96, 105-108 (2d Cir. 2020); Republic of Kazakhstan v. Biedermann Int'l, 168 F.3d 880, 883 (5th Cir. 1999).
17 Guo, 965 F.3d at 105-106 (citing Nat'l Broad. Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999)).
19 In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710, 717-732 (6th Cir. 2019).
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