Domestic Discovery for Foreign Arbitrations? Now Three Circuits Say “No”
Well, that didn’t take long!
Earlier this month I posted a short piece describing a two-to-two circuit split on the question of whether a foreign private arbitration panel is a “foreign or international tribunal” for purposes of 28 U.S.C. § 1782, which authorizes United States District Courts to require a person who “resides or is found” in the district to provide documents or deposition testimony for use in a proceeding before such a tribunal. Two Circuits – the Second, most recently in In re Guo, 965 F.3d 96 (2d Cir., 2020), and the Fifth, most recently in El Paso Corp. v. La Comision Ejecutiva Hidroelectrica Del Rio Lempa, 341 F. App’x 31 (5th Cir., 2009) – said no: an arbitration panel is not the type of tribunal to which § 1782 applies. Two other Circuits – the Fourth, in Servotronics, Inc. v. Boeing Company, 954 F.3d 209 (4th Cir., 2020), and the Sixth, in In re Application to Obtain Discovery, 939 F.3d 710 (6th Cir., 2019) – disagreed, holding that federal district courts may indeed grant applications under § 1782 for discovery to be used before foreign private arbitration panels.
The Seventh Circuit broke the tie on September 22, 2020, in Servotronics, Inc. v. Rolls-Royce PLC, __ F.3d __, 2020 WL 5640466 (7th Cir., 2020), holding that a foreign private arbitration panel doesn’t qualify as a “foreign or international tribunal” under § 1782. Not only is Servotronics the same applicant as in the Fourth Circuit case that went the other way, but the case arises from the very same British arbitration. So a little background is in order.
A piece of metal became lodged in an engine valve in a new Boeing 787 Dreamliner being tested at a Boeing facility in South Carolina. The resulting fire severely damaged the aircraft. Boeing demanded compensation from Rolls Royce, the engine manufacturer. That claim was settled for $12 million, and Rolls Royce in turn demanded indemnification from the valve manufacturer, Servotronics. When that claim couldn’t be settled, Rolls Royce initiated an arbitration proceeding in the U.K. pursuant to an arbitration clause in the parties’ contract. Servotronics filed applications in two different federal judicial districts, seeking discovery for use in that arbitration from Boeing under § 1782. One application, in the District of South Carolina, sought deposition testimony from Boeing employees located in that district. The other, in the Northern District of Illinois, sought documents from Boeing. The Fourth Circuit held that the English arbitration was a “foreign or international tribunal” within the meaning of § 1782, and allowed the South Carolina depositions. The Seventh Circuit held that it was not, and rejected the Illinois document demands.
The Seventh Circuit reasoned that § 1782 itself is ambiguous as to whether the phrase “foreign or international tribunal” includes foreign arbitrations, but that the meaning ascribed to it by the Fourth and Sixth Circuits would be less harmonious with the legislative history and statutory context, and would result in a conflict with the Federal Arbitration Act, 9 U.S.C. §§ 1-15, which establishes significantly more limited discovery procedures. As the Court explained:
If § 1782(a) were construed to permit federal courts to provide discovery assistance in private foreign arbitrations, then litigants in foreign arbitrations would have access to much more expansive discovery than litigants in domestic arbitrations. It's hard to conjure a rationale for giving parties to private foreign arbitrations such broad access to federal-court discovery assistance in the United States while precluding such discovery assistance for litigants in domestic arbitrations.
2020 WL 5640466 at*6. The Sixth Circuit had responded to similar argument in In re Application by observing that district judges have discretion to in ruling on § 1782 applications for discovery to be used in foreign arbitrations to impose limitations more reflective of the limited scope of discovery ordinarily available in domestic arbitrations. 939 F. 3d at 729-30. The Seventh Circuit didn’t address this point.
Talk about a circuit split! The same accident, the same parties, the same arbitration, and Servotronics gets to take South Carolina depositions but doesn’t get Illinois documents because two federal Courts of Appeals disagree as to the meaning of § 1782.
Don’t touch that dial!