Author: Nika Bederman*
| Jurisdiction: United States |
Topics: Discovery |
On March 22, 2021, the United States Supreme Court granted certiorari in Servotronics Inc. v. Rolls-Royce PLC, in which Servotronics challenged the Seventh Circuit’s decision to reject discovery pursuant to 28 U.S.C. §1782 in a private arbitration.[1] The Supreme Court’s decision will resolve the circuit split on whether §1782 can apply in private international arbitrations.[2]
BACKGROUND: THE CONFLICT
The story of Servotronics v. Rolls-Royce begins in January 2016, when a tailpipe fire at a South Carolina Boeing test facility damaged a Boeing aircraft and its Rolls-Royce engine. After paying paid Boeing a settlement of over $12 million for damage to the aircraft, Rolls-Royce demanded compensation from Servotronics, a New York-based company that had created the engine’s valve.[3] In response, Servotronics claimed that testing personnel had failed to follow their own procedures in response to “warning signs of fuel flow issues that would have averted the fire”. The parties failed in their attempts to settle, and Rolls-Royce initiated arbitration proceedings under the Rules of the Chartered Institute of Arbitrators in England.[4]
THE 28 U.S.C. §1782 ISSUE
During discovery, Servotronics alleged that Rolls-Royce and Boeing were failing to produce documents critical to their case, and filed to compel documents and testimony under 28 U.S.C. §1782(a),[5] which states that “the district court of the district in which a person resides or is found may order him to give his testimony… or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation.”[6] The district court in Chicago approved the subpoena requests, but Rolls-Royce moved to quash them on the grounds that a private foreign arbitration proceeding does not count as a “foreign or international tribunal” under §1782(a).[7] The Seventh Circuit ruled in Rolls-Royce’s favor, following in the footsteps of the Second and Fifth Circuits. [8]
Although it found that in “common and legal parlance”, “foreign or international tribunal” could be understood to include private arbitral panels as well, upon reviewing the statutory context of §1782(a), it determined that a narrower reading was more likely the correct one.[9] In particular, the Seventh Circuit looked at the definition of the word “tribunal” in 1964, when Congress amended §1782(a) to include the phrase “foreign or international tribunal”. At the time, it was “principally defined either as the seat of a judge or as an adjudicatory body acting with governmental authority.”[10] Such a definition, the Seventh Circuit concluded, would have excluded private arbitration proceedings.[11]
Furthermore, a broad interpretation of the word “tribunal” in §1782(a) would create a conflict with the Federal Arbitration Act (FAA). The FAA offers narrower discovery rights in domestic arbitrations compared to the discovery rights §1782(a) grants to parties. If §1782(a) were to include private foreign arbitrations, this would mean that domestic arbitration parties would have significantly less discovery assistance than parties to private foreign arbitrations.[12]
Other circuits have ruled differently on this matter, however; in Servotronics, Inc. v. Boeing Co., a case involving the same parties and facts, the Fourth Circuit had adopted the Sixth Circuit’s position that §1782 discovery should be allowed in foreign-seated private commercial arbitrations.[13] The Sixth Circuit reasoned in In re Application to Obtain Discovery for Use in Foreign Proceedings that based on a “long-held understanding among lawyers and judges”, the definition of “tribunal” includes foreign private arbitrations.[14] In particular, it looked at the Supreme Court’s decision in Intel Corp. v. Advanced Micro Devices, Inc., which broadened §1782(a) to include public agencies with “quasi-judicial authority” within the definition of “tribunals”.[15] The Fourth Circuit agreed with the Sixth Circuit’s conclusion, holding that a contractual arbitration counts as a “tribunal” because it is the “product of government-conferred authority” in the United Kingdom and the United States.[16]
It remains to be seen which side of the circuit split the Supreme Court will take. The Court will most likely consider both dictionary definitions of the term “tribunal” and the legislative history of §1782. Justice Samuel Alito is not taking part in the decision, so it will be up to the eight remaining justices to resolve the question of how foreign private arbitrations will be treated in terms of discovery rights.[17]
[1] Servotronics, Inc. v. Rolls-Royce PLC, 975 F.3d 689 (7th Cir. 2020), cert. granted, No. 20-794, 2021 WL 1072280 (U.S. Mar. 22, 2021).
[2] Id.
[3] Id. at 690.
[4] Id.
[5] In re Servotronics, Inc., No. 18-CV-7187, 2019 WL 9698535 (N.D. Ill. Apr. 22, 2019).
[6] 28 U.S.C. §1782(a).
[7] In re Servotronics, 2019 WL 9698535 at *2; Servotronics v. Rolls-Royce, 975 F.3d at 691; J. Alexander Lawrence et al., International Arbitration Update: Supreme Court Asked to Resolve Circuit Split Over Discovery in Aid of Private Commercial Arbitration Seated Outside the United States, Morrison Foerster Resources (Dec. 16, 2020), https://www.mofo.com/resources/insights/201216-international-arbitration-update.html.
[8] Servotronics v. Rolls-Royce, 975 F.3d at 690; Guo v. Deutsche Bank Secs., Inc., 965 F.3d 96 (2d Cir. 2020); Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880, 882–83 (5th Cir. 1999).
[9] Servotronics v. Rolls-Royce, 975 F.3d at 694-695.
[10] Id. at 695.
[11] Id.
[12] Id. at 695-96.
[13] Servotronics, Inc. v. Boeing Co., 954 F.3d 209 (4th Cir. 2020).
[14] In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710, 717-32 (6th Cir. 2019).
[15] Id.; Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004).
[16] Servotronics v. Boeing, 954 F.3d at 214.
[17] Colin Kalmbacher, Supreme Court Will Decide What ‘Tribunal’ Means in Case Over Tailpipe Fire That Rolls-Royce Wants Kept on British Soil, Law & Crime (March 22, 2021), https://lawandcrime.com/supreme-court/supreme-court-will-decide-what-tribunal-means-in-case-over-tailpipe-fire-that-rolls-royce-wants-kept-on-british-soil/.
* J.D. Candidate 2022, Columbia Law School.