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On March 30, 2020, the United States Court of Appeals for the Fourth Circuit in Servotronics, Inc. v. The Boeing Company, No. 18-2454 (4th Cir. 2020) ruled that a commercial arbitration panel is a “foreign or international tribunal” under 28 U.S.C. § 1782 (“Section 1782”), a federal statute that allows parties to obtain evidence in the United States for use in legal proceedings abroad.
In so holding, the Fourth Circuit joined the Sixth Circuit, which came to the same conclusion last year in In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710 (6th Cir. 2019). While two other circuit courts have previously held that Section 1782 discovery is not available for commercial arbitration, those decisions were issued prior to the Supreme Court’s landmark Section 1782 decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) (finding that discovery under Section 1782 was available in support of a proceeding before a non-judicial international commission).* The Fourth and Sixth Circuits are the only U.S. appellate courts that have ruled definitively on the issue post-Intel, and these decisions may indicate a growing trend of international arbitration practitioners using Section 1782 as a means to obtain evidence in the United States for arbitration proceedings abroad.
Section 1782 is a discovery mechanism that allows “any interested person” to petition a U.S. federal court for an order requiring a party who “resides or is found” within the district in which the court is located to produce evidence for use in proceedings before “a foreign or international tribunal.” Historically, federal district courts reached inconsistent conclusions with respect to whether private commercial arbitration panels are “foreign or international tribunals” under Section 1782—including after the Supreme Court’s Intel decision in 2004.
Other than the Fourth and Sixth Circuits, the Second and Fifth Circuits are the only other U.S. appellate courts to consider the question. Both Circuits, in National Broadcasting Company, Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999) and in Republic of Kazakhstan v. Bledermann International, 168 F.3d 880 (5th Cir. 1999), ruled that commercial arbitral panels are not “tribunals” under Section 1782.
However, those decisions were issued prior to Intel, and district courts in those Circuits have subsequently differed in applying those precedents in Intel’s wake. For example, in In re ex parte application of Kleimar, 220 F.Supp.3d 517 (S.D.N.Y. 2016), a district court judge found that arbitral proceedings before the London Maritime Arbitration Association fell within the scope of Section 1782, while another district court judge in In re application of Hanwei Guo, No. 18-MC-561 (S.D.N.Y. 2019) found that an arbitration before the China International Economic and Trade Arbitration Commission was not a “tribunal” under the statute.
In Servotronics, the Fourth Circuit confronted the question in the context of a UK arbitration involving Rolls-Royce PLC, which had allegedly installed allegedly faulty equipment initially supplied to it by Servotronics, Inc. into an aircraft owned by the Boeing Company. Servotronics filed an application in a district court in South Carolina under Section 1782 to obtain testimony from certain employees at Boeing’s South Carolina plant for use in the UK arbitral proceeding, which the district court denied after concluding that a private arbitration was not before a “foreign tribunal” as that term is used in the statute.
In reversing the district court and remanding for further proceedings, the Fourth Circuit held that the UK arbitration panel is indeed a “foreign or international tribunal” for purposes of Section 1782. In addition to finding that this conclusion was compelled by the legislative history, including Congress’ decision to purposefully expand Section 1782’s language to include more than judicial proceedings, the Court highlighted two particular points:
First, the Court reasoned that even if Section 1782 requires a “tribunal” to be state-sponsored or “governmental,” as Boeing argued, arbitration squarely falls under that definition. Both the US and the UK regulate and treat arbitration as more than a mere agreement between parties; indeed, it is considered in both countries as a “favored alternative to the judicial process” with “government-conferred authority.”
Second, the court noted that Section 1782 is narrow in scope, and generally permits only limited discovery (i.e., the collection of evidence “for use” in foreign proceedings, not any and all potentially relevant or admissible evidence) and thus would not burden arbitral proceedings with the full extent of U.S. discovery procedures. Moreover, applications under Section 1782 are subject to the discretion of district court judges, who can deny or tailor overbroad requests, which can reduce the burdens associated with discovery.
It may be too soon to tell whether the Servotronics decision represents a new trend for U.S. discovery in aid of international arbitrations, and the scope of Section 1782 will likely continue to be litigated in other Circuits for the foreseeable future. However, international arbitration practitioners should be aware of these decisions, particularly when considering seeking evidence located in the U.S. in aid of arbitration proceedings abroad. Similarly, litigants in the United States should be aware of the implications of this developing interpretation of Section 1782. Now, in both the Sixth and Fourth Circuits, it is undisputed that a district court may grant a request for evidence for use in private commercial arbitrations.
*As background for readers who may be unfamiliar with the United States court system, the federal intermediate appellate courts are divided into thirteen separate courts of appeals, or circuit courts. Decisions issued by the circuit courts are only binding on the federal district courts in that circuit, and are only reviewable by the United States Supreme Court.
30 April 2020
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