US Circuit split deepens on Section 1782 discovery for use in private foreign arbitration
On 22 September 2020, the U.S. Court of Appeals for the Seventh Circuit in Servotronics, Inc. v. Rolls-Royce PLC, No. 19-1847 (7th Cir. 2020) held that private foreign arbitration is not “a proceeding in a foreign or international tribunal” within the meaning of 28 U.S.C. § 1782 (“Section 1782”), a statute authorizing parties to obtain evidence in the U.S. for use in legal proceedings abroad.
The Seventh Circuit joins the Second and Fifth Circuits, which have also reached the same view but contrasts with the Fourth and Sixth Circuits, which have held that Section 1782 discovery is available for private foreign arbitration. As this rift deepens, it becomes more likely this issue will reach the U.S. Supreme Court for resolution soon.
Section 1782 is a discovery mechanism that allows “any interested person” to petition a U.S. district court for an order requiring a party who “resides or is found” within that district to produce evidence for use in proceedings before “a foreign or international tribunal.” Section 1782 does not define what qualifies as a “foreign or international tribunal,” and circuit courts have split as to whether that includes private foreign arbitration.
In the 1999 cases National Broadcasting Company, Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999) and Republic of Kazakhstan v. Bledermann International, 168 F.3d 880 (5th Cir. 1999), the Second and Fifth Circuits held that Section 1782 authorizes district courts to provide discovery assistance only to state-sponsored foreign tribunals, not private foreign arbitrations. The Second Circuit reaffirmed its holding in In Re: Application and Petition of Hanwei Guo, 965 F.3d 96 (2d Cir. 2020), when asked to reconsider its position in light of Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004)(“Intel”), where the U.S. Supreme Court established factors that courts should consider when deciding discovery requests under Section 1782.
Yet in Servotronics, Inc. v. The Boeing Company, 954 F.3d 209 (4th Cir. 2020) and In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710 (6th Cir. 2019), the Fourth and Sixth Circuits reached the opposite conclusion. Notably, the Fourth Circuit allowed discovery for use in arbitration in London. The Seventh Circuit faced with the same parties and facts has now held that the district court is not authorized to do so under Section 1782.
The Decision: Servotronics, Inc. v. Rolls-Royce PLC
The case concerned a Boeing aircraft engine which caught fire during testing in South Carolina. Boeing purchased the engine from Rolls-Royce, which manufactured the engine using parts from Servotronics. Rolls-Royce sought an indemnity from Servotronics following settlement with Boeing. The parties submitted the issue to arbitration in London.
Servotronics sought a subpoena from an Illinois district court to compel Boeing to produce documents for use in the London arbitration. Rolls-Royce intervened and moved to quash the subpoena, arguing that Section 1782 did not authorize such a subpoena in private foreign arbitration. The district court, and ultimately the Seventh Circuit, agreed with Rolls-Royce.
The Seventh Circuit first noted that “tribunal” is not defined in Section 1782, and dictionary definitions leave room for competing interpretations as to whether it includes private arbitration panels. Further , when placed in its statutory context (Section 1782 having been promulgated by a Congressional Study group in 1964, whose mandate did not include judicial assistance to private foreign arbitration), the court preferred a narrower reading. The court also found this to be consistent with the purpose behind other legislation governing service of process and letters rogatory.
Finally, the court found that its narrower construction of “tribunal” avoids conflict with the Federal Arbitration Act (“FAA”). Section 1782 already authorizes discovery assistance that is broader than the FAA: where the FAA permits only arbitral panels to summon witnesses and produce documents, Section 1782 allows litigants and other “interested persons” to obtain such discovery orders from district courts. The court held that to also apply Section 1782 to private foreign arbitrations would give foreign parties “access to much more expansive discovery than litigants in domestic arbitrations.”
The court briefly addressed Intel, where the Supreme Court quoted from a footnote in a law review article written by a professor who served as the reporter for the Rules Commission that proposed Section 1782. Notably, that footnote defined “tribunal” to include, “arbitral tribunals.” The Seventh Circuit however did not accept that this should change its view, noting, “[t]here is no indication that the phrase ‘arbitral tribunals’ includes private arbitral tribunals.”
The Seventh Circuit’s decision joins the growing split in circuit courts’ interpretation of Section 1782. As a result, the same parties to the same dispute may request discovery assistance yet receive different permissions from different district courts, as was the case for Servotronics in the Fourth and Seventh Circuits, both decided this year. Given this inconsistency, it is likely that the issue will reach the Supreme Court soon. Until then, international arbitration practitioners should be aware of these decisions when considering seeking evidence in the U.S. in aid of private foreign arbitrations.