Supreme Court Hears Arguments on Whether Section 1782 Allows Discovery for Use Before International Arbitration Tribunals

By John Pinney & Russ Bleemer

The U.S. Supreme Court today heard almost two hours of argument on whether 28 U.S.C. § 1782 allows parties to seek a federal district court order for discovery of evidence for use before international arbitral tribunals.  

In consolidated cases this morning, the Court not only heard arguments from the parties’ counsel but also conducted a potentially pivotal discussion with an attorney from the U.S. Solicitor General’s office.  The government sided with the petitioners and argued against Section 1782’s application for both private international and investor-state arbitrations.

A key issue that emerged during today’s argument was whether the phrase “foreign or international tribunal” should be the focus or whether the single word “tribunal” alone should form the basis of the court’s consideration of whether Section 1782 allows U.S. federal district courts to provide judicial assistance to international arbitral tribunals. 

The Court itself was hesitant about arbitration matters’ inclusion in the law, which is titled “Assistance to foreign and international tribunals and to litigants before such tribunals.” There are “too many problems extending this,” said Justice Stephen G. Breyer to respondent counsel urging foreign arbitral tribunals’ access to the law, asking whether the decision should simply be, “[G]o to Congress [and] get it worked out.”

Soon after, Justice Neil Gorsuch said that including arbitration tribunals “runs very counter to our intuitions that arbitration which is that it is supposed to be quick. . . . And [Sec.] 1782 is a very liberal grant of discovery.”

The cases were differentiated by the types of arbitration involved.  ZF Automotive US Inc. v. Luxshare Ltd., No. 21-401, is a private arbitration, and AlixPartners LLP v. The Fund for Protection of Investor Rights in Foreign States, No. 21-518, is investor-state arbitration, involving the government of Lithuania.

The Court granted certiorari for the two cases argued today in December, shortly after another case addressing the same issue argued today was dismissed in late September.  That case, Servotronics, Inc. v. Rolls-Royce, PLC, No. 20-794, was voluntarily dismissed on the eve of argument that had been set for Oct. 5, during the first week of the Court’s 2021-2022 term. 

[CPR Speaks blog publisher CPR filed an amicus brief in Servotronics and today’s AlixPartners urging the Court to take the cases because of the significance of their issues to international arbitration, but not in support of either side. These briefs were written principally by co-author John Pinney. For details, see John Pinney, “International Arbitration Is Back at the Supreme Court with Today’s Cert Grant on Two Section 1782 Cases,” CPR Speaks (Dec. 10) (available here).]

The first of the two consolidated cases argued today was ZF Automotive, which arises from a private commercial contract with ZF Automotive’s German parent that requires any disputes to be arbitrated before the German Arbitration Institute.  The ZF Automotive case was brought in Detroit prior to commencement of any private international arbitration in Germany.  The district court allowed the requested discovery.  On appeal to the Sixth Circuit, ZF Automotive, in a most unusual move, petitioned for certiorari before judgment to bypass waiting for the Sixth Circuit to decide its appeal. The Supreme Court granted certiorari on Dec. 10.

The second case, AlixPartners, involves an investor-state arbitration arising from a bilateral investment treaty between Russia and Lithuania.  Interestingly, the AlixPartners case is an appeal from the Second Circuit, which in its decision distinguished NBC (see details below), as well as the Second Circuit’s more recent In re Guo, 965 F.3d 96 (2d Cir. 2000), to allow Section 1782 discovery for investor-state cases.

By accepting both a private international arbitration case (ZF Automotive) and an investor-state arbitration case (AlixPartners), the Supreme Court is poised to decide definitively whether any non-governmentally created tribunal can be a “foreign or international tribunal” within the meaning of Section 1782. That was the key focus in today’s arguments.

The cases have attracted 12 amicus briefs – five in support of the petitioners opposing Section 1782 discovery, four in favor of Section 1782 discovery, and three in support of neither side. 

The most significant amici is the United States, which opposes Section 1782 discovery in both private and investor-state arbitrations, arguing that the term “tribunal” does not include international arbitral tribunals, whether they be created either for private international arbitrations or under bilateral or multi-national investment treaties.  The Solicitor General requested and was granted the right to argue orally for the United States today in support of petitioners.

Today’s Arguments

As noted above, a key issue that emerged early in today’s arguments was whether the Section 1782 phrase “foreign or international tribunal” should be the focus or whether the single word “tribunal” alone should form the basis of the court’s consideration of whether the law allows U.S. federal district courts to provide judicial assistance to international arbitral tribunals.   

The 58-year-old statute states, “The district court of the district in which a person resides or is found may order him to give his testimony or statement 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.  . . .”

The petitioners opposing Section 1782 discovery–Roman Martinez, deputy office managing partner in the Washington, D.C. office of Latham & Watkins on behalf of ZF Automotive, and Joseph T. Baio, senior counsel at New York’s Willkie Farr & Gallagher, for AlixPartners–argued that the entire phrase, “foreign or international tribunal,” must be considered, and that the phrase has never been used with respect to an arbitral tribunal.

The respondents, on the other hand, focused on the word “tribunal” and argued that it has frequently been used with respect to arbitral tribunals, both contemporaneously in 1964 when the statute was enacted and in current usage. The respondent attorneys arguing on behalf of, respectively, Luxshare and the Fund for Protection of Investor Rights in Foreign State, were Andrew Rhys Davies, a New York partner at Allen & Overy, and Alexander A. Yanos, a New York and Washington partner in Alston & Bird.

Veteran Assistant Solicitor General Edwin Kneedler’s argument, which split the four party appearances, appeared to be given weight, especially in relation to how allowing discovery under Section 1782 might affect the United States’ relations with foreign governments.  His argument contended that there is no meaningful distinction between private international arbitral tribunals and arbitral tribunals established under investment treaties, mainly because neither are “governmental.” 

If you have a U.S. court engaged in discovery, said Kneedler, “it creates the potential for . . . controversy and . . . for having the United States involved . . . in something that is really none of its business.”

The takeaway from Kneedler’s arguments was that the Court should be cautious in accepting respondents’ arguments because any expansion of the scope of Section 1782’s reach should be addressed by Congress.  Congress “had specifically in mind formality,” he concluded.

Kneedler’s point resonated with both Justices Gorsuch and Breyer in the argument that immediately followed by Andrew Rhys Davies, arguing for Luxshare to allow discovery under Sec. 1782 for the company’s arbitration in Germany.  Davies had a difficult time answering Gorsuch’s repeated inquiries on why a definitive Sec. 1782 extension shouldn’t be left to Congress.  Davies ultimately countered that there was no need because the full statute answers the application question by putting it in the U.S. District Court’s hands.

Breyer shrugged the answer off, and said there may be too many problems extending the statute, referring to timing of the discovery requests in the arbitration proceeding, including before a tribunal is established.

Davies insisted the statute as it currently exists contemplates those decisions by the federal court, but Gorsuch jumped back into the conversation immediately, noting that such moves runs counter what arbitration is supposed to be, characterizing Sec. 1782, as noted, as “a very liberal grant of discovery.”

Source of the Review

The Court’s review on this issue can be attributed to a 3-to 2-circuit split created when the Sixth U.S. Circuit Court of Appeals decided Abdul Latif Jameel Transp. Co. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019) (“FedEx”).  At the time, the only circuit court decisions on the issue had been decided in 1999 by the Second Circuit (National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999)) and the Fifth Circuit (Republic of Kazakhstan v. Biedermann Int’l., 168 F.3d 880 (5th Cir. 1999)). In both cases, the courts ruled that the phrase “foreign or international tribunal” in Sec. 1782 did not apply with respect to private international arbitral tribunals. 

After the Sixth Circuit decided FedEx, the Fourth Circuit followed the Sixth Circuit in Servotronics Inc. v. Boeing Co., 954 F.3d 209 (4th Cir. 2020), but in a parallel case also brought by Servotronics, the Seventh Circuit instead followed the Second and Fifth Circuits in Servotronics Inc. v. Rolls-Royce PLC, 975 F.3d 689 (7th Cir. 2021), holding that Sec. 1782 did not apply with respect to private international arbitral tribunals.

All of these cases came in the wake of the only U.S. Supreme Court facing Section 1782 head on, Intel Corp. v. Advanced Micro Devices Inc., 542 U.S. 241 (2004). Today’s arguments discussed extending discovery to arbitration tribunals in light of Intel’s inclusion of matters quasi-judicial and administrative bodies.

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For an amicus argument against allowing Sec. 1782 discovery, see analysis by Derek T. Ho & Eliana M. Pfeffer, “Discovery in Aid of Foreign Arbitration Proceedings Unfairly Imposes Tremendous Costs on U.S. Companies,” 40 Alternatives 58 (April 2022) (available at https://bit.ly/3JUXs13).

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Today’s consolidated cases are expected to be decided before the Court’s term ends at the end of June. The transcript and audio of the Sec. 1782 arguments are available on the Supreme Court’s website here. Justice Clarence Thomas has missed this week’s arguments — hospitalized with an infection, according to the Court’s Sunday announcement — but will participate using the briefs and the transcript.

While Court watchers’ eyes this week have been on the confirmation hearings in the U.S. Senate Judiciary Committee, the continuing business of the nation’s top Court is a two-week deep dive into arbitration. The arbitration focus will resume with arguments on Monday morning with Southwest Airlines Co. v. Saxon, No. 21-309. That employment case will consider whether workers who load or unload goods from vehicles that travel in interstate commerce, but do not physically transport such goods themselves, are interstate ‘transportation workers’ exempt from the Federal Arbitration Act.

Highlights from Morgan v. Sundance Inc.No. 21-328 — an employment arbitration case that was the first of the March arbitration cases, argued earlier this week — can be found on CPR Speaks here. The four-case run will conclude next Wednesday with Viking River Cruises v. MorianaNo. 20-1573, which focuses on the relationship between the FAA and California’s Private Attorneys General Act. For background on Viking River, see Mark Kantor, “US Supreme Court to Review Whether Private Attorney General Action Can Be Waived by an Arbitration Agreement,” CPR Speaks (Dec. 16) (available here).

And one 2021-2022 term arbitration case, Badgerow v. Walters, No. 20-1143, awaits decision. Details on the case from the Nov. 2 arguments is available on CPR Speaks here.

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Pinney is counsel to Graydon Head & Ritchey in Cincinnati. On CPR’s behalf, he acted as counsel of record in an amicus brief urging the U.S. Supreme Court to accept the Servotronics and AlixPartners cases, as detailed above. Details on the brief can be found on CPR Speaks here. His AlixPartners brief on CPR’s behalf can be found on the Supreme Court docket page linked at the top or directly at https://bit.ly/3pzZpHj. Bleemer edits Alternatives to the High Cost of Litigation for CPR at altnewsletter.com.  Tamia Sutherland, a second-year law student at the Howard University School of Law, in Washington, D.C., assisted with the preparation of this post.

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Supreme Court Preview: Wednesday’s Combined Arguments Will Seek to Extend Federal Discovery Law to Arbitration Tribunals

By Tamia Sutherland

The U.S. Supreme Court will continue its two-week, four-argument deep dive into arbitration law and practice on Wednesday morning with an international law case.  It will consider the consolidated arguments in ZF Automotive US Inc. v. Luxshare Ltd., No. 21-401, and AlixPartners LLP v. The Fund for Protection of Investor Rights in Foreign States, No. 21-518.

The issue that the Court has agreed to decide is whether 28 U.S.C. § 1782 can be invoked in international arbitrations to obtain U.S.-style discovery for evidence. The question is whether the statutory language—“foreign or international tribunal”—extends to arbitration panels.

There is a circuit split on the issue, which is detailed at length at John Pinney, “International Arbitration Is Back at the Supreme Court with Today’s Cert Grant on Two Section 1782 Cases,” CPR Speaks (Dec 10, 2021) (available here).

ZF Automotive US, ZF Friedrichshafen AG (ZF AG) is a German corporation. It sold its Global Body Control Systems business unit to respondent Luxshare, a Hong Kong limited liability company. Luxshare alleges that after the deal with ZF AG closed, it learned that ZF US―a Michigan-based automotive parts manufacturer and a subsidiary of ZF AG―fraudulently concealed material facts during the negotiation and diligence process.

The Master Purchase Agreement provided that the transaction is to be governed by German law, and requires that all disputes be resolved “by three (3) arbitrators in accordance with the Arbitration Rules of the German Institution of Arbitration (DIS).”

In contrast to the private arbitration of ZF Automotive, AlixPartners focuses on investor-state arbitration, in which one of the parties is the government. In AlixPartners, the respondent Fund now before the Supreme Court is a Russian entity pursuing claims before an ad hoc UNCITRAL-rules arbitral tribunal against Lithuania for investors’ financial losses resulting from the insolvency of a Lithuanian bank.

The Fund brought its § 1782 request for discovery in New York against AlixPartners, a financial consulting firm that had advised the Lithuanian government regarding the bank’s insolvency.

More information on the cases and their parallels to Servotronics, Inc. v. Rolls-Royce, PLC, No. 20-794 , a case dismissed by the Court last September before its hearing in the wake of an arbitration award, is available in John Pinney’s post linked above. [The post also contains links to a CPR amicus brief in AlixPartners authored principally by Pinney urging the Court to take the case, but not in support of either side.]

On Wednesday, the consolidated arguments will include an argument by the U.S. Solicitor General, Elizabeth Barchas Prelogar.  In an amicus brief in support of the petitioners, Prelogar and her office argue that Section 1782 “does not authorize judicial assistance to obtain discovery for use in an arbitration, before a nongovernmental adjudicator, to which the parties consent.”

The amicus defines a foreign or international tribunal under the law as “a governmental adjudicator that exercises authority on behalf of one or more nation-states. It criticizes the approaches of the two federal circuits courts permitting arbitration discovery as “unsound.”

The Court’s calendar with the arguments’ timing is available here; the arguments will be available live, audio-only, via www.supremecourt.gov.

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For an amicus argument against allowing Sec. 1782 discovery, see analysis by Derek T. Ho & Eliana M. Pfeffer, “Discovery in Aid of Foreign Arbitration Proceedings Unfairly Imposes Tremendous Costs on U.S. Companies,” 40 Alternatives 58 (April 2022) (available at https://bit.ly/3JUXs13).

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The author, a second-year law student at the Howard University School of Law, in Washington, D.C., is a CPR 2021-22 intern.

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The Latest #SCOTUS #Arbitration: Process ‘Preference’; Int’l #Discovery; Federal Courts’ Arb #Jurisdiction

CPR presents on YouTube linked and embedded above a new discussion on the current U.S. Supreme Court hot arbitration topics.  

The discussion is moderated by Russ Bleemer, editor of Alternatives to the High Cost of Litigation (http://altnewsletter.com, and for CPR members at www.cpradr.org/news-publications/alternatives) (@altnewsletter)), who is joined by Angela Downes, Assistant Director of Experiential Education and Professor of Practice Law at the University of North Texas-Dallas College of Law; independent Dallas attorney-arbitrator Richard Faulkner, and arbitration advocate Philip J. Loree Jr., who heads the Loree Law Firm in New York (@PhilLoreeJr). 

Here are the matters discussed, and links on this CPR Speaks blog to details on the cases and potential cases along with resources including links to lower court opinions and briefs.

  1. Morgan v. Sundance Inc., No. 21-328, an employment case on the extent to which a federal court may defer to an arbitration agreement, which the nation’s top Court agreed to hear last week. For details, see Mark Kantor, “U.S. Supreme Court Adds an Arbitration Issue: Is Proof of Prejudice Needed to Defeat a Motion to Compel?” CPR Speaks (Nov. 15) (available here).
  2. The Court has scheduled two cases involving the reach of 28 U.S.C § 1782 for a Dec. 3 conference that will determine whether it should hear the matters or let lower court opinions stand.  The cases examine whether the statute, which authorizes “any interested person” in a proceeding before a “foreign or international tribunal” to ask for and receive discovery from a person in the United States, covers international arbitration tribunals. The cases, AlixPartners LLP v. The Fund for Protection of Investors’ Rights in Foreign States, No. 21-518, and ZF Automotive US Inc. v. Luxshare Ltd., No. 21-401, are discussed at Bryanna Rainwater, “The Law on Evidence for Foreign Arbitrations Returns to the Supreme Court,” CPR Speaks (Oct. 22, 202) (available here).  CPR has filed an amicus brief asking the Supreme Court to accept and decide the AlixPartners case; the NYC-based nonprofit which publishes this blog did not take a position in the case.  The details on the filing can be found at “CPR Asks Supreme Court to Consider Another Foreign Tribunal Evidence Case,” CPR Speaks (Nov. 12) (available here) (containing information and links to CPR’s previous amicus brief in Servotronics v. Rolls Royce PLC, No. 20-794, another Section 1782 case that the Supreme Court dismissed in September and removed from the Court’s October argument calendar).
  3. Badgerow v. Walters, No. 20-1143, an employment discrimination case that dives into the jurisdiction of federal courts under Federal Arbitration Act sections on enforcing and overturning arbitration awards.  The case was most recently discussed on CPR Speaks at Russ Bleemer, “Supreme Court Hears Badgerow, and Leans to Allowing Federal Courts to Broadly Decide on Arbitration Awards and Challenges,” CPR Speaks (Nov 2) (available here).

The video embedded above can be found on YouTube at https://www.youtube.com/watch?v=Sw8ps4vtTfs.

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United States Submits Amicus Brief in Servotronics International Arbitration Supreme Court Case

By Cai Phillips-Jones

Multiple parties have filed briefs concerning arbitration discovery rules in a case now before the U.S. Supreme Court for fall argument, Servotronics v. Rolls Royce, No. 794 (see the Court’s official docket at https://bit.ly/3ysbMrL).  

In the case, the Court will decide the question of whether federal district courts can assist with obtaining evidence in foreign arbitration cases at the parties’ request. The argument date has not yet been set.

The U.S. Solicitor General’s office in the Justice Department has filed an amicus brief advocating on behalf of the U.S. government for a narrow interpretation of 28 U.S.C. 1782, a law that has created a split among federal circuit courts. The law allows circuit courts to authorize discovery for litigation originating in “foreign tribunals,” including compelling testimony from witnesses residing in the United States. 

But circuit courts have not been able to agree about whether the law pertains to arbitration taking place in foreign countries: The Fourth and Sixth U.S. Circuit Courts of Appeals support court involvement in discovery for these arbitrations under Section 1782, and the Second, Fifth and Seventh Circuits reject this interpretation of the law.

The Fourth and Seventh Circuits both heard the same Servotronics case that is now on the Supreme Court docket. The circuit courts reached opposite conclusions. For background on the cases’ paths and how the current Seventh Circuit case made it to the Supreme Court, see Amy Foust, “The Next Arbitration Matter: Supreme Court Agrees to Decide Extent of Foreign Tribunal Evidence Powers,” CPR Speaks (March 22) (available at https://bit.ly/36cp27K), and “YouTube Analysis: What Happens Next with the 3/22 Servotronics Cert Grant on Foreign Arbitration Evidence,” CPR Speaks (March 22) (available at https://bit.ly/3jLbVT3).

CPR, which publishes CPR Speaks, submitted an amicus brief in support of the Servotronics certiorari request in January, which also was the subject of an amicus brief by the Atlanta International Arbitration Society. Since the petition was granted, 11 additional amicus briefs, including the brief of the Solicitor General’s office, have been filed.

Of the group, two state that they do no support either party–those of Prof. Yanbai Andrea Wang, of Philadelphia’s University of Pennsylvania Carey Law School, who asks the Court to clarify the scope of Section 1782, previously interpreted in the Intel case discussed below; and the International Court of Arbitration of the International Chamber of Commerce, which discusses the ICC’s international law views.

Two briefs support the petitioner, submitted on behalf of Columbia Law School Prof. George A. Bermann; and Palo Alto, Calif.-based ADR provider Federal Arbitration Inc.

Seven of the briefs support the respondent in seeking a narrow scope for Section 1782 discovery to exclude international arbitrations. In addition to the U.S. government’s brief, they include briefs submitted on behalf of China and Hong Kong-based arbitrators Dr. Xu Guojian, Li Hongji, Zhu Yongrui, Tang Qingyang, Chi Manjiao, Ronald Sum, and Dr. Zhang Guanglei; the U.S. Chamber of Commerce and the Business Roundtable; International Arbitration Center in Tokyo;  the General Aviation Manufacturers Association Inc. and the Aerospace Industries Association; Halliburton Co., which is facing a Section 1782 issue in a separate case, and the Institute of International Bankers, a New York City-based industry association of international banks operating in the United States.

* * *

In its brief, the government reviews the history of requests for discovery from foreign parties.

According to the amicus brief, prior to 1855, federal courts did not have the authority to compel a witness to testify in a case involving a foreign state party. In 1855, an act was passed by Congress to remedy this, but in a strange twist this law was subsequently “buried in oblivion” due to “a succession of errors in indexing and revising the statutes” and lost to the courts. A similar law was passed in 1877 and, in 1948, the law was broadened to include discovery for non-state parties.

In 1964, the language in the law was broadened again, applying to “a proceeding in a foreign or international tribunal” compared to the previous version’s “any judicial proceeding in any court in a foreign country.” Since then, only one Supreme Court case has discussed the scope of the law, Intel Corp. v. Advanced Micro Devices Inc., 542 U.S. 241 (2004).

The case concerned the distinction between judicial and administrative processes and whether Section 1782 applied to the latter. The Court found it applied. But recently, disagreement  has sprung up about whether the “foreign tribunal” language includes arbitrations involving foreign parties. The U.S. government has now taken the position that the law should not apply to private foreign arbitrations.

In its brief, United States argues (1) that such discovery functions were not within the scope of Congress’ intent when it passed 28 U.S.C 1782; (2) that interpreting the law to apply to international commercial arbitrations would create asymmetry with the domestic rules of arbitration incorporated in the Federal Arbitration Act; and (3) such an interpretation would create additional problems if extended to investor-state arbitration.

Noting that previous versions of the law clearly referred to only courts, the government acknowledges that the 1964 revision changed this language from “any judicial proceeding in any court in a foreign country,” to “a proceeding in a foreign or international tribunal.” This change, according to the government, and in contrast to the Fourth Circuit’s interpretation, was “only a measured expansion of the provision’s scope to capture quasi-judicial entities (such as investigating magistrates) and certain intergovernmental bodies (such as state-to-state claims commissions).” As the government points out, at the time the 1964 law was passed, international commercial arbitration was still novel, and thus likely outside Congress’s intent.

The government’s second argument discusses the incongruence of the limited discovery available under the FAA to arbitrators, in contrast to the discovery requests available to parties under Section 1782. Interpreting the law to apply to commercial arbitrations would “[allow] more expansive discovery in foreign disputes than what is permitted domestically,” the government’s amicus brief states.

While the court acknowledges that Section 1782 is not coextensive with domestic discovery rules, the “stake asymmetry” produced by a broad interpretation of the law “should [be taken] into account” in determining the law’s scope.

Finally, the government discusses a particular type of arbitration, investor-state arbitration, which gives investors who have claims against a foreign state in which they held an investment a private remedy for losses allegedly caused by the state. Arbitration in this context replaced a more time-consuming and expensive process, diplomatic protection, involving a government negotiating a resolution on behalf of one of its citizens who has suffered an economic injury.

The solicitor general’s amicus brief argues that investor-state arbitrations would be hampered by additional discovery procedures and “upset settled expectations” of investor and state parties entering contracts.

The U.S. government, in addition to filing a brief, has requested permission from the court to argue the case with the parties this fall The Court has not yet acted on the oral argument request, which is expected to be granted.

Meantime, the underlying arbitration in Servotronics has been conducted in London the week of May 10. If a decision emerges before the Court hears the arguments, the existence of an arbitration award could raise questions of mootness.

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The author, a J.D. student who will enter his third year this fall at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, is a 2021 CPR Summer Intern.

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The Next Arbitration Matter: Supreme Court Agrees to Decide Extent of Foreign Tribunal Evidence Powers

By Amy Foust

The U.S. Supreme Court today granted review in Servotronics Inc. v. Rolls-Royce PLC, et al., No. 20-794, and will be the next arbitration case on the Court’s docket.  It will likely be heard in the term beginning in October.

The case highlights law that had long appeared settled on whether foreign tribunals seeking discovery in the United States includes private arbitration panels.

In the past two years, cases on the statute in question–28 U.S.C. § 1782, “Assistance to foreign and international tribunals and to litigants before such tribunals”–have packed federal courts. See Joseph Famulari, “Section 1782 Circuit Split Update: 7th Circuit says Law Doesn’t Include Arbitration, as 9th Circuit Hears Arguments,” CPR Speaks (Oct. 22, 2020) (available at http://bit.ly/38kxyCV), an John B. Pinney, “Update: The Section 1782 Conflict Intensifies as the International Arbitration Issue Goes to the Supreme Court,” 38 Alternatives 125 (September 2020) (available at https://bit.ly/3tbgFCX).

Petitioner Servotronics presented the question formally as:

Whether the discretion granted to district courts in 28 U.S.C. § 1782(a) to render assistance in gathering evidence for use in “a foreign or international tribunal” encompasses private commercial arbitral tribunals, as the U.S. Courts of Appeals for the Fourth and Sixth Circuits have held, or excludes such tribunals without expressing an exclusionary intent, as the U.S. Courts of Appeals for the 2nd, 5th and, in the case below, the 7th Circuit, have held.

The question doesn’t reveal the unusual posture of the case, because it literally created its own circuit court split. There are two decisions:  The Seventh U.S. Circuit Court of Appeals decision on appeal that was granted today had prohibited Servotronics’ requested discovery for the foreign arbitration tribunal also had been decided in Servotronics’ favor against the same adversaries, Rolls Royce and Boeing, when the case was heard in the Fourth Circuit.

The International Institute for Conflict Prevention and Resolution—CPR, which publishes this blog–submitted an amicus brief asking the Supreme Court to resolve the split in opinions without taking a position on the merits. See “CPR Files Amicus Brief Asking U.S. Supreme Court to Tackle Foreign Discovery for Arbitration,” CPR Speaks (Jan. 6, 2021) (available at http://bit.ly/2PJvzBO) (CPR has created a web page for the brief at http://bit.ly/3nklaYp).  

The evolution of the circuit split is described in John B. Pinney, “Will the Supreme Court Take Up Allowing Discovery Under Section 1782 for Private International Arbitrations?” 38 Alternatives  103 (July/August 2020) (https://onlinelibrary.wiley.com/doi/abs/10.1002/alt.21848) (Pinney prepared on behalf of CPR the Supreme Court amicus brief in Servotronics).  

Justice Samuel A. Alito Jr. didn’t participate in the consideration of or the decision to accept the petition, according to this morning’s order list, indicating that the case could be decided by eight judges later this year.

In the case the nation’s top Court agree to hear today began in January 2016, during testing at a Boeing facility, when an engine manufactured and installed on an aircraft by Rolls Royce caught fire. Boeing sought reimbursement from Rolls Royce for damage to the aircraft.  Boeing and Rolls Royce settled the matter between them.

Rolls Royce then sought reimbursement from Servotronics, which manufactured a fuel valve for the engine.  When negotiations over the reimbursement failed, Rolls Royce demanded arbitration under the rules of the Chartered Institute of Arbitrators in the United Kingdom, as permitted by an agreement between Rolls Royce and Servotronics.

During the arbitration, Rolls Royce and Boeing declined an invitation to produce evidence that Servotronics insists is critical to its defense, including information about what Rolls Royce and Boeing did after observing certain test results.  Servotronics contended those test results presaged the fire and showed a missed opportunity to intervene before the fire.

Rolls Royce countered that the discovery requested by Servotronics was reviewed and denied by the arbitral panel, in part because the request was overly broad.  Servotronics applied for leave under 28 U.S.C. §1782 to subpoena records from Boeing’s Illinois headquarters and, in a separate application, to take the depositions of three South Carolina-based Boeing employees,  where the test flight went awry.

The South Carolina application was denied, but the denial was overturned by the Fourth Circuit. Servotronics Inc. v. Boeing Co., 954 F.3d 209, 216 (4th Cir. March 30, 2020) (available at https://bit.ly/3h7s0P8). The Fourth Circuit rejected the notion that §1782 is limited to public or state-sponsored tribunals. 

Further, the court reasoned, arbitration in the United Kingdom is government-sanctioned and regulated, at least by the U.K. Arbitration Act of 1996.  Therefore, a U.K. arbitrator is acting under the authority of the state and would meet Boeing’s proposed restrictions on the scope of §1782.

The appeals court dismissed Boeing and Rolls Royce’s predictions of expanded discovery and increased international arbitration costs if a tribunal is broadly defined in §1782, reasoning that courts have discretion to consider applications for documents or testimony in view of the Congressional purpose of extending aid to a foreign tribunal.

But the case also was being litigated in the Midwest. An Illinois application was initially granted ex parte but was quashed upon intervention by Rolls Royce and Boeing. The denial of discovery in Illinois was upheld by the Seventh Circuit—the case before the Court in Friday’s conference and accepted for argument today. Servotronics Inc. v. Rolls Royce PLC, 975 F.3d 689 (7th Cir. Sept. 22, 2020) (available at https://bit.ly/3ccK7RU).

The Seventh Circuit had followed the Second and Fifth Circuits in finding that a “foreign or international tribunal,” as used in 28 U.S.C. §1782, refers to a state-sponsored tribunal, and private arbitration is not state-sponsored. 

The Seventh Circuit opinion noted that a limited definition of “foreign or international tribunal” also avoids an apparent conflict with the Federal Arbitration Act, which permits a district court to order discovery only on request of the arbitrator.  The panel observed that including private international arbitral tribunals in the scope of §1782 would result in a prohibition on a party to a domestic arbitration seeking court assistance with discovery under the FAA, while permitting a party to an international arbitration to obtain the same assistance (under §1782).

The case therefore presented the circuit split in stark relief—with discovery granted in the Fourth Circuit, and denied in the Seventh, in the same matter between the same parties before the same foreign arbitral tribunal. 

Rolls Royce argued that certiorari should be denied to allow the Circuit Courts continue to consider the issue and because this case would likely be moot before the Supreme Court could complete its review, with the final arbitral hearing scheduled for May.

Today’s order provides further review and clarification by the Supreme Court in an area that had been considered settled law until the flurry of cases hit the circuit courts in recent years.  CPR Speaks will provide more analysis later today  on the background and the future of Servotronics.

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Author Amy Foust is an LLM candidate studying dispute resolution at the Straus Institute, Caruso School of Law at Malibu, Calif.’s Pepperdine University, and an intern with the CPR Institute through Spring 2021.

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