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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