International Arbitration Is Back at the Supreme Court with Today’s Cert Grant on Two Section 1782 Cases

By John Pinney

The U.S. Supreme Court this afternoon granted certiorari on two Section 1782 cases, 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.

By accepting these cases, the nation’s top Court has again agreed to decide whether 28 U.S.C. § 1782 can be invoked by parties in international arbitrations to obtain U.S.-style discovery to obtain evidence for use in such proceedings.

It is the second time this year that the Court has taken on the issue. Today’s cert grants follow the voluntary dismissal in September just six days before the scheduled argument for Servotronics, Inc. v. Rolls-Royce, PLC, No. 20-794, a case that the court had agreed to hear on the same issue last March.  For details on the dismissal, see Bryanna Rainwater, “Case Dismissed: Supreme Court Lightens Its Arbitration Load as Servotronics Is Removed from 2021-22 Docket,” CPR Speaks (Sept. 8) (available here).

As it had done in Servotronics, the International Institute for Conflict Prevention and Resolution, which publishes CPR Speaks, filed an amicus brief in support of the AlixPartners certiorari petition. [Editor’s note: John Pinney, author of this CPR Speaks blog post, also is counsel of record on both amicus briefs on CPR’s behalf. See the credit line for links below.]

In its order granting cert on the two cases, the Court formally granted CPR’s leave to file an amicus brief in AlixPartners. The Court consolidated the two cases and allotted an hour for an oral argument. The order is available here.  The case has not yet been scheduled; schedules for winter and spring 2022 argument dates in the current 2021-2022 term have yet to be released, and the case could be added before the Court’s year ends in June.

The specific issue before the Supreme Court is whether the critical phrase in § 1782, “foreign or international tribunal,” includes international arbitral tribunals. As readers who have been following the cases addressing § 1782 over the past two years know—see links to key CPR Speaks blog posts below–there is a circuit split regarding the applicability of § 1782 for private international arbitrations. The Second, Fifth and Seventh U.S. Circuit Courts of Appeals have held that an international arbitral tribunal is not a “tribunal” within the meaning of the statute, while the Fourth and Sixth Circuits have decided it is.

There was widespread disappointment in the international arbitration community when Servotronics was officially dismissed in late September after a party requested the dismissal shortly after an award was issued in the underlying London arbitration that mooted the § 1782 case before the Supreme Court.

The ZF Automotive case is virtually identical to Servotronics in that it involves a private international arbitration. It is noteworthy, however, that the ZF Automotive petition was brought before judgment out of the Sixth Circuit, one the two circuit courts allowing § 1782 discovery for a private international arbitral tribunal.

On the other hand, AlixPartners presents a significantly different issue than the Servotronics matter.

AlixPartners arises not from a private international arbitration but instead from an investment case brought under the Russian-Lithuanian bilateral investment treaty. 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 the 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. The case comes to the Supreme Court after the Second Circuit, applying criteria established in a recent case that denied discovery for a case before a private international arbitration tribunal–see In re Hanwei Guo for an Order to take Discovery for Use in a Foreign Proceeding Pursuant to 28 U.S.C. 1782, 965 F.3d 96 (2d Cir. 2020), as amended (July 9, 2020) (available at https://bit.ly/3IxxzUK)–allowed discovery for the investment case because of the degree of governmental involvement due to the investment treaty. 

For more on ZF Automotive, see Bryanna Rainwater, “The Law on Evidence for Foreign Arbitrations Returns to the Supreme Court,” CPR Speaks (Oct. 22, 202) (available here). For a CPR YouTube discussion of the cases and two other pending U.S. Supreme Court arbitration matters, see “The Latest #SCOTUS #Arbitration: Process ‘Preference’; Int’l #Discovery; Federal Courts’ Arb #Jurisdiction,” CPR Speaks (Nov. 23) (available here).

By taking both ZF Automotive and AlixPartners, the Supreme Court will now decide the scope of § 1782 for both private international and investment arbitrations.

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John 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 AlixPartners case, but not taking a position on behalf of either party. Details on the brief can be found on CPR Speaks here. His AlixPartners brief on CPR’s behalf can be found at on the Supreme Court docket page linked at the top or directly at https://bit.ly/3pzZpHj. Earlier this year, he filed a similar friend-of-the-Court brief asking the Supreme Court to accept the Servotronics case, which was accepted and later dismissed ahead of a scheduled argument. Details on the dismissal can be found in the CPR Speaks Sept. 8 posting cited above, and here. He discusses the Servotronics brief in a CPR YouTube analysis here. His Servotronics brief on CPR’s behalf can be found on the Supreme Court docket page linked at the top of this post or directly at https://bit.ly/3Ez58U4.

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YouTube Analysis: What Happens Next with the 3/22 Servotronics Cert Grant on Foreign Arbitration Evidence

John Pinney, counsel to Graydon in Cincinnati, joins Russ Bleemer, editor of Alternatives to the High Cost of Litigation, to set the stage on why the U.S. Supreme Court agreed Monday, March 22, to hear Servotronics Inc. v. Rolls-Royce PLC, et al., No. 20-794, and what may happen if the arbitration proceeds in advance of the expected late 2021 Court arguments.

This morning, CPR Speaks examined the cert grant and provided links covering some of the policy considerations that John discusses in this video.  See Amy Foust, The Next Arbitration Matter:  Supreme Court Agrees to Decide Extent of Foreign Tribunal Evidence Powers, CPR Speaks (March 22).

Disclosure: As discussed in the CPR YouTube video, 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 federal circuit court opinions on the topic 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).

Our guest John Pinney wrote the amicus brief on CPR’s behalf.   

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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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