Corporation Not Entitled to Discovery Assistance for Private Foreign Arbitration

Two corporations agreed to arbitrate a dispute in front of a foreign arbitration panel in Birmingham, England, under the terms of their agreement. After they agreed to arbitrate, one of the parties filed an ex parte application to a U.S. district court asking the court to issue a subpoena compelling a third company to produce documents for use in the arbitration. The district court initially granted the motion, but later quashed it after the defendant objected. The plaintiff appealed, and the appellate panel determined that the district court did not err. The appellate panel found that private arbitration panels did not qualify for the kind of discovery assistance provided for foreign state-sponsored tribunals under §§ 1781 and 1782 of Title 28.

Rolls-Royce PLC manufactured and sold a Trent 1000 aircraft engine to the Boeing Company for incorporation into a 787 Dreamliner aircraft. In January 2016, Boeing tested the new aircraft at its facility near the Charleston International Airport in Charleston, South Carolina. A piece of metal became lodged in an engine valve, restricting the flow of fuel to the engine. As Boeing employees attempted to fix the problem, the engine caught fire, damaging the aircraft. Boeing demanded compensation from Rolls-Royce, and in 2017 the companies settled for $12 million. Rolls-Royce then sought indemnification from Servotronics, Inc., the manufacturer of the valve.

Under an agreement between Rolls-Royce and Servotronics, any dispute not resolved through negotiation or mediation must be submitted to binding arbitration in Birmingham, England under the rules of the Chartered Institute of Arbiters. After the parties agreed to arbitrate, Servotronics filed an ex parte application to the U.S. District Court for the Northern District of Illinois asking the court to issue a subpoena compelling Boeing to produce documents for use in the London arbitration. The judge initially granted the application and issued the requested subpoena. Rolls-Royce intervened and moved to quash, arguing that 28 U.S.C. § 1782(a) did not permit a district court to order discovery for use in a private foreign commercial arbitration. The judge reversed and quashed the subpoena and Servotronics appealed.

The appellate panel began by noting that § 1781 and § 1782 of Title 28 govern the district court’s authority to provide discovery assistance in litigation in foreign and international tribunals. The panel then stated that the instant case involved a § 1782(a) application filed by a party to private commercial arbitration in the United Kingdom. The panel noted that there was no letter rogatory or a request from a foreign or international tribunal. Rather, the panel stated the judge based her initial decision on Servotronics’ status as a party with interest in the foreign dispute, before determining that the statute did not authorize discovery assistance for private foreign arbitrations.

The panel then stated that whether the district court concluded correctly in quashing the subpoena was a question of the first impression for the 7th Circuit. However, the panel noted, several of its sister circuits had already addressed the issue, and a split had recently emerged. The panel then stated that it would side with the 2nd and 5th Circuits in the interpretive debate. The panel noted that both an interpretation that the word “tribunal” encompassed private arbitration panels and an interpretation that it did not were plausible based on canvassing dictionary definitions of the word “tribunal.”

The panel then turned to the statutory context to provide additional clues. The panel then stated that once it situated the word “tribunal” within the proper statutory context, the expansive definition, which included private arbitrations, became far less plausible. The panel stated that service-of-process assistance and letters rogatory, governed by § 1696 and § 1781, are matters of comity between governments, which suggested that the phrase “foreign or international tribunal” as used in the statutory scheme meant state-sponsored tribunals and did not include private arbitration panels. The panel then found that the narrower understanding of the word “tribunal” avoided a serious conflict with the Federal Arbitration Act. The panel stated that, because the discovery assistance contemplated by § 1782(a) is notably broader than that authorized by the FAA, an expansive interpretation of the word “tribunal” would lead to a situation in which parties to private foreign arbitrations had broader access to federal-court discovery assistance than parties to domestic arbitrations. The panel concluded that § 1782(a) does not authorize district courts to compel discovery for use in private foreign arbitrations and it, therefore, affirmed the decision of the district court.

You can view the Court’s decision here.

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