Fourth Circuit held that parties can apply for discovery orders from federal district courts under Section 1782 to support foreign seated private arbitration – case note of Servotronics, Inc. v. Boeing Co., No. 18-2454 (4th Cir. March 30, 2020)
Tony Ng, Kathryn (Lee) Boyd and George Yates
The United States Court of Appeal for the Fourth Circuit has recently held that federal district courts can order discovery in support of foreign-seated private commercial arbitration under Section 28 U.S.C. § 1782. This decision, together with the Sixth Circuit in re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710, 723 (6th Cir. 2019), have created a split with the previous rulings of the Second and Fifth Circuits in which the courts held that federal district courts do not have the power to order discovery for private arbitration seated outside the US.
Circuit Court Decisions before Boeing
Section 1782 provides that a U.S. district court may, on the request of an interested party, provide assistance in connection with a proceeding before “a foreign or international tribunal” by ordering a person in its district to give his “testimony or statement or to produce a document or other thing” to support an arbitration. But can parties in foreign seated private arbitration obtain Section 1782 assistance? The issue will then be whether a private arbitral tribunal is a “foreign or international tribunal” under Section 1782.
i. Second and Fifth Circuits in Bear Stearns and Biedermann
In National Broadcasting Company, Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999) and Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999), the Second and Fifth Circuits held that, in respect of arbitration, Section 1782 assistance is only available to governmental or intergovernmental arbitral tribunals.Those courts arrived at their conclusion by focusing on the absence in the legislative history of Section 1782 of any mention of private arbitral proceedings [1][2]. In particular, the Second Circuit considered that “significant congressional expansion of American judicial assistance to international arbitral panels created exclusively by private parties would not have been lightly undertaken by Congress without at least a mention of this legislative intention.”[3]. Both the Fifth and Second Circuits also relied on several policy considerations to deny the expansion of Section 1782 assistance to private arbitration, including that such authorisation would undermine the efficiency of the arbitration proceedings [4].
ii. Sixth Circuit in re Application to Obtain Discovery for Use in Foreign Proceedings
Twenty years later in 2019, the Sixth Circuit veered from the Second and Fifth Circuits and held that a private commercial arbitration tribunal is a “foreign and international tribunal” under Section 1728.
The Sixth Circuit reached its conclusion mostly by a textual analysis of “foreign and international tribunal”. The Sixth Circuit consulted different dictionaries and judgments and concluded that the phrases “foreign tribunal” and “international tribunal” are not a “term of art with a specialized meaning”[5] and that “tribunal” should cover private tribunals. Moreover, the Sixth Circuit noted that the Supreme Court decision Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) will support its conclusion and that Intel “contains no limiting principle suggesting that the ordinary meaning of “tribunal” does not apply”[6].
The Sixth Circuit expressed doubts in the approach by the Second and Fifth Circuits in Bear Stearns and Biedermann in overly relying on the absence of specific mention of private arbitral tribunals in the legislative history of Section 1782. It reasoned that “the Second and Fifth Circuits turned to legislative history too early in the interpretation process”[7] and noted that “some scholars and judges have questioned the reliability of legislative history as an indicator of statutory meaning”[8]. Even assuming the legislative history was helpful in the analysis, the Sixth Circuit considered that Congress intended to expand the applicability of Section 1728 and “the legislative history does not indicate that the expansion stopped short of private arbitration”[9].
The Sixth Circuit also found the other policy considerations in Bear Stearns and Biedermann unpersuasive. For the consideration in efficiency of arbitration proceedings, the Sixth Circuit was of the view that a district court has the discretion to limit or reject intrusive or burdensome discovery requests [10].
Servotronics, Inc. v. Boeing Co.
After the Sixth Circuit’s decision of re Application, the Fourth Circuit has recently sided with the Sixth Circuit in the interpretation of Section 1728 in Boeing.
Servotronics supplied a valve to Rolls-Royce PLC. The latter installed the valve in an engine it manufactured. The engine was supplied to the Boeing Company for a new Boeing aircraft. During an engine test in January 2016, the engine caught fire and caused significant damage to the aircraft. Rolls-Royce settled Boeing’s claim for damages. Rolls-Royce contended that Servotronics’ valve caused the fire and commenced arbitration against Servotronics.
The arbitration was seated in Birmingham, UK. To obtain evidence for the arbitration, Servotronics filed an application under Section 1782 to obtain testimony from three Boeing employees residing in South Carolina.
The issue here was whether the UK tribunal was a “foreign tribunal” under Section 1782.
Relying on Bear Stearns and Biedermann, the district court ruled that the private arbitration between Servotronics and Rolls-Royce was not a “foreign tribunal” and denied Servotronics’ application.
Servotronics appealed to the Fourth Circuit.
Decision of Fourth Circuit
Unlike the Sixth Circuit, the Fourth Circuit did not carry out an extensive analysis of the reasoning of the Second and Fifth Circuits in Bear Stearns and Biedermann. It also did not approach the issue with a “textual analysis” of the wording of Section 1728. Nevertheless, its reading of Intel is somewhat similar to the Sixth Circuit’s.
The Fourth Circuit’s decision turned on its analysis of the legislative history of Section 1782, in particular a 1964 amendment adding the language “a foreign or international tribunal” to the scope of the act [11]. The Court noted that the Supreme Court in Intel emphasised Congress’s insertion to a proposed amendment of “a foreign or international tribunal” to replace a previous version of “in any judicial proceeding pending in any court in a foreign country”. The Fourth Circuit noted that the Supreme Court considered that “Congress understood that its change would authorize U.S. assistance not only in connection with court proceedings but also “in connection with administrative and quasi-judicial proceedings abroad””[12]. The Fourth Circuit considered that the 1964 amendment “manifests Congress’ policy to increase international cooperation by providing U.S. assistance in resolving disputes before not only foreign courts but before all foreign and international tribunals”[13].
Conclusion
The Fourth Circuit Court’s decision in Servotronics has concretized a pivotal departure in the interpretation of “foreign and international tribunals” from the decades old Second and Fifth Circuits’ limited reading of Section 1782 to apply only to proceedings before governmental or intergovernmental tribunals.
Servotronics reflects both the proliferation of private commercial arbitration in the recent past and U.S. courts’ growing acceptance and encouragement of arbitration for dispute resolution. We predict other courts will follow suit in a broad application of Section 1782, and perhaps obviate review by the Supreme Court, particularly given the Intel decision. In any case, we likely await final resolution of this issue by the Supreme Court.
[1] Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999), 882
[2] National Broadcasting Company, Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999), 190
[3] Ibid, 190
[4] Biedermann, 883 and Bear Stearns, 190-191
[5] In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710, 723 (6th Cir. 2019), 719
[6] Ibid, 726
[7] Ibid, 726
[8] Ibid, 727
[9] Ibid, 728
[10] Ibid, 729-730
[11] Servotronics, Inc. v. Boeing Co., No. 18-2454 (4th Cir. March 30, 2020), 209, 213
[12] Ibid, 213
[13] Ibid, 213