Supreme Court May Decide if Litigants Can Conduct U.S. Discovery for Private International Arbitrations

Troutman Pepper

Troutman Pepper

While discovery, especially document discovery, is increasingly a feature in complex international commercial arbitrations, it is almost never as broad as discovery permitted by U.S. law and procedure. Indeed, when global companies contract, the parties often agree to arbitration in lieu of litigation, particularly U.S. litigation, at least in part to avoid the breadth of U.S. discovery. However, as the law stands today, commercial parties who elect to arbitrate before a “foreign or international tribunal,” for example, under the rules of an arbitral body such as the LCIA or the ICC, face the real prospect that one of them might attempt to use 28 U.S.C. §1782 to obtain discovery in the U.S.

The statute is unique, as it allows a party access to discovery of witnesses and documents located in the U.S. without having to endure the procedural burdens of the Hague Convention. The issue courts are grappling with is whether parties to private international arbitrations can avail themselves of this powerful tool. As discussed below, there is a circuit split as to whether this unique statute extends to private, “foreign” or “international” commercial arbitrations. The U.S. Supreme Court may well take up that split if Rolls-Royce, plc files a petition for a writ of certiorari based on a dispute arising from engine fires on the Boeing 787 Dreamliner.

28 U.S.C. §1782 provides, in pertinent part:

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 order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court. By virtue of his appointment, the person appointed has power to administer any necessary oath and take the testimony or statement. The order may prescribe the practice and procedure, which may be in whole or part the practice and procedure of the foreign country or the international tribunal, for taking the testimony or statement or producing the document or other thing. To the extent that the order does not prescribe otherwise, the testimony or statement shall be taken, and the document or other thing produced, in accordance with the Federal Rules of Civil Procedure.

A person may not be compelled to give his testimony or statement or to produce a document or other thing in violation of any legally applicable privilege.

28 U.S.C. § 1782(a) (emphasis added).

Federal courts have issued conflicting rulings as to the reach of the term “foreign or international tribunal.” In 1999, the Second and Fifth Circuits held that the statute does not extend to “foreign or international” arbitrations. The Second Circuit, in NBC v. Bear Stearns, 165 F.3d 184 (2d Cir. 1999), concluded that a commercial arbitration conducted in Mexico under the auspices of the ICC, a private organization headquartered in France, was not a proceeding in a “foreign or international tribunal” pursuant to the statute. The Second Circuit reviewed the legislative intent behind the statute. Evaluating House and Senate Reports, which explained the choice of the word “tribunal,” the Second Circuit found persuasive the legislature’s intent that courts should have discretion to grant assistance “when proceedings are pending before investigating magistrates in foreign countries.” NBC, 165 F.3d at 189 (internal citations omitted). Similarly, the amended statute facilitates the collection of evidence for use “before a foreign administrative tribunal or quasi-judicial agency.” Id. Thus, the Second Circuit found that the absence of reference to private proceedings “strongly suggest[s]” that Congress did not consider them in drafting the statute. Id. Likewise, the Fifth Circuit, in Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999), held that a “foreign or international tribunal” must be public, state-sponsored, or governmental. See also El Paso Corp. v. La Comision Ejecutiva Hidroelectrica Del Rio Lempa, 341 F. App’x 31, 33 (5th Cir. 2009) (affirming Biedermann as controlling, notwithstanding the Supreme Court’s decision in Intel Corp. discussed below).

In 2004, the Supreme Court, in Intel Corp. v. Advanced Micro Devices, Inc. 542 U.S. 241, 253 (2004), held that the Commission of the European Communities is a “tribunal” pursuant to the statute. Id. at 258. Reasoning that the Commission’s determinations are subject to review in the Court of First Instance and the European Court of Justice, there was “no warrant to exclude the European Commission.” Id. at 254-255; 258. However, in evaluating the amendments to the statute, the Court noted that “[t]he term ‘tribunal’ ... includes investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts.” Id. at 258[1]. The opinion makes no mention of either NBC or Biedermann.

Relying on the Intel Corp. decision, the Sixth and Fourth Circuits have since ruled that the statute does apply to private commercial arbitrations before a foreign arbitral body. In 2019, In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710, 713 (6th Cir. 2019)[2], the Sixth Circuit held, generally, that the Supreme Court’s reasoning in Intel Corp. signifies that there is no distinction between public or private in the statutory language of “foreign or international tribunal.”

On March 30, 2020, the Fourth Circuit joined the Sixth Circuit in allowing §1782 to be used in a private “foreign or international” arbitration. See Servotronics, Inc. v. Boeing Co., 954 F.3d 209, 216 (4th Cir. 2020). The Fourth Circuit, citing to Intel Corp., evaluated the statute’s amendment in 1964, in which Congress sought to improve U.S. cooperation with foreign nations by providing “federal-court assistance in gathering evidence for use in foreign tribunals.” Id. at 213 (citing Intel Corp., 542 U.S. at 247, 124 S. Ct. 2466). The amendment deleted from the former version the words “in any judicial proceeding pending in any court in a foreign country” and replaced them with the phrase “in a proceeding in a foreign or international tribunal.” Id. (citing Intel Corp. at 248–49) (emphasis in original). Accordingly, the Fourth Circuit concluded that “[t]he current version of the statute, as amended in 1964, thus 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.” Id.

The Fourth Circuit’s decision -- which may be subject to a petition by Rolls-Royce – involves the Boeing 787 Dreamliner aircraft, which was subject to engine fires within the Rolls-Royce engines in 2015. Rolls-Royce claims that the proximate cause of the engine fires was a valve supplied by Servotronics. After settling with Boeing, Rolls-Royce sought indemnity from Servotronics and, upon refusal, pursued arbitration in 2018, seated in Birmingham, England pursuant to the rules of the Chartered Institute of Arbitrators (CIArb). At issue was Rolls-Royce’s attempt to preclude Servotronics from compelling three Boeing employees in the U.S. to testify in connection with the underlying arbitration.

That issue arose when Servotronics filed an ex parte application in the U.S. District Court of South Carolina to obtain an order allowing subpoenas for the chair of the Boeing Incident Review Board that investigated the fire and two employees who participated in troubleshooting the plane’s engine issues. After the district court ruled that the English arbitration panel was not a “tribunal” under the statute, see In re Servotronics, Inc., No. 2:18-MC-00364-DCN, 2018 WL 5810109, at *1 (D.S.C. Nov. 6, 2018), Servotronics appealed to the Fourth Circuit, which reversed for the reasons described above. Servotronics, 954 F.3d at 216. On April 28, 2020, Rolls-Royce filed a motion to stay pending resolution of its petition for writ of certiorari, but as of this date there is no indication that Rolls-Royce has filed. Id. [ECF 11].

Most recently, in HRC-Hainan Holding Co. LLC v. Yihan Hu, No. 20-15371 (9th Cir. March 4, 2020), a group of investors, ousted from a Chinese in vitro fertilization project, sought discovery under the statute in a $20 million arbitration before the China International Economic and Trade Arbitration Commission (CIETAC). The investors contracted to provide more than $10 million to construct and furnish an in vitro fertilization center; they accuse the owners of illegally seizing control of the IVF center and improperly using the investors’ equipment and intellectual property. The investors argue that “the ordinary meaning of ‘tribunal’ includes an arbitral tribunal, regardless of whether it is governmental or private.” However, Yihan Hu argues, in keeping with the Second Circuit’s rationale in NBC, that §1782 does not apply to such arbitrations among private parties. How the Ninth Circuit might rule, and if it will do so before the Supreme Court weighs in, is uncertain.

Regardless of which direction the Ninth Circuit goes, there is a clear circuit split. If Rolls-Royce does petition the Supreme Court, and whether the Court ultimately takes the Rolls-Royce case, obviously remains to be seen. But, in that event, and should the Court conclude the Fourth and Sixth Circuits had it right, many international companies will undoubtedly find themselves engaged in U.S. discovery notwithstanding dispute resolution clauses requiring binding arbitration before “foreign tribunals,” which many of those companies chose, at least in part, to avoid U.S. courts generally, and U.S. discovery more specifically.

[1] The Court cites to Prof. Hans Smit’s International Litigation Under the United States Code, 65 Colum. L. Rev. 1015, 1026–1027 (1965). Professor Smit participated in drafting the 1964 amendments to the statute.

[2] Abdul Latif Jameel Transp. Co. Ltd. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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