The Seventh Circuit Joins The Second And Fifth Circuits In Holding That 28 USC § 1782(a) Does Not Apply To Private International Arbitration

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In our recent post, we have discussed the split in the federal appeals courts over whether a private international arbitration constitutes a “foreign or international tribunal” within the meaning of 28 U.S.C. § 1782(a), which authorizes U.S. district courts to provide assistance to foreign or international tribunals by ordering discovery of persons in the district.

On September 22, 2020, in Servotronics, Inc. v. Rolls-Royce PLC et al., No 19-1847, the U.S. Court of Appeals for the Seventh Circuit joined the Second and Fifth Circuits in holding that 28 USC § 1782(a) does not apply to private international arbitration.  As we have previously discussed, the Sixth and Fourth Circuits both recently ruled that section 1782 may be invoked to seek discovery in aid of private foreign or international commercial arbitrations. 

In Servotronics, the parties were involved in arbitration in England under the rules of the Chartered Institute of Arbiters (“CIArb”), which concerned an indemnification dispute over losses incurred when an aircraft engine caught fire during testing in South Carolina.  Servotronics filed an ex parte application under Section 1782 in the U.S. District Court for the Northern District of Illinois seeking a subpoena compelling Boeing to produce documents to be used in the arbitration in England.  The District Court initially issued the subpoena, but after Rolls-Royce intervened and moved to quash it, the District Court ruled in Rolls-Royce’s favor.

Servotronics, which was previously successful in the Fourth Circuit, appealed the District Court’s decision.  The Seventh Circuit, after discussing the split among the circuit courts, held that “a more limited reading of § 1782(a) is probably the correct one: a ‘foreign tribunal’ in this context means a governmental, administrative, or quasi-governmental tribunal operating pursuant to the foreign country’s ‘practice and procedure.’”  Specifically, in its decision, the Seventh Circuit relied on the statute’s legislative history and the fact that the narrower interpretation of the “tribunal” avoids “a serious conflict” with the Federal Arbitration Act (the “FAA”).

The Seventh Circuit noted that if Section 1782 were construed to permit federal courts to provide discovery assistance in private foreign arbitrations, litigants in those arbitrations would have access to more expansive discovery than litigants in domestic arbitrations:

“It’s hard to conjure a rationale for giving parties to private foreign arbitrations such broad access to federal-court discovery assistance in the United States while precluding such discovery assistance for litigants in domestic arbitrations.

This issue is still under consideration in the Ninth Circuit in HRC-Hainan Holding Co., LLC v. Yihan Hu, No. 20-15371, where oral arguments were held in September 2020.

Conclusion

The federal courts of appeal remain split on this issue so the outcome of a discovery petition in the United States in support of international arbitration will very likely depend on which circuit the petition is filed in.  As a result, it is imperative to consult a U.S. attorney concerning the rules applicable to obtaining discovery from non-parties in the jurisdictions where such discovery may be sought.

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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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