Supreme Court to Resolve Circuit Split Over Whether District Courts Can Order Discovery in Aid of Private International Arbitration
Construction and Procurement Law News, Q3 2021
This term the Supreme Court is set to resolve a circuit split over the extent of a federal district court’s power to order a person “who resides in or is found” in its district “to give testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal” pursuant to 28 U.S.C Section 1782(a). Put simply, the question before the Court is whether the term “foreign or international tribunal” includes private international arbitration tribunals and thus whether Section 1782 can be used to introduce U.S.-style discovery into private international arbitration.
The Seventh and Fourth Circuits arrived at opposite answers to this question when examining the same set of facts in the same underlying case. In the underlying case, Servotronics sought discovery from Boeing, a third party to the arbitration, to assist Servotronics in a UK-based arbitration against Rolls-Royce.
The Seventh Circuit (with jurisdiction over federal trial courts in IL, IN, and WI) held that the phrase “foreign or international tribunal” in the context of Section 1782(a) means “a state-sponsored, public or quasi-governmental tribunal” and thus that Section 1782(a) does not authorize the district court to compel discovery for use in the UK-arbitration. In stark contrast, the Fourth Circuit held that the phrase “foreign or international tribunal” in the context of Section 1782(a) includes private arbitration, and it therefore found that that Section 1782(a) does authorize the district court to compel discovery for use in the UK-arbitration. The Supreme Court granted cert over the Seventh Circuit case, Servotronics Inc., v. Rolls-Royce PLC, 975 F.3d (7th Cir. 2020), and it was set for oral argument on October 5, 2021. Servotronics announced it would drop its appeal on September 8, 2021.
Hence, the dispute remains unresolved on this international law discovery issue. For now, the Fourth Circuit (with jurisdiction over federal trial courts in MD, NC, SC, VA, and WVA) holds that Section 1782 allows district courts to provide discovery assistance to participants in private arbitrations, then U.S. companies subpoenaed in the federal trial courts in those states may be compelled to participate in onerous U.S.-style discovery even though they have chosen international arbitration in part to avoid the burdens of discovery.
Moreover, third parties to the arbitration, like Boeing in the underlying case, who possess material evidence may also be compelled to provide witnesses and documents to assist a private foreign tribunal. This could mean that in an international construction dispute, any party involved in a project would be potentially open to discovery, including expansive document production and depositions, in international arbitration.
Importantly, however, Section 1782 also gives the district court the authority to determine the procedure for the gathering of evidence. Therefore, even if the Supreme Court one day determines that the phrase “foreign or international tribunal” includes private international arbitration, a district court may nevertheless restrict the scope of discovery by applying, in whole or in part, the “practice and procedure of the foreign country or the international tribunal” with jurisdiction over the underlying “proceeding.”
This article, "Supreme Court to Resolve Circuit Split Over Whether District Courts Can Order Discovery in Aid of Private International Arbitration," was published in the Bradley Construction and Procurement Law Newsletter for the third quarter of 2021.