In a victory for the global use of arbitration as a dispute mechanism, the Fourth Circuit ruled that a district court could compel testimony from American residents for use in private arbitration in the United Kingdom. Servotronics, Inc. v. Boeing Co., ___ F.3d. ___, 2020 U.S. App. LEXIS 9872 * (4th Cir. March 30, 2020). As there are myriad contracts with arbitration agreements, this ruling means that parties will have an even freer hand in determining the procedures and substantive law to govern the resolution of their disputes as the arbitration clause need not specify an American forum in order for American courts to be able to compel testimony from individuals and companies domiciled in the United States. This ruling is not unbridled, as district courts are given discretion under 28 U.S.C. § 1782 to determine the extent of permissible discovery, but is much more arbitration friendly than preventing the procurement of testimony or documents from parties located in the United States.
The statute at issue, 28 U.S.C. § 1782, provides that “[t]he 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. . . .” The issue addressed in Servotronics is the extent of “foreign or international tribunal” and whether that phrase only encompasses courts and governmental bodies or whether it also extends to private arbitral panels.
Both the Second and Fifth Circuits have held that private arbitral bodies are not “tribunals” for purposes of § 1782(a). National Broadcasting Company, Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999); Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999). Subsequently, the Supreme Court held that § 1782 could be used to assist in proceedings before the Commission of European Communities. Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). Intel did not involve a private arbitral body and did not mention either Bear Sterns or Biedermann, sowing the seeds for confusion. After Intel, district courts have not reached a consensus on the scope of § 1782. Compare In re Hallmark Capital Corp., 534 F. Supp. 2d 951, 955 (D. Minn. 2007) and In re Roz Trading Ltd., 469 F. Supp. 2d 1221, 1224 (N.D. Ga. 2006) (holding that private arbitral bodies are encompassed by § 1782) with In re Dubey, 949 F. Supp. 2d 990, 993–94 (C.D. Cal. 2013); Ex rel Application of Winning (HK) Shipping Co. Ltd., 2010 WL 1796579, at *7 (S.D. Fla. April 30, 2010); In re Operadora DB Mexico, S.A. de C.V., 2009 WL 2423138, at *6 (M.D. Fla. Aug. 4, 2009); and In re Arbitration between Norfolk S. Corp., Norfolk S. Ry. Co., & Gen. Sec. Ins. Co. & Ace Bermuda Ltd., 626 F. Supp. 2d 882, 885–86 (N.D. Ill. 2009) (holding the private arbitral bodies are not encompassed by § 1782). In this case, the district court ignored Intel and relied on the earlier precedents to deny Servotronics’ § 1782 application.
During the time between the district court’s opinion and the Fourth Circuit’s opinion in this case, the Sixth Circuit held that § 1782(a) unambiguously “includes private commercial arbitral panels established pursuant to contract and having the authority to issue decisions that bind the parties.” In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710, 723 (6th Cir. 2019). This, in combination with the Fourth Circuit’s opinion here, creates at least a superficial circuit split with the Second and Fifth Circuits (though it is likely the Supreme Court will choose to wait until there is a post-Intel circuit split).
The Fourth Circuit also performed an analysis of how its ruling is in accord with the governmental policy embodied in the Federal Arbitration Act and its UK counterpart. It rejected a parade of horribles on the basis that § 1782 is more limited in scope than discovery under the Federal Rules of Civil Procedure and is supervised by the district court and not the parties themselves. On its reading of UK law concerning arbitrations, the Fourth Circuit held that even if it applied the more restrictive scope of § 1782(a), it would still hold that this UK arbitration panel would meet the definition as being blessed by the government of the United Kingdom in the same way the Federal Arbitration Act blesses American arbitration panels (this is another reason why this case will probably not be the one that the Supreme Court will accept to definitely answer the question of the scope of § 1782(a)).