In re Servotronics, Inc., No. 2:18-mc-00364-DCN (D.S.C. Nov. 6, 2018) [click for opinion]
Plaintiff Rolls-Royce manufactured an engine that contained a valve made by Defendant Servotronics. The engine was incorporated into a plane made by Boeing. During testing on the plane, a piece of metal got lodged in the valve, and a fire occurred in the engine that damaged both the engine and the plane. Boeing maker sought compensation from Rolls-Royce. Rolls-Royce settled the claim and in turn demanded indemnification from Servotronics, which Servotronics refused.
Rolls-Royce and Servotronics’s relationship was governed by an agreement, which called for disputes to be resolved by arbitration under the rules of the Chartered Institute of Arbitrators. The parties agreed to arbitrate in London.
Servotronics sought testimony to be used in the arbitration from employees at Boeing’s facilities in Charleston, South Carolina. Accordingly, Servotronics filed an ex parte application in the District Court for the District of South Carolina for an order pursuant to 28 U.S.C. § 1782 to take discovery for use in the foreign proceeding.
A court has the authority to grant a Section 1782 application when (1) the person from whom discovery is sought resides or can be found in the district where the application is made; (2) the discovery is for use in a proceeding before a foreign tribunal; and (3) the application is made by a foreign or international tribunal or any interested person. At issue here was whether the private arbitral body conducting the arbitration qualified as a tribunal under Section 1782.
Relying on precedent from the Second and Fifth Circuits, the court held that private arbitral bodies do not constitute “tribunals” and thus do not fall within the ambit of Section 1782. The court noted that the Supreme Court had referenced “arbitral tribunals” among the foreign tribunals to which Section 1782 applies in its 2004 decision in Intel Corp. v. Advanced Micro Devices, Inc. But the Supreme Court never specifically referenced private arbitral tribunals or mentioned the relevant Second and Fifth Circuit precedent. In the absence of such guidance, the district court declined to find that Section 1782 applies to private international arbitrations and denied Servotronics’s application.
A version of this post originally appeared in the January 2019 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.