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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.

Author

Marilyn Batonga is a member of Baker McKenzie's Litigation & Government Enforcement Practice Group in Washington, DC. She has extensive experience in internal investigations, white collar defense, and anti-corruption due diligence. Marilyn is also a civil litigator and has handled matters before state and federal courts in New York. Marilyn represents both domestic and international corporate clients in a broad range of compliance and dispute resolution matters, including criminal investigations by the US Department of Justice, the US Securities and Exchange Commission, and other government agencies. She advises clients on compliance programs and performs due diligence on various business transactions. Currently, she focuses her practice on representing companies in investigations related to the Foreign Corrupt Practices Act and the False Claims Act. She has recently spent time in South Africa conducting internal investigations for companies impacted by reports of state capture and #GuptaLeaks. Marilyn has been recognized for her pro bono work, which involves the representation of minors in immigration and family court proceedings. Marilyn Batonga can be reached at [email protected] and + 1 202 835 6173.

Author

Grant Hanessian is a member of the Dispute Resolution team at Baker McKenzie New York. Grant Hanessian serves as global co-chair of the Firm’s International Arbitration Group. He chaired the Litigation Department of the Firm’s New York office from 2003 to 2012. Mr. Hanessian is the US alternate member of the ICC International Court of Arbitration in Paris, vice chairman of the Arbitration Committee of the US Council for International Business (US national committee of the ICC), and a member of the ICC’s Commission on Arbitration and its Task Forces on Arbitration Involving States or State Entities and on Financial Institutions and International Arbitration (leader of Investment Arbitration and Banking & Finance work stream). He is also a member of the American Arbitration Association—International Centre for Dispute Resolution’s International Advisory Committee and its Advisory Committee on Brazil, the International Arbitration Club of New York, the Arbitration Committee of the International Institute for Conflict Prevention and Resolution, the New York City Bar Association's Committee on International Commercial Disputes and Club Español del Arbitraje, and is a founding board member of the New York International Arbitration Center. Grant Hanessian can be reached at [email protected] and +1 212 891 3986.