Reed Smith Client Alerts

In Servotronics, Inc. v. Boeing Co., No. 18-2454 (4th Cir. March 30, 2020), the United States Court of Appeals for the Fourth Circuit recently held that: (1) private arbitral tribunals seated outside the United States constitute foreign tribunals for purposes of 28 U.S.C. section 1782 (section 1782); and (2) parties may therefore seek discovery from a U.S. federal court pursuant to section 1782 in support of foreign-seated arbitral tribunals. Servotronics is significant because it represents the second time in less than a year that a U.S. federal appellate court has expressly concluded that foreign-seated private arbitration tribunals qualify for section 1782 discovery assistance, which lends further support to the growing consensus that private international arbitral tribunals should benefit from section 1782 assistance.

I. Servotronics background

Servotronics concerned a dispute between a parts manufacturer (Servotronics), an aircraft engine manufacturer, and an aircraft designer/manufacturer. In relevant part, Servotronics manufactured a servo valve that was placed in an aircraft engine that faced mechanical difficulties during testing in an aircraft engine that was installed in a passenger aircraft. The mechanical failure resulted in a fire that started in the aircraft engine and eventually spread to the aircraft itself.

Following the fire, the aircraft designer/manufacturer sued the engine manufacturer for damages, and those two parties settled for $12.8 million. The engine manufacturer then demanded that Servotronics indemnify it for the $12.8 million loss the engine manufacturer suffered.

Servotronics rejected the engine manufacturer’s indemnity demand, and the aircraft engine manufacturer commenced an arbitration against Servotronics pursuant to an arbitration clause in a contract between those parties. The arbitration clause seated the arbitration in Birmingham, England, and required the arbitration to be conducted in accordance with the Rules of the Chartered Institute of Arbitrators (Arbitration).

After the Arbitration was commenced, Servotronics filed an ex parte application pursuant to section 1782 in federal district court in South Carolina asking for the right to serve subpoenas on former and current employees of the aircraft designer/manufacturer. The requested subpoenas sought oral evidence from those employees that Servotronics intended to use in the Arbitration.

The federal district court before which Servotronics filed its section 1782 application denied the application on grounds that private arbitral tribunals seated outside the United States are not foreign tribunals within the meaning of section 1782. To reach that conclusion, the federal trial court relied on two nonbinding pre-Intel decisions from the Second Circuit Court of Appeals (which has jurisdiction over federal courts in New York, Connecticut, and Vermont) and the Fifth Circuit Court of Appeals (which has jurisdiction over federal courts in Texas, Louisiana, and Mississippi).

Servotronics subsequently appealed the trial court’s decision to the Fourth Circuit, which had not previously ruled on whether an arbitral tribunal seated outside the United States constitutes a foreign tribunal for section 1782’s purposes.