Reed Smith Client Alerts

In Servotronics, Inc. v. Rolls-Royce PLC, the U.S. Court of Appeals for the Seventh Circuit recently held that 28 U.S.C. section 1782 does not authorize a district court to compel discovery for use in private arbitrations seated outside the United States.1 Rolls-Royce is significant because: (1) it deepens the circuit split that has emerged over the use of section 1782 to obtain discovery in aid of private commercial arbitrations seated outside the United States; and (2) it virtually assures that the U.S. Supreme Court will take the issue up on certiorari when the opportunity arises.

The Seventh Circuit Court of Appeals deepens the circuit split

The Rolls-Royce decision arose from the same factual event that led to a conflicting section 1782 decision from the Fourth Circuit in March of this year in Servotronics, Inc. v. Boeing Co., 954 F.3d 209 (4th Cir. 2020), which is discussed in detail in our prior alert. There, an aircraft engine manufactured by Rolls-Royce caught fire during maintenance because of a faulty valve, and the resulting fire severely damaged a Boeing 787 aircraft in which that engine was housed.

Boeing brought a claim against Rolls Royce for the fire damage to the aircraft, and the parties settled their dispute. Rolls-Royce then commenced an arbitration against Servotronics, the manufacturer of the valve. The arbitration was seated in England and was conducted under the rules of the Chartered Institute of Arbitrators.

After Rolls-Royce commenced the arbitration, Servotronics filed section 1782 applications to obtain evidence to be used in the arbitration, including an ex parte application in the Northern District of Illinois against Boeing. Servotronics’ ex parte application sought the right to serve a subpoena on Boeing to compel it to produce documents that Servotronics intended to use in its arbitration with Rolls Royce.

The trial court initially granted Servotronics’ ex parte application, but subsequently reversed its decision after Boeing contested the matter. Specifically, after hearing from Boeing, the trial court quashed the subpoena on grounds that in its view, a private arbitral tribunal does not qualify as a foreign tribunal within the meaning of section 1782.

Servotronics appealed that decision to the Seventh Circuit, which affirmed the trial court’s ruling that a private arbitral tribunal does not qualify as a foreign tribunal within the meaning of section 1782. The Seventh Circuit therefore reached the exact opposite conclusion from the Fourth Circuit when it considered a similar section 1782 application from Servotronics for evidence to be used in the exact same arbitration.