This article first appeared on the Securities Arbitration Alert (SAA) Blog, here.
Joining the Second and Fifth Circuits, the Seventh Circuit holds that 28 USC Section 1782 does not provide for discovery in aid of private, foreign, commercial arbitration. And the District of Delaware follows suit for the second time.
We have already reported on this issue several times this year. To review, under 28 U.S.C. § 1782, a party to a matter pending in a “foreign or international tribunal” can seek an ex parte order in aid of discovery. Specifically: “The 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 … for use in the foreign proceeding.” But does section 1782 cover foreign, private arbitration proceedings? The answer is “Yes and No,” depending on the Circuit. Here was the split before September 22: the Second and Fifth, and two Third Circuit District Courts hold that section 1782 covers only governmental arbitration forums. The Fourth, Sixth and Ninth Circuits extend section 1782’s reach to private arbitration organizations. The latest entry in the “no” camp is the Seventh Circuit, which holds in Servotronics, Inc. v. Rolls-Royce PLC, No. 19-1847, 2020 WL 5640466 (Sept. 22, 2020), that section 1782 does not extend to private international commercial arbitration.
Same Case Yields Different Results
We covered in SAA 2020-13 (Apr. 8) Servotronics, Inc. v. The Boeing Co. and Rolls-Royce PLC, 954 F.3d 209 (4th Cir. Mar. 30, 2020), where in a case involving a private commercial arbitration being held in England under Chartered Institute of Arbitrators Rules, the Court upheld a District Court decision ordering discovery from three Boeing employees residing in South Carolina. In this latest case the District Court bars Servotronics from obtaining discovery documents located in Illinois for use in the same private arbitration pending in London, and the Seventh Circuit affirms unanimously. Among the Court’s rationales is a perceived conflict between section 1782 and the Federal Arbitration Act: “The discovery assistance authorized by § 1782(a) is notably broader than that authorized by the FAA…. If § 1782(a) were construed to permit federal courts to provide discovery assistance in private foreign arbitrations, then litigants in foreign arbitrations would have access to much more expansive discovery than litigants in domestic arbitrations. It’s hard to conjure a rationale for giving parties to private foreign arbitrations such broad access to federal-court discovery assistance in the United States while precluding such discovery assistance for litigants in domestic arbitrations. In sum, what the text and context of § 1782(a) strongly suggest is confirmed by the principle of avoiding a collision with another statute: a ‘foreign or international tribunal’ within the meaning of § 1782(a) is a state-sponsored, public, or quasi-governmental tribunal.”
District of Delaware is on Board
Although the Third Circuit has not weighed in on this issue, two District Courts in the Circuit have said “no” to section 1782 discovery in private arbitration tribunals. See In re Ex Parte Application of Axion Holdings Cyprus Ltd., No. 20-00290 (MN) (D. Del. Sept. 18, 2020) (memo order), involving an arbitration that was filed with the London Court of International Arbitration. The other Opinion on this issue from the District of Delaware is In re EWE Gesspeicher GBMH, No. 19-MC-109-RGA (D. Del. Mar. 17, 2020), reported on in SAA 2020-14 (Apr. 15).
(ed: *Judge Coney Barrett was not part of the panel deciding the case. **Every time we cover the growing split, our editorial note queries if SCOTUS will eventually take up the gaping split on this issue. The answer remains: “Perhaps.” We covered in SAA 2020-13 (Apr. 8) the Fourth Circuit’s decision in Servotronics. It was widely reported that a Petition for Certiorari was coming, but so far -- nothing.)
George H. Friedman is the publisher and Editor-in-Chief of the Securities Arbitration Alert, a weekly online publication covering the latest developments in financial services arbitration and mediation. He is also the principal of George H. Friedman Consulting, LLC, providing expert advice on arbitration and mediation in general and the FINRA dispute resolution forum in particular.
He is former Executive Vice President - Dispute Resolution of the Financial Industry Regulatory Authority (“FINRA”), a position he held through January 2013. He held the same title at NASD, which consolidated with NYSE Member Regulation to form FINRA in 2007. In this capacity, he was in overall charge of FINRA's dispute resolution program, carried out by the company's four regional offices and 72 hearing locations in the United States and abroad, 200 employees, and an annual budget of $50 million. He also served as Secretary of the Securities Industry Conference on Arbitration. He has been referred to by the U.S. Court of Appeals—4th Circuit as a “leading arbitration expert.” He is a member of the American Arbitration Association's National Roster of Neutrals.
Mr.Friedman is an Adjunct Professor of Law at Fordham Law School, where he has taught a course on alternative dispute resolution since 1996. He is Chairman of the Board of Directors of Arbitration Resolution Services, Inc. of Coral Springs, Florida. Arbitration Resolution Services is an innovative online arbitration services company facilitating an affordable alternative to costly courtroom litigation and in-person arbitration for resolving Business-to-Business, Business-to-Individual, and Vehicle and Property Damage disputes. ARS is unique in that its entire process can be completed online through the company website.
In his extensive dispute resolution career, he previously held a variety of positions of responsibility at the American Arbitration Association, most recently as Senior Vice President from 1994 to 1998. He joined NASD in 1998 as Senior Vice President of NASD's Dispute Resolution Division, and was named Executive Vice President in 2002.
Mr. Friedman received a B.A. in Political Science from Queens College, and a Juris Doctor from Rutgers Law School - Newark, where he was an editor of the Law Review. He is admitted to the New York and New Jersey Bars and the United States Supreme Court, and is a Certified Regulatory and Compliance Professional. Mr. Friedman is a member of the Securities Experts Roundtable, and of several bar associations. He is past chair of the Committee on Alternative Dispute Resolution of the New York County Lawyers Association. He is a member of the Banking Advisory Committee of Bergen (NJ) Community College.
Mr. Friedman has lectured extensively on the subject of alternative dispute resolution, and has the distinction of being one of the architects of the American Arbitration Association’s Due Process Fairness Protocols for both employment arbitration and health care dispute resolution, and assisted in creating the Consumer Due Process Protocol. He has published often, with articles appearing in the Securities Arbitration Commentator, the ABA's Dispute Resolution Magazine, the New York Law Journal, the Rutgers Law Review, and the National Law Journal. He has blogs at Arbitration Resolution Services, Inc., the Securities Arbitration Commentator, and the World Future Society, among others.