Case of the Day: Servotronics v. Boeing
Posted on March 31, 2020
The case of the day is Servotronics, Inc. v. The Boeing Co. (4th Cir. 2020). Servotronics was a supplier to Rolls Royce, which manufactured engines for use on Boeing’s 787 Dreamliner airplane. Following a 2016 testing accident, Rolls Royce settled Boeing’s claim for damages and then sought indemnification from Servotronics. The parties arbitrated their dispute in the UK. Servotronics brought an application in South Carolina under 28 U.S.C. § 1782 seeking issuance of subpoenas to two Boeing employees. The case thus set up one of the big open questions in § 1782 practice: is a private foreign arbitral tribunal a “tribunal” for purposes of the statute?
Prior to Intel, two courts of appeals had held that the private arbitral tribunals were not tribunals for purposes of the statute. The question is whether under Intel the outcome should be different. I’ve written about the issue a few times before. In September 2019 I wrote about the Sixth Circuit’s decision holding that private arbitral tribunals are within the scope of the statute. The Sixth Circuit’s decision in Abdul Latif Jameel Transportation was the first appellate case, post-Intel, to reach that result. I’ve written about the issue at the district court level several times (and there is a new N.D. Cal. decision I have yet to write about).
The Fourth Circuit focused on the 1964 amendment to § 1782, which changed the phrase “in any judicial proceeding pending in any court in a foreign country” to “in a proceeding in a foreign or international tribunal.” It cited both the legislative history and the draftsman, Hans Smit, for the view that the revised statute was intended to reach “administrative and quasi-judicial” proceedings, including arbitrations. And the court discounted a notion that a private arbitral tribunal could not qualify under the statute precisely because it is private and non-governmental. That view, the court reasoned, was at odds with the legislative policies in favor of arbitration embodied in the FAA and in foreign arbitration statutes. “Thus, even if we were to apply the more restrictive definition of ‘foreign or international tribunal’ [under which] the term refers only to ‘entities acting with the authority of the State[,]'” the court noted, “we would conclude that the UK arbitral panel charged with resolving the dispute between Servotronics and Rolls-Royce meets that definition.”
The court ended by rejecting arguments about consequences of its decision for arbitration. To what the court says here, I would just add that a tribunal can forbid the parties to make use of US discovery procedures without first obtaining leave, and that under Intel, such a position would almost certainly lead a US court to reject an application for discovery.
I expect this issue to be decided by the Supreme Court before too long. Stay tuned.