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In re Servotronics Inc.

United States District Court, D. South Carolina, Charleston Division

November 6, 2018

IN RE SERVOTRONICS, INC.

          ORDER

          DAVID C. NORTON UNITED STATES DISTRICT JUDGE.

         This matter is before the court on SERVOTRONICS, INC.'s (“SERVOTRONICS”) ex parte application for an order pursuant to 28 U.S.C. § 1782 to take discovery for use in a foreign proceeding, ECF No. 1. For the reasons set forth below, the court denies the application.

         I. BACKGROUND

         This application arises out of an arbitration related to a fire at Boeing's facilities in Charleston, South Carolina. On January 16, 2016, Boeing was conducting testing on a plane when a tailpipe fire occurred in the plane's engine. The engine was manufactured by Rolls-Royce, and it contained a valve manufactured by SERVOTRONICS. During testing, a piece of metal got lodged in the valve, which affected the engine fuel flow. As a result, the Boeing ground crew began troubleshooting the engine, and subsequently the fire occurred. The fire damaged both the engine and the plane.

         Boeing sought compensation for the damage from Rolls-Royce, and Rolls-Royce settled the claim. Then Rolls-Royce demanded indemnity from SERVOTRONICS, which SERVOTRONICS refused. Rolls-Royce and SERVOTRONICS had previously signed a Long-term Agreement (“LTA”) that requires the use of arbitration to resolve any disputes. The LTA states:

[T]he dispute shall be referred to and finally resolved by arbitration in Birmingham, England, under the rules of the Chartered Institute of Arbitrators, and these Rules are deemed to be incorporated by reference into this clause.

ECF No. 1-1 at 3. Rolls-Royce served a notice of arbitration on SERVOTRONICS seeking approximately $12.8 million from SERVOTRONICS. The parties have agreed to arbitrate in London instead of Birmingham as a matter of convenience. SERVOTRONICS does not explicitly allege that arbitration under the rules of the Chartered Institute of Arbitrators is a private arbitration, as opposed to a state-sponsored arbitration, but SERVOTRONICS's legal argument makes it clear that the arbitration at issue here is a private one, or that they consider it to be a private one.

         SERVOTRONICS maintains that it is not liable for the fire or the damage caused by the fire, and it claims that fault lies with Rolls-Royce and Boeing. SERVOTRONICS is seeking testimony from three Boeing employees to be used in the arbitration in support of SERVOTRONICS's defenses. The first two employees, Terrance Shifley and Alan Sharkshna, are employees who participated in troubleshooting the plane's engine. The third employee, Scott Walston, was the chairperson of the Boeing Incident Review Board that investigated the fire. Because the arbitration is set to take place in London, England, SERVOTRONICS requests that the court issue an order allowing SERVOTRONICS to serve subpoenas on the three Boeing employees. In the alternative, SERVOTRONICS asks that the court issue an order to show cause why the application should not be granted.

         II. DISCUSSION

         Section 1782 allows a district court to order a person who resides in the court's district to provide testimony or documents to be used in a proceeding in a foreign tribunal. 28 U.S.C. § 1782(a). This statute “affords the district courts wide discretion in responding to requests for assistance in proceedings before foreign tribunals.” Al Fayed v. United States, 210 F.3d 421, 424 (4th Cir. 2000). When considering a discovery application under § 1782, the district court should keep in mind the statute's “twin aims of providing efficient means of assistance to participants in international litigation in our federal courts and encouraging foreign countries by example to provide similar means of assistance to our courts.” In re Letter of Request from Amtsgericht Ingolstadt, Fed. Republic of Germany, 82 F.3d 590, 592 (4th Cir. 1996) (internal quotation omitted).

         When presented with a § 1782 discovery application, a district court must engage in two inquiries. First, it must determine if it has the authority to grant the application. Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264 (2004). Courts have such authority when (1) “the person from whom discovery is sought reside[s] (or [can] be found) in the district of the district court to which the application is made”; (2) “the discovery be for use in a proceeding before a foreign tribunal”; and (3) “the application be made by a foreign or international tribunal or any interested person.” Application of Esses, 101 F.3d 873, 875 (2d Cir. 1996) (internal quotations omitted).

         If the court determines that it has authority under § 1782, it then must decide whether to exercise its discretion to grant the application. Intel, 542 U.S. at 264. “[T]he Supreme Court laid out four discretionary factors to guide the courts in ruling on a § 1782 application: (1) whether ‘the person from whom discovery is sought is a participant in the foreign proceeding'; (2) the receptivity of the foreign tribunal to U.S. court assistance; (3) whether the § 1782 application is an attempt to ‘circumvent foreign proof-gathering restrictions'; and (4) whether the documents and testimony sought are ‘unduly intrusive or burdensome.'” In re Chevron Corp., 2010 WL 4883111, at *2 (W.D. Va. Nov. 24, 2010) (quoting Intel, 524 U.S. at 264-65).

         Turning first to whether the court has the authority to grant SERVOTRONICS's application, the first and third requirements are clearly met here. SERVOTRONICS alleges that all three Boeing employees it seeks to depose live in South Carolina, and SERVOTRONICS is an interested party because it is a party to the arbitration. However, whether the second requirement-that the evidence be used “in a proceeding before a foreign tribunal”-is met is not as straightforward.

         The issue presented here is whether the private arbitral body conducting the arbitration qualifies as a “tribunal” for the purposes of § 1782. The Second and Fifth Circuits have held that private arbitral bodies do not fall within the ambit of § 1782. After these two cases were decided, the U.S. Supreme Court interpreted § 1782 in the seminal case Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). Lower courts have subsequently disagreed on how Intel affects ยง 1782 on the issue of private arbitration. For reasons discussed below, the court holds ...


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