by Lionel M. Schooler, FCIArb
Jackson Walker LLP1
Introduction. In In Re Financialright Claims GmbH, _____ F.4th ____, 2025 WL 2977513 (3d Cir. 2025), the United States Court of Appeals for the Third Circuit addressed an issue of first impression, the issue of the breadth and limitations of federal court jurisdiction when a court is presented with a claim grounded upon §1782 discovery petition.
Background. The appellee (Financialright Claims GmbH) filed a lawsuit pursuant to 28 U.S.C. §1782, which generally discusses the jurisdiction of a U.S. federal court to compel discovery, both from a witness being requested to testify, and from a party being requested to produce documents. The appellants objected to this process, contending that the appellee had a contractual obligation to arbitrate such disputes.
Lawsuit Claim. Appellants accordingly moved to compel arbitration. It was noted that Appellants could have sought the requested relief pursuant to 9 U.S.C. §206 of the New York Convention but, instead, pursued relief under 9 U.S.C. §4 of the Federal Arbitration Act. The District Court denied the motion, determining that this §1782 petition did not qualify as a “civil action” required by Section 4 and, thus, that it lacked subject matter jurisdiction.
Issues Presented. Whether the District Court had subject matter jurisdiction of this dispute.
Judicial Analysis. Appellants and Appellee had entered into an agreement whereby Appellee would serve as an aggregator of price fixing agreements arising in Germany. The agreement con-tained an arbitration clause covering any dispute, controversy or claim, including any issue pertaining to formation, interpretation or breach. Based upon that agreement and a related agreement between Appellees and counsel it had retained to represent Appellees in that ongoing litigation. Appellant sought to obtain documents from Appellees regarding this dispute, pursuant to §1782.
Turning to Section 4 of the FAA, the Court determined that it empowers a District Court to compel arbitration where, if not for the arbitration agreement, it “would have jurisdiction under Title 28” as a civil action. From this language, the Court concluded that judicial authority pursuant to FAA Section 4 is premised upon the existence of a “suit” that qualifies as a “civil action.” Analyzing several authorities outside the Third Circuit, the Court went on to assess the status of “civil action,” determining that the wording of Section 4 does not convey subject matter jurisdiction to a District Court.
The Court accordingly determined that Section 1782 does not satisfy these fundamental jurisdictional criteria and, therefore, that the District Court correctly dismissed the case for lack of subject matter jurisdiction.
Conclusion. The In Re Financialright Claims decision highlights the significance of the clear delin-eation of arbitration claims and arbitration proceedings as separable, delimiting the extent to which parties can invoke §1782 as jurisdictional and, therefore, its power to advance the purposes of legal disputes in U.S. courts.
1 Mr. Schooler is a former member of the Board of the CIArb North America Branch, and the immediate Past Chair of the Texas Chapter.
