June 13, 2022

Supreme Court Decides ZF Automotive US, Inc. v. Luxshare, Ltd.

On June 13, 2022, the U.S. Supreme Court decided ZF Automotive US, Inc. v. Luxshare, Ltd., No. 21-401, holding that Section 1782 requires a “foreign or international tribunal” to be governmental or intergovernmental in nature, and that private adjudicatory bodies do not fall within Section 1782’s ambit.

In a consolidated appeal, the Court was asked to consider the appropriate scope of 28 U.S.C. § 1782, which authorizes a federal district court to compel individuals and companies within its jurisdiction to provide discovery to proceedings pending in “foreign and international tribunals.” The title case involved an attempt by a Hong Kong company, Luxshare, Ltd., to obtain discovery from ZF Automotive US, a Michigan subsidiary of a German corporation, in an arbitration proceeding before a private dispute resolution body in Germany. Based on binding precedent of the U.S. Court of Appeals for the Sixth Circuit — which had previously ruled that private commercial arbitration panels are “foreign tribunals” for purposes of Section 1782 — a Michigan district court granted Luxshare’s application for discovery from the U.S.-based company. The Supreme Court agreed to review the decision before the Sixth Circuit completed its appellate process.

The remaining consolidated appeal dealt with a private arbitration proceeding by a Russian corporation against the government of Lithuania based on the purported fraud of a Lithuanian bank, which was initiated under a bilateral investment treaty entered into by Russia and Lithuania. The treaty featured a dispute resolution procedure and offered parties initiating an action under the treaty four options for dispute resolution. After electing to initiate private arbitration under the Rules of the United Nations Commission on International Trade Law, the Russian organization filed a Section 1782 application in federal court seeking discovery from AlixPartners, which had served as bankruptcy receiver for the Lithuanian bank. The U.S. Court of Appeals for the Second Circuit affirmed the district court’s ruling, which had granted the application, and held that the arbitration panel fell within the ambit of Section 1782.

In a unanimous opinion, the Supreme Court reversed. At the outset, the Court considered the meaning of Section 1782’s phrase, “foreign or international tribunal.” It held that while a “tribunal” need not be a “formal ‘court,’” the text of Section 1782 “is best understood to refer to an adjudicative body that exercises governmental authority.” The Court rejected the argument that Section 1782’s “foreign and international tribunal” language includes private adjudicative bodies, like those involved in the appeals before it. In so doing, the Court reasoned that the term “‘[f]oreign tribunal’ more naturally refers to a tribunal belonging to a foreign nation than to a tribunal that is simply located in a foreign nation.” Likewise, the term “international tribunal” is best understood as one that “involves or is of two or more nations, meaning that those nations have imbued the tribunal with official power to adjudicate disputes.” The Court continued, “[s]o understood, ‘foreign tribunal’ and ‘international tribunal’ complement one another; the former is a tribunal imbued with governmental authority by one nation, and the latter is a tribunal imbued with governmental authority by multiple nations.”

The Court further reasoned that extending Section 1782 to include private bodies would put the statute in significant tension with the Federal Arbitration Act because Section 1782 already permits much broader discovery than the FAA allows. As the Court noted, interpreting Section 1782 to reach private arbitration would therefore create a notable mismatch between foreign and domestic arbitration, and quoting a Seventh Circuit opinion, continued by stated that “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.”

Justice Barrett authored the opinion for the Court, in which all other Members joined.

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