Preview of the Oral Argument at the Supreme Court: ZF Automotive US, Inc. v. Luxshare, Ltd.

The Supreme Court decided to grant certiorari to the case ZF Automotive US, Inc. v. Luxshare, Ltd., and the parties will argue in front of the Court tomorrow, March 23. The issue is whether 28 U.S.C. § 1782(a) applies to private commercial arbitral tribunals. The statute gives litigants the right to ask district courts to assist them in gathering evidence for use in “a foreign or international tribunal.” To invoke § 1782(a), an applicant must meet the three criteria set out in the statute: (1) the person from whom discovery is sought “resides or is found” within the district; (2) the discovery is “for use in a proceeding before a foreign or international tribunal”; and (3) the application is made by an “interested person.” Currently, circuits are split on whether private commercial arbitral tribunals are within the meaning of “foreign or international tribunal.” The Second, Fifth, and Seventh Circuits have held that private commercial arbitral tribunals are not within the meaning of “foreign or international tribunal” while the Fourth and Sixth Circuits have held that they are within the meaning.

The Circuit Split    

The Fourth Circuit supports the view that private arbitral tribunals are within the scope of § 1782(a). In Servotronics, lnc. v. Boeing Company, the court articulated its reasons as follows: First, this is Congress’ policy to increase international assistance by U.S. courts to resolve disputes before all foreign and international tribunals. Second, private arbitral tribunals are entities that exercise conferred governmental authority because arbitration in the U.S. is supervised by the courts and endorsed by Congress. The Sixth Circuit sides with the Fourth Circuit, but it gave different reasons in In re Application to Obtain Discovery for Use in Foreign Proc.. There, the court focused on a textual argument and stated that the broad dictionary definitions of “tribunal” include private arbitrations and that, historically, American courts used “tribunal” to describe private arbitrations.

The Second Circuit had a different ruling on this issue. In Nat’l Broad. Co. v. Bear Stearns & Co., the court primarily looked at the legislative history of § 1782 and found that Congress only intended for the statute to cover government-sponsored tribunals. The Fifth Circuit’s view is almost identical and explicitly relied on the Second Circuit’s opinion in Republic of Kazakhstan v. Biederman Int’l.

In Servotronics, lnc. v. Boeing Company, the Seventh Circuit articulated another reason why private arbitration is not within the scope of § 1782(a). There, the court stated that because the statute allows courts to prescribe the practice and procedure of the foreign country or the international tribunal—and private arbitrations’ practice and procedure are not practice and procedure of foreign country or the international tribunal—the statute does not cover private arbitrations.

Section 1782(a) is a Powerful Tool and Parties May Desire It

If a party’s § 1782(a) application is granted, the court may order a person to give her testimony or to produce a document or other thing, in accordance with the Federal Rule of Civil Procedure. The order may also specify that the discovery procedure needs to follow the rules of foreign country or the international tribunal, but following the Federal Rule of Civil Procedure is the default under § 1782, and many courts opt for it. Section 1782(a) is powerful because the discovery rules under Federal Rules of Civil Procedure are liberal and expansive. The scope of Rule 26 is very broad as it states, “parties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense….” U.S. companies may desire § 1782(a) because their counsels will be more familiar with the U.S. discovery rules instead of foreign discovery rules. Section 1782 applications have become increasingly popular since 2016. There was an average of just 25 to 45 § 1782 applications between 2012 and 2016—which can be contrasted with 90 and 120 applications in 2019 and 2020, respectively.

If the Supreme Court, following tomorrow’s oral argument, ultimately decides in favor the broader reading of section 1782(a), we should expect to see a surge of § 1782(a) application in the coming years.

Ultimately, the Supreme Court’s decision on this issue may have a significant impact on business, especially American companies involved in international trade. We should try our best to allow American companies to apply American laws in international arbitrations from a policy standpoint and a ruling that 28 U.S.C. § 1782(a) applies to private commercial arbitral tribunals would serve that purpose well.

Qingrong Ruan is a second-year law student at Wake Forest University School of Law. Qingrong graduated from Duke University in 2019 with a master’s degree in Economics. Previously, in 2017, he graduated from the University of Rochester and earned a bachelor’s degree in Mathematics and Financial Economics. Qingrong is interesting in corporate law, bankruptcy law, and security law.