The US Supreme Court Wednesday heard oral arguments in ZF Automotive US, Inc. v. Luxshare, Ltd., a case concerning federal district courts’ authority to apply a particular statute to private commercial arbitral tribunals.
In August 2017, Luxshare, Ltd. (Luxshare) purchased business units from ZF Automotive US, Inc. (ZF) for approximately $1 billion, and the deal closed in April 2018. Within the purchase agreement was an arbitration clause, stating that all disputes would be settled via arbitration in Germany under the rules of the German Institution of Arbitration, a private arbitration body.
Two years after the deal closed, Luxshare allegedly discovered that ZF fraudulently concealed certain material facts, inflating the purchase price. Luxshare intended to bring claims for the losses due to ZF’s allegedly wrongful conduct. However, Luxshare first sought to obtain discovery from ZF and its senior officers. Therefore, Luxshare asked a federal district court to compel discovery under 28 USC 1782(a), a statute providing district courts with the ability to compel discovery for use in a “foreign or international tribunal.”
The federal district court granted Luxshare’s application, and subpoenas were sent to ZF senior officers. ZF immediately moved to quash the subpoenas, positing that the arbitral panel did not constitute a “foreign or international tribunal” under § 1782(a). The district court granted the motion in part, which authorized limited discovery. ZF then appealed to the United States Court of Appeals for the Sixth Circuit, asking for a stay of the district court’s discovery order.
While the appeal was pending before the Sixth Circuit, a case with a similar question before the Supreme Court of the United States was dismissed by petitioners. Therefore, ZF petitioned the Supreme Court to grant certiorari.
The Supreme Court granted cert, and on Wednesday, the question presented before the Court was:
Whether 28 USC § 1782(a), which permits litigants to invoke the authority of United States courts to render assistance in gathering evidence for use in “a foreign or international tribunal,” encompasses private commercial arbitral tribunals, as the U.S. Courts of Appeals for the 4th and 6th Circuits have held, or excludes such tribunals, as the U.S. Courts of Appeals for the 2nd, 5th and 7th Circuits have held.
The justices spent much of the time probing precisely what it means to be a governmental tribunal. ZF argued that it was limited adjudicative bodies that were created by the government and that exercised authority conferred by the government. Whereas Luxshare argued that the term was to be construed more broadly, encompassing essentially anybody governed by a foreign jurisdiction and its laws. Justices Sonia Sotomayor and Neil Gorsuch seemed unconvinced by ZF’s arguments of what a governmental tribunal is and pushed back rather hard. In contrast, Chief Justice John Roberts seemed more receptive to ZF’s points.
A decision is projected to be released by early to mid-summer.
