by Andrew Flake
Mere days after our last TAOR blog published, wistfully reviewing the dismissal of the Servotronics case, the Supreme Court has decided to take the question up again, this time in a new case involving a subsidiary of German auto-parts maker ZF Group.
The key issue is the same as in Servotronics — whether Section 1782 applies to a foreign arbitration proceeding or not — and arises in the Sixth Circuit, which is one of the circuits that have permitted discovery to be taken in support of foreign international arbitrations.
Luxshare, which bought a business unit from German parent ZF AG, filed a foreign-party arbitration under German DIS rules, alleging fraudulent concealment by ZF’s United States subsidiary, ZF Automotive . Luxshare then filed a Section 1782 application in federal district court in Michigan, obtaining the ability to take discovery here. ZF moved to quash and, following that unsuccessful effort, filed both a Sixth Circuit appeal and a petition for certiorari with the Supreme Court
A few aspects of the timing here are of interest.
First, the fact that this petition, which was waiting in the wings, was taken up so quickly after Servotronics became moot tells us that the Court is very interested in addressing the circuit split. This likely in large part because of the increasing prominence of international arbitration, and the related need for certainty about the rules of engagement. On that point, the Atlanta International Arbitration Society filed an amicus brief in Servotronics, pointing out some of the real-world concerns that made Supreme Court review important. Citing this brief in its petition, and referencing the possibility of forum-shopping and uncertainty on the party of parties contracting for international arbitration, ZF argued:
approaches [between the circuits] may disincentivize
parties from entering into contractual agreements to
privately arbitrate disputes,” as it will often be
impossible to know ex ante in which circuits potential
witnesses will be located—much less how those
circuits which have not weighed in on the issue will
come out. See Servotronics Atlanta Int’l Arbitration
Soc’y Amicus Br. in Supp. of Cert. 9.
Secondly, the ZF Automotive petition was granted while the Sixth Circuit appeal is ongoing, a somewhat unusual certiorari before judgment or “leapfrog” petition. ZF Group, which was plainly following the Servotronics case closely, recognized the possibility that it might resolve. The parties in Servotronics, in their briefing, had said exactly that, letting ZF Group know that its case was in the on-deck circle. It is a reminder that, as important as these issues are, courts can only decide issues in a real-world context. So when a case resolves or concludes, as the underlying arbitration in Servotronics did in May, after the parties’ final arbitration hearing in London, the issue becomes moot.
Lastly, certiorari in ZF Automotive came mere days after we published our last blog, so we all have to wonder: Were one or more Justices reading this blog? We’ll never know, but regardless, in a development that is a definite positive for international arbitraiton practice, we are again on track this term to get guidance, and resolution of the Section 1782 circuit split.[The case is ZF Automotive US, Inc. et al. , v. Luxshare, Ltd., Case No. 21-401 (docketed Sept. 14, 2021), https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/21-401.html]