Authors[1]: Flávio Luiz Yarshell*, Michael A. Fernández**, Gustavo Favero Vaughn***
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In ZF Automotive U.S., Inc. v. Luxshare, Ltd., 596 U.S. 619 (2022), the U.S. Supreme Court resolved a circuit split regarding the availability of discovery in connection with international arbitrations under Section 1782 of Title 28 of the United States Code (“Section 1782”) by holding that only a governmental or intergovernmental adjudicative body constitutes a “foreign or international tribunal” under 28 U.S.C. § 1782, and the bodies at issue in that case did not meet such requirement. In this article, we analyze a recent case out of the Northern District of California which distinguished ZF Automotive U.S., Inc. and authorized the use of Section 1782 in support of an international arbitration.
By way of background, Section 1782 governs “[a]ssistance to foreign and international tribunals and to litigants before such tribunals.”[2] But what is a “foreign or international tribunal,” and does that definition include private adjudicatory bodies? In short: No.[3] Until 2022, the U.S. Courts of Appeals split on the issue of whether private adjudicatory bodies, such as private arbitral panels, were “foreign or international tribunal[s].”[4] The “Second, Fifth, and Seventh Circuits held that Section 1782 discovery was not authorized for use in private commercial arbitrations.”[5] The Fourth and Sixth Circuits held to the contrary.[6] The United States Supreme Court quashed this circuit divide in ZF Automotive v. Luxshare (2022).[7]
In ZF Automotive, the Court granted certiorari and consolidated two cases[8] involving “arbitration proceedings abroad for which a party sought discovery in the United States pursuant to [Section 1782].”[9] The Court held that private adjudicatory bodies do not fall under Section 1782.[10] The Court reasoned that “[o]nly a governmental or intergovernmental adjudicative body constitutes a ‘foreign or international tribunal’”[11] under the Statute.[12] Accordingly, “[s]uch bodies are those that exercise governmental authority conferred by one nation or multiple nations.”[13] Although the Court narrowed the definition of “foreign or international tribunal,” there are parties that have argued that it does not preclude the use of Section 1782 in aid of arbitration under all circumstances.[14]
On May 9, 2024, U.S. District Judge Douglas L. Ray became one of the first judges to authorize Section 1782 discovery for use in a non-[International Centre for Settlement of Investment Disputes (‘ICSID’)] arbitration.”[15] The facts of the underlying claim are straightforward.
David Edgar[16] initiated a mandatory arbitration as required under Section 148.2(1) of British Columbia Regulation 447/83 (“Section 148”) claiming that he was injured by an unidentified vehicle in Scottsdale, Arizona.[17] All drivers in British Columbia must hold certain minimum insurance coverage, which includes Underinsured Motorist Protection (“UMP”), provided by the petitioner, Insurance Company of British Columbia (“ICBC”).[18]
Edgar sought Section 1782 discovery, arguing that “the arbitration tribunal in the underlying claim should be considered as a ‘governmental or intergovernmental adjudicative body’ under [Section] 1782” considering “the nature of Canada’s Arbitration Act of British Columbia.”[19]
The Court’s analysis was threefold: First, “ICBC’s application satisfie[d] the three threshold requirements for relief under [Section] 1782.”[20] Second, the Court weighed four discretionary factors in determining its discovery grant under Section 1782.[21] Third, the Court found that British Columbia International Commercial Arbitration Centre “BCICAC”, the non-profit entity through which the claim was brought, should be covered under the auspices of Section 1782 because it exercises sufficient governmental-like authority.[22] The Court emphasized that the “arbitration here [was] not a private arbitration by consent; it [was] an arbitration under the Arbitration Act through BCICAC. Under these circumstances . . . [the] arbitration under the Arbitration Act through BICAC is more akin to a governmental authority than a purely private, commercial body.”[23]
Given the Court’s decision, parties should look out for government mandated arbitration akin to Section 148 as an exception to ZF Automotive’s bar on Section 1782 discovery in aid of arbitration.
*Flávio Luiz Yarshell is a Full Professor of Procedural Law at the School of Law of the University of São Paulo. He is the Founding Partner of Yarshell Advogados and frequently sits as arbitrator.
**Michael A. Fernández is an Adjunct Professor of Law at Fordham University School of Law and Member at Cozen O’Connor whose practice is focused on complex and cross-border commercial litigation, international commercial and investor-state arbitration, and corporate internal investigations.
***Gustavo Favero Vaughn is a Partner at Cesar Asfor Rocha Advogados, in Brazil, where he focuses on complex litigation and commercial arbitration. He has an LL.M. at Columbia Law School and a master’s degree on Procedural Law at the School of Law of the University of São Paulo. He is also an Alumni Advisor at the American Review of International Arbitration (ARIA).
[1] The authors thank Micki Coleman-Palansky, Cozen O’Connor Summer Associate, for her assistance in the preparation of this article.
[2] Section 1782(a) provides in part that “[t]he district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation.” 28 U.S. Code § 1782 (emphasis added).
[3] ZF Auto., 596 U.S. at 623.
[4] Madina Lokova, ZF Automotive v. Luxshare: The Supreme Court’s New Gloss on 8 U.S. Code § 1782 and What it Means for International Commercial Arbitration, 2024 J. Disp. Resol. 42, 44-5 (2024).
[5] Id.; see also National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999); Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999).
[6] See Servotronics, Inc. v. Boeing Co., 954 F.3d 209 (4th Cir. 2020); Abdul Latif Jameel Transp. Co. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019).
[7] See ZF Auto., 596 U.S. 619.
[8] See In re Fund for Protection of Investor Rights in Foreign States v. AlixPartners, LLP, 5 F.4th 216 (2d Cir. 2021); Luxshare, Ltd. v. ZF Auto. U.S., Inc., 15 F.4th 780 (6th Cir. 2021).
[9] ZF Auto., 596 U.S. at 619-20; see also In re Fund for Protection of Investor Rights in Foreign States v. AlixPartners, LLP, 5 F.4th 216 (2d Cir. 2021); Luxshare, Ltd. v. ZF Auto. U.S., Inc., 15 F.4th 780 (6th Cir. 2021).
[10] Id.
[11] Section 1782 presumes that “a ‘foreign tribunal’ is a tribunal imbued with governmental authority by one nation, and an ‘international tribunal’ is a tribunal imbued with governmental authority by multiple nations,” Id. at 620-1.
[12] Id. (“The animating purpose of §1782 is comity: Permitting federal courts to assist foreign and international governmental bodies promotes respect for foreign governments and encourages reciprocal assistance.” This purpose would be confused by “enlisting district courts to help private bodies adjudicate[e] purely private disputes abroad”).
[13] Id. at 638.
[14] Caroline Simson, Ariz. Judge Allows Insurer to Target DOT for Canadian Arb., Law360.com, May 10, 2024, https://www.law360.com/insurance-authority/articles/1836005.
[15] Id.; Memo. of Points and Authorities, 2:8-14, In re Application: For an Order to Appear and Provide Documents and/or Testimony in a Foreign Arbitration Proceeding, No. 2:24-mc-00015-DLR.
[16] David Edgar, a Canadian citizen, was the claimant in the underlying arbitration proceeding (David Edgar v. ICBC). Caroline Simson, supra note 17; Order, 3:1-2, In Re: Ex Parte Application Pursuant to Section 204 of the Federal Arbitration Act and A.R.S. § 12-1507 for an Order to Provide Documents and/or Appear Remotely and Testify in a Foreign Arbitration Hearing, No. 2:24-mc-00015-DLR (“Order”).
[17] Under Section 148.2(1) of British Columbia Regulation 447/83, disputes must “be resolved either by private arbitration by consent or, in the absence of consent, by arbitration under the Arbitration Act of British Columbia through B.C. International Commercial Arbitration Centre (‘BCICAC’).” Id. at 3:1-10; Caroline Simson, supra note 17.
[18] Order, 3:2-7. UMP provides partial coverage for “an injured Canadian citizen’s damages when an at-fault driver does not have enough insurance coverage, but the amount of recovery must be offset against any other insurance that would have been available to the injured claimant.” Id.
[19] Supplemental Memorandum, 6:7-22, In re Application: For an Order to Appear and Provide Documents and/or Testimony in a Foreign Arbitration Proceeding Directed To: (i) Quick Silver Transportation, LLC, an Arizona limited liability company; and (ii) Arizona Department of Transportation, No. 2:24-mc-00015-DLR.
[20] Order, 2:18-9. The three threshold requirements for relief under the Statute are: (1) the person from whom discovery is sought must ‘reside’ or be ‘found’ in the district; (2) the discovery must be for use in a proceeding in a foreign tribunal; and (3) the applicant must be an ‘interested person’ . . . Quick Silver and ADOT both reside in this District, and ICBC is an interested person because it is a party to the arbitration proceeding. ICBC seeks discovery for use in an arbitration proceeding in British Columbia, Canada.
[21] The factors included: (1) whether the ‘person from whom discovery is sought is a participant in the foreign proceeding;’ (2) the nature and character of the foreign proceeding, and whether the foreign court is receptive to judicial assistance from the United States; (3) whether the request is an attempt to circumvent foreign proof-gathering restrictions; and (4) whether the discovery request is ‘unduly intrusive or burdensome’ . . . Quick Silver and ADOT are not parties to the foreign proceeding; there is no reason to believe the BCICAC arbitration panel would be unreceptive to judicial assistance from the United States . . . there is no evidence that ICBC is attempting to circumvent foreign proof-gathering restrictions; and on their face, the proposed subpoenas do not appear unduly intrusive or burdensome. Id. at 2:7-3:21 (citing Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264-6 (2004)).
[22] Id. at 2:21-3:14 (“Although purely private commercial arbitration panels do not fall within this definition, the Supreme Court left open the possibility that other types of arbitration panels could be covered by the statute if they sufficiently exercise governmental authority”) (citing ZF Auto., 596 U.S. at 633).
[23] Order, 3:10-14.