U.S. Supreme Court, ZF Automotive US, Inc. v. Luxshare, Ltd, Docket No. 21-401 and 21-518

Discovery

 

Evidence

 

Judicial Assistance

28 U. S. C. §1782 

Proceeding in a Foreign or International Tribunal 

Arbitration Proceedings Abroad

Are Adjudicative Bodies Here Governmental or Intergovernmental?

Comity

Split Among the Courts of Appeals

 

 

(…) 28 U. S. C.  §1782 permits district courts to order testimony or the production of evidence “for use in a proceeding in a foreign or international tribunal.” These consolidated cases require us to decide whether private adjudicatory bodies count as “foreign or international tribunals.” They do not. The statute reaches only governmental or intergovernmental adjudicative bodies, and neither of the arbitral panels involved in these cases fits that bill.

 

 

In the contract governing the sale, the parties had agreed that all disputes would be “exclusively and finally settled by three (3) arbitrators in accordance with the Arbitration Rules of the German Institution of Arbitration e.V. (DIS).” App. in No. 21–401, p. 93. DIS is a private dispute-resolution organization based in Berlin. The agreement, which is governed by German law, provides that arbitration take place in Munich and that the arbitration panel be formed by Luxshare and ZF each choosing one arbitrator and those two arbitrators choosing a third.

 

 

(Section 1782 allows a party to obtain discovery even in advance of a proceeding. See Intel Corp. v. Advanced Micro Devices, Inc., 542 U. S. 241, 259 (2004).)

 

 

(…) We granted a stay and certiorari before judgment to resolve a split among the Courts of Appeals over whether the phrase “foreign or international tribunal” in §1782 includes private arbitral panels.

 

 

Second case: The Fund initiated a proceeding against Lithuania under a bilateral investment treaty between Lithuania and Russia (titled “Agreement Between the Government of the Russian Federation and the Government of the Republic of Lithuania on the Promotion and Reciprocal Protection of the Investments”). App. to Pet. for Cert. in No. 21–518, p. 56a. The treaty seeks to promote “favourable conditions for investments made by investors of one Contracting Party in the territory of the other Contracting Party.” Ibid.

 

 

Relevant here, the treaty addresses the procedure for resolving “any dispute between one Contracting Party and an investor of the other Contracting Party concerning” investments in the first Contracting Party’s territory. Id., at 64a. It provides that if the parties cannot resolve their dispute within six months, “the dispute, at the request of either party and at the choice of an investor, shall be submitted to” one of four specified forums. Id., at 64a–65a. The Fund chose “an ad hoc arbitration in accordance with Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL),” with each party selecting one arbitrator and those two choosing a third. Id., at 65a; App. in No. 21–518, p. 159a. Under the treaty, “the arbitral decision shall be final and binding on both parties of the dispute.” App. to Pet. for Cert. in No. 21–518, at 65a.

 

Section 1782(a) provides: 

“The 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.”

 

 

Luxshare argues that commercial arbitral panels are §1782 tribunals because they “fit comfortably” under the “quasi-judicial paradigm” from our decision in Intel. Brief for Respondent in No. 21–401, p. 19. There, we recognized that the body at issue, the Commission of the European Communities, was a §1782 tribunal in part because it was a “first-instance decisionmaker” that rendered dispositive rulings reviewable in court. 542 U. S., at 254–255, 258. But we did not purport to establish a test for what counts as a foreign or international tribunal. The issue before us now—whether a private arbitral body qualifies as a “foreign or international tribunal”—was not before us in Intel. No one there disputed that the body at issue exercised governmental authority. (Fn. 1).

 

 

(…) The word “foreign” takes on its more governmental meaning when modifying a word with potential governmental or sovereign connotations. That is why “foreign” suggests something different in the phrase “foreign leader” than it does in “foreign films.” Brief for Petitioners in No. 21–401, pp. 20–21; Brief for Respondent in No. 21–401, pp. 7–8. The phrase “foreign leader” brings to mind “an official of a foreign state, not a team captain of a European football club.” Brief for United States as Amicus Curiae 17. So too with “foreign tribunal.” “Tribunal” is a word with potential governmental or sovereign connotations, so “foreign tribunal” more naturally refers to a tribunal belonging to a foreign nation than to a tribunal that is simply located in a foreign nation.

 

 

This reading of “foreign tribunal” is reinforced by the statutory defaults for discovery procedure. In addition to authorizing district courts to order testimony or the production of evidence, §1782 permits them to “prescribe the practice and procedure, which may be in whole or part the practice and procedure of the foreign country or the international tribunal, for taking the testimony or statement or producing the document or other thing.” §1782(a) (emphasis added). The reference to the procedure of “the foreign country or the international tribunal” parallels the authorization for district courts to grant discovery for use in a “foreign or international tribunal” mentioned just before in §1782. The statute thus presumes that a “foreign tribunal” follows “the practice and procedure of the foreign country.”

 

 

(…) So 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.

 

 

Extending §1782 to include private bodies would also be in significant tension with the FAA, which governs domestic arbitration, because §1782 permits much broader discovery than the FAA allows. Among other differences, the FAA permits only the arbitration panel to request discovery, see 9 U. S. C. §7, while district courts can entertain §1782 requests from foreign or international tribunals or any “interested person,” 28 U. S. C. §1782(a). In addition, prearbitration discovery is off the table under the FAA but broadly available under §1782. SeeIntel, 542 U. S., at 259 (holding that discovery is available for use in proceedings “within reasonable contemplation”). Interpreting §1782 to reach private arbitration would therefore create a notable mismatch between foreign and domestic arbitration. And as the Seventh Circuit observed, “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.” Rolls-Royce, 975 F. 3d, at 695.

 

 

That leaves the question whether the adjudicative bodies in the cases before us are governmental or intergovernmental. They are not.

 

 

Luxshare’s dispute with ZF is straightforward. Private parties agreed in a private contract that DIS, a private dispute-resolution organization, would arbitrate any disputes between them. See Stolt-Nielsen, 559 U. S., at 682 (“An arbitrator derives his or her powers from the parties’ agreement to forgo the legal process and submit their disputes to private dispute resolution”). By default, DIS panels operate under DIS rules, just like panels of any other private arbitration organization operate under private arbitral rules. The panels are formed by the parties—with each party selecting one arbitrator and those two arbitrators choosing a third. No government is involved in creating the DIS panel or prescribing its procedures. This adjudicative body therefore does not qualify as a governmental body.

 

 

The ad hoc arbitration panel at issue in the Fund’s dispute with Lithuania presents a harder question. A sovereign is on one side of the dispute, and the option to arbitrate is contained in an international treaty rather than a private contract. These factors, which the Fund emphasizes, offer some support for the argument that the ad hoc panel is intergovernmental. Yet neither Lithuania’s presence nor the treaty’s existence is dispositive, because Russia and Lithuania are free to structure investor-state dispute resolution as they see fit. What matters is the substance of their agreement: Did these two nations intend to confer governmental authority on an ad hoc panel formed pursuant to the treaty? See BG Group plc v. Republic of Argentina, 572 U. S. 25, 37 (2014) (“As a general matter, a treaty is a contract, though between nations,” and “its interpretation normally is, like a contract’s interpretation, a matter of determining the parties’ intent”).

 

 

The provision regarding ad hoc arbitration appears in Article 10, which permits an investor to choose one of four forums to resolve disputes:

 

“a) a competent court or court of arbitration of the Contracting Party in which territory the investments are made;

“b) the Arbitration Institute of the Stockholm Chamber of Commerce; 

“c) the Court of Arbitration of the International Chamber of Commerce; 

“d) an ad hoc arbitration in accordance with Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).” App. to Pet. for Cert. in No. 21–518, at 64a–65a.

 

 

(…) An ad hoc arbitration panel, by contrast, is not a pre-existing body, but one formed for the purpose of adjudicating investor-state disputes. And nothing in the treaty reflects Russia and Lithuania’s intent that an ad hoc panel exercise governmental authority.

 

For instance, the treaty does not itself create the panel; instead, it simply references the set of rules that govern the panel’s formation and procedure if an investor chooses that forum. In addition, the ad hoc panel “functions independently” of and is not affiliated with either Lithuania or Russia. 5 F. 4th, at 226. It consists of individuals chosen by the parties and lacking any “official affiliation with Lithuania, Russia, or any other governmental or intergovernmental entity.” Ibid. And it lacks other possible indicia of a governmental nature. See ibid. (“The panel receives zero government funding,” “the proceedings . . . maintain confidentiality,” and the “‘award may be made public only with the consent of both parties’”). 

 

(…) We reverse the order of the District Court in No. 21–401 denying the motion to quash, and we reverse the judgment of the Court of Appeals in No. 21–518. 

 

 

 

(U.S. Supreme Court, June 13, 2022, ZF Automotive US, Inc. v. Luxshare, Ltd, Docket No. 21-401 and 21-518, J. Barrett, for a Unanimous Court)

Kiobel v. Cravath, Swain & Moore, LLP, Docket No. 17-424-cv

Discovery (foreign company): Evidence (foreign court): 28 U.S.C. § 1782: Trade secret: Attorney: Ethics (client’s documents):

Section 1782 “provides federal‐court assistance in gathering evidence for use in foreign tribunals.” Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247 (2004).

Petitioner‐Appellee Kiobel seeks documents belonging to Royal Dutch Shell (a foreign company) from Shell’s United States counsel, Respondent‐Appellant Cravath, Swaine & Moore LLP. The documents were transferred to Cravath for the purpose of responding to discovery requests in a prior case over which the court was ultimately found to lack jurisdiction. The United States District Court for the Southern District of New York (Hellerstein, J.) granted Kiobel’s petition seeking leave to subpoena Cravath. We reverse: it is an abuse of discretion for a district court to grant a 28 U.S.C. § 1782 petition where the documents sought from a foreign company’s U.S. counsel would be “unreachable in a foreign country,” because this threatens to jeopardize “the policy of promoting open communications between lawyers and their clients.” Application of Sarrio, S.A., 119 F.3d 143, 146 (2d Cir. 1997).

For the purpose of pretrial discovery, the district court consolidated Kiobel’s case with other Alien Tort Statute cases arising out of the same events in Nigeria, the Wiwa cases. See Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88 (2d Cir. 2000). The consolidated cases generated a large volume of discovery, including depositions and documents. The discovery materials were subject to a stipulated confidentiality order entered into in the Wiwa cases, and signed by Kiobel. Most of the documents produced by Shell were marked “confidential,” meaning that they were to be used “solely for purposes” of the then‐pending Kiobel and Wiwa litigations. The parties agreed to destroy or return each other’s confidential material not later than thirty days after the respective cases’ conclusions, and that the order would survive the end of litigation. Any de‐designation of confidential documents or modification of the confidentiality order required agreement by the parties to the confidentiality order, or could be ordered by the district court. Cravath attorneys signed the stipulation in their capacity as Shell’s counsel.

Years after (…), Kiobel prepared to file suit against Shell in the Netherlands, advancing the same allegations made in her Alien Tort Statute suit. Kiobel now wants to deploy the discovery from her American litigation in her Dutch lawsuit, but is impeded by the confidentiality order which limits its use to only the U.S. Kiobel and Wiwa Alien Tort Statute cases. On October 12, 2016, Kiobel filed the pending 28 U.S.C. Section 1782 petition to subpoeana Cravath and obtain “all deposition transcripts from the Kiobel and Wiwa cases,” as well as “all discovery documents and communications produced to the plaintiffs by Shell and other defendants in Kiobel and the Wiwa cases.”

(…) Therefore, although our Court in Ratliff held that Davis Polk was subject to appellant’s subpoena, Ratliff did not disturb Sarrio’s suggestion that a district court should not exercise its discretion to grant a Section 1782 petition for documents held by a U.S. law firm in its role as counsel for a foreign client if the documents are undiscoverable from the client abroad, because this would disturb attorney‐client communications and relations. Sarrio, 119 F.3d at 146; Ratliff, 354 F.3d at 170.

(…) The decision to alter the confidentiality order without Shell’s participation, and without considering the costs of disclosure to Shell, makes this case exceptional, and mandates reversal. See Mees, 793 F.3d at 302 (explaining that under Intel, district courts should apply the standard from Federal Rule of Civil Procedure 26 to assess when a discovery request is unduly burdensome); see also In re Catalyst Managerial Servs., DMCC, 680 Fed. App’x 37, 39 & n.1 (2d Cir. 2017) (discussing a party’s argument about the burdens of discovery on a third‐party putative foreign defendant in the context of the fourth Intel factor).

(…) As amicus the New York City Bar Association notes, its Ethics Opinion 780 states that law firms have an interest in retaining documents where needed to protect themselves from accusations of wrongful conduct. So U.S. law firms may be harmed if they must destroy or return a foreign client’s documents as soon as possible once a proceeding is completed.

(U.S. Court of Appeals for the Second Circuit, July 10, 2018, Kiobel v. Cravath, Swain & Moore, LLP, Docket No. 17-424-cv, J. Jacobs)

28 U.S.C. § 1782 prévoit l’assistance des cours fédérales dans le processus de production de moyens de preuve à l’intention de Tribunaux étrangers.

En conformité avec sa jurisprudence Sarrio rendue en 1997 (analysant 28 U.S.C. § 1782), le 2è Circuit fédéral juge en l’espèce qu’une cour de district fédérale ne peut pas ordonner d’une étude d’avocats sur territoire U.S. la production de moyens de preuve appartenant à un client étranger de l’étude quand le but de cette procédure est la production de ces moyens de preuve dans le cadre d’une autre procédure hors U.S., laquelle procédure ne permettant pas (encore) la production desdits moyens de preuve (même s’ils peuvent être produits ultérieurement). De la sorte, ces moyens de preuve ne peuvent pas être obtenus si la procédure hors U.S. n’a pas encore débuté et que dite procédure (typiquement des systèmes de droit civil) ne connaît pas l’institution de « discovery » antérieure au procès proprement dit (typiquement des systèmes de Common law).

En juger autrement reviendrait à porter atteinte au principe de libre et complète communication entre le client et son avocat.

Il est à noter que la partie requérante ne sollicitait la production qu’à l’encontre de l’étude d’avocats, et non à l’encontre de son client.

Par ailleurs, en l’espèce, les moyens de preuve recherchés avaient antérieurement été produits dans une procédure, terminée, devant les cours U.S. Les parties à cette procédure avaient convenu de leur caractère confidentiel, ces moyens devant être détruits ou retournés après la fin de la procédure. Les parties avaient convenu que la confidentialité ne pouvait être levée que de leur mutuel consentement, ou par ordre de la cour de district fédérale. Dès lors, sans l’intervention de la cour de district, les moyens de preuve ne pouvaient pas être produits hors U.S. considérant la confidentialité promise. D’où la présente procédure en production fondée sur 28 U.S.C. § 1782. Le 2è Circuit juge donc ici que requérir et obtenir ces documents contreviendrait au principe de libre communication entre le client et l’avocat.

Cette affaire est considérée comme exceptionnelle par la cour. Dans des affaires plus « ordinaires » n’impliquant ni clauses de confidentialité ni principe de libre communication entre client et avocat, les cours fédérales examinent une requête en production fondée sur 28 U.S.C. § 1782 sous l’angle des quatre facteurs établis par la jurisprudence Intel rendue par la Cour Suprême fédérale en 2004 (542 U.S. 241).

(La présente décision cite aussi l’ « Ethics Opinion 780 » de l’association du barreau de la ville de New York, qui dispose que les études d’avocats ont un intérêt à la conservation des documents, pour pouvoir faire face cas échéant à des reproches de violations d’obligations professionnelles).