Latham plays chess in 3D for SCOTUS to take charge of new discovery case

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Latham & Watkins offices in New York. REUTERS / Andrew Kelly

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(Reuters) – Whether you call it a procedural game or a shrewd counterattack, Latham & Watkins are trying to make it very difficult for the U.S. Supreme Court to say no to a new opportunity to resolve an issue. circuit split on whether parties to private foreign arbitration can get discovery by US courts.

The Supreme Court had been given the task of deciding whether such a discovery is authorized under Section 1782 of Title 28 of the United States Code in Servotronics Inc v. Rolls-Royce PLC. This case appeared over the summer to emerge as one of the most important cases in the tribunal’s tenure. But on September 29, in response to a joint petition from Servotronics and Rolls-Royce, the Supreme Court dismissed the case.

Latham’s customer, ZF Automotive US Inc, had already filed a petition asking the Supreme Court to review an order from the Michigan Magistrate’s Court ordering it to turn over documents to Luxshare Ltd. Luxshare, which paid around $ 1 billion to acquire part of ZF in 2017, requested the discovery ahead of the threat of arbitration in Germany, which is due to be filed before the end of 2021. US District Judge Laurie Michelson of Detroit approved Luxshare’s request in August, citing the U.S. 6th Court of Appeals ruling that private arbitration is within the scope of Article 1782.

ZF appealed to the 6th Circuit – but also went straight to the Supreme Court with a request to skip the 6th Circuit appeal. ZF’s certiorari petition anticipated that the Servotronics case could be moot before the Supreme Court heard the case. (The UK arbitrators had refused to stay their proceedings pending the US court ruling on whether Servotronics was entitled to the disputed discovery.) So Latham presented the ZF case as some sort of plan B for the Supreme Court, arguing that because Luxshare had not yet launched its arbitration in Germany, this case did not raise the same problem of non-compliance as the Servotronics case.

Latham told the Supreme Court that ZF even agreed to waive the statute of limitations on Luxshare’s arbitration case to ensure the discovery dispute remains alive.

Luxshare lawyers at Allen & Overy filed a convincing opposition case on Thursday. It is extremely rare, according to Luxshare, for the Supreme Court to grant certiorari before a lower court judgment. Historically, the court has only agreed to hear pre-trial cases in the most serious circumstances, such as cases involving US foreign policy or raising concerns about the institutional authority of the federal government.

A battle of discovery in a possible private trade agreement arbitration “cannot stand alongside the types of extraordinary cases in which this tribunal has granted certiorari before judgment,” said the opposition brief.

This is all the more true, according to Allen & Overy, as the scope of section 1782 might not even be the deciding issue in Luxshare’s battle of discovery. ZF had also raised case-specific challenges to the discovery order. Better let 6th Circuit hear ZF’s appeal, Luxshare said, before taking the case to the Supreme Court.

The 6th Circuit, meanwhile, denied ZF’s request to stay the discovery order on October 13. The move meant that ZF faced an October 27 deadline to hand over the documents to Luxshare. The company faced the looming prospect that even its rushed Supreme Court petition might be too late to keep its documents out of Luxshare’s hands – and out of the threat of German arbitration.

This is where Latham’s strategy gets really mind-boggling. On Thursday evening, after Luxshare filed its brief opposing the Supreme Court review, ZF asked the 6th Circuit to summarily uphold the trial court’s discovery order. ZF also informed the 6th Circuit that it was dropping its specific challenges to the order, so the court need only address the section 1782 issue in its summary confirmation decision.

It is of course extremely rare for the losing party to ask a court of appeal for a summary affirmation of its defeat. Latham has made no secret of ZF’s motive: to improve his chances in the Supreme Court. After all, Luxshare’s strongest opposition argument was the unusual procedural stance of ZF’s Supreme Court review application before a lower court judgment. A summary 6th Circuit assertion would negate this argument – and ZF’s concession on case-specific challenges would erase Luxshare’s assertion that the Article 1782 issue might not end the dispute.

The summary affirmation motion, however, was only the first part of ZF’s plan. Keep in mind that Luxshare is due to get its hands on the disputed evidence in a few days. So, on Friday, Latham filed a stay request with the Supreme Court, arguing that unless the court freezes the status quo, Luxshare will be able to use the discovery to which it may not be entitled.

More broadly, ZF argued, the Supreme Court should grant the stay in order to preserve its own ability to resolve the circuit split over whether Section 1782 allows US courts to grant discovery in foreign private arbitration. . The theoretical character hangs over each case presenting this problem, warned ZF. At least in this dispute, the arbitration has yet to start – and ZF again pledged in its stay request to waive the statute of limitations for initiating Luxshare arbitration.

“In light of the Servotronics dismissal, this case presents an ideal vehicle through which the court could determine – once and for all – what Section 1782 means,” ZF said.

ZF lead attorney Roman Martinez de Latham and Luxshare attorney Andrew Rhys Davies of Allen & Overy both declined to make statements. It’s a safe bet, however, that Luxshare will oppose the Supreme Court’s suspension arguing that ZF will not be irreparably hurt if he has to hand over the disputed find.

If Latham’s machinations fail, another Section 1782 petition awaits the attention of judges, from consultancy firm Alix Partners LLP, in investor-state arbitration by Russian investment entity pursuing a claim against Lithuania. But that’s a story for another day.

Read more:

DOJ to argue before SCOTUS against US discovery in foreign private arbitration

Supreme Court to Resolve U.S. Discovery Circuit Division in Foreign Private Arbitration

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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the principles of trust, is committed to respecting integrity, independence and freedom from bias.

Alison frankel

Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A graduate of Dartmouth University, she worked as a reporter in New York covering the legal and law industry for more than three decades. Prior to joining Reuters, she was a writer and editor for The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin. Contact her at [email protected]


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