In re Application of FIMI-Finanziaria Immobiliare Italia S.R.L. and FINAB 43 S.R.L. in Liquidazione

At a glance

Parties

In re Application of FIMI-Finanziaria Immobiliare Italia S.R.L. and FINAB 43 S.R.L. in Liquidazione (petitioners); respondents 400 Fifth Avenue Corp. and related 400 Fifth entities, Bizzi & Partners Development LLC, Giuseppe Rossi, Andrus Laurits and Steven Della Salla

Case no.

U.S. District Court, Southern District of New York, No. 19-mc-584 (PKC)

Court

U.S. District Court, Southern District of New York (Castel, U.S.D.J.)

Forum and rules

Discovery application under 28 U.S.C. § 1782 in aid of a planned Italian arbitration before a sole arbitrator appointed by the President of the Court of Milan

Sector

Real estate development (Manhattan)

Outcome

Motion to quash granted (3 August 2020): the Italian arbitration is a private arbitration, not a "foreign or international tribunal" under section 1782.

The dispute

The petitioners are shareholders of 400 Fifth Avenue Holding SpA, an Italian holding company set up to develop real estate in Manhattan. They were preparing an arbitration in Italy for damages over alleged breaches of fiduciary and other duties by the company's directors and statutory auditors, which they said cost them their investment. Section 22 of the company's bylaws sends such disputes to a sole arbitrator appointed by the President of the Court of Milan, with the Italian Code of Civil Procedure on "ritual arbitration" applying in the alternative. The court had earlier granted an ex parte application under 28 U.S.C. § 1782 for discovery from entities and individuals involved in the project. Those respondents were not intended parties to the arbitration. They moved to quash a subpoena for testimony served on Steven Della Salla and a subpoena for documents served on Bizzi & Partners Development LLC, arguing that a private arbitration does not meet the statute's "foreign or international tribunal" requirement. The published documents also include a 2017 judgment of the Court of Appeal of Tirana recognising an ICC award in Hobas Rohre GmbH v. C & S Construction Energy sh.p.k. That judgment does not relate to this case.

Key holdings

1. NBC v. Bear Stearns remains good law after Intel, as the Second Circuit confirmed in In re Guo. Section 1782 does not reach arbitral bodies established by private parties. The court applied Guo's functional test: does the body have the attributes most commonly associated with private arbitration? pp. 4–6
2. State affiliation: apart from the appointment by the President of the Court of Milan, the arbitration has no link to the Italian state. The parties pay the arbitrator, and the Italian courts play no role unless a party challenges the award. p. 6
3. Possible review by Italian courts does not make the arbitration a state proceeding. The limited grounds of challenge are nullity, third-party opposition, revocation, and error of law in restricted cases. Refusal grounds under Article V(2) of the New York Convention, and manifest disregard of the law, have never been held to turn a private arbitration into a state-sponsored one. pp. 6–8
4. The arbitrator's jurisdiction comes from the parties' consent through the company bylaws, not from any governmental grant of authority. The bylaws can bind the parties even though they were not negotiated. pp. 8–9
5. Appointment of the arbitrator by a court does not, on its own, make a private arbitration a government-sponsored proceeding (compare NY CPLR § 7504). The incorporation of the Italian Code of Civil Procedure on ritual arbitration does not either. pp. 9–10
6. Because the mandatory section 1782 requirements are not met, the court did not reach the discretionary Intel factors. The motion to quash both subpoenas was granted. p. 10

Procedural history

1. 19 December 2019Ugolini declaration filed in support of the ex parte section 1782 application. The court granted the application.
2. 5 February 2020Respondents moved to quash the subpoenas served on Steven Della Salla and Bizzi & Partners Development LLC (Gray declaration).
3. 23 July 2020Oral argument on the motion to quash.
4. 3 August 2020Opinion and Order granting the motion to quash.

Tribunal, counsel and experts

Experts

Federico Barbàra (respondent) · Cino Raffa Ugolini (claimant)

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Keywords

• 28 U.S.C. § 1782
• discovery in aid of foreign proceedings
• foreign or international tribunal
• private arbitration
• In re Guo
• NBC v. Bear Stearns
• Intel v. AMD
• motion to quash
• subpoena
• Italian arbitration
• ritual arbitration
• court-appointed arbitrator
• corporate bylaws arbitration clause
• New York Convention Article V(2)
• public policy
• fiduciary duty
• real estate development
• 400 Fifth Avenue

Summary generated with AI from the published documents — refer to the award for the authoritative text.