FAA Does Not Authorize Arbitrators To Summon Non-Parties For Pre-Hearing Discovery

Introductory Statement

Civil litigators often take for granted the ease with which they can obtain pre-trial discovery from non-parties in both state and federal courts, and frequently assume that the “presumption in favor of arbitrability” embodied in the Federal Arbitration Act (FAA) includes a statutory grant of subpoena power to arbitrators that matches what is available in federal court. That is not so. In fact, the power to summon non-parties in arbitration – both for discovery and evidentiary hearing – is much more limited, to the extent it exists at all. Additionally, the power to summon non-parties raises other questions, including the following:

A very good discussion of the above issues is contained in Chapter 9 of THE COLLEGE OF COMMERCIAL ARBITRATORS GUIDE TO BEST PRACTICES IN COMMERCIAL ARBITRATION (4th ed. 2017).

9 U.S.C. § 7

Section 7 of the FAA grants arbitrators authority to “summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case,” and such subpoena is then to be served “in the same manner as subpoenas to appear and testify before the court.” 9 U.S.C. § 7. Accordingly, the procedural aspects of an arbitral subpoena under the FAA are governed by Rule 45 of the Federal Rules of Civil Procedure, which imposes a geographical limit on an arbitrator’s power to compel a non-party witness to appear: namely, 100 miles of where the witness resides, is employed, or regularly transacts business in person.

Whether an arbitrator can compel a non-party witness to testify and/or produce documents other than at an arbitral hearing is dependent on the law of the federal jurisdiction where the arbitral seal is located. On this topic, as it true with many procedural matters concerning arbitration, there is a split in the federal circuits.

Both the Sixth and Eighth Circuits have interpreted Section 7 liberally to allow arbitrators to summon non-parties for pre-hearing discovery. See, Am. Fed’n of Television & Radio Artists, AFL-CIO v. WJBK-TV, 164 F.3d 1004, 1009 (6th Cir. 1999) (“… the FAA’s provision authorizing an arbitrator to compel the production of documents from third parties for purposes of an arbitration hearing has been held to implicitly include the authority to compel the production of documents for inspection by a party prior to a hearing.”); Sec. Life Ins. Co. of Am. v. Duncanson & Holt, 228 F.3d 865 (8th Cir. 2000) (“[I]mplicit in an arbitration panel’s power to subpoena relevant documents for production at a hearing is the power to order the production of relevant documents for review by a party prior to the hearing.”). At least one federal district court outside the Sixth and Eighth Circuits has agreed with this view. See, Festus & Helen Stacy Found., Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 432 F.Supp. 2d 1375, 1379-1380 (N.D.Ga. 2006).

Prior to the Ninth Circuit’s decision in Vividus, the Second and Third Circuits had adopted a narrow interpretation of Section 7 and held that an arbitration subpoena cannot compel a third-party to produce pre-hearing discovery; that the language of Section 7 plainly and unambiguously restricts an arbitrator’s subpoena power to compelling the non-party witness to appear in the physical presence of the arbitrator(s) and to hand over documents at that time. See, Life Receivables Trust Syndicate 102 at Lloyd’s of London, 549 F.3d 210, 215-216 (2d Cir. 2008) (arbitrators can order production of documents by a non-party witness only in connection with the witness’ appearance at a hearing, including preliminary non-merits hearings, the emphasis being on the witness’ appearance and production being in the physical presence of the arbitrator(s)); Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 406-407 (3d Cir. 2004) (“… Section 7’s language unambiguously restricts an arbitrator’s subpoena power to situation in which the non-party has been called to appear in the physical presence of the arbitrator and to hand over the documents at that time.”). Several district courts in other federal jurisdictions have endorsed this relatively restrictive interpretation. See, e.g., Chi. Bridge & Iron Co. N.V. v TRC Acquisition, LLC, Civil Action No. 14-1192, 2014 WL 3796395 (E.D.La. 2014); Alliance Healthcare Servs. v. Argonaut Private Equity, LLC, 804 F.Supp. 2d 808, 810-811 (ND.Ill. 2011); Kennedy v. Am. Express Travel Related Servs. Co., 646 F.Supp. 2d 1342, 1344 (S.D. Fla. 2009).

Finally, the Fourth Circuit has adopted a hybrid approach, allowing non-party document discovery where the party seeking such discovery establishes a “special need or hardship.” See, COMSAT Corp. v. Nat’l Sci. Found., 190 F.3d 269, 276 (4th Cir. 1999).

The Holding in CVS Health Corp. v. Vividus, LLC

The Vividus parties (referred to as “HMC” in the decision) sued several defendants in the district court of the Southern District of New York. The court severed the Vividus parties’ claims against the various defendants and ordered that those claims be litigated or arbitrated in separate proceedings based upon forum selection and arbitration clauses contained in the Vividus parties’ pre-existing agreements with the defendants. The Vividus parties’ claims against Express Scripts were transferred to the district court in the Eastern District of Missouri (referred to as “the Missouri Litigation” in the decision). The claims against CVS/Caremark were submitted to arbitration in Arizona (referred to as “the Arizona Arbitration” in the decision).

In the Missouri Litigation, Express Scripts produced documents pursuant to a protective order issued in that matter. A month later, the arbitrators in the Arizona Arbitration issued a subpoena directing Express Scripts to produce certain documents it had produced in the Missouri Litigation for use in the Arizona Arbitration. The subpoena directed that the documents be produced at the law offices of the Vividus parties’ counsel, and also contained provisions regarding procedures for making objections to the subpoena.

When Express Scripts ignored the arbitration subpoena, the Vividus parties filed a petition pursuant to Section 7 of the FAA asking the district court in Arizona to enforce the arbitral subpoena and compel production. Specifically, the Vividus parties asked the district court to issue an order directing Express Scripts to respond to the subpoena or to assert its objections to the subpoena. In denying the petition, the district court concluded that Section 7 of the FAA does not confer upon and arbitrator authority to compel pre-hearing document discovery from a non-party to the arbitration outside the presence of an arbitrator. Instead, the district court ruled that the statute’s text only allows an arbitrator to summon testimony and documents from a non-party in the context of an arbitration hearing. The Vividus parties appealed and the Ninth Circuit affirmed the district court’s ruling.

The Ninth Circuit started its discussion by noting the “plain meaning” rule for statutory interpretation: namely, that “[i]f the language has a plain meaning or is unambiguous, the statutory interpretation inquiry ends there.” *2. The Court concluded that a plain reading of the text of Section 7 revealed that an arbitrator’s power to compel the production of documents is limited to production at an arbitration hearing.

“The phrase ‘bring with them,’ referring to documents or other information, is used in conjunction with language granting an arbitrator the power to ’summon … any person to attend before them.’ Id. Under this framework, any document productions ordered against third parties can happen only ‘before’ the arbitrator. The text of section 7 grants an arbitrator no freestanding power to order third parties to produce documents other than in the context of a hearing.”

*2.

Post Script

The Ninth Circuit’s decision in the Vividus case only scratches the surface of the many undecided issues that exist with regard to an arbitration tribunal’s power to summon third-party witnesses, as described in the Overview Statement above. This is a developing area of the law in which there will most likely be future developments. Stay tuned!