Arbitral Subpoenas: Planning Required – and Maybe a Trip

In earlier articles and in my book, Arbitrating Patent Disputes: A Practical Guide, we have focused on subpoenas in arbitration.  The main messages are these: plan ahead and know the rules of your jurisdiction.  This message has been reinforced recently by the Eleventh Circuit‘s narrow reading of the Federal Arbitration Act. 

We’ll get to that shortly.  But first, a little background.

Subpoenas and arbitrators

The FAA provides subpoena power to arbitrators, also referred to as an “arbitral summons.”  But not all courts agree on what the subpoenas can be used for.  For example, an arbitrator was allowed to subpoena documents, but not witnesses for prehearing production in Schlumberger Sema, Inc,. v. Xcel Energy, Inc., 2004 WL 67647 (D. Minn. 2004).  But neither was allowed in Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 407 (3d Cir. 2004). Only subpoenas to provide documents and testimony at the hearing itself was permissible.  It depends upon the jurisdiction.  

Arbitrators have no enforcement powers over non-parties.  Subpoenas are enforced by court. This can require a separate enforcement proceeding. That takes time.

Getting the evidence

An approach often used  to obtain important evidence from non-parties is suggested by Stolt-Nelson  SA v. Celanese AG, 430 F.3d 567, 577 (2d Cir. 2005).   If a party can convince the arbitrator or panel that the evidence is needed, it can be obtained in a separate hearing at a place where the witness can be subpoenaed.  This separate hearing is part of the overall hearing record and is not merely discovery-taking.

This approach easily fits within the section 7 of the Federal Arbitration Act which provides that the arbitrator or panel “may 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.”  If the witness refuses or fails to comply “upon petition the United States district court for the district in which such arbitrators, or a majority of them, are sitting may compel the attendance of such person or persons before said arbitrator or arbitrators, or punish said person or persons for contempt . . .”  Of course, it isn’t quite a discovery deposition, but it allows access to the needed information. 

AAA Commercial Rule 35 recognizes this procedure and specifically gives arbitrators the power to hold a hearing in a place the witness can be compelled to or agrees to appear.  So, if need be, the arbitrator can bring the hearing to the witness, so to speak, to obtain important testimony and documents.

Often, the non-party will recognize the inevitable and agree to provide necessary evidence without need to enforce the subpoena in court.  But the party seeking the evidence still needs to plan ahead.  If the non-party refuses to supply the evidence it will need to take the time to go to court to enforce the subpoena.   Arbitrators aren’t usually receptive to postponing a hearing while a party goes to court to get documents if the party waited to subpoena evidence until the eleventh hour.

Saving time and money through technology

One of the advantages of arbitration is flexibility.  This can save time, aggravation and money.  It is quite common, for example, to take testimony by video connection or even by telephone. This saves travel expense for all involved while still providing the information.  I have found that, when well done, taking video testimony is like having the witness in the room. But that is true only so long as the logistics of getting the right documents to the witness and video and sound quality issues are worked out in advance.  Taking evidence by video can be somewhat of a disaster if the picture keeps getting lost, the sound quality is poor, or it is difficult for everyone to locate the right documents.  Planning ahead can avoid these problems.

Given all of the above, you might think that one way to make arbitral subpoenas easier for everyone would be to have the witness provide documents in advance and then take the testimony by video.  The arbitrator and parties would obtain the needed information and everyone would save travel costs.  And, if you could get all parties to agree to this procedure. it would be a win for all. 

But be careful!

But if you want the arbitrator to order this, watch out.  Which brings us to the Eleventh Circuit ‘s recent decision in Managed Care Advisory Group, LLC v. Cigna Healthcare, Inc., No. 17-13761 (11th Cir., September 18, 2019).  There the Court recently rejected the provide-documents-and-appear-by-video approach to getting documents and testimony. 

The case involved an arbitration to resolve a dispute over a portion of the settlement funds from the settlement of a class action against managed care companies.  During the course of the arbitration, the arbitrator issued arbitral summonses to non-parties to appear for a live hearing and video conference and to bring certain documents with them.  The party seeking the information moved to enforce the summonses, and the opposing party moved to strike them.  The district court enforced them, but the Eleventh Circuit reversed. 

Not in the physical presence of the arbitrator

The Court parsed the literal language of the Federal Arbitration Act, 9 U.S.C. § 7, quoted above.  It then noted, as had the Third Circuit before it, that section 7 “restricts an arbitrator’s subpoena power to situations in which the non-party has been called to appear in the physical presence of the arbitrator and hand over documents at that time.  Managed Care, slip op. at 22, quoting Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 407 (3d Cir. 2004).  

The summonses at issue said the hearing would be in Miami, but the witnesses would testify in various locations by video conference.  The Court interpreted section 7 to allow attendance only in the physical presence of the arbitrator, not in a video feed from a different location.  The summonses’ provisions were beyond the arbitrator’s powers under section 7. 

Prehearing discovery

And, the Court found, requiring the documents to be produced before the hearing amounted to forbidden pre-hearing discovery.    It noted that section 7 had been held by the Second, Third and Fourth, and Ninth Circuits not to allow arbitrators to order non-parties to produce documents outside the presence of the arbitrator.  The Eighth Circuit, on the other hand, had found that, implicit in the arbitrator’s subpoena power to require production of documents at the hearing, is the power to order production of relevant documents for review by a party before a hearing.  But the Managed Care court disagreed with that approach.  If Congress meant to give arbitrators that power, the Court reasoned, it could have.  But it didn’t.  Slip op. at 24.

Making parties and the arbitrator think twice

The Court noted that enforcing section 7’s prohibition on pre-hearing discovery would force the parties to consider whether the documents sought are important enough to justify the time the cost of an actual appearance before the arbitrator. In addition, the Court thought that “enforcing the bar on pre-hearing discovery is beneficial because it will impose some inconvenience on the arbitrator and will induce the arbitrator to weigh whether the production of the documents is necessary.”  Slip op. at 28. 

As an arbitrator I – like most  arbitrators—have spent  a great deal of time trying to make arbitration as efficient as possible while still allowing parties to get enough information to fairly present their case.  So, I was disappointed that the Court felt an added inducement was necessary to get arbitrators to do that.  But there it is.

Now what?

As part of your planning, you always need to determine whether evidence from non-parties is necessary and, if so, how to get it.  If you need to compel a non-party to produce evidence, you need to start early to obtain an arbitral subpoena or summons and make sure issuing it is within the arbitrator’s power. 

Don’t expect the arbitrator to figure this all out for you.  Counsel ultimately will need to enforce the subpoena, so make sure you are asking the arbitrator to do something within his or her power.  If not, you could end up spending a great deal of time and money trying to enforce the unenforceable. 

If you can convince the arbitrator to issue a subpoena within his or her power, you may well be able to negotiate a cheaper and easier way to obtain the evidence form the non-party. That could involve a video hearing with earlier provision of documents, or other means.  But start with subpoena that is firmly within the arbitrator’s power.

So, plan ahead and know about the rules in your jurisdiction.

Coming up

The Eleventh Circuit also had an interesting take on issuing arbitral subpoenas and summonses and the place of enforcing them.  We’ll take that up in the next article.