Making Arbitration Work: The Reach of Arbitral Subpoenas

Ninth Circuit Court of Appeals

Some background: Congress helps arbitration

As we have discussed earlier, the Federal Arbitration Act was enacted in 1925 to overcome judicial hostility to arbitration.  It places agreements to arbitrate on the same footing as other contracts.  Similarly, Congress passed Article 2 of the FAA to facilitate arbitration of international disputes after the United States entered into the New York Convention in 1958.  This is more formally known as the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Arbitrators don’t have sheriffs, marshals, contempt powers, or other means necessary to enforce their decisions and orders.  Courts need to do that.  One of the important things courts do to facilitate arbitration is enforce the subpoenas arbitrators issue.  Without the ability to require the testimony of key witnesses at arbitration hearings, arbitration could become a poor way to resolve disputes.  Arbitrators might not have enough information to make well-informed decisions.

A problem with subpoenas

Which brings us to the case of Jones Day v. Orrick, Herrington & Sutcliffe, LLP, No. 21-16642, 2022 U.S. App. LEXIS 21149 (9th Cir. August 1, 2022).

A former Jones Day international partner based in Paris left to join the Orrick firm.  This led to a dispute between the partner and Jones Day.  Jones Day’s partnership agreement required the dispute to be arbitrated under the FAA in Washington, D.C. 

Jones Day requested a subpoena for Orrick documents relevant to the dispute. The arbitrator issued it and summoned Orrick to appear before him to produce the documents.  Orrick didn’t comply.  Jones Day tried to enforce the subpoena in state court in the District of Columbia, but the court refused to do so.  It didn’t think it had jurisdiction.

Jones Day then asked the arbitrator to hold a hearing in California, Orrick’s principal place of business, and issue a subpoena to Orrick to appear there.  The arbitrator did that.  But Orrick still refused to comply.  So, Jones Day asked the federal court in the Northern District of California to enforce the subpoena, also referred to as an “arbitral summons.”

The district court denied the request.  It noted that the seat of the arbitration was Washington, D.C.   And it said section 7 of the FAA allowed a district court to compel attendance only in the seat of the arbitration.  It rejected the notion that an arbitrator could sit in more than one location. 

A Stolt-Nielsen digression

Let’s digress for a moment here.  One of the ways arbitrators sometime enforce subpoenas to non-parties is to move part of the arbitration to a place where the court has jurisdiction to compel the witness to attend.  This procedure became popular – and maybe even necessary – after the decision in Stolt-Nielsen SA v. Celanese AG, 430 F.3d 567, 577 (2d Cir. 2005). There the arbitrator held a separate hearing to obtain evidence from a non-party witness.  Because the hearing was held before the arbitrator, as allowed by FAA section 7, the court said the hearing was not an improper attempt to obtain pre-hearing discovery. 

Since that case, arbitrators have moved to location of parts of arbitration hearings to places where a non-party witness could be subpoenaed to obtain necessary evidence.  AAA Rule 36(b) even contemplates doing just that. 

For the district court to rule this was not allowed was a big deal.  The practical effect of the ruling seemed to be that there was no way to get evidence from non-parties located outside of the district in which the main arbitration hearing was set.    

The Ninth Circuit resolves the problem

Now back to the case. 

Jones Day appealed.  The Ninth Circuit first found that there was federal jurisdiction of the arbitration because district courts have jurisdiction, according to FAA section 203, of a proceeding “falling under” the New York Convention.   But Orrick noted that Section 203 only mentions orders to compel arbitration, appointment of arbitrators, and enforcement of arbitral awards.  So, Orrick argued, requests to enforce subpoenas do not “fall under” the Convention. 

The Ninth Circuit disagreed. It found that nothing in the Convention or Article 2 of the FAA limits the use of the powers given to arbitrators generally.  Article 2 “supplements” provisions of FAA Article 1.  Thus, arbitrators in international arbitrations have all the powers of arbitrators in domestic arbitrations.  The purpose of the Convention was to encourage arbitration – not limit arbitrators’ powers.

The Ninth Circuit also rejected the argument that the subpoena could only be enforced in Washington, D.C., the seat of the arbitration.  That argument relied on section 204 of the FAA which says a subpoena can be enforced where the arbitration is taking place.  The court found that too was a permissive provision and did not limit the venue for a motion to enforce a subpoena. Venue was proper in California under 28 U.S.C. § 1391, the general venue statute, because that was Orrick’s principal place of business. The court didn’t need to decide the issues raised under FAA section 7 because section 1391 was sufficient to find justification to enforce the subpoena.

Orrick and its partners were compelled to comply with the arbitral subpoenas/summonses. 

And so?

Jones Day specifically addressed the FAA’s international provisions, but it relies on arbitrators’ general powers in all arbitrations.  So, it establishes that all FAA subpoenas can be enforced in court just like trial subpoenas.  This includes the witness’s place of residence. Thus, the case makes it clear that arbitrators have nationwide subpoena powers.

This is critical in cases that can only be properly decided after considering evidence from non-parties. Along with the expanded availability of obtaining evidence through online hearings and the like (see the earlier article in this series, “Zooming Into Arbitration”), the approach of the Ninth Circuit continues to make arbitration a robust, cost-effective way to resolve disputes.

You still need to check out the law in your specific jurisdiction to be sure how to handle non-party subpoenas.  But in many – if not most – jurisdictions, the procedure used in Jones Day can be used to obtain critical information from non-parties.