Welcome to Our Dispute: Subpoenas and Summonses in Arbitration. Part 2: Arbitrator Authority

In the last article on summonses in arbitration, we suggested that it was of note that the Federal Arbitration Act (FAA) gives arbitrators the power to require non-parties to appear and give evidence.  After all, arbitrators are chosen by the parties by contract.  And the non-parties are strangers to that contract.  But this power is necessary in many cases to make arbitration a fair and effective way to resolve disputes.  Arbitrators need enough information to make a good decision

We also digressed a little to note that, while we often refer to arbitral “subpoenas,” it’s more correct to call them “summonses.”  That’s what the FAA calls them.

Recognizing arbitrators’ ethical and professional duty to keep arbitration efficient, we further noted that the first question we should ask is whether an arbitral summons is really necessary. Perhaps the information is not sufficiently important to affect the decision.  Or perhaps there is an easier way to get it. Or maybe a party already has it but is just double-checking.  That may not be necessary.  Or maybe the important information is publicly available.  It’s always worth checking the need for the summons as a first step.

          Arbitral authority

Assuming the arbitrator or panel has decided the information is necessary to allow a party a fair opportunity to present its position, we come to the next question. Does the arbitrator have authority to issue the summons and compel attendance of the witness? 

          Discovery

Let’s start with discovery.  Arbitrators have authority to require the parties to produce documents and even witnesses for depositions, although that authority should not be taken lightly either.

Discovery from non-parties may be different story, depending on what court will be called on to enforce an arbitral summons. 

The source of arbitrators’ authority to issues  summonses  to non-parties is found in the FAA, 9 U.S.C. § 7: “[A]rbitrators . . . 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.”     Courts enforce arbitral summonses.  Section 7 says that “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.”

So, what does all this mean for discovery?

          No discovery allowed (sort of)

Many courts have relied on the statutory language and found arbitrators have no authority to issue summonses to non-parties to provide discovery.  The FAA says a witness may be summoned to “attend before [the arbitrators] or any of them as a witness” and to bring documents.  A deposition, some courts reason, is not “before” the arbitrator or panel, so arbitrators don’t have the authority to require a deposition or document production.  The Second, Third, Fourth, Ninth and Eleventh Circuits have so held. Life Receivables Tr. v. Syndicate 102 at Lloyds of London, 549 F.3d 210, 216 (2d Cir. 2008); Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 407 (3d Cir. 2004); COMSAT Corp. v. Nat'l Sci. Found., 190 F.3d 269, 275-76 (4th Cir. 1999); CVS Health Corp. v. Vividus, LLC, 878 F.3d 703, 708 (9th Cir. 2017); Managed Care Advisory Group, LLC v. Cigna Healthcare, Inc., 939 F.3d 1145 (11th Cir. 2019). 

          Maybe in the right case

There is a nuance here we shouldn’t overlook.  The Fourth Circuit held in one case that the FAA does not authorize arbitrators to subpoena third parties during prehearing discovery unless there is a showing of special need or hardship. Comsat Corp. v. Nat'l Sci. Found., 190 F.3d 269 (4th Cir. 1999).  But in that case, there was no such showing, so it allowed no discovery.  Still, it may be that 26 years later that decision will help in the right case. 

By implication, probably not

The Seventh Circuit has implied arbitral discovery summonses are beyond arbitrators’ powers.  In Servotronics, Inc. v. Rolls-Royce PLC, 975 F.3d 689 (7th Cir. 2020), the court was dealing with discovery in an international case, governed by a different section of the FAA.  But in analyzing the matter, it noted that, “[t]he FAA permits the arbitration panel—but not the parties—to summon witnesses before the panel to testify and produce documents . . .”  So, that looks like a “no” on arbitral discovery summonses, although that wasn’t exactly the issue before the court

Hang on, though.  In a minute, we’ll discuss a common workaround to the above cases. 

Yes.  Document discovery allowed

The Eighth Circuit has decided the power to order the production of relevant documents for review by a party prior to the hearing is implicit in an arbitrator’s or panel's power to subpoena relevant documents.  In re Sec. Life Ins. Co. of Am., 228 F.3d 865, 870-71 (8th Cir. 2000).  But the Minnesota District Court later decided that power does not extend to depositions, which are more onerous. Shlumberger Sema, Inc. v. Xcel Energy, Inc., 2004 WL 67647 (D. Minn. 2004).

Maybe depositions, too

Later, though, a Minnesota Magistrate Judge found that, using Zoom, depositions were not onerous. So, she allowed an arbitration discovery deposition. Int'l Seaway Trading Corp. v. Target Corp., (D. Minn. Feb. 22, 2021).

So, does that mean you should assume in a jurisdiction where Eighth Circuit law applies, that arbitrators have authority for discovery?

Probably not.  But we’ll discuss that in the next article.

          The common work-around

Relying on Stolt-Nielsen SA v. Celanese AG, 430 F.3d 567, 577 (2d Cir. 2002), there is a workaround to the law that arbitrators have no power to issue discovery summonses. The workaround is to make seeking the information part of the hearing and to bring the hearing to the witness if necessary.  This ticks all of the statutory boxes.  The witness is called before the arbitrator or panel, and they can require the witness to bring relevant documents.

But what if the witness is outside the hearing location?  Recall the summons is to be enforced like a subpoena.  That brings Rule 45 of the Federal Rules of Civil Procedure into play. Non-party witnesses can be required to attend a hearing or produce documents only within 100 miles of where the person resides, is employed, or regularly transacts business in person.  So, the arbitrator or panel may be required to move a portion of hearing to the witness's location. 

Arbitrators routinely use this approach. It is even recognized by arbitral rules.  For example, if a witness refuses to attend the hearing either in person or electronically, “either party may request that the arbitrator order the witness to appear in person for examination before the arbitrator at a time and location where the witness is willing and able to appear voluntarily or can legally be compelled to do so.”   See AAA Commercial Rule 36(b).  JAMS Comprehensive Arbitration Rule 19(c) provides that arbitrators, “in order to hear a third-party witness, or for the convenience of the Parties or the witnesses, may conduct the Hearing at any location.”

      Video hearings

Can Zoom, Teams, etc. solve all this?  Maybe.  Note the AAA rule mentions the possibility of an electronic appearance.  That could be by Zoom, Teams, or some similar video platform.  So, the witness could stay put and arbitrators could too, using video conferencing. But will that always work? 

It worked in the Minnesota case of Int'l Seaway Trading Corp. as noted above.  But it didn’t work in a New York case, Broumand v Joseph, No. 20-cv-9137 (S.D. N.Y., Feb. 27, 2021).  There the district court refused to enforce a subpoena which sought to compel a witness to testify remotely at an arbitration hearing being held by videoconference.  Even though the hearing at issue was taking place via videoconference, the venue for the arbitration was in New York City which was more than 100 miles from where the witness was located.  It didn’t matter that the witness did not have to travel over 100 miles. “The site of the arbitration,” said the court, “does not change simply because certain participants remotely access the proceedings from elsewhere.”

          And so?

This is all getting pretty complicated, and the law is not always consistent.  So, where does this all leave us?  What is the most practical way to proceed? 

We’ll take that up in the next article.  And we’ll also take a little detour to discuss state arbitration laws that come in to play in a few cases.

Stay tuned.