Does an arbitrator have the authority to issue a subpoena to a third party during the discovery phase of arbitration?
The answer to this question is surprisingly complex, and depends in part on the threshold issue of which arbitration statute applies. An arbitration will fall under one of two statutory schemes, the Federal Arbitration Act (FAA) or a state arbitration statute. The FAA creates a body of federal substantive law creating and regulating the obligation to honor an agreement to arbitrate, however, it does not establish independent federal jurisdiction. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n.32 (1983); see also 9 U.S.C. 4 (requiring diversity or a federal question before a district court can compel an arbitration pursuant to the FAA).1 The FAA applies to any "contract evidencing a transaction involving commerce." 9 U.S.C. 2. In Citizens Bank v. Alafabco , 539 U.S. 52, 56 (2003), the Supreme Court interpreted the term involving commerce "as the functional equivalent of the more familiar words "affecting commerce" - words of art that ordinarily signal the broadest permissible exercise of Congress' Commerce Clause power." Thus, the FAA has broad applicability.
State arbitration statutes, frequently derived from the Uniform Arbitration Act of 1956 (UAA) or the Revised Uniform Arbitration Act of 2000 (RUAA), will ordinarily apply only when parties agree to arbitrate pursuant to those rules.2
Section 7 of the FAA governs the authority of arbitrators to issue subpoenas. An arbitrator "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." 9 U.S.C. 7. If a party refuses to comply with an arbitrator's subpoena the parties can seek enforcement from the "district court for the district in which such arbitrators, or a majority of them, are sitting."3 Id. The location of the arbitration has strategic implications because which Circuit Court of Appeals has jurisdiction can determine whether a pre-hearing subpoena issued by an arbitrator is valid.
Varying Interpretations Of 7 Of The FAA
Whether a non-party must comply with an arbitrator's pre-hearing discovery subpoena for documents pursuant to 7 of the FAA is a question that presently divides the federal courts. Three Circuit Courts of Appeals have directly ruled on the issue and each has taken a different position.
In In re Sec. Life Ins. Co. of Am., 228 F.3d 865 (8th Cir. 2000), the Eighth Circuit upheld an arbitration panel's power to order production of documents from a non-party prior to the arbitration hearing. The court stated, "implicit 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." Id. at 870-71. The Southern District of Florida and the Middle District of Tennessee have interpreted 7 of the FAA in a similar manner, allowing an arbitrator to issue subpoenas for documents to non-parties during discovery. Paul D. Friedman & Lucy Martinez, Arbitral Subpoenas Under U.S. Law and Practice, 14 Am. Rev. Int'l Arb. 197 (2003).
The Third Circuit has taken the opposite position. In Hay Group v. E.B.S. Acquisition Corp., the Third Circuit held that 7 of the FAA only grants arbitrators the power to compel the production of documents from non-parties at the arbitration hearing. 360 F.3d 404 (3d Cir. 2004). The court specifically focused on the "bring with him" language as indicative of the limited power of the arbitrator. Thus, when an arbitration is governed by the FAA and is taking place in the Third Circuit, arbitrators lack the authority to issue discovery subpoenas for documents to non-parties.
The Fourth Circuit has adopted a third approach. The Fourth Circuit has concluded that 7 does not authorize an arbitrator to issue discovery subpoenas for documents to non-parties absent special need. Comsat Corp. v. Nat'l Sci. Found., 190 F.3d 269 (4th Cir. 1999). In Comsat, the Fourth Circuit declined to define "special need" but stated that, at a minimum, the party seeking the information must show that the information is not available elsewhere. Id. at 276; See In re Deiulemar Compagnia Di Navigazione S.p.A., 198 F.3d 473 (4th Cir. 1999) (Fourth Circuit finds "special need" in a case where the evidence sought was on a ship that was scheduled to leave U.S. waters).
Subpoena For Documents vs. Subpoena For Testimony
Adding to the complexities of the issue, some federal courts have drawn a distinction between the authority of an arbitrator to issue a subpoena for documents and the authority to issue a subpoena for testimony. In Integrity Ins. Co. v. Am. Centennial Ins. Co., the Southern District of New York upheld the authority of an arbitrator to issue a subpoena for documents to a non-party but refused to enforce a subpoena to depose a non-party during the discovery phase.4 The court reasoned that upholding the subpoena for testimony would require the individual to appear twice. 885 F. Supp. 69 (S.D.N.Y. 1995). A similar decision was reached by the District of Minnesota in SchlumbergerSema, Inc. v. Xcel Energy, Inc. No. Civ. 02-43004PAMJSM, 2004 WL 67647 (D. Minn. Jan. 9, 2004). The court noted that production of documents is less burdensome on the non-party. Id. These decisions imply that the court's inquiry will not focus solely on the inherent authority of the arbitrator and that the courts will also look at the impact the subpoenas have on non-parties.
State Arbitration Statutes
Most states have established individual arbitration statutes. Recently, certain states have adopted provisions of the RUAA, which was enacted in 2000.5
New York. In New York, arbitrations are governed by the New York Civil Practice Law and Rules Article 75 (CPLR). Pursuant to CPLR 7505, "[a]n arbitrator and any attorney of record in the arbitration proceeding has the power to issue subpoenas." The subpoena power conferred on arbitrators, however, is limited to obtaining evidence for the hearing. Friedman, supra , 14 Am. Rev. Int'l Arb. at 229. Furthermore, CPLR 3102(c), states that "disclosure to aid in bringing an action, to preserve information or to aid in arbitration, may be obtained, but only by court order." Thus, under the New York statute, pre-hearing discovery in arbitrations is unavailable and must be obtained by court order.
New Jersey and the Revised Uniform Arbitration Act. In New Jersey, agreements to arbitrate are governed by the revised New Jersey Arbitration Act (Revised Act). N.J.S.A. 2A:23B-1 to 32. The Revised Act is modeled after the RUAA as proposed by the National Conference of Commissioners on Uniform State Laws (NCCUSL).
The Revised Act alters the language used to describe the power of an arbitrator to conduct discovery and subpoena witnesses. In the first instance, permitting any discovery is left to the discretion of the arbitrator. The arbitrator must consider "the needs of the parties to the arbitration proceeding and other affected persons and the desirability of making the proceeding fair, expeditious, and cost effective." N.J.S.A. 2A:23B-17(c). If the arbitrator allows third-party discovery, the arbitrator may subpoena third parties for discovery "proceedings." N.J.S.A. 2A:23B-17(f).
In comment eight, the NCCUSL addresses the impact that 17 of the RUAA has on non-parties. The comment notes that non-parties who disagree with a subpoena issued to them can simply refuse to comply because subpoenas issued by arbitrators are not self-enforcing. When a non-party does not comply with a subpoena, it is up to the requesting party to proceed to court in order to enforce the subpoena. The intent of the drafters in crafting 17, as articulated in comment eight, was "to follow the present approach of courts to safeguard the rights of third parties while insuring that there is sufficient disclosure of information to provide for a full and fair hearing." The comment concludes, not surprisingly, that further development of this area of arbitration law should be on a case by case basis.
Connecticut. In Connecticut, the use of subpoenas and depositions in arbitrations is governed by Connecticut General Statute 52-412. Section 52-412(a) grants arbitrators, umpires and any other persons qualified by law to issue subpoenas in a civil action the "power to issue subpoenas for the attendance of witnesses and for the production of books, papers and other evidence at arbitration hearings." This section expressly states that the subpoena power of an arbitrator is limited to compelling testimony and documents for use at the arbitration hearing.
Section 52-412(c), governs the use of depositions and states that any party to a written arbitration agreement can make an application to the Superior Court "for an order directing the taking of depositions, in the manner and for the reasons prescribed by law for taking depositions to be used in a civil action, for use as evidence in an arbitration." In McKenna v. Shearson Lehman Hutton, Inc., 592 A.2d 980 (Conn. App. Ct. 1991), the court held that because 52-412(c) allowed only for evidentiary depositions, a request to depose a non-party prior to the arbitration hearing was denied absent a showing that the non-party would be unavailable.
The conflicting decisions and uncertainty in some state statutes can force parties to arbitrations to go to court to obtain or enforce a subpoena issued to a non-party. If parties are forced to actually litigate this basic procedural issue, it will undermine their decision to utilize arbitration in the first place - which was meant to be a cost effective, more efficient alternative to traditional litigation.
1 See David S. Schwartz, The Federal Arbitration Act and the Power of Congress over State Courts, 83 Or. L. Rev . 541 (2004), arguing that the FAA is procedural rather than substantive.
2 It is unclear if state arbitration laws can apply simultaneously with the FAA if they do not directly conflict with the FAA and if the state laws are not inconsistent with FAA policies. See Anne M. Devens, Federal Versus State Arbitration Laws: Whose Law Applies and Why Does It Matter?, www.vba.org. The drafters of the RUAA believe that on issues where the FAA is silent, state arbitration law can apply. Revised Uniform Arbitration Act (U.L.A.), Prefatory Note.
3 In Dynegy Midstream Services v. Trammochem, 451 F.3d 89 (2d Cir. 2005), the Second Circuit held that 7 of the FAA does not authorize nationwide service of process, therefore, it lacked personal jurisdiction over the party to which the subpoena was issued.
4 But see Odfjell ASA v. Celanese AG, 328 F. Supp. 2d 505 (S.D.N.Y. 2004) (the court refused to permit an arbitrator to issue pre-hearing documentary or testimonial subpoena to a non-party).
5 Revised Uniform Arbitration Act (U.L.A.) (Alaska, Colorado, Hawaii, Nevada, New Jersey, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, Utah, and Washington have adopted some form of the RUAA).
John P. Scordo is a Partner in the Litigation Department of Day Pitney LLP. His practice focuses on commercial and insurance litigation and arbitration. Kristine R. Begley is a Summer Associate at the firm.