January 09, 2018

Toward a Uniform Position on US Arbitral Subpoenas

American arbitration law in force since 1925 empowers arbitrators to issue subpoenas to non-parties. This power is found in Section 7 of the US Arbitration Act (FAA). This provision is essentially the only provision of the FAA that directly states a micro-level rule of procedure concerning how proceedings shall be conducted in  an arbitration involving interstate or international commerce. Therefore authoritative decisional law about the meaning of FAA Section 7 has considerable importance to the day-to-day work of arbitrators in domestic and international cases that are seated in the United States (or by agreement are governed by US arbitral procedural law).

It is a rare occasion when an issue concerning enforcement of an arbitral subpoena is decided by a US Circuit Court of Appeals. Such a rare occasion occurred last month when the US Court of Appeals for the Ninth Circuit, agreeing with holdings of the Second, Third and Fourth Circuits, held that an arbitrator’s power under FAA Section 7 to obtain documents by subpoena is confined to requiring a witness to come to an arbitral hearing and to bring along documents for submission as evidence at the hearing. (CVS Health Corp. v. Vividus, LLC, 2017 WL 6519942 (9th Cir. Dec. 21, 2017)). According to these four federal appellate courts — in decisions from 1999, 2004, 2008, and now 2017 — that conclusion is compelled by the plain meaning of the words used in the statute: “… 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.

One US appellate court, the Eighth Circuit, adopted a different view in a decision in 2000 that predates the Second and Third Circuit cases. The Eighth Circuit held that an implicit power to require document production in advance of a hearing — in the manner of discovery in a US litigation — could be inferred from the explicit statutory power to order production in conjunction with the appearance at a hearing of a witness under subpoena.

In US legal parlance a “Circuit split” exists whenever different federal courts of appeals rule differently on the same issue. And so it has been conventional in discussion of the arbitral subpoena power to refer to a “Circuit split” because of the 8th Circuit ruling (and to a small degree because the Fourth Circuit allowed that, despite the evident plain meaning of the statutory words, perhaps in a case of special need or hardship there might be a power to subpoena documents to be produced separately from any hearing).

Here we have a “split,” but it is far from being down-the-middle, for multiple reasons. First one should consider the US cities whose US District Courts are bound by the Eighth Circuit’s decision, as compared to the list of cities in the Second, Third, and Ninth Circuits. The former includes Minneapolis, St. Louis, Kansas City, Des Moines, Little Rock, and Omaha. The latter includes New York, Philadelphia, Los Angeles, San Francisco, San Jose/Silicon Valley, San Diego, Seattle, Phoenix, Portland, and Pittsburgh. Consider also the fact that US District Courts in Dallas, Chicago, Miami, New Orleans, and Northern Virginia have followed the 2d-3d-4th (and now 9th) Circuit view — this survey is based only on published decisions — on the basis of the persuasive force of this position and not because of appellate authority they were bound to follow in their own Circuits.

The consequence is that in most of the US cities of greatest economic significance, and thus probably in most of the places where non-party witnesses in US-seated international arbitrations and high-value domestic arbitrations will be found, the rule is likely to be that the arbitral subpoena must summon a witness to a hearing in order to compel the witness to produce documents.  The Eighth Circuit view has no such retinue of unbound District Court adherents, and this is presumably because its view is simply less persuasive. It finds no support in the text of the statute and relies upon an analogy between arbitration and litigation: that whereas a judicial subpoena may issue for trial or discovery, an arbitral subpoena should be able to issue for a hearing or for discovery. But evidently most courts have been persuaded that this analogy fails because discovery occupies a different place in arbitration.

It is also inferable that this is not the type of “Circuit split” that is likely to be resolved by the US Supreme Court — not when the issue has only reached federal appellate courts four times in almost 20 years and participants in an ongoing arbitration are likely to find solutions that do not involve taking this avoidable issue to the Supreme Court.

So what shall the arbitrator do? Arbitration counsel who are sensitive to the issue may be willing to design the proposed subpoena to order production at a witness hearing. To that end, since 2015 many arbitrators have provided to counsel the New York City Bar’s Annotated Model Federal Witness Summons.   (A link can be found on this Commentator’s general website www.lexmarc.us) But what if counsel, so informed, insists on a discovery-style subpoena and declares its willingness to litigate for its enforcement in a jurisdiction where the issue is technically open?  And suppose the adverse party does not object? It is not for the Tribunal to declare predictively that the subpoena is not likely to be enforced. But if arbitral persuasion of counsel fails, it is surely within the Tribunal’s discretion to warn counsel that delays in obtaining non-party evidence due to judicial enforcement proceedings might not furnish a basis for postponement of the final merits hearing, thereby encouraging counsel to follow the now-customary pre-merits hearing route for document disclosure: i.e. the issuance of a subpoena calling for a pre-merits hearing before members of the Tribunal, at a place of compliance close to where the witness is found, with the understanding conveyed by the Tribunal to counsel that if the witness and both parties will agree to waive the hearing, there is no obstacle to consensual third-party document production in a non-hearing setting in advance of the merits hearing.

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