The scope and enforceability of subpoenas remains one of the most unsettled areas in arbitration. Earlier this year, in Broumand v. Joseph, No. 20-CV-9137 (JSR), 2021 WL 771387 (S.D.N.Y. Feb. 27, 2021), the Southern District of New York (SDNY) weighed in by determining that a witness providing testimony remotely does not satisfy section 7 of the Federal Arbitration Act’s (FAA) “presence requirement.”
This is just one part of a larger Circuit split. The confusion comes from the language of the FAA that provides arbitrators with the authority to issue subpoenas and sets the scope for service and enforcement through Federal Rule of Civil Procedure 45. See 9 U.S.C. § 7. One caveat to the traditional Rule 45 subpoena, though, is that arbitrators may only summon a person “to attend before them[.]” Id. A majority of Circuits that have addressed the issue, including the Second, Third, Ninth, and Eleventh, interpret the requirement to permit arbitral subpoenas only to compel testimony and documents during a hearing. The Sixth and Eighth Circuits have adopted a more lenient approach, allowing arbitral subpoenas to compel the production of documents prior to (and during) a hearing, but have not reached the issue of whether arbitral subpoenas can compel testimony prior to a hearing. Parties and arbitrators sometimes craft a work-around, convening a hearing solely for the purpose of taking testimony from a third party. Notably, under this approach, the arbitrator must be present, which is clearly a different setting than traditional, discovery-style depositions.
With the Second Circuit having already adopted the strictest approach to enforcing arbitral subpoenas, perhaps it is unsurprising that, in Broumand, the SDNY continued the strict application of the FAA’s requirement “to attend” before the arbitrators. The SDNY determined that the geographic limits found in Rule 45(c) apply, and that permitting a witness to testify remotely could not overcome the one-hundred-mile limitation because the hearing itself was still more than one hundred miles away. The SDNY also found that the “presence requirement” of the FAA could not be satisfied by video testimony, reasoning that the principal behind the presence requirement “is to force an arbitrator to think twice before issuing an arbitral subpoena[,]” and that “[a]llowing arbitrators to subpoena nonparties for discovery without requiring the arbitrators to convene and preside over a physical hearing would largely undermine that calculation.” Id. at *11.
The SDNY is not the first court to adopt this interpretation of Section 7, with the Eleventh Circuit having come to the same conclusion two years ago in Managed Care Advisory Grp., LLC v. CIGNA Healthcare, Inc., 939 F.3d 1145 (11th Cir. 2019). But it does appear to be the first court to adopt this approach in the “new normal” of the pandemic, which has forced parties and decision-makers alike to accept (and even embrace) remote testimony.
Already, the Northern District of Illinois has disagreed with this approach, though only in the context of interpreting Rule 45’s geographic limitation and not addressing section 7’s presence requirement. See United States v. $110,000 in United States Currency, No. 21 C 981, 2021 WL 2376019 (N.D. Ill. June 10, 2021). The Illinois district court expressly disagreed with the Broumand court’s focus on the physical location of the questioner (and hearing) instead of the witness. Id. at *3. The Illinois court reasoned that permitting a witness to provide remote testimony addressed the purpose behind Rule 45(c), which is “to protect third parties from the undue burden of traveling more than 100 miles to provide testimony or produce documents in a proceeding to which they are not a party.” Id.
Although the SDNY may prove a bellwether in prohibiting remote testimony for arbitral subpoenas, such an approach does appear to push against the general trend of the legal community in embracing virtual technology. In short, the scope of arbitral subpoenas is still very much in flux.