No Nonparty Discovery in Arbitration

Section 7 of the Federal Arbitration Act (FAA) does not authorize prehearing discovery from nonparties and requires nonparties to testify in the physical presence of the arbitrator, according to a federal appellate court. Managed Care Advisory Group, LLC v. CIGNA Healthcare, Inc.

As this holding adopts the majority rule, the decision is not likely to cause experienced practitioners to change their litigation tactics. It is, however, a cautionary tale about the importance of carefully crafted arbitration clauses. Without one, litigants can find themselves locked into arbitration without access to critical evidence.

Disputes about Settlement Payments to Class Members

The litigation, which took place in the U.S. Court of Appeals for the Eleventh Circuit, concerned disputes about payments to healthcare providers under an agreement settling class action lawsuits against managed care medical insurance companies, including CIGNA Healthcare, Inc. In the class actions, healthcare providers alleged that insurers wrongfully rejected claims for payment.