Over the decades, arbitration has greatly expanded as an often-preferred alternative to court. The Supreme Court in its many decisions favoring arbitration has likely hastened that development. The Supreme Court has found that arbitration clauses can survive even when contained in a contract that is alleged to have been procured by fraud, Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395 (1967), and that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983). In 1985, the Court held that “[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.” Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, Inc., 473 U.S. 614, 626 (1985).
The Supreme Court has held that the FAA takes precedence over state laws seeking to limit it, Southland Corp. v. Keating, 465 U.S. 1 (1984), as well as over some conflicting federal laws, Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018). Through this same period, the use of arbitration has exploded. Arbitration is used to resolve consumer and employment matters, large and complex commercial matters, construction disputes, international commercial disputes, investor disputes, and even civil rights cases.
Litigants’ reliance on discovery has also evolved and expanded over the past century, especially in arbitration. A century ago, litigation-style discovery was not contemplated in arbitration, and depositions were rare. That is no longer the practice. Although in arbitration there is generally less discovery than in litigation, litigators almost always need some discovery. Prehearing requests for production and depositions are deemed essential by most litigants who, while willing to limit it, are rarely willing to eliminate prehearing discovery. And while arbitrators can always require parties to exchange documents and other information and make persons under the parties’ control available for depositions, it is not unusual for there to be relevant documents or even nonparty witnesses who possess information the litigants deem essential.
Section 7 of the FAA, which sets forth the powers of the arbitrator to subpoena witnesses and evidence, was drafted a century ago, when the nature of the disputes resolved in arbitration was more limited and when there was less reliance on prehearing discovery. Section 7 provides:
The arbitrators selected either as prescribed in this title or otherwise, or a majority of them, 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. The fees for such attendance shall be the same as the fees of witnesses before masters of the United States courts. Said summons shall issue in the name of the arbitrator or arbitrators, or a majority of them, and shall be signed by the arbitrators, or a majority of them, and shall be directed to the said person and shall be served in the same manner as subpoenas to appear and testify before the court; if any person or persons so summoned to testify shall refuse or neglect to obey said summons, 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 in the same manner provided by law for securing the attendance of witnesses or their punishment for neglect or refusal to attend in the courts of the United States.
9 U.S.C. § 7.
Some circuits—in particular, the Second, Third, Fourth, Ninth, and Eleventh Circuits—have interpreted section 7 as limiting prehearing discovery or even prohibiting nonparty discovery outside the presence of the arbitrator. Absent prehearing discovery, there is no alternative but for lawyers to receive potentially massive “document dumps” during the course of the arbitration hearing with no ability to review and digest what in some cases could be volumes of relevant information. This is highly problematic.
In some of these jurisdictions, a practice has emerged where, in the case of a prehearing nonparty subpoena for documents, especially regarding a subpoena addressed to a custodian of records, the litigants notice up a hearing via telephone or Zoom and the arbitrator issues a third-party subpoena deuces tecum. If the party complies voluntarily and produces the documents in advance of the scheduled telephonic hearing before the arbitrator, the hearing is canceled. The third parties usually comply voluntarily, and the hearings are routinely canceled. These subpoenas, however, because they were issued in connection with a hearing before the arbitrator, are believed to be enforceable pursuant to section 7, should someone fail to comply voluntarily.
This practice is imperfect. Even more problematic is the 2019 decision in Managed Care Advisory LLC v. Cigna Healthcare, Inc., 939 F.3d 1145 (11th Cir. 2019), in which the Eleventh Circuit expressly prohibited that work-around. In Managed Care, the Eleventh Circuit found that section 7 did not permit any prehearing discovery. It also found that videoconference hearings were not contemplated by the drafters in 1925 and did not satisfy the requirement that the hearing be held before the arbitrator. Managed Care, 939 F.3d 1160–61. In jurisdictions, like the Eleventh Circuit, that do not recognize a power to issue nonparty prehearing subpoenas in arbitrations, litigants and arbitrators are left with few options.
While some state arbitration acts have remedied this by granting more liberal subpoena powers to arbitrators, similar to those in Federal Rule of Civil Procedure 45, nonparty prehearing subpoenas remain problematic when the nonparty and the documents reside outside the jurisdiction of the state court.
My proposal is relatively modest and straightforward: Amend section 7 of the FAA to align it with various state arbitration acts that give the arbitrators the power to issue clearly enforceable prehearing deposition subpoenas and subpoenas deuces tecum for discovery materials to nonparties. I believe this proposal would be embraced by both sides of the “v” as claimants and respondents would receive more certain access to prehearing information. Litigants in consumer matters and those in large and complex commercial matters often have a need of information in the hands of nonparties and would likely support this change.
A possible objection to this proposal is that discovery should be limited in arbitration and that these additional powers would expand arbitration discovery inappropriately. This is a red herring. Simply giving arbitrators the power does not require arbitrators to exercise it. However, the failure of the FAA to grant arbitrators this power clearly and unmistakably has the potential to prevent litigants from obtaining critical relevant information. Giving greater power to the arbitrators rectifies an unintended consequence of a 1925 statute. In light of the current state of pretrial discovery in litigation in the United States, this may be an issue that plaintiffs, defendants, consumers, and employees rally around and support. For these reasons, section 7 of the FAA should be amended to provide arbitrators in all matters with the powers in Rule 45 of the Federal Rules of Civil Procedure.
There is a role for the ABA in facilitating third-party discovery under the FAA. The ABA sections could propose, and the ABA could adopt, a resolution supporting the amendment of section 7 of the FAA to provide arbitrators with broader prehearing powers to require third-party discovery. A resolution would empower our ABA representatives on Capitol Hill to share the legal community’s concern with legislators. An ABA resolution would be a significant and powerful first step.