July 7, 2020

Volume X, Number 189

July 07, 2020

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July 06, 2020

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Arbitration Subpoenas: Jurisdiction and Venue Basics for Enforcement Made Simpler

The statutory mechanism for judicial enforcement of an arbitration “subpoena” – in actuality, an arbitrator’s summons to give evidence -- is simply by petition to “the United States District Court for the district for which such arbitrators, or a majority of them, are sitting….” Federal Arbitration Act (“FAA”) § 7, 9 U.S.C. § 7.  But U.S. law regarding the limited subject matter jurisdiction of its federal courts, coupled with Congress’ omission to provide for such jurisdiction in chapter 1 of the FAA, makes for significant potential complexity at the threshold of enforcing an arbitral subpoena issued in connection with a domestic arbitration.  Fortunately, the Second Circuit Court of Appeals recently simplified such matters a bit.

Section 7 of the FAA enables arbitrators to “summon…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 [document] which may be deemed material as evidence in the case.”  When such a witness is recalcitrant, getting through a federal court house door in order to enforce such a summons requires a litigant first to identify which federal court’s door to approach, and then to establish that court’s subject matter jurisdiction over the enforcement proceeding.  As a practical matter, one must (i) identify the proper venue -- the federal jurisdiction in which the arbitrators or a majority of them are “sitting” -- and (ii) then allege a credible basis for that court’s subject matter jurisdiction. 

The Second Circuit Court of Appeals recently provided some helpful clarity with respect to jurisdiction and venue basics, as well as the role of the District Court concerning enforcement of an arbitral subpoena in connection with a domestic arbitration.  See Washington Nat’l Co. v. OBEX Group LLC, 2020 U.S. App. LEXIS 14062 (2d Cir. May 1, 2020).

In Washington Nat’l, an arbitration panel had summoned two witnesses to testify at a hearing in New York and to bring with them certain documents.  Id at *3.  The panel convened as scheduled, but the witnesses failed to appear.  See id. at *9-*10.  Washington National therefore petitioned a New York federal District Court to enforce the arbitrators’ summonses.  The two summoned witnesses moved to dismiss the enforcement proceeding, arguing principally that the District Court did not have subject matter jurisdiction.  They also moved to quash the arbitral subpoenas in question. 

The District Court denied those motions and ordered the witnesses to appear with documents at an arbitral hearing in New York.  See Washington Nat’l Ins. Co. v. OBEX Group LLC, 2019 U.S. Dist. LEXIS 9300 (S.D.N.Y. Jan. 18, 2019). The Second Circuit affirmed, adding that the District Court was not required to consider the witnesses’ motions to quash the arbitral summonses. 

Subject Matter Jurisdiction:  Diversity

Ancillary judicial proceedings in connection with a non-domestic arbitration, regarding which FAA ch. 2 applies, do not face a subject matter jurisdiction barrier because the District Court’s jurisdiction is established by statute.  See FAA § 203.  But when such judicial proceedings concern a domestic arbitration, as to which only FAA ch. 1 applies, an independent basis for subject matter jurisdiction – diversity jurisdiction (28 U.S.C. §1332), as a practical matter – must be shown.  (Personal jurisdiction over a summoned witness is another matter, typically solved by the arbitrators by specifying a hearing locale at or about the place of residence or business of that witness.)

Washington National had asserted that the District Court had diversity jurisdiction pursuant to 28 U.S.C. §1332 – i.e., (a) that the parties in question were “citizens of different States” and (b) that the matter in controversy “exceed[ed] the sum or value of $75,000.” 

The witnesses argued that the court should weigh diversity by “looking through” the FAA §7 petition to determine whether the parties to the underlying arbitration were diverse.  That sort of “look through” analysis had been the means of determining diversity jurisdiction with respect to petitions under FAA §4 (to compel arbitration) and FAA §10 (to vacate an arbitral award).  The District Court rejected that argument, holding that it should consider the citizenships of the parties to the controversy that was actually before it, rather than the citizenships of the parties to a “different” controversy (i.e., the underlying arbitration claims and defenses).  The parties before the court in connection with each Section 7 petition were (i) an arbitrating party and (ii) a non-party witness.

Relying on its own precedent, the Second Circuit opined simply that diversity jurisdiction concerning a petition under the FAA need “look only to the citizenship of the parties in the [proceeding] before [the court].”  See 2020 U.S. App. LEXIS 14062, citing Hermes of Paris, Inc. v. Swain, 867 F.3d 321 (2d Cir. 2017).  Hence, only the parties litigating the petition to compel compliance with the summonses need be diverse for subject matter jurisdiction purposes. 

Subject Matter Jurisdiction:  Amount in Controversy

On the other hand, in order to determine the amount in controversy with regard to a proceeding to enforce an arbitral summons, the court had to “look through” the petition in order to estimate its effect on the underlying arbitration.  (Otherwise, what sense could be made of monetizing a demand to give evidence?)

Washington National had averred that the value of the documents in question “exceeds the sum or value of $75,000,”  id. at *19, and “it must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal.”  Id. (emphasis in original), citing AFA Tours, Inc. v. Whitchurch, 937 F.2d 82, 87 (2d Cir. 1991), quoting Saint Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938).

In that regard, the Second Circuit pointed out that the “amount in controversy” concerning proceedings seeking equitable relief such as an injunction “is measured by the value of the object of the litigation” before the court.  See id. at *18-*19.  The Court noted that Washington National was seeking an arbitral award of $134 million, and that the documents sought by the summonses in question were relevant to “whether [Washington National] is entitled to all or part of that award.”  Id. at *19.  Hence, even if the documents called for by the summonses concerned only a small fraction of the award sought, the $75,000 amount in controversy requirement would be satisfied.  See id

Venue[1]

The witnesses also argued that Washington National had not sought enforcement in the proper federal district.  FAA § 7 requires that an enforcing petition must be made in the District Court for the district in which the summoning arbitrators, or a majority of them, are “sitting”.  However, there is no statutory definition of “sitting” for these purposes.

The witnesses had argued below that the court should look to the arbitrators’ respective business addresses to make that determination.  That argument was roundly rejected.  Instead, both the District Court and Court of Appeals in effect defined the “sitting” location as the place at which the arbitrators specified the subpoenaed witnesses should appear for a hearing.

In most cases, that is likely to be the situs of arbitration designated in the governing arbitration agreement, but arbitrators are not constrained to conduct hearings solely there.  See, e.g., American Arbitration Association Commercial Arbitration Rules R-11; cf. id. R-24.  Indeed, arbitrators will likely strive to specify a hearing locale at or about the place of residence or business of the summoned witness in order to ensure that the enforcing court has personal jurisdiction over that witness.

The witnesses furthermore argued to the Court of Appeals that the arbitrators were not “sitting” in the Southern District of New York because they had previously held a hearing in the Eastern District of Pennsylvania and, the witnesses maintained, the governing statute “does not permit arbitrators to sit in more than one district.”  Id. at *27-*28.  But the Second Circuit opined that [“w]hether the arbitrators were sitting in the Eastern District of Pennsylvania at another time or in connection with a separate summons is not relevant to our inquiry.”  Id. at *29.

Indeed, the pertinent arbitration agreement provided that the arbitration would take place in New York (unless the parties agreed otherwise).  See id. at *28.  And in the relevant instance, the arbitrators indeed did sit as scheduled for a hearing in New York, at which the witnesses failed to appear as summoned.  Hence, there was no arguable failure to comply with the “venue” requirement of FAA § 7.  See id. at *28-*29. 

Motion to Quash (Fed. R. Civ. P. 45)

Finally, the witnesses moved to squash the summonses in question on the asserted grounds that they were “unduly burdensome, overbroad, duplicative of prior arbitration summonses, and required disclosure of privileged or protected matter.”  Id. at *23.  However, the Court of Appeals indicated that the District Court had been correct in declining to rule on those objections.

The Second Circuit opined that the duty of the District Court, under Fed. R. Civ. P. 45, to quash a litigation subpoena upon a timely motion in an appropriate case does not apply to the enforcement of an arbitral summons under FAA §7.  While FAA §7 provides that a summons is to be enforced in the same manner as a subpoena, Rule 45 does not pertain to enforcement, but rather concerns subpoenas generally.  See id. at *25. 

The Court furthermore pointed out that the witnesses’ arguments in this regard were inconsistent with the strong federal policy favoring arbitration as an alternative means of dispute resolution.  See id.  That is, the Court of Appeals was concerned that the District Court should not become an appeals body for all such procedural matters that came before an arbitral panel.  That would frustrate the achievement of the expected benefits of private dispute resolution, including lower costs, greater efficiency, and greater speed.

Rather, the Second Circuit envisioned that the arbitral panel would rule on objections in the course of its consideration of (a) requests to issue such summonses and (b) the presentation of evidence, thus acting in parallel with the role of a District Court in issuing subpoenas, ruling on objections (under Rule 45), and hearing evidence.  See id. at *26.

The Second Circuit ultimately ruled that the District Court was not obliged, under FAA § 7, to consider objections to an arbitral summons based on the terms of Fed. R. Civ. P. 45.  It pointedly did not determine, on the other hand, “whether district courts have the power to rule on such objections.”  See id. at *26. 

In all, this decision by the Second Circuit lends useful authority for resisting efforts to make judicial enforcement of arbitral subpoenas more complicated than warranted.


[1]  We use the word “venue” here in its generic sense.  However, the language of FAA § 7 is analogous to that in Fed. R. Civ. P. 37(a)(2) concerning the “appropriate court” for a motion to compel disclosure by a non-party.

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume X, Number 149

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Gilbert Samberg International Arbitration Attorney Mintz
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Gil is a litigator with extensive experience in complex international and domestic commercial disputes. Much of his practice is focused on international arbitration and other cross-border alternative dispute resolution (ADR) proceedings. Gil serves companies in diverse sectors, including financial services, capital equipment design and manufacturing, political risk and credit insurance, commodities trading, engineering, and construction.  He also draws on his science background to serve companies in the biotechnology and chemicals sectors as well as other technology-...

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