Enforcement of Arbitration Subpoenas and Summonses
Sometimes it is necessary to obtain evidence from non-parties during a reinsurance arbitration. Yet, the Federal Arbitration Act(“FAA”) does not expressly sanction non-party (or for that matter any) pre-hearing discovery. In practice, however, most parties ask the arbitration panel to issue a subpoena to a “hearing” and then negotiate with the non-party about producing documents without the need to appear at a hearing with a witness. Most non-parties just want the subpoena for their records (to protect against criticism from others about volunteering information) and will eventually agree to produce a negotiated set of documents. Moreover, nothing in the FAA bars a party from negotiating a common-sense resolution to a subpoena request.
But what happens if it turns out that a non-party witness is needed at the hearing or additional documents that the non-party did not produce are required? If the non-party does not voluntarily appear, a hearing subpoena or a summons is necessary to compel the testimony and documents. And what happens if the non-party fails to appear? A recent case addressed this issue in the context of a petition for enforcement of a hearing summons.
In Washington National Ins. Co. v. Obex Group LLC, No. 18 CV 9693 (VB), 2019 U.S. Dist. LEXIS 9300 (S.D.N.Y. Jan. 18, 2019), an action was brought by a cedent to enforce two arbitration summonses issued by the panel in an underlying reinsurance arbitration. The non-party was summoned to appear at a hearing, but failed to attend. The cedent brought this proceeding to compel the non-party to attend and produce documents at the hearing. The non-party moved to quash.
The court denied the motion to quash and granted the petition to compel enforcement of the summonses, requiring the non-party to appear and produce all responsive, non-privileged documents on a date of the underlying arbitration panel’s choosing. The case raises a number of interesting issues.
First, this was a summons, not a subpoena. Section 7 of the FAA authorizes arbitrators to “summon 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.” While not radically different than a subpoena, given that it is to be served in the same manner as a subpoena, it is a different instrument. The International Commercial Disputes Committee and the Arbitration Committee of the New York City Bar Association drafted a model summons and included with it a comprehensive report with annotations to cases. You can find that model and report here. It is worth reviewing.
Second, Section 7 of the FAA allows the party who sought the summons to enforce the summons: “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.” That is what was sought in the petition here, in New York, where the arbitrators were sitting (the summons was to appear at a hearing before the panel in New York).
In granting the petition, the court rejected some interesting arguments. Among them was the argument that because the arbitrators were not from New York, the New York federal court lacked the authority to adjudicate the petition. The court noted that no case was cited or found where a court looked to the arbitrators’ business addresses to determine where the arbitrator’s were sitting. Another objection was that the arbitration panel was not permitted to issue non-party subpoenas or summonses in multiple districts. The court held that nothing in Section 7 requires an arbitration panel to sit in only one location. We have participated in hearings where hearing sessions were held in more than one location. That is the beauty of the flexibility of arbitration.
The court also rejected the argument that the summonses were for impermissible pre-hearing discovery. Citing the Second Circuit, the court noted that the authority in Section 7 is not limited to witnesses at merits hearings, but extends to hearings covering a variety of preliminary matters. Life Receivables Tr. v. Syndicate 102 at Lloyd’s of London, 549 F.3d 210, 212 (2d Cir. 2008). As the court stated, the summonses were for a hearing, not a deposition, and the panel’s order stated that the panel was prepared to receive testimony and documentary evidence and to rule on evidentiary issues.
The court rejected any arguments about the merits of the objections to the testimony and documents, stating that those issues are for the arbitrator to determine. Finally, the court rejected the argument that enforcement was improper because the cedent did not move to compel enforcement and did not submit supporting evidence. The court pointed to the plain language of Section 7 that provides for a petition to compel attendance before the arbitrators where the summoned party refuses or neglects to obey the summons. Moreover, each party had submitted declarations with exhibits supporting their positions.
Of course, going through the Section 7 enforcement mechanism is inefficient no matter how quickly the court moves. And clearly it will delay the ultimate hearing. Nevertheless, if the testimony and documents are highly relevant and make the difference in the case, a non-party summons and the ability to enforce the summons by compelling the non-party to appear and produce is the way to go.