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Discovering Documents from Nonparties in Online Arbitration?

by Amy Schmitz

June 2020

Amy Schmitz

A new wrinkle has popped up in the wake of Managed Care Advisory Group, LLC v. CIGNA Healthcare, Inc., 939 F.3d 1145, 1160 (11th Cir. 2019).  In that case, the Court of Appeals held that the district court did not have the authority to force non-parties to arbitration to comply with the summons and provide testimony that would be transmitted via video conference. The court relied on a literal meaning of § 7 of the FAA, which gives the arbitrator the power to compel a non-party to attend an arbitration and bring documents.  The court found that in this case, the testimony would be taken via video conference, so it wouldn’t be in the physical presence.  The court thus held that the arbitrator wasn’t technically compelling their “attendance before” the arbitrator. Therefore, there was not authority for the district court to order them to do so, cutting off access to discovery from third parties unless there is an in-person hearing.

This solidified a Circuit Split on the subject. The Second, Third, Fourth, and Ninth Circuits, all have cases holding that § 7 does not provide for pre-hearing discovery from non-parties to the arbitration agreement (they can only order them to produce documents if they are called as a witness at a hearing). See Life Receivables Tr. V. Syndicate 102 at Lloyds of London, 549 F.3d 210, 216 (2d Cir. 2008), Hay Grp., Inc. v. E.B.S. Acquisitions Corp., 360 F.3d 404, 407 (3d Cir. 2004), COMSAT Corp. v. Nat’l Sci. Found., 190 F.3d 269, 275-76 (4th Cir. 1999) (allowing an exception upon a showing of “special need or hardship”), and CVS Health Corp. v. Vividus, LLC, 878 F.3d 703, 708 (9th Cir. 2017).  The Sixth and Eighth Circuits have held that there is implicit arbitral power to authorize subpoenas for pre-hearing discovery from third parties (looking at the documents without the witness needing to be present at a hearing).  See Am. Fed. of Television and Radio Artists, AFL-CIO v. WJBK-TV (New World Comm. Of Detroit, Inc.), 164 F.3d 1004, 1109 (6th Cir. 1999) and In re Sec. Life Ins. Co. of Am., 228 F.3d 865, 870-71 (8th Cir. 2000).

The above cases from the Second, Third, Fourth and Ninth Circuits read § 7 of the FAA as saying that non-party document disclosure is only allowed when the non-party is at a hearing before the arbitrator. Although they don’t address the issue of video or teleconferencing directly, they do seem to emphasize the importance of the witnesses being in the physical presence of the arbitrators.

However, with the growth of online hearings in the wake of Covid-19, it is unclear whether the staunch view on §7 will remain.  This creates a real issue for those facing arbitral hearings online in cases where they need discovery from third parties.  For more discussion, see Frances C. Slusarz, No Nonparty Discovery in Arbitration: Workarounds to the Rule can be Limited and Costly, ABA, April 2020, https://www.americanbar.org/groups/litigation/publications/litigation-news/top-stories/2020/no-nonparty-discovery-in-arbitration/

Professor Amy Schmitz joined the University of Missouri School of Law and the Center for Dispute Resolution as the Elwood L. Thomas Missouri Endowed Professor of Law in 2016. Previously she was a Professor at the University of Colorado School of Law for over 16 years. Prior to teaching, Professor Schmitz practiced law with large law firms in Seattle and Minneapolis, and served as a law clerk for the U. S. Court of Appeals for the 8th Circuit.  Professor Schmitz teaches courses in Contracts, Lawyering, Online Dispute Resolution (ODR), AI, Data Analytics and the Law, Arbitration, International Arbitration, and Consumer Law. She has been heavily involved in ODR teaching and research for a long time and is a Fellow of the National Center for Technology and Dispute Resolution, as well as the Co-Chair of the ABA Technology Committee of the Dispute Resolution Section and the ODR Task Force.  She serves on the Association of American Law Schools Executive Committee on Commercial and Consumer Law, was an External Scientific Fellow of the Max Planck Institute Luxembourg, and is a researcher with the ACT Project exploring AI and ODR. Professor Schmitz has published over 50 articles in law journals and books, and a book, The New Handshake: Online Dispute Resolution and the Future of Consumer Protection, with Colin Rule.



Website: law.missouri.edu/person/amy-j-schmitz

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The views expressed by authors are their own and do not necessarily reflect the views of Resourceful Internet Solutions, Inc., Arbitrate.com or of reviewing editors.
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