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Handling Nonparty Discovery in Domestic Arbitration Proceedings: Fundamentals and Best Practices

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Handling Nonparty Discovery in Domestic Arbitration Proceedings: Fundamentals and Best Practices

Nonparty discovery in domestic arbitration proceedings is an often misunderstood and overlooked aspect of case planning, management, and administration. As more domestic disputes are compelled to arbitration, either through company-sponsored programs in the employment and consumer context or through increased incorporation of contractual arbitration provisions in the commercial context, both advocates and neutrals need to understand how to properly address nonparty discovery in arbitration, which stands in stark contrast to similar processes in court litigation. With over 20 years of experience as a commercial and intellectual property litigator, coupled with over 10 years of experience as an arbitrator and mediator, Theo Cheng will explain the differences, provide an update on the legal landscape, offer practical tips, and share best practices to master this challenging aspect of arbitration proceedings.

Transcript

- My name is Theo Cheng, and Welcome to Handling Non-Party Discovery in Domestic Arbitration Proceedings: Fundamentals and Best Practices. There are four learning objectives for this program. First, you will understand the background legal framework under both federal and state law authorizing the issuance of non-party subpoenas and summonses in domestic arbitration proceedings. Second, you will become familiar with the differing legal landscapes governing non-party discovery in domestic arbitration, which differs markedly as between federal and state law, and also by geographic region. Third, you will appreciate both the benefits and limitations of non-party discovery in domestic arbitration proceedings. And finally, you will learn how to identify and recognize early on the need for non-party discovery in domestic arbitration proceedings, and to strategically manage the proceeding to achieve a cost-effective and expeditious dispute resolution process. And before we dive into the program, just a little about me. I have over 20 years of experience as a commercial and intellectual property litigator. I am now an independent full-time arbitrator and mediator based out of Princeton Junction, New Jersey. I focus on commercial, intellectual property, technology, entertainment and employment disputes. And I have been appointed to the private rosters maintained by the American Arbitration Association, the CPR Institute and Resolute Systems. I'm a fellow of the College of Commercial Arbitrators and a member of the National Academy of Distinguished Neutrals. I'm also a AAA Master Mediator and an adjunct professor at New York Law School, where I teach an ADR survey course that covers negotiation, mediation and arbitration, as well as a stand-alone domestic arbitration course. I'm the past chair of the New York State Bar Association's Dispute Resolution Section and I'm the current president of the Justice Marie L. Garibaldi American Inn of Court for ADR, the oldest and longest continuing inn of court in the country devoted exclusively to alternative dispute resolution. Take a moment to imagine these kinds of scenarios that may often come up in your litigation matters. Testimony from a former co-worker, who has now since left the company, about the office atmosphere that the co-worker experienced while employed could be material to the veracity of a claimant's hostile work environment claim. Or cellphone records from a mobile carrier that could help corroborate a witness's testimony about specific calls that were made during the relevant period. How about documents and testimony from an independent contractor engaged by the claimant, who could establish whether the claimant fulfilled its obligations under the party's contract? Or documents from the claimant's new employer regarding her conduct in connection with a non-solicitation covenant she had entered into with the respondent that may be relevant to whether those obligations were breached. And, of course, sales information from downstream customers could be relevant to a damages analysis in an intellectual property dispute. As you can see from those foregoing examples, non-party discovery can be just as critical in an arbitration setting as in a court litigation. But surprisingly, non-party discovery is often overlooked and misunderstood, both by attorneys and their clients, as well as by arbitration tribunals. In an arbitration proceeding, much like in a civil court action, the party is permitted to obtain legal process, like a subpoena, to secure discovery. And by that, I mean testimony, information and documents from a non-party individual or entity. But the nature and scope of that legal process in the arbitral forum are markedly different from what's available in a court litigation. Specifically, in order to understand non-party discovery in the arbitral forum, you will need to be aware of at least the following. First and foremost, the governing authority over non-party discovery. And by that, I mean either the Federal Arbitration Act or any one of an applicable state arbitration procedural statute. You'll wanna understand what proper process means under those legal frameworks, what makes for a valid and enforceable subpoena. You'll wanna be clear what the authority of the tribunal is to issue subpoenas in the first instance, thereby understanding in advance how subpoenas are valid and enforceable, and in minimizing the possibility of challenges and objections. You'll wanna know also what the standard for obtaining non-party discovery is. And as we'll discuss further, it's very, very different than the standard in court litigation. Of course, service of process is also important. You'll wanna be able to make sure that you serve the subpoena appropriately on the non-party. And there may also be a requirement for the non-party to appear before the arbitration tribunal, which is very different from what happens in the court litigation. And finally, what to do when a non-party chooses not to comply with the subpoena. What are the attorney's options for enforcement of the subpoena in cases of non-compliance? So let's turn first to the governing authority. Again, by that, I mean the Federal Arbitration Act and state arbitration procedural statutes. Initially, you have to be clear about identifying that authority governing the issuance of a subpoena because the legal framework can lead to very, very different outcomes. Again, those principal governing authorities are the Federal Arbitration Act, found in Title IX of the United States Code, and any one of the various state arbitration procedural statutes, and in particular, the Uniform Arbitration Act, promulgated in 1955, the Revised Uniform Arbitration Act, promulgated in 2000, and Article 75 of the New York Civil Practice Law and Rules. We'll go through these in the order presented. First, the Federal Arbitration Act and the summons procedure under that statutory scheme. Under the Federal Arbitration Act, we look to Section 7 of that statutory scheme, where it says that the arbitrators, 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. And that summons shall issue in the name of the arbitrator or arbitrators, or a majority of them. So based on this text in Section 7, we can make a few observations that are important for the practitioner. Unlike in typical civil litigation practice, where attorneys are generally permitted free rein to issue subpoenas to relevant non-parties, under the FAA, it's clear that it is the tribunal, either a sole arbitrator or a majority of the arbitration panel, and only that tribunal, that may issue a subpoena, or as it is called under the FAA, a summons, that compels an individual or an entity to produce relevant and material testimony, information or documents. But that may be a surprise to you and other practitioners because you're so used to issuing subpoenas on your own in federal or state court, but the FAA is quite circumscribed, and counsel may not issue a subpoena in a matter that's governed by the Federal Arbitration Act. So in that circumstance, you should expect to engage in a fair amount of advanced coordination and communication with the tribunal before any process is issued to non-parties. Now, the Federal Arbitration Act also has a standard for obtaining non-party discovery that may surprise you. First, under Rule 26 of the Federal Rules of Civil Procedure, which governs discovery in federal court, parties may obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense and proportional to the needs of the case. Moreover, information within this scope of discovery need not be admissible in evidence to be discoverable. Now, what I just read is quite a broad mandate for obtaining discovery in a federal court litigation. I will note, however, that the 2015 amendments to those rules had actually deleted a former provision for discovery of relevant, but inadmissible information, that appears reasonably calculated to lead to the discovery of admissible evidence. In other words, the 2015 amendments actually curtailed an even broader mandate for discovery in federal court. However, I find many attorneys continue to misunderstand and misapply this much, much broader standard, that's now been out of date for over seven years now, as equivalent to a broad scope of discovery that's available in the arbitral forum. Compare that with Section 7 of the Federal Arbitration Act. Section 7 refers to the issuance of a summons to any person to attend before the tribunal 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. Now, while testimonial appearances for providing this evidence is not explicitly referenced in what I just read, the structure of the Federal Arbitration Act certainly contemplates that a witness complying with a summons would testify and provide evidence in the case, perhaps accompanied by any requested documents. And you should note that tribunals will be inclined to permit discovery from non-parties on non-cumulated evidence that is, A, known or reasonably believed to exist, B, not available within the party's control, and C, necessary to establish some fact in dispute. Note that what I just related is a far narrower scope of discovery than what we just talked about in Federal Rule of Civil Procedure 26 . In particular, the material evidence requirement that's explicitly stated in Section 7 of the FAA focuses on evidence that is relevant and material to a resolution of the proceeding, not a broad mandate for discovery from a non-party. So if you should draft requests seeking the production of documents or information, do so with a reasonably high degree of specificity so that a tribunal can assess the significance of the evidence that you are seeking. And as you draft your document requests, be sure to avoid the following. First, resorting to broad categories of subject matter. Second, identifying sources or repositories of potential evidence. And finally, using sweeping phrases, such as, quote, any and all, unquote, in favor of targeted categories or the identification of specific documents. You can tell all of us as lawyers practiced using the kinds of drafting that I just mentioned. It's the common course of discovery request to be broad and to try and sweep in as much as we can. It's quite different with respect to non-parties here, particularly under the Federal Arbitration Act. Now let's turn to service of process under the Federal Arbitration Act. Section 7, again, is the relevant text. Section 7 provides that the summons should be served in the same manner as subpoenas to appear and testify before the court. That implies that we need to look at the rule regarding subpoenas in federal court and how they are served. And that points us to Rule 45 of the Federal Rules of Civil Procedure. When you look at that rule, that rule has been amended to provide service of process nationwide for a judicial subpoena. That also means that an arbitral tribunal sitting in one place may issue summonses to a witness who resides a considerable distance away from the place or seat of the arbitration. But compelling a witness to appear has certain geographical limitations. And again, we look back at Rule 45, and in particular, Rule 45 . And Rule 45 says that a summons can only command an individual to attend and testify at a hearing within 100 miles of where the person resides, is employed or regularly transacts business in person, or within the state where the person resides, is employed or regularly transacts business in person if the person is, A, a party or a party's officer, or B, commanded to attend the trial and would not incur substantial expense. So just to give you a practical example, assume that you have an arbitration tribunal that's seated in New York City. That arbitration tribunal could not compel a non-party residing in Chicago to fly halfway across the country to come to New York to testify at an evidentiary hearing. However, that panel could require that individual to travel within the state of Illinois to testify at an evidentiary hearing scheduled somewhere within Illinois if the witness would not incur substantial expense in doing so. Alternatively, a New-York based arbitrator from that panel, or the entire panel itself, could simply fly out to Chicago, where the non-party resides, and hold the evidentiary hearing there. Now, similarly, for documents and tangible things, the summons can only command an individual to appear and produce the requested items within 100 miles of where the person resides, is employed or regularly transacts business in person. And we have that from Federal Rule 45, again, . Additionally, a summons can command inspection of premises, but only at the premises to be inspected. And we get that from Rule 45 . So just note that there are significant geographical limitations for serving a subpoena, even though you may have the ability to take advantage of nationwide service of process. Now, I've mentioned a few times the Federal Arbitration Act's requirement to have the non-party appear before the tribunal. And this is an important aspect of non-party discovery practice under the FAA. At least three federal circuit courts, the Second, the Third and the Ninth, have interpreted Section 7 of the Federal Arbitration Act to require that the individual or entity being subpoenaed appear at a hearing before one or more of the members of the tribunal. And that's a plain reading of the text of Section 7 of the Federal Arbitration Act. Now, under that interpretation, what that means is that you may not serve a summons simply seeking the production of documents from a non-party without having the party appear in advance of the hearing. So in other words, you cannot simply serve a discovery subpoena like you would in court. There must be an associated hearing where one or more of the members of the tribunal is present. By implication or extension of this interpretation, Section 7 also bars the issuance of pre-hearing discovery deposition subpoenas. Again, unlike what attorneys are quite used to in either federal or state court litigation. Because, again, the interpretation of Section 7 and its plain text is that there must be a hearing at which an arbitrator, one or more of the members of the tribunal is present, and the witness appears for a hearing before that tribunal. I will note that the extension of Section 7 to pre-hearing discovery deposition subpoenas is not an issue that's been squarely presented in any of those three circuit court opinions. However, I do note that in reaching these respective conclusions, the Second, Third and Ninth Circuits did reject the Eighth Circuit's view that implicit in an arbitration panel's power to subpoena relevant documents for production at a hearing is the power to order the production of relevant documents prior to the hearing. So for the Eighth Circuit, even though Section 7 is silent on this matter, it equates those two powers together. Again, this is an argument that's been rejected by the Second, Third and Ninth Circuits. Those three circuit courts also rejected the view that was adopted by the Fourth Circuit, that although Section 7 generally precludes discovery subpoenas, a party might, under unusual circumstances, petition the district court to compel pre-arbitration discovery upon a showing of special need or hardship. Unfortunately, that court, the Fourth Circuit, declined to define what special need meant or hardship, aside from observing that, at a minimum, a party must demonstrate that the information it seeks is otherwise unavailable. In passing, I also note that the Seventh Circuit has a decision that did allow pre-hearing discovery, but that decision is arguably limited to the labor arbitration context, which may be unique for its own reasons. Now, assuming the tribunal accepts the majority view, meaning the view of the Second, Third and Ninth Circuits, the parties would not engage in any so-called pre-hearing discovery of non-parties using summonses. Rather, under the FAA, the tribunal may only compel testimony and the production of documents from a non-party in the context of a scheduled evidentiary hearing. And Section 7 of the Federal Arbitration Act contemplates that the tribunal will convene a hearing to secure the testimony of a witness or receive documents into evidence, likely accompanied by the testimony of a non-party records custodian witness to authenticate those documents at or near the place where the witness is located and where counsel, the parties and one or more members of the tribunal are present. But that leaves open the problem of how the tribunal should permit disclosure of documents or testimony from a non-party if the parties and/or the party don't agree about it. Here, the FAA, remember, does provide that the individual or entity may appear before one or more of the members of the tribunal. And so the FAA does contemplate that there's flexibility as to scheduling when multiple arbitrators are serving on the tribunal. So when preparing a summons, you should coordinate with at least one of the arbitrators on the tribunal so you can schedule an evidentiary hearing date, likely on a day that's different from the main merits hearing at the end of the case, for when one of the arbitrators can be present. And so the simplest way to comply with Section 7's requirements is to schedule a separate hearing date for the non-party witness at a physical location within the Federal Arbitration Act's geographic constraints. And at least one member of the tribunal must physically travel to that location to preside over the hearing and accept the testimony, information and/or documents into evidence. Now, just note that the tribunal generally retains a discretion to conduct a hearing in any fashion that comports with due process. And so the presence of the tribunal members, the counsel, the parties and the non-party witness in the exact same physical location may not entirely be necessary, particularly if the time and cost associated with scheduling an additional hearing date at a remote location are overly burdensome. So to address any logistical or cost concerns, the parties could agree, with, of course, the non-party witness's consent, to schedule a hearing for the non-party's testimony using the following protocol. First, the witness would appear and testify via an audio or video teleconferencing platform, such as Zoom or Microsoft Teams or Cisco Webex. Second, the testimony would be taken at a location that certainly complies with the geographical constraints of the Federal Arbitration Act. Third, the parties would receive documents electronically, either through email or an FTP protocol or even through a thumb drive. And some or all of the other participants will be located either at the seat of the arbitration or elsewhere, and participate remotely. Moreover, if the parties waive cross-examination, the witness's testimony itself could be presented simply through a witness statement or an affidavit or a declaration. Or if the witness also consents, testimony may be again given via telephonic or video conference hearing, during which documents can be received electronically. But bear in mind that there are some courts, some outlier courts, in my view, that will not enforce a summons if the witness appears virtually and would electronically submit the documents. And on the slide, I cite to a Southern District case from last year that did just that. And also note that in the Eleventh Circuit, there is a decision that holds that the trial court does not have the authority to compel non-parties to comply with a summons by appearing through a video conference, and to bring with them certain documents, because the non-party was not being compelled to attend in the physical presence of the arbitrator. So while the practice of arbitration has advanced to the point where many of us are now using technology and remote proceedings as a way to save time and cost, courts are not always keeping up with interpreting the Federal Arbitration Act to help parties and tribunals keep the costs down. So just to recap, what I've been describing about how to schedule a separate evidentiary hearing so that testimony and/or documents from a non-party could be brought into evidence at a separate hearing where the arbitration tribunal is present, is also referred to as an Federal Arbitration Act workaround because that is instead of having everyone show up at the merits hearing at the very end of the case. And so just to recap, the tribunal can compel attendance of a witness at a hearing under the FAA, accompanied by documents, if so desired, well before the final evidentiary hearing, so long as at least one arbitrator is present at the hearing, the arbitrator receives testimony, the arbitrator rules on any objections made by the party's counsel, the documents, of course, are deemed material evidence in the case, and the hearing becomes part of the record of the evidentiary hearing to be used in deliberations. Now, just a few practice points about this workaround that's come to bear in Federal Arbitration Act practice. First, for a testimonial summons, meaning a summons requiring only the non-party's live testimony, the witness's testimony does serve as substantive evidence in the proceeding, meaning that absent a showing of good cause, it's very unlikely that the witness will be allowed to be called again at a later evidentiary hearing when the rest of the case is presented to the tribunal. So again, this is very different from what attorneys are normally used to when you call a witness in this pre-hearing or pre-trial stage. This isn't a chance for the attorney to lock down the witness's testimony into a transcript so that they can later cross-examine the witness with prepared material at the evidentiary hearing. To the contrary, the witness is actually being presented for, likely, the first and only time as evidence in the case. And absent some changed circumstances, for example, or new evidence coming through, coming to bear, that witness will not likely be called again at a later point, and in particular, at the later merits evidentiary hearing at the end of the case. And even if that witness were to be called, it's very likely that the tribunal would circumscribe that witness's testimony only to new questions or new areas of inquiry, as opposed to areas that already have been covered in the earlier pre-hearing evidentiary hearing. Also, for a summons seeking only the production of documents, and in that situation, usually documents would be accompanied by a custodian of records who would testify as to authenticity of those records, it is commonplace for non-parties to elect to avoid the inconvenience of having that records custodian appear by simply delivering the documents to counsel for the parties in lieu of having to show up at the scheduled evidentiary hearing. So in this way, really, pre-hearing non-party discovery functions essentially like a subpoena for the production of documents in a state or federal court action. That's normally what attorneys are used to. When the documents discovery subpoena is served on a non-party, the non-party will work out a time when documents will be produced, either in physical form or electronic form, to the subpoenaing party, and there will be no need for the party to show up with a custodian of records. Or perhaps, at best, the custodian of records would submit an affidavit or declaration to accompany the documents that are being produced, just to make sure that authenticity is satisfied. But remember here, that, again, this is not a discovery proceeding, really. So that the tribunal will receive those documents produced by a non-party, pursuant to a summons, as evidence in the case, not as mere discovery in the proceeding. And that evidence may then subsequently be relied upon by the tribunal, the counsel and the parties as substantive evidence in the case. So this isn't a situation where a production of documents is made to a subpoena and party, and then some culled set of those produced documents are then prepared as hearing exhibits, for example. No, actually, the entire production comes in as evidence in the case, and can be used and relied upon by any participant in the proceeding as substantive evidence for deliberation purposes. Now let's turn to enforcement of subpoenas under the Federal Arbitration Act because recipients of subpoenas can simply ignore or decline to comply with a subpoena, because subpoenas on their own, on their face, are not self-reinforcing. So you must undertake separate enforcement proceedings to compel compliance. And here, again, I return back to Section 7 of the FAA for the relevant text. Section 7 provides that if any person or persons so summoned to testify shall refuse or neglect to obey the summons, upon petition to the United States District Court for the district in which the arbitrators or a majority of them are sitting, meaning the federal trial court over which the arbitrators sit under, that court may compel the attendance of such person or persons before those arbitrators, or punish those 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 federal courts. What this all means is that in order to enforce a subpoena, or a summons, I should say, against a non-party, you have to file an enforcement proceeding in federal court. Or if there's no basis for subject-matter jurisdiction, you'd have to find a competent state court. But you have to file it in the federal court in the judicial district where the arbitrators are located, unless, of course, that court decides to transfer the enforcement case to the federal district where the seat of the arbitration is located. The upshot of this is that while it's debatable whether arbitrators have sanctions powers, and that depends on the rules and the governing authority, as well as decisional law where the seat is located, arbitrators most certainly do not possess independent contempt power like judges in courts do. And so ultimate enforcement of a summons for non-compliance by a non-party has to be made in court. And for your benefit, the relevant citation for the enforcement is actually Rule 45 again of the Federal Rules of Civil Procedure. It's 45 . A couple of practice points about this aspect of enforcement. First, if the tribunal or a majority of the arbitrators chooses to convene a hearing in the district where the witness resides, and by that, I'm assuming that it's in a location different from where the arbitrators are seated. So, for example, the tribunal could be located in New York City, and the witness happens to be in Chicago, so the tribunal decides to convene a separate hearing in Chicago, the local federal district court there certainly could exercise personal jurisdiction over the witness. And assuming it could also exercise subject-matter jurisdiction. And remember, I said this before, but the Federal Arbitration Act itself does not provide an independent basis for federal court jurisdiction. Some other basis for jurisdiction must exist. Even though the FAA is a federal statute, it doesn't give you federal question jurisdiction in the federal courts. So assuming this federal district court could exercise subject-matter jurisdiction over the dispute, that court could enforce the summons under Section 7 because the tribunal is technically sitting in that district at the time that enforcement is needed. However, if the tribunal is in a situation where it's participating remotely, either by telephone or video conferencing, you may have limited options to enforce a subpoena if the enforcing court construes the term sitting as requiring the physical presence of the tribunal. So it's important to determine in advance the identity of the appropriate forum where enforcement might take place, 'cause it might depend on whether that enforcing court would construe the term sitting as requiring physical presence. 'Cause if so, it's debatable whether or not the tribunal is actually sitting in the district, since you're really only participating over the internet or over the phone lines. And it may be a subject of decisional case law that you would need to look into before agreeing to have the tribunal participate remotely. Now let's turn to process under state arbitration statutes. Most states' arbitration statutes fall into one of three categories. Either they're modeled after the FAA. They adopt one or both of the Uniform Arbitration Act or the Revised Uniform Arbitration Act, with or without modifications. Or, as in the case of Article 75 of the New York Civil Practice Law and Rules, they predate the Federal Arbitration Act itself. Now, these state statutes can differ markedly in both the nature and scope of permissible non-party discovery. Some of them provide minimal guidance and authority, while others are far more detailed. So it's important to be sure to research the existing decisional law interpreting your applicable statute for additional guidance and practice limitations. We'll first turn to the UAA and the RUAA, both of which are model statutes promulgated by the Uniform Law Commission, also known as the National Conference of Commissioners on Uniform State Laws. The Uniform Law Commission was established in 1892, and it generally has the purpose and function of providing states with nonpartisan legislation in an attempt to bring clarity and stability to critical areas of state statutory law. The Uniform Arbitration Act was promulgated in 1955. Since then, it's been enacted in 21 states across the nation and also the District of Columbia. The RUAA was promulgated several decades later, in 2000, as an update to the Uniform Arbitration Act to reflect changes and revisions in arbitration practice across the country. The RUAA has been endorsed by the American Arbitration Association and the National Academy of Arbitrators. It was also approved by the American Bar Association in 2001. The RUAA has been enacted in 21 states, although not necessarily the same ones that enacted the UAA, as well as the District of Columbia. And Vermont and Tennessee recently introduced RUAA legislation, so we'll have to wait and see if the RUAA gets enacted in those two states. Turning to process under the UAA, we look to Section 7. Section 7 provides that the arbitrators may issue or cause to be issued subpoenas for the attendance of witnesses and for the production of books, records, documents and other evidence, and shall have the power to administer oaths. Subpoenas also have to be served in the manner provided by law for the service and enforcement of subpoenas in a civil action. Section 7 then goes on to provide that on application of a party and for use as evidence, the arbitrators may permit a deposition to be taken in the manner and upon the terms designated by the arbitrators of a witness who cannot be subpoenaed or is unable to attend the hearing. This leads to a few practice points under the UAA that I just wanna make clear. First, by its express language, the Uniform Arbitration Act provides an arbitrator with authority only to require the attendance of witnesses and the production of documents, A, at the evidentiary hearing, which, of course, is akin to what we've seen already under the Federal Arbitration Act, or B, to depose a witness who cannot be subpoenaed or is unable to attend an evidentiary hearing. So with respect to this second part, the UAA is a little bit more broad and liberal than the Federal Arbitration Act, but, again, it's not an open ability to depose witnesses, but it puts two caveats on it. The witness has to be someone who cannot be subpoenaed or is unable to attend an evidentiary hearing. Now, state courts are divided on whether the Uniform Arbitration Act actually permits an arbitrator to more generally compel non-parties to produce documents or provide testimony outside of the context of an evidentiary hearing. Not surprisingly, most courts have permitted pre-hearing discovery of all kinds at the discretion of the tribunal. So in other words, vesting unfettered, broad discretion in the tribunal to manage the proceeding. On discovery matters, states that have adopted statutes substantially similar to the UAA have also left these issues to the discretion of the tribunal. Other courts, however, require a showing of extraordinary circumstances before allowing any discovery. And some other courts have even concluded that pre-hearing discovery is simply unavailable. So this just underscores my earlier point, that it's very important to investigate and look into the existing decisional case law regarding your particular arbitration statute, because, at least with respect to non-party discovery, the scope and nature of that discovery can be quite different, depending on how the courts have interpreted this particular statute. Now, in states where pre-hearing discovery appears to be limited or constrained by the requirement of an evidentiary hearing, much like under the FAA, you could consider one of two things. First is to adopt one or more of the alternatives we discussed earlier under Section 7 of the FAA, or simply seek an agreement between the parties to conduct pre-hearing discovery. Arbitration, after all, is a creature of contract. And if the parties can agree on a process, then that agreement will be honored by the arbitration tribunal, so long as it's in keeping with a cost-effective and expeditious arbitration process. Turning to the RUAA, process under that statute is a little bit different, and there, for that, we're gonna turn to Section 17. Under Section 17 sub b, absent the party's agreement to the contrary, the RUAA empowers an arbitrator to permit a deposition of any witness to be taken for use as evidence at the hearing, including a witness who cannot be subpoenaed for or is unable to attend a hearing. Under Section 17 sub c, more generally, the arbitrator is empowered to permit such discovery as the arbitrator decides is appropriate in the circumstances, taking into account the needs of the party to the arbitration proceeding and other affected persons, and the desirability of making the proceeding fair, expeditious and cost-effective. In doing so, the arbitrator may order a party to the arbitration proceeding to comply with the arbitrator's discovery-related orders, issue subpoenas to the attendance of a witness, and for the production of records and other evidence at a discovery proceeding. And take action against a non-compliant party to the extent a court could if the controversy were the subject of a civil action in this state. So a few practice points arise here as well. First and foremost, as you can tell from the language I just read, the RUAA provides far more robust management and enforcement of the discovery process by the tribunal. In particular, with respect to permitting a deposition of a witness, there isn't any constraint on that at all, in the sense that it's really up to the arbitrators, or the tribunal, to permit that deposition in its discretion. It's not limited, like it was under the UAA, to a witness who cannot be subpoenaed or is unable to attend a hearing. Moreover, because the RUAA expressly leaves the nature and scope of discovery to the discretion of the arbitrator, it truly affords sufficient flexibility for parties, counsel and the tribunal to conduct non-party pre-hearing discovery, while also avoiding the limitations that we saw earlier, found in both the Federal Arbitration Act and the Uniform Arbitration Act. Now, a really important point here is that in states that have enacted both the UAA and the RUAA, it's very important to pay particular attention to the RUAA's effective date, which is usually found in the statute's preamble or opening provisions. Because depending on what that effective date is, you'll wanna be clear whether or not it's the UAA or the RUAA that applies to your particular proceeding. And if, for some reason, it's the UAA and you would like the RUAA to apply, remember, again, that arbitration is a creature of contract. The parties could agree to have the RUAA apply to their proceeding, notwithstanding the fact that the statute's effective date is later. But, again, it does require party agreement on that issue. As to enforcement for non-compliance, like any other subpoena, like the FAA summons, a subpoena under UAA or the RUAA is not self-enforcing. So in most cases, you must enforce an arbitral subpoena through an application or petition in the relevant state court. Now, that's consistent with the enforcement mechanism that's addressed in Section 7 of the UAA. And the RUAA actually contains an express enforcement provision for discovery-related subpoenas in Section 17 , which vests that authority in the courts. Unlike the Uniform Arbitration Act, though, the last clause of Section 17 sub d of RUAA also appears to vest authority in the arbitrator to take action against a non-complying party to the extent the court could if the controversy was the subject of a civil action in this state. Read broadly, that arguably applies to applications for enforcement due to non-compliance with arbitral pre-hearing discovery subpoenas. And, in fact, some state arbitration statutes also permit arbitrators to enforce pre-hearing discovery subpoenas in the same manner as in a civil proceeding. Therefore, arguably, again, depending on the applicable law and the case law, decisional law there, arbitrators in those particular jurisdictions may actually have contempt power given to them by statute and by case law to enforce subpoenas against non-complying non-parties. Now let's turn to New York CPLR Article 75. Unlike other states, New York has not adopted either the UAA or the RUAA. Rather, Article 75 of the New York Civil Practice Law and Rules, also known as the CPLR, governs arbitration in the state of New York. And there's a historical reason for that, because the original version of this statutory scheme was adopted in 1920, and it was this statutory scheme that became the model for the Federal Arbitration Act itself, which was enacted five years later, in 1925. And the CPLR has some very interesting process issues. First and foremost, under Section 7505, it provides that an arbitrator and any attorney of record in the arbitration proceeding has the power to issue subpoenas. Otherwise, the statute provides no further guidance, in terms of explicit language, for tribunals or practitioners on how much non-party discovery should be conducted. And that stands in great contrast to not only the FAA, which came five years later, but obviously with respect to the UAA and the RUAA. But the mere fact that attorneys, in addition to the arbitration tribunal, have the independent authority to issue subpoenas can raise some concerns for arbitration tribunals. And that's because most tribunals believe that practitioners are not as well-versed in non-party subpoena practice in the arbitral forum. And that's certainly been my experience, that attorneys are very, very comfortable with subpoena practice in both federal and state court, but are not typically understanding of the differences between court subpoenas and arbitral subpoenas, and the procedures under which those subpoenas need to be issued and the procedures under which those subpoenas need to be enforced. Therefore, arbitrators will likely prefer to exert a little bit more control over the process and generally try to dissuade practitioners in New York cases from issuing subpoenas on their own, without the tribunal's consultation or preapproval. So even though the CPLR empowers attorneys to issue non-party subpoenas, it's probably a wise practice to discuss this issue with the tribunal in advance. As to service of process, it's important to note that unlike the FAA, which provides for nationwide service of process under Rule 45 of the Federal Rules of Civil Procedure, you can only serve a subpoena under CPLR 7505 within the geographical boundaries of New York State. In order to serve a subpoena outside the state's borders, you must first obtain an order from the tribunal allowing you to seek either a commission for service in another state or a letters rogatory for service in another country from the applicable New York State courts. So the geographical scope of a subpoena under CPLR 7505 is necessarily constrained to the state borders. There is also a requirement to appear before the tribunal because, like the FAA, the CPLR only allows parties to compel the production of documents from a non-party in connection with a scheduled evidentiary hearing, and does not permit pre-hearing production of documents or depositions. So in order to comply with the CPLR, you should consider adopting one or more of the alternatives that we discussed earlier under Section 7 of the FAA. But what if you really wanna take pre-hearing depositions? What are some options for practitioners in New York? Well, there are at least two I can think of. First, because attorneys are permitted to independently issue subpoenas, the attorney, him or herself, could issue that subpoena for a pre-hearing deposition under 7505, and notice the deposition in that fashion. But remember that doing so means knowing that the subpoena is not legitimate, because we know that Article 75 does not authorize pre-hearing depositions, and that raises managerial and ethics concerns for the attorneys and the tribunal, of the kind that I talked about earlier. Secondly, attorneys could seek the assistance of the court under CPLR 3102 sub c. That section states that before an action is commenced, disclosure to aid in bringing an action to preserve information or to aid in arbitration may be obtained, but only by court order. So you see that there are some prerequisites under 3102 sub c, but if they are applicable in your situation, the attorney could seek an order from the court compelling the deposition, quote, to aid in arbitration, unquote. And a newer court will order discovery-native arbitration only under extraordinary circumstances. Now, that sounds like a pretty high burden, but there is actually some case law in New York that suggests that parties can likely satisfy the standard relatively easily, by agreeing on the need for non-party discovery, meaning if they stipulate to that. Now, with respect to enforcement, like any other arbitral subpoena, pre-hearing discovery subpoenas issued under the CPLR are also not self-enforcing. Moreover, Article 75 itself doesn't include any provision for a tribunal to enforce its own subpoenas. So enforcement proceedings, if any, need to be undertaken separately, by bringing an appropriate application or petition in New York State court. And the citation for that is New York CPLR 2308 sub b, which provides that unless otherwise provided, if a person fails to comply with a subpoena which is not returnable in a court, the issuer or the person on whose behalf the subpoena was issued may move in the Supreme Court to compel compliance. Let me wrap up this program with several strategic considerations and practice points. In practice, many tribunals routinely execute any summons or subpoenas that the parties submit and present to the tribunal for review and approval. And that's because tribunals typically view their role as facilitating the production of relevant material evidence necessary for the parties' respective prosecution and defense of the proceeding. But tribunals, depending on their philosophy, may decline to issue subpoenas that are, on their face, unenforceable. And they do that for two reasons. First, it's to avoid or minimize unnecessary disputes over the subpoena's validity and enforceability. Now, that makes sense because a tribunal is trying to move the process along efficiently, expeditiously, without delays and without additional cost. Perhaps more importantly, a tribunal may disapprove of unenforceable subpoenas because they want to uphold and maintain the integrity of the final award at the end of the day. Because after all, legal processes, like subpoenas, even if they would ultimately be quashed as unenforceable, do impose a legal threat, actual or perceived or subtle, to a non-party, an in terrorem effect, if you will, because they coerce compliance. Non-parties, probably more so than parties and counsel in an arbitration proceeding, have even less knowledge or understanding of the rights and obligations connected to arbitral subpoenas, and so they are less likely to understand what limitations there are in arbitral subpoenas and whether they can challenge them at all. And so it's important to recognize that arbitration tribunals will be mindful of ensuring that subpoenas are, at least on their face, valid and enforceable. Now, where the governing arbitration statute allows attorneys to issue subpoenas, like in Article 75 of the CPLR, tribunals are likely also going to exercise oversight over how and to whom the subpoenas are issued. And to facilitate that process, it's important to consider discussing the need for non-party subpoenas early on in the process. It's my experience, actually, that procedures relating to requests for the issuance of arbitral subpoenas are often not discussed during early case management conferences. Rather, they are brought on at the spur of the moment, when the arbitral subpoena becomes relevant to one of the parties. And perhaps that's because both counsel and arbitration tribunals are not as familiar with the nature of arbitral subpoena power and the proper procedures. Or, as in states like New York, attorneys may simply assume that as attorneys and officers of the court, they are authorized to issue them, so they don't believe there's anything different about arbitral subpoenas and their practice in an arbitral forum than what they're used to in either a federal or state court. But identifying your discovery needs early in the proceeding will help the tribunal better manage the case, particularly since non-party discovery can significantly impact the arbitration proceeding's cost and efficiency. For example, even if you have agreed on a timetable or a procedure for handling non-party subpoenas, there may always be complexity surrounding the nature and the scope of arbitral subpoena power and enforcement that can lead to delays and disruptions. So when you're setting your arbitration timetable, consider scheduling additional days and times for separate evidentiary hearings to obtain testimony, information or documents from non-parties. And remember that objections to the issuance of a subpoena and collateral enforcement proceedings also have negative impacts on your case. They're gonna negatively impact the proceeding's efficiency and cost, for sure, and evidence that the parties may ultimately present at the evidentiary hearing. So to keep the proceeding on track, consider setting a firm deadline for the submission of non-party subpoenas and any objections to them during the information and document exchange phase. The parties should also discuss a framework for handling any questions, objections or applications to quash or modify the subpoena in the first instance, through a conference call with the tribunal and counsel. Doing so will reduce the need for later court intervention to enforce compliance. And as a courtesy, be sure to apprise the non-party of the appropriate forum in which they should submit a motion to quash a subpoena as unenforceable, thereby avoiding any further delays if that motion were to be brought in the wrong forum. Arbitration itself is an adversarial proceeding, but nonetheless, it places a premium on cooperation between the parties and counsel. To that end, the parties should strive to cooperate to make reasonably available all necessary testimony, information or documents from non-party individuals or entities whose cooperation they can secure based on existing relationships or influence. Because doing so may even obviate the need for an arbitral subpoena in the first place. Only when you cannot voluntarily obtain the non-party discovery that you really need should you consider submitting a subpoena to the tribunal for its signature or request an appropriate order from the tribunal. Now, in the event a non-party subpoena becomes necessary, you should provide the document to the tribunal in a word processing format so that the tribunal can make any necessary revisions to comply with the governing statute or to tailor the subpoena to your particular case. Be sure to draft any production request with specificity, and not with broad subject-matter categories or sweeping phrases, like the ones we discussed earlier in the program. The parties should also consider requiring the requesting party to disclose to all other parties their intent to issue the subpoena before requesting it, and to indicate to the tribunal whether any party opposes issuance. A party objecting to the issuance of a subpoena or its contents should then be required to present its contentions to the tribunal within a relatively short period of time, after which a tribunal would either overrule the objection, thereby issuing the subpoena, or sustaining the objection, thereby declining to issue the subpoena. Be also mindful of the limitations to non-party discovery in arbitration. The jurisdictional region of an FAA summons is quite limited. While there is nationwide service of process available under Rule 45 of the Federal Rules of Civil Procedure, hearing locations are quite geographically confined, as stated in Rule 45. And there's certainly no nationwide service of process under the UAA, the RUAA or the CPLR. If you have a witness or a party located outside the state's borders, you will need to get a commission first, and to do that, you would seek an order from the tribunal allowing you to go to state court to get that commission. And for subpoenas to go outside the US, again, you'll need to seek an order from the tribunal to seek permission for a letters rogatory or a letter of request from an appropriate court. And as with all subpoenas, unless there's otherwise some explicit authorization under the arbitration statute, like the RUAA, subpoenas are all not self-enforcing, and so all enforcement for non-compliance has to be done in an appropriate court. I'll leave you with some reference materials. First is a practice note that I wrote on non-party discovery in domestic arbitration proceedings, which goes into more detail about the concepts we've talked about in this program, and includes some case citations to help you get started with your research. Secondly, the College of Commercial Arbitrators has put out a "Guide to Best Practices "in Commercial Arbitration." It's now in its fourth edition. The guide is excellent, and devotes a chapter exclusively to summoning non-party witnesses. And I commend you to read that chapter to get some further guidance. And finally, back in 2015, the New York City Bar Association issued a report entitled "A Model Federal Arbitration Summons "to Testify and Present Documentary Evidence "at an Arbitration Hearing." That's available at the link on the slide. What's really great about this report is that it not only goes into more detail about the workaround that we discussed under the Federal Arbitration Act, but it also provides a model or sample federal arbitration summons that you can customize and tailor for your particular proceeding. Thank you for attending the program. I hope you found it helpful. I wish you good luck and all the best in handling your non-party discovery needs. Thank you again.

Presenter(s)

TCJ
Theo Cheng, JD
Attorney, Arbitrator, and Mediator
ADR Office of Theo Cheng

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