Ninth Circuit Addresses Circuit Split Regarding Arbitral Discovery

The Ninth Circuit recently discussed a circuit split in the context of subpoena powers and discovery under the FAA in the case of CVS Health Corporation v. Vividus, LLC, No. 16-16187 (9th Cir. Dec. 21, 2017) (click here for a copy of the decision).

Section 7 of the FAA generally grants arbitrators the authority to subpoena witnesses for a hearing, including the bringing of relevant documents to the hearing, and if a witness refuses to honor the subpoena, a district court has authority to enforce the subpoena and punish the witness.  The arbitration panel in this case issued a subpoena to a non-party to produce certain documents prior to a hearing.  When the non-party refused to respond, one of the parties to the arbitration asked a district court to enforce the subpoena pursuant to section 7 of the FAA.  However, the district court refused, finding that the FAA does not grant arbitrators such a power to compel pre-hearing production of documents from a non-party.  The Ninth Circuit affirmed the district court’s order.

The Ninth Circuit relied on the text of section 7, which provides that arbitrations may compel the attendance of a person “to attend before them . . . as a witness,” and to “bring with him” relevant documents.  Because this language only discusses the hearing itself, and not any pre-hearing discovery, the Ninth Circuit ruled that section 7’s subpoena powers do not cover pre-hearing discovery.  The Ninth Circuit noted that its decision conflicted with the Eighth Circuit, which has held that section 7’s broad subpoena power for a hearing encompasses the lesser subpoena power regarding pre-hearing discovery.

In my view, the Ninth Circuit is interpreting the FAA correctly, as originally intended.  (Remember, back in the 1920s, broad pre-hearing discovery as we know it today under the Federal Rules of Civil Procedure did not exist.)  However, the Supreme Court has judicially expanded the FAA in stages over the decades, to a point where the current application and coverage of the FAA is no longer limited or grounded by the terms of the statute.  The current legal framework of the FAA collapses upon any serious examination of the FAA’s text.  (For example, section 2 of the FAA only covers claims that literally arise out of a contract.  Last week, a court compelled arbitration of a rape claim. See Haasbroek v. Princess Cruise Lines, Ltd., No. 17-CV-22370-KMM, 2017 WL 6343620, at *5 (S.D. Fla. Dec. 12, 2017) (“the Court notes that independent torts—including those involving rape—do not necessarily fall outside the scope of an arbitration clause in an employment agreement.”)  However, one’s right to be free from bodily harm does not arise out of a contract; it arises from an obligation under tort and criminal laws.  The FAA only applies to claims arising out of a contract; the FAA was never intended to apply to tort claims or statutory claims.  This is just one example, but there are many other examples where Supreme Court rulings or interpretations of the FAA do not fit with the original text or meaning of the statute.)   It’s problematic when a court relies on expansive judge-made interpretations of the FAA for many issues, but then switches to a very literal interpretation of the FAA for other issues.  Limited discovery powers may have been appropriate in the 1920s, when the FAA was limited in its construction and application to contractual disputes about the interstate shipment of goods.  However, in light of judicial expansions of the FAA to cover virtually every type of claim, limited discovery under section 7 of the FAA is problematic.  How can an employee, for example, prove his or her claims in arbitration if the arbitration proceeding only requires each party to disclose the evidence they plan to use to support their own claims and defenses, if the evidence of wrongdoing is in the hands of the defendant and involves multiple co-workers and supervisors at different locations, and if there is a confidentiality clause broadly prohibiting the employee from discussing the incident with coworkers?   The FAA was never designed or fine-calibrated for the broad uses of arbitration today.  I’m not arguing against arbitration.  With fair procedures and meaningful consent, arbitration can be superior to and rival any court system.  However, (I know I sound like a broken record) the FAA is badly in need of reform and updates.

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