In arbitrations, parties often desire to obtain documents or testimony from third parties. For instance, a party may want to compel a former employee to testify; likewise, to prove its case, a party may need to obtain documents from a company which was involved in a transaction in dispute, but which was not a party to the relevant arbitration agreement.
This is a hotly-contested issue in international arbitrations in the United States. Different appellate courts have taken a variety of approaches in relation to this area. The outcome depends upon the courts' interpretations of Section 7 of the Federal Arbitration Act ("FAA").
Section 7 of the FAA provides, in relevant part, that arbitrators "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." 9 U.S.C.A. § 7. The plain language of the statute permits arbitrators to summon witnesses and to require the production of documents at an arbitration hearing; the question is whether they may require the production of witnesses and documents prior to the hearing date.
In the recent case of Stolt-Nielsen v. Celanese, 430 F.3d 567 (2d Cir. 2005), the Second Circuit held that arbitrators can compel non-parties to give evidence and produce documents at "a hearing" before arbitrators - and, importantly, that this "hearing" may be held prior to the trial-type hearing on the merits. This approach is similar to that taken by the Eighth Circuit, which has held that implicit in an arbitration panel's power to subpoena witnesses and relevant documents for production at a hearing is the power to order the production of relevant documents for review by a party prior to the hearing. Security Life Ins. Co. v. Duncanson & Holt, Inc., 228 F.3d 865 (8th Cir. 2000).
The permissive approach of the Second and Eighth Circuits contrasts dramatically with a leading opinion (by Supreme Court nominee Judge Alito) in the Third Circuit. In Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404 (3rd Cir. 2004), the Court, based on a strict reading of the FAA, held that the language of Section 7 "unambiguously" provided that the only power conferred on arbitrators under the Act was to compel a non-party "to bring" items with him if and when summoned to testify as a witness at trial-type arbitration hearings on the merits.
Finally, the Fourth Circuit has taken a "middle approach," holding that an arbitrator is not authorized to subpoena third parties to provide pre-hearing discovery absent a showing of "special hardship." Comsat Corp. v. National Science Foundation, 190 F.3d 269 (4th Cir. 1999).
Unless and until the Supreme Court resolves this split, persons drafting arbitration clauses for use in proceedings in the United States may want to consider whether third party discovery may be required. As matters now stand, the venue chosen in the clause may ultimately determine whether parties can obtain pre-hearing production of witnesses and documents from non-parties.