Life Settlements Corp. d/b/a Peachtree Life Settlements (“Peachtree”) entered into a contingent cost insurance contract with Syndicate 102 at Lloyd’s of London (“Syndicate 102”) to insure against the risk that living insureds under life policies which Peachtree purchased might live past his or her projected life expectancy. Some of the purchased life policies were placed by Peachtree with Life Receivables Trust (the “Trust”), an entity created by Peachtree for the express purpose of holding the policies. Syndicate 102 declined a claim by Peachtree after an insured outlived his life expectancy, asserting that the Trust made fraudulent misrepresentations regarding the date on which the underlying life policy was purchased, and also regarding the insured’s life expectancy. Syndicate 102 and the Trust arbitrated the dispute under the parties’ agreement, which commanded arbitration under American Arbitration Association rules.
After Syndicate 102 unsuccessfully attempted to join Peachtree as a party to the arbitration (Peachtree was also a party to the contract containing the arbitration agreement), it successfully sought the arbitrators’ issuance of subpoenas commanding Peachtree to produce certain documents that the Trust was unable to obtain from Peachtree, due to Peachtree’s expressed position that it was not a party to the arbitration, and the arbitrators thus had no jurisdiction to issue orders binding on Peachtree. After Peachtree refused to comply with the subpoenas, Syndicate 102 filed an action in the federal district court seeking to compel compliance. The court ordered Peachtree to comply. Peachtree appealed, and the Second Circuit held – noting a split among the circuits – that the plain language of §7 of the Federal Arbitration Act does not authorize pre-hearing discovery from non-parties, and that a non-party may only be compelled to produce documents or testimony in conjunction with an appearance before the arbitral panel. The Court thus reversed the district court’s ruling ordering Peachtree to comply with the subpoenas. Life Settlements Corporation d/b/a Peachtree Life Settlements v. Syndicate 102 at Lloyd’s of London, No. 07-1197-cv (2d. Cir. Nov. 25, 2008).