Arbitration is a means for parties to resolve disputes in a more efficient and less costly manner than seeking recourse through the judicial system. The Federal Arbitration Act empowers the arbitrator to subpoena non-parties and their documents to an arbitration proceeding. However, there is disagreement among the courts regarding the arbitrator’s power to compel pre-hearing document production from non-parties.
The federal circuits have approached this issue in three ways. The United States Courts of Appeals for the Sixth and Eighth Circuits enforce pre-hearing document subpoena requests by arbitrators, while the Second, Third, Ninth and Eleventh Circuits do not. The Fourth Circuit has concluded that district courts may enforce these subpoenas when there are “extraordinary circumstances” based on “a showing of special need or hardship.” District courts generally have erred on the side of not enforcing these subpoenas in circuits where the appellate court has not addressed the issue.
The approach of the Fourth Circuit is nuanced. Rather than adopt a bright line test, the Fourth Circuit created what is referred to as a “special need or hardship” exception in the case of COMSAT Corp v. NSF. That court explained that “we do not now attempt to define ‘special need,’ except to observe that at a minimum, a party must demonstrate that the information it seeks is otherwise unavailable.”
Subsequent case law explaining what constitutes “extraordinary circumstances” is sparse; however, courts in the Fourth Circuit have had some opportunities to determine when the COMSAT exception applies. For example, in Robertson v. T-Mobile US, Inc., the District of Maryland compelled a non-party to produce telephone records in pre-hearing discovery since the requested records were “essential [to the petitioner’s] claims” and “otherwise unavailable.” Additionally, in Deiulemar Compagnia di Navigazione S.P.A. v. M/V Allegra, the Fourth Circuit upheld the District of Maryland’s order granting Deiulemar’s Rule 27 petition, which stated that Deiulermar’s expert “and his staff could inspect the vessel, observe repairs, and copy documents from the ship” after the vessel’s owner initially prevented Deiulemar from inspecting the vessel.
The Deiulemar case involved a dispute over subpar vessel speed, wherein liability turned on whether the substandard speed was caused by marine growth or a deficient engine. The engine at issue was scheduled for repair and the vessel was scheduled to leave the United States after the repair. The Fourth Circuit found that this situation met the “extraordinary circumstances” standard. While Deiulemar did not directly consider whether an arbitrator’s subpoena was enforceable, the Fourth Circuit’s analysis heavily cited COMSAT, since a related arbitration was ongoing, indicating that similar facts would likely meet the standard under a different procedural posture.
Since arbitration clauses are commonplace in business contracts today, entities entering into such agreements should be aware of the consequences of the language they use. As the Fourth Circuit has stated, “[w]hen contracting parties stipulate that disputes will be submitted to arbitration, they relinquish the right to certain procedural niceties which are normally associated with a formal trial.” If you have specific questions related to pre-hearing discovery or arbitration clauses generally, you should contact your attorney to understand how the law applies to your situation. Vandeventer Black’s attorneys are available for consultation regarding this or other contract formation and dispute resolution-related matters.