Methods for Discovery in Arbitration
| Publication year | 2008 |
| Pages | 0022 |
A Look at the Law
by John W. Hinchey and Ryan J. Szczepanik
Arbitration is increasingly becoming the preferred method of dispute resolution for commercial disputes. The reason is clear "” speed and reduced cost, without sacrificing the neutrality of the decision-maker. Although extensive formal discovery in litigation promotes the policy of achieving full disclosure of information and, thus, the fair resolution of a dispute, such full-blown discovery is viewed as inconsistent with speed and reduced cost. Thus, in arbitration, limited pre-trial discovery is the rule.
Within the arbitration process, discovery procedure normally will be based on party agreement, including the agreed arbitration rules. Absent that, the consent of the tribunal is required. The arbitrators usually will provide for relevant pre-hearing document production and will almost always allow witness examination at the arbitration hearing. Also, depending on the nature of the case and the attitudes of the arbitrators, parties may be permitted to take a limited number of depositions of a limited duration. Arbitrators typically allow no interrogatories or requests for admissions.
Due to the limited discovery within the arbitration process, lawyers should be aware of all legal and creative discovery options both within and outside of the arbitration process. This article will address methods of discovery both within and outside the arbitration process, with the goal of presenting the full range of discovery options in arbitration.
Discovery Within the Arbitration Process
The biggest influence on the determination of discovery methods within the arbitration process will be the actions taken or not taken by the parties themselves.[1]For example, if an arbitral tribunal lacks the authority to compel discovery, then the specification of discovery methods and rules in the arbitration agreement may be the only way around the possibility of having incomplete evidence at the time that an award is made.[2] Thus, in their arbitration agreement, parties should focus on choosing methods and rules that are most appropriate to their given situation and potential disputes.[3] The parties may do this by (a) setting forth the discovery procedure in their arbitration clause; and (b) referencing rules or procedural law that provides for discovery procedure. Short of these steps, parties may stipulate to discovery procedure after a dispute arises, known in arbitration procedure as a "submission agreement." Once the parties are engaged in dispute, however, reaching agreement on arbitration procedure and the scope of discovery may prove difficult or impossible.
Specifying Discovery Procedure in the Arbitration Agreement
The easiest and most efficient manner to avoid uncertainty over discovery in arbitration is for the parties to agree in their arbitration clause on how they will conduct discovery. At the time of drafting the contract, negotiations on the dispute resolution provisions are generally the least controversial. For example, the parties can generally agree on exchanging documents relevant to the disputed issues in the matter, the pre-hearing exchange of witness statements (which will provide the parties time to rebut the witnesses' testimony at the hearing), and an agreed number of depositions of party opponent witnesses per side, pursuant to a time schedule. At the very least, the parties can usually agree to an exchange of only those documents that each side will use to support its case at the hearing, while agreeing to withhold documents to be used exclusively for cross-examination.[4]
The parties also should consider adding provisions to their arbitration agreement establishing their duty to comply with the discovery procedures that they have set forth in the arbitration clause, including conditions that will encourage compliance with the discovery procedures and discourage parties from engaging in dilatory tactics. At a minimum, the compliance terms should require the parties to answer reasonable discovery requests and establish time limits for the discovery process. The parties further may agree to provide the tribunal with the authority to penalize noncompliance by, for example, drawing adverse inferences that the contents of a document are adverse to a party's case if that party fails to produce a requested document without sufficient showing of reason. Alternatively, and if not authorized by law or the applicable rules, the parties may authorize the tribunal to compel production of documents and the appearance of witnesses by issuing a subpoena. Moreover, the parties should agree to a mandatory pre-hearing conference, during which the parties may raise outstanding discovery issues.[5]
Prior agreement on discovery methods will almost always expedite fact development and, thus, promote efficiency and thereby reduce costs. It also will reduce tension after a dispute arises.[6]
Referencing Governing Law or Rules in the Arbitration Agreement
In general, the parties should agree to the rules or the law that will govern the discovery proceeding. For example, the parties can agree that the civil discovery procedures under the law of the state in which the arbitration will be held will govern or that the discovery procedures will be conducted pursuant to the rules published by Judicial Arbitration and Mediation Services, Inc. (JAMS).[7] Many arbitration rules, however, lack specific guidance on discovery. Thus, the tribunal may be left with wide discretion to determine which methods of discovery may be used (or whether discovery will be used at all), subject to the tribunal's concern for ensuring a basic measure of equity by considering the expectations of the parties and the need for conducting a full and fair hearing. The tribunal also is limited in its discretion by the rules of arbitration as dictated by the administering institution, for example, the American Arbitration Association (AAA).[8] The parties should consult the administering institution's rules to see whether they address the issue of discovery.
Look to the Law of the State in Which the Arbitration is Taking Place
The parties should consider whether the law of the state in which the arbitration is taking place contains any provisions governing discovery in arbitration. The governing law on arbitrations in Georgia is the Georgia Arbitration Code (GAC).[9] It applies "to all disputes in which the parties thereto have agreed in writing to arbitrate and shall provide the exclusive means by which agreements to arbitrate disputes can be enforced," with the exception of certain enumerated agreements.[10] The GAC anticipates a discovery process by providing that arbitrators may establish discovery procedures allowing the parties to obtain depositions and documents and that "[a] party shall have the opportunity to obtain a list of witnesses and to examine and copy documents relevant to the arbitration."[11]
Many states have adopted some form of the Uniform Arbitration Act (UAA),[12] which provides for more limited discovery than the GAC. In particular, Section 17 of the UAA empowers an arbitrator to issue a subpoena "for the attendance of a witness and for the production of records and other evidence at any hearing," with the subpoena enforceable in state court.[13] Section 17 also empowers the arbitrator, upon request of a party or witness, 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."[14] Further discovery is permitted in the arbitrator's discretion.[15] In addition, Section 17 empowers a court in a state other than the state in which the arbitration is pending to enforce a subpoena issued by the arbitrator.[16]
Arbitrations Involving Transactions in Interstate Commerce
The Federal Arbitration Act (FAA)[17] applies to any arbitration involving a transaction in interstate commerce.[18] The FAA preempts any state law that conflicts with its provisions.[19] Section 7 of the FAA permits the arbitrators to "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." The summons is enforceable in the U. S. district court for the district in which such arbitrators are sitting, with sanctions for failure to comply.[20] Several federal courts have interpreted Section 7 of the FAA to apply to pre-hearing document production.[21]
Third-Party Discovery
The arbitral tribunal's authority over the proceeding rests on the parties' private contractual arrangement to submit their disputes to that tribunal. Thus, the tribunal generally has no power to enforce its orders upon nonparties that are not bound by the arbitration clause of the parties' agreement. As a result, tribunals are hesitant to compel nonparties to produce documents or to appear at deposition.[22]
For example, in the context of the FAA, the U.S. Court of Appeals for the 3rd Circuit has held that the FAA does not authorize arbitrators to issue pre-hearing document subpoenas,[23] while the U.S. Court of Appeals for the 4th Circuit has held that arbitrators may only compel nonparty depositions or compel nonparties to provide documents during pre-hearing discovery if there is a showing of special need or hardship.[24] The U.S. Court of Appeals for the 8th Circuit and the U.S. District Court for the Northern District of Georgia, on the other hand, have found that arbitral subpoenas for pre-hearing document discovery from third parties issued pursuant to the FAA are enforceable.[25] The U.S. Court of Appeals for the 2nd Circuit, in contrast, has held that arbitral subpoenas for third-party document discovery...
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