Evidence and Discovery in American Arbitration: The Problem of 'Third Parties'
Alan Scott Rau
University of Texas at Austin - School of Law; University of Texas at Austin - The Kay Bailey Hutchison Center for Energy, Law & Business
American Review of International Arbitration, Fall 2009
U of Texas Law, Public Law Research Paper No. 153
Energy Center Research Paper No. 05-10
One common theme in any discussion of the fact-finding process in arbitration is the extent to which arbitral discretion can be deployed in the service of extracting necessary evidence. Techniques are legion to deal with recalcitrant parties, but where information is in the hands of someone who is not himself a party to the arbitration proceeding, the problem is much exacerbated.
For quite a number of years, lower federal courts routinely assumed that the Federal Arbitration Act authorized arbitrators not only to subpoena third parties for the production of documents and testimony at the actual hearing - an uncontroverted proposition - but in advance as well, for purposes of discovery. However, over the last decade, we have seen a sharp and unmistakable retrenchment: And we now have a number of flat and unnuanced holdings to the effect that arbitrators lack any power whatever to make any discovery orders of any kind against third parties. Federal courts of appeal have taken the position that while the FAA allows third parties to be enlisted in arbitration as "witnesses," the "plain meaning" of the statute is that arbitrators may not compel them to give depositions - or even to produce documents - prior to the time when they give testimony at the actual "hearing."
However, a proper resolution of this problem should recognize that even in the absence of arbitration, strangers every day are commandeered - against their will and at the mere whim of attorneys for the litigants - into serving the adjudicative process. Allowing the state to conscript strangers to produce evidence for the parties to an arbitration agreement may be just another application of the same phenomenon. (In fact it is precisely the arbitration process that attempts to cabin this exercise of litigant power). Nevertheless expecting non-signatories to participate in a pre-arbitration process of discovery does not in the slightest degree imply that we are thereby replicating the domestic litigation order.
Under any statutory scheme, the arbitrators must (with the presumed acquiescence of the parties) be entrusted with the power to act as the gatekeepers to the discovery process. This is a necessary reading of the FAA, which allows the tribunal alone to compel testimony or production, and should equally be our model for related statutes, such as statutes permitting discovery in aid of "foreign tribunals" (now increasingly recognized as applicable to foreign commercial arbitral tribunals). The statutes present us with a diversity of procedures and verbal formulations, but what they all nevertheless have in common, is a recognition that priority to the arbitral tribunal will serve to support the distinctive features of the arbitral process. And at the same time they share awareness of the need for a backup role for the courts, in the interest of policing conduct that may affect non-consenting parties. Since arbitrators do not at least for the moment have federal marshals at their disposition, these are equivalent schemes posing the only interesting question - how power is to be shared.
In arbitration as in litigation, it is precisely the role of courts to ensure that private self-interest - the self-justifying, self-intensifying, dynamics of adversarial behavior - does not encroach too far on the legitimate interests of strangers: Courts have in fact demonstrated considerable sensitivity to the plight of non-litigants who may "have no dog in the fight" carried on by others, and they have no end of experience in threading their way towards a reasonable accommodation.
So the posturing and the striking of poses, the staking out of absolute prohibitions - the blanket assertions of "impossibility" - all so common to much of the case law and commentary, take us absolutely nowhere. Sensitivity to the culture and likely incentives of arbitrators is a useful start. A further step is the opening of a dialogue between arbitrators and courts, where both recognize that collaboration and a sense of common enterprise in shaping a fair arbitral process need not be stigmatized as "interference." However the balance is struck, the question must not be framed rhetorically as an inquiry into "arbitral power," but rather as one of the proper allocation of roles between coordinate fora - and in this dialectic the Devil, as he always does, lurks amidst the details.
Number of Pages in PDF File: 57
Keywords: arbitration, international arbitration, FAA, evidence, discovery, non-signatories, non-parties
JEL Classification: K12, K19, K33, K39, K41
Date posted: May 1, 2009 ; Last revised: March 1, 2014
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