I don’t mean to be imprecise, but I think that the Eleventh Circuit may have recently issued the most luddite opinion I’ve seen in a good long while. See Managed Care Advisory Group, LLC v. CIGNA Healthcare, Inc., 2019 WL 4464301 (11th Cir. Sept. 18, 2019). According to the court, Section 7 of the FAA, which allows arbitrators to subpoena non-parties and their documents, must be interpreted narrowly. And when I say narrowly, the Eleventh Circuit isn’t joking around.
Arbitrators can only require summonsed non-parties to appear in the physical presence of the arbitrator. This means literal physical presence; none of this video conference nonsense. Additionally, Section 7 prohibits any pre-hearing discovery, which means that documents from non-parties can only be obtained when they physically show up to a hearing.
The underlying dispute isn’t particularly important, but briefly, just for context, it involved arbitration over a settlement agreement. Essentially, a class of medical providers had sued managed care insurance companies, alleging that the insurers improperly processed and rejected certain physicians’ claims for payment. A big kerfuffle ensued. Ultimately, the case settled. Sometime after the settlement, a group acting on behalf of the class members submitted to an arbitration agreement with one of the insurers. They were trying to resolve a dispute over a portion of the settlement funds. Eventually, during the course of an arbitration, the arbitrator summonsed several non-parties to appear for a live hearing and video conference and to bring certain documents along with them. The non-parties objected to the summonses.
After dealing with some preliminaries – jurisdiction, the nationwide service of arbitral summonses, and the correct court to enforce arbitral summonses – the court gets to the big bang. It starts by quoting Section 7, which allows an arbitrator to “summon in writing any person to attend before them . . . as a witness and in a proper case to bring with him . . . any book, record, document, or paper which may be deemed material as evidence in the case.” The text laid out, the Eleventh Circuit turns to a plain-meaning and quaintly originalist reading.
The court observes that “Congress passed Section 7 in 1925, so we must ascertain the meaning of ‘attendance’ and ‘before’ in Section 7’s grant of authority . . . in the same manner provided by law for securing the attendance of witnesses . . . in the courts of the United States” as of 1925. Since there was none of this new-fangled video conference rubbish in 1925, Section 7 of the FAA doesn’t include technological means of having witnesses “attend” the hearing. In short, “Section 7 does not authorize district courts to compel witnesses to appear in locations outside the physical presence of the arbitrator. . . .”
Moreover, a simple reading of Section 7, according to the Eleventh Circuit, only allows arbitrators to compel non-parties to come to a hearing with documents. It doesn’t allow arbitrators to compel non-parties to produce documents before such a hearing. “Thus, the FAA implicitly withholds the power to compel documents from non-parties without summoning the non-party to testify.” And, even if the non-party is summoned to testify, the FAA does not allow “pre-hearing” discovery.
It’s worth noting that the Eleventh Circuit aligns itself with the Second, Third, Fourth, and Ninth Circuits. But the Eleventh Circuit is a bit cheeky. It insinuates that these other circuits agree with both prongs of its holding: (1) arbitrators can only compel non-parties to attending in-person, physical hearings in the same room as the arbitrator; and (2) the FAA does not permit pre-hearing discovery from non-parties. In fact, these other circuits seem to only endorse, at least expressly, the second point. (Then-judge Alito writing for the Third Circuit did say that Section 7 “unambiguously restricts an arbitrator’s subpoena power to situations in which the non-party has been called to appear in the physical presence of the arbitrator and to hand over the documents at that time.” But the Third Circuit was not faced with non-parties being summoned to a video conference.)
The Eighth Circuit appears to be the outlier with respect to this second point, reasoning that, well, times have changed and efficiency interests suggest that arbitrators should have the authority to require pre-hearing production of evidence from non-parties.
With respect to the Eleventh Circuit’s first holding, I’m not aware of any other decisions to say that arbitrators and non-parties have to be in the same physical space. I confess, that feels unnecessarily technophobic to me. The Eleventh Circuit says that the second holding – arbitrators cannot compel pre-hearing discovery from non-parties – compels the first – arbitrators and non-parties need to be in the same room. Otherwise, how would the arbitrators get any documents that non-parties bring with them? But Really? I teach students regularly who are not in the same physical room as me. And I can easily share, electronically, documents or other information with them in real time.
I don’t mean to be cheeky myself, but this all seems silly. And radically inefficient. And to miss the point of much modern discovery, in a world where “documents” are often anything but paper. Taken to its extreme, the Eleventh Circuit’s decision could mean that arbitrators lack the power to compel non-parties to produce any form of ESI (“electronically stored information”), at least to the extent that the non-parties couldn’t “bring it with them” to the hearing.
This decision is radically anti-arbitration. To be sure, the notion that non-parties cannot be compelled to produce pre-hearing discovery isn’t entirely new, though it too seems anti-arbitration. But this appended requirement of physical presence at a hearing . . . I’m flummoxed.
Hat tip to Erika Birg, a partner at Nelson Mullins in Atlanta, for highlighting this important case for me.