News & Updates: Third Party Discovery In Arbitration? Not So Fast.

Most lawyers assume that they have the right to take all the discovery they want in arbitration proceedings, including third-party discovery. Arbitration is no different than traditional litigation, they assume, and proceed with a discovery plan that is just as comprehensive as if the matter were pending in court.

But not so fast: parties’ right to third party discovery in arbitration proceedings should not be taken for granted. Increasingly, third parties have objected to such discovery, and Courts of Appeal, including the Ninth Circuit, have interpreted Section 7 of the Federal Arbitration Act (FAA) to hold that an arbitrator lacks the power to issue subpoenas for third party deposition or document production. CVS Health Corp. v. Vividus, LLC, 878 F.3d 703 (9th Cir. 2017).

Section 7 states that arbitrators may summon “any person to attend before them” as a witness and to bring “any book, record, document, or paper which may be deemed material as evidence in the case.” 9 U.S.C. § 7 (emphasis added). If the witness does not comply, Section 7 gives the district court the power to compel the witness’s attendance before the arbitrator. Id. Interpreting this language, the Ninth Circuit, like the Second, Third, and Fourth Circuits, held that the arbitrators’ power to summon testimony or documents “before them” does not extend to the right to summon pre-hearing discovery of third parties, to be taken outside of the arbitrators’ presence. CVS Health Corp., 878 F.3d at 707-708.

This is consistent with California law, but only up to a point. The rule in California is that third party discovery is not permitted in arbitrations except (1) in personal injury or wrongful death cases, or (2) where the parties have expressly incorporated into their arbitration agreement Section 1283.05 of the Code of Civil Procedure, which permits the parties to take discovery, including third party discovery, as though the arbitration were pending in the superior court. Under California’s statutory framework, therefore, the parties may grant to themselves the right to conduct third party discovery, but only if they do so in the arbitration agreement.

The take-away for litigators is that when planning your arbitration case, be sure to understand the scope of discovery allowable under the law. Third parties – including former employees of your client or your opponent – may possess important evidence. While these third parties may be compelled to appear at the arbitration hearing, they may not be compelled for discovery purposes. Whether such limits on discovery will turn out to be a blessing or a curse will depend on the facts of each case. But only by understanding the limits at the outset, you can better plan your case.