Originally from Dispute Resolution Journal

EMPLOYMENT

Enforceability of Third-Party Subpoenas

The 3rd Circuit refused to enforce document subpoenas issued by the arbitrator to non-parties prior to the hearing.

David Hoffrichter left his job at the Hay Group and joined PriceWaterhouseCoopers. His separation agreement forbade him from soliciting Hay’s employees or clients for a year and required arbitration of any disputes arising under the agreement. Subsequently, Hay began an arbitration against Hoffrichter alleging violations of the non-solicitation clause. Eventually PriceWaterhouse sold the division employing Hoffrichter to E.B.S. Hay obtained arbitral subpoenas requiring both PriceWaterhouse and E.B.S. to produce certain documents prior to the hearing. When PriceWaterhouse and EBS refused to comply, Hay sought to enforce the subpoenas in federal court. The objectors argued that the Federal Arbitration Act did not authorize arbitrators to issue subpoenas to non-parties for pre-hearing discovery. The district court ruled that the subpoenas should be enforced. PriceWaterhouse and E.B.S. appealed and obtained an emergency stay from the 3rd Circuit.

The 3rd Circuit reversed. It ruled that under the FAA, arbitrators have no authority to subpoena third parties to produce documents prior to the hearing. It reasoned that the subpoena power of an arbitrator is strictly limited to that granted in § 7, which provides that the arbitrator may subpoena documents in the possession of a third party only when they are to be brought by a witness to the hearing. Although some courts have found the power to issue document-only subpoenas implied in § 7, the 3rd Circuit did not. It concluded that § 7 implicitly withholds the power to compel a third-party witness to only produce documents. If that were not the case, the court explained, it would have been unnecessary for Congress to say that the subpoena power included the right to compel an attending witness to bring documents. The court said its decision was not based on considerations of efficiency, but on the primary purpose of the FAA to give effect to private agreements.

The court also disagreed with the 4th Circuit’s statement that a subpoena compelling a non-party to produce documents before the hearing could be enforced when “special need” for the information could be shown.

Hay Group Inc. v. E.B.S. Acquisition Corp. et al., PriceWaterhouseCoopers L.L.P., 360 F.3d 404 (3rd Cir. March 12, 2004). —Liz Carson