In the

United States Court of Appeals

For the Seventh Circuit

No. 09-2377

GOTHAM HOLDINGS, LP, et al.,

Plaintiffs-Appellees,

v.

HEALTH GRADES, INC.,

Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 09 C 1843—James B. Zagel, Judge.

SUBMITTED AUGUST 28, 2009—DECIDED SEPTEMBER 3, 2009

Before EASTERBROOK, Chief Judge, and WILLIAMS and

SYKES, Circuit Judges.

EASTERBROOK, Chief Judge. Gotham Holdings is a plaintiff, and Health Grades a defendant, in litigation

pending in the Southern District of New York. (Although

there are multiple plaintiffs, we use one name to denote

all.) Health Grades contends in the New York case that

an arbitration award supports its view of the merits. It

tendered the award and some of the documents exchanged in the arbitration. When Gotham Holdings
2 No. 09-2377

asked to see related documents, Health Grades balked,

observing that the parties to the arbitration (Health

Grades and Hewitt Associates, LLC) had pledged

confidentiality. Gotham Holdings rejoined that, by

relying on the award, Health Grades had waived

confidentiality. When Health Grades refused to budge

from its position, Gotham Holdings served a subpoena

on Hewitt Associates and moved to enforce it in the

Northern District of Illinois, where Hewitt Associates’

principal offices are located. See Fed. R. Civ. P. 34(c), 45.

No one contends that the subpoena exceeds the bounds

set by Fed. R. Civ. P. 26(b)(1), and the district court directed Hewitt Associates to produce the documents.

Hewitt Associates is willing to hand them over. But the

district court issued a stay pending Health Grades’ appeal.

(Appellate jurisdiction rests on the doctrine of Perlman

v. United States, 247 U.S. 7 (1918).) Because the discovery

deadline in the New York suit is approaching, and the

documents covered by the subpoena may lead to additional discovery requests in New York, we granted

Gotham Holdings’ request to expedite the appeal. It has

been submitted on the briefs to the motions panel that

granted the request for expedited consideration.

We affirm the district court’s decision, for two reasons.

First, ¶6 of the agreement between Health Grades

and Hewitt Associates provides that materials from

the arbitration may be disclosed in response to a subpoena. Second, even if the agreement had purported

to block disclosure, such a provision would be ineffectual. Contracts bind only the parties. No one can “agree”
No. 09-2377 3

with someone else that a stranger’s resort to discovery

under the Federal Rules of Civil Procedure will be cut off.

We applied this principle in Jepson, Inc. v. Makita Electric

Works, Ltd., 30 F.3d 854 (7th Cir. 1994), to confidentiality

agreements reached during litigation. That conclusion is

equally applicable to confidentiality agreements that

accompany arbitration. Indeed, we have stated more

broadly that a person’s desire for confidentiality is not

honored in litigation. Trade secrets, privileges, and statutes

or rules requiring confidentiality must be respected, see

Fed. R. Civ. P. 45(c)(3)(A)(iii), but litigants’ preference for

secrecy does not create a legal bar to disclosure. See Baxter

International, Inc. v. Abbott Laboratories, 297 F.3d 544 (7th

Cir. 2002); United States v. Foster, 564 F.3d 852 (7th Cir.

2009) (Easterbrook, C.J., in chambers).

Health Grades and Hewitt Associates were entitled to

agree that they would not voluntarily disclose any information related to the arbitration. See ITT Educational

Services, Inc. v. Arce, 533 F.3d 342, 347–48 (5th Cir. 2008).

Disclosure would be authorized only when a third party

had a legal right of access. That’s what ¶6 of this agreement does: The parties promised to keep their mouths

(and files) shut unless a subpoena required a turnover.

Gotham Holdings is entitled to compulsory process to

acquire documents from third parties. Health Grades

does not argue that any privilege protects this material.

The Supreme Court has expressed reluctance to create

new privileges, see University of Pennsylvania v. EEOC,

493 U.S. 182 (1990) (declining to create an “academic

deliberations privilege”), and Health Grades does not
4 No. 09-2377

attempt to show that an “arbitration privilege” would be

appropriate under the Court’s standards.

According to Health Grades, access to the information

would undermine the national policy favoring arbitration. There is no such policy. Arbitration agreements are

optional and enforced just like other contracts. 9 U.S.C. §2.

The Federal Arbitration Act eliminates hostility to

private dispute resolution; it does not create a preference

for that process. “There is no federal policy favoring

arbitration under a certain set of procedural rules; the

federal policy is simply to ensure the enforceability,

according to their terms, of private agreements to arbitrate.” Volt Information Sciences, Inc. v. Stanford University,

489 U.S. 468, 476 (1989). See also, e.g., Arthur Andersen, LLP

v. Carlisle, 129 S. Ct. 1896, 1901 (2009) (federal policy is “to

place [arbitration] agreements upon the same footing

as other contracts”). People do not “violate” or “undermine” any federal policy if they litigate rather than arbitrate. Federal policy favors arbitration only in the sense

that it favors contracts in general.

The Federal Arbitration Act does not promote arbitration at the expense of strangers. Suppose Health Grades

and Hewitt Associates had agreed between themselves

that Gotham Holdings would pay the arbitrators’ fees.

That would make arbitration more attractive, but no one

would think the agreement enforceable; third parties’

rights may be affected only with their consent. Just so

here. Gotham Holdings has an entitlement to material

information in the hands of Hewitt Associates. Nothing

that Health Grades and Hewitt Associates can do or
No. 09-2377 5

say, separately or collectively, can affect that legal right.

We concluded in Teamsters Negotiating Committee v.

Troha, 328 F.3d 325 (7th Cir. 2003), that parties to a

labor arbitration may use subpoenas to obtain information from third parties. It would be weird to treat this as

a one-way street, so that parties to arbitration may

obtain, but need not divulge, information relevant to the

resolution of other disputes.

Hewitt Associates does not contend that the subpoena

is unduly burdensome. No one contends that a recognized privilege applies to these documents. So the subpoena was properly enforced. The stay is lifted, and the

judgment is affirmed. The mandate will issue today.

9-11-09