Source: https://www.cobar.org/-em-Colorado-Lawyer-em/Details-Page/ArticleID/52/Alternative-Dispute-Resolution-Discovery-to-Nonparties-in-Colorado-Arbitrations
Timestamp: 2020-05-29 13:22:59
Document Index: 304615946

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Alternative Dispute Resolution: Discovery to Nonparties in Colorado Arbitrations
Alternative Dispute Resolution articles are sponsored by the CBA Alternative Dispute Resolution Section. They describe recent developments in the evolving field of ADR, with a particular focus on issues affecting Colorado attorneys and ADR providers.
Robert E. Benson is of counsel with Holland & Hart LLP in Denver—RBenson@hollandhart.com.
This article summarizes the power to compel nonparties by subpoena to produce documents and to submit to depositions for discovery purposes under the Colorado Revised Uniform Arbitration Act and the Federal Arbitration Act.
This article covers the ability of parties in arbitration under the Federal Arbitration Act (FAA), 9 USC §§ 1 et seq., and the Colorado Revised Uniform Arbitration Act (CRUAA), CRS §§ 13-22-201 et seq., to request that the arbitrator issue subpoenas directing prehearing discovery (depositions and document requests) to nonparties. It does not deal with compelling nonparties to appear as witnesses to testify and to produce documents at the arbitration hearing, although much of the applicable law is the same, nor does it address discovery to parties to the arbitration. When the power to compel discovery exists, the issues covered include the jurisdictional boundaries for discovery subpoenas, enforcement of discovery subpoenas, objections to discovery, court discovery, subpoenas in aid of arbitration, discovery under the Federal Rules of Civil Procedure (FRCP), and whether the FAA or the CRUAA applies.
This article emphasizes the decisions of the Colorado state courts, the U.S. District Court for the District of Colorado, the Tenth Circuit Court of Appeals, and the U.S. Supreme Court. However, because these courts have not answered most of the questions presented, particularly under the FAA, decisions of other courts are considered for guidance. As to the issues considered herein under the FAA, the court decisions in general are not consistent, providing limited guidance to practice in Colorado under the FAA.
The frequent need for parties in arbitration to discover facts and documents from nonparties is apparent. Sometimes nonparties voluntarily produce requested documents and provide factual information by interview or deposition; however, the compulsory subpoena process often is needed to obtain that discovery.
Arbitration is a dispute resolution process created through private contract between two or more parties. Parties cannot by their agreement require a nonparty to respond to discovery. Therefore, if a nonparty will not voluntarily respond to discovery requests, the legal basis for compelling discovery from the nonparty is the FAA, the CRUAA, or other applicable rule or statute.1
The Colorado legislature can provide a means for compelling a nonparty to respond to discovery requests in a private arbitration proceeding if the nonparty is a citizen or resident of Colorado, or perhaps if the nonparty is served in Colorado based on actions in Colorado. Congress also can so provide wherever the nonparty is located, at least if within the United States.
Discovery to Nonparties under Colorado Arbitration Law
CRS § 13-22-217 defines discovery under the CRUAA. Various Colorado rules of procedure govern certain aspects of discovery in arbitration proceedings.
CRUAA and the Rules
CRS § 13-22-217(3) empowers the arbitrator to permit discovery as he determines is appropriate, considering "the needs of the parties to the arbitration proceeding and other affected persons and the desirability of making the proceeding fair, expeditious, and cost effective." Because this section does not limit to whom the discovery may be directed, it includes nonparties.2
CRS § 13-22-217(4) permits the arbitrator to issue discovery subpoenas to witnesses without limitation, and therefore includes subpoenas to nonparties. Subsection (4) provides that the arbitrator may "take action against a non-complying party to the extent a court could take such action if the controversy were the subject of a civil action; except that the arbitrator shall not have the power of contempt." Read in conjunction with CRCP 37(b), the term "non-complying party" likely refers to any person or entity, not just a party to the arbitration, who does not comply with a subpoena.3
CRS § 13-22-217(6) provides that "[a]ll provisions of law that compel a person under a subpoena to testify . . . as a witness shall apply to an arbitration proceeding in the same manner as if the controversy were the subject of a civil action." In addition, subsection (7) provides for judicial enforcement. CRS Chapter 13, Article 90 governs witnesses, and CRCP 45 covers procedures for subpoenas. Although courts have not considered whether the term "law" in subsection (6) includes rules of civil procedure, based on the plain wording of the statute, procedural rules are likely "law" for purposes of subsection (6).4
The scope of CRS Chapter 13, Article 90 includes
who may5 and may not testify (including privilege)6
the deadman’s statute7
religious opinions8
the power to enforce subpoenas9
service of subpoenas.10
CRS § 13-22-217(6) probably makes most of CRCP 45 applicable to CRUAA subpoenas, specifically the provisions regarding the form and contents of subpoenas,11 service of subpoenas,12 protecting a person subject to a subpoena13 (this may be superseded in part as to arbitration subpoenas by subsection 217(5), which provides for issuance of protective orders by arbitrators), duties in responding to a subpoena,14 and subpoenas for deposition, including provisions concerning the place of examination for both residents and nonresidents of this state.15
Procedures for Issuance of a
Discovery Subpoena to Nonparties
Only an arbitrator may issue a discovery subpoena under CRS § 13-22-217(3). Typically, the party requesting issuance of the subpoena prepares, signs, and submits the form to the arbitrator, with a copy to opposing counsel. If a party objects, the arbitrator must first resolve those objections. CRCP 4, which governs process, may be deemed in part incorporated under subsection (6), except to the extent that it is in conflict with the CRUAA; because the CRUAA requires the arbitrator to issue subpoenas, the Rule 4 procedure allowing an attorney to issue them is not applicable.
Rules 45(a)(1)(B) and (c)(2)(A) provide for subpoenas for documents only, without requiring a person to appear and give testimony. Given the wording of subsection 217(4), that an arbitrator may take such action "to the extent a court could take such action if the controversy were the subject of a civil action," it should incorporate this Rule 45 provision.
Form and Contents of the
Discovery Subpoena to a Nonparty
The CRUAA does not define any requirements as to the form or contents of the subpoena. Under CRS § 13-22-217(6), the contents of the subpoena are as prescribed by CRCP 45(a)(1), Form and Contents. The wording must be modified slightly to reflect the arbitration forum, but the essential requirements of the rule should be followed. Complying with the rule should satisfy the arbitrator as to the substance and form of the subpoena, as well as fulfilling the subsection 217(6) requirements. The arbitrator may require that the subpoena state additional information, such as providing for objections to the subpoena or requests for protective orders.
Service of the Subpoena on Nonparties
Under CRS 13-22-217(1), a subpoena issued under section 217 "shall be served in the manner for service of subpoenas in a civil action." The attorney should also consult CRS § 13-90-115, which governs service of subpoenas. CRCP 45(b)(1)(C) requires that service be made by delivering a copy to the named person or "as otherwise ordered by the court consistent with due process." The rule does not address whether service may be "otherwise ordered" by the arbitrator or whether application must be made to a court. This provision presumably supersedes any general provisions in CRCP 4, but Rule 4 may also apply in part.
Fees and mileage. CRS § 13-22-217(6) provides that all fees for attending a deposition or a discovery proceeding as a witness apply in an arbitration proceeding as if the controversy were the subject of a civil action in this state. Colorado law does not provide for witness fees. Mileage to be tendered to the subpoenaed nonparty is governed by CRS § 13-33-103(1), which provides for mileage in the same amount as for state officers and employees under CRS § 24-9-104.
Timing of service. CRCP 45(b)(1)(B) states that subpoenas for depositions must be served not later than seven days prior to the deposition.
Proof of service. Under CRS § 13-90-115 and CRCP 4, proof of service is made by affidavit of the person making the service.
Place of Service and Territorial-
Jurisdictional Limits on a CRUAA Subpoena
The CRUAA does not define the territorial limits in which a subpoena may be served. CRS § 13-22-217(1) states, however, that service of a subpoena under section 217 shall be "in the manner for service of subpoenas in a civil action." Subsection 217(6) provides that the laws compelling a person under a subpoena to testify in a deposition or discovery proceeding as a witness apply to an arbitration proceeding in the same manner as if the controversy were the subject of a civil action. CRCP 45(b)(2) provides that service of subpoenas may be made anywhere within the state of Colorado.16
Place of Appearance by Nonparty for
Deposition or Production of Documents
In addition to the CRCP 45(b)(2) requirement that service be made in Colorado, CRCP 45(e) provides that Colorado residents may be required by subpoena to attend a deposition only in the county where the witness resides or is employed or transacts business in person, or at another convenient place determined by the court. Nonresidents of Colorado may be required by subpoena to attend only within 40 miles of the place of service of the subpoena in Colorado or in the county where the nonresident resides, is employed, or transacts business in person, or at such other convenient place as fixed by the court.
The CRUAA does not state whether an arbitrator may determine an "other convenient place."
Waiver of Statutory Subpoena Powers
Under CRS § 13-22-217(3), the arbitrator may permit only discovery determined to be appropriate in the circumstances. However, section 204 allows the parties, by agreement, to reduce, eliminate, or limit discovery.
CRS § 13-22-217(5) allows an arbitrator to "issue a protective order to prevent the disclosure of privileged information, confidential information, trade secrets, and other information protected from disclosure to the extent a court could if the controversy were the subject of a civil action."
Subsection (5) provides that a disclosure may be protected "to the extent a court could if the controversy were the subject of a civil action," apparently incorporating the CRCP 45(c)–(d) protective order provisions. (Section 217(6) uses the same language as subsection (5) with respect to provisions of law that compel a person to testify under subpoena.)
While a subpoenaed nonparty can apply to the arbitrator for a protective order, there is no provision for appeal of the arbitrator’s grant or denial of a protective order, although a court would likely entertain an appeal by a nonparty. The nonparty probably can also apply directly to a court for a protective order, but should be mindful that when a party seeks to enforce a subpoena in court, the subpoenaed party may object on the same grounds as for a protective order.17
Alternatives to Section 217 Discovery to Nonparties
Attorneys should also consider several alternatives to CRS § 13-22-217 discovery.
Colorado Rules of Civil Procedure. CRCP 81 provides that the rules of civil procedure do not govern procedure and practice in any special statutory proceeding insofar as they are inconsistent or in conflict with the procedure and practice provided by the applicable rule. This may leave room for application of the rules of civil procedure where there is no conflict or inconsistency with the CRUAA. There have been no published decisions construing Rule 81 as a means of discovery to nonparties in arbitration.
Judicial subpoenas in aid of arbitration. As discussed below, Colorado trial courts should have the same power as federal district courts to issue subpoenas in aid of arbitration.
Subpoenas to Perpetuate Testimony
CRS § 13-22-217(2) provides for the use of a witness deposition as evidence at a hearing, including that of a witness who cannot be subpoenaed for the hearing or who is unable to attend the hearing. This subsection, when read with section 217 as a whole, makes it clear that the arbitrator can issue subpoenas to nonparties for testimonial depositions.
Discovery to Nonparties Outside of Colorado
There are procedures for obtaining discovery from nonparties who are located outside of Colorado when arbitration is pending in Colorado or another state.
Discovery in another state in a Colorado arbitration. As discussed below, under CRCP 45 any subpoena in a Colorado arbitration may be served only within the territorial boundaries of the state. Often, however, a party may need discovery from a person located in another state who is not a resident or citizen of Colorado. If the arbitrator authorizes discovery to a nonresident nonparty not found in Colorado, the party must follow the laws of the other state. For example, if the other state has adopted the Revised Uniform Arbitration Act, CRS § 13-22-217(7) provides the procedure.
Discovery in Colorado in an out-of-state arbitration. If a party in an out-of-state arbitration wants to take a discovery deposition of a person in Colorado, that party could serve the subpoena through a Colorado court under CRS § 13-22-217(7).
The Uniform Interstate Depositions and Discovery Act, CRS §§ 13-90.5-101 et seq., does not help a party in an out-of-state arbitration who wishes to depose a nonparty in Colorado. The official comment to section 103 states that it excludes its use in arbitration.
Discovery Before the Arbitrator
Discovery may be accomplished by the arbitrator convening the arbitration hearing, subpoenaing the nonparty from whom discovery is sought, or taking the testimony of the nonparty and then recessing the hearing for a period to enable the subpoenaing party to incorporate such "discovery" into its case preparation for when the hearing reconvenes.18
Discovery to Nonparties under the FAA
Under 9 USC § 7, "Witnesses Before Arbitrators; Fees; Compelling Attendance," arbitrators may summon in writing "any person to attend before them" or as a witness and to bring with them records, documents, or other papers that may be material as evidence in the case. This statute may permit subpoenas of nonparties and their documents to the arbitration hearing. The legal issue is whether the phrase "any person to attend before them" permits the subpoena of nonparties for prehearing discovery depositions and production of documents.
Case Law under the FAA
Court decisions that have considered whether the FAA authorizes discovery depositions and subpoenas are in conflict. Positions taken by courts as to the power of arbitrators to issue discovery subpoenas to nonparties include:
The arbitrator has authority under section 7 to issue subpoenas for discovery depositions and production of documents.19
The arbitrator has authority under section 7 to issue discovery subpoenas to nonparties for documents, but not for testimony.20
The arbitrator does not have authority under section 7 to issue discovery subpoenas to nonparties for either documents or testimony.21 (On occasion, a court issues a subpoena to nonparties to appear before the judge to provide discovery testimony.22)
Documents may be subpoenaed by an arbitrator to be produced at a "hearing" held by the arbitrator solely for the purposes of pre-arbitration hearing document production.23 There seems no reason why this same procedure could not be followed with respect to discovery depositions of nonparties.
An arbitrator may "compel pre-arbitration discovery upon a showing of special need or hardship."24
The majority of courts that have considered the issue have held that the FAA does not authorize subpoenas to third parties for discovery, at least for depositions. The Supreme Court, Tenth Circuit Court of Appeals, District of Colorado, and other Colorado courts have not directly ruled on the issue. The following discussion assumes that these Colorado courts would allow discovery subpoenas to nonparties.
Procedure for Issuance of a
Section 7 provides that the arbitrator or arbitrators, or a majority of them, may issue a summons directed to a person in the name of the arbitrator or arbitrators, or a majority of them, and directs that the summons be signed by the arbitrators or a majority of them.
The party seeking the subpoena prepares the subpoena and submits it to the arbitrator, with a copy to other counsel, and requests issuance by the arbitrator by signing the same. The arbitrator then returns the issued subpoena to the requesting party, with a copy to other counsel.
Form and Content of a
Section 7 does not define the form or the contents of the subpoena, other than it must summon the person to attend before the arbitrators as a witness and in a proper case to bring documents that may be deemed material as evidence in the case. While FRCP 45(a)(1) as to form and content is not incorporated into section 7, it provides guidance, and the standard subpoena forms can be modified to apply to arbitration.
Service of the Subpoena Upon Nonparties and Fees
Section 7 provides that subpoenas must be served in the same manner as subpoenas to appear and testify before the court. Hence, FRCP 45(b) governs service.
Section 7 further provides that witness fees must be the same as for subpoenas issued by the U.S. courts, which may include both state and federal courts. As to federal courts, the fees are per diem and mileage and are set forth in 28 USC § 1821.
Place of Service and Territorial-Jurisdictional
Limits of an FAA Subpoena to Nonparties
If the arbitrator has the power under section 7 to issue a discovery subpoena for documents, testimony, or both, questions arise as to the jurisdictional limits: where the subpoena may be served, and the locale for production or testimony. Section 7 provides that the subpoena must be "served in the same manner as subpoenas to appear and testify before the court."
Because discovery subpoenas (if allowed) and hearing subpoenas under the FAA rely on the same statutory language, it can generally be assumed that the territorial limits for each are the same. However, court decisions conflict as to what those territorial limits are, holding that:
Section 7 provides that FRCP 45 governs service and enforcement of arbitration subpoenas. The subpoena issued by an arbitrator under section 7 is limited to the territorial scope of FRCP 45(b)(2), which can be served only in the federal judicial district in which the arbitrator is sitting, or within 100 miles thereof. Similarly, the subpoena can require that documents be produced or testimony be given only in that same territory.25
The subpoena issued by an arbitrator under section 7 is unlimited territorially; it can be served throughout the United States. Similarly, the subpoena can require documents to be produced or testimony to be given at any location within the United States.26 This approach recognizes that section 7 does not state a territorial limit and, therefore, there are none.
In non-arbitration matters, Congress has expressly provided for nationwide service of judicial subpoenas.27
Neither the District of Colorado nor the Tenth Circuit has decided these issues.
Deposition and Production of Documents
As discussed above, section 7 does not define the place of appearance pursuant to a subpoena, either for discovery or for the hearing.
Waiver of Statutory Subpoena Powers and Discovery
There is no statutory provision for waiver of discovery in FAA arbitrations. However, given that arbitration is a consensual process, it is likely that the parties’ agreement as to limitations on discovery will be enforced, absent exceptional circumstances.28
Section 7 does not provide for protective orders. However, because issuance is under FRCP 45, motions for protective orders under FRCP 45(c) should be applicable.29 Because the arbitrator issues the subpoena, it follows that the arbitrator can issue a protective order with respect to that subpoena. A court can also issue a protective order, or at least hear an appeal from the arbitrator’s order. However, in the few reported cases on this issue, courts have held that the arbitrator, not the court, determines the materiality of the sought evidence.30
Alternatives to Section 7 for Discovery to Nonparties
In a jurisdiction that interprets section 7 of the FAA as not authorizing compulsory (subpoenaed) discovery to nonparties, there may be alternative procedures.
Discovery before the arbitrator. The basis for denying that an arbitrator may issue a discovery subpoena (for testimony, documents, or testimony and documents) is that it calls for testimony, production, or both outside of the arbitration hearing. Under section 7, arbitrators may summon a person before them as a witness and to bring documents.
While the statute requires the witness to attend before the arbitrator, there is no requirement that it be at the arbitration hearing. The arbitrator perhaps can convene a discovery hearing for deposition testimony and production of documents.31
Based on Stolt-Nielsen SA v. Celanese, an arbitrator’s issuance of a subpoena for a person to attend a discovery deposition and produce documents before her would not fulfill section 7, because that section calls for attendance at a part of the arbitration hearing on the merits.32
Discovery under the Federal Rules of Civil Procedure. FRCP 81, "Applicability of the Rules in General . . .," provides, "(a) Applicability to Particular Proceedings. . . . (6) Other Proceedings. These rules, to the extent applicable, govern proceedings under the following laws, except as these laws provide other procedures: . . . (B) 9 U.S.C. Relating to arbitration."
Few cases have discussed the extent to which the Federal Rules of Civil Procedure, including the discovery provisions, are "applicable" to arbitration.33
Discovery under 28 USC § 651. In 1998, Congress passed the Alternative Dispute Resolution Act of 1998 (ADRA), 28 USC §§ 651 et seq.34 Briefly, the ADRA provides that each U.S. district court must authorize the use of alternative dispute resolution processes by local rule. (The District of Colorado has not promulgated such rules.) Referral of a dispute to arbitration is only by consent of the parties. Section 656, governing subpoenas, provides that FRCP 45 "applies to subpoenas for the attendance of witnesses and the production of documentary evidence at an arbitration hearing under this chapter." The language is strikingly similar to that of 9 USC § 7.
Section 651(e) further provides that 28 USC §§ 651 et seq. does not affect USC Title 9. While it appears that the chapter does not provide for discovery to nonparties, parties could file suit and request referral to arbitration under section 651.
Judicial subpoenas in aid of discovery in arbitration. Some courts have held that courts may authorize issuance of discovery subpoenas for discovery depositions and production of documents for arbitration upon showing a "special need or hardship."35 The showing required may be that the information sought is not otherwise available.36
In some instances, courts have used their subpoena power under FRCP 45 to permit a party to undertake discovery to nonparties in arbitration.37 Under this procedure, there must be a pending judicial action concerning the arbitration, and the court proceeds under Rule 45 as in every other judicial action. Typically, this situation arises where the arbitration is in court on a motion to compel or stay arbitration. The court allows discovery to proceed under its auspices pending determination of whether the controversy must be arbitrated. The subpoenas are issued by the court and not in the arbitration by the arbitrator.38
An analogous situation occurs when a plaintiff commences suit in court and a defendant moves to dismiss or stay because the contract requires arbitration. Whether discovery may proceed in the arbitration under the federal rules pending determination of the motion is determined according to the factors outlined in String Cheese Incident, LLC v. Stylus, Inc.39 Similar considerations may apply to discovery during an appeal of a denial of a motion to compel arbitration.
In Block 175 Corp. v. Fairmont Hotel Management Co.,40 the court granted a motion to compel arbitration and stay the civil action. Nevertheless, the court held that "[d]iscovery by written or oral deposition" could continue in the court.41
The FAA does not have a provision for perpetuating testimony by deposition, but the power to subpoena to perpetuate testimony for hearing should be within the power to subpoena to give testimony at the hearing. However, the subpoena may have to be issued by a court under FRCP 27.42
Discovery to Nonparties in Other Districts
Assuming that an arbitrator has authority to subpoena nonparties under section 7, enforcement is by the district court in the district in which the arbitrator is sitting. Questions arising under this section include whether an arbitrator may issue a subpoena for service outside the district or for appearance outside the district. Many of the problems with out-of-state subpoenas under the federal system, such as subject matter jurisdiction, are discussed in Amgen, Inc. v. Kidney Center of Delaware County, Ltd.43
When FAA and CRUAA Apply
In general, the FAA applies to arbitration disputes involving interstate commerce.44 When applicable, the FAA preempts state law. State procedural law generally is not preempted by federal law. However, the parties may agree that the FAA applies, even if it does not by its terms. If the FAA does not apply, state law applies. Similarly, the parties may agree that state law such as the CRUAA applies even if by the terms of the FAA, the FAA applies. On the other hand, the CRUAA is applicable (subject generally to choice of law rules and the procedural-substantive law distinction) unless preempted by the FAA. Colorado state courts have jurisdiction to enforce subpoenas issued pursuant to the CRUAA and should have jurisdiction if they are issued under the FAA. The following situations illustrate the applicability of these laws.
FAA in Colorado State Court
A state court generally can and must enforce the FAA, when applicable. This power should include enforcement of FAA subpoenas. When the controversy involves interstate commerce under FAA § 2, or the FAA applies by agreement of the parties, a party should be able to enforce an FAA subpoena in state court. Under the procedural versus substantive distinction, a Colorado state court could apply the state procedural statute, section 217, in a proceeding to enforce an FAA subpoena or other discovery order.
CRUAA in Federal Court
If the CRUAA applies by its terms or agreement of the parties, a party may seek to enforce a CRUAA subpoena in federal court, with jurisdiction being under 28 USC § 1331 (federal question) or 1332 (diversity).
Under the procedural versus substantive distinction discussed above, the federal court would apply the FAA, but could apply the CRUAA, either by determining CRUAA § 217 is substantive, or by recognizing that the parties agreed to application of the CRUAA and should not be deprived of its benefits by reason of the enforcement action having been brought in or removed to federal court. Some federal courts have interpreted FAA § 7 to be generally consistent with the Revised Uniform Arbitration Act.45
Enforcement of Discovery Orders
and Subpoenas to Nonparties
Both the FAA and the CRUAA have enforcement provisions for discovery orders and subpoenas.
Enforcement of Subpoenas Issued Under FAA § 7
Title 9, USC § 7 provides that if a person is summoned to testify and refuses or neglects to obey the summons, the person can be compelled to attend "upon petition to the United States district court for the district in which such arbitrators, or a majority of them, are sitting," or punished for contempt. Enforcement of a subpoena under the FAA is in the "manner provided by law for securing the attendance of witnesses or their punishment for neglect or refusal to attend in the courts of the United States." Essentially, this procedure incorporates the FRCP 45(e) contempt power. However, it can be argued that "in the courts of the United States" refers to both state and federal courts "of the United States." In such case, CRCP 45 may apply.
Enforcement of Subpoenas under CRUAA § 217
CRS § 13-22-217(1) provides that a subpoena issued under this section on "motion to the court by a party to the arbitration proceeding or by the arbitrator" may be enforced in the same manner as enforcement of subpoenas in a civil action. Therefore, enforcement of subpoenas under the CRUAA is the same as under CRCP 45 for enforcement of judicial subpoenas. The state courts have subject matter jurisdiction, but as discussed below, venue may be an issue.
Enforcement of Subpoenas Issued
in Out-of-State Arbitrations
A party in an out-of-state arbitration could serve the subpoena through a Colorado court under CRS § 13-22-217(7), which allows the court to determine conditions to make the arbitration proceeding, "fair, expeditious, and cost effective."
Selecting a State or Federal Court
for Enforcement of the Subpoena
An attorney seeking enforcement of a subpoena must consider jurisdiction and venue.
Jurisdiction and Venue of Federal
District Courts to Enforce Subpoenas
The fact that the FAA governs an arbitration does not mean proceedings with respect to the FAA can be brought in federal court.
Subject matter jurisdiction. The FAA does not create jurisdiction in federal courts; independent jurisdiction, such as a federal question or diversity of citizenship with $75,000 in controversy, must be established.46 Whether these independent jurisdictional requirements apply to motions to enforce subpoenas in the federal court under the FAA is unresolved. Some courts have held that a motion under section 7 requires a jurisdictional basis independent of the FAA.47 If a court ruled on a motion to compel arbitration, having diversity of citizenship jurisdiction, that court’s jurisdiction continues to enforce subpoenas under section 7.48 Some courts have expressly or implicitly found that the FAA provides federal court jurisdiction with respect to enforcement of subpoenas issued under the FAA, without any independent basis.49 The cases are not definitive as to whether the amount in controversy is the amount at issue in the arbitration or whether the subpoena has to "involve" $75,000.
Venue. Venue for proceedings to enforce subpoenas issued under the FAA is defined in section 7 as where "the United States district court for the district in which such arbitrators, or a majority of them, are sitting . . . ." Given that the court must have in personam jurisdiction through service upon the nonparty, this venue provision is a further potential restriction on where the nonparty may or may not be served.
Where the arbitrators are "sitting" may be ambiguous. The place the arbitration hearing is to be physically held is determined by the arbitration agreement, by agreement of the parties, or by order of the arbitrator and defines where the arbitrators are "sitting." However, when a hearing is held at multiple locations, the issue becomes complicated. As discussed below, this raises issues of federal court jurisdiction and whether a state court may enforce a subpoena issued under the FAA.
In personam jurisdiction. The court must have personal jurisdiction over the subpoenaed person or entity. Rule 45 defines the necessary service and territorial limits of service, as discussed above.50 The territorial boundaries in which a subpoena may be served may define whether the court may exercise in personam jurisdiction over the person served.51
If the federal court does not have subject matter jurisdiction, the issue becomes whether a state court may enforce a subpoena issued under the FAA, as discussed above.
Jurisdiction and Venue of Colorado
State Courts to Enforce Subpoenas
Enforcement of subpoenas in Colorado state courts differs depending on whether the CRUAA or FAA applies.
CRUAA enforcement. Colorado state district courts are courts of general jurisdiction and thus have jurisdiction over all issues under the CRUAA. If the proceeding is brought in Colorado state courts, venue is governed by CRCP 98.52
FAA enforcement. The U.S. Supreme Court has recognized generally that the FAA may be enforced by state courts and has applied that principle to specific provisions of the FAA.53 However, there is no decision as to whether this principle extends to section 7.
An Indiana court of appeals decision is instructive. In Beck’s Superior Hybrids, Inc. v. Monsanto Technology LLC,54 a party sought to enforce a subpoena duces tecum issued under the FAA in the Indiana state courts. The state court acknowledged that the federal court had no jurisdiction to enforce the subpoena because there was no federal question or diversity of citizenship. The Indiana intermediate court of appeals dismissed the action, essentially holding that section 7 enforcement proceedings may be brought only in federal district court. The court of appeals recognized that section 7 (and the FAA generally) did not create federal court jurisdiction and there was no other basis for federal jurisdiction. However, the lack of federal court enforcement jurisdiction did not allow the state court to exercise jurisdiction. The claimant was simply left without a forum in which to enforce its FAA subpoena.
In all other areas under the FAA, the U.S. Supreme Court has ruled that the FAA may be applied and enforced by the state courts. Should the issue ever reach the Supreme Court, it is likely that enforcement proceedings under section 7 would be permitted to be brought in state courts, for example, by applying state court procedural subpoena law, or that section 7 would be held to create independent federal jurisdiction for enforcement of subpoenas. Knowing the federal question and diversity jurisdiction requirement, it is not likely that Congress created a right for enforcement of subpoenas without a forum for enforcement.
Objections to the Subpoena
The subpoenaed nonparty may object to the subpoena, for example, on grounds that the documents requested are privileged, the nonparty was served outside the jurisdictional limits of Rule 45, the subpoena imposes too great a burden, or the subpoenaing party should bear the cost of researching the data files for the requested documents.
CRUAA proceedings. Section 217 incorporates state statutes and rules. Subsection (5) specifically provides that an arbitrator may issue a protective order to prevent disclosure of matters, such as privileged or confidential information and trade secrets, to the extent that a court could. This necessarily implies that after being served, a nonparty can apply to the arbitrator for a protective order. If a petition is filed with the arbitrator, it is unclear whether a party or nonparty can appeal the arbitrator’s decision to a court and, if so, what the standard of review would be under those circumstances. Alternatively, the served nonparty could wait for the subpoenaing party to bring a judicial enforcement action and assert its objections there.
There may also be a right to petition a court instead of the arbitrator.
FAA proceedings. The FAA does not provide for objections to subpoenas but instead provides for enforcement by the court if the subpoenaed person fails to comply with the subpoena issued by the arbitrator. Thus, at the time the subpoenaing party seeks to enforce the subpoena through the courts, objections may be asserted.
However, it is likely that the subpoenaed nonparty could submit its objections to the arbitrator who issued the subpoena, as discussed with respect to the CRUAA, rather than waiting for court proceedings. If the arbitrator has statutory authority to issue subpoenas, it follows that the arbitrator also has the power to quash or otherwise limit the subpoena. It appears that this procedure has been frequently followed.55
As discussed with respect to the CRUAA, questions about FAA enforcement remain, for example, about the effect of an arbitrator’s decision on objections to the subpoena, and what happens if an arbitrator denies objections and refuses to quash or limit the subpoena. It is unclear whether the subpoenaed nonparty may simply ignore the decision and ignore the subpoena unless and until the subpoenaing party moves to enforce that subpoena in the courts, whether potential judicial review is de novo, and what weight would be given to the arbitrator’s ruling on the objections. Authority on such questions may be sought in the thousands of mostly unreported court decisions on arbitrations each year.
Arbitrator Remedies for Noncompliance
with Subpoenas under the CRUAA
CRS § 13-22-217(4) provides that an arbitrator may take action against a "non-complying party" for failure to obey a subpoena "to the extent a court could take such action if the controversy were the subject of a civil action; except that the arbitrator shall not have the power of contempt." There is no case law or statute defining the remedies of the arbitrator, but subsection (1) states that "[a] subpoena issued under this section [217] . . . upon motion to the court . . . [may be] enforced in the manner for enforcement of subpoenas in a civil action."
The CRUAA provides for discovery to nonparties generally at the discretion of the arbitrator. Subpoenas to nonparties may be enforced in Colorado state courts and likely under the CRUAA in the federal courts.
On the other hand, courts are split as to whether section 7 of the FAA authorizes discovery subpoenas to nonparties. The District of Colorado, Tenth Circuit, and Colorado Supreme Court have not ruled on the issue. If such discovery subpoenas are authorized, they should be enforceable under section 7 in any federal court having jurisdiction, and in the state courts. The FAA may not preempt CRS § 13-22-217, so it may be used in all arbitrations to provide for and enforce discovery subpoenas to nonparties. Limitations on territorial service and locale of discovery are defined under state law, but issues remain under federal law.
For practitioners seeking discovery from nonparties in a case governed by the FAA, a solution may be an agreement of the parties that all or part of the CRUAA shall apply, notwithstanding that the FAA applies according to its terms. This agreement can be a part of the agreement to arbitrate, or an agreement after the arbitration commences (probably only with the consent of the arbitrator). If so, any subpoena would then be issued under the CRUAA. If an enforcement proceeding were brought in state court, section 217 should apply.
Even if the FAA applies, and a motion to enforce the subpoena is filed in state court, the state court may apply section 217. Although the FAA preempts state law, in such circumstances only conflicting substantive law may be preempted, not the state court’s procedural, non-conflicting law. It is unlikely that section 7 was intended to give exclusive enforcement of federal subpoenas to the federal courts, when in some cases the federal court lacks jurisdiction.
The CRUAA provides a defined procedure for discovery subpoenas to nonparties. Questions remain about procedures under the FAA.
1. See Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 406 (3d Cir. 2004).
2. Cf. Revised Uniform Arbitration Act, § 17, Cmt. 8 (2000), which discusses the intent of section 17 to "follow the present approach of courts to safeguard the rights of third parties while insuring that there is sufficient disclosure of information to provide a full and fair hearing."
3. Cf. id. ("In determining whether to enforce an arbitral subpoena, the courts have been very solicitous of the nonparty status of a person challenging such an order.").
4. Rules of procedure are promulgated by the Supreme Court pursuant to CRS §§ 13-2-108 and -110. Section 108 states that such rules "shall neither abridge, enlarge, nor modify the substantive rights of any litigants." See also People ex rel. Mijares v. Kniss, 357 P.2d 352, 355 (Colo. 1960) ("What is procedural and what is substantive is frequently a question of great difficulty."). Thus, for example, CRCP 45 is an implementation of statutory provisions, and is part of the "law." (This article proceeds on the basis that rules of procedure are "law.") The term "law" in subsection 6 includes rules of procedure. See Revised Uniform Arbitration Act, § 17, Cmt. 7 (2000). See generally Black’s Law Dictionary "Procedural Law" under "Law."
5. CRS § 13-90-101.
6. CRS §§ 13-90-106 and -107.
7. CRS § 13-90-104.
8. CRS § 13-90-110.
9. CRS § 13-90-112.
10. CRS § 13-90-115.
11. CRCP 45(a)(1).
12. CRCP 45(b).
13. CRCP 45(c).
14. CRCP 45(d).
15. CRCP 45(e).
16. This provision reflects the Colorado Supreme Court decision in Colorado Mills, LLC v. SunOpta Grains and Foods Inc., 269 P.3d 731 (Colo. 2012), holding that Colorado courts as a matter of state sovereignty have no authority to enforce civil subpoenas against out-of-state nonparties served outside the state. (The Court did not consider service of nonparties who are nonresidents but served within the state, and service of residents outside the state. The Court rejected the suggestion that the Colorado long-arm statute permits enforcement of a civil subpoena against an out-of-state, nonresident, nonparty.)
17. See Revised Uniform Arbitration Act, § 17, Cmt. 8 (2000).
18. See Hay Group, Inc., 360 F.3d at 413 (concurring opinion).
19. 45 A.L.R. Fed. 2d 51, § 15.
20. 45 A.L.R. Fed. 2d 51, § 13.
21. 45 A.L.R. Fed. 2d 51, §§ 14 and 16.
22. See generally Security Life Ins. Co. of America v. Duncanson & Holt, Inc., 228 F.3d 865, 869, 872 n. 2 (8th Cir. 2000); contra Thompson v. Zavin, 607 F.Supp. 780 (C.D.Cal. 1984). Hay Group, Inc., 360 F.3d at 406, 409 noted that prehearing document subpoenas of nonparties did not exist in federal court litigation until 1991, long after the adoption of the FAA in 1925. See note 38.
23. Hay Group, Inc., 360 F.3d 404 (concurring opinion); Stolt-Nielsen SA v. Celanese AG, 430 F.3d 567 (2d Cir. 2005); Guyden v. Aetna, Inc., 2006 WL 2772695 (D.Conn.) (hearing may be before single arbitrator); Seaton Ins. Co. v. Cavell USA, No. 3:07-cv-356 (D.Conn. Mar. 21, 2007).
24. COMSAT Corp. v. Nat’l Sci. Found., 190 F.3d 269, 276 (4th Cir. 1999).
25. 45 A.L.R. Fed.2d 51, § 8; Dynegy Midstream Services, LP v. Trammochem, 451 F.3d 89, 95 (2d Cir. 2006).
26. 45 A.L.R. Fed. 2d 51, § 9; Festus & Helen Stacy Found., Inc. v. Merrill Lynch, Pierce Fenner, & Smith, Inc., 432 F.Supp.2d 1375 (N.D.Ga. 2006); Security Life Ins. Co., 228 F.3d 865.
27. E.g. 15 USC 57b-1.
28. See Revised Uniform Arbitration Act, § 17, Cmt. 1 (2000).
29. Cf. Festus & Helen Stacy Found., Inc., 432 F.Supp.2d 1375.
30. Id. at 1380.
31. See Hay Group Inc. (concurring opinion).
32. Stolt-Nielson SA, 430 F.3d at 577.
33. See 45 A.L.R. Fed. 2d 51, §§ 21-22.
34. See Advanced Network Installations, Inc. v. Cameron, 2009 WL 1082203 (W.D.Pa), as to implementation by the Western District of Pennsylvania.
35. COMSAT Corp., 190 F.3d at 276.
37. See notes 23 and 38.
38. Oriental Commercial & Shipping Co. v. Rosseel, N.V., 125 F.R.D. 398 (S.D.N.Y. 1989); Cotter v. Shearson Lehman Hutton, Inc., 126 F.R.D. 19 (S.D.N.Y. 1989). See generally Block 175 Corp. v. Fairmont Hotel Mgmt. Co., 648 F.Supp. 450 (D.Colo. 1986), 45 A.L.R. Fed. 2d 51, §§ 21 and 22.
39. String Cheese Incident, LLC v. Stylus, Inc., 2006 WL 894955 (D.Colo.), discussed in Stone v. Vail Resorts Dev. Mgmt., 2010 WL 148278 (D.Colo.).
40. Block 175 Corp. v. Fairmont Hotel Mgmt. Co., 648 F.Supp. 450.
41. Id. at 454. See generally, Anno., Discovery in Aid of Arbitration Proceedings, 98 A.L.R. 1247; Benson, Colorado Arbitration Law and Practice, § 13.5 (Second ed., CLE in Colo., Inc. Supp. 2013). 42. See Application of Deiulemar Compagnia Di Navigazione S.p.A v. M/V Allegra, 198 F.3d 473 (4th Cir. 1999) (also discusses federal court jurisdiction to issue such a subpoena).
43. Amgen, Inc. v. Kidney Center of Delaware County, Ltd., 95 F.3d 562 (7th Cir. 1996).
44. Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995).
45. See Benson, "Application of the Federal Arbitration Act in State Court Proceedings," 43 The Colorado Lawyer 33 (Dec. 2014).
46. Moses H. Cone Mem’l Hospital v. Mercury Const. Corp., 460 U.S. 1, 25 n. 32 (1983).
48. Western Emp. Ins. Co. v. Merit Ins. Co., 492 F.Supp. 53 (N.D.Ill. 1979).
49. Odfjell, ASA v. Celanese AG Ltd., 328 F.Supp.2d 505 (S.D.N.Y. 2004); Gresham v. Norris, 304 F.Supp.2d 795 (E.D.Va. 2004).
50. Moses H. Cone Mem’l Hosp., 460 U.S. at 25 n. 32; Stolt -Nielson S.A., 430 F.3d at 572; Southland Corp. v. Keating, 465 U.S. 1 (1984). See Merrill Lynch, Pierce, Fenner & Smith Inc. v. Melamed, 405 So.2d 790 (Fla.App. 1981) (whether in such a situation a Colorado state court would apply CRUAA section 217 or FAA section 7 to enforce a subpoena issued under the FAA is uncertain). See Benson, supra note 45.
51. Compare long-arm statutes defining the scope of personal jurisdiction based on activities within the state rather than locale of service. However, these statutes appear to be limited to service of summons and complaint, and not applicable to service of subpoenas. Compare FRCP and CRCP 4 with FRCP and CRCP 45.
52. See Benson, supra note 45.
53. Southland Corp., 465 U.S. 1. See Merrill Lynch, Pierce, Fenner & Smith, Inc., 405 So.2d 790.
54. Back’s Superior Hybrids, Inc. v. Monsanto Tech, LLC, 940 N.E. 2d 352 (Ind.App. 2011).
55. COMSAT Corp., 190 F.3d at 269; Griffith v. Univ. Hosp. LLC, 249 F.3d 658 (7th Cir. 2001); Fowler v. Ritz-Carlton Hotel, 579 Fed.Appx. 693 (11th Cir. 2014).