Thelast instalment of the Businessperson’s Federal Arbitration Act FAQ Guide discussed whether under Section 7 of the Federal Arbitration Act arbitrators can issue an enforceable subpoena that purports to allow a witness to appear at a hearing via video conference or teleconference. It explained that the answer, at least according to the U.S. Court of Appeals for the Eleventh Circuit in Managed Care Advisory Grp. v. CIGNA Healthcare, 939 F.3d 1145, 1158-61 (11th Cir. 2019) (“MCA Group”), is “no.”
In light of COVID-19 restrictions, in-person hearings are unlawful in certain jurisdictions, or at least contrary to government-issued medical guidance. As a practical matter that means the rule espoused by MCA Group would render unenforceable under Section 7 any arbitral subpoena seeking documents or testimony from a third party. Parties and non-parties may agree to comply with subpoenas authorizing video conference appearances, but those subpoenas cannot, under the reasoning of MCA Group, be enforced by courts under Federal Arbitration Act Section 7.
This instalment addresses the question whether other courts are likely to follow MCA Group, particularly in light of the COVID-19 pandemic.
Will Courts follow the 11th CircuitMCA Group Decision in Light of the COVID-19 Crisis?
This segment of the Businessperson’s Federal Arbitration Act FAQ Guide concerns the enforcement of arbitral subpoenas under Section 7 of the FAA.
Arbitrators can require the parties before them to produce documents, appear for depositions, and testify at hearings. That power is not self-executing but is derived from Federal Arbitration Act-authorized judicial enforcement of arbitration agreements and awards. If, for example, parties do not comply, the arbitrators may, absent contract language to the contrary, impose sanctions, including attorney fee awards or adverse inferences on merits issues.
But resolving disputes often requires testimony and documentary evidence from persons who are not parties to the dispute. Courts have subpoena power and can compel third-party witnesses within their jurisdiction to testify, produce documents, or both. They can enforce that power through contempt sanctions.
Arbitrators have no such inherent power over third parties and FAA-authorized judicial power to confirm (i.e., reduce to judgment) arbitration awards does nothing to impose legally enforceable obligations on persons not lawfully parties to, or otherwise bound by, those arbitration awards.
The last instalment of this post discussed how arbitrator selection and arbitrator appointment works in practice. This segment addresses the FAQ “Does Section 5 of the Federal Arbitration Act Authorize a Court to Appoint a Replacement Arbitrator if an Arbitrator on a Three-Person Panel Dies Prior to the Panel Making an Award?”
Does Section 5 of the Federal Arbitration Act Authorize a Court to Appoint a Replacement Arbitrator if an Arbitrator on a Three-Person Panel Dies Prior to the Panel Making an Award?
Under Second Circuit authority courts are not permitted to appoint a replacement arbitrator on a three-person panel if an arbitrator dies prior to the panel making a final award. The arbitration must start anew before a new panel.
If an arbitrator dies prior to the panel making a partial final award, then the original award stands, but the parties are required to constitute a new panel to arbitrate the issues that the partial final award did not resolve.
It is unlikely that Courts in the Seventh and Eighth Circuit will adopt this rule, and whether any others will adopt remains to be seen.
The last instalment of this post discussed Section 5, the circumstances under which Courts can appoint arbitrators under Section 5, what papers are filed on a Section 5 application, and what the application should show.
This segment addresses the FAQ “How does Section 5 Work in Practice?” Next we’ll address the FAQ “Does Section 5 of the Federal Arbitration Act Authorize a Court to Appoint a Replacement Arbitrator if an Arbitrator on a Three-Person Panel Dies Prior to the Panel Making an Award?”
The Arbitrator Selection Process
Once arbitration is demanded, the arbitrator selection process begins.
Arbitration agreements address arbitrator selection in different ways. Sometimes parties simply agree that the process set forth in arbitrator provider rules applies. Sometimes parties specify their own method of selection, and sometimes by their agreement they modify an otherwise agreed provider-rule-governed selection procedure.
The qualifications of the arbitrators, the number of arbitrators to serve, and the procedures (if any) to apply if the parties reach an impasse, are key components of the selection process.
For illustration purposes only let’s consider how, for example, arbitrator selection may work under what we sometimes refer to as the traditional, industry tripartite arbitrator selection model. While that model may vary according to the parties’ agreement, typically it requires the party demanding arbitration to appoint a party appointed arbitrator, and for the other party to appoint its own party appointed arbitrator within X days.
The two appointed arbitrators then select an umpire. Sometimes the parties agree that the appointed arbitrators select three umpire candidates each, strike two from the other’s list, and resolve the tie by coin flip, Dow Jones pick (last digit odd or even), or a like tie-breaking procedure.
If the other party fails to appoint timely its arbitrator, then the party demanding arbitration gets to appoint that arbitrator, and the arbitration may proceed even if the other party refuses to participate.
In administered arbitration, single arbitrators are often appointed by the arbitration provider generating a list of an odd number of arbitrator candidates and allowing the parties to strike an even number of candidates, with the remaining candidate being appointed as an umpire. Sometimes provision is made for the arbitration provider to submit an additional list if one or both parties request it.
These are simply examples of how arbitrator selection may proceed. If you’ve agreed to administered arbitration, be sure to check provider rules, for they typically specify the number of arbitrators to serve, their qualifications, how they are to be selected, in situations where the parties do not otherwise agree.
This segment of the Businessperson’s Federal Arbitration Act FAQ Guide discusses the provisions of Section 4 relating to the jury trial of arbitrability issues.
The last instalment discussed the following FAQs related to Section 4 applications to compel arbitration:
How does a Federal Court “Hear” an Application to Compel Arbitration?
In what Federal Court may an Application to Compel Arbitration be Filed?
This segment addresses the FAQ “What Happens when a Court Determines there is a Genuine Issue of Material Fact Concerning the Making of the Arbitration Agreement or the Failure, Neglect, or Refusal to Perform that Agreement?”
What Happens when a Court Determines there is a Genuine Issue of Material Fact Concerning the Making of the Arbitration Agreement or the Failure, Neglect, or Refusal to Perform that Agreement?
In the last postwe explained that district courts adjudicate applications to compel by applying a standard akin to that which applies to summary judgment motions. Courts therefore ascertain whether there are any genuine issues of material fact in dispute. If the material facts are not in dispute, then the Court determines whether the motion should be granted or denied by applying the law to the undisputed facts.
Today’s segment of the Businessperson’s Federal Arbitration ACT FAQ Guide continues to focus on the nuts and bolts of applications to compel arbitration under Section 4 of the Federal Arbitration Act.
Thelast instalment discussed Section 4 generally, divided the statute into five parts, and addressed an FAQ related to the first of those five parts: “Under Section 4, who May Petition what Court when and for what?”
This segment addresses the following FAQ related to the second of those five parts: “What Papers Comprise an Application to Compel Arbitration and how are they Served?”
Future segments will address FAQs relating to the other three parts of Section 4.
Applications to Compel Arbitration: Section 4 and its Component Parts
As explained in our prior post, Section 4 consists of 386 words jammed into a single paragraph, but it is easier to digest and follow if we divide it up into subparagraphs or subsections, which we do below, using bold and bracketed text:
[(a) Who may Petition what Court When and for What.] A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.
[(b) Notice and Service of Petition.] Five days’ notice in writing of such application shall be served upon the party in default. Service thereof shall be made in the manner provided by the Federal Rules of Civil Procedure.
[(c) Hearing Procedure and Venue.] The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed. If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof.
[(d) Jury Trial, where Applicable] If no jury trial be demanded by the party alleged to be in default, or if the matter in dispute is within admiralty jurisdiction, the court shall hear and determine such issue. Where such an issue is raised, the party alleged to be in default may, except in cases of admiralty, on or before the return day of the notice of application, demand a jury trial of such issue, and upon such demand the court shall make an order referring the issue or issues to a jury in the manner provided by the Federal Rules of Civil Procedure, or may specially call a jury for that purpose.
[(e) Disposition upon Trial.] If the jury find that no agreement in writing for arbitration was made or that there is no default in proceeding thereunder, the proceeding shall be dismissed. If the jury find that an agreement for arbitration was made in writing and that there is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.
9 U.S.C. § 4 (bold and bracketed text added).
What Papers Comprise an Applicationto Compel Arbitration and how are they Served?
The question of what papers comprise an application to compel arbitration and how are they served arises out of what we refer to as “Section 4(b),” which states:
Five days’ notice in writing of such application shall be served upon the party in default. Service thereof shall be made in the manner provided by the Federal Rules of Civil Procedure.
. . . .
9 U.S.C. § 4.
These two sentences should be interpreted in conjunction with Section 6 of the Federal Arbitration Act and the Federal Rules of Civil Procedure. Also relevant is whether the application to compel is an independent proceeding, or is simply a motion made in an existing action.
Section 6: Application treated as a Motion
Like all other applications for relief under the Federal Arbitration Act, an application to compel arbitration, when brought as an independent legal proceeding in federal district court, is a summary or expedited proceeding, not a regular lawsuit. Rule 81(a)(6)(B) of the Federal Rules of Civil Procedure provides that the Federal Rules “to the extent applicable, govern proceedings under the following laws, except as these laws provide for other procedures. . . (B) 9 U.S.C., relating to arbitration. . . .”
Section 6 of the FAA “provide[s] for. . . procedures” other than those applicable to ordinary civil actions because it requires applications for relief under the FAA to be made and heard as motions:
Any application to the court hereunder shall be made and heard in the manner provided by law for the making and hearing of motions, except as otherwise . . . expressly provided [in the Federal Arbitration Act].
9 U.S.C. § 6.
While Section 6 of the Federal Arbitration Act and Fed. R. Civ. P. 81(a)(6)(B) establish that Federal Rules of Civil Procedure pleading rules applicable to full-blown lawsuits do not apply to applications to compel arbitration, those Rules, and also local court rules, govern motion practice, and are thus made applicable by Section 6 to applications to compel arbitration, unless otherwise provided in the Federal Arbitration Act.
Requirement of Five Days’ Notice
What we refer to as “Section 4(b)” states, in part: “Five days’ notice in writing of such application shall be served upon the party in default.”
That means: (a) notice of the application to compel arbitration must be in writing; (b) it must be dispatched or delivered in a prescribed manner to the opposing party (i.e. “served”); and (c) it must be so dispatched or delivered at least five days before the hearing date on the motion.
Papers Comprising Application to Compel Arbitration
Gateway disputes, which concern whether parties are required to arbitrate a dispute on the merits, are the principal subject of pre-award Federal Arbitration Act litigation. In the last segment of this series, Gateway Disputes about Whether Arbitration Should Proceed (Part I), we answered a number of FAQs concerning gateway disputes, including who gets to decide those disputes:
What is the Difference between Pre-Award and Post-Award Litigation under the Federal Arbitration Act?
What are Gateway Questions?
Who Decides Gateway Questions?
How do Parties Clearly and Unmistakably Agree to Submit Questions of Arbitrability to Arbitrators?
Are there any Arbitrability Disputes that Courts Decide when the Contract at Issue Clearly and Unmistakably Provides for the Arbitrator to Decide Questions of Arbitrability?
Today we’ll answer some more FAQs about how gateway disputes are decided (or at least are supposed to be decided) by courts and arbitrators:
What is the Presumption of Arbitrability?
Does the Presumption of Arbitrability Apply to all Questions of Arbitrability?
What Law Applies to Determine Gateway Disputes about Arbitrability to which the Presumption of Arbitrability does not Apply?
How is Presumption of Arbitrability Applied to Resolve Gateway Questions about the Scope of an Arbitration Agreement?
What Defenses, if any, Can Parties Assert against Enforcement of an Arbitration Agreement, and what Law Governs these Defenses?
The answers to these questions, along with the answers provided in Part I, will provide you with a solid foundation for understanding how pre-award Federal Arbitration Act litigation works and what to expect if your business is or becomes embroiled in it. The next segment will answer FAQs about the nuts and bolts of pre-award Federal Arbitration Act practice and procedure under Sections 2, 3, and 4 of the Act.
What is the Presumption of Arbitrability?
Back in 1983 the U.S. Supreme Court, in the landmark decision Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983), famously declared that “[t]he [Federal] Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.”
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