After reading Professor Rau's article entitled
"Evidence and Discovery in American Arbitration: The Problem of 'Third
Parties'", I once again found myself angry at the weird arbitration
restrictions that court's interpretations of the FAA have set up. I hadn't
really considered the issue of arbitral discovery involving
information/testimony of third parties before I read the article. Professor
Bayer mentioned fairly early in the semester that an arbitrator could
definitely order the oral deposition of a third party, but that some
jurisdictions feel that an arbitrator doesn’t have the power to demand document
production from a third party. Frankly, that was the first and last time I
thought about third-party discovery.
But, Professor Rau points out that it’s the
courts that have created the issues with third-party discovery in arbitration.
For example, there’s the issue of whether the third-party “consented” to be
involved in the arbitration—since arbitration is by agreement, how can you
force a party to appear when they didn’t initially agree? Theoretically
speaking, that’s a good argument. Courts have responded to this argument in a
myriad of ways, which Professor Rau calls mostly “flat and unnuanced”. This is
because the general consensus has evolved into something pretty illogical—that arbitrators
can “enlist” third parties to come to an arbitration “as a witness”, but can’t
compel them to give depositions or bring documents with them. If documents are
needed, they have to be accompanied by the third party personally, and the
third party has to also be coming to the arbitration to give testimony.
Now, I’m sure there’s an excellent theoretical
background that underlies this solution the courts have come up with. But, in
the real world, does this make any sense at all? Reading through it, I got the
general sense that “something just isn’t right here”. And that’s mostly because
I see these rules creating an arbitration system that is crippled and
ineffective. What if a third party has important documents, but isn’t needed to
testify about them? What if not being able to get those documents completely
changes how the arbitrator rules in the dispute? Wouldn’t that open the award
up to a challenge in court? And then, wouldn’t that result in litigation that
the arbitration process was supposed to avoid?
Professor Bayer told us that one criticism of
arbitration is that the ability to order discovery has made arbitration too
much like litigation. That certainly may be the case. But, I can visualize
complex disputes (where, say, the parties chose arbitration for confidentiality
purposes, not for cost efficiency) where the vital information may be scattered
across many groups. Wouldn’t discovery be necessary in order to give the
arbitrator the most comprehensive basis for his/her award? By limiting
third-party discovery, I think the courts are making the problems that
arbitration faces worse, not better.
