Will the Courts Ever Get it Right?

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.