Discovery in Arbitration: What You Get and What You Do Not

No automatic rules

In a Texas lawsuit, discovery is governed by Rules 190 through 215 of the Texas Rules of Civil Procedure; in federal court, by Rules 26 through 37. Both give a party rights: to serve requests, to take a set number of depositions, to compel answers, to ask the court for sanctions. None of that applies in arbitration unless the parties' agreement says it does. The arbitrator's power comes from the contract and the rules it incorporates, and the default in most provider rules is a managed exchange of information, not discovery as a litigator understands it. What court discovery provides is described in what discovery is in a business lawsuit; this article is about the difference.

What the AAA rules provide

Rule R-23 of the AAA Commercial Arbitration Rules, titled Pre-Hearing Exchange and Production of Information, states the philosophy in its first sentence: the arbitrator shall manage any necessary exchange of information with a view to achieving an efficient and economical resolution, while promoting equality of treatment and safeguarding each party's opportunity to present its claims and defenses. The arbitrator then has specific powers, on a party's application or on his or her own initiative:

• to require the parties to exchange the documents in their possession on which they intend to rely, and to update that exchange as new documents become known;
• to require the parties, in response to reasonable document requests, to make available documents in their possession that are not otherwise readily available to the requesting party and are reasonably believed to exist and to be relevant and material to the outcome of disputed issues; and
• where documents are kept electronically, to require production in the form most convenient and economical for the producing party, and to set reasonable search parameters that balance the need for the documents against the cost of finding them.

Notice what is missing. Interrogatories, requests for admission and depositions do not appear in R-23. The standard for document requests is "relevant and material to the outcome of disputed issues," a tighter test than the relevance-and-proportionality standard of the court rules. And the arbitrator decides what is reasonable, with no appeal.

Depositions

In AAA commercial arbitration, depositions happen when the arbitrator allows them or the parties agree. Many arbitrators permit a small number of short depositions of key witnesses, especially in larger cases; many do not. The preliminary hearing, held early under Rule R-22, is where the schedule and the scope of information exchange are set, and it is where a party that needs depositions must ask for them with reasons. A party that waits until the exchange is under way has usually lost the argument.

Texas law adds a statutory layer when the Texas Arbitration Act governs. Section 171.050 allows the arbitrators to authorize a deposition for use as evidence when a witness cannot be compelled to appear or cannot attend the hearing, and for discovery or evidence when the deponent is an adverse witness. The deposition proceeds as it would in a civil action in district court. Section 171.051 lets the arbitrators issue subpoenas for attendance or for production of records, and a subpoenaed witness may appear at the hearing or at a deposition. Service and enforcement follow the rules for district court subpoenas. These provisions give a party in a Texas-act arbitration a clearer path to a non-party's testimony than federal law provides.

Third parties under the Federal Arbitration Act

Most business arbitration clauses fall under the FAA because the contract involves interstate commerce, and here the picture is less helpful. Section 7 of the FAA allows the arbitrators, or a majority of them, to summon in writing any person to attend before them as a witness and, in a proper case, to bring any book, record, document or paper that may be deemed material as evidence. If the person refuses, the federal district court for the district where the arbitrators sit may compel attendance or punish the refusal as contempt.

The text speaks of attendance before the arbitrators. Federal courts of appeals disagree about whether it also allows an arbitrator to order a non-party to hand over documents before any hearing. The Second Circuit held in Life Receivables Trust v. Syndicate 102 at Lloyd's of London (2d Cir. 2008), following the Third Circuit, that § 7 does not authorize pre-hearing document subpoenas to non-parties; documents can be obtained from a non-party only by having a witness bring them to a hearing before the arbitrators. The Eighth Circuit held the opposite in In re Security Life Insurance Co. of America (8th Cir. 2000), finding the power to order pre-hearing production implicit in the power to subpoena documents for the hearing. Arbitrators in the restrictive circuits have adapted by convening a short preliminary hearing at which the non-party appears with the documents, which satisfies the statute's text while delivering the records before the main hearing.

Enforcement inside the arbitration

Against the parties themselves, the arbitrator has real power. Rule R-24 authorizes the arbitrator to issue any orders necessary to enforce R-22 and R-23, including conditioning production of confidential material on protective orders, imposing search parameters for electronic documents, allocating the cost of production, and, for willful noncompliance, drawing adverse inferences, excluding evidence and submissions, and making special allocations of costs or an interim award of costs. An arbitrator cannot hold a party in contempt, but an adverse inference on the central disputed fact is often worse for the non-producing party than a fine.

Court help is available in narrow circumstances. Under the FAA the district court enforces § 7 summonses. Under the Texas act, § 171.051(d) applies the laws that compel compliance with district court subpoenas to arbitration subpoenas. Neither statute lets a party go to court to expand discovery beyond what the arbitrator has ordered.

Example

Suppose a Dallas distributor arbitrates a termination dispute with a manufacturer under a clause adopting the AAA Commercial Rules and the FAA. The distributor believes the manufacturer decided to terminate months before the stated reason arose and that the proof sits in emails between the manufacturer and the distributor's replacement, a non-party in Houston. At the preliminary hearing the distributor asks for targeted document requests on the termination decision, two depositions, and a subpoena to the replacement. The arbitrator allows the requests with date limits and search terms under R-23, allows one deposition of the manufacturer's decision-maker, and declines a second. On the replacement, the arbitrator issues a § 7 summons for a one-hour preliminary hearing at which the replacement is to appear with the emails, which avoids the dispute about pre-hearing subpoenas. When the manufacturer produces only sales data and withholds the executive emails, the distributor moves under R-24; the arbitrator orders production within ten days and warns that an adverse inference will follow if it does not occur. It occurs.

What this means for the clause you have, or will sign

If your disputes will turn on the other side's internal documents or on third-party witnesses, the time to secure discovery is when the contract is drafted. A clause can provide for a set number of depositions, adopt the discovery rules of a named court, or require that the arbitrator permit document requests on all disputed issues. A clause can equally limit discovery to the documents each side relies on, which favors the party with fewer records to produce. The AAA rules are a default, not a ceiling or a floor.

If the clause is already signed and silent, the preliminary hearing is the moment that matters. Arrive with a specific list: which documents, from whom, why they are material, how long production will take, and which witnesses you need and why a written statement will not do. Arbitrators grant specific, bounded requests and deny general ones. How that hearing fits into the whole proceeding is in how business arbitration works, step by step, and the broader trade-offs between the forums are in arbitration vs. court for a business dispute.

Tina Wysk represents businesses in commercial arbitration in Dallas, including the information exchange and third-party subpoena issues described here. See the business arbitration and mediation practice page.