Arbitrators have the power to issue subpoenas when necessary. Those subpoenas may be enforced in court. In reinsurance arbitrations, subpoenas are issued relatively rarely, but they do happen. The law surrounding subpoenas in arbitrations was in flux some years ago but since has normalized. Yet occasionally, disputes over the validity and enforceability of arbitral subpoenas arise as it did in a recent case involving a reinsurance dispute.
In Symetra Life Insurance Co. v. Administrative Systems Research Corp., International, No. 21-2742 (6th Cir. Nov. 7, 2022)(Not Recommended for Publication), the district court granted the cedent’s petition to compel compliance with an arbitral subpoena. The subpoena was issued by an arbitration panel in a reinsurance dispute concerning allegations of breach of an employee benefits plan reinsurance agreement when the reinsurer failed to indemnify the cedent for a settlement between it and a dialysis provider.
The subpoena compelled the custodian of records of the third-party administrator (“TPA”) of two of the employee benefit plans to appear with documents before an arbitration hearing in Michigan. The TPA was affiliated with the reinsurer. The TPA moved to quash the subpoena before the arbitration panel and the panel denied the motion and issued the subpoena.
The cedent petitioned the Michigan federal court to to compel the third-party administrator to comply with the subpoena. The Magistrate Judge that was assigned the petition ruled that the arbitration panel was sitting in Michigan and ordered compliance even though the cedent had argued in an earlier proceeding that the arbitration panel would only ever sit in Washington. The district court agreed with the Magistrate Judge and issued judgment enforcing the subpoena.
On appeal, the TPA raised many issues, which the court rejected. These included a challenge to the court’s subject matter jurisdiction (“Because it does not appear to “a legal certainty” that the subpoenaed documents’ value is $75,000 or less, we find that the district court had subject matter jurisdiction”), standard of review by the district court (“Because this analysis would be proper under either the “clearly erroneous or contrary to law” standard or the de novo standard, we see no reason to remand the case”), where the arbitration panel sits, judicial and collateral estoppel (changed circumstances), compliance with Section 7 of the Federal Arbitration Act (“Under a straightforward reading of the statute’s text, the subpoena was a proper exercise of the panel’s section 7 powers”), and materiality (materiality should be left for the arbitration panel).
Focusing on where the arbitration panel was sitting, this is an issue that often gets raised in resisting an arbitral subpoena. In an earlier proceeding, the cedent argued that the panel could only sit in Washington because the reinsurance contract named Washington the seat of arbitration. But it turned out that the venue for arbitration was disputed and that main hearing ended up being set in Texas. The court rejected the TPA’s argument that Section 7 of the Federal Arbitration Act meant that the panel may sit in only one location, the site of the final hearing. The court held that “the FAA’s text contains no such restriction, and we decline [the TPA]’s invitation to read additional terms
into the statute.” The court also noted that the arbitration panel declared that it was sitting in Michigan for the hearing on the subpoena.
For those who have to request arbitral subpoenas to third parties, this case provides a nice roadmap for how to obtain and enforce the subpoena.
