Int’l Seaway Trading v Target 2021 WL 672990 (D. Minn. Feb. 22 2021)
Issue Discussed: Enforcement of an arbitral subpoena for a “virtual” deposition by a former employee non-party witness.
Submitted by Michael Kuehn
Date Promulgated: February 22, 2021
Case: Int’l Seaway Trading v Target2021 WL 672990 (D. Minn. Feb. 22 2021)
Court: U.S. District Court for the District of Minnesota
Date Decided: February 22, 2021
Issue: Enforcement of an arbitral subpoena for a “virtual” deposition by a former employee non-party witness.
Submitted by: Michael Kuehn, Riverstone
A dispute arose between International Seaway Trading (“Seaway”) and Target over the quality of goods Seaway had contracted to provide. Target refused to pay and Seaway demanded arbitration pursuant to the contract.
The arbitration progressed and Target deposed the Seaway employee previously responsible for the relationship with Target. The employee was deposed pursuant to a subpoena for testimony and documents that was issued by the arbitrator in Minneapolis. During the arbitration, the employee’s counsel directed him not to answer certain questions on certain topics.
Target objected and sought another deposition of the then former employee via subpoena from the arbitrator. After finding counsel’s deposition objections improper, the arbitrator issued the second subpoena over the objection of the former employee that he was no longer an employee. The subpoena directed the former employee to appear for the deposition by “virtual means.” The former employee then filed a motion to quash the subpoena in Federal District Court in Minnesota.
The former employee raised three primary objections in his motion to quash. First, he argued that the arbitrator lacked authority to issue a subpoena to a non-party witness prior to the arbitration. Second, he argued that the District Court lacked statutory authority to enforce the subpoena outside the territorial limits imposed by statute. Third, he argued that a second deposition would pose under burden and expense and be disproportionate to the needs of the case.
The District Court denied the motion to quash and upheld the subpoena.
The Court first explained that the Federal Arbitration Act, 9 U.S.C. § 7, gives arbitrators the power to subpoena non-parties to testify and produce documents at the arbitration hearing. The Court also explained that the Eighth Circuit Court of Appeals had ruled in In re Security life Ins. Co. of Am., 228 F.3d 865, 871 (8th Cir. 2000) that the statute implicitly gives the arbitrator the power to issue a subpoena for the production of documents prior to an arbitration hearing.
The Court then framed the question before it as whether Section 7 also authorized an arbitrator to issue a pre-hearing subpoena for a non-party deposition – an issue the Appellate Court had not addressed. The Court considered, but rejected, the argument from the former employee that Appellate Courts from other Circuits had ruled that Section 7 does not authorize an arbitrator to issue pre-hearing subpoenas for discovery from non-parties. The Court explained that case law from other jurisdictions was not binding and that the rationale from In Re Security Life permitting an arbitrator to issue a pre-hearing subpoena for documents applied with equal force to a pre-hearing subpoena for a deposition.
The Court then rejected the former employee’s argument that the subpoena should be quashed because it exceeded the territorial limits of Federal Rule of Civil Procedure 45 (“Rule 45”) governing subpoenas. The Court assumed, without deciding, that effective service of a subpoena pursuant to Section 7 of the FAA required compliance with Rule 45. The Court explained that Rule 45(b)(2) provides that a subpoena “may be served at any place in the United States.” Therefore, there were no problems with the location of service.
The Court also found that the territorial limitations in Rule 45(c) regarding the place of compliance did not warrant quashing the subpoena because the former employee had been commanded to appear for a deposition “by virtual means.” Specifically, Rule 45(c) provides that a subpoena “may command a person to attend … a deposition only … within 100 miles of where that person resides….” The Court explained that “[g]iven the plain language of Rule 45(c), a remote deposition subpoena requiring … compliance in St. Louis does not run afoul of the Rule simply because it was issued by an arbitrator in Minneapolis.”
Finally, the Court dismissed the former employee’s relevance and burden arguments finding that they had already been addressed by the arbitrator before issuance of the second subpoena.