Eleventh Circuit Joins Majority of Circuits in Holding That FAA Prohibits Pre-Hearing Discovery From Non-Parties

After twenty years of litigation in Managed Care Advisory Group, LLC v. Cigna Healthcare, Inc., 2019 WL 4464301 (Sept. 18, 2019), the Eleventh Circuit issued a per curiam opinion reversing the enforcement of arbitral summonses and holding that the FAA implicitly withholds the power to compel documents from non-parties without summoning them to testify.

Beginning in 1999, medical providers filed several class actions against managed care insurance companies, which were consolidated into a multidistrict litigation before the Southern District of Florida, which approved a settlement but retained jurisdiction over matters relating to the agreement. Then, Managed Care Advisory Group, acting on behalf of class members and never a party itself to the MDL, entered an arbitration agreement with Defendant CIGNA in an attempt to resolve a dispute over a portion of the settlement funds. The arbitrator issued certain non-party summonses requiring video participation and, in some cases, the production of documents, and CIGNA subsequently moved to enforce the settlement agreement and to compel an accounting. After oral argument, the Eleventh Circuit reversed the enforcement of arbitral summonses and reversed and remanded the denial of the motion to enforce the settlement agreement and compel an accounting.

The Court began its analysis by deciding on an abuse of discretion standard of review of enforcement of arbitral summonses. After finding that the district court’s order enforcing the arbitral summons was final and appealable because it had disposed of all the issues before it, the Eleventh Circuit pointed out that while the district court had ancillary subject matter jurisdiction, the magistrate judge improperly found jurisdiction on two additional grounds: (1) the district court appointed the arbitrator and (2) the parties agreed to jurisdiction of the district court in their arbitration agreement. These bases do not establish jurisdiction of the court. But the court still had ancillary jurisdiction because of its retention of jurisdiction of matters related to the administration of the settlement agreement.

The Eleventh Circuit held that section 7 of the FAA does permit nationwide service of arbitral summonses. It reasoned that the FAA allows a court to “compel the attendance of such person . . . in the same manner provided by law for securing the attendance of witnesses . . . in the courts of the United States” and concluded that this required a motion to compel be filed in the district in which the arbitrators are sitting, rather than where compliance is required.

But, the court agreed with the Second, Third, Fourth, and Ninth Circuits in holding that the plain language of the FAA unambiguously requires witnesses to appear before an arbitrator and bring documents with them, thus prohibiting pre-hearing discovery from non-parties. The FAA implicitly withholds the power to compel documents from non-parties without summoning them to testify. The finding to the contrary was an abuse of discretion. A court order compelling the “attendance” of a witness “before” the arbitrator means compelling the witness to be in the physical presence of the arbitrator. (The court examined 1925 dictionaries to define “attend” and “before”). So the plain meaning of section 7 requires the summonsed non-party to appear in the physical presence of the arbitrator as opposed to a video conference or teleconference and prohibits pre-hearing discovery.

Additionally, the district court abused its discretion in allowing the arbitrator to review the claims that have already been paid because the district court has a duty to class members to ensure that they receive what they are entitled to under the settlement agreement and may not defer to the arbitrator to compel an accounting of the claims that fall outside the ambit of the arbitration agreement. While MCAG asserted by declaration that CIGNA’s $11 million pre-arbitration payment had been disbursed to class members, it conceded at oral argument that $3.5 million had not been so disbursed. Nor had it disbursed any of the $14 million CIGNA paid since the arbitration began. The court held that this called for an accounting because there is no formal record of what MCAG did with millions of dollars.

Author: E. Keith Emanuel

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