Beck’s Superior Hybrids v. Monsanto: Enforcing an Arbitrator’s Subpoena
Posted on January 15, 2011
Beginning today, Letters Blogatory is going to cover cases on the enforcement of international arbitral awards and judicial assistance to international arbitral tribunals. The discussions about the scope of the judicial assistance statute we’ve had just in the first week (here and here) suggest to me that arbitration is closely linked to questions of judicial assistance generally. We may also be covering domestic arbitration issues from time to time to the extent they seem to bear on relevant issues.
Beck’s Superior Hybrids, Inc. v. Monsanto Co. is such a case. Monsanto and Du Pont were parties to a license agreement that contained an agreement to arbitrate any disputes arising out of the agreement in New York City. Monsanto demanded arbitration, asserting that Du Pont had improperly sublicensed rights to third parties, including Beck’s Superior Hybrids, which was located in Indiana. At Monsanto’s request, the tribunal issued a subpoena duces tecum to Beck’s. Beck’s refused to comply. Monsanto commenced an action in the Indiana superior court, seeking to compel compliance, and the Indiana court ordered Beck’s to comply with the subpoena. Beck’s appealed and won. Why?
Section 7 of the Federal Arbitration Act provides that arbitrators may issue subpoenas and that the District Court “for the district in which such arbitrators, or a majority of them, are sitting” can compel compliance with the subpoena. So under the statute, the District Court for the Southern District of New York was the proper court to enforce compliance with the arbitrator’s subpoena. But there was no question but that the SDNY would lack subject-matter jurisdiction over a petition to enforce the subpoena, because a party seeking to proceed under Section 7 of the FAA must show an independent basis for federal subject-matter jurisdiction, such as diversity of citizenship, and Monsanto could not do so here. Moreover, the SDNY would have lacked personal jurisdiction Thus the FAA creates a jurisdictional “gap”: the only court with authority to enforce a subpoena under the statute may lack jurisdiction over a petition to enforce the subpoena or over the person whose evidence the subpoena seeks to compel. But as the Indiana court noted, that is not Beck’s problem: “Monsanto agreed to arbitration, and it is the party chargeable with any negative results associated with that choice.”
Monsanto did make an interesting attempt to construe the statute in a novel way. It argued that one of the arbitrators would be “sitting” in Indiana for the purpose of presiding at the preliminary hearing at which the subpoena commanded Beck’s to appear and produce its documents. But leaving aside the fact that the statute points to the jurisdiction where a majority of the arbitrators are sitting, the agreement to arbitrate specified New York as the seat of the arbitration.
Parenthetically, the jurisdictional “gap” suggests yet another reason why, as I have argued, the judicial assistance statute should not be read to extend to foreign arbitral tribunals. It would be incongruous for parties to a foreign arbitration to have the right to take pretrial discovery anywhere in the United States under the statute when parties to a domestic arbitration face subject-matter and personal jurisdictional hurdles that sharply limit the enforceability of arbitrators’ subpoenas.