Strategy of the Day: Variations in State Arbitration Law

The Federal Arbitration Act preempts state arbitration law, but not entirely. State law that is inconsistent on the FAA’s rules about when an agreement to arbitrate is enforceable or about when awards must be enforced are preempted. But state law that relates to some procedural matters in arbitration is not preempted even when the FAA applies.

You might ask whether this actually makes any real difference. The answer will vary from state to state. Almost every state has enacted some version of the Uniform Arbitration Act, proposed in the 1950s, or the more modern Revised Uniform Arbitration Act. But there are some state-specific variants.

In Massachusetts, for example, Section 7(e) of the MUAA provides:

Any party in an arbitration proceeding may serve upon any other party a request for the production of documents and things and for entry upon land for inspection and other purpose as permitted by and in accordance with the procedure set forth in rule thirty-four of the Massachusetts Rules of Civil Procedure in effect at the time the request is made. The enforcement and objections of such request shall be made to the arbitrators and the arbitrators only shall issue such orders as they deem necessary on objections and on requests for enforcement of production both prior to and after the commencement of the hearing.

In other words, if the MUAA applies and is not preempted, parties have a right to serve a request for the production of documents on each other, as they would in a civil action. Section 7(e) is not found in the UAA itself and was not part of the statute as originally enacted in Massachusetts; the statute was amended in 1978 to include the provision.

I am not aware of any decision on whether the FAA preempts Section 7(e), and in my own practice as arbitrator in arbitrations seated in Massachusetts, I have never been asked to decide the question myself. But let’s assume for purposes of this post that Section 7(e) is not preempted. What possibilities does this open up for parties and for lawyers drafting dispute resolution clauses? Well, if you want to have a right to obtain documents from your opponent in arbitration, instead of relying on the arbitrator’s discretion, you can choose to arbitrate in Massachusetts, if you are careful not to exclude application of the MUAA.

Here is how I approach such issues when drafting. First, I want to make sure I know what the default rule is in case the contract is silent. There is a lot of cases out there on when the FAA applies and on when the FAA preempts and does not preempt state arbitration law. Second, I want to think about whether the state law variant (here, a right to take document discovery) would likely favor my client, likely favor the other party, or (as is often the case) if it’s impossible to say until an actual dispute arises. Third, I want to think about the choice of the arbitral seat in a broad sense. How friendly or hostile are the courts to enforcement of agreements or enforcement of awards? Where are the likely witnesses located? Are there other jurisdiction-specific issues? Then I draft accordingly. These kinds of considerations are just as relevant for international arbitration as for domestic US arbitration, since in general, the US applies the same law to both (except, of course, that Chapter 2 of the FAA implements the New York Convention—but I don’t think the Convention has much to say about the issue I’m raising).

3 responses to “Strategy of the Day: Variations in State Arbitration Law”

  1. Should the arbitration clause call for arbitration under a set of rules, then the parties would seem to waive section 7(e). AAA Commercial Rule R-23 (2022), for example, states “The arbitrator shall manage any necessary exchange of information among the parties with a view to achieving an efficient and economical resolution of the dispute, while at the same time promoting equality of treatment and safeguarding each party’s opportunity to fairly present its claims and defenses.”

    1. Steven, thanks for the comment! I am not sure that is right. I have not had to rule on the issue, but in Massachusetts arbitrations where I have been counsel, arbitrators have taken the view that there is a statutory right to serve a request for documents. I do not want to state a strong view on the topic, as I may one day have to decide it, but the view other arbitrators have taken seems at least sensible to me. Nothing in Rule R-23 seems incompatible with the statute, at least on the face of the rule.

      1. I’m not sure either. But Rule R-23 puts the arbitrator in charge of whether there will be any document exchange is if so the extent. Unless the MA rule is non-waivable (which is possible, like the New York rule that parties have the right to counsel) I think it would be a heavy lift to convince an arbitrator that document exchange is mandatory. Especially in an international case.

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