Discovery in Contract Arbitration

By Michael S. Fields*

A. Introduction

Discovery in contract arbitration is proceduralized by a combination of contract, statute and arbitration provider rules.  There is no single set of rules applicable to all contract arbitration discovery.

Since discovery in arbitration is normally controlled by the neutral arbitrator, there is very little case law interpretation to guide arbitration discovery.  The recent case of Miranda v. 21st Century Insurance Company (2004) 117 Cal.App.4th 913 [12 Cal.Rptr.3d 159] is an exception, and it explains the power of the arbitrator in contract arbitrations, other than in uninsured motorist cases.  The court controls discovery issues for uninsured motorist contracts.  Further discussion of Miranda can be found in the uninsured motorist section of this article.

B. Required Reading

Before commencing arbitration, it is essential to know the provisions controlling the arbitration, and, a fortiori, the discovery rules.  Therefore, the practitioner must be familiar with the following documents:

1. Arbitration Contract Discovery rules and procedures may be set out in the contract, or it may incorporate statutory provisions, and/or require service provider rules, such as those provided by the American Arbitration Association (AAA).

2. California Arbitration Act (CAA), Code of Civil Procedure section 1280 et seq. Code of Civil Procedure sections 1283.05 and 1283.1, control discovery for California arbitrations.

3. Federal Arbitration Act (FAA), 9 U.S.C. ’ 1 et seq. The FAA primarily controls arbitrations involved in interstate commerce.  There is no provision, however, for discovery in the FAA.  Thus, if an arbitration agreement comes under the jurisdiction of the FAA, the contract must provide the discovery procedure to be followed by the parties to the arbitration.  Otherwise, the arbitrator can set out discovery procedures, if so requested by the parties.

4. Arbitration Provider Rules. These rules control many commercial arbitrations, if they are so referenced in the contract.  Many contracts refer to the discovery rules set out in the Commercial Arbitration Rules of the American Arbitration Association. Others will specifically state that a provider, like the AAA, will administer the arbitration.   Incumbent in such administration are all of the provider rules, which will include the discovery provisions. Some of these provider rules are discussed below.

C. California Statutory Provisions

As mentioned above, Code of Civil Procedure section 1280 et seq. controls California arbitrations.  Specifically, sections 1283.05 and 1283.1 control discovery.  Other statutes have specific discovery applications.  For example, uninsured motorist discovery is controlled by Insurance Code section 11580.2 subdivision (f) and Judicial Arbitration discovery is controlled by Code of Civil Procedure section 1141.24.

The two statutes controlling California arbitration discovery, as mentioned above, are Code of Civil Procedure sections 1283.05, Right to Discovery; Procedure and Enforcement, and 1283.1 Incorporated Into Proceedings for Wrongful Act or Neglect of Another B Other Proceedings by Agreement Only.  These statutes control discovery for all personal injury matters, and for commercial cases exceeding $50,000.   Any contract, however, can specify that the statutory rules of Code of Civil Procedure section 1283.05 will apply to the arbitration proceedings. (Code of Civil Procedure section 1281.1, subdivision (b).   See also Code of Civil Procedure section 1282, Exercise of Powers of the Arbitrator, subdivision (a)(2).)

Basic provisions of Code of Civil Procedure section 1283.05 are:

a. Discovery commences after the appointment of the arbitrator(s), and all discovery under the Civil Discovery Act, Code of Civil Procedure section 2016.010, is allowed.  However, subdivision (e) requires that Depositions for discovery shall not be taken unless leave to do so is first granted by the arbitrator or arbitrators.  As a practical matter, the parties can stipulate to commencement of depositions at any time

b. The arbitrator, and not the court (with the exception of uninsured motorist cases, discussed later, and judicial arbitrations), have the power to enforce discovery and  the remedies provided in the Civil  Discovery Act. The arbitrator, however, has no power to order the arrest or imprisonment of a person. (Note that any discovery monetary award is enforceable by the court, after a confirmation hearing, as allowed by the CAA.)

c. All of the parties and their officers and employees are subject to arbitrator enforcement of discovery rules for deposition of other discovery requirements. Likewise, all documents relevant to the matter are subject to the arbitrator=s production enforcement powers.

Code of Civil Procedure section 1283.1 subdivision (a) provides that the discovery requirements are, by operation of law, made part of all arbitration agreements involving any injury to, or death of, a person caused by the wrongful act or neglect of another. Subdivision (b) allows for the discovery requirements of Code of Civil Procedure section 1283.05 to be made a part of contracts not involving personal injury AOnly if the parties by their agreement so provide… A drafter of arbitration agreements can, therefore, incorporate the discovery section of Code of Civil Procedure section 1283.05 into arbitration contracts. There will then be a clear and understandable discovery procedure in the contract.

D. Arbitration Provider Rules

There are many businesses that provide panels of arbitrators, and many of them provide rules and procedures for conducting arbitrations.  If there is a specific contract reference to an arbitration provider and its rules, those rules will control the arbitration. The discovery provisions in those rules, unless specifically amended in the contract, will control.  The discovery rules set out by the providers, however, can be scant and vague.

1. American Arbitration Association

 

Discovery Rules

American Arbitration Association (AAA) has many publications, which set out rules for various types of arbitrations.  They can be found on the AAA website, www.adr.org

In the AAA publication entitled Drafting Dispute Resolution Clauses, a Practical Guide, effective July 1, 2004, the AAA provides a checklist for the dafter, and one segment applies to discovery. It states: The parties are free to customize and refine the basic arbitration procedures to meet their particular needs…  Later, the publication sets out The major features of arbitration are: and it then states its rules on discovery, as follows:

[T]here is no motion procedure of formal discovery;… Though there may be no formal discovery, the AAA=s various commercial rules allow the arbitrator to require production of relevant information and documents.  The AAA=s rules are flexible and may be varied by mutual agreement of the parties.

In the AAA=s Commercial Arbitration Rules, effective July 1, 2003, discovery procedures are stated to be at the discretion of the arbitrator and requires informal production of documents.  For Large, Complex Commercial Cases, the rules are more expansive. UnderRrule L-4. Management of Proceedings, the rules are:

 * * *

(b) Parties shall cooperate in the exchange of documents, exhibits and information within such party=s control if the arbitrator(s) consider such production to be consistent with the goal of achieving a just, speedy and cost-effective resolution of a Large, Complex Commercial Case.

(c) The parties may conduct such discovery as may be agreed to by all the parties provided, however, that the arbitrator(s) may place such limitations on the conduct of such discovery as the arbitrator(s) shall deem appropriate.  If the parties cannot agree on production of documents and other information, the arbitrator(s), consistent with the expedited nature of arbitration, may establish the extent of the discovery.

(d) At the discretion of the arbitrator(s), upon good cause shown and consistent with the expedited nature of arbitration, the arbitrator(s) may order depositions of, or the propounding of interrogatories to, such persons who may posses information determined by the arbitrator(s) to be necessary to determination of the matter.

(e) The parties shall exchange copies of all exhibits they intend to submit at the hearing 10 business days prior to the hearing unless the arbitrator(s) determine otherwise.

* * *

For employment contracts, the AAA has its National Rules for the Resolution of Employment Disputes, effective January 1, 2004.  These rules are mindful of the broader discovery requirements established by case law, and it states at Rule 7.

Discovery:

The arbitrator shall have the authority to order such discovery, by way of deposition, interrogatory, document production, or otherwise, as the arbitrator considers necessary to a full and fair exploration of the issues in dispute, consistent with the expedited nature of arbitration.

Whether this provision comports with the arbitration requirements ofthe California Supreme Court case of Armendariz v. Foundation Health Psychare Services Inc. (2000) 24 Cal.4th 83 [99 Cal.Rptr.2d 745] as discussed in the next section is a matter of controversy.  See Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 720-721 [13 Cal.Rptr.2d 88, 89], where the courts found reference to AAA rules did not satisfy the Armendariz requirements.  Discovery issues and discovery parameters are required in the AAA rules to be established at the Arbitration Management Conference, set within 60 days after appointment of the arbitrator.

2. Judicial Arbitration and Mediations Services 

B JAMS 

BDiscovery Rules

JAMS also has its rules on its website, www.jamsadr.com, and those rules are similar to AAA, with the following major distinctions:

(1)  All informal exchange of documents, names of potential witnesses, names of expectant experts witnesses and expert documents shall be exchanged 21 calendar days after all pleadings have been received.

(2)  Each party is allowed one deposition, without further permission of the arbitrator.

(3)  Newly acquired relevant documents, newly retained expert information, and newly discovered witnesses are to be provided to the other party on an ongoing basis.

(4)  Any of the above information that is not exchanged may not be considered by the arbitrator, without consent of the parties or upon a showing of good cause.

(5)  JAMS is to be notified of any discovery issues, and a conference with the arbitrator will be arranged.  The arbitrator is to decide the dispute, or, with written consent of the parties, the arbitrator can appoint a master to assist with resolving discovery disputes.

See JAMS Comprehensive Arbitration rules and Procedures, revised February 19, 2005, Rule 17, Exchange of Information.

3. Kaiser Arbitration Discovery Rules

For Kaiser disputes with their members, the Kaiser contract requires that Rules for Kaiser Permanente Member Arbitrations will be administered by its Office of the Independent Administrator (OIA).  The Kaiser contract states the arbitration rules can be obtained by calling 1-800-464-4000.

Discovery regarding Kaiser Arbitrations is set out in OIA Rule 27.  Discovery. Note that the OIA frequently modifies its rules, and the January 1, 2005, rules for discovery provide the following requirements:

(1)  Discovery can commence after Kaiser serves its Transmission Form, indicating the appointment of Kaiser=s attorney.  If either party objects to this prompt discovery, discovery will then commence as soon as the Neutral Arbitrator is appointed.

(2)  ADiscovery shall be conducted as if the matter were in California state court. This rule is interpreted to mean the California Civil Discovery Act applies to Kaiser arbitrations.

(3)  Discovery motions timing is controlled by the California Code of Civil Procedure or upon the appointment of the Neutral Arbitrator, whichever is later.

(4)  The claimant can informally request medical records at claimant=s expense, and Kaiser must provide the records within 30 days.  Note that there is no requirement for Kaiser to verify these records.

Some services like ARC and ADR have no rules regarding arbitration, discovery, and their services will follow the requirement of the contract. 

E. Discovery Requirements Established by Case Law

In order to ensure fairness in employment discrimination cases, the California Supreme Court requires Adequate mandatory discovery rights to be available to the employee.  Such provision must be impliedly or expressly set out in the contract, before the arbitration provision will be enforced by the court.  Otherwise, the court will find them procedurally and substantively unconscionable.  Procedural unconscionability is when  the employee had no meaningful opportunity to negotiate or accept the terms.  Substantive unconscionability is when  there is a lack of mutuality, in that the employer has access to the witnesses and required documents and the employer rarely brings such an action against the employee.  See Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83 [99 Cal.Rptr.2d 745].  This rule was extended by the court to violation of public policy issues in Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064 [130 Cal.Rptr.2d 892]. 

In footnote 11, Armendariz, supra, the court explained that the discovery for actions to enforce statutory guaranteed rights, need not be a full panoply of discovery procedures, so long as it is Adequate to protect the employee=s rights.

We recognize, of course, that a limitation on discovery is one important component of the >simplicity, informality, and expedition of arbitration.=  [Citation omitted.]   The arbitrator and reviewing court must balance this desirable simplicity with the requirements of the FEHA in determining the appropriate discovery, absent more specific statutory or contractual provisions.

The case law requires more than minimal discovery in statutory discrimination allegations.  In Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 716-719 [13 Cal.Rptr.3d 88], the court found a provision allowing only two depositions without arbitrator approval to be unconscionable.  In O=Hare v. Municipal Resource Consultants (2003) 107 Cal.App.4th 267 [132 Cal.Rptr. 2d 116] the court found unconscionable an arbitration provision that stated There shall be no pre-arbitration discovery.  The court cited the Armendariz court=s adequate discovery requirement is indispensable for statutory discrimination cases and employees; are at least entitled to discovery sufficient to adequately arbitrate their statutory claim, including access to essential documents and witnesses, as determined by the arbitrator(s) and subject to limited review. Id. at p. 280-281.

F. Uninsured Motorist Statutory Scheme for Discovery

Insurance Code section 11580.2 sets out rules for discovery in uninsured motorist and underinsured motorist cases

Uninsured Motorist (UM)** arbitration discovery has different discovery rules than provided by Code of Civil Procedure section 1283.05.  The Civil Discovery Act has application to uninsured motorist cases, only as so directed in Insurance Code section 11580.2, subdivision (f).  Specifically, subdivision (f) states that Code of Civil Procedure section 2016.010, A[Civil Discovery Act] . . . shall be applicable to these determinations, and all rights, remedies, obligations, liabilities and procedures set forth [therein] shall be available to both the insured and the insurer at any time after the accident, both before and after the commencement of arbitration, if any…

Insurance Code section 11580.2 then sets out limitations on the discovery. Most of the limitations are not really limitations, but rather an interpretation of the Civil Discovery Act.  The limitations in Insurance Code section 11580.2, subdivision (f), are:

! Subdivision (f) (1) & (2) interprets courts to mean the superior court. It is the superior court that has exclusive jurisdiction, not the arbitrator, for responsibilities of discovery in UM cases.  See Miranda, supra, at p. 926.

! Subdivision (f) (3) explains that depositions may be taken without leave of court unless the insured wants a deposition within 20 days of the accident.

! Although the Civil Discovery Act applies to UM cases, subdivision (f) (4) excludes medical mental examinations set out in the Code of Civil Procedure section 2019.010; Methods of Discovery, subdivision (d).

! Subdivision (f) (5) states the insured and insurer are each a party of record for any discovery enforcement.

! Subdivision (f) (6) allows the insured or insurer to serve upon the other interrogatories and request for admissions under Code of Civil Procedure sections 2030 and 2033, respectively, … at any time more than 20 days after the accident without leave of court.

! Insurance Code section 12580.2, subdivision (f) (6), then goes on to state that discovery in any other action is not limited by the taking of discovery in the UM matter.

1. The Court Has Exclusive Jurisdiction of Discovery Issues In UM Cases

The proper manner to enforce discovery or discovery violations in UM cases have long been a concern to the practitioner.  Earlier last year, a definitive answer was provided by an appellate court decision.  It held the superior court has exclusive jurisdiction for ruling on discovery enforcements, violations and sanctions.  See Miranda v. 21st Century Insurance Company (2004) 117 Cal.App.4th 913, 926 [12 Cal.Rptr.3d 159].

Miranda holds that the jurisdiction of the superior court is exclusively required for UM discovery issues, as there is no mention in the code of the arbitrator having any power to rule on UM discovery issues.  In all other contract arbitration discovery issues, it is the arbitrator that has such  jurisdiction.

Miranda is one of the few cases allowing a peek into arbitration discovery. Before Miranda, there had been scant law on the discovery process in arbitrations.  As we know, arbitrators do not publish their decisions on such matters, and, unless there is proof the arbitrator exceeded his/her powers, there is no review and appeal of an alleged abuse of an arbitrator=s decision.  Thus, there is no way to develop a body of law and precedent to follow for arbitration discovery issues.

According to Miranda, the court=s jurisdiction in UM cases extends to the ultimate sanction, i.e., the right to dismiss the arbitration claim for failure to comply with discovery.  See Code of Civil Procedure section 2023.030 and Miranda, supra, at p. 926. 

Miranda bucks the trend of cases holding that a court cannot dismiss an arbitration.  Prior cases hold only the arbitrator has such power.  See Byerly v. Sale(1988) 204 Cal.App.3d 1312 [251 Cal.Rptr. 749] and Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1801-1802 [13 Cal.Rptr.2d 678].

Other cases interpreting facets of UM discovery are Workman v. Superior Court (1986) 176 Cal.App.3d 493 [222 Cal.Rptr. 69], regarding the extent of the court=s discretion, and Kaplan v. Eldorado Ins. Co. (1976) 55 Cal.App.3d 587, 591 [127 Cal.Rptr. 669], regarding the court=s dismissal of a UM arbitration as a discovery sanction.  Note that Miranda, supra, at p. 922, found the holding of Kaplan valid, but in Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1801-1802 [13 Cal.Rptr.2d 678], it was held that the court has no power to dismiss an arbitration proceeding, only the arbitrator has such power.

2. Commencing UM Discovery

As established above, it is the superior court not the arbitrator that controls UM arbitrations.

Discovery in other matters subject to arbitration have different rules than UM discovery. Discovery can only commence after serving the demand for arbitration.

In UM cases, discovery regarding interrogatories and request for admissions can commence by either party 20 days after the accident, without filing a Demand for Arbitration, without filing a complaint in court, without petitioning the court, and without leave of court.  Insurance Code section 11580.2, subdivision (f) (6).  See also Workman v. Superior Court (1986) 176 Cal.App.3d 493, 498 [222 Cal.Rptr. 69].  Note that such discovery before the 20th day after the accident requires a petition to the court.

In Workman, supra, the court held that mail service of the request for admissions on the responsible adjuster was adequate service of that discovery request. Workman involved proper service of discovery after a Demand for Arbitration was served on the insurance company.  However, Workman, supra, at pp. 500-501, indicates that no formal service of a Demand for Arbitration or an appearance by the insurance company is required to commence UM discovery.  In Workman, the appellate court=s ruling found that the trial court abused its discretion regarding discovery rulings in the UM case before it.

3. Compelling Discovery in UM Cases

Code of Civil Procedure section 1290.4, subdivision (b), requires a petition to the court to obtain court involvement with enforcement of arbitration.  Miranda,supra, at p. 928, however, does not require a petition, as defined in Code of Civil Procedure section 1290.4.  Instead, Miranda refers to the proper procedure for court involvement to compel UM discovery as a motion to compel compliance.

The mechanism for filing a motion to enforce discovery, without first establishing a complaint or petition, is not explained in Miranda.  Some authorities suggest the use of an application to commence discovery, but this procedure is antiquated and not recognized in the Civil Discovery Act.  The application to commence discovery appears to be a vestige of old American Arbitration Association (AAA) rules, when the AAA was the primary agency for providing UM arbitrators. 

The proper first procedure, in this writer=s mind, is a Motion to Compel Uninsured Motorist Discovery, filed concurrently with a Request for Judicial Notice. The Demand for Arbitration or a compelling order should be attached to the Request for Judicial Notice, so the court can take notice that the arbitration process has commenced.  See Evidence Code section 452, subdivision (h).  Be prepared to file an initial filing fee and a separate motion fee.

* Mr. Fields, a trial attorney since 1969, has contributed to and edited Matthew Bender=s contractual arbitration sections of its California Pleading and Practice set, Volume 4, chapters 32, 33 and 34, which also has been available as a stand alone volume.  He is currently writing a book on Contract Arbitration for West Publishing Company.  He has lectured numerous times on contractual arbitrations and, more specifically, Kaiser Arbitrations; and has written numerous articles on contractual arbitrations, trial practice and procedure, ethics and many other topics.  Mr. Fields is a trial attorney, neutral arbitrator and mediator.  He was the 2003 Consumer Attorneys Association of Los Angeles president; past Chair of the Litigation Section of the Los Angeles County Bar Association; past President of the Trial Practice Inn of Court; and past chair of the State Bar Litigation Section ADR Committee.

** Discovery for uninsured motorist (UM) and underinsured motorist (UIM) claims are identical.  The use of UM in this article also has application to UIM cases.