52 Cal.App.5th 360
Cal. Ct. App.2020Background
- Veeco sued former employee Miguel Saldana in arbitration (per his Veeco confidentiality agreement) for alleged theft of confidential MOCVD-related data after he took a job at competitor Aixtron. Aixtron was not a party to the arbitration.
- The arbitrator issued a pre‑hearing subpoena duces tecum directing Aixtron to produce business records and certain Aixtron computers for forensic inspection by a neutral expert; Aixtron objected and refused to comply.
- Aixtron filed a petition in superior court seeking vacatur/protection from the arbitrator’s discovery order; the superior court denied that petition (August Order). Veeco separately petitioned to enforce the arbitrator’s subpoena; the superior court granted enforcement (December Order).
- On appeal the court considered (1) whether the superior court orders were appealable and (2) whether the arbitrator had statutory authority under the FAA or California Arbitration Act (CAA) to issue pre‑hearing discovery subpoenas to a nonparty.
- The court held both superior court orders were appealable and reversed: the arbitrator lacked authority to issue the pre‑hearing discovery subpoena to nonparty Aixtron under either federal or California law; it vacated the subpoena and ordered the superior court to grant Aixtron relief.
Issues
| Issue | Plaintiff's Argument (Veeco) | Defendant's Argument (Aixtron) | Held |
|---|---|---|---|
| Appealability of superior court orders denying vacatur/protection and enforcing arbitrator subpoena | August Order not appealable; December Order is appealable but August Order should be dismissed | Orders are appealable under the one‑final‑judgment rule (Berglund/Uber reasoning) because special proceedings resolved discovery dispute finally between party and nonparty | Both orders were appealable under the one‑final‑judgment rule; court considered merits |
| Whether FAA authorizes arbitrator to compel pre‑hearing document production from nonparties | Arbitrator and JAMS rules (and 9 U.S.C. §7) authorize subpoenas and thus pre‑hearing third‑party production | FAA does not permit arbitrators to order pre‑hearing discovery from nonparties; §7 limited to compelling attendance/production at the hearing | Adopted Ninth Circuit (CVS Health) approach: FAA does not grant arbitrators a freestanding power to order pre‑hearing nonparty document production |
| Whether CAA (Cal. Code Civ. Proc.) authorizes arbitrator to order nonparty pre‑hearing discovery here (§§ 1282.6, 1283.05, 1283.1) | §1282.6 (and arbitrator’s signature) permits issuing discovery subpoenas; JAMS rules and incorporation grant discovery authority | CAA limits discovery: §1283.05 applies only when §1283.1 makes it applicable (personal injury/wrongful death) or parties expressly agree to incorporate §1283.05; arbitration clause here did not provide for §1283.05 discovery | CAA did not authorize this subpoena: arbitration agreement did not incorporate §1283.05; §1282.6 does not give unrestricted discovery power to arbitrators; subpoena exceeded statutory authority |
| Whether JAMS rules or arbitration agreement conferred nonparty discovery power | Parties agreed to JAMS rules (per arbitration admin) which allow subpoenas prior to hearing and thus authorize the discovery subpoena | Nonparties (Aixtron) did not consent to arbitration or to be bound by JAMS; JAMS rules do not override statutory limits or confer broader nonparty discovery absent party agreement under §1283.1(b) | JAMS rules do not authorize nonparty pre‑hearing discovery where statute and arbitration agreement do not provide for it; Aixtron had not consented |
Key Cases Cited
- Berglund v. Arthroscopic & Laser Surgery Ctr. of San Diego, L.P., 44 Cal.4th 528 (Cal. 2008) (nonparties to arbitration entitled to full judicial review of an arbitrator’s discovery order)
- CVS Health Corp. v. Vividus, LLC, 878 F.3d 703 (9th Cir. 2017) (FAA §7 does not authorize arbitrators to order pre‑hearing third‑party document production)
- Security Life Ins. Co. of Am. v. Stephens, 228 F.3d 865 (8th Cir. 2000) (arbitrator power to order pre‑hearing document production from nonparties recognized)
- Am. Fed’n of Tel. & Radio Artists v. WJBK‑TV, 164 F.3d 1004 (6th Cir. 1999) (similar to Security Life: broader arbitrator discovery power under FAA)
- Moncharsh v. Heily & Blase, 3 Cal.4th 1 (Cal. 1992) (arbitral finality and limited judicial review of arbitration awards)
- OTO, LLC v. Kho, 8 Cal.5th 111 (Cal. 2019) (arbitration clauses that expressly incorporate §1283.05 permit court‑level discovery rights in arbitration)
- Uber Technologies, Inc. v. Google LLC, 27 Cal.App.5th 953 (Cal. Ct. App. 2018) (superior‑court order resolving a special proceeding to vacate/confirm an arbitrator’s discovery order is appealable under the one‑final‑judgment rule)