2024 NY Slip Op 50469(U)
N.Y. Sup. Monroe2024Background
- Investcloud, Inc. had an agreement with Manning & Napier Advisors, LLC to develop software, with a mandatory arbitration clause referring disputes to JAMS in New York.
- The agreement's vendor selection was managed by PricewaterhouseCoopers (PWC), and Evan Siegal of PWC was named a relevant witness.
- In arbitration, Investcloud sought documents and deposition from Siegal and PWC, alleging Manning did not provide necessary discovery related to the vendor selection process.
- Investcloud served subpoenas on Siegal and PWC for pre-hearing discovery and sought court intervention to compel compliance, without first seeking a ruling from the arbitrator.
- The court entered a temporary stay of arbitration to resolve the discovery issue; the parties agreed the Federal Arbitration Act (FAA) and JAMS rules applied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to Compel Non-party Discovery | Court can compel non-party discovery in FAA arbitration | Only the arbitrator may determine and compel non-party discovery | Only arbitrator can authorize non-party discovery |
| "Special Need or Hardship" Standard | Court should determine if standard is met before compulsion | Arbitrator must make this determination | Arbitrator must decide on "special need or hardship" |
| Role of Court in Arbitration Discovery | Court must intervene for fair discovery | Courts should not interfere in arbitral discovery | Court should not intrude into arbitral discovery |
| Parties' Rights Under JAMS/FAA | Subpoena served by party should be enforced by court | Only arbitrator has subpoena authority under FAA and JAMS | FAA and JAMS rules give subpoena power to arbitrator |
Key Cases Cited
- ImClone Sys. Inc. v. Waksal, 22 A.D.3d 387 (N.Y. App. Div. 2d Dep't 2005) (arbitrator may order non-party discovery upon showing of special need or hardship)
- Nationwide Gen. Ins. Co. v. Investors Ins. Co., 37 N.Y.2d 91 (N.Y. 1975) (courts should avoid unnecessary entanglement in arbitration)
- Goldfinger v. Lisker, 68 N.Y.2d 225 (N.Y. 1986) (court should decline intervention where arbitration procedures are fair)