958 F.3d 126
2d Cir.2020Background
- Washington National Insurance Co. (WNIC) and Bankers Conseco Life Ins. Co. (BCLIC) alleged fraud in a reinsurance scheme and sought ~$134 million in arbitration against Beechwood; claimants subpoenaed OBEX Group LLC and its CEO Randall Katzenstein for documents and testimony.
- OBEX produced a large document set, refused additional narrowed searches and to appear for a hearing unless reimbursed; the arbitration panel issued §7 summonses directing OBEX/Katzenstein to appear in New York and bring specified documents; they did not appear.
- WNIC filed a §7 enforcement petition in SDNY invoking diversity jurisdiction (WNIC Indiana; respondents New York); BCLIC (a New York citizen) did not join the petition.
- Respondents moved to dismiss for lack of diversity (arguing a “look‑through” to arbitration parties, Rule 19 joinder of BCLIC, and insufficient amount in controversy) and to quash the summonses (pre‑hearing discovery, overbreadth, undue burden, privilege); district court denied both motions and granted the petition.
- On appeal respondents repeated jurisdiction and merits objections and added venue (where arbitrators were “sitting”); the panel later received document production and the underlying arbitration settled but privacy/return issues left the appeal live.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject‑matter jurisdiction (diversity) — "look through" | Only parties to the §7 petition determine diversity; WNIC (IN) v. respondents (NY) is diverse | Court must "look through" the petition to underlying arbitration parties (including BCLIC, NY), so no complete diversity | Look only to parties to the petition (Hermès/Doctor's Assocs.); district court had diversity jurisdiction |
| Rule 19 joinder (BCLIC) | BCLIC not necessary/indispensable; court can afford complete relief without it | BCLIC must be joined; its joinder would destroy diversity | BCLIC not a necessary party (did not claim an interest); no joinder required |
| Validity of §7 summonses; pre‑hearing discovery/materiality; Rule 45 objections | Summonses require appearance and production at a hearing and comply with §7; district court not required to rule on Rule 45 objections | Summonses were a subterfuge for pre‑hearing discovery, overbroad, unduly burdensome, and sought privileged matter; Rule 45 protections should be enforced by the court | Summonses valid under §7 (docs to be produced at hearing, may be deemed material); district court not obligated under §7 to adjudicate Rule 45 objections; those matters are for the arbitrators |
| Venue — where arbitrators are “sitting” for §7 enforcement | Panel issued summonses for a hearing in Manhattan; thus arbitrators were sitting in SDNY | Arbitrators previously sat in another district (EDPA); §7 enforcement in SDNY improper | Enforcement proper in SDNY because the specific summonses commanded appearance in Manhattan; "sitting" refers to where arbitrators sat for those summonses |
Key Cases Cited
- Stolt‑Nielsen SA v. Celanese AG, 430 F.3d 567 (2d Cir. 2005) (discussing §7 enforcement and related jurisdictional principles)
- Vaden v. Discover Bank, 556 U.S. 49 (2009) (establishing "look‑through" for federal‑question jurisdiction in FAA petitions)
- Doscher v. Sea Port Group Sec., LLC, 832 F.3d 372 (2d Cir. 2016) (applying Vaden to FAA §1/§4 context for §1331 inquiries)
- Hermès of Paris, Inc. v. Swain, 867 F.3d 321 (2d Cir. 2017) (for §1332 diversity in FAA petitions, look only to parties to the petition and necessary Rule 19 joinees)
- Doctor's Assocs., Inc. v. Distajo, 66 F.3d 438 (2d Cir. 1995) (same principle on assessing diversity in FAA enforcement actions)
- A.F.A. Tours, Inc. v. Whitchurch, 937 F.2d 82 (2d Cir. 1991) (amount‑in‑controversy measured by value of object of litigation for injunctive/declaratory relief)
- St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938) (plaintiff’s good‑faith claim controls amount in controversy unless legal certainty to the contrary)
- Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) (emphasizing federal policy favoring arbitration and limited judicial review)
- Dynegy Midstream Servs., L.P. v. Trammochem, 451 F.3d 89 (2d Cir. 2006) (section 7 does not allow nationwide service; enforcement limited to district where arbitrators are sitting)
- Life Receivables Tr. v. Syndicate 102 at Lloyd's of London, 549 F.3d 210 (2d Cir. 2008) (nonparties retain privacy interests; production may not moot review)