STOLT-NIELSEN SA, Stolt-Nielsen Transportation Group Ltd. (SNTG), Stolt-Nielsen Transportation Group, BV, and Stolt-Nielsen Transportation Group, Inc., Appellants, v. CELANESE AG, Celanese, Ltd., and Millenium Petrochemicals, Inc., Defendants-Claimants-Appellees, Celanese Chemicals Europe GMBH, Celanese Pte, Ltd, Grupo Celanese SA, and Corporativos Celanese S. de RL de C.V., Claimants-Appellees, Odfjell ASA, Odfjell USA, Inc., Odfjell Seachem as, Jo Tankers as, Jo Tankers, BV, and Jo Tankers, Inc., Plaintiffs.
Docket No. 04-6373 CV
United States Court of Appeals, Second Circuit
Argued: July 14, 2005. Decided: November 21, 2005.
430 F.3d 567
Hector Torres, Kasowitz, Benson, Torres & Friedman, LLP, New York, NY, for Appellees.
Before: STRAUB and SACK, Circuit Judges, and KRAVITZ, District Judge.*
KRAVITZ, District Judge.
Stolt-Nielsen SA, Stolt-Nielsen Transportation Group, Ltd., Stolt-Nielsen Transportation Group, BV, and Stolt-Nielsen Transportation Group, Inc. (collectively, “Stolt“) appeal from an order of the United States District Court for the Southern District of New York (Jed. S. Rakoff, District Judge) granting a motion to enforce four subpoenas served on Stolt‘s custodians of records and denying Stolt‘s request to quash a subpoena served on its former counsel. The subpoenas were issued by an arbitration panel presiding over an arbitral proceeding to which neither Stolt nor its former counsel is a party. Section 7 of the Federal Arbitration Act (FAA) provides that arbitrators “may summon in writing any person to attend before them ... as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case.”
BACKGROUND
The present case arises out of a dispute over alleged anti-competitive behavior in the business of shipping and transporting chemicals by specialized shipping vessels known as parcel tankers. Celanese AG, Celanese Ltd., and Millenium Petrochemicals, Inc. (collectively, “Claimants“) develop, produce, and sell chemical products. Between 1990 and 2002, Claimants entered into numerous contracts for the shipment of chemical products by Stolt and by two other groups of companies known in this case as “Odfjell” and “JO Tankers.”1 In 2003 and 2004, certain of the Odfjell and JO Tankers groups of companies (as well as certain individuals) pled guilty to a criminal conspiracy to rig bids and fix prices in the parcel tanker market in violation of the Sherman Act,
Pursuant to an arbitration clause contained in the parties’ shipping contracts,2 Claimants instituted arbitration proceedings against Odfjell and JO Tankers for price-fixing, bid-rigging, and other wrongful behavior. Stolt is not a party to Claimants’ arbitration with JO Tankers and Odfjell. Claimants’ arbitration with Odfjell and JO Tankers is to be conducted in New York under the rules of the Society of Maritime Arbitrators, which provide that the powers and duties of the arbitrators will be governed by the Society‘s rules and the Federal Arbitration Act,
In April 2004, the arbitration panel, at Claimants’ request, issued a subpoena ad testificandum and subpoena duces tecum directing non-party Hendrikus van Westenbrugge, a former executive of JO Tankers then incarcerated at a federal correctional facility in New Jersey, to appear for a pre-hearing deposition before Claimants and to produce at that time various documents sought by Claimants. After Mr. van Westenbrugge failed to comply with the subpoena, Claimants moved the District Court to compel compliance with the arbitration panel‘s subpoena. The District Court declined. After considering the language of Section 7 and case law interpreting that provision, the court held that Section 7 grants arbitrators the power to compel non-parties to provide testimony and documents before the arbitrators themselves, but it does not authorize arbitrators “to compel a pre-hearing deposition of or pre-hearing document production from a non-party.” Odfjell ASA v. Celanese AG, 328 F.Supp.2d 505, 507 (S.D.N.Y.2004) (emphasis in original).
On December 7, 2004, the District Court issued an order granting Claimants’ motion to compel compliance with the Stolt subpoenas and denying Stolt‘s motion to quash the O‘Brien subpoena. Having been apprised of the court‘s order, the arbitration panel informed Stolt that the subpoenas would be returnable on December 21, 2004. Stolt then appealed the December 7 order to this Court, and after the arbitration panel rejected Stolt‘s request for a continuance, Stolt asked the District Court to stay the arbitration hearing pending this appeal.
On December 18, 2004, the District Court denied Stolt‘s motion for a stay pending appeal and provided the parties with a written explanation for its December 7 order. Odfjell ASA v. Celanese AG, 348 F.Supp.2d 283 (S.D.N.Y.2004). The District Court rejected Stolt‘s argument that the subpoenas were “thinly disguised attempt[s] to obtain the pre-hearing discovery” that the court had previously prohibited. Id. at 286. The District Court explained that in contrast to the van Westenbrugge subpoenas, “the instant subpoenas ... call for the non-party to appear before the arbitrators themselves.” Id. According to the court, “[t]his difference is dispositive” because Section 7 authorizes arbitrators to summon witnesses to testify “before them” and to bring documents, and that “is precisely what the instant subpoenas require.” Id. at 287. Finally, the court rejected Stolt‘s argument that the subpoenas were unenforceable on grounds of inadmissibility and privilege, concluding that the arbitration panel was the proper venue to raise such arguments in the first instance. Id. at 287-88.
On December 21, 2004, a panel of this Court denied Stolt‘s motion for an emergency stay pending the present appeal. That same day, Mr. O‘Brien and Stolt‘s custodians of records appeared before the arbitration panel in accordance with the subpoenas. Stolt‘s custodians of records brought with them more than 300 boxes of documents in response to the subpoenas. Due to the logistical difficulties in having the witnesses authenticate 300 boxes of documents, the parties agreed to continue compliance with the Stolt subpoenas, pending Claimants’ review of the documents Stolt had produced.
Mr. O‘Brien, however, did testify before the arbitration panel and also provided documents to the panel, in accordance with the subpoena. Stolt‘s counsel asserted attorney-client privilege at several points during the hearing in objection to questions asked of Mr. O‘Brien.3 Based on Stolt‘s assertion of privilege, Mr. O‘Brien refused to answer thirty-two questions that the panel directed him to answer; Stolt also objected to Mr. O‘Brien‘s production of several documents. See Odfjell ASA v. Celanese, 380 F.Supp.2d 297, 300 (S.D.N.Y.2005). After the hearing was adjourned, Claimants moved the District Court to compel Mr. O‘Brien to answer the thirty-two questions and to produce the requested documents. Id. The District Court denied the motion, ruling that Stolt first should be allowed to produce evidence establishing the validity of its claim of attorney-client privilege. The court remanded the matter to the arbitration panel for further proceedings consistent with its opinion. Id. at 303.
I.
At the outset, we address the issues of subject matter and appellate jurisdiction, although the parties themselves do not question the existence of either. In their opening briefs, both parties presumed that the FAA provided a basis for subject-matter jurisdiction. However, in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), the Supreme Court explained that the FAA “creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate, yet it does not create any independent federal-question jurisdiction under
This Court has not previously considered whether Section 7 requires an independent basis for subject matter jurisdiction. Section 7 does explicitly permit an aggrieved party to bring a petition before a district court to enforce an arbitration subpoena. See
We are satisfied that the parties in this case have done so, since maritime jurisdiction provides an ample basis for subject matter jurisdiction. District courts have original jurisdiction under
Satisfied that subject matter jurisdiction exists, we next turn to this Court‘s jurisdiction over the present appeal. See Arnold v. Lucks, 392 F.3d 512, 517 (2d Cir.2004) (“[E]very federal appellate court has a special obligation to satisfy itself... of its own jurisdiction....” (internal quotation marks omitted)). Section 16(a)(3) of the FAA confers a right to an appeal from a “final decision with respect to an arbitration that is subject to this title.”
However, the Seventh Circuit‘s reliance in Amgen on the dichotomy between so-called “independent proceedings” and “embedded proceedings” was cast into considerable doubt by the Supreme Court‘s decision in Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). See Salim Oleochemicals v. M/V SHROPSHIRE, 278 F.3d 90, 92 (2d Cir.2002) (recognizing that the “analysis prescribed in Green Tree displaces [an] approach which turn[s] on the independent/embedded distinction“). There, the Supreme Court rejected the notion that “Congress intended to incorporate the rather complex independent/embedded distinction, and its consequences for finality, into § 16(a)(3).” Green Tree Fin., 531 U.S. at 88-89. Instead, the Supreme Court instructed lower courts that the phrase “final decision” in Section 16(a)(3) is to be construed in accordance with that term‘s “consistent and longstanding interpretation.” Id. at 88.
Under traditional finality principles, a district court‘s decision to compel compliance with a subpoena or to deny a motion to quash a subpoena is generally not a “final decision” and therefore is not immediately appealable. Thus, in United States v. Construction Products Research, Inc., 73 F.3d 464 (2d Cir.1996), we observed that “[t]he general rule is that orders enforcing subpoenas issued in connection with civil and criminal actions ... are not final, and therefore not appealable.” Id. at 468 (emphasis in original). See, e.g., United States v. Ryan, 402 U.S. 530, 532-33, 91 S.Ct. 1580, 29 L.Ed.2d 85 (1971); Cobbledick v. United States, 309 U.S. 323, 328, 60 S.Ct. 540, 84 L.Ed. 783 (1940); In re DG Acquisition Corp., 151 F.3d 75, 85 (2d Cir.1998). See generally 9A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2466, at 87 (2d ed.1995). Instead, in a criminal or civil proceeding, a witness wishing to contest a subpoena must usually disobey the subpoena, be held in civil or criminal contempt, and then appeal the contempt order. See Constr. Prods. Research, 73 F.3d at 469 (“To obtain appellate review, the subpoenaed party must defy the district court‘s enforcement order, be held in contempt, and then appeal the contempt order, which is regarded as final under [
One could certainly argue that enforcement of an arbitration subpoena presents a situation closer to that of an administrative agency subpoena than enforcement of a subpoena in a ordinary civil or criminal proceeding. On the other hand, Section 7 itself explicitly states that if a witness neglects a summons to appear at an arbitration hearing, a district court may “punish said person ... for contempt in the same manner provided by law for securing the attendance of witnesses or their punishment for neglect or refusal to attend in the courts of the United States.”
Having set forth the competing interests, we find that in this case we need not choose between them. For there is another, well-recognized basis for appellate jurisdiction in this particular case that permits us to leave undecided the issue addressed by the Seventh Circuit in Amgen. This Court has previously recognized that where a subpoenaed third-party witness does not object to testifying, but someone else does — often on grounds of privilege — a district court‘s refusal to quash the subpoena is immediately appealable by the objecting party. See In re Grand Jury Proceedings, 219 F.3d 175, 182 n. 3 (2d Cir.2000) (permitting a company to immediately appeal a district court‘s enforcement of subpoenas issued to its counsel and founder). “The theory of immediate appealability... is that the third party [witness] will not be expected to risk a contempt citation and will surrender the documents sought, thereby letting the ‘cat out of the bag’ and precluding effective appellate review at a later stage.” In re Katz, 623 F.2d 122, 124 (2d Cir.1980). Here, Stolt objects to the District Court‘s denial of its motion to quash the O‘Brien subpoena. Like the third-party witness in In re Katz, Mr. O‘Brien cannot be expected to risk a contempt citation rather than comply with the subpoena. Indeed, he has demonstrated that he is more than willing to comply with the subpoena without any additional prompting. Therefore, under traditional finality principles, the District Court‘s order refusing to quash the O‘Brien subpoena is immediately appealable.
In this appeal, the issue is identical for both the Stolt subpoenas and the O‘Brien subpoena, as Stolt asks us to quash both sets of subpoenas “as beyond the scope of Section 7 of the Federal Arbitration Act.” Moreover, the District Court recognized that a motion to compel compliance with the O‘Brien subpoena would have to be granted “for the same reasons ... as requires the Court to grant claimants’ motion to compel compliance with the Stolt-Nielsen subpoena.” Odfjell ASA v. Celanese AG, 348 F.Supp.2d 283, 288 (S.D.N.Y.2004); cf. Lamar Adver., 356 F.3d at 372 (exercising pendent jurisdiction where the district court denied plaintiff‘s “request for a preliminary injunction for the very same reasons it denied [his] motion for summary judgment“). Therefore, under the circumstances of this case, we find that an exercise of our pendent jurisdiction is proper over Stolt‘s appeal from the District Court‘s order enforcing the Stolt subpoenas.6
II.
Turning to the merits of Stolt‘s appeal, we note at the outset that we review the District Court‘s interpretation of Section 7, as we review other questions of statutory interpretation, de novo. See Lander v. Hartford Life & Annuity Ins. Co., 251 F.3d 101, 107 (2d Cir.2001); United States v. Koh, 199 F.3d 632, 636 (2d Cir.1999). Section 7 provides in relevant part that “[t]he arbitrators ... or a majority of them, may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case.”
Like the District Court, we are not persuaded that the December 21 hearing was the ruse Stolt claims it to be. Therefore, we have no occasion to rule on the authority of arbitrators to order non-parties to participate in discovery. Any rule there may be against compelling non-parties to participate in discovery cannot apply to situations, as presented here, in which the non-party is “summon[ed] in writing . . . to attend before [the arbitrators] or any of them as a witness and . . . to bring with him . . . [documents] which may be deemed material as evidence in the case.”
Several factors convince us that the subpoenas were well within the authority provided arbitrators under Section 7, although we hasten to add that we do not suggest that all of these factors need be present in every case in order to justify arbitration subpoenas under Section 7. First, the custodians and Mr. O‘Brien were not ordered to appear for depositions. Depositions usually take place outside the presence of the decision maker, and they are designed to allow parties to prepare for the eventual presentation of evidence or examination of witnesses before the decision maker at trial or a hearing. See Black‘s Law Dictionary 451 (7th ed.1999) (defining “deposition” as “[a] witness‘s out-of-court testimony that is reduced to writing . . . for later use in court or for discovery purposes” (emphasis added)). Here, by contrast, the custodians and Mr. O‘Brien were directed to appear at a hearing before the arbitrators, and all three arbitrators were present at that hearing. See Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 407 (3d Cir.2004) (noting that while Section 7 does not permit a subpoena to compel production from a non-party in absence of a hearing, it does permit subpoenas in which “the non-party has been called to appear in the physical presence of the arbitrator and to hand over the documents at that time“).
Third, the testimony provided at the hearing became part of the arbitration record, to be used by the arbitrators in their determination of the dispute before them. Finally, we note that if Judge Rakoff had been of the view that the arbitrators and Claimants were attempting by artifice to undermine his prior order forbidding the use of Section 7 to take discovery of non-parties, there is every reason to believe he would have so found. But, in fact, he concluded based upon the record before him and the representations of the parties that the December 21 hearing was convened by the arbitrators in good faith and that it complied with Section 7, as well as the spirit and terms of his prior ruling. Section 7 does not deny arbitrators the power to summon witnesses to a hearing under such circumstances.
Contrary to Stolt‘s assertions, the mere fact that the session before the arbitration panel on December 21 was preliminary to later hearings that the panel intended to hold does not transform the December 21 hearing into a discovery device. As Judge Rakoff rightly recognized, “Nothing in the language of the FAA limits the point in time in the arbitration process when [the subpoena] power can be invoked or says that the arbitrators may only invoke this power under section 7 at the time of the trial-like final hearing.” Odfjell ASA, 348 F.Supp.2d at 287. To the contrary, the language of Section 7 is broad, limited only by the requirement that the witness be summoned to appear “before [the arbitrators] or any of them” and that any evidence requested be material to the case. See
According to Stolt, that “Section 7 speaks of a ‘witness’ providing ‘evidence‘” suggests that the provision applies only to a merits hearing akin to a full-blown trial. Yet, often witnesses are called and evidence is adduced in contexts other than trials. For instance, courts hear evidence and testimony at preliminary hearings on issues such as the admissibility of evidence or on a motion for interim relief. See, e.g., New York ex rel. Spitzer v. Operation Rescue Nat‘l, 273 F.3d 184, 199 (2d Cir.2001) (noting that a district court heard testimony at a preliminary injunction hearing); Frank v. Plaza Constr. Corp., 186 F.Supp.2d 420, 425 (S.D.N.Y.2002) (noting that the court held an “evidentiary hearing” before trial to determine the authenticity and admissibility of a document).
So, too, arbitrators may need to hear testimony or receive evidence on preliminary issues — such as whether an arbitration clause is enforceable or whether a claim is barred by relevant statutes of limitations — in advance of an ultimate hearing on the substantive merits of the underlying claims in the arbitration. See, e.g., Tellium, Inc. v. Corning Inc., No. 03 Civ. 8487, 2004 WL 307238, at *1 (S.D.N.Y. Feb.13, 2004) (noting that an arbitration panel “[found] disputed issues of fact regarding” plaintiff‘s claim that it was not a proper party to the arbitration and “grant[ed it] the right to present evidence on the matter at an early hearing in advance of the plenary hearing“); Echeverri v. Starrett City, Inc., No. 96-CV-1006, 1998 WL 903482, at *2 (E.D.N.Y. Dec. 7, 1998) (noting that “consideration of [plaintiff‘s] claim on the merits” was to follow an “initial hearing” on the issue of arbitrability). Arbitrators may also need to hold a preliminary hearing to decide whether to preserve the status quo, as well as to decide issues of privilege, authenticity, and admissibility. See Am. Express Fin. Advisors Inc. v. Thorley, 147 F.3d 229, 230-31 (2d Cir.1998) (recognizing that arbitrators can grant preliminary injunctive relief); American Arbitration Association, Commercial Arbitration Rules and Mediation Procedures, at R-31(b) (“The arbitrator shall determine the admissibility, relevance, and materiality of the evidence offered and may exclude evidence deemed by the arbitrator to be cumulative or irrelevant.“); id. at R-34(a) (“The arbitrator may take whatever interim measures he or she deems necessary, including injunctive relief and measures for the protection or conservation of property and disposition of perishable goods.“). In any case, we doubt that arbitrators are prohibited from making use of their powers under Section 7 to hear testimony and gather evidence as to the merits of a dispute so long as they do so by summoning witnesses and evidence before them.
Furthermore, the present case demonstrates the usefulness of employing subpoenas at a preliminary hearing before the arbitration panel. Because Stolt‘s interests and those of Mr. O‘Brien were not aligned, Mr. O‘Brien did not object to appearing before the arbitrators. In view of Stolt‘s assertion of privilege, however, issues remained as to which questions Mr. O‘Brien would be permitted to answer, even if he were willing to provide answers. Rather than be forced to deal with thorny issues of privilege at the “final” hearing, the arbitrators were instead able to subpoena Mr. O‘Brien for a preliminary session in which those issues could be resolved. Similarly, even though the parties dispensed with the testimony of the Stolt custodians, the hearing could also have usefully resolved issues of foundation and admissibility regarding the Stolt documents in advance of a final hearing.
Stolt objects that if non-party witnesses may be summoned to hearings other than the final “merits hearing,” witnesses will face the burdensome prospect of being recalled to testify at multiple sessions. In that regard, however, it is worth noting that Claimants assured the District Court before it decided to enforce the subpoenas that Claimants would not recall Stolt‘s custodians of records for multiple hearings. Id. at 287 n. 2. Nor should we lightly assume that arbitrators will subpoena third-party witnesses gratuitously, since the arbitrators themselves must attend any hearing at which such subpoenas are returnable. See Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 414 (3d Cir.2004) (Chertoff, J., concurring) (noting that Section 7‘s “procedure requires the arbitrators to decide that they are prepared to suffer some inconvenience of their own” when they subpoena third-party witnesses). Arbitrators issuing subpoenas and district courts asked to enforce them can, and should, take steps to minimize the burden on non-party witnesses. Indeed, that is precisely what happened here.8
Finally, there is an artificiality about Stolt‘s argument that further confirms the wisdom of rejecting it. Arbitration hearings, even “trial-like merits hearings,” are often continued, frequently with many months elapsing between hearing sessions. If the arbitrators had summoned Mr. O‘Brien or the Stolt custodians for the first day of the scheduled hearings on the merits on October 17, 2005, heard their testimony, and then adjourned for ten months, before reconvening, even Stolt would concede that Section 7 would authorize the subpoenas. Yet, according to Stolt, the ten-month gap here between the December 21, 2004, hearing and the beginning of the “merits” hearing somehow rendered the subpoenas invalid. Nothing in the language of Section 7 or common sense dictates such a result. Here, as noted above, all three arbitrators participated in a hearing in which they received testimony and documents, took evidence, and considered matters of admissibility and privilege, resolving many of them. Preliminary or not, what occurred on December 21, 2004, was the sort of hearing to which Section 7 authorizes arbitrators to summon non-party witnesses.
In sum, we again leave to another day the question whether Section 7 authorizes arbitrators to issue discovery-type subpoenas to those who are not parties to the arbitration. We decide only that Section 7 unambiguously authorizes arbitrators to summon non-party witnesses to give testimony and provide material evidence before an arbitration panel, and that is precisely what occurred in this case. Accordingly, the O‘Brien and Stolt subpoenas were authorized by Section 7, and the District Court‘s judgment is affirmed.
Notes
24. ARBITRATION. Any and all differences and disputes of whatsoever nature arising out of this Charter shall be put to arbitration in the City of New York or in the City of London whichever place is specified in Part I of this charter pursuant to the laws relating to arbitration there in force, before a board of three persons, consisting of one arbitrator to be appointed by the Owner, one by the Charterer, and one by the two so chosen.
The arbitrators selected either as prescribed in this title or otherwise, or a majority of them, may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case. The fees for such attendance shall be the same as the fees of witnesses before masters of the United States courts. Said summons shall issue in the name of the arbitrator or arbitrators, or a majority of them, and shall be signed by the arbitrators, or a majority of them, and shall be directed to the said person and shall be served in the same manner as subpoenas to appear and testify before the court; if any person or persons so summoned to testify shall refuse or neglect to obey said summons, upon petition the United States district court for the district in which such arbitrators, or a majority of them, are sitting may compel the attendance of such person or persons before said arbitrator or arbitrators, or punish said person or persons for contempt in the same manner provided by law for securing the attendance of witnesses or their punishment for neglect or refusal to attend in the courts of the United States.