Opinion
Case No. 2:23-mc-51767
2024-03-08
AMERICAN INCOME LIFE INSURANCE COMPANY, Petitioner, v. FFL ONYX, L.L.C., Respondent.
Jason Fathallah, Husch Blackwell LLP, Milwaukee, WI, Eric J. Minch, The Miller Law Firm P.C., Rochester, MI, for Petitioner.
Jason Fathallah, Husch Blackwell LLP, Milwaukee, WI, Eric J. Minch, The Miller Law Firm P.C., Rochester, MI, for Petitioner.
ORDER DENYING PETITIONER AILIC'S PETITION TO ENFORCE COMPLIANCE WITH AAA'S SUBPOENA DUCES TECUM (ECF No. 1)
Anthony P. Patti, UNITED STATES MAGISTRATE JUDGE
A. Introduction
The American Arbitration Association (AAA) is currently considering a claim by American Income Life Insurance Company (AILIC) against Valentino Kalaj — a member of FFL Onyx, L.L.C. — and Carl Gretz ("Respondents") in which AILIC alleges misappropriation of confidential information and trade secrets, as well as breaches of contracts. (ECF No. 1, ¶¶ 2, 12; ECF No. 1-2, PageID.9; ECF No. 7-1.) See also AAA Case No. 01-23-0002-6899. FFL Onyx, L.L.C. is "organized in Florida" and is allegedly comprised of members Kalaj
and Elton Yaldo. (ECF No. 1, PageID.1 ¶ 2.)
In November 2023, FFL Onyx was served with a subpoena to produce documents (ECF No. 1-2). Although its principal address is 34119 W. 12 Mile Road, Suite 206, Farmington Hills, MI 48331, service was made via its registered agent, ZenBusiness, Inc., at 336 E. College Ave., Suite 301, Tallahassee, FL 32301. (ECF Nos. 1-3, 7-1). The subpoena is lengthy, seeking a large number of documents, and specifies the "Place for Physical Production/Mailing Address" as Husch Blackwell, LLP in St. Louis, Missouri. (ECF 7-1, PageID.42.) It also provides, in part:
See also https://search.sunbiz.org/Inquiry/CorporationSearch/SearchResultDetail?inquirytype=EntityName&directionType=Initial&searchNameOrder=FFLONYX%20L23000_1629080&aggregateId=flall23000162908-db08d90d-9edf-412a-907e-25e5a2cefcda&searchTerm=ffl%20onyx&listNameOrder=FFLONYX%20L230001629080.
This subpoena may be satisfied by producing copies via secure transmittal to AIL's counsel of record [listing certain emails], or, if necessary, mailing copies to the offices of: Husch Blackwell, LLP, 8001 Forsyth Blvd, Suite 1500, St. Louis, MO 63105, or by different place or method established by mutual agreement of you and AIL.
(Id., PageID.47 ¶ 28 (emphasis in original).)
B. Instant Matter
Currently before the Court is AILIC's December 27, 2023 petition to enforce compliance with AAA's subpoena duces tecum (ECF No. 1), which has been referred to me, consistent with 28 U.S.C. § 636(b)(3) ("A magistrate judge may be assigned such additional duties as are not inconsistent with the Constitution and laws of the United States."). (ECF No. 3.)
The Undersigned interprets this petition as a matter ancillary to the arbitration proceeding, rather than a case dispositive request; therefore, I have addressed this motion by way of an order, as opposed to a report and recommendation. See 28 U.S.C. § 636(b)(1)(A). See e.g., cases involving discovery sought in foreign proceedings, where "Most lower courts [...] have found that such rulings are not dispositive and are therefore subject to review only for clear error." In re Hulley Enters., 400 F. Supp. 3d 62, 71 (S.D.N.Y. 2019) (citing cases). As one court in this Circuit has likewise explained, "[t]he majority of persuasive authority on this topic concludes that a magistrate judge's ruling on a motion for discovery [under 28 U.S.C. § 1782(a)] is nondispositive." JSC MCC Euro-Chem v. Chauhan, No. 17-00005, 2018 U.S. Dist. LEXIS 138075 at *2 (M.D. Tenn. Aug. 15, 2018) (citing cases).
The Court noticed an in-person hearing for March 5, 2024 at 10:30 a.m. (ECF No. 4), and FFL Onyx was served with a copy of the notice via its registered agent, ZenBusiness, Inc., at 336 E. College Ave., Suite 301, Tallahassee, FL 32301 (ECF No. 5-1). On the date set for hearing, attorneys Jason Fathallah and Eric J. Minch appeared on AILIC's behalf. No one appeared for FFL Onyx, nor did its alleged members Kalaj or Yaldo appear.
C. Discussion
An arbitrator "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." 9 U.S.C. § 7 (emphases added). "[I]f 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." (Id. (emphases added).)
AILIC "reasonably believes that FFL Onyx has documents and information relevant to the claims and issues in the Arbitration[,]" and contends that, "[a]s of the date of [its petition], FFL Onyx has not provided any response and has not produced any documents in response to the Subpoena." (ECF No. 1, PageID.4-5 ¶¶ 12, 14.) Although this is the district in which Arbitrator Gasiorek is sitting (see id., PageID.5, ¶¶ 10, 17), Section 7 only compels the attendance of a person or persons before said arbitrator and possibly the production of documents in conjunction with that attendance, i.e., this statute does not compel mere production of documents — as is requested here — to a non-arbitrator, let alone to an out of state counsel for one of the parties. Although, at oral argument, Plaintiff urged the Court not to elevate "form over substance" in applying Section 7 of the Federal Arbitration Act (FAA), the Court simply cannot ignore that the statute's express language: (1) clearly links the power to subpoena, whether a witness alone or a witness with documents, to attendance at hearings; (2) likewise links what a court can remedy to a refusal to "testify"; (3) empowers the Court to "compel the attendance ... before said arbitrator or arbitrators"; and, (4) identifies the purpose of contempt as "securing the attendance of witnesses" or their "punishment for neglect or refusal to attend ... [.]" 9 U.S.C. § 7.
Donald J. Gasiorek (P24987) is an attorney located at 30500 Northwestern Hwy, Ste. 425, Farmington Hills, Michigan 48334. See https://sbm.reliaguide.com/lawyer/48334-MI-Donald-Gasiorek-21811.
In fact, in Dodson Int'l Parts, Inc. v. Williams Int'l Co., No. 19-MC-50489, 2019 WL 5680811 (E.D. Mich. June 26, 2019) (Majzoub, M.J.), this Court made clear that the relief sought here is unavailable under the FAA:
As an initial matter, the undersigned observes that Section 7 does not allow arbitrators to subpoena third-parties for discovery purposes. See Hay Grp., Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 407 (3d Cir. 2004) [Alito, J.] ("Section 7's language unambiguously restricts an arbitrator's subpoena power to situations 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."); Life Receivables Tr. v. Syndicate 102 at Lloyd's of London, 549 F.3d 210, 216 (2d Cir. 2008) (agreeing with Hay and observing that "[w]hen placed in historical context, section 7's narrow subpoena power makes sense, since it largely mirrors the previous version of Federal Rule of Civil Procedure 45" which "did not allow federal courts to issue prehearing document subpoenas on non-parties"); CVS Health Corp. v. Vividus, LLC, 878 F.3d 703, 708 (9th Cir. 2017) ("Given the clear statutory language, we reject the proposition that section 7 grants arbitrators implicit powers to order document discovery from third parties prior to a hearing.").
According to the plain language of Section 7, an arbitrator can direct a third-party to testify and/or produce documents only at a hearing "before" the arbitrator. Dodson contends that the subpoena at issue commands TECS to appear "before" the arbitrator. (Docket no. 6, p. 5.) But Dodson's assertion that testifying and transmitting documents by remote uplink is equivalent to appearing "before the arbitrator" stretches that phrase past its breaking point. In no meaningful sense is a third-party in Connecticut "before" an arbitrator in Michigan. Accordingly, the Court should dismiss Dodson's petition to enforce the subpoena against TECS.
Dodson Int'l Parts, Inc., 2019 WL 5680811, at *2. See also Odfjell ASA v. Celanese, 328 F. Supp.2d 505, 507 (S.D.N.Y. 2004) (expressly agreeing with the Third Circuit's Hay Group decision, cited above).
While Petitioner would have the Court look to Am. Fed'n of Television & Radio Artists, AFL-CIO v. WJBK-TV (New World Commc'ns of Detroit, Inc.), 164 F.3d 1004 (6th Cir. 1999), that Sixth Circuit decision is based 29 U.S.C. § 185, i.e., § 301 of the Labor Relations Management Act (LRMA), and the mention of the FAA is dicta. Am. Fed'n, 164 F.3d at 1009 ("We hold that under § 301, a labor arbitrator is authorized to issue a subpoena duces tecum to compel a third party to produce records he deems material to the case either before or at an arbitration hearing.") (emphasis added). As the Sixth Circuit made clear in that case, it was "not necessary to decide whether the FAA itself applies to Pierce's employment or the arbitration being conducted pursuant to the collective bargaining agreement." Id. Indeed, to emphasize the narrow scope of its ruling, the court went on to "caution that this decision should not be read to mean that a party to the arbitration is entitled to any such discovery, only that a labor arbitrator may issue such a subpoena." Id. (emphasis added, footnote omitted). And notably, the instant matter is not a labor case.
Additionally, the venue provision in FAA § 7 is telling: The District Court to be petitioned is based on where "such arbitrators, or a majority of them, are sitting...." 9 U.S.C. § 7. This is because the relief to be sought is attendance before the arbitrator, with or without documents or records. In the instant matter, non-compliance by FFL Onyx — a non-party Florida limited liability company — is its failure to produce pre-hearing documents in the Eastern District of Missouri. Even if FFL Onyx has a principal address in Farmington Hills, Michigan, it is unclear how this Court would be the court of first instance to enforce this subpoena when Fed. R. Civ. P. 45(d)(2)(B)(i), (d)(3)(A), and (e)(2)(B) all contemplate objections or enforcement actions regarding subpoenas in "the district where compliance is required ... [,]" and only look to transfer a subpoena-related motion to the district where the subpoena was issued — in this case, the Eastern District of Michigan, within which Arbitrator Gasiorek sits — if "the person subject to the subpoena consents" or if "the court finds exceptional circumstances[,]" under Fed. R. Civ. P. 45(f).
D. Order
In its petition, AILIC seeks an order "compelling FFL Onyx to comply with the Subpoena, to produce the requested documents, and that AIL be awarded its costs and attorney's fees incurred in connection with this motion, and such other relief as is just and proper." (ECF No. 1, PageID.5.) Upon consideration of the motion papers and oral argument, and for all the reasons stated on the record by the Court, which are hereby incorporated by reference as though fully restated herein, Section 7 of the FAA does not provide this Court with the authority to compel FFL Onyx to comply with the subpoena, as it is currently phrased. Accordingly, AILIC's petition to enforce compliance with AAA's subpoena duces tecum (ECF No. 1) is DENIED. Finally, although the Court refrains from providing an advisory opinion, in the event AILIC attempts another petition for relief under Section 7 of the Arbitration Act to compel an actual appearance before the arbitrator, Petitioner should also consider the scope, breadth, territorial reach, and proportionality of the subpoena as it is currently phrased, Fed. R. Civ. P. 26(b)(1), Fed. R. Civ. P. 45 ("Subpoena"), Fed. R. Civ. P. 81(a)(5) ("Proceedings Involving a Subpoena"), Fed. R. Civ. P. 81(a)(6)(B) ("9 U.S.C., relating to arbitration"), and the person to whom or the entity to which the subpoena is issued, particularly in light of the recipient's non-party status.
The attention of the parties is drawn to Fed. R. Civ. P. 72(a), which provides a period of fourteen (14) days after being served with a copy of this order within which to file objections for consideration by the district judge under 28 U.S.C. § 636(b)(1). Alternatively, to the extent this motion would be construed as making a dispositive request, and Plaintiff should treat the Undersigned's related opinion as having been offered in a report and recommendation. See E.D. Mich. LR 7.1(e)(1)(A), 28 U.S.C. § 636(b)(1)(B).