Balancing Burdens: Clarifying the Discovery Standard in Arbitration Proceedings

Abstract

As litigation costs rapidly rise, the United States needs a just and effective, but lower-cost, manner to resolve disputes. For years, arbitration has been that alternative Unfortunately, recent disagreement among the circuits on the scope of arbitrators' authority to compel testimony or document production as conferred by the Federal Arbitration Act (FAA)2 threatens to undermine the desirability and efficacy of arbitration resolution.' When there is uncertainty as to the ability of parties to obtain and analyze information prior to a hearing, contracting parties may perceive arbitration as an unjust or ineffective manner for resolving disputes, and thus will likely not opt in to arbitration proceedings. This may be particularly acute in industries, such as health insurance or reinsurance, in which critical information often resides with nonparties. As parties shift from arbitration to litigation, the overall costs of enforcing their contracts will increase, which will cause the gains from each contract to fall, suggesting that the marginal contract will not be made. To keep arbitration as an effective mode of dispute resolution and maximize the number of efficient contracts made, this procedural issue must be resolved. Congress must take action to clarify the scope of arbitrators' authority and empower them to issue enforceable nonparty subpoenas for prehearing