Griffin Firm Obtains Landmark Decision from U.S. District Court in Miami, Florida Enforcing Arbitration Subpoena Against Out-of-State, Non-Party Witness

On September 22, 2016, the Law Offices of Montgomery G. Griffin (“LOMGG”) (with the assistance of co-counsel James McQueen, Esq. of Newport Beach) obtained a landmark legal ruling in the United States District Court for the Southern District of Florida (Case No. 1:16-cv-21261JLK).  The case involved a former broker (represented by a major international law firm, Greenberg Traurig LLP) who was refusing to testify in an American Arbitration Association arbitration pending in California that related in part to his handling of certain former clients’ (represented by the LOMGG) brokerage accounts with a major Wall Street firm.  As the court explained in its decision, the former clients alleged that they had suffered “approximately $42 million in losses” in the underlying arbitration, making it one of the largest securities arbitration cases on record for an elderly, retail investor.         

The parties to the arbitration and arbitration panel arranged to hold two days of special hearing sessions in Miami, Florida (near where the broker resided following his relocation from California after FINRA disbarred him).  The arbitration panel issued a summons (or subpoena) to compel the broker’s attendance at the Miami hearing sessions. When the former broker balked at attending the hearing, the LOMGG then filed a petition to enforce the summons on behalf of our clients.  The broker opposed the petition, arguing primarily that, under Section 7 the Federal Arbitration Act (“FAA”), an arbitration summons could not be enforced against an out-of-state, non-party witness (such as the broker). Following significant briefing by both sides, the Florida district court ruled in favor of the LOMGG’s clients and ordered the broker to appear at the special hearing session.  The ruling appears to represent the first time an arbitration party in the United States was able to successfully compel the participation of an out-of-state, non-party witness. The procedures and arguments employed by the LOMGG and accepted by the court have now paved a promising path for all arbitration practitioners to obtain testimony from out-of-state, non-party witnesses in the future.  

The central issue in the matter was how Section 7 of the FAA—the primary (if not exclusive) means for an arbitration party to enforce a subpoena or summons against a non-party—ought to be interpreted.  Section 7 specifies that a petition to enforce an arbitration summons must be brought in the “district court for the district in which [the] arbitrators . . . are sitting” and that the court could compel the witness’s attendance only “in the same manner provided by law for securing the attendance of witnesses . . . in the courts of the United States.”  In the LOMGG’s case, the broker argued in part that because the arbitration panel, parties, and prior proceedings were in California, the arbitration panel was “sitting” in California for purposes of Section 7, meaning that any petition to enforce the summons would need to be brought in California. If the customers had sought enforcement of the summons in California, however, the broker would likely have argued that the California court lacked jurisdiction over him and that the court could not enforce the summons “in the same manner” (quoting Section 7) as a court subpoena since court subpoenas generally must be enforced by a court in close proximity to the witness’s residence.  

The LOMGG argued that by convening a special in-person hearing in Florida near the witness, the panel was effectively “sitting” in Florida for purposes of the summons, making the Florida court the appropriate place for the LOMGG clients to bring their petition to enforce arbitration subpoena.  

The Florida court’s order, which largely adopted the LOMGG’s positions, represents a seminal ruling on the meaning of the “sitting” language of Section 7, as well as an important precedent in general for the enforceability of arbitration summons against out-of-state, non-party witnesses.  Indeed, a 2015 publication by the New York City Bar Association International Commercial Disputes Committee remarked that the committee was not aware of any federal decisions that considered the sitting issue the LOMGG litigated, reflecting that the decision was likely the first of its kind. In addition, the court’s order addressed several other important legal issues raised in the parties briefing that had little-to-no precedent, resolving each favorably for the LOMGG’s clients.  A copy of the court’s order is linked below.

(View Court Order)