Section 7 of FAA: Are “Sitting” and “Seat” Synonymous?

January 28, 2022

Pursuant to Chapter 1 of the Federal Arbitration Act (“FAA”), arbitrators may issue summonses. If any person or persons so ‎summoned to testify refuses or neglects to obey the 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.”  9 U.S.C. § 7. (emphasis added)

Section 208 of Chapter 2 of the FAA provides that Chapter 1 actions and proceedings not in conflict with Chapter 2 or the New York Convention are applicable in international arbitrations.

In Jones Day v. Orrick, Herrington & Sutcliffe LLP, Jones Day brought an arbitration against ex-partner Michael Bhuler for allegedly breaching his ‎partnership agreement as he negotiated to depart Jones Day and join Orrick Herrington & ‎Sutcliffe LLP (“Orrick”).  The arbitration agreement calls for JAMS arbitration, seated in Washington, ‎D.C., under the Federal Arbitration Act (“FAA”).

The arbitrator subpoenaed Orrick and its two partners to appear at a hearing in Washington. ‎ Orrick refused, and Jones Day attempted to enforce the subpoena in D.C. Superior Court.  ‎Among the arguments posited by Orrick was that only the California courts have personal ‎jurisdiction over Orrick.  Jones Day objected.‎

Orrick claims that only California courts have personal jurisdiction, and that only D.C. ‎federal court can enforce the arbitral subpoena, when Orrick no doubt would argue that ‎D.C. federal court lacks subject-matter jurisdiction.  Orrick’s position would mean that ‎Jones Day’s validly-issued arbitral subpoena cannot be enforced in any court in the ‎United States.

‎The Washington, D.C. court sided with Orrick, holding that it did not have personal jurisdiction ‎over Orrick.‎

After the ruling, the JAMS arbitrator issued a new subpoena, calling for Orrick and the partners ‎to appear before him at a hearing in California. Orrick again refused to comply.‎

Jones Day moved to enforce the subpoena in federal court in San Francisco, thereby ‎circumventing Orrick’s personal jurisdiction argument.  In addition to relying on Section 7, Jones ‎Day contended that the court had subject matter jurisdiction pursuant to Chapter 2 of the FAA because Jones Day is seeking to ‎enforce the power of an arbitrator in an international arbitration. Chapter 2, Section 203 of the ‎FAA provides that “[a]n action or proceeding falling under the [Convention on the Recognition ‎and Enforcement of Foreign Arbitral Awards of June 10, 1958, (theNew York Convention”)] ‎shall be deemed to arise under the laws and treaties of the United States,” and “[t]he district ‎courts of the United States . . . shall have original jurisdiction over such an action or proceeding, ‎regardless of the amount in controversy.”  9 U.S.C. § 203.

The district court was unpersuaded and denied the motion, ruling that the FAA required Jones Day to seek enforcement in federal court in the jurisdiction where the ‎arbitration is seated, interpreting the word “sitting” found in 9 U.S.C. § 7  as the equivalent of “seat.” ‎See Jones Day v. Orrick, Herrington & Sutcliffe LLP, et al,  Case No. 21-mc-80181-JST, N. D. Calif. (2021)

The matter is now on expedited appeal to the Ninth Circuit. Jones Day argues that the district ‎court’s interpretation of Section 7 impairs an arbitrator’s ability to obtain ‎information from a non-local witness. Jones Day further asserts that under the FAA and ‎commercial arbitration rules, arbitrators can “sit” for hearings in other locales.  Thus, the language ‎of the statute allows enforcement to be wherever arbitrators are sitting for hearings, not just the ‎seat of the arbitration.

Orrick has countered that Jones Day is attempting to rewrite the statute to ‎allow arbitrators to manufacture venue by traveling to different jurisdictions.  Orrick further ‎asserts that Jones Day’s attempt to establish subject matter jurisdiction is misplaced because Jones Day is relying on provisions in the law granting federal-court jurisdiction for actions to compel international arbitration and enforce ‎international arbitration awards and have no applicability to the question of enforcing subpoenas.

Oral argument before the Ninth Circuit is scheduled for 10 February 2022.‎