National Litigation Hotline

The Third Circuit has held that nonparties in an arbitration concerning alleged violations of a nonsolicitation agreement cannot be compelled to produce documents pursuant to an arbitrator's subpoena. Hay Group v. E.B.S. Acquisition Corp., 360 F.3d 404 (3d Cir. March 12).

David Hoffrichter was employed by the Hay Group, a Philadelphia-based management consulting company. In 1999, Hoffrichter left the Hay Group to work for PricewaterhouseCoopers LLP (PwC). At the time Hoffrichter left for PwC, Hay required him to sign a separation agreement that included a clause requiring him to refrain from solicitation of Hay clients or employees for 1 year after his departure. The agreement also required the parties to submit any dispute to binding arbitration. One year later, Hay commenced an arbitration alleging that Hoffrichter had violated the nonsolicitation clause. In 2002, PwC sold the division in which Hoffrichter worked to E.B.S. During the arbitration proceedings, Hay issued subpoenas both to E.B.S. and PwC in an effort to obtain documents from both. E.B.S and PwC resisted the subpoenas. However, the arbitrator agreed that the production of the documents was necessary. Hay ultimately took the discovery dispute to a federal district court for resolution. E.B.S. and PwC did not convince the court, however, that the Federal Arbitration Act (FAA) did not authorize the subpoenas and that the Federal Rules of Civil Procedure prevented the trial court from enforcing a subpoena on a nonparty for documents outside the court's territorial jurisdiction. Thus, the district court enforced the subpoenas, and both PwC and E.B.S. appealed.