DISCOVERY RESTRICTIONS

Vo v. Technology Credit Union, 108 Cal. App. 5th 632


Vo sued TCU, his former employer, for violation of FEHA after TCU terminated him. TCU’s motion to compel arbitration was denied on the ground that it prohibited Vo from engaging in third party discovery, citing Aixtron, Inc. v. Veeco Instruments, Inc. (2020), 52 Cal. App. 5th 360. TCU appealed and the Court of Appeal reversed.

In Aixtron, a different panel of this court held that an arbitrator could not compel prehearing third party discovery when the arbitration agreement failed to explicitly authorize discovery from nonparties or failed to incorporate the statutes then in effect that authorized prehearing discovery. The court determined that the parties did not provide for discovery in their arbitration agreement under the CAA because the agreement did not mention section 1283.05 or even contain the word “discovery” and thus the arbitrator did not have the authority to issue a subpoena compelling prehearing discovery from the third party. But Aixtron did not consider the issue of whether the arbitration agreement was unconscionable. Rather, the court considered the authority of the arbitrator to order and compel discovery from a nonparty where that party objected to the arbitrator's order.

In Ramirez v. Charter Communications, Inc. (2024) 16 Cal. 5th 478, the court, which did not disapprove of Aixtron or discuss it, made clear that the review of an arbitration agreement for unconscionability turns on whether a party has access to adequate discovery to vindicate its claims. The court then emphasized that giving the arbitrator authority to expand discovery is one way to ensure adequate discovery is available. When a clause is ambiguous as to whether the arbitrator can order additional discovery and susceptible to an interpretation that either renders it valid or void, the court should select an interpretation that makes the contract valid. Here, the parties agreed when the agreement was executed that the incorporated JAMS Rules would control the arbitration procedures. Examining those rules with the reasoning of Ramirez in mind, they allow both parties to take one deposition of the opposing party or individual under the control of the opposing party without the arbitrator's approval. It then gives the arbitrator the authority to expand discovery, permitting Vo the opportunity to obtain the third-party discovery required to adequately arbitrate his claims.

The Supreme Court recently clarified that we should not construe discovery provisions defining the scope of an arbitrator's authority “in a limited way” and instead should select an interpretation that renders an agreement valid. We thus disapprove of Aixtron to the extent it interpreted the scope of an arbitrator's authority narrowly. In accordance with Ramirez, we construe the rule to provide the arbitrator the authority to make available additional nonparty discovery is necessary to allow fair arbitration of the claim. Under the agreement here, there is no limitation to the expanded discovery and no additional burden on either party to justify such discovery. Simply, a party must obtain the approval of the arbitrator.

The procedural posture of the case before us differs from that in Aixtron. In Aixtron, a third party appealed the trial court orders enforcing compliance with an arbitrator's subpoena to produce records. Here, both Vo and TCU are parties to the agreement, and no third party is refusing to comply with a subpoena. To the extent there may be a recalcitrant third party in the course of the arbitration process, an arbitrator would not have the authority to enforce compliance with its discovery order under the JAMS Rules applicable to the agreement here and in Aixtron. But the Supreme Court has clarified that we review an arbitration agreement for unconscionability at the time of formation. Consistent with the direction of Ramirez, we do not determine that the agreement is unenforceable by presuming that a third party would refuse to respond to a discovery order issued by the arbitrator. Here, the JAMS Rules incorporated into the arbitration agreement permit an arbitrator to allow for necessary third-party discovery. The possibility of a recalcitrant third-party witness does not preclude a holding that the discovery available under the provision is adequate and the agreement valid.