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Berglund v. Arthroscopic & Laser Surgery Center (Cal. Supreme Ct. - July 17, 2008)

By Shaun Martin

Justice Kennard (and the rest of the California Supreme Court) couldn't be more right. Arbitrators have the statutory power to compel discovery by nonparties. And nonparties should be required to argue first to the arbitrator -- primarily for efficiency reasons -- that they shouldn't be compelled to produce the discovery. But a nonparty is thereafter entitled to full judicial review of any such discovery order. Because the nonparty has not agreed to be bound by the arbitrator's decision, and hence remains able to seek judicial review. Exactly right.

So I agree with everything Justice Kennard says, and think that's exactly right. However -- and perhaps this is a nit, but I think it may be a little more than that -- if I were writing the opinion for the court, I might have also done a little more to describe the precise nature of the judicial review which the Court (rightly) holds remains available in such discovery disputes. For example, I assume that judicial review of the arbitrator's decision is de novo since the arbitrator has no consensual power to bind, and I'd expressly say so. I'd also make express that both the arbitrator and judiciary have the power (but not the obligation) to stay the discovery and/or the underlying arbitration during the pendency of judicial discovery review. I might also have provided at least a minimial degree of insight into how judicial review of such arbital discovery orders should be accomplished as a matter of procedure, since the arbitration statutes themselves delineate how final judicial review is obtained but nowhere explain how interlocutory review may be sought.

Finally, I'd have also answered the obvious -- but lingering and unaddressed -- question regarding whether the party to the arbitration proceeding also has an unlimited right to judicial review of adverse discovery orders vis-a-vis a nonparty. On the one hand, the party has agreed to bind itself to the arbitrator's ruling, and hence the constitutional and statutory basis for judicial review does not exist as applied to parties. On the other hand, it would seem anomalous -- and unfair -- for nonparty discovery to be a one-way rachet in which the nonparty possesses the right to judicial review of an adverse discovery ruling while a converse ruling would be immune from similar review. Sure, the party (unlike the nonparty) has agreed to the finality of arbitration, but I don't think they should be held to have agreed to finality vis-a-vis a nonparty that's not similarly bound.

I'm not sure that Justice Kennard (or anyone else on the Court) disagrees with what I've said above. Though perhaps they -- or at least some -- might. Regardless, given the obvious (and important) implications of the Court's holding, as well as the widespread use of nonparty discovery in arbitration proceedings, I think that it would be extremely helpful to address at least the most central of the resulting issues at the outset, rather than create a mess for the Court of Appeal to sort out over the next several years. In this area, at least, a minimal degree of certainty and guidence might be warranted.

So I agree with the Court. I'd have just done a little more to give parties, arbitrators and lower courts a bigger heads up.

Full post as published by California Appellate Report on July 17, 2008 (boomark / email).