Broumand v. Joseph

Background

Stafford Broumand was involved in an ongoing arbitration in New York. The arbitrator issued subpoenas directing Jeremy Joseph and Sean Gabriel, who were not parties to the underlying arbitration, to testify and provide documents. The subpoenas initially called for attendance at an evidentiary hearing in New York City. The arbitrator later ruled that the arbitration would proceed by videoconference.

Joseph and Gabriel did not comply. Broumand filed a petition under Section 7 of the Federal Arbitration Act to compel compliance. Joseph and Gabriel moved to dismiss under Federal Rule of Civil Procedure 12(b)(2), arguing that the court lacked personal jurisdiction, and under Rule 12(b)(6), arguing that the subpoenas were invalid.

Personal Jurisdiction

The court held that Broumand made the required initial showing of personal jurisdiction. It found that the service of Gabriel’s subpoena was sufficient at that stage, even though Gabriel disputed whether he had agreed to accept service.

The court held that New York’s general and specific jurisdiction statutes did not provide a basis for jurisdiction. The respondents’ relationships with New York entities did not make them essentially at home in New York, and Broumand had not shown enough purposeful business activity in New York connected to the subpoenas.

The court separately held that Section 7 of the Federal Arbitration Act permits nationwide service of process. Section 7 refers to the way federal subpoenas are served, and the court concluded that this reference incorporates later changes to Federal Rule of Civil Procedure 45. Because the current rule permits service anywhere in the United States, Section 7 supplied a statutory basis for personal jurisdiction.

The court also held that the relevant contacts for due-process purposes were contacts with the United States as a whole, even though the case reached federal court through diversity jurisdiction rather than federal-question jurisdiction. Because Joseph and Gabriel lived in the United States, they had sufficient minimum contacts. The court further held that requiring them to participate by videoconference was not unreasonable. It therefore denied their Rule 12(b)(2) motions.

Enforceability of the Subpoenas

The court nevertheless held that the subpoenas could not be enforced. Federal Rule of Civil Procedure 45(c) limits where a subpoena may require a person to attend a hearing, including to locations within 100 miles of where the person resides, works, or regularly conducts in-person business. The court held that this limit applies to arbitral subpoenas issued under Section 7 of the Federal Arbitration Act.

The court rejected Broumand’s argument that remote testimony avoided the geographic limit because the respondents would not need to travel. The arbitration remained located in New York, and videoconferencing did not move the hearing to the respondents’ locations. The subpoenas therefore sought to require Joseph and Gabriel to attend a hearing outside the limits of Rule 45(c).

The court also held that Section 7 requires a nonparty who is subpoenaed to provide documents to testify in the arbitrator’s physical presence at a hearing. Video testimony did not satisfy that presence requirement. Because the subpoenas sought documents without requiring in-person testimony before the arbitrator, they were unenforceable on this alternative ground as well.

Disposition

The court’s January 28, 2021 order granted Joseph and Gabriel’s motions to dismiss the petition. The opinion explains that, although the court had personal jurisdiction over them, the petition failed to state a claim on which relief could be granted. The clerk was directed to close the case. The court did not reach several other arguments concerning the underlying arbitration, the subpoenas’ stated time and place of compliance, and Broumand’s alleged lack of diligence.