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FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018
NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018
SUPREME COURT OF THE STATE OF NEW YORK
WESTCHESTER COUNTY
In the Matter of the Application of Roche
Molecular Systems, Inc. to Enforce a Subpoena
for the Testimony of Philip Gutry
Index No.: 53064/2018
ROCHE MOLECULAR SYSTEM, INC.,
Petitioner,
- against -
PHILIP GUTRY,
Respondent.
RESPONDENT'S MEMORANDUM OF LAW IN OPPOSTION TO PETITION
FOR ENFORCEMENT OF SUBPOENA AND IN SUPPORT OF REQUEST
TO QUASH SUBPOENA OR FOR A PROTECTIVE ORDER
1
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TABLEOFCONTENTS
PRELIMINARY STATEMENT ..................................................................................................1
STATEMENT OF THE FACTS ..................................................................................................2
ARGUMENT................................................................................................................................4
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I. The Commission Was Improper Under California Law......................................................4
II. This Court Has Authority To Quash The Subpoena
Or Enter A Protective Order Vacating The Subpoena.........................................................6
III. Roche's Attempt To Circumvent the Procedures of the FAA Is Improper .........................7
A. The FAA Applies Here.........................................................................7
B. FAA Section 7 Prohibits the Gutry Deposition............................................. 8
C. Roche May Not Use CPLR § 3119 To Obtain Discovery Prohibited by the FAA... 10
IV. The FAA, Rather Than New York Law, Controls The Arbitral Process...........................12
V. The CPLR Similarly Requires That The Subpoena Be Quashed Or Vacated ...................14
CONCLUSION...........................................................................................................................16
..
11
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TABLE OF AUTHORITIES
Cases
In re Arbitration between Hawaiian Elec. Indus., Inc. & HEI Power Corp.,
No. M-82, 2004 WL 1542254 (S.D.N.Y. July 9, 2004)..............................................................
9
Alexander v. Blue Cross of Cal.,
88 Cal. App. 4th 1082 4
(2001)......................................................................................................
Armendariz v. Foundation Health Psychcare Servs., Inc.,
24 Cal. 4th 83 4
(2000)...................................................................................................................
Christensen v. Nauman,
73 F. Supp. 3d 405 (S.D.N.Y. 11
2014).........................................................................................
Cohen v. S.A.C. Capital Advisors, LLC,
11 Misc. 3d 1054(A) (Sup. Ct. N.Y. Co. ....................................................................
2006)....................................................................
8, 13
COMSAT Corp. . v.Nat'l Sci. Found.,
190 F.3d 269 (4th Cir. 1999).......................................................................................................
7
De Sapio v. Kohlmeyer,
35 N.Y.2d
~ ~ 402 (1974) ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
...............................................................................14, 15
Dicostanzo v. Schwed,
146 A.D.3d 1044 (3d Dep't ..............................................................................................
2017)..............................................................................................
7
Fairchild Corp. . v.Alcoa, Inc.,
510 F.Supp.2d 280 (S.D.N.Y. 11
2007).........................................................................................
Folkways Music Publishers, Inc. v. Weiss,
989 F.2d 108 (2d .......................................................................................................
11
Cir.1993).......................................................................................................
Gilead Sciences, Inc. v. Roche Molecular Sys.,
No. 1777 CV 1628 (Mass. Superior Ct., Essex Co., Nov. 17, ......................................
2017)......................................
2, 9
Hay Group., . Inc. v. E.B.S. Acquisition Corp.,
360 F.3d 404 (3d Cir. 2004)........................................................................................................
........................................................................................................
7
Hendler & Murray v. Lambert,
147 A.D.2d 442 (2d Dep't 14
1989)...............................................................................................
...............................................................................................
Hyatt v. State Franchise Tax Board,
962 N.Y.S.2d 282 (2d Dep't 2013)..........................................................................................
5, 6
In re Aerco Int'1, Inc.,
40 Misc. 3d 571, 573-74 (Sup. Ct. Westchester Co. May 16, 6
2013)..........................................
..........................................
...
111
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In re Beck's Superior Hybrids, Inc.,
940 N.E.2d 352 (Ind. Ct. App. 11
2011)........................................................................................
........................................................................................
In re The Matter of Salvano v. Merrill Lynch,
85 N.Y.2d
~ ~ 173 (1995) ...............................................................................................................
13
Int'l Components Corp. . v.Klaiber,
54 A.D.2d 550 (1st Dep't 14
1976)................................................................................................
................................................................................................
Life Receivables Tr. v. Syndicate 102 at Lloyd's of London,
549 F.3d 210 (2d Cir. 2008)........................................................................................................
........................................................................................................
8
L' d'
Lizardi v. Bogale,
53 Misc. 3d 1202(A) at *2 (Sup. Ct. Queens Co. 2016).......................................................
.......................................................
7, 16
Local 447 of Int'l Union of Painters & Allied Trades v. Feaker Painting, Inc.,
788 N.W.2d 398 (Iowa Ct. App. 14
2010).....................................................................................
.....................................................................................
Mastrobuono v. Shearson Lehman Hutton, Inc.,
514 U.S.
~ ~ 52 (1995)..............................................................................................................
13
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 12,
Matter of Diamond Waterproofing Systems, Inc. v. 55 Liberty Owners Corp.,
4 N.Y.3d
~ ~ 247 (2005) ...................................................................................................................
8
Odfjell ASA v. Celanese AG,
328 F. Supp. 2d 505 (S.D.N.Y. 2004).........................................................................................
9
Snap Parking, LLC v. Morris Auto Enterprises, LLC,
No. A-4733-15T4, 2017 WL 1131068 (N.J. Super. Ct. App. Div. Mar. 27, 2017)..................
..................
10
Sovak v. Chugai Pharm. Co.,
280 F.3d 1266 (9th Cir.)............................................................................................................
13
Stolt-Nielsen Transp. . Group, Inc. v. Celanese AG,
430 F.3d 567 (2d Cir. 2005)........................................................................................................
........................................................................................................
9
Travelers Indem. Co. v. United Diagnostic Imaging, P.C.,
73 A.D.3d 791 (2d Dep't 14
2010).................................................................................................
.................................................................................................
Volt Information Sciences., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ.,
489 U.S.
~ ~ 468 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 12
(1989)..................................................................................................................
Statutes
9 U.S.C.
~ ~ ~§ 7...........................................................................................................................
10
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 8,
9,
Cal. Civ. Proc. Code § 1282.6(a)....................................................................................................
....................................................................................................
5
Cal. Civ. Proc. Code § 1283 5
...........................................................................................................
.
1V
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.
Civ. Proc. Code § 1283.1 4
........................................................................................................
Cal. Civ. Proc. Code § 2031.060(h)................................................................................................
6
Cal. Civ. Proc. Code § 2031.320(b)................................................................................................
6
CPLR § 2304...............................................................................................................................
6
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 4,
CPLR § 3103.........................................................................................................................
15
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 4,
7,
CPLR § passim
3119..........................................................................................................................
INDIANA CODE 34-44.5 11
.................................................................................................................
Treatises
CONNORS, PRACTICE COMMENTARIES, MCKINNEY'S CONS. LAWS OF N.Y., BOOK 7B, CPLR §
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
V
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PRELIMINARY STATEMENT
In an over-zealous attempt to obtain discovery itis not entitled to in an arbitration
Francisco,l
proceeding before the American Arbitration Association in San petitioner Roche
("Roche" "Petitioner"
Molecular Systems, Inc. or "Petitioner") has overstepped state and federal law by
obtaining a commission to depose non-party Philip Gutry from a clerk in state court in California
who apparently rubber-stamped its inappropriate request, and serving a subpoena based on iton
"Subpoena" -
Gutry in New York (the "Subpoena"). Petitioner's attempt to depose Gutry who has already
offered to appear at in the arbitration - is improper for five reasons.
hearing underlying
First, non-party discovery is extremely limited in California arbitrations and does not
include Petitioner's attempt to depose Gutry here. The California Civil Discovery Act authorizes
arbitrators to issue third-party subpoenas in just two situations: (1) where the action is a personal
injury or death case, and (2) where the arbitration agreement explicitly provides for third-party
discovery. Neither is true here, and Petitioner's commission should never have been issued. Had
Petitioner's application received any judicial review at all in California, itwould never have been
granted. But as Petitioners admit, itdid not.
Second, the Subpoena demands that Gutry appear at a deposition pursuant to CPLR §
3119. By attempting to employ CPLR § 3119 in an arbitral context, Petitioner is trying to avoid
the clear - and deliberate - rules established the Federal Arbitration Act that
by ("FAA")
prohibit exactly this kind of arbitral discovery from non-parties. CPLR § 3119 was not intended
to expand the scope of discovery permitted by arbitrators in arbitral proceedings and this court
should not read itto do so.
1In Re AAA Gilead Inc. v. Roche Molecular No. 01-16-0004-
Arbitration, Sciences, System, Inc.,
"Arbitration"
7625 (the "Arbitration").
I
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Third, a similar request from Roche has already been denied by a state court in
Massachusetts. See Gilead Sciences, Inc. v. Roche Molecular Sys., No. 1777 CV 1628 (Mass.
Superior Ct., Essex Co., Nov. 17, 2017), attached as Exhibit A to the March 12, 2018
Affirmation of Lisa Lebowitz. This Court should do the same thing here. As Roche is aware
from this prior effort to obtain the same discovery in Massachusetts as here, its attempt at
enforcement of a non-party arbitral deposition subpoena should be happening in federal court in
the Northern District of California.
Fourth, under the FAA, quashing the Subpoena is warranted since the Second Circuit
explicitly prohibits the pre-hearing deposition of a non-party in an arbitration proceeding. Gutry
has volunteered to provide what the Second Circuit allows as far as the of non-
already testimony
party at arbitration: testimony at a hearing. In short, Roche is trying to mis-use CPLR § 3119 to
get discovery itis not entitled to under state and federal law.
Finally, even if the Subpoena were proper under the FAA, the Subpoena should be
quashed or vacated pursuant to the CPLR because: (i)no extraordinary circumstances exist that
would warrant the issuance of the Subpoena, and (ii)the Subpoena would present an
unreasonable burden on since itwill force him to twice - once for a deposition and
Gutry testify
once at the arbitration - as a to the arbitration.
hearing non-party
STATEMENT OF THE FACTS
("Gilead"
Arbitration claimant Gilead Sciences, Inc. ("Gilead") is a research biopharmaceutical
company that was founded in 1987 in Foster City, California. According to itswebsite, Gilead
has become one of the largest biopharmaceutical companies in the world, and has locations
throughout North America including Florida, Washington State, Washington, D.C., Canada and
Mexico. See Lebowitz Aff. Ex. B. Gutry is a former employee of Gilead.
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Arbitration respondent and Petitioner Roche was founded in the early 1990s and
according to itswebsite, develops, manufactures and supplies a wide array of innovative medical
diagnostic products, tests, platforms and technologies. It isheadquartered in Pleasanton,
California, and maintains locations in New Jersey, California, Massachusetts and Switzerland.
Lebowitz Aff. ¶ 5.
On or about January 29, 2018, Roche received a commission from the Superior Court of
California, County of San Francisco, purporting to authorize a pre-hearing deposition upon oral
"Commission"
examination of non-party Philip Gutry to take place in New York (the "Commission"). Lebowitz
Ex. C. By Roche's own admission, the Commission was not awarded on the merits by a judge.
Itwas simply issued by a clerk without any kind of judicial review. Memo of Law in Support of
Petition at 2 n.2. As set forth in greater detail below, had itbeen reviewed by a California judge
itnever would have been issued.
On February 12, 2018, Roche obtained the Subpoena pursuant to CPLR § 3119 and
served iton Gutry. Lebowitz Ex. D. The Subpoena demands that Gutry appear and attend a pre-
hearing deposition in connection with the Arbitration. It states that itseeks the deposition
because Gutry allegedly acted on behalf of Gilead in negotiating a 2008 Amendment to a
License Agreement between Roche and a subsidiary of Gilead at issue in the Arbitration.
On or about February 12, 2018, predecessor counsel for Gutry advised counsel for Roche
that Gutry would voluntarily appear for an early, pre-merits hearing before the arbitral tribunal to
provide testimony, but would not appear for a pre-hearing deposition. Lebowitz Aff. ¶ 9. By
letter dated February 26, 2018, Gutry's current counsel reiterated his offer to appear at an early
hearing before the arbitral tribunal to provide testimony and further advised Roche's counsel that
the Subpoena was improper because itsought discovery that was prohibited under the FAA.
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Lebowitz Ex. E. Pursuant to CPLR § 2304, the February 26, 2018 letter formally requested that
Roche withdraw the Subpoena; counsel for Roche refused. Counsel met and conferred to resolve
the dispute surrounding the Subpoena and the deposition but were unable to do so. Lebowitz
Aff. ¶¶ 11-13.
On March 5, 2018, Roche filed the instant Petition to enforce the Subpoena. Gutry
opposes the Petition and seeks an order pursuant to CPLR § 2304 to quash the Subpoena, or
alternatively, pursuant to CPLR § 3103, for a protective order vacating the Subpoena.
ARGUMENT
L The Commission Was Improper Under California Law
Under California law, Petitioner had no right to subpoena Gutry for a pre-hearing
clause.2
discovery deposition in a California arbitration arising out of a contractual arbitration clause.
Gutry has already offered Petitioner all that they are entitled to under California law: to appear
at a hearing and provide testimony. The Superior Court of California had no authority to issue
the pre-hearing deposition subpoena to non-party Gutry, itwas not valid under California law,
and thus CPLR § 3119 does not apply.
There is an extremely narrow right to non-party discovery in California arbitrations
arising out of contracts. See, e.g.,Armendariz v. Foundation Health Psychcare Servs., Inc., 24
Cal. 4th 83, 106 n.11 (2000) ("a limitation on discovery is one important component of the
'simplicity, informality, and expedition of arbitration'"). The California Civil Discovery Act
authorizes arbitrators to issue third-party subpoenas in just two situations: (1) where the action is
a personal injury or death case, and (2) where the arbitration agreement explicitly provides for
third-party discovery. Cal. Civ. Proc. Code § 1283.1; Alexander v. Blue Cross of Cal., 88 Cal.
2
The choice of law provision in the license agreement provides that it "shall be governed by and
California."
construed in accordance with the laws of the State of Rabinowitz Ex. 16.
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App. 4th 1082, 1088 (2001). In contract cases like the one at issue here, the ability of a party to
issue a subpoena depends on the specific terms of the arbitration agreement -
specifically,
whether itexpressly incorporates Section 1283.05 of the California Civil Discovery Act. Cal.
Civ. Proc. Code § 1283.1.
The arbitration provision at issue here does not expressly incorporate Section 1283.05 or
provide for third-party discovery. Rabinowitz Ex. 1 ¶ 4. Thus, the clerk at the Superior Court of
California who rubber-stamped Petitioner's request to depose Gutry had no authority to do so,
and the subpoena for his deposition should never have been issued.
Petitioner's claim to the arbitration panel that "California law ...provide[s] expeditious
procedures for [] obtaining a commission from California authorizing the deposition of a third
arbitration"
party in New York for purposes of this was simply inaccurate. Rabinowitz Ex. 2 at
4. Had their application received any judicial review at allin California, itwould never have
been granted. But as Petitioners admit, itdid not.
Under California law, arbitrators have the authority to order witnesses to appear at a
hearing but cannot order the deposition of a witness unless "exceptional circumstances exist as to
make itdesirable, in the interest of justice and with due regard to the importance of presenting
hearing"
the testimony of witnesses orally at the to allow a deposition to be taken and used as
evidence at an arbitration hearing. Cal. Civ. Proc. Code §§ 1282.6(a), 1283. Here, Gutry has
"exceptional"
affirmatively offered to appear at the hearing. There is no need, letalone an need,
for him to be also subjected to an evidentiary deposition in addition to his live hearing testimony.
Petitioner's cases construing CPLR § 3119 are inapposite. Hyatt v. State Franchise Tax
Board, 962 N.Y.S.2d 282 (2d Dep't 2013), cited by Petitioner in itsmemo of law here and in its
initial application to the arbitration panel, Rabinowitz Ex. 2 at 4, did not involve an arbitral
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subpoena to a non-party like Gutry. The petitioner there sought to quash non-party deposition
subpoenas issued by the California Franchise Tax Board in the context of a tax audit.
Similarly, In re Aerco Int'1,Inc., involved a motion to quash nonparty subpoenas for
depositions and documents arising out of a proceeding in New Jersey Superior Court. 40 Misc.
3d 571, 573-74 (Sup. Ct. Westchester Co. May 16, 2013). Because that court had already
reviewed the subpoenas and was "in a better position to determine the appropriate scope of
subpoena,"
disclosure and has already reviewed the this court afforded the prior decisions of the
latitude"
New Jersey Superior Court "the widest possible and denied the motion to quash. None
of the nonparties at issue in that case offered to testify.
California law provides that sanctions are available to non-parties -
monetary including
attorney's fees and costs - for for a protective order or a motion to
successfully moving opposing
compel. See Cal. Civ. Proc. Code §§ 2031.060(h), 2031.320(b).
IL This Court Has Authority To Quash The Subpoena Or Enter A Protective Order
Vacating The Subpoena
Because the commission was issued by the clerk of the California court without judicial
review, this Court need not give the issuance of the commission any deference. See Hyatt v.
State Franchise Tax Bd., 105 A.D.3d 186 (2d Dep't 2013). CPLR § 3119 specifically authorizes
applications for protective orders and to quash or modify an out-of-state subpoena served in New
("
York. Id. at 200; see also CPLR § 3119(e) ("An application to the court for a protective order or
to enforce, quash, or modify a subpoena issued under this section must comply with the rules or
statutes of this state and be submitted to the court in the county in which discovery is to be
conducted").
"A motion to quash, fix conditions or modify a subpoena shall be made promptly in the
returnable."
court in which the subpoena is CPLR § 2304; see also Hyatt, 105 A.D.3d at 201-2
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"nonjudicial" "office"
("A witness subject to such a or subpoena may always challenge the
subpoena in court on the ground that itcalls for irrelevant or immaterial documents or subjects
the witness to harassment"); Lizardi v. Bogale, 53 Misc. 3d 1202(A) at *2 (Sup. Ct. Queens Co.
2016) (quashing non-party subpoena and noting that "as a matter of policy, nonparties ordinarily
should not be burdened with responding to subpoenas for lawsuits in which they have no stake or
interest unless the particular circumstances of the case require their involvement.")
In addition, this court has broad discretion to enter a protective order vacating the
subpoena. CPLR § 3103 provides that a court may "on its own initiative, or on motion of any
party or of any person from whom or about whom discovery is sought, make a protective order
denying, limiting, conditioning or regulating the use of any disclosure device. Such order shall
be designed to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other
courts."
prejudice to any person or the CPLR § 3103(a); see also, Dicostanzo v. Schwed, 146
A.D.3d 1044, 1047 (3d Dep't 2017) (affirming trial court's grant of a protective order vacating
plaintiffs request for production of documents "where, as here, a majority of the disclosure
demands were overbroad, duplicative, immaterial or improper, a trial court may vacate, rather
than prune, the entire demand.)
III.Roche's Attempt To Circumvent The Procedures Of The FAA Is Improper
A. The FAA Applies Here
"An arbitrator's authority over parties that are not contractually bound by the arbitration
Act."
agreement is strictly limited to that granted by the Federal Arbitration Hay Group., . Inc. v.
E.B.S. Acquisition 360 F.3d —
406-07 (3d Cir. see also COMSAT
Corp.,., 404, 2004) (Alito, J.);
("
Corp. . v.Nat'l Sci. Found., 190 F.3d 269, 275 (4th Cir. 1999) ("The subpoena powers of an
arbitrator are limited to those created by the express provisions of the FAA.").
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In addition, the FAA "applies expansively to any transaction affecting interstate
commerce and signifies Congressional intent to exercise its Commerce Clause powers to the
extent."
fullest Cohen v. S.A.C. Capital Advisors, LLC, 11 Misc. 3d 1054(A) (Sup. Ct. N.Y. Co.
2006); see also, Matter of Diamond Waterproofing Systems, Inc. v. 55 Liberty Owners Corp.,. 4
(" "affects"
N.Y.3d 247, 252 (2005) where a contract containing an arbitration provision
interstate commerce, disputes arising thereunder are subject to the FAA."). The instant
Arbitration invo
Preview
FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 SUPREME COURT OF THE STATE OF NEW YORK WESTCHESTER COUNTY In the Matter of the Application of Roche Molecular Systems, Inc. to Enforce a Subpoena for the Testimony of Philip Gutry Index No.: 53064/2018 ROCHE MOLECULAR SYSTEM, INC., Petitioner, - against - PHILIP GUTRY, Respondent. RESPONDENT'S MEMORANDUM OF LAW IN OPPOSTION TO PETITION FOR ENFORCEMENT OF SUBPOENA AND IN SUPPORT OF REQUEST TO QUASH SUBPOENA OR FOR A PROTECTIVE ORDER 1 1 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 TABLEOFCONTENTS PRELIMINARY STATEMENT ..................................................................................................1 STATEMENT OF THE FACTS ..................................................................................................2 ARGUMENT................................................................................................................................4 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ I. The Commission Was Improper Under California Law......................................................4 II. This Court Has Authority To Quash The Subpoena Or Enter A Protective Order Vacating The Subpoena.........................................................6 III. Roche's Attempt To Circumvent the Procedures of the FAA Is Improper .........................7 A. The FAA Applies Here.........................................................................7 B. FAA Section 7 Prohibits the Gutry Deposition............................................. 8 C. Roche May Not Use CPLR § 3119 To Obtain Discovery Prohibited by the FAA... 10 IV. The FAA, Rather Than New York Law, Controls The Arbitral Process...........................12 V. The CPLR Similarly Requires That The Subpoena Be Quashed Or Vacated ...................14 CONCLUSION...........................................................................................................................16 .. 11 2 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 TABLE OF AUTHORITIES Cases In re Arbitration between Hawaiian Elec. Indus., Inc. & HEI Power Corp., No. M-82, 2004 WL 1542254 (S.D.N.Y. July 9, 2004).............................................................. 9 Alexander v. Blue Cross of Cal., 88 Cal. App. 4th 1082 4 (2001)...................................................................................................... Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal. 4th 83 4 (2000)................................................................................................................... Christensen v. Nauman, 73 F. Supp. 3d 405 (S.D.N.Y. 11 2014)......................................................................................... Cohen v. S.A.C. Capital Advisors, LLC, 11 Misc. 3d 1054(A) (Sup. Ct. N.Y. Co. .................................................................... 2006).................................................................... 8, 13 COMSAT Corp. . v.Nat'l Sci. Found., 190 F.3d 269 (4th Cir. 1999)....................................................................................................... 7 De Sapio v. Kohlmeyer, 35 N.Y.2d ~ ~ 402 (1974) ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ...............................................................................14, 15 Dicostanzo v. Schwed, 146 A.D.3d 1044 (3d Dep't .............................................................................................. 2017).............................................................................................. 7 Fairchild Corp. . v.Alcoa, Inc., 510 F.Supp.2d 280 (S.D.N.Y. 11 2007)......................................................................................... Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108 (2d ....................................................................................................... 11 Cir.1993)....................................................................................................... Gilead Sciences, Inc. v. Roche Molecular Sys., No. 1777 CV 1628 (Mass. Superior Ct., Essex Co., Nov. 17, ...................................... 2017)...................................... 2, 9 Hay Group., . Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404 (3d Cir. 2004)........................................................................................................ ........................................................................................................ 7 Hendler & Murray v. Lambert, 147 A.D.2d 442 (2d Dep't 14 1989)............................................................................................... ............................................................................................... Hyatt v. State Franchise Tax Board, 962 N.Y.S.2d 282 (2d Dep't 2013).......................................................................................... 5, 6 In re Aerco Int'1, Inc., 40 Misc. 3d 571, 573-74 (Sup. Ct. Westchester Co. May 16, 6 2013).......................................... .......................................... ... 111 3 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 In re Beck's Superior Hybrids, Inc., 940 N.E.2d 352 (Ind. Ct. App. 11 2011)........................................................................................ ........................................................................................ In re The Matter of Salvano v. Merrill Lynch, 85 N.Y.2d ~ ~ 173 (1995) ............................................................................................................... 13 Int'l Components Corp. . v.Klaiber, 54 A.D.2d 550 (1st Dep't 14 1976)................................................................................................ ................................................................................................ Life Receivables Tr. v. Syndicate 102 at Lloyd's of London, 549 F.3d 210 (2d Cir. 2008)........................................................................................................ ........................................................................................................ 8 L' d' Lizardi v. Bogale, 53 Misc. 3d 1202(A) at *2 (Sup. Ct. Queens Co. 2016)....................................................... ....................................................... 7, 16 Local 447 of Int'l Union of Painters & Allied Trades v. Feaker Painting, Inc., 788 N.W.2d 398 (Iowa Ct. App. 14 2010)..................................................................................... ..................................................................................... Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. ~ ~ 52 (1995).............................................................................................................. 13 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 12, Matter of Diamond Waterproofing Systems, Inc. v. 55 Liberty Owners Corp., 4 N.Y.3d ~ ~ 247 (2005) ................................................................................................................... 8 Odfjell ASA v. Celanese AG, 328 F. Supp. 2d 505 (S.D.N.Y. 2004)......................................................................................... 9 Snap Parking, LLC v. Morris Auto Enterprises, LLC, No. A-4733-15T4, 2017 WL 1131068 (N.J. Super. Ct. App. Div. Mar. 27, 2017).................. .................. 10 Sovak v. Chugai Pharm. Co., 280 F.3d 1266 (9th Cir.)............................................................................................................ 13 Stolt-Nielsen Transp. . Group, Inc. v. Celanese AG, 430 F.3d 567 (2d Cir. 2005)........................................................................................................ ........................................................................................................ 9 Travelers Indem. Co. v. United Diagnostic Imaging, P.C., 73 A.D.3d 791 (2d Dep't 14 2010)................................................................................................. ................................................................................................. Volt Information Sciences., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. ~ ~ 468 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 12 (1989).................................................................................................................. Statutes 9 U.S.C. ~ ~ ~§ 7........................................................................................................................... 10 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 8, 9, Cal. Civ. Proc. Code § 1282.6(a).................................................................................................... .................................................................................................... 5 Cal. Civ. Proc. Code § 1283 5 ........................................................................................................... . 1V 4 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 . Civ. Proc. Code § 1283.1 4 ........................................................................................................ Cal. Civ. Proc. Code § 2031.060(h)................................................................................................ 6 Cal. Civ. Proc. Code § 2031.320(b)................................................................................................ 6 CPLR § 2304............................................................................................................................... 6 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 4, CPLR § 3103......................................................................................................................... 15 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 4, 7, CPLR § passim 3119.......................................................................................................................... INDIANA CODE 34-44.5 11 ................................................................................................................. Treatises CONNORS, PRACTICE COMMENTARIES, MCKINNEY'S CONS. LAWS OF N.Y., BOOK 7B, CPLR § ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ V 5 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 PRELIMINARY STATEMENT In an over-zealous attempt to obtain discovery itis not entitled to in an arbitration Francisco,l proceeding before the American Arbitration Association in San petitioner Roche ("Roche" "Petitioner" Molecular Systems, Inc. or "Petitioner") has overstepped state and federal law by obtaining a commission to depose non-party Philip Gutry from a clerk in state court in California who apparently rubber-stamped its inappropriate request, and serving a subpoena based on iton "Subpoena" - Gutry in New York (the "Subpoena"). Petitioner's attempt to depose Gutry who has already offered to appear at in the arbitration - is improper for five reasons. hearing underlying First, non-party discovery is extremely limited in California arbitrations and does not include Petitioner's attempt to depose Gutry here. The California Civil Discovery Act authorizes arbitrators to issue third-party subpoenas in just two situations: (1) where the action is a personal injury or death case, and (2) where the arbitration agreement explicitly provides for third-party discovery. Neither is true here, and Petitioner's commission should never have been issued. Had Petitioner's application received any judicial review at all in California, itwould never have been granted. But as Petitioners admit, itdid not. Second, the Subpoena demands that Gutry appear at a deposition pursuant to CPLR § 3119. By attempting to employ CPLR § 3119 in an arbitral context, Petitioner is trying to avoid the clear - and deliberate - rules established the Federal Arbitration Act that by ("FAA") prohibit exactly this kind of arbitral discovery from non-parties. CPLR § 3119 was not intended to expand the scope of discovery permitted by arbitrators in arbitral proceedings and this court should not read itto do so. 1In Re AAA Gilead Inc. v. Roche Molecular No. 01-16-0004- Arbitration, Sciences, System, Inc., "Arbitration" 7625 (the "Arbitration"). I 6 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 Third, a similar request from Roche has already been denied by a state court in Massachusetts. See Gilead Sciences, Inc. v. Roche Molecular Sys., No. 1777 CV 1628 (Mass. Superior Ct., Essex Co., Nov. 17, 2017), attached as Exhibit A to the March 12, 2018 Affirmation of Lisa Lebowitz. This Court should do the same thing here. As Roche is aware from this prior effort to obtain the same discovery in Massachusetts as here, its attempt at enforcement of a non-party arbitral deposition subpoena should be happening in federal court in the Northern District of California. Fourth, under the FAA, quashing the Subpoena is warranted since the Second Circuit explicitly prohibits the pre-hearing deposition of a non-party in an arbitration proceeding. Gutry has volunteered to provide what the Second Circuit allows as far as the of non- already testimony party at arbitration: testimony at a hearing. In short, Roche is trying to mis-use CPLR § 3119 to get discovery itis not entitled to under state and federal law. Finally, even if the Subpoena were proper under the FAA, the Subpoena should be quashed or vacated pursuant to the CPLR because: (i)no extraordinary circumstances exist that would warrant the issuance of the Subpoena, and (ii)the Subpoena would present an unreasonable burden on since itwill force him to twice - once for a deposition and Gutry testify once at the arbitration - as a to the arbitration. hearing non-party STATEMENT OF THE FACTS ("Gilead" Arbitration claimant Gilead Sciences, Inc. ("Gilead") is a research biopharmaceutical company that was founded in 1987 in Foster City, California. According to itswebsite, Gilead has become one of the largest biopharmaceutical companies in the world, and has locations throughout North America including Florida, Washington State, Washington, D.C., Canada and Mexico. See Lebowitz Aff. Ex. B. Gutry is a former employee of Gilead. 7 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 Arbitration respondent and Petitioner Roche was founded in the early 1990s and according to itswebsite, develops, manufactures and supplies a wide array of innovative medical diagnostic products, tests, platforms and technologies. It isheadquartered in Pleasanton, California, and maintains locations in New Jersey, California, Massachusetts and Switzerland. Lebowitz Aff. ¶ 5. On or about January 29, 2018, Roche received a commission from the Superior Court of California, County of San Francisco, purporting to authorize a pre-hearing deposition upon oral "Commission" examination of non-party Philip Gutry to take place in New York (the "Commission"). Lebowitz Ex. C. By Roche's own admission, the Commission was not awarded on the merits by a judge. Itwas simply issued by a clerk without any kind of judicial review. Memo of Law in Support of Petition at 2 n.2. As set forth in greater detail below, had itbeen reviewed by a California judge itnever would have been issued. On February 12, 2018, Roche obtained the Subpoena pursuant to CPLR § 3119 and served iton Gutry. Lebowitz Ex. D. The Subpoena demands that Gutry appear and attend a pre- hearing deposition in connection with the Arbitration. It states that itseeks the deposition because Gutry allegedly acted on behalf of Gilead in negotiating a 2008 Amendment to a License Agreement between Roche and a subsidiary of Gilead at issue in the Arbitration. On or about February 12, 2018, predecessor counsel for Gutry advised counsel for Roche that Gutry would voluntarily appear for an early, pre-merits hearing before the arbitral tribunal to provide testimony, but would not appear for a pre-hearing deposition. Lebowitz Aff. ¶ 9. By letter dated February 26, 2018, Gutry's current counsel reiterated his offer to appear at an early hearing before the arbitral tribunal to provide testimony and further advised Roche's counsel that the Subpoena was improper because itsought discovery that was prohibited under the FAA. 8 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 Lebowitz Ex. E. Pursuant to CPLR § 2304, the February 26, 2018 letter formally requested that Roche withdraw the Subpoena; counsel for Roche refused. Counsel met and conferred to resolve the dispute surrounding the Subpoena and the deposition but were unable to do so. Lebowitz Aff. ¶¶ 11-13. On March 5, 2018, Roche filed the instant Petition to enforce the Subpoena. Gutry opposes the Petition and seeks an order pursuant to CPLR § 2304 to quash the Subpoena, or alternatively, pursuant to CPLR § 3103, for a protective order vacating the Subpoena. ARGUMENT L The Commission Was Improper Under California Law Under California law, Petitioner had no right to subpoena Gutry for a pre-hearing clause.2 discovery deposition in a California arbitration arising out of a contractual arbitration clause. Gutry has already offered Petitioner all that they are entitled to under California law: to appear at a hearing and provide testimony. The Superior Court of California had no authority to issue the pre-hearing deposition subpoena to non-party Gutry, itwas not valid under California law, and thus CPLR § 3119 does not apply. There is an extremely narrow right to non-party discovery in California arbitrations arising out of contracts. See, e.g.,Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal. 4th 83, 106 n.11 (2000) ("a limitation on discovery is one important component of the 'simplicity, informality, and expedition of arbitration'"). The California Civil Discovery Act authorizes arbitrators to issue third-party subpoenas in just two situations: (1) where the action is a personal injury or death case, and (2) where the arbitration agreement explicitly provides for third-party discovery. Cal. Civ. Proc. Code § 1283.1; Alexander v. Blue Cross of Cal., 88 Cal. 2 The choice of law provision in the license agreement provides that it "shall be governed by and California." construed in accordance with the laws of the State of Rabinowitz Ex. 16. 9 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 App. 4th 1082, 1088 (2001). In contract cases like the one at issue here, the ability of a party to issue a subpoena depends on the specific terms of the arbitration agreement - specifically, whether itexpressly incorporates Section 1283.05 of the California Civil Discovery Act. Cal. Civ. Proc. Code § 1283.1. The arbitration provision at issue here does not expressly incorporate Section 1283.05 or provide for third-party discovery. Rabinowitz Ex. 1 ¶ 4. Thus, the clerk at the Superior Court of California who rubber-stamped Petitioner's request to depose Gutry had no authority to do so, and the subpoena for his deposition should never have been issued. Petitioner's claim to the arbitration panel that "California law ...provide[s] expeditious procedures for [] obtaining a commission from California authorizing the deposition of a third arbitration" party in New York for purposes of this was simply inaccurate. Rabinowitz Ex. 2 at 4. Had their application received any judicial review at allin California, itwould never have been granted. But as Petitioners admit, itdid not. Under California law, arbitrators have the authority to order witnesses to appear at a hearing but cannot order the deposition of a witness unless "exceptional circumstances exist as to make itdesirable, in the interest of justice and with due regard to the importance of presenting hearing" the testimony of witnesses orally at the to allow a deposition to be taken and used as evidence at an arbitration hearing. Cal. Civ. Proc. Code §§ 1282.6(a), 1283. Here, Gutry has "exceptional" affirmatively offered to appear at the hearing. There is no need, letalone an need, for him to be also subjected to an evidentiary deposition in addition to his live hearing testimony. Petitioner's cases construing CPLR § 3119 are inapposite. Hyatt v. State Franchise Tax Board, 962 N.Y.S.2d 282 (2d Dep't 2013), cited by Petitioner in itsmemo of law here and in its initial application to the arbitration panel, Rabinowitz Ex. 2 at 4, did not involve an arbitral 10 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 subpoena to a non-party like Gutry. The petitioner there sought to quash non-party deposition subpoenas issued by the California Franchise Tax Board in the context of a tax audit. Similarly, In re Aerco Int'1,Inc., involved a motion to quash nonparty subpoenas for depositions and documents arising out of a proceeding in New Jersey Superior Court. 40 Misc. 3d 571, 573-74 (Sup. Ct. Westchester Co. May 16, 2013). Because that court had already reviewed the subpoenas and was "in a better position to determine the appropriate scope of subpoena," disclosure and has already reviewed the this court afforded the prior decisions of the latitude" New Jersey Superior Court "the widest possible and denied the motion to quash. None of the nonparties at issue in that case offered to testify. California law provides that sanctions are available to non-parties - monetary including attorney's fees and costs - for for a protective order or a motion to successfully moving opposing compel. See Cal. Civ. Proc. Code §§ 2031.060(h), 2031.320(b). IL This Court Has Authority To Quash The Subpoena Or Enter A Protective Order Vacating The Subpoena Because the commission was issued by the clerk of the California court without judicial review, this Court need not give the issuance of the commission any deference. See Hyatt v. State Franchise Tax Bd., 105 A.D.3d 186 (2d Dep't 2013). CPLR § 3119 specifically authorizes applications for protective orders and to quash or modify an out-of-state subpoena served in New (" York. Id. at 200; see also CPLR § 3119(e) ("An application to the court for a protective order or to enforce, quash, or modify a subpoena issued under this section must comply with the rules or statutes of this state and be submitted to the court in the county in which discovery is to be conducted"). "A motion to quash, fix conditions or modify a subpoena shall be made promptly in the returnable." court in which the subpoena is CPLR § 2304; see also Hyatt, 105 A.D.3d at 201-2 11 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 "nonjudicial" "office" ("A witness subject to such a or subpoena may always challenge the subpoena in court on the ground that itcalls for irrelevant or immaterial documents or subjects the witness to harassment"); Lizardi v. Bogale, 53 Misc. 3d 1202(A) at *2 (Sup. Ct. Queens Co. 2016) (quashing non-party subpoena and noting that "as a matter of policy, nonparties ordinarily should not be burdened with responding to subpoenas for lawsuits in which they have no stake or interest unless the particular circumstances of the case require their involvement.") In addition, this court has broad discretion to enter a protective order vacating the subpoena. CPLR § 3103 provides that a court may "on its own initiative, or on motion of any party or of any person from whom or about whom discovery is sought, make a protective order denying, limiting, conditioning or regulating the use of any disclosure device. Such order shall be designed to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other courts." prejudice to any person or the CPLR § 3103(a); see also, Dicostanzo v. Schwed, 146 A.D.3d 1044, 1047 (3d Dep't 2017) (affirming trial court's grant of a protective order vacating plaintiffs request for production of documents "where, as here, a majority of the disclosure demands were overbroad, duplicative, immaterial or improper, a trial court may vacate, rather than prune, the entire demand.) III.Roche's Attempt To Circumvent The Procedures Of The FAA Is Improper A. The FAA Applies Here "An arbitrator's authority over parties that are not contractually bound by the arbitration Act." agreement is strictly limited to that granted by the Federal Arbitration Hay Group., . Inc. v. E.B.S. Acquisition 360 F.3d — 406-07 (3d Cir. see also COMSAT Corp.,., 404, 2004) (Alito, J.); (" Corp. . v.Nat'l Sci. Found., 190 F.3d 269, 275 (4th Cir. 1999) ("The subpoena powers of an arbitrator are limited to those created by the express provisions of the FAA."). 12 of 21 FILED: WESTCHESTER COUNTY CLERK 03/12/2018 08:54 PM INDEX NO. 53064/2018 NYSCEF DOC. NO. 29 RECEIVED NYSCEF: 03/12/2018 In addition, the FAA "applies expansively to any transaction affecting interstate commerce and signifies Congressional intent to exercise its Commerce Clause powers to the extent." fullest Cohen v. S.A.C. Capital Advisors, LLC, 11 Misc. 3d 1054(A) (Sup. Ct. N.Y. Co. 2006); see also, Matter of Diamond Waterproofing Systems, Inc. v. 55 Liberty Owners Corp.,. 4 (" "affects" N.Y.3d 247, 252 (2005) where a contract containing an arbitration provision interstate commerce, disputes arising thereunder are subject to the FAA."). The instant Arbitration invo