In a proceeding under the Federal Arbitration Act (“FAA”) to determine if a dispute must be arbitrated, a federal district court performs a more limited function than in a plenary civil action. On an application to stay an action allegedly referable to arbitration, the court decides only if “the issue involved in such suit or proceeding is referable to arbitration under [a written arbitration] agreement.” 9 U.S.C. § 3. On a petition to compel arbitration, the court decides only whether “[1] the making of the agreement for arbitration or [2] the failure to comply therewith” are in issue. 9 U.S.C. § 4. If the court is satisfied that the two matters are not in issue, it must direct the parties to arbitrate in accordance with the agreement. But if either matter is in issue, the court must proceed summarily to trial. Id.
Though the court’s role in such proceedings is limited, it nonetheless must resolve factual issues. The adjudication of such factual issues may require discovery. The FAA does not mention discovery to determine the arbitrability of a dispute, but by requiring a court to resolve the factual issues on which arbitrability depends – including, if necessary, to conduct a trial – the FAA implicitly permits discovery in appropriate circumstances.
For example, determining whether an arbitration agreement was made can involve a fact-intensive inquiry about what the parties intended; whether and how they executed the agreement containing an arbitration clause; or whether they had actual or constructive knowledge of that clause. Sometimes a non-signatory is bound by an arbitration agreement based on such legal theories as incorporation by reference, assumption, agency, veil-piercing, or estoppel, which may require significant factual investigation.
It comes as no surprise, then, that the federal courts have developed rules concerning discovery rights in proceedings under the FAA. Those rules, in turn, are related to the standard for deciding a motion to compel arbitration. When it is apparent on the face of the complaint and the documents incorporated therein that the parties agreed to arbitrate, the court should apply the FRCP 12(b)(6) standard for a motion to dismiss for failure to state a claim, without any opportunity for discovery. But if the petition and incorporated documents do not clearly establish the existence of an agreement to arbitrate, or if the opposing party presents reliable evidence that places the agreement in issue, then the court should allow discovery on the validity of the arbitration agreement and then apply the FRCP 56 standard for motions for summary judgment. See, e.g., Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 773-76 (3d Cir. 2013) (citing Deputy v. Lehman Bros., Inc., 345 F.3d 494, 511 (7th Cir....
