Amgen, Inc. v. Kidney Center of Delaware County, Ltd.

• Decision Date: 06 September 1996
• Docket Number: No. 95-1988,95-1988
• Parties: AMGEN, INCORPORATED, Plaintiff-Appellee, v. KIDNEY CENTER OF DELAWARE COUNTY, LIMITED, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 562

95 F.3d 562

AMGEN, INCORPORATED, Plaintiff-Appellee, v. KIDNEY CENTER OF DELAWARE COUNTY, LIMITED, Defendant-Appellant.

No. 95-1988.

United States Court of Appeals Seventh Circuit.

Argued Dec. 6, 1995.

Decided Sept. 6, 1996.

William J. Harte (argued), Joseph E. Tighe, Richard J. Prendergast, Richard J. Prendergast, Ltd., Chicago, IL, William M. Shields, Monteverde & Hemphill, Philadelphia, PA, Gerald T. McLaughlin, Cooley, Godward, Castro, Huddleson & Tatum, Palo Alto, CA, for plaintiff-appellee.

Jeffrey D. Colman, Jenner & Block, Chicago, IL, Michael G. Tierce (argued), Schnader, Harrison, Segal & Lewis, Philadelphia, PA, for defendant-appellant.

Before LAY, ^* CUDAHY and KANNE, Circuit Judges.

CUDAHY, Circuit Judge.

Through the Federal Arbitration Act (FAA), 9 U.S.C. § 1, et seq., Congress has adopted a policy favoring arbitration as a means of resolving certain contractual disputes. The FAA creates a body of substantive law that regulates arbitration agreements involving interstate commerce or maritime transactions, and this law generally attempts to make arbitration agreements easier to enforce and arbitration proceedings easier to administer. Towards these ends, it authorizes the federal courts to enforce the arbitration agreements to which it applies. In addition, it creates some elementary procedural rules to facilitate the conduct of arbitrations. First, it gives arbitrators broad authority to order the collection of evidence relevant to the arbitration. Although it does not give the arbitrators themselves any power to enforce these orders, it does give the district courts authority to compel compliance with them. This case raises questions about the authority created by these two procedural rules. The parties here disagree about the extent of an arbitrator's authority to summon witnesses to participate in prehearing discovery, and they dispute the extent of the federal courts' authority to enforce these summonses. Before we can decide these issues, however, we must address problems relevant to our own jurisdiction and the jurisdiction of the district court.

I.

Amgen, Inc. has a patent for erythropoietin, something that it describes as a "genetically engineered health care product." In 1985, Amgen and Ortho Pharmaceutical Corp. entered into an agreement by which Ortho acquired a limited license for the use of erythropoietin. This license did not include the right to use and sell erythropoietin for use by patients receiving kidney dialysis therapy, a right that Amgen retained. The licensing agreement provided that the parties would arbitrate any dispute pertaining to the agreement and that the arbitration would take place in Chicago, Illinois. Such a dispute arose in 1989, and Amgen and Ortho agreed that Frank J. McGarr, former Chief Judge of the United States District Court for the Northern District of Illinois, would preside over the arbitration. During the course of the arbitration, the arbitrator determined that he required evidence from several parties who were unconnected with the contract between Amgen and Ortho. One of those parties was the Kidney Center of Delaware County (KCDC), which provides dialysis services and apparently purchases a great deal of erythropoietin. The arbitrator issued a summons to KCDC, ordering it to appear at a deposition in Pennsylvania and to produce relevant documents. KCDC refused to comply with the summons.

Seeking to compel KCDC's compliance, Amgen filed a petition (styled as a motion) in the district court for the Eastern District of Pennsylvania under § 7 of the FAA. That section authorizes the federal district courts to confirm the authority underlying an arbitrator's summons and to compel compliance with such a summons. The Pennsylvania court pointed out that § 7 gives this authority only to the district court for the district in which the arbitrator sits. Because Judge McGarr was sitting in Chicago, the Pennsylvania court concluded that it had no authority either to confirm the authority behind the summons or to enforce it; but it did note that a district court for the Northern District of Illinois could issue the order that Amgen sought. Hence it sent its case file to Chicago and gave Amgen leave to refile its petition there.

Amgen followed this procedure, submitting the same petition in the Northern District of Illinois that it had submitted in Pennsylvania. The district court here issued an order in which it confirmed that the arbitrator had the authority to elicit evidence from KCDC. In that same order, however, the district court noted that compelling compliance with the arbitrator's summons would be complicated because it could not simply issue its own subpoena to KCDC. Federal Rule of Civil Procedure 45(a)(2) provides that a subpoena commanding document production or attendance at a deposition shall issue from the district court for the district in which the document production or deposition will occur. Thus, only a district court in the Eastern District of Pennsylvania could issue a subpoena to KCDC. Nevertheless, the district court also decided that Federal Rule of Civil Procedure 45(a)(3)(B) presented a way around this problem. Rule 45(a)(3)(B) creates a mechanism by which a court in one federal district can obtain deposition testimony and document production in a different district. Through this mechanism, an attorney who is authorized to practice in the district court that seeks discovery may issue a subpoena on behalf of a court in the district where the deposition and document production will take place. The district court here sought to activate this mechanism and directed an attorney for Amgen to issue a subpoena to KCDC on behalf of the district court for the Eastern District of Pennsylvania. The Illinois district court retained jurisdiction over the case to supervise KCDC's compliance with the subpoena. See Amgen, Inc. v. Kidney Ctr. of Delaware Cty., Ltd., 879 F.Supp. 878 (N.D.Ill.1995).

Before Amgen's attorney could issue the subpoena, KCDC appealed the Illinois district court's order to us. It argued that the arbitrator did not have the authority under the FAA to issue a summons calling for discovery from a distant party unconnected with the contract that was at issue in the arbitration; it therefore contended that the district court erred in confirming that authority. KCDC also insisted that the order by the district court here was improper because it did not actually compel compliance with the summons. As KCDC understands the order, it only describes a method by which another court may compel compliance with the summons. Therefore, KCDC believes that the order here was the equivalent of an advisory opinion, which is improper under Article III of the Constitution.

II.

We must first determine whether we have jurisdiction to review the district court's order. The parties have addressed the question of our jurisdiction with respect to 28 U.S.C. § 1291, which gives the courts of appeal jurisdiction over most final decisions of the district courts. Because they have not discovered any cases addressing questions of appellate jurisdiction of orders issued under § 7 of the FAA, they try to find analogies for the order in question here. They therefore discuss the general principles of finality under § 1291, and they also discuss such matters as the finality of a district court's discovery orders to nonparties, the finality of a district court's orders enforcing subpoenas by administrative agencies, and the collateral order doctrine.

These arguments are, unfortunately, beside the point because Amgen and KCDC have overlooked the statute that directly determines our jurisdiction over appeals from orders issued under the FAA--9 U.S.C. § 16. The most widely used provisions of § 16 permit an immediate appeal from orders that give litigation precedence over arbitration and deny an immediate appeal from orders that give arbitration precedence over litigation. ¹ See Perera v. Siegel Trading Co., Inc., 951 F.2d 780, 783 (7th Cir.1992); see also 15B Charles A. Wright, et al., Federal Practice & Procedure § 3914.17 (1992). In addition, § 16 also includes a provision that affects orders issued under the FAA when the arbitration has nothing to do with any litigation. This is the provision that matters here. It permits an immediate appeal from "a final decision with respect to an arbitration that is subject to this title." 9 U.S.C. § 16(a)(3). We can therefore hear KCDC's appeal if the order here is a "final decision with respect to an arbitration."

As commentators have recently noted, the meaning of "final decision" under § 16 is somewhat uncertain. 15B Federal Practice & Procedure at § 3914.17. Before the enactment of § 16 in 1988, the federal courts relied on the principles relevant to § 1291 to determine when an order respecting arbitration was final and appealable. Through the application of these principles, they developed a reasonably comprehensive definition of "final decision" in the context of FAA cases. Id. But § 16 flatly contradicted some aspects of that definition. For example, until 1988, an order compelling arbitration under § 4 was considered to be a final decision. See University Life Ins. Co. of America v. Unimarc, Ltd., 699 F.2d 846, 848-49 (7th Cir.1983). Now, of course, such an order is not an appealable final decision under § 16, specifically because of the provisions of § 16(b). Consequently, we cannot rely entirely on the earlier definition of "final decision" in connection with orders respecting arbitration. Nevertheless, the old understanding of "final decision" still guides our inquiry to a great extent. Perera, 951 F.2d at 784-85; see also 15B Federal Practice & Procedure at § 3914.17.

When a district court issues an order under the FAA, the procedural context from which that order emerges determines whether it is final. A district court can apply the FAA in either of two procedural contexts. The first...