The Wisconsin Supreme Court has heard oral arguments in a case concerning the scope of discovery in arbitration cases.

IDS Property Casualty Insurance Company issued an automobile insurance policy to the Marlowes (the plaintiffs). The uninsured provision contained an arbitration agreement which provided that the “local rules of law as to procedures and evidence will apply” to the arbitration.

Following a car accident, the Marlowes asserted an uninsured motorist (UM) claim under the IDS policy, and the parties agreed to arbitrate the claim. IDS subsequently requested discovery from the Marlowes, including depositions, the production of medical records, and an independent medical examination.

The Marlowes refused to comply with the discovery request claiming that Wisconsin’s arbitration law (Wis. Stat. § 788.07) limited discovery in arbitration to taking depositions. IDS countered that the plain language of the UM contract stated that the local discovery laws of the state were to apply. Under Wisconsin’s discovery rules (Wis. Ch. 804), discovery is allowed beyond just depositions.

The arbitration panel agreed with IDS’s discovery request. Instead of complying with IDS’s discovery requests, the Marlowes filed a declaratory judgment action in circuit court asking the court to declare that IDS was limited only to taking depositions as prescribed under the arbitration law. The circuit court agreed with the Marlowes and held that discovery was limited to depositions under Wis. Stat. § 788.07.

The court of appeals reversed the circuit court. First, the court of appeals held that the circuit court did not have the authority to grant a declaratory judgment on the discovery issue. According to the court of appeals, an arbitration panel’s intermediate rulings are not reviewable by the circuit court until after the panel has rendered its decision.

Second, the court of appeals held that an arbitration panel has exclusive authority to interpret an arbitration agreement to determine what procedures the agreement allows. Thus, the arbitration panel in this case had the authority to interpret the arbitration agreement and determine the scope of the discovery in this case.

The Wisconsin Supreme Court is expected to issue a decision before its term ends in the summer of 2013.