By Louise LaMothe
Originally published in the Los Angeles Daily Journal, April 1, 2008
Litigators have been practicing under the changed Federal Rules of Civil Procedure relating to electronically stored information in federal courts since December 2006. A body of federal case law has mushroomed, explaining how these new obligations affect litigants, and many states have passed similar legislation.
In California, the Judicial Council is proposing both statutory and rule changes, now out for public comment. Almost unnoticed, however, the advent of e-discovery and the handling of ESI in general also have brought challenges to arbitration, which historically has operated in a much more limited discovery and looser evidentiary environment.
How should arbitrators handle ESI when it arises in cases before them? Which lessons from ESI in litigation are applicable to arbitration, and which are not?
Discovery in Arbitration?
Some might ask, Why even discuss this subject? There is no right to discovery in arbitration in the first place, so there is no reason to talk about e-discovery. The average arbitrator probably is used to handling hearing preparation based on some general guideposts – discovery is not generally allowed in arbitrations conducted under the basic commercial rules of the largest ADR provider, the American Arbitration Association, though arbitrators usually order what the parties can agree to.
Sometimes, the arbitrator handles production of documents from a recalcitrant party by convening the arbitration hearing, because the arbitrator has the right to order production of documents at the hearing. The arbitrator acknowledges the production of documents at the beginning of the “hearing,” then recesses the hearing so that the party seeking the documents can review them. Under such a practice, the arbitrator may “reconvene” the hearing weeks later and proceed with hearing the evidence.
Many arbitrators, having found this procedure cumbersome and inefficient, have begun to press the parties to agree to some discovery in advance of the evidentiary hearings. Similarly, some arbitrators prefer to allow limited depositions in order to avoid time-consuming examinations of witnesses for the first time at evidentiary hearings.
Although the AAA rules do not provide for discovery in basic commercial cases, Rule 21 states that, in the exercise of the arbitrator’s discretion, he or she may order an exchange of information, “consistent with the expedited nature of arbitration.” This exchange, the rule states, includes the production of “documents and other information.” This general framework supports the arbitrator who wants to order information produced ahead of the hearing, rather than waiting for documents to be produced there, and ESI certainly falls within the general rubric of “documents and other information.” JAMS Rule 17 also allows for the exchange of information and is more specific about the methods. However, if the average arbitrator approaching the issue of e-discovery looks only to AAA Rule 21 or JAMS Rule 17, neither is particularly helpful.
The AAA’s Large Complex Case Rules and its National Employment Rules are clearer about the right to discovery. The Large Complex Case Rules (applicable to all cases in which the amount in controversy is at least $500,000) give broad authority to the arbitrator to control discovery (L-4(c)), including depositions (L-4(d)). Rule 9 of the Employment Arbitration Rules is even more specific: “The arbitrator shall have the power to order such discovery, by way of deposition, interrogatory, document production or otherwise, as the arbitrator considers necessary to a full and fair exploration of the issues in dispute.”
International arbitration rules, such as the International Centre for Dispute Resolution (ICDR-part of the AAA), generally don’t provide for discovery; even here, pre-hearing procedures can be used to gain access to information. For example, without mentioning discovery by name, ICDR International Arbitration Rules, Article 19 (3) provides, “At any time during the proceedings, the tribunal may order parties to produce other documents, exhibits or other evidence it deems necessary or appropriate.” No guidelines exist for how to manage this process.
A useful template exists in Rule 26(f) of the Federal Rules of Civil Procedure, which requires an early meeting of counsel where ESI is now discussed in detail. Briefly, Rule 26(f) requires a new level of cooperation between the parties before a Rule 16(b) conference with the court. Parties must meet and confer about (among other things) the preservation of discoverable information and the form in which ESI will be produced. The rule can be adapted for use by an arbitrator, as well.
A well-organized first preliminary hearing with the arbitrator (like the Rule 16(b) conference with the court under the FRCP) has many benefits. It efficiently covers the issues and sets a tone of active management of the arbitration.
Although preliminary hearings are standard fare, the attorneys’ preparation for them can be haphazard. Likewise, lawyers well capable of handling ESI in litigation may become a bit sloppy in arbitration because the rules are looser and the proceedings informal. To avoid this and to promote early cooperation among counsel, arbitrators should send out an agenda order before a first hearing with the parties.
Agenda orders can be tailored to each case, covering all of the issues expected to arise in the first preliminary hearing and taking into account any idiosyncrasies arising from the parties’ arbitration agreement, as well as the amount in controversy. The agenda order includes a direction to the parties, patterned on Rule 26(f), to meet and confer before the first hearing with the arbitrator in order to agree on a plan for exchanging information and, if warranted, a discovery plan.
Here is an example of that portion of an order:
“Exchange of information and discovery: “Counsel for the parties are ordered to meet and confer in advance of the preliminary hearing to exchange information regarding the documents and other information, including ESI, that they believe are likely to be relevant to the issues in the case. Consistent with the expedited nature of arbitration, the arbitrator urges the parties to develop a plan for the exchange of information, and discovery, if provided for in their agreement or otherwise allowed under any applicable rules and statutes.
“Counsel shall jointly report by e-mail to the arbitrator with a copy to the case manager no later than 48 hours before the preliminary hearing as to the agreements reached in their conference, and any remaining areas of disagreement, stating the position of counsel on each contested issue.
“In order to prepare for the conference, counsel for each party shall first meet with the client to determine the nature and extent of the information reasonably likely to be used in the hearings or to be requested in connection with the hearings. The meeting shall identify, in particular, whether electronically stored information (ESI) is likely to be relevant to the case. If ESI is likely to be used in the hearings or requested in connection with the hearings, then counsel shall determine with the client the following information: the types of ESI the client has, the location of the ESI and the identity of its custodian, the format in which the ESI is kept, and what steps are being taken for its preservation during the case. Counsel and the party should also discuss the scope of the production of the ESI that the party is willing to agree to, as well as the form of production, and how privilege and privacy concerns will be addressed in the production.”
It is obvious from these rather detailed requirements that the arbitrator must allow plenty of time between issuing an order to meet and confer and setting the date of the first preliminary hearing. Rushing this aspect of the preparation is counterproductive when parties are trying to locate and understand their ESI in order to be ready to proceed at that preliminary hearing.
First, counsel for each party needs to meet with the client to review thoroughly the types of ESI likely to be relevant to the case. In that meeting, counsel should be inquiring of the client in detail about the type of information technology systems that the client maintains, where the ESI is located, who the custodians of the data are and what steps are necessary to preserve the data. Then counsel needs to determine in consultation with the client how much of the ESI will be offered for production and in what type of format the production should occur. This type of analysis can take anywhere from a few days to several weeks, and the arbitrator needs to allow for it.
Counsel also needs to inquire of the client how to define what ESI most likely will be relevant in the case. Counsel may need to determine whether the arbitrator likely will allow discovery of ESI after considering the amount in controversy in the case and the difficulty of producing the ESI. The objective of both sides should be to avoid overbroad requests for information, which results in mountains of ESI, which must be reviewed. And when they meet, counsel should establish a joint protocol, if possible, for review of the information received.
Additional issues frequently arise, of course, depending on the type of case and the amount in controversy. The arbitrator will have to assess the cost of production of the ESI and weigh the parties’ arguments on how that expense should be borne. In some cases, such as trade secret and many employment matters, it may be necessary to gain access to ESI on home computers, handheld devices and elsewhere, some of which may belong to third parties. Here, the important differences between arbitration and litigation crop up, of course. Arbitrators do not have the same power as judges and lack the power to enforce subpoenas. Arbitrators also do not discipline parties by issuing sanctions orders. They rely on persuasion, party agreements and other devices to achieve compliance.
The suggestions made here are a first step only, but one that, at the outset of the case, helps the parties and the arbitrator know where ESI issues may arise and begins to provide a way of dealing with them. And if the arbitrator in your next case does not seem inclined to get an early grip on the ESI, at the first opportunity, you as counsel should suggest that the parties use a Rule 26(f)-type conference. Many arbitrators, still computer-illiterate and unfamiliar with ESI, welcome help from well-prepared counsel to identify and get ESI under control.
Louise A. LaMothe, an arbitrator and mediator, practices private dispute resolution throughout California. She is based in Santa Barbara.