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The intersection of e-discovery and arbitration

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  • Stroock & Stroock & Lavan LLP
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July 20, 2021 - The benefits of arbitration versus litigation are well-known and well-accepted. Generally speaking, arbitration should be less costly, faster, and more efficient. Court dockets are crowded, and judges often lack the time to supervise the progress of every civil case on their docket with personal attention. In arbitration, it is just the opposite. What the parties expect, and usually get, is the arbitrator's undivided attention and supervision. If exercised well, this should result in achieving the twin goals of speedy and relatively inexpensive resolution of disputes.

However, e-discovery has now become a routine issue in all commercial arbitrations. Despite the fact that traditionally arbitrations did not allow the broad discovery permitted in civil litigation, over the years the parties now expect that in commercial arbitrations they will be entitled to document discovery, interrogatories, depositions, and even records from non-parties. Arbitrators must make every effort to ensure that discovery — particularly discovery of electronic records, now universally known as ESI (electronically stored information) — does not become a major cause of increased cost and delay in reaching a speedy resolution.

In court, e-discovery is governed by the Federal Rules of Civil Procedure. In very quick summary fashion here are the highlights of those rules. The parties must discuss issues relating to e-discovery in advance of the first court conference. Rule 26(f) requires the parties to discuss the scope of e-discovery, the form in which ESI will be requested and produced, and issues relating to privilege and work product protection. Practically speaking this means the parties should agree on the sources to be searched, the number of custodians whose records will be searched, whether ESI will be produced in native or image format, whether privilege logs are required, and whether to agree to a Federal Rule of Evidence 502 Order governing privileged or protected information that is inadvertently produced.

Rule 16 requires the court to issue a scheduling order that covers the topics set out in the previous paragraph. An important aspect of the rules is that a court must now consider proportionality when deciding whether a request for ESI should be permitted. Rule 34 now permits the early service of document requests, even prior to the initial conference, so that these requests can be discussed at their Rule 26(f) conference and then at the Rule 16 conference.

Objections to discovery requests must be stated with specificity and must indicate whether any documents are withheld based on the objections and must specify whether copies will be produced or made available for inspection.

Finally, Rule 37 governs when a court can impose curative measures for the loss or destruction of ESI. The most severe measures can only be imposed if a party lost the information as a result of an intent to deprive the other party of that information.

Turning to arbitration, it is essential that the arbitrator cover most of these topics at the initial conference. The arbitrator should ask whether the parties have agreed on a protocol to govern the exchange of ESI. If they have, the arbitrator will likely approve that protocol. But, if not, the arbitrator should limit the number of custodians per side (typically no more than five) and the sources that will be searched (typically only active data as opposed to back up tapes or cloud storage).

Costs will be borne by the producing party, but the arbitrator has the power to shift costs if she believes that the requests are broader than necessary. The arbitrator should also ask whether the parties have agreed on search terms and, if not, should encourage them to do so, and to discuss what search techniques will be used (e.g. TAR or traditional keyword searching). Principles of proportionality apply to an even greater extent in arbitration. If discovery is allowed to get out of control the arbitrator is not doing her job.

Many ADR providers have now promulgated guidelines to govern e-discovery in arbitrations. Because these are relatively new and not widely known it is useful to discuss them here in some detail. While there may be others, I will discuss the procedures and guidelines that have been adopted by the International Institute for Conflict Prevention and Resolution (CPR), JAMS, and the American Arbitration Association (AAA).

CPR begins with the concept of party-agreed disclosure suggesting that parties may provide for modes of disclosure in their arbitration agreement or at any time thereafter. If there is agreement, the arbitrator should memorialize this in an order, set a schedule for disclosure, and impose any other reasonable conditions. The suggested modes are divided into four categories (A-D).

Mode A limits disclosure to that information a party intends to use in support of its case to be provided in print or in another reasonably usable form. Mode B requires disclosure in a reasonably usable form, by a specified number of custodians, for the period between the signing of the arbitration agreement and the date of the filing of the arbitration demand. Disclosure should be made only from primary sources, not from back-up servers or tapes, or from cell phones, voicemails or PDAs. Disclosure is to be made only from reasonably accessible active sources.

Mode C is the same as B but allows a larger number of custodians and a longer date range. It also permits production of deleted, fragmented, or other not reasonably accessible data upon a showing of special need and relevance. Mode D calls for the disclosure of ESI if relevant to a party's claim or defense so long as it is reasonable, not duplicative, and does not impose an undue burden.

Finally, in a section titled "General Principles" CPR requires that requests be reasonably specific, and requests for ESI from a wide range of custodians should only be granted on a showing of extraordinary need. Requests from not reasonably accessible sources should only be required if the requesting party can demonstrate that files were deliberately destroyed or altered by a party in anticipation of litigation.

The JAMS guidelines state that ESI should be produced from sources used in the ordinary course of business. Absent compelling need there is no requirement to produce ESI from back-up servers, tapes or other media. Also, absent compelling need, documents should be produced in a searchable format that is convenient and economical for the producing party. Interestingly, the guidance states that parties need not produce metadata other than header fields found in email correspondence. An arbitrator is urged to apply principles of proportionality in deciding whether to grant or deny a disputed request for ESI, or to consider cost-shifting.

In considering the appropriate scope of ESI production, JAMS sets forth eight factors an arbitrator should consider including: the amount in controversy, the complexity of the issues, the number of parties, the merits of the claims, public policy considerations, whether the requests are duplicative or redundant, whether there is a less expensive source for this information, and the relevance of the requested information.

Rule 22 of the AAA Commercial Rules sets out the Authority of the Arbitrator with respect to controlling e-discovery. The arbitrator may require the parties to exchange documents in their possession or custody, on which they intend to rely, and must require the parties to update this exchange if additional documents are found on which they intend to rely.

ESI should be produced in the form most convenient and economical to the producing party. The parties should attempt to agree on search parameters that balance the need for the ESI that is relevant and material to the disputed issues, weighing that need against the costs of search and production. If the parties cannot agree, the arbitrator should designate appropriate search parameters. The arbitrator may condition production of documents on the entry of a confidentiality order. Finally, the arbitrator may allocate the costs of production, if necessary, and has the authority to impose sanctions if needed.

The arbitration guidance and rules just described employ many of the concepts found in the Federal Rules but tend to be more restrictive. While parties in an arbitration may obtain what is necessary to prove their case, they will not be allowed to engage in fishing expeditions, scorched earth tactics, turning over every stone, or violating principles of proportionality.

In my experience as an arbitrator, I have seen more disputes over ESI issues than I expected. Had the parties reviewed the guidance and rules summarized above, many of these disputes would not have arisen. If arbitrators and parties take them to heart, then arbitration will continue to be speedier and less expensive than litigation.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News.

Hon. Shira A. Scheindlin, a former U.S. District Judge for the Southern District of New York, is of counsel at Stroock & Stroock & Lavan in New York City. She has arbitrated or mediated more than 60 complex civil cases since leaving the bench in 2016. She can be reached at sscheindlin@stroock.com.

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