This is the third and final installment of our series on the legal obligation to preserve digital evidence for discovery in the arbitration context. Part one outlined the inherent tension between arbitration and litigation with respect to the rules for evidence retention. Part two provided a summary of how arbitral bodies have shaped (or attempted to shape) the e-discovery landscape in arbitration.
This article will offer some practical document retention guidance for parties in, or who anticipate being in, arbitration. Of course, our guidance should be considered general. Since laws on the subject vary from jurisdiction to jurisdiction and from arbitral body to arbitral body, and since no two factual situations are identical, nothing in this article should be considered a substitute for consultation with competent counsel who has taken the time to learn your unique situation. That being said, here are three guideposts that should help in reducing risk in this uncertain field.
Not every party involved in an arbitration (or, for that matter, a litigation) has or needs to have a deep-seated fear of document production, digital or otherwise. Individuals and small businesses, for example, often maintain a very limited universe of documents that can easily be segregated, foldered, preserved, and produced, with minimal cost. These parties also tend to have relatively simple computer systems that simplify the work of an IT consultant.
Let’s go one step further and consider the case of the small business entering into an agreement (with an arbitration clause) with a much larger, complex, and, no doubt, more document-laden company. The small company, looking ahead to an arbitration dispute, might very well favor a set of arbitral discovery protocols more closely resembling litigation than arbitration. After all, the larger company will probably be the one to incur greater e-discovery costs and be more likely to run afoul of e-discovery rules, so broad rules might put the smaller company on a stronger footing in the arbitration. On the flipside, the larger company would want to avoid the expense and burden of litigation-like digital discovery rules, and would therefore likely want an arbitration agreement with a more limited e-discovery protocol. The point here is that one size does not fit all, and you must take the time, before you sign the contract, to think about how you would fare in arbitration from a digital discovery perspective.
There are a number of bodies that administer arbitrations: the American Arbitration Association, the International Institute for Conflict Prevention & Resolution, JAMS, and NAM to name just a few. Each of these arbitral bodies has its own set of rules and protocols that govern the discovery process. Some have specific protocols dedicated to the preservation and discovery of digital evidence; some have more general protocols and leave to their arbitrators the discretion to address the manner in which e-discovery issues will be handled.
Depending on the company’s tolerance and appetite for the costs and benefits of e-discovery, one arbitral body might be more advantageous than another. We will not recommend one body over another in this article, but the lawyer drafting the arbitration clause of a contract should put significant thought into specifying an arbitral body. Perhaps this involves a bit of reading tea leaves, since it is impossible to predict what disputes will arise when a contract is signed. But a few hours spent by attorney and client — including the company personnel who will be directly responsible for complying with e-discovery protocols—will be well worth the cost.
And by the way, if there is a concern about how an arbitrator will rule on e-discovery issues, don’t be shy about including that consideration on your arbitrator selection checklist. Especially in arbitrations governed by rules that vest considerable discretion in the hands of the arbitrator, it is important to make sure your panel, whether one or three, has a sufficient understanding of e-discovery issues, including the costs involved in the preservation of electronic information.
At the end of the day, no matter how attractive an arbitral body’s e-discovery rules might be, nothing can beat an arbitration provision that sets forth an e-discovery protocol that meets your needs and satisfies your risk tolerance in this area. Remember that, with very few exceptions, courts will not interfere with whatever private discovery rules and procedures the parties wish to promulgate for themselves.
What should the contract cover? At a minimum, an arbitration provision that deals proactively with e-discovery might cover the extent to which digital data must be preserved, the circumstances under which backup media must be preserved and produced, an expeditious method for resolving e-discovery disputes, the timing and frequency of counsel-only meet and confer sessions, the requirement for information technology consultants and experts, the parameters for search terms and custodians, and a proportionality methodology tailoring the extent of e-discovery to the amount in controversy.
Pardon the pun, but the jury is still out on the intersection between arbitration and e-discovery. First, the rules of the road are not at all clear. Second, there is a tension between the purposes to be served by arbitration, with its focus on efficiency, and discovery of any kind, let alone the sort of intrusive and expensive digital discovery that has become the budgetary bane of so many corporate general counsel. Third, notwithstanding the guidance above, it is not an easy feat of negotiation to come together, in advance, on an arbitral e-discovery protocol. But with sufficient thought by both attorney and client, it is possible for parties to an arbitration agreement to address and handle the preservation and production of electronic evidence.