The business world has undergone a digital transformation, so it is probably not surprising to learn that 90% of all business information is electronically stored. Recent changes in Federal and State statutory schemes, the evolution of case material and the expansion of continuing education programs on the subject of E-discovery reflect this growing reality. Overlooked in the proliferation of commentary on retaining, finding, processing and producing electronically stored information (“ESI”) is the question of how to deal with such discovery in an arbitration setting.
Why are the problems and issues different in court and arbitration? To begin with, despite the pressure in some quarters to mirror litigation, most arbitrators are sensitive to the need to keep arbitration faster and cheaper than court. One important method of doing that is to suppress discovery, a material cause of runaway costs in litigation. While California law has always encouraged full discovery, and Federal Law only ameliorates it in certain specific ways (e.g. the number of interrogatories permitted), the rules of most arbitration tribunals either ignore specific references to discovery or permit very limited discovery (for example, JAMS Rule 17 (b) permits one deposition of an opposing party). Instead, the published arbitration rules generally combine a required voluntary exchange of documents and discretionary discovery to ensure that the parties have what they need to try their case.
While the Federal and State statutory framework for discovery has been modified to address electronic discovery (see, Fed. Rule of Civil Proc. 26 and Cal. Code Civ. Proc. Secs. 2031.010 et seq.), arbitration rules either give a token nod to the existence of ESI (See, JAMS Rule 17 [a]) or ignore it altogether. This leaves the entire issue in the hands of the parties and the Arbitrator. The task in arbitration is to balance the realistic discovery needs of the parties with a rational cost-suppression regime. To achieve that balance, this article proposes a three part approach to ESI discovery.
If an arbitration involving ESI is to proceed efficiently, the parties and the Arbitrator need to decide as early as possible how ESI is going to be used. Issues of retention, collection, processing and production of ESI are likely to arise and become intractable unless they are attended to early. The first meaningful opportunity to raise these issues is the preliminary conference—usually telephonic and among the attorneys and arbitrator—which can create focus and set the agenda for E-discovery issues downstream. Although the attorneys may be only vaguely familiar with their clients’ ESI systems at this stage they should be prepared to raise and discuss the following:
1. Preservation: What is the client’s normal retention protocol and has the client (including the Claimant) been informed of the need to preserve all relevant documents for the duration of the case? If this cannot or will not be done, the parties need to discuss whether an order will be necessary.
2. Scope of Discovery: Even without an understanding of their adversary’s ESI systems, the parties should be able to articulate, at least generally, what documents or data they believe they are going to need to prosecute or defend the case. Is the Claimant simply seeking a few emails, or does the case involve a compendium of communications, agreements, drafts, spreadsheets, or research documents? Even if the scope of discovery changes, this information will give all sides the ability to start a dialogue with their client, and to think about ways to limit discovery costs.
3. Preliminary production issues. Is the exchange of information, including ESI likely to be simple and cooperative or is it more likely that there will be complexity and disagreement? Do counsel know enough about their clients’ systems and data storage to make commitments about some or all of the requested information? Are counsel sufficiently versed in the relevant technological issues to gather the necessary information, or will additional expertise be needed to address these issues?
4. Deadlines. It is common to set discovery deadlines and hearing dates at the preliminary conference, but in more complex matters, it may take a number of scheduling conferences to arrive at firm dates. Counsel should use the first preliminary conference to gain an understanding of some realistic discovery and hearing dates, or to commit to reschedule a conference for the purpose of determining such dates after meeting and conferring as discussed below.
If more can be accomplished at the preliminary conference, it should be. It is this arbitrator’s experience, however, that the attorneys often lack a detailed understanding of their clients’ ESI systems and the technical problems inherent the requested discovery at this early stage of the proceeding.
MEET AND CONFER:
If the Arbitrator concludes that the parties will need to do more work on E discovery, he or she should order a meet and confer, tailored to fit the circumstances. In discussing the meet and confer, the Arbitrator and parties should approach it as a discovery crossroads. One possible outcome of the meet and confer is that the parties will resolve their discovery issues without assistance and arrive at the hearing, exhibits in hand. But if that result isn’t likely or does not occur, some or all of the following approaches may be selected voluntarily or ordered by the Arbitrator:
1.IT experts: If it is apparent that resolution of some or all of the discovery issues will require technical expertise not possessed or likely to be possessed by the attorneys, each side may have to bring to the meeting an IT expert familiar with the respective client’s systems. While this may be an added financial burden at the outset, it may save multiples of the added cost in attorney time, and avoid costly mistakes.
2. E-Discovery experts: As those who have been through the e-discovery wars can attest, minefields abound. Creating search protocols that are efficient without being over or under-inclusive; that protect client proprietary information, applications and programs; that produce data in a useable form without damage to the underlying applications; and that provide evidentiary reliability, may require outside experts who do this for a living. If the Arbitrator concludes that such an expert is necessary, he or she may strongly urge the parties to add such a person to the roster of attendees. In some cases, the need to hire such an expert is obvious and justified by the value of the dispute. If the parties resist, in appropriate cases, the Arbitrator may hire his own expert and allocate the costs appropriately.
3. Report. Unless the parties think further intervention is unnecessary, the Arbitrator should require the parties to submit a joint report of the meet and confer to the Arbitrator briefly describing their areas of disagreement and proposed solutions.
4. Specificity of issues: If the discovery issues are sufficiently clear at the preliminary conference, the Arbitrator should order the parties to discuss and attempt to resolve isolated unresolved issues at the meet and confer. These might involve retention of data, the treatment privileged information, the reduction or shifting of costs, the terms of a protective order and the format or formats in which data is produced (e.g. native form, .pdf, .tif, .xcel, or other format).
After a well organized meet and confer, the discovery issues that remain, if any, are likely to be specific, limited and difficult. At this point, the Arbitrator may conduct a hearing designed to resolve (and not postpone) those issues. The primary focus of this hearing is to make a cost-benefit analysis with less deference to the concept of full discovery, than to the concepts of economy and usefulness. Again, IT and E-discovery experts may be required to attend. While a complete list of solutions is not possible here, the Arbitrator could do some of the following to resolve the dispute:
1. Mediate agreements for costs controls: Sometimes, the parties just need a push to do things which will save everyone money. Such agreements could be: (a) to produce all documents without advance screening for privilege, permitting later retrieval without waiver; (b) to settle on a sampling test protocol which all parties agree is reasonable to determine the validity of the scope of collection methods; (c) to defer, stage, or drop certain searches which are less likely to produce valuable information; (d) substitute cheaper methods of discovering the same information, such as using hard copies instead of electronic versions, extrapolating the information from existing documents, or seeking the information from a third, less costly, source.
2. Cost adjustment or allocation: Most discovery disputes involve an issue of cost. It is common for parties to complain that the discovery requested is simply too expensive. As we have seen, there are a number of ways to address this problem, but if all else fails, where one party insists on a burdensome search, the Arbitrator may condition the discovery in question on the proponent’s willingness to pay for it. Another solution is to include discovery costs in arbitration costs to be allocated at the end of the proceeding.
3. Decisions: In many cases, the Arbitrator may simply end up as a discovery judge, deciding on such things as the production format or formats, what information is privileged, and what data must or need not be produced.
The combination of people, processes and technology tends to lead to error and expense. The developers of ESI were not lawyers or judges, and most systems are designed to promote the businesses which install them, not to resolve legal disputes. As a result, the discovery of ESI is often costly, and in some cases, prohibitively so. With the important caveat, that only so much can be done to reduce cost and burden, arbitration’s flexibility, timeliness and concern for economy make it a better forum than court in which to balance realistic discovery needs, usefulness, and costs to end up with a fair result.