Arbitration Without the Feel of Litigation: It’s all about control, and it starts with discovery

Saturday, October 28, 2017 - 13:29

For many, electronic discovery in litigation is a source of uncertainty, not to mention the headaches and exhaustion caused by seemingly infinite motion practice. When federal rules were adopted to address electronically stored information (ESI) in 2006, the primary culprits were email messages and electronic files. Thanks primarily to the rise of mobile devices, the sources for electronic data are more diverse than before. Even with amendments to the Federal Rules of Civil Procedure (FRCP) in 2015 aimed at narrowing e-discovery with a particular focus on proportionality, most of the caselaw governing electronic discovery disputes in litigation still favors expansive, costly discovery. It can quickly get out of control.

At its core, the goal of arbitration is to create control – control over the scope of legal issues, control as to who adjudicates and control of the costs. When parties agree to arbitrate, they are protecting against the variable and often unpredictable aspects of litigation. By placing the parties in a private setting without the rigors and demands of the public courts and federal or state rules, arbitration is supposed to be faster, straightforward and, above all, cost-effective.

At least that is how it is supposed to work.

Alas, arbitration alone is no guarantee for a less expensive, speedier outcome. A retired arbitrator and former judge I spoke with commented that although parties were contracting to arbitrate at increased rates, they were not placing limits on discovery, which resulted in arbitrations that more closely mimic litigation. FRCP Rule 26 may not read exactly the same as American Arbitration Association Rules 21 and 22 or JAMS Rules 16 and 17. But in practice, unless parties and the arbitrator carefully and consciously limit discovery, arbitration rules also can also lead to substantial amounts of discovery and costly motion practice. Without an electronic discovery plan, arbitration becomes little more than sophisticated and expensive forum shopping. The forum and the rules alone will not save you.

But the rules will help you prepare. Under the AAA rules (and other dispute resolution guidelines as well), arbitrators have wide latitude to determine the scope of electronic discovery by expanding or limiting what the parties have previously agreed to, restricting searches and date ranges, allocating cost responsibility and imposing sanctions for noncompliance. Given the broad discretion afforded the arbitrator, it falls to the parties themselves to take the necessary steps to limit discovery. That starts with the arbitration agreement.

The Arbitration Clause and ESI

When drafting arbitration clauses, parties should be mindful of the potential ESI data sources, how ESI will affect the arbitration process, how collection and processing of ESI will affect the length of time to resolve the dispute and how ESI could ultimately affect the costs and outcomes. Parties often have unequal discovery burdens and are in the best position to limit what data will be considered as evidence while drafting the arbitration provisions.

In the eyes of the former arbitrator I know, clauses that govern the scope of ESI are underutilized – forcing arbitrators to make key discovery decisions without a full appreciation of the amount of data or burdens that will be imposed as a result of their decisions. As technology grows more complex, resolving discovery disputes has become more complicated, too. It is not uncommon for arbitration clauses to require that arbitrators be sufficiently trained and experienced with electronic discovery or require that they hire a special master to handle the minutiae of ESI disputes. Other arbitration clauses will dictate that arbitrators use a set of model rules to handle any ESI disputes. These clauses establish control over the process and narrow the scope of issues to be addressed at the pre-hearing conference.

The Prehearing Conference

Like its meet-and-confer counterpart in litigation, the prehearing conference in an arbitration plays an outsized role in the final disposition of the matter. With ESI playing such an important role in arbitrations, it’s no surprise that several key decisions about ESI will be rendered at the prehearing conference. Even if parties prepare by drafting detailed arbitration clauses, there are more details to iron out at the conference. Many of these steps will sound eerily familiar to e-discovery in traditional litigation. Fear not: There are ways to limit discovery throughout the hearing. The need to do so is frequently emphasized in arbitration rules. For example, the AAA Preliminary Hearing Procedure P-1(b) states, “Care must be taken to avoid importing procedures from court systems, as such procedures may not be appropriate to the conduct of arbitrations as an alternative form of dispute resolution that is designed to be simpler, less expensive and more expeditious.”

To avoid polluting an arbitration with the FRCP discovery rules, parties need to think differently about who should attend the preliminary hearing. If the hearing is populated only by outside counsel, it will look and sound like a litigation. In-house counsel, information technology personnel, and, if possible, electronic discovery experts should be invited to attend and participate. It will make for a more substantive conference and assist the arbitrator’s decision-making.

In preparation for the prehearing conference, parties should have deep knowledge about the formats of their electronically stored data, the custodians who possess the most relevant and important data, and the accessibility of the data. Parties should also implement arbitration holds to protect and preserve the relevant data. Ideally, since the goal of arbitration is to focus on the key issues, the parties will agree on the language and length of time that data must be preserved. If not, at the prehearing conference the parties should ask the arbitrator to create a preservation order that places reasonable, but narrow restrictions on the data types and date range of what must be preserved.

The arbitration order should also address some of the nitty-gritty questions of e-discovery in a way that reflects the narrowed focus of arbitration:

  • What types of documents are at issue and should be produced?
  • Can the number of custodians be limited?
  • How will parties handle claw-backs of inadvertently produced information?
  • In what format will documents be produced to the opposing party?
  • How will search terms be used to find relevant data without turning arbitration into litigation?

The last question is among the most important. There is no quicker way to upend the goal of alternative dispute resolution than to exchange lengthy lists of search terms that bog the parties down in preproduction document review. A helpful way to prevent out-of-control discovery is to use data sampling, a popular method to verify the accuracy and robustness of search terms. Starting with narrow sets of search terms, parties will sample the results and exchange those sub-set samples of responsive data. If parties need more documents, additional and/or broader search terms will be ordered by the arbitrator until the samples are no longer providing responsive results. It’s an inexact approach, but it is consistent with the aims of arbitration – lowering cost by limiting the amount of data to be discovered.

Data analytics software can assist in this process as well by applying the same algorithms that are used in predictive coding in larger documents reviews. Despite the different forum, many of the technological tools used in e-discovery can be deployed in narrow ways that are compatible with arbitration.

A Framework for Discovery Disputes

There will still be disputes, of course. An adversarial system is not going to be harmonized through alternative dispute resolution.

My retired arbitrator friend offered a framework for handling discovery disputes. After years of observing his arbitrations transformed into litigations, and tired of seeing his role as arbitrator morph into that of a discovery magistrate, he started to aggressively push back against discovery disputes. He suggested a common-sense test that would keep both parties honest. It consists of two questions: To the demanding party: “Why do you need what you’ve asked for?” And to the producing party: “Why can’t they have it?”

By focusing on these questions and bringing the parties to the table to negotiate and discuss their answers, the retired arbitrator saw his discovery motion practice decrease from nearly 50 percent of his time to about 5 percent of his time. The amount of electronic data exchanged declined as well. Parties were happier. Resolutions were quicker. Control was re-established.

Of course, it did not always work. Sometimes the hard lines that parties took could not be negotiated around. And other times parties were less than forthcoming. Sometimes sanctions were imposed. Sometimes the aims of arbitration were frustrated by the parties intentionally – an effort to game alternative dispute resolution just the same as one would game litigation. 

Perhaps this is why despite the best efforts to create alternate dispute resolution systems where the costs should be narrower and more focused, arbitrators still need wide latitude to order discovery and impose sanctions (every established set of arbitration rules provides for both).

Parties need to be prepared for electronic discovery in arbitration the same way that they would with litigation, or else their arbitration will turn into one. There is no cost-effective, straightforward alternate for understanding the rules, preparing for the procedures and having a technologically literal tribunal.


Martin Barna, a vice president at AlixPartners LLP in New York, has over 10 years of experience as a commercial litigator, counsel and consultant. Barna advises clients regarding electronic discovery, leveraging data technology to craft strategic and cost-effective workflows for litigations and investigations. He can be reached at mbarna@alixpartners.com.