Efficient Arbitration, Part II: Getting Control of Electronic Discovery

In the last article on this topic, we identified cost as one of the major complaints about arbitration. While arbitration is supposed to be faster and cheaper than litigation, the perception often is that it is not. The culprit, as usual in legal disputes, is discovery. If we are to maintain – or at this point perhaps re-establish – arbitration as a preferred alternative to litigation, we will need to deal with the cost of discovery.

One way to do that is to forego the sort of one-size-fits-all approach we have seen to discovery in court in favor of an approach thoughtfully balancing the need for information with the expense of getting it. Arbitrators, who typically have a deep background in the sorts of issues presented in the arbitrations before them, are well suited to help the parties with the balance.

The last article in this series noted the general help provided by CPR’s document discovery protocol which presents different possible modes of general document discovery depending on the needs of the case. We now take up discovery of electronically stored information, often called “ESI” for short. This has the potential to be extraordinarily expensive if not handled properly.

The easy things to fix

Let’s start with the low hanging fruit. Not all cases require a great deal of electronic discovery. More and more businesses simply have electronic versions of their files that are analogous to the paper files they used to keep. For many cases, the issue is no more complicated than simply looking in “the file” kept for the contract at issue and perhaps the related emails of those most involved.  But other cases may demand more. And some counsel, used to federal court discovery, will demand a search of the opposing parties’ entire electronic storage system. Dealing with electronic discovery at the initial scheduling conference will help determine how much of an issue this is likely to become in any given case and what level of expense makes sense to get the needed information.

At very least, if the case will involve electronic discovery  – and these days most cases will involve at least some – there needs to be some agreement on the format for electronic documents. Some lawyers are used to producing documents in .pdf, others in native format, and others in .tif files, usually depending on their document management system, if any. Before producing documents, counsel must discuss the format they want. Otherwise there will inevitably be a dispute about whether the documents should be produced in some other format and who should pay for it if they were produced in the “wrong” format.

Then there is the whole issue of metadata. Metadata is data about data, including, who created it, when, where, in what form, what revisions were made, etc. It is usually expensive to deal with and rarely critical. It may be important to have it if the authenticity of an electronic document is in question. But that is rare. Normally, you will not want to require that extra effort be made to gather it for each document absent a showing it is needed for a specific purpose for specific documents.

Fitting the search to the need

Of course, the main issue is how to get information the parties need to prepare and present their cases without breaking the bank. Again, CPR has a useful protocol that provides a way to think about this.

CPR posits different modes of electronic discovery. The first is simply disclosure of copies of electronic information to be presented at the hearing, either printed out or in other usable form. This would often be adequate for a routine matter.

The second mode includes disclosure in usable form of documents (a) from a specific, limited number of custodians, (b) provided from the time of signing the contract at issue to the date of filing the arbitration demand, (c) only from primary storage facilities with no need for disclosure from backup servers, tapes, PDAs, voicemails, etc., and (d) with no need to provide anything but reasonably accessible data.

The third mode would include the second mode, but with more custodians and a wider time period to fit the specifics of the case. The mode would also allow require, upon a showing of special need and relevance, disclosure of deleted, fragmented or documents otherwise difficult to obtain by other than forensic means.

The final mode would be full discovery of electronic information relevant to any party’s claims or defenses, subject to limitations of reasonableness, duplication, and undue burden. This would be like federal court discovery in a large case.

Of course, these are just suggestions, but provide a good starting point for discussion and may even provide a basis for agreement between counsel for the parties.

Cost shifting

Another fairly simple approach to e-discovery sometimes proposed is to require the requesting party to pay the cost of responding.  Some arbitrators I know swear by this as the answer to overreaching demands requiring searching and production of electronic documents. This seems like a simple solution, but may not always be as it may involve the arbitrator in determining whether the amounts charged are reasonable and the like. For cases involving serious e-discovery disputes, however, this approach is worth considering.

Keeping a practical mind set

The key to all this is really a more sophisticated way of asking, “If I were this party, where would I go to find the important information regarding the dispute?” In most cases, the starting point – and often the ending point – would be on the systems used by the people most involved in the contract and subsequent dispute for the time period of the dispute. This normally would not require searching all the company’s servers, PDAs, voicemails, and backup tapes or searching a whole system for key words, or using predictive coding. Most disputes in arbitration are likely to be more discrete and focused than that.  If they aren’t, the parties need to be prepared to explain that to the arbitrator and maybe even pay the other side’s cost for extraordinary effort in looking.

That should go a long way to reigning in the costs of arbitration and making it a real alternative to litigation.

Of course, discovery isn’t only about documents.  Counsel is used to taking depositions for cases in court and will very often want to do the same in arbitration.  We’ll take that up in the next installment.