Article: Coaching by message is not okay in arbitration

When I am going to conduct an online arbitration, I send out guidelines in advance. A few of the guidelines are directed to coaching or scripting the witness’s testimony. Among other things, I instruct that no one is allowed to communicate with the witness in any form – electronic or otherwise – while the witness is testifying.

I have sometimes wondered whether it’s overkill to even mention that coaching is not allowed.  That’s really ethics 101 – no cheating, right?  Lawyers and their clients must understand they can’t just use a messaging app to coach a witness, right?

Maybe not. Case in point: Nuvasive, Inc. v. Absolute Medical, LLC, No. 22-10214 (11th Cir. June 21, 2023).

Here’s what happened.

The dispute

Absolute had an exclusive sales representative agreement with Nuvasive. Nuvasive sued Absolute and others, including its owner, claiming Absolute started another marketing company, stopped selling Nuvasive's products, and sold those of Nuvasive’s competitors to Nuvasive's customers. The legal claims included, among other things, a claim for breach of contract. The breach of contract claim had an arbitration clause, so the court eventually sent that claim to arbitration and stayed the rest of the case.

During the video conference hearing, the owner of Absolute sent messages to one of its sales representatives, coaching him on how to answer questions.  The sales rep was testifying by video from Orlando. The owner was observing by video – and texting the sales rep– from his counsel’s office in Atlanta.

The arbitration panel found Nuvasive was liable for breach of contract, but that Absolute had not proven damages.

The attack on the award

Nuvasive later learned of the coaching during discovery in the court case. The discovery had been delayed by Absolute, however, so the evidence of coaching wasn’t discovered until after the three-month statutory deadline to move to vacate the award had passed.

Nuvasive still moved to vacate the award, and the district court equitably tolled the time to bring the motion based on the delay. Then, the court did a side-by-side comparison of the text messages and the sales rep’s contemporaneous   testimony.  It found “three specific instances during [the sales rep’s] testimony that establishe[d] by clear and convincing evidence that his testimony was indeed being guided by the [owner’s] messages.” The court then found the award was procured by “corruption, fraud, or undue means.”   It therefore vacated the award under 9 U.S.C. § 10(a)(1).

And it further refused to send the matter back to arbitration. It opted instead to try the contract claims with the other claims in the case.

The appeal

Nuvasive appealed to the Eleventh Circuit.  But it got nowhere.

The court first rejected a claim that the motion was too late. Equitable tolling was available and, based on the defendant’s discovery delays, tolling was in order.

The Eleventh Circuit next rejected Absolute’s “no harm, no foul” argument. While it was true the coaching didn’t go to damages, it was enough that the fraud was materially related to an issue in the arbitration. Nuvasive didn't need to prove it would have won on damages absent the coaching. 

Finally, the Eleventh Circuit found the trial was well within its discretion not to return the case for further arbitration after vacating the award. The defendant’s misconduct, which also included destroying documents along with the coaching, justified the trial court's maintaining control of the entire case after vacating the award.

Lessons learned

We can take at least three things away from this case, I think.

First, some people will cheat and coach witnesses during online hearings. So, watch out. My online guidelines will continue to prohibit communicating by any means with witnesses while testifying.  And counsel should emphasize this with their clients to be sure it doesn’t happen.

Second, if a party gets caught coaching, things will not go well. The deadline for moving to vacate the award can be extended. And once this sort of cheating is shown, the award will get thrown out even if the cheating didn’t help the cheater that much. In this case, the trial court and appellate court had absolutely no patience for cheating and readily labeled it fraud and corruption.

Third, a court has discretion not to send a case back to arbitration if cheating in arbitration is shown. The court can – and in this case did – take charge to make sure the cheater plays by the rules.