Arbitrating the Patent Case Part XXII: Attacks on the Award

In earlier articles in this series we followed arbitration involving patent matters from drafting the arbitration clause through the award, motions to “reconsider” the award and, finally a motion to confirm the award.  We now arrive at attacks on the award.

The standard that applies to review of an arbitration award is much more rigorous than appellate review of a trial court judgment.  The whole point of arbitration is to have a quick, relatively inexpensive, final determination of the parties’ dispute.  The Federal Arbitration Act (“FAA”) and most state arbitration acts recognize that.  Because the FAA typically pre-empts state arbitration acts for transactions in interstate commerce – which will almost certainly include your patent arbitration – we will focus on the FAA.

Before we do, however, note that under the rules of most arbitral bodies, you can build in an arbitration appeal.  The newer AAA commercial rules, for example, allow the parties to agree to review of an award by a panel of arbitrators, acting much like an appellate court. But, as a practical matter, you must build that into your arbitration clause if you want an appeal. Nobody is ever going to agree to an appeal after they have won.  We’ll take a look at arbitration appeals in a later article.

Timing

Let’s begin with a timing issue.  You will recall from the last article that a party has one year to seek confirmation of an award.  9 U.S.C. § 9.  A motion to vacate, modify or correct an award must be brought within three months after the award is filed or delivered.  § 12.  So what happens if a party moves to immediately confirm the award?  Does the party wanting to vacate or change the award still get three months, so a confirmed award can later be undone and a judgment on it vacated?

I haven’t seen this be much of a problem as a practical matter. The party seeking to vacate the award usually does so in response to an application to confirm it, so the issue doesn’t arise.  I did once have a state court, applying rules almost identical to the FAA, postpone the hearing on a motion to confirm the award until over 90 days after the award to make sure the other party had a chance to move to vacate the award before it was confirmed.

Grounds for vacating awards

The FAA has only a few specific grounds for vacating the award.  They are:

(1)   where the award was procured by corruption, fraud, or undue means;

(2)   where there was evident partiality or corruption in the arbitrators, or either of them;

(3)   where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4)   where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

9 U.S. C. § 10. Note first that none of these grounds are that the arbitrator improperly applied the law or that the findings of fact have no support.  To quote the Eighth Circuit, so long as “the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority,” the award must be confirmed.  Gas Aggregation Svcs., Inc. v. Howard Avista Energy, LLC, 319 F.3d 1060 (8th Cir. 2003).

Evident partiality

“Evident partiality” can be a ground for attacking an award in the right case.   For example, in a Second Circuit case, an award was vacated under the evident partiality standard where an arbitrator had reason to believe a conflict of interest might exist, but chose to ignore it and instead erected a “Chinese wall” in his company.  If he had investigated, he would have learned that his company had a significant contract in place with one of the parties.  But he disclosed neither that he had decided not to investigate further nor that he had erected the wall.  The award was vacated.  Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., 492 F.3d 132 (2d Cir. 2007).

The cases tend to be quite fact specific, so a party considering this ground will need to review all applicable cases in the jurisdiction and the specific facts of the case.

Of course, there is always the danger that a party will learn of a failure to disclose a relationship and keep it under wraps until they see whether or not they won.  Courts don’t like that type of gamesmanship.  The Fifth Circuit held that a party seeking to vacate an arbitration award based on an arbitrator’s evident partiality must object during the arbitration proceedings. Failure to do so results in waiver of its right to object.  Dealer Computer Services, Inc. v. Michael Motor Co., Inc., 11-20053, 2012 WL 3317809 (5th Cir. Aug. 14, 2012).

The district court found that rule that an objection must be made during the proceedings “paradoxical [because] if the arbitrator completely failed to disclose a potential conflict, the objecting party could not know about it in order to object.” But the Fifth Circuit noted that the arbitrator had at least generally disclosed that she had been in an earlier arbitration involving one of the parties.  That was found to be sufficient to provide notice to the objecting party. The Fifth Circuit upheld the award.

Because many courts are willing to define “evident partiality” to include unrevealed relationships with a party, this is one of the more promising grounds for vacating an award.  That law – and the ethical rules – keep diligent arbitrators making disclosures of just about anything that could cause their neutrality to be questioned.

Refusal to hear evidence

This ground seems to be at the heart of some arbitrators’ apparently limitless patience in hearing evidence of dubious value.  Arbitrators often simply take evidence “for whatever relevance it may have, if any,” to be determined later so as not to be accused of refusing to hear evidence.  Still, this ground is not as promising for getting an award overturned as one might suppose.

First, a party would have to show the evidence is “pertinent or material” not just that the arbitrator refused to consider all the evidence proffered.   Second, in AAA Commercial arbitrations, for example, the parties have agreed to the AAA rules which specifically give the arbitrator the power to “determine the admissibility, relevance, and materiality of the evidence offered and may exclude evidence deemed by the arbitrator to be cumulative or irrelevant.”  Rule 34(b).  Given that the parties typically will have agreed to these rules, the arbitrator would have to have fairly blatantly abused this authority for it to become a real issue.

But his ground has recently been applied in a fairly high profile case to vacate an award.  In National Football League Management Council v. National Football League Players Association, No. 15 Civ. 5916 (S.D.N.Y. Sept. 3, 2015), the district court vacated the arbitration award of the NFL Commissioner suspending quarterback Tom Brady for four games over the “inflategate” controversy.  In so doing, he noted that Brady’s counsel had sought to call for examination Jeff Pash, an announced co-lead investigator of the allegations against Brady.  Instead, the Commissioner, serving as arbitrator, refused to compel his examination, finding it would be cumulative of other evidence already submitted.

The court found denial of an opportunity the examine Mr. Pash was fundamentally unfair and violated the FAA.  While recognizing an arbitrator has authority to exclude cumulative evidence, the court found he could not simply do so ipse dixit without indicating “in what respects it would be cumulative.”  The decision is on appeal.

Exceeding authority

Another ground that could be promising in the right case would be an arbitrator exceeding authority.  The arbitrator derives all power from the parties’ contract, so only issues the parties have given the arbitrator power to arbitrate may be decided.  Of course, the parties may expand this authority by actually arbitrating issues before the arbitrator beyond these agreed.  And note that, if the parties’ contract incorporates AAA or other rules, the arbitrator’s power will include those given in the rules unless the parties contract otherwise.

As pointed out earlier in this series, parties will not want to get too elaborate about what is or is not to be arbitrated so that the arbitrator’s authority is unclear.  Otherwise the award will be subject to attack on this ground.

This ground may also be raised to attack a late award.  Many rules or arbitration clauses require that an award be made within a certain amount of time, often 90 days.  Some late awards have been vacated because the arbitrator was without power after the time for issuing the award had run.

There is room for gamesmanship here, with parties complaining about a late award only after it is issued and they lost.  Some state arbitration statutes specifically require that an attack on a late award be made before it is issued.  The FAA does not, but that doesn’t mean the award will be vacated automatically if it is late.  Still, it is best to avoid all this by getting the award issued on time.

Other statutory grounds

The FAA’s other grounds for vacation are fairly esoteric and will not come up very often.  Hopefully, you have vetted your arbitrator or arbitrators during the selection process so they are unlikely to engage in misconduct or write incomprehensible awards.

There are other grounds for attacking awards that have been raised and considered over the years, which we will take up in the next article.

 

Efficient Arbitration Part VI: Discovery Motions

In this series of articles we have been considering ways to make arbitration more efficient and inexpensive, while maintaining a fair opportunity for both sides to present their case.  We first focused on discovery in general, noting that the flexibility of arbitration can help provide ways to obtain necessary information while avoiding the expense of court-like discovery.  We then dealt with issues of non-party discovery and then took up dispositive motions, other areas of possible unnecessary expense.  We now arrive at discovery motions.

Discovery motions in general

For the first part of my career as a civil litigator, discovery motions took up much time and effort.  After serving and negotiating over elaborate requests, the parties would often reach an impasse and move the discussion to the court house.  The parties would prepare elaborate briefs with citation to the rules and citation to somewhat similar cases to justify the request for information or to justify a refusal to provide it.  Since knowledge is power, the side seeking the information was convinced the other side was holding out, hiding key information that would be the key to the case.  The party opposing discovery was often convinced the other side was simply trying to spend it to death.  And so the fight carried on.

In many courts, magistrates and judges now take a different approach to the whole matter.  They first require a letter-brief or phone call to go over the issues and resolve them more informally.  This is not uniform, but is becoming more common around the country.

Arbitrators have always had this tool available and use it all the time.  Perhaps we should use it more and use some other available tools as well.

A holistic approach to discovery and motions

AAA Commercial Rules require the arbitrator to (as I have noted in a couple of these articles) “manage any necessary exchange of  information among the parties with a view to achieving an efficient and economical resolution of the dispute, while at the same time promoting equality of treatment and safeguarding each party’s opportunity to fairly present its claims and defenses.”

I have found the best way to make discovery efficient is to take it up at the first conference.  And in some detail — not just generally.  The parties and arbitrator can discuss the sort of discovery the parties contemplate and then set a deadline for completing requests and answers.  Here is an example:

The parties shall serve their written requests for documents by November 1, 2015.  The parties shall provide their responses to those requests and responsive documents by December 2, 2015.

Setting the dates is generally preceded by a discussion of what type of discovery, if any, is necessary for each side.  We also discuss the time realistically needed to complete the request and response.

Anticipating that the parties may not completely agree on what it or the other party actually needs to “fairly present its claims and defenses,” I usually provide an informal process for resolving that. I build in a time for a party to obtain arbitrator input on the request, if a discussion with the other side doesn’t resolve the issue, by addressing what more it believes it needs in a letter to be provided by a set date.  The other side has a week or so to respond, and the first party may reply if necessary.

Some arbitrators prefer a brief conference call to use of letters.  But to assure that necessary information is available without breaking the bank, it can be important to allow each side an opportunity to present its position, albeit concisely, in writing.   Normally, the relatively short letters provide enough information to decide whether the discovery makes sense or not. But if not, a quick conference call can usually clear things up.

Importantly, the pretrial order should also make it clear that court-like discovery motions are not allowed, and this more informal procedure should be followed instead.

Planning and discussion – not motions

So really, there is no need for formal discovery motions in arbitration. Instead, discovery planning should set the basic contours and dates of information exchange.  This is then followed by an informed discussion about the extent of discovery that must be provided.  That way we can balance the cost of getting the information with the need for getting it.

This is all not to say that all these issues are easy or can be treated superficially.  Arbitrators are, for example, required to respect attorney-client privilege, which can involve some fairly complex issues in some cases.  And discovery of electronic information can become technically challenging. But this more informal process suffices for most discovery issues and provides the background needed to know whether there is a need to explore some very specific issues a little further if they arise.

Arbitrating the Patent Case Part XX: Post Hearing Motions

The hearing in your patent arbitration is over, the briefs are in, and you receive the award.  Let’s assume it is not what you hoped.  Not bad, but not great either.

You asserted two patents.  The arbitrator found no infringement of the first patent based on a claim construction you think is just plain wrong.  You are certain the arbitrator relied on a particular embodiment shown in the specification of the patent to limit a broader claim term.  You are disappointed because your arbitrator is quite experienced, having been a patent litigator for twenty years. Still, there it is.  While the arbitrator said in her award she was using the specification to interpret the claim, you are convinced she used it to limit the claim.  While this is a pretty subtle distinction in some cases, you don’t think it is in yours

You did prevail on the second patent, but you are a little disappointed in the amount of damages.  While you would have preferred lost profits on lost sales – who wouldn’t? – you were happy with the royalty rate.  But you think the base is simply mistaken.  This issue was a little confusing during the hearing as there were a few different products that you claimed infringed the patent, but you are confident she either missed a year of sales or one of the products.  There seems to be no other explanation for the amount.

You also question the pre-judgment interest award.  Your proposed amount was based on sales under both patents and for all products.  The amount awarded is, of course, less than if you won on everything, but after checking with your expert, you think the prejudgment interest calculation appears too low and appears uncompounded even though your opponent didn’t object to compounding.

Overall, you think the award is pretty favorable, but not as favorable as it could be.  If this was a trial, you would bring post-trial motion to straighten things out or at least set the stage for an appeal. There is enough at stake to do that.

But, because this is an arbitration you wonder what your options are.  Where do you start?

The rules

Your first order of business is to see what set of rules you are under.  Let’s assume AAA Commercial Rules apply.  The rules specifically address the type of post-award requests you can bring.  Rule 50 provides:

Within 20 calendar days after the transmittal of an award, any party, upon notice to the other parties, may request the arbitrator, through the AAA, to correct any clerical, typographical, or computational errors in the award. The arbitrator is not empowered to redetermine the merits of any claim already decided.  (Emphasis added.)

Is that it, you wonder?  It is.  To understand why, let’s revisit what arbitration is all about in the first place.  The idea of arbitration is to have a knowledgeable decision maker consider and decide a private dispute.  And the process is to be fairly quick, inexpensive and informal.  Thus, by design, there are not to be complex motions, review, and appeal.  Decisions are to be fast, fair and final.  So it is little wonder that the typical post-trial motions available in court are not available in arbitration.

What can be corrected?

With that background in mind, how do your issues stack up in terms of being eligible for post-hearing consideration?

The infringement issue likely provides little hope. The arbitrator has determined the merits of the dispute and found no infringement for one patent.  This was not a matter of a clerical, typing, or computational error.  The arbitrator couldn’t revisit the issue even if she wanted to. If she did, she may be operating outside her authority, which is one of the few grounds for vacating an arbitration award in court.  Save your time and money.  Efficiency and finality will trump you urge to reargue this issue.

What about the mistake you think was made on the royalty base?  That shows   more promise.  If the arbitrator truly made a mistake and overlooked a year or a product, you may well obtain some relief.  Hard as they try, decision makers sometimes do make errors, particularly in situations where accounting can become somewhat complex.  If the arbitrator concludes she “added it up wrong,” she will fix it.

The same is true for the pre-judgment interest award.  If it truly is just a computational error, or maybe even a typo, the arbitrator will likely fix it.  If, on the other hand, it is based on a finding that, for example, a lower interest rate should apply based on the evidence presented, it will stand.

Avoiding the issue

This is probably a good time for some advice on presenting computations in a patent arbitration.  Your side likely has the benefit of a trained accountant or, in a bigger case, even a forensic accounting expert with access to programs and information allowing fairly sophisticated calculations.  The arbitrator probably does not.  Thus, you are far more likely to avoid mistakes if you break your damages down into smaller categories, depending on how the underlying substantive decisions could go.  If, for example, there is an issue whether or not three products infringe, you would want to separate out your proposed damages by product in the event the arbitrator finds some but not all products infringe.  That makes it easy to add up.

The same would be true for prejudgment interest calculations which can become pretty complicated pretty fast, particularly if there are different interest rates for different years and compounding is involved.  The arbitrator is more likely to get things right if you provide the tools to allow him or her to do so.

Think of it as having the arbitrator take a multiple choice test on damages rather than an essay test.

Next up

We will next take up confirming the arbitration award.

Efficient Arbitration, Part IV: Non-Party Discovery

In the earlier articles in the series we addressed the main thing that makes arbitrations expensive: discovery.  As arbitration expanded over the years, many lawyers who were used to litigation-style discovery got involved. They demanded – and often got – litigation-style discovery with its attendant expense.  We have been exploring ways to get the parties the information they need to present their positions, but cut down on unnecessary expense and effort in getting it.  This includes limiting document discovery and e-discovery to the specific needs of the case and limiting depositions to those that are actually necessary.

So far we have been focusing on discovery between or among the parties to the arbitration.  We now take up non-party discovery.

There are a few things to keep in mind at the outset to help you plan any needed non-party discovery.  First, arbitrators have subpoena powers, but they are not the same as courts’ powers, and the power differs among jurisdictions.  Second, arbitrators can’t enforce subpoenas.  Courts must do that.  Third, because of the first and second things, some creativity may be necessary.

Arbitrator subpoena power in general

Most commercial arbitrations will be governed by the Federal Arbitration Act (“FAA”) because the issues typically involve interstate commerce.  The FAA preempts state law.

The FAA provides at 9 U.S.C. § 7 that arbitrators may “summon in writing” any person to “attend before them” as a witness and bring material documents.  The written summons is served in the same manner as a subpoena to appear and testify before a court.  So that is easy enough for arbitration hearings.  Arbitrators can issue subpoenas to require witnesses to appear and bring documents.

But what if they don’t appear?  The FAA also answers that in section 7.  The federal court in the district where the arbitration is being held can compel the attendance of the witness and can punish the witness for refusal to attend, just as if a court proceeding was involved.  Note the arbitrator can’t do that.  Arbitrators don’t have marshals, jails and the ability to charge fines.  But courts do.  The actual process to enforce the subpoena may be cumbersome, requiring a court filing and appearance.  But the power to subpoena is clear enough that witnesses will normally obey an arbitration subpoena.

Of course, not even a federal court can subpoena everybody anywhere.  Generally, a non-party witness can only be required to travel 100 miles, or within the state for a trial.  Fed. R. Civ. P. 45(c).  A witness outside that area isn’t subject to a subpoena issued by a court and also, presumably, not one issued by an arbitrator, either.

Discovery: documents

But what about discovery before the arbitration?  Different courts treat that differently.  For example, the Eighth Circuit has decided that the power of an arbitrator to issue a subpoena for testimony and documents implies the power to subpoena documents for review by a party prior to a hearing.  In the Matter of Arbitration Between Sec. Life Ins. Co. of Am. & Duncanson & Holt, 228 F.3d 865. 870-71 (8th Cir. 2000).

By contrast, the Third Circuit recognizes no such power. The only power explicitly stated in the FAA is to require a non-party to “attend before” the arbitrator and bring documents.  This, the court reasoned, does not allow a subpoena for pre-hearing document discovery.  Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 407 (3d Cir. 2004).  You will need to check the law of your jurisdiction to determine if a third-party document discovery subpoena is allowed.

But the courts in your jurisdiction may not have addressed the issue.  It will not be very efficient for you to take a trip to court and possibly an appeal to get it figured out in your jurisdiction.  This may affect you choice of location for the arbitration in your arbitration clause if you think that third-party document discovery is likely to be important.  Or you may be able to be a little more creative, as discussed below.

Discovery: depositions

The Eighth Circuit has ruled on documents but not witnesses.   An Eighth Circuit trial court, however, has concluded that arbitrators do not have to power to subpoena witnesses for discovery depositions.  The court reasoned that production of documents is less onerous and imposes a lesser burden than does a witness deposition.  ShlumbergerSema, Inc. v. Xcel Energy, Inc., 2004 WL 67647 (D. Minn. 2004).  Of course, in the Third Circuit, for example, a deposition subpoena likely isn’t any more available than document discovery since the subpoena has to be tied to an appearance before the arbitrator – not just discovery.  This issue is open in other jurisdictions. The bottom line is this: don’t count on non-party depositions in your next arbitration. You may be disappointed.

Other avenues

Interestingly, the Revised Uniform Arbitration Act does provides arbitrators the power to require prehearing depositions and documents production, at least in the Minnesota version.  See Minn. Stat. § 572B.17 (c) and (d).  So this might provide a route for non-party discovery depositions in jurisdictions that apply the act, although that may be preempted by the FAA. Recall that the FAA preempts state law on matter involving arbitration if the dispute involves interstate commerce, which most do.  You’ll have to check your state’s arbitration act and address the possible preemption issue.

Another possibility is for the arbitrator to hold a separate hearing to take the testimony of a non-party witness and review of subpoenaed documents.   The Second Circuit recognizes an arbitrator’s power to compel testimony and documents from a non-party at a preliminary hearing.  Stolt-Nielsen SA v. Celanese AG, 430 F.3d 567 (2d Cir. 2005). Thus, so long as the arbitrator is there, the testimony could be taken and documents provided at a preliminary hearing set up for the purpose of obtaining that information.

But consider this.  This is an expensive way to proceed that would require you to convince the arbitrator that the information is vital and this is the only way to obtain it.  And you still have the problem of a witness beyond the arbitrator’s subpoena power.  It may be possible to convene the arbitration, with the parties’ permission, in a place where the witness is subject to jurisdiction if the information is that vital.

Another alternative is to take the deposition and get the documents by agreement of the parties and witness.  If everyone agrees, the deposition can go ahead.  You can make it less expensive by taking it over the phone or by Skype or satellite.  Counsel for the parties are likely to agree to the deposition if both sides have some non-party discovery they think is important. Non-parties may be willing to cooperate if the issues are discrete and the process is not burdensome.

Efficient?

This all suggests that you may or may not be able to force non-party discovery in an arbitration.  You will want to think long and hard whether the information is really needed and is worth the cost of obtaining it. That will be on the arbitrator’s mind.  To once again quote the AAA Commercial rules, the arbitrator must seek to achieve “an efficient and economical resolution of the dispute, while at the same time promoting equality of treatment and safeguarding each party’s opportunity to fairly present its claims and defenses.”

The bottom line is, if the information is vital to a claim or defense and a deposition or document demand on a non-party is the only way to get it, an arbitrator will likely try to find a way to help a party obtain it.  If, on the other hand, a party is simply “fishing,” it is unlikely to get much help from the arbitrator.

Up next

Litigation-like things that add to the expense of arbitration are not limited to discovery.  We will take up pre-hearing motions next.

Efficient Arbitration, Part III: Getting Control of Depositions

In the last two articles in this series we noted that one of the main objections to arbitration is its cost.  Some folks are convinced that arbitration is just as expensive as litigation in court.  I have found that not to be true, but encounter that perception frequently.  I had a discussion about that with a lawyer just today, in fact.

The main thing that drives up the cost in arbitration – as in any adversary proceeding – is discovery.  So we began looking at ways used to reign in costs in arbitration starting with document discovery in general and electronically stored information in particular.

The next form of discovery that we will consider is depositions.

Do you need them at all?

Of course, the way to save costs would be to simply not allow depositions at all.  In fact, in some smaller matters, that is the default.  But, while arbitration matters usually don’t need the full range of discovery and cost we see in litigation, there shouldn’t be a “trial by ambush” either.  In fact, under AAA Commercial rules for example, the Arbitrator must “manage any necessary exchange of information among the parties with a view to achieving an efficient and economical resolution of the dispute, while at the same time promoting equality of treatment and safeguarding each party’s opportunity to fairly present its claims and defenses.”  So if depositions are actually needed to obtain necessary information, they should be allowed.

When are depositions really needed?

The first question you will want to ask is whether depositions are needed at all.  If they are, you will want to ask how to take only as much time as needed for them.

Here is a way to think about that.  With the advent of e-mail and electronic document storage, there is often a record of day-by-day events for important matters in a case.  This is particularly true for the kinds of cases often the subject of arbitration.  The contracts and formal documents are likely to be stored electronically, of course.  And people really don’t talk on the phone or in person quite as much as they once did.  So there is often a record of the parties’ communications in e-mail exchanges and the like.  E-mails tend to be fairly informal and candid.  Thus, you often don’t need to rely on someone’s memory of what happened months or years ago at a meeting or in a call.  Key events are often reflected in real time in e-mail and attached documents.

This often means you can eliminate the depositions we often see in commercial cases these days that go like this:

Q:  Marked as deposition exhibit 278 is an e-mail that appears to be from you to Mr. George Johnson dated January 7^th 2013. Did you write this e-mail?

A:  Yes.

Q:  And here you say, “You’re right.  The entire shipment was defective, and we are really sorry about that.” Did you write that?

A:  I guess so. There it is.

Q:  And when you wrote that, did you mean that entire shipment was defective, and your company was really sorry about that?

And on it goes.  It’s hard to see how this kind of deposition is particularly useful.  You have the e-mail admission, and that’s what you will be relying on at the hearing anyway.

And yet, there are times when depositions are needed to understand technical terms, the importance of a sequence of events or other matters.  You may also want to see what key facts are admitted and which are not.  Often in a commercial arbitration it is more often the inferences and conclusions to be drawn from underlying facts that is really in dispute.  But there are sometimes actually disputes as to what happened.  Sometimes even the authenticity of an e-mail is an issue.  But not very often.

This suggests that depositions be limited to matters where testimony can advance the inquiry.  But you can’t expect the arbitrator to micromanage every question or topic.  That would be too expensive.

So the way to think about your case is to see if there is important information that can be gained from a deposition and to be prepared to explain, at least in general terms, why that is so and why there isn’t a different way to get it.

There are then useful approaches to making sure that depositions are not just being taken for the sake of taking them.  As with document discovery, an arbitrator can be fairly helpful in “saving counsel from themselves” by requiring an efficient process that forces everyone to get to the point quickly.

Limiting depositions when needed

Here are four approaches to consider.  I have seen a number of them work very well.  First, is simply limiting the time for depositions.  Each party could be given, for examples, ten hours in which to take depositions.  They can call anyone they want during that time, but still have the time limit.  Then the arbitrator can build in an “escape valve,” so the parties can come back for more if they can show they need them.  They usually don’t come back because they have used their time very efficiently and gotten what they need.   I’ve seen this work very well in cases I have handled both as counsel in arbitration and as an arbitrator.

Second is deciding at or shortly after the scheduling conference who the limited number of deponents will be and the general time for each.  It may only need to be one or two for each side.  Again, this will tend to get everyone to the point.

Third is to make at least some use of 30(b)(6)-type depositions in the case.  The Federal Rules allow depositions on identified topics where a representative who has looked into the issues speaks for his or her company on pre-designated topics.  It may seem odd to import a fairly technical federal rules-type procedure into an arbitration.  But in the right kind of case, I have seen this work to speed things up while still getting the information a party needs to present its case or defense. This can be combined with limits on time or number to make sure things don’t get out of hand.

The fourth is to simply have counsel agree to interview a witness on some specific topics just to clarify key issues.  Of course, both counsel would be present and the interview would proceed in questions and answers.  But it may not be necessary to have a formal deposition with all its expense to allow counsel to understand some technical matters or specific things raised in some documents.  This alternative probably won’t serve the purpose in every case, but in some situations it may well be all you need.   You can even agree to record it to have a record for those few times where the exact answer might be critical.

Electronics are cheaper than cars and airplanes

One final thing.  For many matters, phone or Skype depositions or interviews can work very well. Again, you can record them if you feel a record is necessary.  That can save time and travel.  In fact, there probably isn’t much excuse for not using available technology for fairly routine matters that simply need clarification.

Third party depositions and subpoenas are another tricky and sometimes expensive area in arbitration.  We’ll take that up next.

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.

Efficient Arbitration, Part I: Getting Control of Document Discovery

Arbitration offers many benefits over litigation in resolving commercial and intellectual property disputes.  The parties have an active role in picking the decision maker. In fact, they are generally given a listing of well-qualified arbitrators who are often experts in their legal field from whom to choose.  The whole system is set up to go faster with less formality and more emphasis on substance.  Continual procedural gambits and expense are easier to overcome, and the parties can count on a “date certain” for their hearing.  By contrast, a trial in court must be at the convenience of an often overburdened court awash in criminal and other matters.  In court you often are subject to call on a few days’ notice for a long period of time while the criminal matters go to the head of the line.

Why arbitration is not as favored as it used to be

So why isn’t every lawyer a fan of arbitration?  And I can tell you that there are many lawyers who are not fans of arbitration.  I’ve talked to them.

One reason we can’t do much about.  It is only natural to believe in the merits of your claim or defense.  When you lose, there is a tendency to blame arbitration.   The cure is to shun arbitration in the future if possible.  You normally can’t do that with court.

The other reason is cost.  The parties and their in-house counsel get the bill for the arbitration and conclude it is just as expensive as litigation.  The reaction is, “I thought this was supposed to be cheaper than court.  But here I have to pay arbitration fees and costs, and I also have to pay these large legal bills.  This isn’t cheaper at all!”  That may or may not really be true.  It could well be that court would have been more expensive. But the perception is still there.  In fact, while arbitration was once favored by corporate counsel, a study done in 2011 shows a significant decrease in use of arbitration in commercial matters since 1997 with cost being the main concern.  R. Lamare, The Evolution of ADR Systems at Large U.S. Corporations, Dispute Resolution Magazine, Vo. 20, No. 3 (2014)(online: http://ow.ly/NsI93).

Of course, the main thing that makes arbitration expensive, just as in litigation, is discovery, especially electronic discovery.

This should come as no real surprise.  Advocates want to be sure they have all the facts they can find to present their positions and maximize their chances of winning.  But this comes with what can be a huge price tag these days where the facts are to be found in computers, on servers, and even in smart phones, if you look hard enough.  But in many disputes the cost of getting all those facts can overwhelm the amount at stake.

Fixing discovery

This all suggests that, if arbitration is going to somehow provide an advantage over traditional litigation, containing discovery is a good place to start.  But how do you make sure the parties have the facts they need without breaking the bank?  Actually, there are plenty of tools available.  So let’s think about how to use them.

We’ll begin by focusing on normal document discovery.  Many lawyers in arbitration are focused on the traditional litigation-based rationale for discovery: parties may obtain discovery of any non-privileged matter relevant to a party’s claim or defense.  Fed. R. Civ. P. 26(b)(1).  This is true no matter whether or not the evidence is itself admissible so long as it is calculated to lead to discovery of admissible evidence, whatever that means. Id.   Usually one side’s “calculation”  looks to the other side like a “fishing expedition.”  The latest rule amendments replace “calculated to lead to discovery of admissible evidence” with “proportional to the needs of the case,” which is a welcome change.  But lawyers still know they are subject to later criticism unless they leave no stone unturned in search of that one critical clue that could turn the case around.  That is true whether such a clue exists or not. Besides, it is the opponent who actually has to turn over the stones in their trove of documents.  So why not insist that they do it?

Because arbitration is by its nature more flexible than litigation, the cost of discovery can be managed on a basis that makes the most sense for an individual case.  This is something we must take advantage of to try to manage the cost of discovery in arbitration.  And the arbitrator can usually save counsel from themselves regarding overly broad discovery by making sure the search for documents is rational rather than needlessly exhaustive.

A good place to start

A good way to begin to think about all this begins with the protocols issued by CPR on what it refers to as “modes” of discovery.  (Available under “Resources” at cpradr.org).  Different modes can be used, depending on the specifics of the case, including the amount involved and the likely location of information.

The first mode just requires provision of the documents a party intends to offer at the hearing a few days before the hearing.  That may be adequate in a fairly small-dollar dispute where the facts are straightforward.

The second mode requires the disclosures as in the first mode, but adds a prehearing disclosure of those documents “essential to a matter of import to the proceeding for which a party has demonstrated a substantial need.”  In other words, if a party thinks a certain category of documents needs to be provided by the other party, it needs to explain why.  It will be given the documents if the explanation is persuasive.

The third mode includes everything in the second, together with disclosure prior to the hearing of “documents relating to the issues in the case that are in the possession of persons who are noticed as witnesses by the party requested to provide disclosure.”  In other words, witnesses need to provide the documents they have that are relevant to the issues on which they will testify.

The fourth mode essentially tracks the scope of litigation discovery, requiring provision of “relevant documents regarding non-privileged matters that are relevant to any parties’ claim or defense, subject to limitations of reasonableness, duplication and undue burden.  This would be reserved for matters where there is enough at issue to justify this deep a dive into the documents.

These proposed modes are useful in suggesting the depth of discovery possible and, in many case, the parties will agree what makes sense for the matter.  In other cases, they will not agree.  That is where an experienced arbitrator comes in to weigh the likely burdens and expense against the likely value of the information.  The advantage of thinking of things this way, however, is it provides a basic structure for determining how far document discovery should go to begin to fit the procedures to the dispute.

Remember, these modes are just suggestions.  A careful study of the particulars of the case may reveal that there is another hybrid mode that makes more sense in the unique situation presented.  But these suggested modes are a good place to start and are quite a bit more helpful to crafting an efficient discovery process than general notions of relevancy, calculation, and burdens.

Of course, while the general scope suggested by the suggested modes are a good way to start getting a handle on discovery, there is still the complication of electronic discovery, which we will take up in the next installment.

 

Arbitrating the Patent Case Part XVIII: Presenting Testimony at the Hearing

We have previously had a look at many aspects of arbitrating patent cases, beginning with the type of cases likely to be arbitrated, arbitration clauses, and the arbitration process up to the hearing.  We then began looking at the hearing itself, beginning with sequestration issues that can arise, opening statements, and case organization.  We went on to presenting documents on the hearing, including the positives — and pitfalls — of electronic document presentation as well as some observations on how most arbitrators actually use documents during the hearing and decision-making process.

We will now take a look at presenting testimony at the hearing.

Transcripts.  First, an observation on having a transcript of testimony.  Most arbitrators I know would prefer to have a transcript if possible.  Most arbitrators, like most lawyers, are quite gifted note takers, having had decades of practice.  But notes often are not a perfect substitute for a verbatim transcript on closely contested issues.  The transcript gives everyone a way to be very precise about what the testimony was.

But most arbitrators are also committed to trying to keep costs down if at all possible, so it is unlikely that an arbitrator will ever insist or even suggest it is necessary that the parties bear the additional costs of a transcript.

So when is a transcript worth the cost?  Here is one way to think about it.

Many patent arbitrations are very document heavy so that the real evidence is in the documents.  In most patent cases, much of the key evidence is found in the patents, prosecution history, technical information about the involved products, financial documents, and the like.  While explanations and discussion of these documents and the issues raised by them in testimony is important and may even be critical, a verbatim transcript of what was said may not be necessary or worth the price.  The details are in the documents.  A transcript could  be overkill.

Occasionally, however, a case can turn on the testimony itself, particularly where the documentary evidence is lacking and personal accounts are critical.  If your case is likely to turn on that kind of information, then a transcript is likely worth the price.  This is particularly so if there is a great deal at stake that helps justify the added expense.

Presenting the testimony.  Let’s turn now to presenting witness testimony at the hearing.  Of course, as in any hearing the testimony will be under oath and subject to cross examination.  Because of the relative informality of the proceedings, it will be tempting to lead the witness to save time.  Avoid the temptation.  It simply is not as persuasive to ask the witness to agree to what the lawyer states as it is to elicit real testimony.  The arbitrator already has a pretty good idea what the lawyer would like the witness to say.  The real question is what the witness actually knows, not what he or she will agree to.

Because the rules of evidence in arbitration are relaxed, it may be tempting to take advantage of that and elicit hearsay and other testimony that would never be allowed during a court proceeding.  But be careful. Don’t confuse the ability to get evidence “into the record” with the persuasiveness of the evidence.  While most arbitrators will allow hearsay and the like because the arbitration rules allow it, the evidence is always taken subject to later reflection and study of the persuasive effect of the evidence.  Rank, unreliable hearsay is rarely persuasive and likely won’t advance your cause. Indeed, that a party may be willing to stake its case, at least in part, on such evidence may be detrimental to the integrity of the case as a whole.

Expert reports as direct testimony.  One technique that has gained some sponsorship over the years is the use of the expert’s report as the direct testimony of the expert. This has some advantages.  There is, for example, no question whether the expert’s testimony is straying from the opinions stated in the report because the report is the testimony.  Presumably it also saves time to use the report as testimony, because the arbitrators will have read the report in advance.

While originally enthusiastic about this approach, I am no longer a fan of it.  Part of what we are doing with testimony – and why we don’t just decide everything on written submissions – is gauging the expertise and trustworthiness of the expert.  Only observing testimony allows one to do that.  Perhaps most importantly, having the expert summarize what in the opinion is most important helps the focus the inquiry and pinpoints the most important aspects of the opinion and ultimately the issues in dispute.  Testimony that is given with the understanding that the arbitrators will have the report, but also with emphasis given to the most important points, is the best way to proceed, in my judgment.

Written witness statements.  I have a similar view on  presenting direct testimony of lay witnesses in written witness statements that are then subject to cross examination.  One simply cannot gauge the knowledge or veracity of a witness without listening to the witness’s testimony.  Indeed, we all know the statements are typically written by the lawyers, so it is as though we are simply asked to reread the facts section of the brief again.  In fact, it strikes me as a little unfair to meet the witnesses only on paper when they are telling their side of things, and first meeting them as speaking human beings only on cross examination.  Cross examination tends not to bring out the best in most people.

Next up:  Post hearing briefing and closing arguments.

Arbitrating the Patent Case Part XVII: Presenting Documents at the Hearing

We have previously had a look at many aspects of arbitrating patent cases, beginning with the type of cases likely to be arbitrated, arbitration clauses, and the arbitration process up to the hearing.  We then began looking at the hearing itself, beginning with sequestration issues that can arise, opening statements, and case organization.  We will now continue on to presenting documents at the hearing.  This may seem a little mundane, but it is not.  It can have a significant effect on the efficiency and effectiveness of the hearing.

Patent arbitration tends to be document heavy, and the current technology available to present documents leads to many possibilities.  Here are a few thoughts on that from one arbitrator’s point of view.  Not all arbitrators will necessarily agree with me on all this, but this reflects what I have found over the years.

Presenting written documents

With the advent of Trial Director and other systems to present documents electronically, it can be tempting to default to that system for everything.  I’m not sure it is worth the expense in many cases.  I am sure that, if done improperly, use of these systems can be a detriment rather than a benefit.

But first let’s consider the benefits of trial presentation systems. These systems allow you to focus the witnesses’ and arbitrator’s attention to specific documents and passages in the way you choose.  You can project the page of the document, blow up or highlight a particular passage of interest, and otherwise direct everyone’s attention to the particular part of the document you are working on.  If done correctly, there is no need to fumble around through a book of exhibits and then call out page numbers and paragraphs so everyone can get to the right place.  Nor is the witness or arbitrator as likely to get distracted by other document content you aren’t dealing with at the time.  You may be able to avoid dragging pounds of paper copies around the country if everything is on your computer.

On the other hand, this way of presenting documents doesn’t take into consideration the way many people process and use information from documents in an arbitration.  I, and most arbitrators I have worked with, tend to take notes on exhibits, and underline or highlight key parts of the documents. This is very useful when it comes to analyzing the case and writing an award.  No one I know can memorize all the pertinent language in a document for later recall.  Thus, for matters where the information in the document is critical, you will often see arbitrators reaching for their copy of the document if it is available or asking for a copy if it is not. Be aware that a transitory projection doesn’t usually get the job done.  You need a way to put important evidence you want the arbitrator to rely on into the arbitrator’s hands.

Use of a document projection system can sometimes be annoying.  Have you ever been at a hearing where a vendor was hired to do the document retrieval and the presentation went something like this?

Lawyer:  [To vendor running system].  Put up bates number 14578. [Pause and wait for projection].   Oh, wait sorry, go to 14587.

Arbitrator:  Can I have the Exhibit number please?

Lawyer:  Just a minute.  [Pause.]  I’ll have to get that to you at the break.  OK, please blow up paragraph 2 – or I mean 3.  [Long pause.]  Can you highlight the second sentence?  Okay, blow it up, please.  Oh, before we do that, can we go to bates number 14586 for a little context?  [Pause]. Now, Ms. Witness, see that date?  Ok.  Now back to 14587.  [Pause.] I’ve blown up paragraph 2 . . . See where it says . . .

Witness:  Excuse me. It is hard for me to get the context of this without reviewing the whole document. May I see it instead of just the parts you are projecting?

You get the idea.  The whole process of explaining how to project the right part of the document can get lengthy and tedious.  And it may well appear unfair to the witness to pick out a sentence or two from a document he or she hasn’t seen in three years and start asking about it.

The answer, of course, is to have things better organized.  But in some cases, it is just easier and less time consuming to have a notebook with the exhibit tabbed and refer to it.  This goes more like:

Lawyer:  Let me direct you to Exhibit 27.  You will find it tabbed in the notebook you have in front of you.  Is this an email you sent to Joe Dokes on March 12, 2013?

 

Witness:  It appears so.

 

Lawyer:  Please turn to page two, the second paragraph.  Here you say, “I agree that we should be paying license fees on this product . . .” [Etc.]

If the arbitrator is going to turn to the tabbed exhibit to highlight it or make notes on the document anyway, it might be better to just get everyone to that document.

You may want to do a combination of the two, projecting the document to lead the witness through it, but giving the arbitrator a chance to pull it up in the exhibit book.  But if you want to forego some expense, use tabbed exhibits in three-ringed notebooks − one for you, one for the witness and one for the arbitrator − and skip the presentation system for written documents.  Or, if the technology is too challenging for you, but there is an advantage to having a particular document projected, just use a document camera to project it.

You can be sure of this: You won’t lose your arbitration because you didn’t project exhibits.   But tabbed exhibits are almost always necessary and generally are effective enough in the context of your patent arbitration.

Two more thoughts on notebooks.  First, giant notebooks with 5 inch spines are heavy and awkward, particularly if there is more than one of them everyone has to retrieve and you are moving between them.  Use more, smaller notebooks, clearly labeled so it is easy to find the one that has the right exhibit in it.

Second, it may seem like a good idea to simply have a book for each witness with the exhibits you will use for that witness.  This works well during testimony.  But it can get confusing in a long arbitration.  The arbitrator ends up with a jumble of notebooks, many with the same exhibits, so it is difficult to locate an exhibit and may be nearly impossible to locate the copy with the arbitrator’s notes.  Exhibit books with exhibits tabbed in order are usually best.  Make a list of exhibits organized by date, too, to allow easier retrieval and review.

Visual information

For drawings, photos, or other highly visual documents critical to patent cases, projection will often be the way to go, so everyone can follow along.  Thus, if you are trying to show where each element of a claim is in an accused product, or that an element is missing, a large visual you or the witness can point to is a must.  But remember to have a smaller version available in permanent form so that arbitrator can easily locate and study it as part of the decision or award writing process.

Sometimes you are better off with a large chart or two so you can easily write on it, draw arrows, or the like.  It depends on your case and what you are presenting with a given witness.  But the arbitrator won’t be hauling charts around, so remember to provide a small version of it for later reference.  A smaller version of the drawing and a document camera may be all you  need.

Computer animation

You can spend a small fortune on computer animations and the like, but this is rarely necessary.  Most patent arbitrators can visualize what is necessary from drawings or photos without the expense of animations that may or may not be completely accurate.

Of course, you can simply bring smaller devices to the hearing or take a field trip to observe large devices or systems in operation.

Helpful technology

It has become more and more common for counsel to provide arbitrators with documents electronically, either on a USB drive or by emailing pdfs.  Patent arbitrations tend to involve traveling to the hearing, so this is a good way to allow everyone having a computer or tablet to easily retrieve exhibits at the hearing and for review afterwards.  One typically can’t take notes on the documents (absent some extra software and practice using it), but having them easily accessible anywhere is a real plus.  Talk this over with the arbitrator early on to see whether he or she uses a computer or tablet and in what format to provide the documents.

Unused exhibits

Parties usually provide exhibits in books or electronically that they don’t end up using and that never make it into the record.  You may be worried that the arbitrator will go off on his or her own quest and review unused exhibits and use them to come to conclusions.  The arbitrators I know are very unlikely to do that.  There is always plenty to consider without looking for more outside the record, and it is thought to be unfair to consider documents that are not part of the record.  In fact, many arbitrators tell the parties that if an exhibit is in the record, but hasn’t been discussed with a witness, you shouldn’t expect them to consider it.

But if you are worried about having exhibits available to the arbitrator that aren’t in the record, the arbitrator will certainly let you remove them from the notebooks.  You will have to keep track of what exhibits are in the record and agree with opposing counsel on that.  If you provided pdfs of exhibits, you’ll have to ask the arbitrator to delete the old set and substitute a new set you’ll provide with only the exhibits of record.

Next up.  Presenting testimony.

Arbitrating the Patent Case Part XVI: Presenting the Evidence

We have previously had a look at many aspects of arbitrating patent cases, beginning with the type of cases likely to be arbitrated, arbitration clauses, and the arbitration process up to the hearing.  We then began looking at the hearing itself, beginning with sequestration issues that can arise and, finally opening statements.  We have now arrived at the beginning of evidence and how most effectively to begin.

There is no one way to start, of course.  But the standard for admissibility for evidence in an arbitration presents some possibilities for efficiently presenting each party’s case that are worth exploring.  Let me give you a couple of examples I have seen that have worked well.

A first approach, and one that is very common, is having the most involved or responsible representative of a party narrate most of the facts involved, often in chronological order.  This is more likely to be effective in an arbitration than in court because of the standard for admissibility.  The standard set forth in AAA Commercial rules is, for example:

(a) The parties may offer such evidence as is relevant and material to the dispute and shall produce such evidence as the arbitrator may deem necessary to an understanding and determination of the dispute. Conformity to legal rules of evidence shall not be necessary.  .  .

Because the real key to admissibility is relevance and materiality, it is possible for one witness to “tell the story” of a party by both relating personal experience and relying on business documents that help to tell the story. This is particularly useful because many arbitration issues turn on contracts and written documents.  Thus, a knowledgeable witness can introduce the key documents and much of the evidence in the case in a logical order.  This may be more difficult to do in a court where there are strict standards for laying foundation, hearsay problems with documents and related technical evidentiary matters to address. Many of those are obviated in an arbitration where, in the words of AAA Rule 34 “[c]onformity to legal rules of evidence shall not be necessary.”

A note of caution is in order here.  Just because the rules of evidence don’t apply, doesn’t mean that anything goes.  First, again in the words of Rule 34, “[t]he arbitrator shall determine the admissibility, relevance, and materiality of the evidence offered and may exclude evidence deemed by the arbitrator to be cumulative or irrelevant.”  So taking things too far and having a witness introduce a document that he or she knows nothing about and isn’t part of what one would expect to be in a company’s normal business records, may not be seen by the arbitrator as useful or relevant.  Have in mind that it should be clear that the witness, the testimony and documents introduced have enough in common that it makes sense the witness would be offering the testimony and evidence to provide a genuine understanding of the issues.  After all, getting a document or testimony into “the record” only means it is in there.  It doesn’t mean anybody will be persuaded by it or believe it.

Still, you likely can get into evidence documents and evidence that may not have gone in under technical legal rules with your first witness, but that are helpful to understanding the important events in the case in a logical order.   But for contested matters at the heart of the dispute, keep in mind you should be prepared to present evidence from the witness who wrote the document or observed the events described in it to provide first- hand information necessary for the arbitrator to determine the truth of the matter.

Another effective way I have seen of presenting evidence at the outset to outline the case was use of a technical expert.  The key to the case was the expert’s opinion, which was based on most of the evidence in the case, including all the key documents.  Thus, as the first witness, the expert basically gave each of his opinions on liability and backed it up with the key evidence on which he relied.  This was not a patent case, but was a fairly complex dispute over whether a software system met the specifications and representations about its functionality.  But one can imagine a similar approach to whether, for example, license fees are owed for certain products under the terms of a license agreement and underlying patent or the like.

When representing a respondent, a similar approach is available, using an involved and responsible witness or perhaps a technical expert.  While a fair amount of groundwork for the respondent’s position will likely already have been presented on cross examination, a coherent overview of the most important defense points can be made through a single witness.  And, of course, the respondent will have the benefit of knowing what points the claimant has emphasized in their case and be able to outline the key evidence in response to each point.  Again, contested matters will need to be addressed by other witnesses more directly involved, but providing a well-organized overview of the defense through a first witness can be quite effective.

Of course, the above approach won’t necessarily work for every case.  There may not be one witness who was really involved enough with the key facts and circumstances to provide a useful overview.  It may be that one event or issue is so important to the case that you would want to lead with your best witness on the point.  Or it may be that the subject matter of the case best lends itself to a few witnesses that have knowledge in one or two of each of the key matters in the case.

But however you end up doing things, you will want to pay attention to the most effective and efficient way to provide an understanding of the key issues and evidence at the outset.  In the end, the arbitrator will likely be able to piece together the case from evidence you present during the course of the proceeding.  Yet, finding ways to get the key information and issues out at the outset is worth the effort.

Put another way, it is difficult to rule for you if your position is difficult to understand.  So anything you can do to clarify your position at the outset should be considered.

Up next:  Practical considerations regarding evidence.