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.

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 XI: the Prehearing Schedule

In this series or articles, we first focused on the patent cases most likely to be arbitrated, formulation of arbitration clauses, and some matters to be addressed during the prehearing conference.  We then took a slight diversion to examine federal statutes governing arbitration of patent matters.  After looking at considerations regarding use of experts in arbitration, we are now ready to consider how all these pretrial matters fit into the final schedule.

As earlier noted, arbitrators factor in the amount of discovery and other prehearing matters that must be accomplished before finalizing the schedule.  They then tend to set the final hearing date and work back from there on prehearing deadlines.

Planning for pre-hearing procedures.  This can become complex in a patent arbitration, but if well planned, can provide some real benefits.  Let’s assume, for example that the parties are convinced – and convince the arbitrator – that a separate Markman hearing to construe the patent claims at issue will likely resolve the key issues in the case.  Time will need to be built into the schedule to allow the parties to exchange the information necessary to inform the Markman presentations.  And here is where the flexibility of arbitration can potentially save time and money.  If, in fact, if the claim construction has some possibility of resolving much of the case, it may well be the best course of action to assure discovery is tailored only to those facts that bear on claim construction and discovery of everything else, including sales and related information, be done later.  It may not need to be done at all.  The Commercial Arbitration Rules of the AAA, in fact, encourage consideration of “whether there are any threshold or dispositive issues that can efficiently be decided without considering the entire case,” including “bifurcation of the proceeding.”  Rule 21 and Checklist P-2.

But be careful.  One of the problems with patent litigation in court is the mandatory phases of the case – infringement contentions, invalidity contentions, claim construction contentions, claim construction statements, claim construction hearing, etc. –  under local patent rules, all of which can add to delay and expense.  As earlier noted, some cases need to proceed with attention to all these matters, but many do not.  As earlier noted, the attractive thing about arbitrating patent disputes is fitting the process to the problem and avoiding unnecessary activities.  Thus, if there is only a minimal chance that separate Markman hearings – or any other separate proceeding, including a dispositive motion – will actually save time and money, it isn’t a good idea.

That said, I think arbitrators should always be on the lookout, with the parties’ help, for procedures that will help focus the arbitration on threshold issues and otherwise save time and money.  But one also has to remember that, from an advocate’s point of view, it is attractive to focus first on the strengths of their case or the opposing side’s weaknesses, which may or may not actually save time and may just prolong the arbitration.  If a party sincerely thinks that focusing on an issue can genuinely structure the case in a way that could avoid some expense and that is fair to both sides, it should be prepared to explain why.  Better yet, it may be able to convince the opposing party it will save everyone time and money to have key issues determined first.

Information exchange.  Of course, the schedule also has to account for discovery, known in the language of AAA rules as “exchange and production of information.”  It is worth remembering that the arbitrator is charged with managing “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.”  AAA Commercial Rule 22.

You will need to build in some time for the exchange and also for resolving any disagreements.  Discovery disagreements normally should not need to be the subject of court-style motions.  Instead, a brief letter from each side explaining the need for the information or problems with providing it should suffice. The arbitrator can then ask any questions during a phone conference and quickly get the parties on track with a prompt ruling.  In routine disputes a conference call with counsel and the arbitrator may be all that is necessary.

To avoid expensive disputes over electronic discovery, guidelines should be set in advance to limit where the parties must search for electronic documents and the format in which they are to be produced.  Here the arbitrator is charged with “balancing the need for production of electronically stored documents relevant and material to the outcome of disputed issues against the cost of locating and producing them.”  Rule 22.  Give some thought to this in advance to help the arbitrator help you save costs and avoid frustration.  An earlier article in this series provided some further guidance on that issue.

I recall the time counsel for each side produced electronic documents in the format they preferred, which was different than the other side preferred.   After doing so, each asked me to order the other to use the format they preferred.  Each was sincere in their belief and could give good reasons why their preferred format made sense.  But the result was a complication that cost money.  Discussing the issue before producing documents would have saved a motion, expense, and aggravation.

Subpoenas.  Remember, as noted in an earlier article, if you plan to subpoena witnesses or documents you will need to start analyzing how to do that and allow for possible delays in that process.  If you foresee difficulties, it is best to address them at the prehearing scheduling conference.

Inspections.  It may be that your case involves a process or device that requires a visit by the arbitrator to allow you to explain it and allow the arbitrator to understand it.  It may be that drawings, photos and videos will be sufficient, but often there is no substitute for observing the real thing.  If that is true in your case, you will want to account for that at the scheduling session and address the logistics as is necessary.  If travel is involved, this can be expensive, so think through this carefully.  Field trips are fun, but like anything else in arbitration, you must balance the cost and benefit.

Expert reports.  If the case will involve experts, which as noted in the last article in this series it often will, time needs to be built in for exchange of reports and possible rebuttal reports.  Parties may want to take depositions of experts, but be cautious about that.  If the reports include sufficient information, expert depositions may be unnecessary.  This is particularly likely to be true if the expert reports serve as the direct testimony of the expert.  Foregoing expert depositions in favor of good expert reports can present a real cost savings and not really any disadvantage in being prepared to cross examine the opposing expert.

Prehearing filings.  Once you have accounted for the time necessary to get ready for the arbitration, you will need to set deadlines for providing exhibit lists, witness lists, and prehearing briefing.  You will have to work out whether these will be phased in, with the claimant going first with response by the respondent, or whether the exchange will be simultaneous.  You will also want to think about providing an “escape valve” if one party is genuinely surprised by a document or witness and believes it needs to call another witness or present another document to fully air the issue.  This could be in the form of an additional disclosure of witnesses or documents if necessary.  The point, from the arbitrator’s point of view, is to avoid surprises and provide everyone a fair chance to present a case or defense.

Planning for the hearing.  Counsel will be asked for their estimate of how long the hearing will take.  Here are a few guidelines for that.  Things tend to go twice as fast in arbitration as in most courtrooms.  Breaks tend to be fewer and shorter, and there is generally much less need for preliminaries.  The arbitrator is already quite focused on your case and, having read your briefs and dealt with other aspects of the case, is likely to be familiar with the background.  Generally, the exhibits will go in faster and there is no need for sidebars and complicated evidentiary arguments, although at least some issues in that regard are bound to arise.  There may or may not need to be closings.  But when estimating your time for the case, factor in time for your opponent to cross-examine your witnesses and present witnesses.

It often makes sense to build in a “spillover day” into the schedule, so that everyone has their schedule clear if it becomes some extra time is needed to complete the hearing.  Trying to resynchronize schedules of counsel, witnesses and an arbitrator or panel to finish testimony of a witness or two can delay the conclusion of the arbitration by months.

With the above in mind, as well as the particulars of your case, you should be equipped to do your part to help realize arbitration’s promise of providing a fair opportunity to be heard while minimizing time and expense.

Next up.  The hearing schedule.