David K. Taylor | Buildsmart
This post is a continuation of the Top 10 most horrible, terrible, no good, “bang your head against the door” mistakes that I have seen lawyers make before, during, and after arbitrations in which I served as the arbitrator. As stated in the previous posts, there are pros and cons to binding arbitration versus trial in a court that go beyond a series of blog posts. In many instances, representing a party in an arbitration requires more due diligence and work than a trial. Great “arbitration” lawyering is essential, but many times does not happen.
No. 4: Not understanding Pre-Arbitration Discovery Rights… and Limitations
After going through arbitrator selection and the initial administrative hearing, you not only have an arbitrator, but a scheduling order and a hearing date. Typically, in court, there would then be the start of a tedious and expensive pre-hearing “discovery” process. The mistake: not knowing your arbitration pre-discovery rights and limitations and not having a discovery “plan” in place that takes into consideration these limitations. Recall arbitration is a matter of contract. Does the arbitration clause address pre-arbitration discovery? Typically, a clause will incorporate by reference the rules of the group that will be administering the arbitration, such as the American Arbitration Association (AAA). What do these rules provide, if anything, on pre-hearing discovery? Recall my previous post discussion about effective drafting of arbitration clauses. The lawyer drafting the clause may have referenced some rules that may call for full bore discovery, when the pitch to the client to agree to arbitration was that discovery would be limited. The AAA also has separate rules for complex cases. You have to know what discovery you can and cannot obtain according to the clause and the rules, and be prepared to negotiate with opposing counsel if you cannot get what you need.
Party document exchange is always allowed, and it can be as simple as a letter with a list. It’s not necessary to send a formal “Request for Documents.” I still have arbitrations when counsel try to send interrogatories or requests for admissions. Again, absent a clause or agreement with counsel, the “rules of civil procedure” do not apply in arbitrations. The arbitrator does have the power to entertain motions related to party discovery, such as motions to compel. Entertaining and awarding sanctions is another matter, since again the rules of civil procedure, where judges are given options, do not apply. In these days of e-discovery, especially when there may be reams of documents and emails (especially in construction cases), it makes sense to try to work with opposing counsel on some kind of e-discovery protocol, such as search terms. Any reasonable arbitrator will expect and demand this sort of cooperation.
Pre-hearing depositions are always a tricky subject. Absent a clause, or what the rules provide, typically a party does NOT have a right to take any pre-hearing depositions. This drives some lawyers who do not have arbitration experience crazy. The arbitrator also does not have the right to “order” depositions (there can be exceptions for out-of-state witnesses). There can be an “agreement” with counsel for a full blown, unlimited depositions or just a few. But be forewarned: Many arbitrators who feel strongly about controlling legal costs (one hallmark of arbitration), may push back on “agreements” for extensive discovery. There have been arbitrations where the arbitrator believes the lawyers are out of control and sets up conference calls insisting that the clients participate, along with all counsel, to discuss why such depositions are necessary. How the arbitrator thinks about depositions is key when reviewing arbitrator lists. This is also a topic that prior to the initial scheduling conference counsel should have discussed, and certainly with the arbitrator in that conference where a scheduling order is being fashioned.
What about pre-hearing third-party discovery? The short answer is, unlike “court,” there is no “right” to such discovery. This is a huge factor in agreeing to arbitration in the first place. If there is a dispute arising out of the contract and your client will be the one who will need to have third-party discovery to prevail, that discovery may not happen. This post isn’t long enough to go through all of the case law (federal circuit courts differ on the enforceability of third-party, pre-hearing arbitrator subpoenas) and articles (just Google) on this topic. It is also important to know that unlike judges, arbitrators do not have the power to enforce a pre-hearing, third-party subpoena. The remedy for that party is to “go to court” to try to enforce the subpoena. Best advice: Have the arbitrator issue third-party discovery subpoenas early, well in advance of the hearing date. Since these third parties may simply ignore the subpoena, obtaining a continuance of a hearing because of your own issues with third-party discovery may not happen.
The primary learning points: (a) Know what your arbitration clause and rules allow for pre-hearing discovery; (b) have a plan for discovery in advance of the initial scheduling conference; (c) try to reach agreement with counsel if at all possible; and (d) use the arbitrator to manage the process to favor your client. Failing to do any of this will seriously hurt your chances of success at a hearing.