The Importance of Defining the Parameters of Discovery in Arbitration
Discovery is often time-consuming and expensive. Many litigants see arbitration as an avenue to limit discovery and thereby reduce the cost and expense of litigating. While arbitration may be used to alleviate some of the burdens of discovery, it is not a panacea to discovery-related headaches. Instead, the greater flexibility provided by arbitration requires that litigants and their counsel exercise reasoned judgment very early in the case to define discovery parameters that will allow for smooth, efficient and economical discovery that meets the needs of the case and client.
In state or federal court there is one set of rules of civil procedure that provide clear guidance as to what information is discoverable, by whom, when, and how. For example, in federal court, F.R.C.P. 26(b)(1) provides that the scope of discoverable information is that which is “reasonably calculated to lead to the discovery of admissible evidence.” In addition to the Rules, a well-developed body of case law provides additional direction.
This is rarely the case in arbitration. Instead of a mandated set of rules, it is often up to the parties to agree upon a set of rules to govern the exchange of information at the outset. It can at times be difficult to agree with opposing counsel as to what set of rules should be used, and in such situations it can be tempting to choose to move forward without reaching agreement. Counsel should be weary of this option. You would not play a game of baseball without knowing the rules—how many strikes, how many outs, how many innings, how many points scored for a run—because such an experiment would lead to confusion and unnecessary conflicts. The same is true for discovery. If the parties do not know what is required of them in exchanging information, it is exponentially more difficult to meet your own discovery obligations and to compel opposing counsel to meet theirs. Further, when a dispute does arise it can be difficult to resolve without intervention from the arbitrator because there are no standards to rely on in negotiating the parties’ respective positions. Finally, if the arbitrator is asked to intervene, there is little predictability in how the arbitrator will resolve the dispute because there are no clear guidelines upon which the arbitrator will rely.
Some arbitration services providers have rules for conducting arbitrations, including discovery rules, but these rules are not necessarily binding on the parties. For example, JAMS Comprehensive Arbitration Rules and Procedures provides that the rules are binding on the parties only where the parties agree to be bound by the rules or for cases where any claim or counterclaim exceeds $250,000 and no alternative rules are agreed upon. Similarly, the American Arbitration Association’s Commercial Arbitration Rules are binding only if the parties fail to specify particular rules. In these situations, it is easy to fall back on the set of rules promulgated by the arbitration services provider, but that may be a mistake. Instead, counsel should consider the particular needs of the case at issue, including the scope of potential discovery, the dollar amount (or other relief) at issue, and the relationship between the parties.
By way of example, if the case is contentious and discovery disputes are expected, the more informal rules promulgated by the arbitration service providers may prove too amorphous. Under the JAMS Rules parties are required to “cooperate in good faith in the voluntary informal exchange of all non-privileged documents and other information . . . relevant to the dispute of claim . . . .” Rule 17(a). This provides little guidance as to what is actually required of the parties. In contrast, the Federal Rules of Civil Procedure or state discovery rules may be more beneficial because there is developed case law that provides clear direction as to the requirements of discovery.
Arbitration provides an opportunity for litigants to customize a discovery process that works for them and their particular circumstances. However, such flexibility requires counsel to consider discovery issues early and work with opposing counsel to choose a set of rules that will provide the best structure for efficient and constructive discovery.