One of the benefits of arbitration is the ability to select triers of fact with specialized knowledge or experience in a specific industry. Another benefit is the freedom of the parties to select a procedure that is sensible for their specific dispute. But the intersection of specialized, often highly technical, or esoteric subject matter with procedural freedom can result in confusion about the ground rules for the use of experts in the arbitration. A detailed, carefully negotiated expert discovery agreement is therefore essential to good arbitration practice. And one subject for which this is especially true is the treatment of drafts by, and communications with, expert witnesses.

A carefully drafted arbitration clause may specify the substantive law that will apply to a dispute and certain procedural rules that will govern the arbitration—often by specifying arbitration under the auspices of an institutional arbitration provider such as the American Arbitration Association (AAA) or JAMS. But while selecting law and forum is usually enough when it comes to litigation, it is not for arbitration. The federal courts, or the courts of a selected state, have detailed rules and a well-developed body of binding case law to fill in procedural gaps or resolve ambiguities. Arbitration has neither. This lack of pre-existing default rules for expert discovery means that the parties have not only the freedom, but also the obligation, to establish their own rules as they proceed.

Arbitration rules often say very little about privilege or work product protections. AAA Commercial Rule 34(c) says only that the "arbitrator shall take into account applicable principles of legal privilege, such as those involving the confidentiality of communications between a lawyer and client." See also JAMS Comprehensive Rule 22(d) (providing that "the Arbitrator shall apply applicable law relating to privileges and work product."). Because privilege is often treated as a matter of substantive law, privilege disputes can be resolved by the application of either a pre-existing agreement as to choice of law or, in its absence, conflicts of laws principles. However, work product protection is usually treated as procedural, not substantive. E.g., Chaiken v. VV Publishing, 1994 U.S. Dist. LEXIS 16530, at *3 (S.D.N.Y. Nov. 16, 1994) ("Work product immunity, however, is distinct from the 'privilege' granted to attorney client communications, and is viewed as a procedural matter governed by the federal procedural rules.") (footnote omitted); accord Brandman v. Cross & Brown Co., 479 N.Y.S.2d 435, 437 (Sup. Ct. Kings Cty. 1984) (holding that, unlike privilege, "work product … [is] governed by the New York CPLR as a matter of pure procedure"). This means that, in a AAA or JAMS arbitration, the parties and arbitrator(s) can find themselves confronting a question about the procedural question of work product without any applicable procedural rule.

Different Approaches to Expert Confidentiality

During an arbitration, one party's attorney might ask an adverse expert about prior drafts of her report, or her communications with the latter party's counsel. In a federal district court, those question would generally be improper. Since 2010, Federal Rule of Civil Procedure Rule 26(b)(4)(C) protects as work product "communications between the party's attorney and any witness required to provide a report under Rule 26(a)(2)(B), regardless of the form of the communications," with three exceptions for communications that: (1) relate to the expert's compensation; (2) "identify facts or data that the party's attorney provided and that the expert considered in forming the opinions to be expressed;" or (3) "identify assumptions that the party's attorney provided and that the expert relied on in forming the opinions to be expressed." And, Rule 26(b)(4)(B) provides "drafts of any report or disclosure required under Rule 26(a)(2)," i.e., any expert report, are protected as work product.

In some state courts, however, the same questions would be entirely proper. E.g., Sandler v. Independent Living Aids, 2018 N.Y. Slip Op. 31006(U) at *4-*5 (Sup. Ct. N.Y. Cty. May 24, 2018) (holding that draft reports are discoverable and that "an adverse party is entitled to communications between counsel" and a testifying expert, "starting on the date when [the expert(s)] initiated preparation of the expert report, including gathering data, receiving instructions from counsel as to the scope of the report and underlying facts.") And in other states, it is unclear which position is correct. See, e.g., 49 Mass. Prac., Discovery §4.5 (May 2018 Update) (explaining that "Massachusetts has not adopted either the 1993 or the 2010 amendments to the Federal Rules of Civil Procedure, and the Massachusetts courts have not addressed the issue [of expert communications] in a reported decision"). Without an agreement between the parties, arbitrators may be forced to simply choose the standard they subjectively prefer. The question of protection for draft reports, in particular, is made even more complicated by the fact that in some state court systems (or at least in certain courts within those systems), pre-trial expert reports are not required in the first place. See, e.g., 49 Mass. Prac., Discovery §3:5 (May 2018 Update) (expert reports are generally permitted but not required in Massachusetts state court). There may thus be a dearth of instructive precedents on the draft reports question even if the arbitrator determines that a particular state's work product standard should apply.

But beyond the fact that the arbitrator's decision in these circumstances would be arbitrary, the lack of an expert discovery agreement can lead to more serious unfairness. One party might have assumed that the federal standard applied and freely communicated with its expert to revise the report so that it best presented that party's argument. The other party may have dealt more cautiously with its expert—as though a different, less protective work product standard applied—leaving the expert to draft a report without the benefit of lawyers' guidance on how to make it more persuasive. If the arbitrator later decides to apply the federal standard, one party will have been litigating with a hand tied behind its own back. Or, if the arbitrator applies a less protective standard, lawyers may be put into the embarrassing position of having to disclose—in the middle of a hearing, in front of their clients—sensitive communications with or instructions to an expert that they assumed were confidential.

Negotiating an Agreement on Expert Confidentiality

Because there is no default rule, counsel in an arbitration should define what information (such as draft reports or attorney-expert communications) is subject to discovery, balancing how much counsel wish to communicate freely with their own expert(s), and how much fodder for cross-examination they hope to obtain for their adversary's expert(s). Protecting drafts and attorney-expert communications makes each side's work easier. And sophisticated experts often make it a habit to put very little in writing besides the final report (or overwrite drafts so that no prior drafts exist), which can make the "right" to discovery of drafts or communications an illusory benefit.

However, our own recent experience offers an example discovery into an opposing expert's drafting process being critical. We confronted a damages expert who offered an opinion underpinned by a particular cost figure. This cost figure came from a document generated by the adverse party, but the expert received the document from that party's counsel (who had retained the expert), rather than from the document's actual source. Because the adverse party was the best source of information about its own costs, and had not produced any other factual information about these costs, communications between the expert and the adverse party's counsel about whether those facts (on which the expert relied) were true and whether or not there was other evidence on the same subject became critically important. Exploring the interactions between the expert and the adverse party's counsel was also helpful in assessing whether the expert's opinion was the expert's own idea to begin with or was instead a lawyer-contrived theory. What came out was that attorneys actually invented the damages theory and then directed the expert to come up with a way to support it, while using only limited data that the adverse party filtered through its attorneys, never allowing the expert to speak directly with the party personnel who could have provided a complete picture of the facts related to damages.

Conclusion

An agreement to arbitrate that selects law and forum is an excellent first step, but it does not finish the task of shaping the arbitration process. As soon as it becomes clear that experts may have a role to play in an arbitration, a detailed expert discovery agreement is vital. This agreement should specify a work-product standard for expert discovery in order avoid unpleasant mid-arbitration surprises.

David B. Newman is a member and Matthew L. Lippert is of counsel in the litigation department of Sills Cummis & Gross P.C.