In another recent article, we explained how arbitration, even under the auspices of a sophisticated arbitral forum such as the American Arbitration Association (AAA) or JAMS, lacks detailed rules about work product protection in expert discovery, and how to avoid stepping in the trap that haziness can create. Newman, D. and Lippert, M., Work Product Protection for Experts in Arbitration: A Trap for the Unwary, N.Y. Law Journal Feb. 7, 2020 at 4. But this absence of default rules is not unique to work product issues. Arbitration lacks clear standards for expert discovery or the submission of expert evidence in general. This (and other types of) procedural freedom are usually extolled as a feature, rather than a "bug," of arbitration. The parties are free to do whatever works for them. But this places the onus on the parties, from very early on in a dispute, to come to a detailed agreement about how expert discovery will work and how expert evidence will be submitted to the arbitrator(s). Relying on assumptions about how things are usually done, or how the arbitrator(s) will eventually decide they ought to be done, can result in very unpleasant surprises.

Expert Reports, Depositions and/or Hearing Testimony

The AAA Commercial Arbitration Rules encourage the parties to "discuss and establish a procedure for the conduct of the arbitration that is appropriate to achieve a fair, efficient, and economical resolution of the dispute," and provides a list of topics to be discussed at a preliminary hearing, including "whether the parties intend to present evidence from expert witnesses, and if so, whether to establish a schedule for the parties to identify their experts and exchange expert reports." AAA Commercial Rules R-21(b); P-2(a)(xi). But they say little more. It is not clear whether experts are required to submit written reports, are subject to deposition, or are required to testify at the arbitration hearing. While AAA Commercial Rule 35(a) provides that "the parties shall give written notice for any witness or expert witness who has provided a written witness statement to appear in person at the arbitration hearing for examination," it does not expressly make expert reports mandatory, and provides that an arbitrator "may," but need not, "disregard the … expert report" if the expert "fails to appear."

The JAMS Comprehensive Arbitration Rules & Procedures are slightly more specific in that they indicate a preference for written expert reports, and no expert depositions. See JAMS Comprehensive Rule 16.2(e) ("Where written expert reports are produced to the other side in advance of the Hearing, expert depositions may be conducted only by agreement of the Parties or by order of the Arbitrator for good cause shown.") (internal citation omitted). But there is still much that is not specified and therefore left to the parties to decide. See JAMS Comprehensive Rule 17(c) ("all Parties continue to be obligated … to honor any informal agreements or understandings between the Parties regarding documents or information to be exchanged"). These rules are also less than clear about whether an expert who prepared a report must also testify at the hearing. See JAMS Comprehensive Rule 20(a) (requiring parties to exchange "a list of the witnesses they intend to call, including any experts" as well as "any written expert reports that may be introduced at the Arbitration Hearing"). These questions about how expert evidence will be submitted and evaluated—whether in a written report, through deposition, at the arbitration hearing, or some combination of these—can and should be addressed in a comprehensive expert discovery agreement.

Considerations in Negotiating an Expert Discovery Agreement

There is an enduring perception that arbitration is supposed to be quick and simple. And while one of the goals of arbitration is to be more efficient than litigation, "efficient" does not always mean objectively "fast" or "inexpensive." This is especially so as sophisticated commercial actors increasingly select arbitration for their disputes. When there are considerable sums of money involved, experts of all sorts can become more and more important, and adversaries will often be tempted to bolster as many of their points as possible with expert testimony. Expert discovery in such an arbitration is not where parties should emphasize their pursuit of cost savings. While arbitration can and should still save time and expense in things like preliminary motions and fact discovery, expert evidence in arbitration often deserves to be prepared and evaluated just as it would be in a litigation. The issues requiring an expert's explanation are no less complex, or important to the dispute, simply because the dispute is being arbitrated. The consequences of a surprise piece of expert testimony can thus be equally severe (both strategically and monetarily) in a sophisticated commercial arbitration as in litigation. On the other hand, there may still be rare instances when the subject matter of a dispute is dizzyingly complex, but the amount in controversy is so small that litigation-style expert discovery is nevertheless unwarranted.

A full, federal-court style expert discovery process would include the discovery devices of expert reports (perhaps with "reply" reports in which one expert responds to another expert's criticisms) and expert depositions before there is any live testimony. In our recent experience, the benefits of an expert discovery process similar to this litigation standard outweighed the costs because the subject matter was highly technical (having to do with the construction of telecommunications network infrastructure) and the amounts of money at stake were well into the tens of millions of dollars. In less complex matters with smaller amounts in controversy, it may make sense to simplify the expert discovery process by exchanging reports and foregoing depositions, while still requiring live expert testimony. That being said, if the other side's expert report is not sufficiently thorough, the lack of a deposition could place a party at a serious disadvantage. And the threat of an impending deposition may itself force experts to produce better reports. Another possible compromise is to agree that each expert report will serve as written direct testimony before the arbitrator(s), so that the parties only need to conduct cross-examination (and possibly a "re-direct" examination") for each expert. It may also be possible to find efficiencies by agreeing to constraints such as page limits for expert reports or time limits for depositions.

Conclusion

As soon as a lawyer in an arbitration foresees the potential for expert evidence, it is crucial that a detailed expert discovery agreement be discussed with the other side and the arbitrator. Ideally, this would take place at the first conference, so that the arbitrator knows what the parties expect in terms of expert reports, depositions, hearing testimony, and work product protection, and feels well positioned to enforce the parties' agreement. Even if the eventual agreement does not perfectly match your (or your client's) preferences, the fact that it sets clear rules can prevent possibly disruptive (and expensive) discovery disputes later on in the arbitration.

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