More than half of non-union private-sector employees are subject to mandatory arbitration procedures. Arbitration clauses are also tucked into consumer contracts, agreements with financial institutions, insurance providers and even medical institutions. So, whether you represent an employer or an employee, a business or a consumer, there is a significant likelihood that the dispute at issue will go to arbitration.

Another element in your client's dispute is that it exists in a digital world. A University of California study reported that, in 1999, “93% of all information generated was in digital form, on computers,” while “7% of information originated in other media, such as paper.” In re Bristol-Myers Squibb Securities Litigation, 205 F.R.D. 437, 440 n.2 (D.N.J. 2002). Discovery of electronically stored information (ESI) can be both expensive and time-consuming. Yet, absent any indication this trend will abate, e-discovery may well be a necessary tool in resolving your client's dispute.

The question then, is not if—but how—the costs associated with e-discovery can co-exist with a process designed to be simpler, less expensive and more expeditious than litigation.

Beginning in 2002, the Sedona Conference Working Group on Electronic Document Retention and Production worked to address concerns that procedures developed for paper discovery might require adaptation for the production of ESI in litigation. Its work culminated in The Sedona Principles, Third Edition: Best Practices, Recommendations & Principles for Addressing Electronic Document Production, 19 Sedona Conf. J. 1 (2018). Two prominent themes in the Sedona Principles—cooperation and proportionality—merit inclusion in one's approach to e-discovery in arbitration.

The cost of reviewing and processing ESI increases dramatically when the data is no longer in an “accessible” or readily usable format, such as active online data, because “inaccessible” data such as backup tapes and deleted data must be reconstructed before the data is usable. Zubulake v. UBS Warburg, 217 F.R.D. 309, 318, 320 (S.D.N.Y. 2003). ESI can become “inaccessible” in the ordinary course through auto-delete features, an automatic document deletion/destruction program, and even the customary practice of not retaining data such as text messages. In anticipation of discovery demands, an “arbitration hold” should be put in place when a party has notice a claim is likely to be asserted. The obligation to preserve is not unbounded; it requires “reasonable and good faith efforts to retain information that is expected to be relevant to claims or defenses in reasonably anticipated or pending” matters. Sedona Principles, supra, No. 5, at 93.

Both the American Arbitration Association (AAA) rules and JAMS procedures call for an early conference with the arbitrator. Even if not directed by the arbitrator, the parties can initiate a cooperative approach by conferring prior to that conference, along the lines of the “meet and confer” required by Fed. R. Civ. P. 26(f). The identification of what data should be preserved and a trigger date for preserving that data can reduce exposure to claims of spoliation and the thorny problem of who pays for the retrieval of “inaccessible” data. This is also a good time to discuss the need for non-disclosure agreements, clawback agreements to address the inadvertent production of privileged documents, and whether IT personnel or e-discovery experts are required.

The operative arbitration clause should identify the rules and procedures to be employed,  Flanzman v. Jenny Craig, 456 N.J. Super. 613, 628-29 (App. Div. 2018), and may even dictate the scope of permissible discovery. At the outset, it is important to understand what rules apply and that they inevitably provide a much more restrictive scope of discovery than that available in litigation, with substantial authority and discretion vested in the arbitrator. See, e.g., AAA Rules for Commercial Arbitration [AAA Rules], R-22(a); JAMS Recommended Arbitration Discovery Protocols for Domestic, Commercial Cases (Jan. 6, 2010) [JAMS Protocols].

“Proportionality” informs the appropriate limits of e-discovery in arbitration. This is not merely a function of the amount in dispute. As described in the Sedona Principles, this standard “requires consideration of the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.”  Sedona Principles, supra, at 51.  See also Fed. R. Civ. P. 26(b)(1); Zubulake, supra, 217 F.R.D. at 324.

AAA R-22(b)(iv) specifically addresses the production of ESI:

The arbitrator may … require the parties … to make [ESI] available in the form most convenient and economical for the party in possession of such documents, unless the arbitrator determines that there is good cause for requiring the documents to be produced in a different form. The parties should attempt to agree in advance upon, and the arbitrator may determine, reasonable search parameters to balance 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.

JAMS emphasizes that discovery requests generally should be clearly defined and limited, avoiding “broad phraseology such as 'all documents directly or indirectly related to.'” JAMS Protocols, supra, at 4. In the case of e-discovery, JAMS suggests an early order, limiting the scope of discovery further by permitting production of ESI “only from sources used in the ordinary course of business.” JAMS Protocols, supra, at 5. Suggested limitations include provisions that, “absent a showing of compelling need”:

• no ESI is required to be produced from backup servers, tapes or other media
• the production of electronic documents shall normally be made on the basis of generally available technology in a searchable format that is usable by the party receiving the e-documents and convenient and economical for the producing party,
• the parties need not produce metadata, with the exception of header fields for email correspondence.

Both JAMS and AAA provide the arbitrator with an effective hammer for enforcing these limitations—the authority to allocate the costs of producing ESI.

The JAMS Protocols provide:

Where the costs and burdens of e-discovery are disproportionate to the nature and gravity of the dispute or to the amount in controversy, or to the relevance of the materials requested, the arbitrator will either deny such requests or order disclosure on condition that the requesting party advance the reasonable cost of production to the other side, subject to the allocation of costs in the final award.

AAA Rule R-23(c) similarly authorizes the arbitrator to issue orders “allocating costs of producing documentation, including [ESI].” In the case of willful non-compliance, arbitrators may “draw[] adverse inferences, exclud[e] evidence and … mak[e] special allocations of costs or an interim award of costs arising from such non-compliance.” R-23 (d). Arbitrators are further authorized to issue other enforcement orders, R-23(e) and to impose sanctions for failure to comply. R-58.

Cost allocation is no substitute for reasonable limits on e-discovery, however (Sedona Principles, supra, at 190), and it is likely to be imposed sparingly.

The institutional curb to overzealous restrictions exists in the statutory grounds for vacating an arbitration award. See, 9 U.S.C.A. §10(a)(3) (“arbitrators … refus[ed] to hear evidence pertinent and material to the controversy”); N.J.S.A. 2A:23B-23(a)(3) (similar provision). But, given the relatively few vacaturs ordered, the prudent practitioner will not place undue reliance on this remedy.

The more fertile ground for your effort lies in cooperating with your adversary and in crafting particularized requests that are “proportional” to the dispute. Bear in mind the limitations anticipated by the AAA rules and JAMS protocols. If requesting metadata (embedded information in electronic documents that is generated when documents are created or revised on a computer), back-up or deleted data, or production in a format that is not considered readily searchable, be prepared to explain why there is “good cause” or a “compelling need” for this request or response. As to requests falling within the realm of discovery anticipated under the arbitration rules, consider the following examples of ways to limit your request to conform to the goals of arbitration and afford a cost-effective means of discovery:

• Limit production to those custodians who are most likely to have relevant documents, such as those persons materially involved in the subject matter of the dispute.
• Identify a limited number of storage sources for those custodians—which may include personally owned laptops and mobile devices.
• Limit the date range for ESI.
• Describe the documents sought as specifically as possible.
• Identify search terms. (This, too, is an issue that calls for cooperation. The search can be narrowed if the parties agree on key words, Boolean terms or natural language searches. When a substantial volume of data is involved, the parties can agree on time-saving techniques such as technology assisted review (TAR) and sampling.)
•  Describe preferred format.

Marianne Espinosa, J.A.D. (ret.), is of counsel to Javerbaum, Wurgaft, Hicks, Kahn, Wikstrom & Sinins, in Springfield Township. Her practice is concentrated on resolving disputes through mediation and arbitration as alternatives to both a trial and an appeal.