ADR

Editor's note: This article describes a hypothetical situation.

Everyone thinks arbitration proceedings are automatically confidential and that the participants cannot blab about them to others.

Everyone thinks a court will do something—they are not sure exactly what, but “something”—if a participant in an arbitration proceeding breaches the supposed rule of “arbitration confidentiality.”

And everyone thinks these rules are inviolate—so inviolate that you cannot reverse the presumption of “arbitration confidentiality.”

But Bob knows these three “rules” belong in the trash heap. When he represents a client in an arbitration proceeding, Bob is careful about getting his adversary to enter into a written arbitration agreement that says the proceedings are confidential. For many years, Bob customarily has tried to get his adversary to agree to the following provision: The parties covenant and agree to keep all aspects of the arbitration proceeding confidential. Except in response to a subpoena or other discovery request from a person or entity that was not a party in the arbitration proceeding, the parties shall not disclose, transmit or disseminate, to any other person or entity whatsoever, (a) the existence of the arbitration proceeding; (b) any information regarding the arbitration proceeding; (c) testimony, documents or any other evidence used at or in connection with the arbitration proceeding; or (d) the results of the arbitra­tion proceeding or the arbitration award.

Thankfully, Bob had convinced his adversary to agree to this very provision in Bob's most recent arbitration proceeding. It made sense. After all, Bob's client had to reveal all kinds of proprietary information during the proceeding. These trade secrets revealed confidential information about how Bob's client conducted its business, including its business practices and its pricing determinations.

And, thankfully, Bob won. The arbitrator's 25-page opinion laid out, business practice by business practice, how the other side had breached the contract by telling third parties about the most secretive aspects of Bob's client's business.

Bob was not concerned about protecting the arbitration award in response to the other side's expected vacatur petition. “Bulletproof,” Bob chortled to his client. “Sure, it will take some time and cost you some money in the court proceedings. But no judge will modify or vacate this award.”

Bob had a momentary scare, right before he filed his papers to confirm the arbitration award, because the award contained lots of references to his client's confidential business practices— and he surely did not want to broadcast these practices to the world. But the scare passed quickly. Bob attached to his application a motion for leave to file the arbitration documents, including the award, under seal. “Pretty standard stuff,” Bob told his client, “especially because I thought ahead by getting the parties to enter into a confidentiality provision. That's why I attached the arbitration agreement as an exhibit to my motion.”

“I told you,” Bob said to his client when the other side stipulated to the entry of the court's anticipated confidentiality order. “The court will grant the now-uncontested motion in no time. We soon will get the court's order confirming the arbitration award.”

Despite Bob's meticulous planning, however, the order never came. In fact, the court did something surprising—to Bob anyway. The court denied the unopposed motion for leave to seal Bob's application.

Had Bob won the battle (winning an arbitration award that directs his client's adversary to stop divulging confidential business information) and lost the war (being forced to reveal this confidential business information as part of the award-confirmation process)?

Let's go back a step to understand the basis for the court's denial of the unopposed motion.

We have a strong tradition of access to courts and court proceedings. Any motion to seal any court record must respond to the presumption in favor of public access to judicial proceedings.

In XPO Intermodal v. American President Lines, 2017 U.S. Dist. LEXIS 176820 (D.D.C. Oct. 16), for instance, the winning party in an arbitration proceeding sought to confirm the arbitration award. Because the proceeding involved disclosure of proprietary and confidential business information, the applicant also sought to file the arbitration-proceeding documents under seal.

The court acknowledged “the exhibits to applicant's Petition do include some potentially sensitive business information.” Nevertheless, the court denied the motion to file the arbitration-proceeding documents under seal: “The court sees no reason to seal the entire petition or any portion of this memorandum opinion and order. It is also unnecessary to seal the exhibits in their entirety simply because they contain or refer to confidential information.” Even worse (for someone in Bob's shoes): “the parties' mutual desire for confidentiality, without more, does not justify the sealing of the entire substantive record of the case.”

OMG. Are the heavens falling? Did the movant in XPO Intermodal give up its confidentiality claims? Was Bob similarly doomed from the start? No, no and no.

Yes, the court in XPO Intermodal stated “the exhibits to applicant's petition do include some potentially sensitive business information, including rates and schedules …” And, yes, the court denied the motion to seal any portion of the application for confirmation of the arbitration award. But—and here is a primer on how the applicant in XPO Intermodal and Bob each went off the tracks—the court explained how to protect the confidential business information:

• Don't be lazy and do what Bob did in his motion for a confidentiality order. Don't make boilerplate statements about the need generally to protect confidential business information, (“generalized business interests in confidentiality simply do not rise to the level of the privacy and property interests that courts have permitted to outweigh the public's right of access”).

• Don't be lazy and do what Bob did. (Did I say that already?) Recognize the weighty and important interests at stake—the strong presumption in favor of public access—and explain to the court why the privacy and property interests at issue outweigh the public's right of access, (“This country has a strong tradition of access to judicial proceedings.”)

• Figure out what you really need to shield from the public, and then specify only the documents and information that must be shielded. That probably will mean that you must allow your filed papers and documents to be publicly available with only the most sensitive information deleted. So get out your red pen and redact only the most sensitive information. (“The court thus sees no reason why the petition itself should not be made publicly available in full, nor any reason why the exhibits thereto should not be made generally available, with only the most sensitive information redacted.”)

Bob lost outright his motion to seal the arbitration-proceeding secrets. However, the court in XPO Intermodal gave the applicant a second chance—one week to file a supplement to the motion, “demonstrating good cause for the temporary seal to remain in place.”

Which suggests that you have two choices the next time you seek to preserve the confidentiality of arbitration documents: do what Bob did—file a boilerplate motion and hope a busy court grants your motion; or anticipate the strong presumption in favor of public access to judicial proceedings, even in connection with arbitration-award confirmation, and provide a detailed road map to the court that justifies your intended sealing of information and documents. The first choice is easier, faster and cheaper. Plus you only risk one thing—allowing your client's secrets to see the light of day and the prying eyes of others. Easy choice, huh?

Charles F. Forer independently provides arbitration, mediation and all other neutral services. He is a former chair of both the Philadelphia Bar Association's alternative dispute resolution committee and fee disputes committee. He is a frequent lecturer and writer on the use of ADR in a variety of settings. Contact at 610-999-5764 and c[email protected].