Electronic Discovery in Arbitration: Privilege Issues and Spoliation of Evidence
Warshauer, Irene C., Dispute Resolution Journal
When discovery of electronic information (ediscovery) is permitted in arbitration, will arbitrators impose sanctions for lost emails or other electronic files? This article discusses how arbitrators could respond to demands for email and backup tapes, and claims that the attorney-client privilege has been waived through the inadvertent production of edocuments.
"Electronic documents are no less subject to disclosure than paper records." So said the U.S. District Court for the Southern District of New York in Rowe Entertainment v. William Morris Agency.1 Unlike paper records, which require most companies to rent storage space, electronic documents take up no additional space and the cost of storing them is negligible.
Because there is little or no need to discard electronic files, a massive amount of electronic data, including email is now being retained. Much of the retained data is on backup tapes created for emergency uploading in case data is lost accidentally or otherwise.
Backup data is usually not easily searched. It tends to be stored on a daily or weekly basis, so it is not indexed by subject matter. The enormous amount of retained electronic data and the difficulty of searching it makes it very expensive and time-consuming to find documents sought to be produced for litigation or arbitration, and then review them to see if they can be withheld from production based on attorneyclient and/or work-product protections. Using shortcuts to conduct a manual review of edocuments to meet discovery and hearing deadlines can lead to an inadvertent waiver of these protections. Spoliation of evidence may also occur through routine recycling of backup tapes, deletion of emails and changes in documents caused by automatic computer operations (metadata).2 This can give rise to requests for the imposition of sanctions.
These issues must be dealt with by arbitrators while still preserving the speedier results, limited discovery and cost effectiveness of arbitration. This article will discuss recent court decisions on the discovery of electronic records (ediscovery) to help guide arbitrators and advocates on (1) inadvertent waivers of the protections afforded by the attorney-client privilege and the work-product doctrine, and (2) spoliation of evidence. It does not address the extent of ediscovery that might be appropriate to any particular arbitration.
Discovery Protections in Arbitration
The attorney-client privilege and the attorney work-product doctrine protect certain documents from discovery in litigation. These privileges are also generally recognized in arbitration. For example, Rule R-31 of the American Arbitration Association's Commercial Arbitration Rules, which governs the introduction of evidence at arbitral hearings, provides in subpart (c) that "[t]he arbitrator shall take into account applicable principles of legal privilege, such as those involving the confidentiality of communications between a lawyer and client."3
Accordingly, counsel may assert these privileges during discovery in arbitration and during the attempt to use privileged material as evidence at the arbitral hearing.
In order to assert one of the legal privileges, the document at issue must be protected by the privilege and the privilege must not have been waived. A waiver can occur by producing the document to an adversary or another person not covered by the privilege. Waiver can occur from intentional disclosure or inadvertent production of a protected document.
Waiver of Legal Privileges
One standard used by courts to determine whether or not a legal privilege has been waived is set forth in United States v. Rigas.4 In Rigas, the court evaluated:
(1) the reasonableness of the precautions taken by the producing party to prevent inadvertent disclosure of privileged documents; (2) the volume of discovery versus the extent of the specific disclosure issue; (3) the length of time taken by the producing party to rectify the disclosure; and (4) the overarching issue of fairness. …