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How we resolve our disputes

Entries in discovery (2)


Electronic discovery and mediation

Recently, I attended a seminar sponsored by the American Bar Association and FINRA titled Utilizing Mediation to Navigate the Perils of Electronic Discovery in Arbitration. I have previously written about effect that the effort and cost of obtaining discovery from adverse parties has on litigation and prospects for settlement. Today, with increasing amounts of information being stored in electronic formats, the cost and effort of obtaining that information has soared. Frequently, the parties need to retain an IT specialist to search, find and interpret the records and data. In complex commercial and financial cases, especially when allegations of fraud are involved, the level of distrust between the parties makes settlement and discovery even more difficult. Judges and arbitrators do not like to wade through the reams of pleadings and documents that are often necessary to resolve disputes concerning electronically stored information (ESI). 

Enter the mediator. By focusing the parties’ attention on the specific issues, rather than on allegations of spoliation of evidence and threats of sanctions for discovery abuse, the mediator can help the parties devise a plan to allocate the costs and schedule the timing and manner of production of evidence, thereby maintaining confidentiality and credibility with the court or arbitration panel. A mediator familiar with the concepts of proportionality, privilege and data mapping can help the parties minimize the time, effort and expense they put into discovery. Thus, they can concentrate on prepartion of the case for trial or arbitration. After they obtain the information they feel they need, the parties might then return to mediation to fully evaluate their settlement options. 

It takes more time, effort and money to fully and properly prepare a case for trial or arbitration today than it did before the advent of ESI. The federal courts and FINRA (which supervises arbitration panels in many securities cases) have done much work lately to help the parties and the tribunals minimize the costs and time involved in resolving modern discovery disputes. Attorneys would serve their clients well by becoming adept at using mediation to relieve the parties and tribunals of most of these burdens. 


Discovering the costs of discovery

A couple of recent articles in the Metropolitan Corporate Counsel highlight the effect that the cost of conducting discovery in complex civil litigation has on settling such cases.  It used to be that an attorney could file a lawsuit on behalf of client and serve it on the defendants along with interrogatories, requests for production of documents, and maybe a notice of deposition or two.  With notice pleading, the plaintiff did not have to be certain of who was responsible for the loss that prompted the lawsuit, or even how exactly it happened.  They would figure that out after reviewing defendants’ records and statements. 

Not anymore.  Most corporate defendants’ records and statements are now maintained in electronic documents and communications.  Accessing such records often requires large investments of time and money in technology and technically savvy personnel.  So the cost of conducting litigation, and e-discovery,has grown enormously for both plaintiffs and defendants.  The courts’ response has been to require more fact pleading and to restrict pretrial discovery by imposing prerequisites such as “meet and confer” conferences to discuss the costs and plan the course of discovery.  Attorneys who normally represent defendants in civil cases complain that this increases the cost of litigation and prompts settlements just to avoid legal costs, even where there is no or minimal liability.  Attorneys who normally represent plaintiffs complain that fact pleading and limits on discovery deter economically impaired plaintiffs from pursuing actions, unless the damages are great enough and liability is clear enough even without knowing defendants’ internal statements and documents.  These considerations apply equally to corporations and individuals.  Corporations can be defendants (e.g., securities, products liability, and employment discrimination cases), and they can be plaintiffs (e.g., intellectual property, real estate, and breach of fiduciary duty cases).  Likewise, individuals can be plaintiffs (e.g., personal injury, breach of contract, and consumer claims) as well as defendants (e.g., embezzlement and fraud schemes, civil RICO actions, breach of non-compete agreements).  Regardless of which side of the fence you sit on, a dispute is going to cost money to resolve. 

It takes investigation and preparation in order to negotiate just as it does to litigate.  The question is whether you need a judge or jury to help you resolve the dispute, or can you do it informally?  Some people are afraid to negotiate because they think it indicates weakness.  But that is true only if they have not investigated or prepared their claim or defense adequately.  So the question of whether to litigate or negotiate a settlement should not depend on the cost of discovery.  If you need a court’s help to get the information necessary to an adequate evaluation of your case, then go to court.  If not, a negotiated settlement is almost always preferable. 

Knowledge is power, and knowledge may cost money.  But, as the saying goes, if you think education is expensive, try ignorance.