Insight

Spoliation Allegations Spread into Arbitration

Spoliation into Arbitration
EM

Elizabeth Del Cid and Katherine McGrail

December 30, 2016 12:00 AM

Spoliation—the destruction of or denial of access to relevant evidence that harms another party’s position in a dispute—has become a point of contention among parties seeking a fair presentation of their case. Like judges, arbitrators, known for their streamlined and confidential approach to dispute resolution and providing relief from strict conformity to the rules of evidence, have been asked to address this issue.

The rules addressing the scope of arbitrators’ authority and recent decisions on spoliation offer a guide on ways to treat cases of spoliation raised in arbitration.

The rules of major arbitration organizations—including the American Arbitration Association (Commercial Arbitration Rules and Mediation Procedures), Financial Industry Regulatory Authority (FINRA) (Code of Arbitration Procedure), International Centre for Dispute Resolution (International Dispute Resolution Procedures), and JAMS (Streamlined Arbitration Rules and Procedures)—provide that arbitators may exercise discretion about which evidentiary procedures to follow and when to issue monetary sanctions, draw adverse inferences, or exclude evidence. In short, arbitrators can decide if the loss of information will affect the outcome of the case and how to overcome that complication.

Following the December 2015 amendment to Rule 37 of the U.S. Federal Rules of Civil Procedure (Rule 37) on the preservation of electronically stored information (ESI), there has been an outbreak of 2016 decisions on how to remedy the loss of material evidence in pending disputes.

Broadly, Rule 37 states that federal judges may issue sanctions, issue adverse inference instructions, dispose of a case, or take other measures to cure the harm done to another party by the party who lost the information or failed to comply with its disclosure obligations.

In 2016, federal courts evaluated Rule 37. In NuVasive, Inc. v. Madsen Medical, Inc., the Southern District of California applied the letter of this rule and issued an adverse inference instruction. The Eastern District of New York in Securities and Exchange Commission v. CKB168 Holdings, Ltd. did the same. The Southern District of Florida in Living Color Enterprises Inc. v. New Era Aquaculture, Ltd. and the District of Maryland in Ericksen v. Kaplan Higher Education, LLC also relied on the rule, but determined whether to issue sanctions only. Unlike this line of cases, in CAT3, LLC v. Black Lineage, Inc., the Southern District of New York relied on the court’s inherent power to impose sanctions instead of under Rule 37. These decisions suggest that, of the available remedies, judges prefer sanctions or adverse inferences over disposing a matter before an evidentiary hearing is held.

Each state court, immune from application of federal rules, has its own set of remedies that govern the issue of spoliation, which may include sanctions, civil penalties, criminal penalties, a criminal sentence, rebutabble presumptions, or a cause of action.

Thus far in 2016, FINRA addressed spoliation in two public arbitration awards. On a motion for remedial action based on spoliation with request for sanctions in Speer v. Morgan Stanley (Florida) and a motion to exclude evidence and for sanctions to remedy spoliation in Sun Trading v. Fitzgerald (Illinois), both requests were denied.

Irrespective of the rules of evidence that are followed or in what forum, the consensus seems to be that so long as the disturbance is addressed, an allegedly missing piece of evidence should not negate either party’s ability to have its case heard. In fairness, parties should have their day in hearing.

Related Articles

The Great Debate: Do You Arbitrate Commercial Disputes?


by David K. Taylor

In a civil case, is it wiser for a business to try to persuade the counterparty to agree from the outset to arbitration—or potentially to place its very solvency in the unpredictable hands of a judge and jury?

Hand moving multicolor blocks

Measuring Success by Results


by John Fields

Recognized Best Lawyers®* recipient Joseph F. Brophy on how his Firm determines success.

Measuring Firm Success

Destiny Fulfilled


by Sara Collin

Was Angela Reddock-Wright destined to become a lawyer? It sure seems that way. Yet her path was circuitous. This accomplished employment attorney, turned mediator, arbitrator and ADR specialist nonpareil discusses her career, the role of attorneys in society, the new world of post-pandemic work and why new Supreme Court Justice Ketanji Brown Jackson represents the future.

Interview with Lawyer Angela Reddock-Wright

Racial Discrimination Suit Against NFL May End in Arbitration


by John Ettorre

A former Miami Dolphins head coach is up against the NLF in a discrimination case that is on a path to arbitration; the NFL remains focused on equality for their diverse coaching staff.

Arbitrating Discrimination Suit Against NFL

“Best Law Firms” Submissions: What They Are and Why They Matter


by Best Lawyers

"Best Law Firms" rankings are produced yearly by U.S. News & World Report and Best Lawyers. The submissions process is an important component for all eligible firms.

Best Law Firms Submissions

Road to Somewhere


by Mark LeHocky

How can attorneys take steps to improve settlement efforts and avoid unpleasant surprises as they map out a dispute resolution? One litigator-turned-general counsel-turned mediator (with some help from a distinguished rock star) points the way forward.

Improved Dispute Resolution Settlement

All Together With Pride: The Best Lawyers Team Volunteers During Pride Month


by Megan Edmonds

Offering time, muscle power, donations and more, the Best Lawyers team supports local advocacy groups’ events.

The Best Lawyers Team Volunteers During Pride

Announcing the 2022 Best Lawyers in Japan


by Best Lawyers

The results include an elite field of top lawyers and firms.

Announcing the 2022 Best Lawyers in Japan

Hey, Big Lender


by Catherine M. Brennan and Latif Zaman

A contentious proposed federal rule would establish “true lender” guidelines for banks and third parties. Does Colorado show the way forward?

Financial Institution

Announcing the 2021 "Best Law Firms" Rankings


by Best Lawyers

Featuring the top-ranked law firms in the nation.

2021 U.S. News - Best Lawyers "Best Law Firms

Without Delay


by Ashish Mahendru and Darren Braun

Remote testimony? Virtual evidence presentation? Been there, done that: Why even international arbitration proceedings have, for the most part, weathered the pandemic just fine.

People talking in a conference room

It’s a Gas, Gas, Gas


by Best Lawyers

Michael Polkinghorne discusses why arbitration or mediation is a better option.

An Interview With White & Case LLP

How to Advise Clients in International Arbitration and Mediation


by Best Lawyers

Karl Pörnbacher discusses how his firm stays at the forefront of advising clients.

An Interview With Hogan Lovells

A Decade of Excellence


by Joseph Begonis

Nine firms weigh in on issues that will shape the legal industry in 2020.

2020 Best Law Firms "Law Firm of the Year"

A Global Approach to Settlement


by Bradley A. Klein, Gretchen M. Wolf, Mayra C. Suárez and Peter Y. Cheun

The Department of Justice, in pursuit of companies whose transgressions cross borders, increasingly credits other countries’ fines to avoid “piling on.”

A Global Approach to Settlement

Property Rights...and Wrongs


by Chad Cooper and Steven S. Kaufman

Winning a legal battle often boils down to finding and targeting the weakest part of an opponent’s case. Four recent real estate disputes in northeast Ohio are good examples.

Strategies for Real Estate Litigation

Trending Articles

Announcing the 2023 The Best Lawyers in America Honorees


by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

Announcing the 2023 The Best Lawyers in Canada Honorees


by Best Lawyers

The Best Lawyers in Canada™ is entering its 17th edition for 2023. We highlight the elite lawyers awarded this year.

Red map of Canada with white lines and dots

Best Lawyers: Ones to Watch in America for 2023


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

Announcing the 2022 Best Lawyers® in the United States


by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

Best Lawyers: Ones to Watch in Canada 2023


by Best Lawyers

The year 2023 marks the second edition of Best Lawyers: Ones to Watch in Canada, highlighting professionals earlier in their legal careers all across Canada.

Blue background with white stairs formed out of lines

Announcing the 2022 Best Lawyers in Canada™


by Best Lawyers

The results include an elite field of top lawyers listed in the 16th Edition of The Best Lawyers in Canada™ and 1st Edition of Best Lawyers: Ones to Watch in Canada.

Announcing the 2022 Best Lawyers in Canada™

Famous Songs Unprotected by Copyright Could Mean Royalties for Some


by Michael B. Fein

A guide to navigating copyright claims on famous songs.

Can I Sing "Happy Birthday" in Public?

Choosing a Title Company: What a Seller Should Expect


by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

All Eyes to the Ones on the Rise


by Rebecca Blackwell

Our 2023 honorees recognized in Best Lawyers: Ones to Watch in America™ tell us more about how their path to law formed, what lead them to their practice areas and how they keep steadfast in their passion to serve others.

Person walking between glass walls towards window

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

The Real Camille: An Interview with Johnny Depp’s Lawyer Camille Vasquez


by Rebecca Blackwell

Camille Vasquez, a young lawyer at Brown Rudnick, sat down with Best Lawyers CEO Phillip Greer to talk about her distinguished career, recently being named partner and what comes next for her.

Camille Vasquez in office

Caffeine Overload and DUI Tests


by Daniel Taylor

While it might come as a surprise, the over-consumption of caffeine could trigger a false positive on a breathalyzer test.

Can Caffeine Cause You to Fail DUI Test?

Announcing the 2022 "Best Law Firms" Rankings


by Best Lawyers

The 2022 “Best Law Firms” publication includes all “Law Firm of the Year” recipients, national and metro Tier 1 ranked firms and editorial from thought leaders in the legal industry.

The 2022 Best Law Firms Awards

Wage and Overtime Laws for Truck Drivers


by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

Press and Publicity: How Television and Social Media Impact Legal Careers


by Justin Smulison

In recent years, with social media giving minute by minute reporting, many lawyers are finding themselves thrust into a spotlight they never planned for. How are lawyers grappling with unexpected stardom, media coverage and merciless influencers?

Close up of camera at news station

Best Lawyers: Ones to Watch – The Future of Legal Talent Looks Bright


by Justin Smulison

Best Lawyers: Ones to Watch is launching its second edition in the United States, and after talking with both a company leader and esteemed lawyers on the list, the importance of this prestigious list is evident.

Best Lawyers: Ones to Watch in America 2022