Collecting and Analyzing iPads in Litigation

In the Division 1 LinkedIn Group earlier in February, Jim Zack from long-time Forum Sponsor Navigant Consulting posted a link to an article on Navigant's website called "Collecting and Analyzing iPads: What You Need to Know."

As an aside, if you are not a member of the Division 1 LinkedIn Group, it is a great way to stay up-to-date with announcements for Division 1, articles such as the one Jim posted, and with the Dispute Resolver generally.  Become a member, and then start a discussion! Now, back to the Navigant article.

Navigant consultant Cuyler Robinson's article outlines some of the issues that one has to deal with when looking for relevant documents and emails in a corporate environment where iPads and other tablets quickly are replacing laptops as the mobile computing hardware of choice for executives and lawyers.

iPads have been around only for five years at this point, and the big issue is that Apple's device security complicates both forensic imaging and forensic data gathering. Apple keeps what's under the hood in the iPad operating system secret, leaving e-discovery vendors and attorneys alike flatfooted when trying to figure out how to gather relevant information.  Add in that backups are made either through iTunes or into the iCloud, and you have multiple layers of complexity involved in trying to get relevant information.

Cuyler's article is well worth the read as a reminder that e-discovery will continue to evolve in the same way that electronic devices generally do.

I mean, how difficult would it be to try to gather electronic data for litigation from Google Glass?

If you have experience with gathering forensic data from this "new" media -- from apps on phones or tablets or the watches or eyeglass computers that are being developed, we would love to hear your experiences.  Was it difficult? How, if at all, can you tell whether relevant information has been spoliated on a tablet?

Trial Tips from Practice Masters

Earlier this week, the "Your ABA" publication included an article entitled "Preparation and Attention to Detail Can Pay off at Trial."  This article arose out of a video seminar of about an hour long that can be downloaded for free by any ABA Member.

The article and seminar focused on general trial strategy related to "the little things" in the case and in presentation generally.  Discussion during the seminar ranged across all areas of trial and included everything from how to handle surprise testimony that pops up at trial for the first time (common sense tip: if it is truly a surprise to you, request a brief recess so that you can consult with your colleagues or client or call someone who can help you with the issue) all the way to how you should dress for various days of court (one panel member suggested wearing brighter ties/clothes on days when the attention should be on you, such as opening statements, closing arguments, and key cross examination days).

One of the most helpful tips from the article that I saw came in the very last sentence:

[Andrew J.] Smiley [managing partner and lead trial attorney at the New York firm of Smiley & Smiley LLP] says you have [to] look at trial like a chess match, anticipating your opponent's next move.  "You should anticipate what can go wrong and plan how you'll handle it," he adds.

The mark of a great trial lawyer is being able to make the times when you truly are surprised by testimony -- whether from opposing witnesses or your own -- and turn those times either into advantages for your client or at least not making it appear that you are caught flatfooted.  While there is no substitute for experience, watching others in action can help guide you in the right direction.

Now, here's my question for all of you: Many of us have now tried a number of cases, whether to juries, judges, or arbitral panels. If you could go back and tell your younger self one or two tips to improve your trial skills far earlier in your career, what would those tips be?

Court Imposes Rule 11 Sanctions Against Counsel for Asserting Claims Against Arbitrator and Arbitration Organization

While not a construction dispute, the United States District Court for the Southern District of New York’s Opinion and Order in Landmark Ventures, Inc. v. Stephanie Cohen, et al., No. 13-9044 (S.D.N.Y. 2014), reminds us that courts consistently uphold the strong arbitral immunity defenses available to arbitrators and the organizations that sponsor arbitrations. Moreover, the case serves as a warning that, if a party to an arbitration intends to seek relief from an adverse arbitration award, counsel for that party should think twice before asserting claims against the arbitrator and/or sponsoring organization because doing so might expose them to sanctions.

In Landmark, the plaintiff, Landmark Ventures, Inc. (“Landmark”) was unsuccessful in an arbitration it filed against InSightec, Ltd. Defendant and arbitrator, Stephanie Cohen, presided over the arbitration pursuant to the rules of the International Chamber of Commerce (“ICC”), also made a defendant to Landmark’s suit. Concurrent with its suit against Ms. Cohen and the ICC, Landmark filed a petition to vacate the award, which the Court denied.

In support of its claims against Ms. Cohen and the ICC, Landmark urged that Ms. Cohen made procedural decisions that were unfair to Landmark, including limiting Landmark’s discovery requests and failing to grant Landmark a continuance to locate an expert witness. Landmark also urged that the ICC is liable for refusing to correct Ms. Cohen’s award and for assessing additional legal fees and costs against Landmark.

The defendants provided the court and Landmark notice of their intent to seek dismissal under the long-standing principle of arbitral immunity and the parties’ agreement through adoption of the ICC rules not to sue the ICC and its arbitrators for any alleged claims arising from the arbitration.  After a pre-motion conference, in which the principle of arbitral immunity was discussed at length, Landmark and its counsel still refused to dismiss Landmark’s claims against Ms. Cohen and the ICC. After the conference, the defendants sent a letter to Landmark notifying Landmark and its counsel of their intent to seek Rule 11 sanctions.

The defendants filed their motion to dismiss and motion for sanctions. The court granted both motions. The court found Landmark’s claims to be frivolous in light of the well-established principles of arbitral immunity and because, following multiple notices from the defendants regarding Landmark’s lack of a cause of action, “[i]nstead of heeding these precedents and dismissing the case without prejudice or responding to the cases in its reply, Landmark simply ignored these precedents and proceeded with the case.”  Moreover, Landmark’s counsel acknowledged at the motion hearing that, under the clear law of the Second Circuit, Landmark had no cause of action against Ms. Cohen and the ICC, yet did not provide any non-frivolous arguments for reversing current law. The Court awarded the defendants sanctions of $20,000 against Landmark’s counsel. The decision is currently being appealed.

For your reference, a copy of the November 25, 2014, decision can be found here.

Discovery in Arbitration: Take Aways from Division 1's Mid-Winter Lunch Program

Division 1: Litigation and Dispute Resolution

This was one of the handouts given during Division 1’s lunch program on Discovery in Arbitration. Special thanks to our speakers: Kelsey Funes, Phelps Dunbar LLP; John Bulman, Pierce Atwood, LLP; Nancy Wiegers Greenwald, Construction Dispute Solutions, LLP; and Linda Turteltaub, Skanska USA Building Inc.  Additional materials relating to the  presentation have been posted  in Division 1’s Dropbox. Please e-mail Division 1 Chair, Nick Holmes, nholmes@nkmlawyers.com, to receive an invitation to the Dropbox. 

The Dirty Dozen:

Best Practices for Discovery in Arbitration

1. Conduct discovery in stages or phases.

2. Use the neutral’s help to create a discovery blueprint.

3. Focus on the relevant facts early. Conduct early witness interviews and think about what you really need to present the case to the arbitrator(s).

4. Require each party with an affirmative claim to specify their damages (category and amount) in the early stages of the case.

5. Use negotiated discovery protocols (search terms; custodians; deposition time limits)

6. Narrow the issues to be arbitrated. Resist the tendency to tell the entire story of the construction project. Focus on the matters in dispute.

7. Select appropriate arbitrators. Select arbitrators with appropriate subject matter and process expertise.

8. Make the most of your preliminary hearing with the arbitrator by having at least a preliminary plan for discovery. Know the schedules of the key participants (including key witnesses) and be ready to commit to a discovery schedule and a hearing date.

9. Include flow-down provisions in your contract to be sure all of the parties can be brought into the arbitration.

10. Work with your client and opposing counsel to craft a written discovery plan before the first call with the arbitrator.

11. Consider allowing direct testimony by written submission.

12. Submit a form of award to arbitrator with post-hearing brief.

Top Five Things to Avoid

1. Don’t – Provide for the Federal Rules of Civil Procedure or other state procedural laws to apply to discovery in an arbitration.

2. Don’t – Provide for judicial review of errors of fact or law. (But, consider the AAA and JAMS appellate process if the case warrants it).

3. Don’t allow motions in limine.

4. Don’t use four witnesses or documents when one will do.

5. Don’t engage in petty discovery disputes.

Limitations on Amending a Notice of Removal, by Tom Dunn*

General Removal Rules 

·         Defendant has 30 days from service of process to file a removal petition. 28 U.S.C. § 1446(b).

·         During this 30-day period, a defendant may amend the petition without leave of court. Muhlenbeck v. KI, LLC, 304 F.Supp.2d 797, 799 (E.D. Va. 2004).

·         After the 30-day period, leave of court is required to amend the removal notice. 28 U.S.C. § 1653 (“[d]effective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.”)

Are there limitations on a Court’s exercise of § 1653?

Can a Court permit a defendant to amend its notice of removal to add additional substantive grounds for removal?

In A.E.A v. Volvo Penta of the Americas, LLC, et al., Civ. No. 2:14-cv-425 (E.D. Va. 2014) (filed 1/9/2015) (“A.E.A.”), the Court answered the first question “yes” and the second question “no.” 

In A.E.A, a minor was injured while tubing in the Chesapeake Bay off of Virginia Beach. The location of the incident triggered federal maritime jurisdiction.  Defendant's notice of removal asserted original maritime jurisdiction of the federal courts and the removal statute.  After the 30-day period lapsed, Plaintiff filed a motion to remand relying upon a statute that provides a plaintiff the option of asserting his or her in personam lawsuit in state court even if it implicates maritime jurisdiction.  See 28 U.S.C. § 1333 (referred to as the savings to suitors clause). Thereafter, Defendant filed a motion for leave to amend its notice of removal. 

In its proposed amended notice of removal, Defendant added a claim that federal question jurisdiction exists and specifically cited to regulatory federal statutes.  The Court explained the “novel” issue presented was “whether § 1653 permits a party to add statements asserting federal question jurisdiction when its Notice relied on other grounds for removal.” A.E.A. at pp. 5-6 (emphasis added).  Following the Fourth Circuit’s decision, Wood v.Crane Co., 764 F.3d 316 (4th Cir. 2014), the Court held it does not have the discretion to allow the substantive amendment beyond the 30-day window under § 1653.  Noting a split in the Circuit Courts, the harmonized rule expressed by the Fourth Circuit in Wood was:

[A]fter thirty days, district courts have discretion to permit amendments that correct allegations already present in the notice of removal. Courts have no discretion to permit amendments furnishing new allegations of a jurisdictional basis. The trick lies in placing a case within one of those two categories. 

A.E.A. at p. 6, quoting Wood, 764 F.3d at 323 (emphasis added by A.E.A. Court).   

Applying the Wood rule, the A.E.A. Court found that Defendant had completely failed to plead in its initial notice of removal federal question jurisdiction or the specific federal regulatory statutes in the proposed amended notice of removal.  The Court stated that federal maritime jurisdiction and federal question jurisdiction are not separate and distinct.  Moreover, it found mere reference to the removal statute 28 U.S.C. § 1441(a) or citation to a federal statute to be insufficient to trigger federal question jurisdiction.  Accordingly, Defendant’s motion for leave to amend its notice was denied and Plaintiff’s motion to remand in accordance with the savings statute was granted. 

Takeaways

1.       Pay careful attention to the Notice of Removal. If you file your removal notice soon after service, calendar a “fresh look” on the 25^th day to make sure the Notice is complete.

2.       If there are multiple grounds to remove an action, state each one separately in the Notice.  In a footnote, the A.E.A. Court left open “whether citing a substantive, non-jurisdictional statute in a Notice of Removal would allow a defendant to supplant or add another substantive statute to its Notice under § 1653.” 

 

* Tom is a member of the steering committee  for Division 1: Litigation and Dispute Resolution of the ABA Forum on Construction Law.  Tom also helps manage The Dispute Resolver Blog.  In his life away from Division 1, Tom is a Partner at Pierce Atwood, LLP.  He practices construction law and business dispute resolution in Massachusetts and Rhode Island.  If you are interested in submitting an article to The Dispute Resolver or to learn more about FCL or Division 1, feel free to contact Tom at rtdunn@PierceAtwood.com. 

Waiver of Arbitration by Litigation Conduct – Who Decides (Court or Arbitrator)? by Tom Dunn*

Common Fact Scenario: Defendant is sued in state or federal court.  Plaintiff and Defendant signed an arbitration agreement.  After participating in the litigation for some period of time, Defendant moves to compel arbitration.  Plaintiff objects asserting, in part, that Defendant waived the right to compel arbitration through participating in the litigation and/or delaying the demand of arbitration. 

Typical Outcome: The question of waiver by litigation conduct is a case by case analysis with no bright lines.  “Thus, ‘a party may waive an agreement to arbitrate by engaging in two courses of conduct: (1) taking actions that are completely inconsistent with any reliance on an arbitration agreement; and (2) “delaying its assertion to such an extent that the opposing party incurs actual prejudice.”’” Shalabyv. Arctic Sand Technologies, Inc., et al., MICV2014-03621, Slip. Op. (Mass.Sup. Ct. 12/15/2014), quoting  Johnson Assocs. Corp. v. HL Operating Corp., 680 F.3d 713 (6th Cir. 2012), quoting in turn Hurley v. Deutsche Bank Trust Co. Ams., 610 F.3d 334, 338 (6th cir. 2010), quoting in turn O.J. Distrib., Inc. v. Hornell Brewing Co., 340 F.3d 345, 356 (6th Cir. 2003).  In general, as a defendant engages in affirmative conduct that involves the exercise of the power and authority of the court, and through the lapse of time, the likelihood that such conduct will be regarded as a waiver increases.  In Shalaby, for example, the defendant filed a Rule 12(b)(6) motion to dismiss, engaged in contentious e-discovery disputes, and requested the Court to issue a discovery protective order. Only after the lapse of six months and partial denial of its dispositive motion did Defendant first assert the affirmative defense of arbitration and/or a right to compel arbitration.  Under these facts, the Court found defendant waived arbitration. Defendant acted completely inconsistent with its rights to arbitration and caused prejudice to plaintiff through a “deliberate and tactical delay six month delay” that caused plaintiff to incur greater expense while also denying her the opportunity for an expeditious alternative to litigation. 

While this result is not that surprising, I found the Court’s discussion on “who” should make the determination of waiver based upon litigation conduct interesting. 

Who should decide waiver by litigation conduct: Court or Arbitrator? The Shalaby court addressed this question under the Federal Arbitration Act and federal case law.  It found the issue “more nuanced” than Massachusetts law, which presumes that questions of arbitrability are issues to be decided by a judge. See O’Brien v. Hanover Ins. Co., 427 Mass. 194, 199 (1998). Two lines of federal case law are relevant:

·       First Options: “Under the [FAA], ‘[c]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is “clea[r] and unmistakabl[e]” evidence that they did so.” Shalaby at p. 2, quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995), quoting in turn AT&T Technologies, Inc. v. Communications Wkrs. of America, 475 U.S. 643, 649 (1986).

·       Howsam: “[T]he Supreme Court moved the line drawn in First Options by deciding that under federal law ‘the presumption is that the arbitrator should decide “allegation[s] of waiver, delay, or a like defense to arbitrability.”’” Shalaby at p. 2, quoting Howsamv. Dean Witter Reynolds, Inc., 537 U.S. 79, 85 (2002), quoting in turn Moses H. Cone Mem. Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983); see also BG Group, PLC v. Republic of Argentina, 134 S.Ct. 1198, 1207-1210 (2014); Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 452-453 (2003).  In these cases, the Supreme Court has found that the questions of waiver are “‘issues of procedural arbitrabillty’ concerning ‘conditions precedent to an obligation to arbitrate’ that presumptively should be decided by an arbitrator, not for the judge. Howsam, 537 U.S. at 85.   

The Supreme Court has not answered whether the Howsam standard applies to waiver by litigation conduct.  Which standard applies: First Options [court decides] or Howsam [arbitrator decides]? The Shalaby Court stated the “consensus view” amongst “virtually every appellate court” is that “‘the Supreme Court in Howsam and Green Tree did not intend to disturb the traditional rule that waiver by conduct, at least where due to litigation-related activity, is presumptively an issue for the court,’ and not for the arbitrator, to decide.” Shalaby at p. 2, quoting Marie v. Allied Home Mortgage Corp., 402 F.3d 1, 14 (1st Cir. 2005).  The rationale is that the conduct that formulates the claim of waiver through litigation conduct primarily occurs before the the court and the court is in the best position to identify abuses and forum shopping.    

After finding that the First Options rule applies to waiver by litigation conduct, the Shalaby Court inquired whether under the facts of the case there was “‘clear and unmistakable evidence’ of such an intent in the arbitration agreement [or in arbitration rules adopted by contract].”  In Shalaby, the agreement cited the JAMS employment arbitration rules which provide that the arbitrator will decide any “Jurisdictional and arbitrability disputes, including disputes over the formation, existence, validity, interpretation or scope of the agreement under which Arbitration is sought[.]” Shalaby at p. 3, citing to JAMS Employment Arbitration Rule 11.  The Court found the rule insufficient to overcome the First Options presumption.

·       Reason #1: “Federal law appears to render ineffective any contract provision purporting to delegate the issue of litigation-conduct waiver to an arbitrator.” The explanation here is that “waiver” constitutes a “default” by a party seeking to enforce an arbitration clause and Section 3 of the FAA (9 U.S.C. § 3) restricts a court from issuing a stay pending arbitration where there is no default.  [Question: wouldn’t the same reasoning apply to the Howsam line of cases?]  The court continued its analysis even if such an agreement were enforceable.

·       Reason #2: The arbitration rules at issue in the case could not overcome the First Options presumption. The Court stated: “The JAMS rule does not clearly and unmistakably provide that an arbitrator must decide the parties’ dispute as to whether [the moving party’s] conduct in this civil action constitutes a waiver of its right to compel arbitration. While the JAMS rule makes clear that the parties agreed to arbitrate ‘the gateway question of whether the underlying substantive dispute between [the parties] is arbitrable,’ nothing in this rule ‘similarly evidences a clear and unmistakable intent to have an arbitrator decide’ whether [the moving party] waived arbitration by ‘actively litigating the underlying dispute in court. There are no references to waiver of arbitration in this or any other provision of the’ JAMS rules.” Shalaby at p. 4, quoting Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 221 (3d Cir. 2007).

Takeaways: Courts are likely to keep the issue of “waiver by litigation conduct” until the U.S. Supreme Court extends its “procedural arbitrability” rule to this specific form of waiver.  While the Shalaby Court does not expressly say so, it is clear that the Court did not wish to reward the perceived purposeful litigation tactics of the employer moving party.  For example, the Court commented:

[Defendant] was happy to litigate Plaintiff’s claims in the Superior Court so long as it thought that it could obtain a quick judgment in its favor on the merits. It only moved to compel arbitration after its motion to dismiss on the merits was denied in part, in a 16-page memorandum of decision dated September 3, 2014. In essence, [Defendant] ‘“wanted to play heads I win, tails you lose,” which “is the worst possible reason” for failing to move for arbitration sooner than it did.’

Shalaby at p. 5 (internal citations omitted) (emphasis added). 

For those arbitration advocates that believe all issues of arbitrability including waiver from litigation conduct should be decided by an arbitrator, not a court, add language to your client’s arbitration agreement that the issue of waiver of arbitration, including but not limited to waiver from litigation conduct shall be exclusively decided by the Arbitrator through the arbitration process.”  This added language would present the issue squarely for the next court that addresses this issue. 

 

* Tom is a member of the steering committee  for Division 1: Litigation and Dispute Resolution of the ABA Forum on Construction Law.  Tom also helps manage The Dispute Resolver Blog.  In his life away from Division 1, Tom is a Partner at Pierce Atwood, LLP.  He practices construction law and business dispute resolution in Massachusetts and Rhode Island.  If you are interested in submitting an article to The Dispute Resolver or to learn more about FCL or Division 1, feel free to contact Tom at rtdunn@PierceAtwood.com.