ADR News from Jim Reiman
This month’s piece includes an extra article or two as well as an “Interesting Case of the Month” piece to make up for the absence of a July issue.
For those who are new to this newsletter, each month I send to friends and colleagues a collection of three or four articles, court decisions, or news items that I’ve come across that I hope readers will find of interest concerning the subjects that occupy my time and thoughts. I focus on three principal topics: i) corporate governance; ii) legal and business issues concerning alternative dispute resolution, primarily mediation and arbitration, and iii) e-Documents, or more specifically, corporate governance policies regarding their management and security, and litigation issues regarding their discovery.
This Month’s Articles
- This month’s articles address strategies to manage litigation costs, a Third Circuit appellate decision regarding an interlocutory appeal from an order finding court jurisdiction under the Federal Arbitration Act, two articles regarding proxy statements (what matters to investors and what makes proxy statements effective), an e-discovery case regarding spoliation of evidence, and an article discussing the future of the current Ancient Document rule in the world of e-documents and e-discovery. Additionally, this month’s issue includes an “interesting case of the month,” which is an article regarding privacy issues raised by the Bill Cosby story.
More specifically, this month’s articles and cases are:
Alternative Dispute Resolution
- A discussion of litigation management: Wendy Hufford and Galina Davidoff discuss their experiences and strategies to manage outside and inside litigation counsel in a piece published in Corporate Counsel magazine. Hufford served as deputy general counsel and assistant secretary of ITT Corporation and Davidoff is strategy and jury consultant.
- A case addressing when and how parties must appeal court decisions denying arbitration and holding that the court possesses jurisdiction.
This month’s articles are all about proxy statements. Two pieces are presented. First, the results of Stanford Business School’s “2015 Investor Survey: Deconstructing Proxy Statements — What Matters to Investors,” and; Second, an article discussing those survey results by Stanford Business School’s David F. Larcker and Brian Tayan titled: “The Ideal Proxy Statement.”
- Federal Rule of Evidence 803(16) permits the admission of documents that would otherwise be barred as hearsay if the documents are at least 20 years old and “and whose authenticity is established.” Given the emergence of electronic documents and the proliferation of 20+ year old documents whose authenticity may be established, the underpinnings of Rule 803(16)are being brought into question.
- A case concerning the award of sanctions for spoliation of evidence and rejection of the defense that the offending party lost his cell phone.
Interesting Case of the Month – Cosby Privacy Issues
In this month’s interesting case of the month I consider the privacy issues raised by the unsealing of deposition testimony in a 10 year old settled lawsuit. While I don’t condone Cosby’s alleged criminal behavior (and I use the word “criminal” carefully), I am troubled by the privacy issues that the unsealing raises.
I hope you find the below discussion and “linked” articles of interest.
Warm regards –
Articles / Alternative Dispute Resolution
A Discussion of Litigation Management
Wendy Hufford and Galina Davidoff engage in a free-wheeling discussion of their thoughts and strategies to manage litigation and reduce litigation expenses. Hufford served as vice president, deputy general counsel and assistant secretary of ITT Corporation, the White Plains, N.Y. based manufacturer of highly engineered, customized solutions for the energy, transportation and industrial markets. Davidoff works with law firms and corporations nationwide providing solutions to difficult persuasion problems based on jury research practices and jurors’ psychology. Their discussion includes data used to assess the success of lawyers and law firms, and in particular data used to make settlement decisions. Additionally, they discuss strategies to manage aggressive trial lawyers. For example, Hufford relates that she requests two sets of binders of “hot documents” from her trial counsel – she “not only want(s) the 25 best documents but also the 25 worst ones.” Additionally, she relates that “when we do jury research, I ask our strongest and most experienced litigation attorney to argue the other side to the mock jury. That requires that attorney to focus on the other side’s best case, and results in the attorney having a more balanced perspective for the dispute.”
The article may be viewed here.
Interlocutory Appeals and the Federal Arbitration Act
Admittedly, this case is both technical and likely of interest only to those readers who are attorneys engaged in arbitration litigation. That said, it is a worthy read for that audience because it reviews and addresses the issue of court jurisdiction and when/how to appeal a judicial decision that a court possesses jurisdiction notwithstanding an arbitration agreement and a challenge to jurisdiction pursuant to that arbitration agreement.
The case, Devon Robotics LLC v. DeViedma, was decided by the Third Circuit Court of Appeals in early August. The procedural history is a bit convoluted but, briefly, Devon filed suit against DeViedma claiming breach of fiduciary duty, tortious interference with current and prospective contractual relations, defamation, and conspiracy. In response, DeViedma filed a motion to dismiss on two grounds: first, that the complaint must be dismissed in favor of arbitration, and second, that Devon failed to state any claim upon which relief could be granted. The District Court granted the motion in part dismissing certain claims, and denied it in part. Thereafter discovery ensued regarding the remaining claims, including 26 depositions and the production of hundreds of thousands of pages of documents.
After discovery, DeViedma filed a motion for summary judgment on the remaining claims and repeated his argument that the claims against him could only be brought in arbitration. The District court rejected the arbitration argument, granted summary judgment on one claim, and denied summary judgment on the final remaining claim. DeViedma thereafter filed an interlocutor appeal on the issue of the court’s jurisdiction.
The Appellate Court ruled against DeViedma holding that the Federal Arbitration Act (the “FAA”) “is strikingly specific in describing the categories of orders from which we may hear interlocutory appeals.” The Court reviewed those specifics and then held: “if a motion does not at least request an order compelling arbitration or an order directing that arbitration proceed, then the denial of that motion is not appealable [under the FAA].”
The full text of the opinion may be found here.
Articles / Corporate Governance
The survey provides the evidence to support what most of us know: proxy statements have become highly legal documents and provide unsatisfactory statements of the key information investors seek. Key findings: “investors are deeply dissatisfied with compensation disclosure;” “proxies are too long and difficult to read – investors rely on only a small fraction of the information;” “portfolio managers are only moderately involved in voting decisions,” and; “proxies are less frequently used for investment decisions.”
The complete survey, and its analysis, may be found here.
David Larcker, the Director of the Corporate Governance Research Initiative at the Stanford Graduate School of Business, addresses the findings of Stanford’s 2015 Investor survey in the article: “The Ideal Proxy Statement.” He states right up front: “Investors believe that proxies, as written today, lack context. In the words of one investor: ‘We’ve lost sight of what the proxy is for. It’s become a catch-all for non-financial information.” The article addresses what investors want, and provides answers and specifics. The conclusion: proxies need to be “shorter, more concise, more candid, and less legal.”
The piece may be found here.
Articles / e-Documents
A report prepared by the Committee on Rules of Practice and Procedure of the Judicial Conference of the United States proposes that Rule 803(16) be abrogated, and notes that the proposal was unanimously approved by the Committee.
Federal Rule of Evidence 803 provides: “The following are not excluded by the rule against hearsay, regardless of whether the declarant is available as a witness: (16) – Statements in Ancient Documents. A statement in a document that is at least 20 years old and whose authenticity is established.”
Explaining its proposal, the Committee states:
“The rationale for [Rule 803(16)’s exception to the general hearsay rule] has always been questionable, because a document does not become reliable just because it is old; and a document does not magically become reliable enough to escape the rule against hearsay on the day it turns 20. The Committee concluded that the exception has been tolerated because it has been used so infrequently, and usually because there is no other evidence on point. But because electronically stored information can be retained for more than 20 years, there is a strong likelihood that the ancient documents exception will be used much more frequently in the coming years. And it could be used to admit only unreliable hearsay, because if the hearsay is in fact reliable it will probably be admissible under other reliability-based exceptions, such as the business records exception or the residual exception. Moreover, the need for an ancient documents exception is questionable as applied to ESI, for the very reason that there may well be a great deal of reliable electronic data available to prove any dispute of fact.”
The full committee report, along with its proposed Committee Note, may be found here.
In the case Kan-Di-Ki, LLC v. Suer, 2015 WL 4503210 (Del. Ch. July 22, 2015), the Delaware Court of Chancery rejected defendant’s explanation that he lost his cell phone as just reason for failure to turn over text messages in discovery, and imposed sanctions for spoliation of evidence. The case is noteworthy in part because the Court inferred “no bad motive as to Suer‘s loss of this device.” Rather, it turned on defendant’s failure to take reasonable steps to preserve evidence and statements by defendant’s counsel that defendant “had no text messages, and . . .emails for business purposes but generally does not text.”
I present the case to emphasize that cell phones and text messages are now part of the world of business documents that counsel need to think about when the obligation to preserve evidence arises in anticipation of litigation. The case is also a good, current (July, 2015) statement of Delaware law regarding the obligation to preserve evidence and remedies for failure to do so.
The full case may be found here.
The section discussing the requirement to preserve evidence and spoliation of evidence begins on p. 77 of the opinion.
Interesting Case of the Month
This month’s “interesting case” concerns the release of testimony of Bill Cosby that had been previously sealed, and the leaking of that information by a court reporter. Set aside the heinous acts purportedly committed by Cosby and consider just the issues of privacy and the payment of monies to settle a case in part to preserve privacy.
Cosby does not now hold public office and never has – he is merely an entertainer. True, he has spoken out from time to time on moral issues, but such acts were incidental to his career as an entertainer. Nonetheless, the New York court ordered that portions of Cosby’s deposition be unsealed because Cosby “has donned the mantle of public moralist and mounted the proverbial electronic or print soap box to volunteer his views on, among other things, child-rearing, family life, education and crime.” As Ellen Brotman, a white-collar crime and government investigation expert stated in one analysis: “I’ve never seen any phrase in another case that says if you’re a public moralist, then you will more likely be subject to this kind of exposure.”
Make no mistake – I abhor the acts Cosby is accused of and have learned from experience that when there’s smoke – lots and lots of smoke, as in the Cosby case – there is almost always fire. I do not feel bad for Cosby nor suggest he merits any sympathy. However, I’m troubled by the decision to unseal his deposition records. He is not a public figure in the legal sense and indeed this was recognized by the NY Court: “Although [Cosby] is a public person in the sense that his name, fame, and brand are worldwide in scope, he does not surrender his privacy rights at the doorstep of the courthouse.” Additionally, the material unsealed was not a trial record, but discovery documents. As the NY Court also noted: “discovery motions and their supporting documents [possess no] presumptive right of public access.”
I offer no conclusions, but present the matter as an “interesting case” that merits thought and consideration.