ADR News from Jim Reiman

Friends and colleagues –

This eMail newsletter is a monthly piece that I send to friends and colleagues. In it I identify, link, and briefly describe three to five 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.

As those who are regular readers know, 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 patent trolls, duties of corporate directors and officers, a report of a recent decision by the Shanghai Second Intermediate Court enforcing a contract’s arbitration clause, and a NY Federal Court decision imposing sanctions for the destruction of e-documents.

More specifically, this month’s articles and cases are:
Alternative Dispute Resolution

• A Chinese court’s decision to enforce an arbitration agreement which provided that the place of arbitration was Shanghai, the language of the arbitration English, and that the arbitration was to be conducted under UNCITRAL Arbitration Rules

Corporate Governance

• A comprehensive description of corporate officers’ and directors’ duties and responsibilities – written for non-lawyers working in the D&O insurance industry
• Patent Trolls – what they are, current legal trends regarding troll litigation, and defense strategies

e-Documents

•  I always look for a case with a lighter side to it. This month’s case concerns the destruction of documents and the consequences of such conduct. It’s a worthy read if you’re a lawyer since it does an excellent job of laying out the principles of e-discovery and remedies for spoliation (failing to preserve, or destroying for those among you who are more cynical) of evidence. If you’re not a lawyer, it’s simply worth noting that using one’s brother-in-law to look at a balky computer that is the only depository of critical documents when your brother-in-law is neither a computer expert nor trained in computer technology, and then discarding the computer when said brother-in-law is unable to fix the computer thus destroying all stored documents is not viewed favorably by judges in the Federal Court in NY.

I hope you find the below discussion and “linked” articles of interest.
Warm regards –

Jim Reiman

Articles / Alternative Dispute Resolution

Shanghai Court Enforces Arbitration Agreement

This case represents yet another example of the increasing willingness of local Chinese courts to accept and enforce arbitration awards entered against local companies, even when the arbitration is conducted in English and governed by non-Chinese rules. As with many court decisions regarding the confirmation of arbitral awards, the issues before the court were highly technical and those readers who are international arbitration practitioners will need to read the linked article since a summary for this general audience will be too generic. An excellent analysis of the case is provided by the JunHe firm, which represented the prevailing party. For the non-lawyers, know that this case is the second recent Chinese provincial court decision to hold an arbitration governed by non-Chinese rules valid and its award enforceable – good news for companies engaged in commerce with Chinese companies and worried about the legal enforceability of their contracts.

The JunHe law firm’s summary of the case may be found here.

Articles / Corporate Governance

Officer and Director Duties

Every corporate officer and director knows that s/he is a fiduciary, and has responsibilities to the corporation’s shareholders and others. Who those “others” are, and exactly what their fiduciary duties require, however, is often not fully understood. The short answer regarding the “who”: “there are five major groups of constituents to whom directors and officers (D&Os) of U.S. corporations and U.S. subsidiaries of foreign corporations owe duties and responsibilities, and are subject to liability: the corporation itself, shareholders, creditors, corporate employees, and governmental regulators/law enforcement agencies.” Perry S. Granof, an attorney and insurance executive that I’ve had the recent pleasure of meeting and getting to know, has just published a handbook for insurance professionals explaining these issues in multiple countries. He’s given me permission to post the chapter on US law on my website. While it is not a “fun” read, it is written for non-lawyers and is an excellent overview and reference piece. Take a look, or go to the piece when you have questions.

Here’s the link.

A hot issue in boardrooms and offices, and in the corridors of the law departments of companies engaged in the development or exploitation of technology is the patent “troll.” While multiple definitions of the term “patent troll” exist, most agree that a “troll” is an effort by the owner of a patent (often a company that purchased the patent and not the inventor) to “overreach: attacking sellers whose goods really aren’t covered by the claims of the patent and asserting patents having questionable validity.”

The issue has become so significant that the US House passed an anti-troll bill last year. While the Senate has yet to adopt the bill, 10 States have signed anti-troll bills into law and several other states are considering legislation – see May 15, 2015 Ars Technica article. In addition to the State and hoped for Federal legislation, effective weapons to fight trolls have been developed. Robert Payne sets forth 5 approaches in a piece published in the June issue of Business Law Today. It’s worthy of a read if your company or clients are targets (or potential targets) of patent trolls.

Robert’s piece: “Fighting Patent Trolls: New Weapons Emerge”.

Articles / e-Documents

Control of E-Data and Attorney’s Liens

This case has the amusing fact scenario described in the introduction – the lawyer defended his decision to dispose of a purportedly broken computer containing the only copies of critical documents upon the failed repair attempts of his untrained and unskilled brother-in-law. Not the strongest of defenses standing alone, but when put into the context that the case involved a $250 million claim alleging that the defendant bank failed to honor and pay an international documentary letter of credit, and that the Bank’s defense is that the letter of credit was never issued and is fraudulent, the plaintiff’s lawyer’s conduct borders on the absurd.

Briefly, all of Plaintiff’s documents had been scanned and placed on a single personal computer. Prior to the commencement of the case, the lawyer printed out those documents which supported his client’s position. Thereafter, the computer became “balky” and when the lawyer’s brother-in-law (who had no computer training nor any particular computer expertise) failed to fix the computer, the plaintiff’s lawyer discarded it thus destroying all evidence save for those documents supportive of his case. To understate the court’s decision: it was not pleased by the lawyer’s conduct and did not believe it responsible.

I present the case to my readers not because of the ridiculous defense, but because it provides an excellent summary of the current state of the law regarding e-discovery generally, and in particular the requirement that evidence be preserved, the current state of the law regarding spoliation of evidence, and the remedies available to litigants when evidence has not been preserved.

The magistrate who initially heard the matter recommended that the Court bar the plaintiff from introducing any evidence derived from the computer, which would have had the effect of barring the plaintiff from presenting its case. The district court, Judge Kimba Wood (a jurist whose opinions are generally highly regarded) agreed that an extraordinary remedy against the plaintiff was appropriate, but determined that a slightly lesser remedy should be imposed – a negative inference (meaning that the court should “infer” that any document on the computer not presented at the trial or hearing would support the defense’s positions and not the plaintiff’s).

The full case may be found here.