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

"Lawyer of the Year"


Lawyer smiles while posing for headshot photo

Robin Meadow

Appellate Practice

Los Angeles, CA

2024

A Time for Choosing


by Brandon D. Saxon and Debra Ellwood Meppen

Vast changes in the law, at both the federal and state level, have made it even harder to get through the already dense thickets of employment arbitration. What do businesses need to know going forward?

Suited man holding up falling walls with gray and yellow backdrop

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

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

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

Uninsured Flying Objects


by Claire O'Rourke, Laura Beth Cohen and Marialuisa S. Gallozzi

As drones and other “unmanned aerial vehicles” increasingly crowd the skies, the law—and insurance policies—will have to figure out how best to bring them back safely to terra firma.

Insurance Regulations for Drones

Trending Articles

The 2024 Best Lawyers in Spain™


by Best Lawyers

Best Lawyers is honored to announce the 16th edition of The Best Lawyers in Spain™ and the third edition of Best Lawyers: Ones to Watch in Spain™ for 2024.

Tall buildings and rushing traffic against clouds and sun in sky

Best Lawyers Expands Chilean 2024 Awards


by Best Lawyers

Best Lawyers is pleased to announce the 14th edition of The Best Lawyers in Chile™ and the inaugural edition of Best Lawyers: Ones to Watch in Chile™, honoring the top lawyers and firms conferred on by their Chilean peers.

Landscape of city in Chile

Best Lawyers Expands 2024 Brazilian Awards


by Best Lawyers

Best Lawyers is honored to announce the 14th edition of The Best Lawyers in Brazil™ and the first edition of Best Lawyers: Ones to Watch in Brazil™.

Image of Brazil city and water from sky

Announcing The Best Lawyers in South Africa™ 2024


by Best Lawyers

Best Lawyers is excited to announce the landmark 15th edition of The Best Lawyers in South Africa™ for 2024, including the exclusive "Law Firm of the Year" awards.

Sky view of South Africa town and waterways

The Best Lawyers in Mexico Celebrates a Milestone Year


by Best Lawyers

Best Lawyers is excited to announce the 15th edition of The Best Lawyers in Mexico™ and the second edition of Best Lawyers: Ones to Watch in Mexico™ for 2024.

Sky view of Mexico city scape

How Palworld Is Testing the Limits of Nintendo’s Legal Power


by Gregory Sirico

Many are calling the new game Palworld “Pokémon GO with guns,” noting the games striking similarities. Experts speculate how Nintendo could take legal action.

Animated figures with guns stand on top of creatures

The Best Lawyers in Portugal™ 2024


by Best Lawyers

The 2024 awards for Portugal include the 14th edition of The Best Lawyers in Portugal™ and 2nd edition of Best Lawyers: Ones to Watch in Portugal™.

City and beach with green water and blue sky

Presenting The Best Lawyers in Australia™ 2025


by Best Lawyers

Best Lawyers is proud to present The Best Lawyers in Australia for 2025, marking the 17th consecutive year of Best Lawyers awards in Australia.

Australia flag over outline of country

The Best Lawyers in Peru™ 2024


by Best Lawyers

Best Lawyers is excited to announce the landmark 10th edition of The Best Lawyers in Peru, the prestigious award recognizing the country's lop legal talent.

Landscape of Peru city with cliffside and ocean

How To Find A Pro Bono Lawyer


by Best Lawyers

Best Lawyers dives into the vital role pro bono lawyers play in ensuring access to justice for all and the transformative impact they have on communities.

Hands joined around a table with phone, paper, pen and glasses

Presenting the 2024 Best Lawyers Family Law Legal Guide


by Best Lawyers

The 2024 Best Lawyers Family Law Legal Guide is now live and includes recognitions for all Best Lawyers family law awards. Read below and explore the legal guide.

Man entering home and hugging two children in doorway

The Best Lawyers in Colombia™ 2024


by Best Lawyers

Best Lawyers is honored to announce the 14th edition of The Best Lawyers in Colombia™ for 2024, which honors Colombia's most esteemed lawyers and law firms.

Cityscape of Colombia with blue cloudy sky above

Announcing the 2024 Best Lawyers in Puerto Rico™


by Best Lawyers

Best Lawyers is proud to announce the 11th edition of The Best Lawyers in Puerto Rico™, honoring the top lawyers and firms across the country for 2024.

View of Puerto Rico city from the ocean

Canada Makes First Foray Into AI Regulation


by Sara Collin

As Artificial Intelligence continues to rise in use and popularity, many countries are working to ensure proper regulation. Canada has just made its first foray into AI regulation.

People standing in front of large, green pixelated image of buildings

Commingling Assets


by Tamires M. Oliveira

Commingling alone does not automatically turn an otherwise immune asset into an asset subject to marital distribution as explained by one family law lawyer.

Toy house and figure of married couple standing on stacks of coins

How To Check a Lawyer's Reputation


by Best Lawyers

If you find yourself facing legal issues, researching and hiring a lawyer with a solid track record and high level of credibility can make all the difference.

Figure holding a magnify glass over digital profile