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

2025 Best Lawyers Awards Announced: Honoring Outstanding Legal Professionals Across the U.S.


by Jennifer Verta

Introducing the 31st edition of The Best Lawyers in America and the fifth edition of Best Lawyers: Ones to Watch in America.

Digital map of the United States illuminated by numerous bright lights

Unveiling the 2025 Best Lawyers Awards Canada: Celebrating Legal Excellence


by Jennifer Verta

Presenting the 19th edition of The Best Lawyers in Canada and the 4th edition of Best Lawyers: Ones to Watch in Canada.

Digital map of Canadathis on illuminated by numerous bright lights

Legal Distinction on Display: 15th Edition of The Best Lawyers in France™


by Best Lawyers

The industry’s best lawyers and firms working in France are revealed in the newly released, comprehensive the 15th Edition of The Best Lawyers in France™.

French flag in front of country's outline

Announcing the 13th Edition of Best Lawyers Rankings in the United Kingdom


by Best Lawyers

Best Lawyers is proud to announce the newest edition of legal rankings in the United Kingdom, marking the 13th consecutive edition of awards in the country.

British flag in front of country's outline

Announcing the 16th Edition of the Best Lawyers in Germany Rankings


by Best Lawyers

Best Lawyers announces the 16th edition of The Best Lawyers in Germany™, featuring a unique set of rankings that highlights Germany's top legal talent.

German flag in front of country's outline

Celebrating Excellence in Law: 11th Edition of Best Lawyers in Italy™


by Best Lawyers

Best Lawyers announces the 11th edition of The Best Lawyers in Italy™, which features an elite list of awards showcasing Italy's current legal talent.

Italian flag in front of country's outline

Combating Nuclear Verdicts: Empirically Supported Strategies to Deflate the Effects of Anchoring Bias


by Sloan L. Abernathy

Sometimes a verdict can be the difference between amicability and nuclear level developments. But what is anchoring bias and how can strategy combat this?

Lawyer speaking in courtroom with crowd and judge in the foreground

Things to Do Before a Car Accident Happens to You


by Ellie Shaffer

In a car accident, certain things are beyond the point of no return, while some are well within an individual's control. Here's how to stay legally prepared.

Car dashcam recording street ahead

The Push and Pitfalls of New York’s Attempt to Expand Wrongful Death Recovery


by Elizabeth M. Midgley and V. Christopher Potenza

The New York State Legislature recently went about updating certain wrongful death provisions and how they can be carried out in the future. Here's the latest.

Red tape blocking off a section of street

Find the Best Lawyers for Your Needs


by Jennifer Verta

Discover how Best Lawyers simplifies the attorney search process.

A focused woman with dark hair wearing a green top and beige blazer, working on a tablet in a dimly

Key Developments and Trends in U.S. Commercial Litigation


by Justin Smulison

Whether it's multibillion-dollar water cleanliness verdicts or college athletes vying for the right to compensation, the state of litigation remains strong.

Basketball sits in front of stacks of money

Is Premises Liability the Same as Negligence?


by Jeremy Wilson and Taylor Rodney Marks

In today's age, we are always on the move, often inhabiting spaces we don't own. But what happens when someone else's property injures you or someone you know?

A pair of silhouetted legs falling down a hole with yellow background

Prop 36 California 2024: California’s Path to Stricter Sentencing and Criminal Justice Reform


by Jennifer Verta

Explore how Prop 36 could shape California's sentencing laws and justice reform.

Illustrated Hands Breaking Chains Against a Bright Red Background

Woman on a Mission


by Rebecca Blackwell

Baker Botts partner and intellectual property chair Christa Brown-Sanford discusses how she juggles work, personal life, being a mentor and leadership duties.

Woman in green dress crossing her arms and posing for headshot

Why Backlinks Matter for Law Firm SEO


by Nancy Lippincott

The key ingredient to a law firm's online search visibility could lie within backlinks, a driving factor in the industry's efforts to build an SEO-based future.

Collection of search bars, menus and posts in front of gray background

Best Lawyers Celebrates Women in the Law: Ninth Edition


by Alliccia Odeyemi

Released in both print and digital form, Best Lawyers Ninth Edition of Women in the Law features stories of inspiring leadership and timely legal issues.

Lawyer in green dress stands with hands on table and cityscape in background