Originally from: AAA Handbook on Arbitration Practice

Preview Page

Arbitrators do not inherently possess the full panoply of judicial powers to sanction abusive conduct during discovery.  Unless authorized by the parties in their agreement, in the applicable institutional arbitration rules, or in the governing arbitration law, an arbitrator’s remedial powers are limited. Typically, those limits are not a serious impediment to serving justice. But they can be in hard cases in which a key element of proof of a cause of action or the amount of damages resides, in whole or large part, in the control of a recalcitrant adversary who refuses to produce it. The harm from a party’s non-production of relevant documents can be substantial. For example, trade secret misappropriation claims often take their direction from the documentary trail. If the trail is false or materially incomplete due to non-production of critical documents, the work undertaken by the claimant's attorney and expert will be misdirected. The cost of this deflection can be staggering. With the stakes this high, it is reasonable to expect an arbitrator to be able to impose remedial sanctions that have meaningful in terrorem and/or economic effect.2 However, that is not necessarily the case in most jurisdictions.

Historically ADR providers typically train their arbitrators to draw an "adverse inference"3 from a party's refusal to produce documents in discovery. Suppose a party fails to produce documents leaving discrete pieces in a chain of proof missing. In this instance, an arbitrator no doubt would be willing to fill in minor gaps with adverse inferences against the non-producing party. However, this remedy may not be acceptable to the arbitrator if the evidence that is withheld is the only evidence available to prove one or more elements of the claimant's causes of action or the amount of damages.4 In a case like this, the arbitrator may be unwilling to make the necessary inferences.