The Big (and Expensive) Dig: Mining for Data in Megaproject Arbitration

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2 The Big (and Expensive) Dig: Mining for Data in Megaproject Arbitration

3 Agenda Applicable Rules Realities of Construction Arbitration Efficiently Managing Discovery Actual Arbitration Examples Future of Data Mining in Arbitration 3

4 Applicable Rules (ICDR) 4

5 Applicable Rules (ICDR) 5

6 Applicable Rules (AAA Commercial and Construction) 6

7 Applicable Rules (AAA Commercial and Construction) 7

8 Applicable Rules (ICC) No specific rules governing document production 8

9 Applicable Rules (IBA) 9

10 Applicable Rules (IBA) 10

11 Applicable Rules (IBA) 11

12 Agenda Applicable Rules Realities of Construction Arbitration Efficiently Managing Discovery Actual Arbitration Examples Future of Construction Arbitration 12

13 Realities of Construction Arbitration Decline of litigation and rise of arbitration Perceived advantages of arbitration: Parties design the process Shorter resolution times Efficiency Cost Confidential Finality 13

14 Realities of Construction Arbitration Influence of U.S. litigation: Increased motion practice Increased discovery Document discovery Depositions Increased cost and delay 14

15 Realities of Construction Arbitration William K. Slate II Former President and CEO of the AAA [O]ut of control arbitration costs and delay is the single biggest challenge facing arbitration today. When did uncontrolled discovery become the norm in the arbitration process? 15

16 Realities of Construction Arbitration Culprits of increased discovery in arbitration? Parties: Lawyers: Clients willing to Need to uncover spend more on all relevant facts discovery given increasing amounts in dispute Arbitrators: Balance between fairness and efficiency 16

17 Realities of Construction Arbitration Discovery in Megaproject arbitration: Complex project delivery systems Multiple parties involved Multiple, interrelated contracts Fact-intensive claims Large number of documents 17

18 Realities of Construction Arbitration Investor Owner Investor Supplier Consortium Partner Consortium Partner Supplier Contractor Major Equipment Supplier Subcontractor Subcontractor Sub-Supplier Sub-Supplier 18

19 Realities of Construction Arbitration Typical claims: Construction defect claims Design defect claims Delay claims Warranty claims Scope claims Require extensive fact-gathering: Who? What? When? Why? 19

20 Realities of Construction Arbitration Example of typical document request (construction arbitration): 20

21 Realities of Construction Arbitration Example of typical document request (construction arbitration): 21

22 Realities of Construction Arbitration Example of typical document request (construction arbitration): 22

23 Realities of Construction Arbitration 80 GB Bottom line: Discovery is unavoidable In 2006, average employee generated 800 megabytes of electronic information 800 MB 8 GB 23

24 Realities of Construction Arbitration Bottom line: 13,500 s Discovery is unavoidable In 2007, average employee sent and received 135 s a day 135 s 1,350 s 24

25 Realities of Construction Arbitration Bottom line: Discovery is unavoidable Discoverable information in electronic format has significantly increased

26 Realities of Construction Arbitration 100 Type of Discoverable Information % of Non-electronic % of Electronic

27 Realities of Construction Arbitration Bottom line: Discovery is unavoidable IDC (global marketing firm): Amount of digital information created in 2006 alone was equivalent to 3 million times the volume of books ever written up to that point in history 27

28 Realities of Arbitration Discovery Bottom line: Discovery is costly In 2009, litigants spent USD 2.8 billion on e-discovery $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Minimum Cost $6,700 1 GB of ESI Collection Maximum Cost $6,000 1 GB of ESI Processing $17,000 $16,000 $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 $210,000 1 GB of ESI $1,800 Review 28

29 Realities of Arbitration Discovery Median value of e-discovery expenditures: USD 1.8 million 29

30 Realities of Arbitration Discovery 30

31 Agenda Applicable Rules Realities of Construction Arbitration Efficiently Managing Discovery Actual Arbitration Examples Future of Construction Arbitration 31

32 Efficiently Managing Discovery Drafting Arbitration Clauses Managing Discovery (Pre-Dispute) Managing Discovery (Post-Dispute) 1. Collecting and Storing Data 2. Reviewing Data 3. Working with Opposing Counsel 32

33 Drafting Arbitration Clauses Arbitration clause: Can limit the type of discovery Document discovery and depositions Can limit the amount of discovery Can limit the time period for discovery 33

34 Drafting Arbitration Clauses Pro-Discovery Clause: Following the submission of the claim and response memorial, each party shall present requests for the production of documents to the other party, relating to issues that are relevant and material to the outcome of the dispute. The Tribunal shall require disclosure of non-privileged materials, including electronic information, relevant to any parties claims or defenses. Each party shall be entitled to take the deposition of any individual that submits a witness statement in support of a party s submission.. 34

35 Drafting Arbitration Clauses Anti-Discovery Clause: The arbitrator(s) shall only require the parties to disclose documents that they intend to rely on in presentation of their case at the hearing. The parties shall not be entitled to take the deposition of any witness. 35

36 Drafting Arbitration Clauses The Middle Ground: Consistent with the expedited nature of arbitration, each party will, upon the written request of the other party, promptly provide the other with copies of documents relevant and material to the outcome of the dispute. Any dispute regarding requested documents, or the relevance or scope thereof, shall be determined by the Tribunal, which determination shall be conclusive. 36

37 Efficiently Managing Discovery Drafting Arbitration Clauses Managing Discovery (Pre-Dispute) Managing Discovery (Post-Dispute) 1. Collecting and Storing Data 2. Reviewing Data 3. Working with Opposing Counsel 37

38 Managing Discovery (Pre-Dispute) Dedicated e-discovery personnel Understand company s ESI: Map IT infrastructure of potential ESI locations Cloud Provider Tablet Video Surveillance System Smart Phone Server Access Control System Digital Media PC Commercial Partner 38

39 Managing Discovery (Pre-Dispute) Document retention policies Easier to rationalize discovery decisions No need to preserve everything (be reasonable) Adopt litigation hold protocol Prior to litigation being reasonably foreseeable 39

40 Managing Discovery (Pre-Dispute) 40

41 Managing Discovery (Pre-Dispute) 41

42 Efficiently Managing Discovery Drafting Arbitration Clauses Managing Discovery (Pre-Dispute) Managing Discovery (Post-Dispute) 1. Collecting and Storing Data 2. Reviewing Data 3. Working with Opposing Counsel 42

43 Managing Discovery (Post-Dispute) (1) Collecting and storing data: Handle custodian interviews in-house Strategic use of outside vendors Develop collection protocol for fixed fee 43

44 Managing Discovery (Post-Dispute) (1) Collecting and storing data: Adopt efficient collection techniques: De-duplication Use of filters Use different time limitations for different custodians Off-site storage of data Use of TAR for determining what data to maintain 44

45 Managing Discovery (Post-Dispute) Reviewing data: Review of data = largest e-discovery cost Review of data = 73% of total e-discovery costs 45

46 Managing Discovery (Post-Dispute) (2) Reviewing data: Use of contract attorneys Trained on general case issues Track review stats on daily basis Quality control work on weekly basis Periodically update training as case evolves 46

47 Managing Discovery (Post-Dispute) (2) Reviewing data: Client input on search terms Avoid review of irrelevant documents Think about use of TAR Manual review = 35% rate of error BUT, TAR not conducive to certain construction documents Limit attorney licenses 47

48 Managing Discovery (Post-Dispute) 48

49 Managing Discovery (Post-Dispute) 49

50 Managing Discovery (Post-Dispute) (3) Working with opposing counsel: No depositions Limit round(s) of expert reports No production of documents in other parties possession Narrow custodians 50

51 Managing Discovery (Post-Dispute) (3) Working with opposing counsel: Reasonable search terms Limit round(s) of document production Limit privilege logs to non-attorney documents Claw-back provision Avoids waiver issue See Inhalation Plastics, Inc. v. Medex Cardio-Pulmonary, Inc., 2012 WL (S.D. Ohio, Aug. 28, 2012) (holding waiver occurred, in part, because defendant failed to establish that it took reasonable precautions to prevent an inadvertent disclosure) 51

52 Agenda Applicable Rules Realities of Construction Arbitration Efficiently Managing Discovery Actual Arbitration Examples Future of Construction Arbitration 52

53 Example Domestic Arbitration USD 1.2 billion in total claims Category Equipment Suppliers Constructor Owner Total Fact depositions Experts Expert reports Fact witness summaries

54 Example Domestic Arbitration USD 1.2 billion in total claims Category Electronic docs produced (number) Electronic docs produced (data size) Hard copy docs produced (boxes) Equipment Suppliers Constructor Owner Total 1,332,071 2,170, ,798 4,464, GB 1.7TB 804GB 3.469TB

55 Example Domestic Arbitration The host cost of the and other electronic documents of 48 of our client s custodians was an outside vendor cost of $55,000/month The document production and review database we used for the arbitration had a base price of $6/GB and was an additional outside vendor cost of $27,000 to $30,000/month Up to 36 outside contract lawyers conducting first tier review of documents Our own fees, of course, were reasonable 55

56 Example International Arbitration Category Claimant Respondent Total Electronic docs produced USD 4.9 billion in total claims 4,598 13,100 17,698 Fact witnesses Fact depositions Experts Expert reports

57 Agenda Applicable Rules Realities of Construction Arbitration Efficiently Managing Discovery Actual Arbitration Examples Future of Construction Arbitration 57