Blog #14 ("Private" Arbitrations Are Not Necessarily "Confidential" Arbitrations, part 2 of 2; Kevin Kennedy)

By Richard J. Decker on November 30, 2011 7:00 AM


Thanks to my colleague Eric Jorgensen for this week's legal portion.

Returning to the question of whether and to what extent parties to an arbitration can protect materials generated and facts uncovered in the arbitration from subsequent disclosure to third parties, we see that surprisingly little case law exists on this issue (and none of it comes from California). The leading federal case seems to be United States v. Panhandle Eastern Corp., 118 F.R.D. 346 (D. Del. 1988), in which the court held that arbitration communications are discoverable and admissible and refused to grant an order protecting them under Rule 26(c). In Panhandle, a pipeline company sought to prevent the disclosure of documents relating to an arbitration held in Geneva, on the (somewhat vague) ground that such disclosure would damage its international business relationships. Specifically rejecting the argument that internal arbitration rules require confidentiality or that a "general understanding" of confidentiality by the parties (as opposed to an explicit confidentiality provision) could justify a protective order, and concluding that the company failed to meet is burden to establish "good cause" for a protective order under Rule 26(c), the court ordered that the material be produced. In Lawrence E. Jaffee Pension Plan v. Household International, Inc., 2004 WL 1821968 (D. Colo. Aug. 13, 2004) (unpublished decision), notwithstanding that the arbitration agreement did contain an explicit confidentiality provision, the court still compelled production of arbitration materials, holding that, even with a confidentiality agreement, the moving party would still have to establish "good cause" for a protective order under Rule 26(c), which the moving party had not done.

What state law exists is generally in accord with the federal approach. For example, in A.T. v. State Farm Mutual Automobile Insurance Co., 989 P.2d 219 (Colo. Ct. App. 1999), the court of appeal found that the arbitration was conducted under the state's version of the Uniform Arbitration Act (UAA), which permitted arbitration awards to be filed, challenged, and enforced in courts, and that the records relating to such an arbitration are thus public in nature.

Having briefly summarized the state of the law regarding the confidentiality (or lack thereof) of arbitrations over the past two blogs, you can see that it is difficult to generalize from such a small number of cases decided across jurisdictions and pursuant to such a variety of statutes and rules. That said, in assessing whether arbitration communications are discoverable and admissible, the courts appear mindful of the need to balance the judicial system's need for evidence with the parties' expectations of confidentiality. The judicial system's need for evidence generally has prevailed, especially when there is no confidentiality clause in the agreement to arbitrate or other clear evidence of the parties' expectation of confidentiality.

However, where there is clear evidence of party expectations, such as through securing a protective order, courts seem to be more willing to acquiesce, if the order otherwise meets relevant standards. Parties seeking to maintain the confidentiality of arbitration proceedings should include a clear and explicit confidentiality provision in their arbitration agreement, should incorporate into the agreement any appropriate institutional confidentiality rules, and, further, should seek an order from the arbitrator or arbitration panel requiring that the proceeding be private and confidential, all of which can help in preventing future disclosures. Even still, the emphasis on adhering to statutory guidelines suggests that an agreement between parties to an arbitration often gives way when tested against the discovery statutes.

Thus, a fair summary seems to be that, when parties seek access to arbitration-related information, courts often engage in balancing, weighing the public interest in the disclosure of the information on the one hand and the parties' interest in maintaining the confidentiality of the information on the other. The results of such balancing have been uneven across jurisdictions, creating uncertainty for parties seeking to ensure confidentiality. The bottom line, therefore, is that neither federal nor state law presently provides any reliable support for the "confidentiality" of arbitration materials when such materials are sought by third-parties for purposes of discovery and admission at trial.

Now for the Opening Day memory.

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Kevin Kennedy
is the first former manager to appear in my blog. I listen to him (and his partner Jim Duquette) every weekday morning on Sirius/XM Satellite radio on the MLB Network--Channel 209 on Sirius and 175 on XM. They do a great show and one of my goals in doing this blog is to be invited on their show as a guest to talk about it. So if any of you can get this to Kevin (as well as the previous 13 editions), I would sincerely appreciate it. I interviewed Kevin at Dodger Stadium when he worked for either ESPN or Fox and talking to him was just like talking to one of my friends about baseball, except he knew more than any of them (myself included). He managed the Texas Rangers and the Boston Red Sox in the 1990's, and I have never been able to understand why no other club has hired him to manage since. But then he would be off the air, and that would not be good. Here are Kevin's memories.

"One of the most memorable Opening Days for me was my first one as a manager with the Texas Rangers. We opened in Baltimore, and it was my first day as a major league manager. President Clinton was there, just to see my first game! It was a pretty big event from a lot of standpoints, but for me, I was managing guys like Jose Canseco, Juan Gonzalez, Rafael Palmeiro, Julio Franco and Nolan Ryan, who was 46 years old and beginning his last year in the majors, while I was younger and was beginning my first year in the majors! I remember receiving a tape of the game from a local TV station that did the game, and you can see me walking back and forth in the dugout, talking to the guys. I remember pinch hitting Doug Strange for Billy Ripken, and Doug hitting a game winning two run homer off Greg Olsen.

"I also remember my first Opener as the Red Sox manager. I think we played the Twins, but what I do remember was walking up the runway at Fenway as the home manager and seeing the Green Monster. That will give you chills. When you're the visiting team, you don't have the same view of the Green Monster - it's to our left after the runway. It was impressive, and it's a memory I will never lose."

Thanks Kevin--I really would be an entertaining guest on your show.

See you all in two weeks. Richie

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