You Promised You Wouldn't Tell: Modifying Arbitration Confidentiality Agreements to Allow Third-Party Access to Prior Arbitration Documents
Journal of Dispute Resolution
You Promised You Wouldn't Tell: Modif ying Arbitration Confidentiality Agreements to Allow Third-Party Access to Prior Arbitration Documents
Gotham Holdings 0
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Article 8
NOTES
You Promised You Wouldn't Tell:
Modifying Arbitration Confidentiality
Agreements to Allow Third-Party
Access to Prior Arbitration
Documents
Gotham Holdings, LP v. Health Grades,Inc.'
I. INTRODUCTION
To facilitate the speed, cost-effectiveness, and casual atmosphere2 of
arbitration, it has long been thought that parties must trade in the usual features of the
courts, such as precedent, appellate review, and certain evidentiary rules. With
the increasing use of arbitration, many parties have begun to demand that some of
the comforts that have long accompanied litigation be merged with the benefits of
arbitration. Courts have, for the most part, denied such demands. Nevertheless,
the Seventh Circuit in Gotham Holdings allowed such a demand by ruling that
third parties must have the opportunity to obtain prior arbitration awards and use
them as evidence of precedent in a subsequent arbitral or judicial proceeding.
Any concern that arbitration will lose its appeal, as such a procedure will drive up
the cost for arbitration and bring arbitration closer to being like litigation, is
misguided. Providing information about prior arbitral awards and related documents
offers precedential value and will only lead to a faster and more cost-effective
process. Similarly, giving parties the opportunity to offer evidence and testimony
other than their own voice will allow them to provide better support for their
claims and permit arbitration to become even more of a "necessary legal
remedy."3
II. FACTS AND HOLDING
In 2005, Health Grades Incorporated (Health Grades) entered into a contract
with Hewitt Associates LLC (Hewitt). Health Grades was to develop online
applications for Hewitt's clients to allow the clients' access to specific health care
464
information provided by Health Grades.4 The contract contained an arbitration
confidentiality agreement.5 This agreement stated that "[a]ll aspects of the
arbitration shall be treated as confidential. Neither the parties nor the arbitrators may
disclose the existence, content or results of the arbitration, except as necessary to
comply with legal or regulatory requirements." 6
Unfortunately, in 2006, a dispute arose between Health Grades and Hewitt,
which resulted in arbitration before an American Arbitration Association (AAA)
panel.7 Pursuant to this arbitration, the parties entered into a Stipulated Protective
Order and Confidentiality Agreement (Stipulated Protective Order), which
required the parties to destroy any confidential documents within forty-five days
after the entry of final judgment. However, unbeknownst to Health Grades, as
argued in their appellate brief, Hewitt did not destroy the confidential documents.9
At the same time Health Grades was engaged in arbitration with Hewitt,
Gotham Holdings, LP (Gotham Holdings) filed suit against Health Grades in the
Southern District of New York.' 0 Gotham Holdings then served Hewitt with a
subpoena in U.S. District Court for the Northern District of Illinois," seeking to
obtain the confidential documents from the arbitration between Hewitt and Health
Grades. 12 While Hewitt did not object to disclosing the documents, Health Grades
moved to quash the subpoena when it ultimately learned that Hewitt did not
destroy the confidential, arbitration documents.13 Health Grades argued that because
of the strong, federal policy favoring arbitration, the court must enforce the
arbitration confidentiality agreement agreed to by the parties and not allow a
thirdparty to obtain these confidential documents, which, according to Health Grades,
should have been destroyed pursuant to the Stipulated Protective Order.14
However, because Health Grades was unable to produce a copy of the
Stipulated Protective Order between Hewitt and Health Grades, the District Court for
the Northern District of Illinois rejected Health Grades' claims and enforced the
subpoena against Hewitt. This resulted in Health Grades' appeal.' 5 Unfortunately
for Health Grades, the Seventh Circuit also rejected Health Grades' assertions,
finding that absent a specific privilege, arbitration confidentiality agreements
protect solely against voluntary disclosures made by the parties to the agreement, not
to third parties who have a legal right of access to the documents, such as through
a subpoena.' 6
A federal policy in favor of arbitration began to take shape in the Supreme
Cour (...truncated)