You Promised You Wouldn't Tell: Modifying Arbitration Confidentiality Agreements to Allow Third-Party Access to Prior Arbitration Documents

Journal of Dispute Resolution, Dec 2010

To facilitate the speed, cost-effectiveness, and casual atmosphere 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.

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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 0 Thi s Note is brought to you for free and open access by the Law Journals at University of Missouri School of Law Scholarship Repository. It has been accepted for inclusion in Journal of Dispute Resolution by an authorized editor of University of Missouri School of Law Scholarship Repository , USA Follow this and additional works at; https; //scholarship; law; missouri; edu/jdr - 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)


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Gotham Holdings, Heath Grades. You Promised You Wouldn't Tell: Modifying Arbitration Confidentiality Agreements to Allow Third-Party Access to Prior Arbitration Documents, Journal of Dispute Resolution, 2010, Volume 2010, Issue 2,