Confidentiality of the Arbitration Process

Many companies and individuals prefer arbitration to litigation because arbitration is considered to be more private. When you litigate a dispute, the court room may be open to the public and anyone can attend the hearings. The press may write about interesting business disputes and include details from the court hearings. The evidence presented at trial also becomes part of court records and may be accessible to the public.  While it is possible to request a closed trial or a “gag order” to try to keep the details of litigation private, there is no guarantee that these options will be available to you. Shhh

Arbitration, on the other hand, can be conducted at closed meetings attended only by the arbitrator and the parties to the disagreement. It is possible to keep the public out and even to prevent news of the arbitration from becoming widely available. The process of arbitration is determined by agreement of the parties, so you can negotiate an arbitration procedure that places a premium on privacy. However, while arbitration is generally private, the confidentiality of the arbitration process is not necessarily guaranteed.

The Confidentiality of the Arbitration Process

Arbitration clauses in contracts may specify how arbitration is to take place. These contracts can attempt to guarantee the confidentiality of the arbitration process. The arbitration can be scheduled to occur at a private location and can exclude anyone from the proceeding who is not a part of the dispute.  The arbitration process can also specify that the dispute and resolution should be kept confidential.

The parties can negotiate and agree on these terms when first beginning their business relationship or entering into a transaction and signing a contract. They can also agree on the terms of the process for arbitration at the time when a disagreement arises. In many cases, unfortunately, arbitration clauses are found in take-it-or-leave it contracts in which a company has created a contract and a consumer can either sign it and accept its terms or walk away. This means that an individual signing an arbitration agreement may not really have the ability to negotiate on the issue of the confidentiality of the arbitration process.

Even when a contract specifying confidentiality is signed, or when the disputing parties agree to keep the arbitration quiet, there is still no guarantee that there will not be public information shared. Witnesses may not agree to maintain confidentiality, and enforcing agreements promising secrecy are difficult to enforce.

In a 2001 California case, Foxgate Homeowners’ Ass’n, Inc. v. Bramalea California, Inc., the court ruled: “[T]here are no exceptions to the confidentiality of mediation communications…. Neither a mediator nor a party may reveal communications made during mediation.”  However, the rules for arbitration may not be so clear cut. In fact, in numerous cases, the courts have decided that confidentiality clauses were unconscionable.  In a 2003 case called Ting v. AT&T, for example, the court ruled that the confidentiality clause was unconscionable (and thus not enforceable) because AT&T was able to accumulate knowledge as it arbitrated disputes while its potential opponents did not have any access to precedent.

Confidentiality clauses in arbitration are not always unconscionable in California according to Davis v. O’Melveny & Myers, but it is important that they are written carefully so as not to be overly broad.

An experienced San Diego business lawyer will help you to explore options for maintaining the confidentiality of the arbitration process. Call today to schedule a consultation and learn more.

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