July 10, 2013
i have represented customers in large and small cases before FINRA and its predecessor SRO's for over 15 years. The following comments are focused on the possible effect on smaller cases of FINRA's proposed rule change regarding E-Discovery:
1. The production of a document in one format should not preclude its production in other formats as well.
Claimants counsel, for example, should be permitted to seek production of account statements and confirmations in the format that is actually delivered to the customer (i.e., as a "hard copy"), as well as in a summary format that can be used by an expert or consultant to extract data for the presentation of a numerical analysis (i.e., in a file that can be used to prepare a profit and loss statement).
Each format is used for a different purpose in connection with an arbitration: The hard-copy format is suitable for use as a physical exhibit and may be the only format that the customer is familiar with and can testify about. The summary format, one the other hand, is more suitable for use in connection with expert testimony. The best format for one purpose may not be the best format for another purpose.
If a respondent is allowed to produce only one form of an electronic document (for example, the hard copy version of an account statement), the claimant will be required to incur additional and unnecessary expense to extract the data manually in order to prepare a numerical analysis. This expense can be significant in cases where a large number of transactions are at issue.
Because the respondent already maintains the data electronically (and uses it to prepare the hard-copy version that is delivered to the customer), there is no significant additional burden on the respondent in being required to produce the information in a format that can be used by the claimants expert witness. In fact, the respondent may already be providing the data in that format to its own expert or consultant while providing the claimantonly with the hard copy format. (For these purposes, it is understood that even though the hard-copy format is delivered as a paper copy to the customer, the same format can be produced electronically (e.g., on disc as a .pdf file)).
I suggest that where a firm makes any document available to customers online in various formats (i.e., .pdf, .qif, .xls, etc.) that the firm be required to produce the same document in any or all of the same formats at the request of the customer and without requiring a specific application to the arbitrators.
2. Among the factors that the arbitrators should be directed specifically to consider in ordering e-discovery is the size of the proceeding and the relative resources of the parties.
In large cases, both sides may benefit from the production of documents in a format that can be readily used in case management software. For industry respondents—who are repeat players in arbitration and who benefit from an economy of scale—this format becomes the de facto standard for electronic production. For individual claimants, however, the size of a claim may not justify the use of case management software and the production of documents in such a format tends to increase the burden and expense on the claimant.
In the case of emails, for example, the easiest format for the claimant may be the format that is exported by Microsoft Outlook (.olm), which can be imported into counsels own copy of Outlook and searched accordingly. The production of the same emails in the .tif format often used by respondents is more difficult and expensive to use in smaller cases.
I suggest that that "the size of the proceeding and the relative resources of the parties" be added to the factors that the arbitrator should consider.
3. With specific reference to the proposed text of the amendment, I have two comments:
A. The phrase "during the proceeding" should be clarified to confirm that it includes all pre-hearing phases of the arbitration and is not limited to the arbitration hearing itself. As mentioned above, certain document formats may be used only for pre-hearing purposes (i.e., the production of an expert analysis) and may never actually be used in that same format at the hearings themselves.
I suggest the phrase "in connection with the arbitration" be used in lieu of "during the proceeding."
B. The term "maneuverability" should be changed to "versatility," which more accurately reflects the idea that is being expressed. Computer software is often sold to the public based upon its versatility in manipulating the data contained in document. The term maneuverability is unusual and may raise more questions than it answers.