By Leslie King O’Neal
Highway safety rules mandate “no texting while driving.” Attorney ethics rules mandate, “no texting witnesses during testimony”[i] Likewise, a party representative should not text a witness about changing answers while he is testifying in an arbitration hearing as occurred in NuVasive, Inc. v. Absolute Medical, LLC.[ii] After the arbitration award, the opposing party discovered the texts through discovery. It filed a motion to vacate the award for fraud under 9 U.S.C. §10(a)(1). The trial court found the witness coaching was fraud and vacated the arbitration award. The Eleventh Circuit affirmed.
Witness Coaching Risks in Virtual Arbitration Hearings
NuVasive highlights the risk of surreptitious “witness coaching” in virtual arbitration proceedings. During the witness’s virtual testimony, a party representative texted him about his answers and the evidence showed the witness changed his answers to correspond with the texts. The witness, the party, the attorneys and the arbitrators were all in different locations during the hearing. The texting was not obvious to the arbitrators or opposing counsel at the time. The witness swore under oath that he was alone while testifying and was not communicating with anyone during the testimony. This was untrue.
Equitable Tolling Allows Motion to Vacate after 3 Month Statutory Window
The arbitration panel entered an award denying Nuvasive’s claim for failure to prove causa tion and damages. After the arbitration award, litigation resumed on the remaining portions of the case. During discovery Nuvasive found the text messages[iii] and moved to vacate the award. However, the three-month statutory window for such motions had closed.[iv] The trial court permitted late filing of the motion to vacate, finding “equitable tolling” applied to extend the filing time.[v] The district court found it was “clear that Defendants were intentionally attempting to run out the clock on Plaintiff’s time to file a motion to vacate by failing to produce the documents that could show misconduct during the arbitration.” The text messages and withholding documents constituted “extraordinary circumstances” justifying equitable tolling. Also, Nuvasive was diligent in filing the motion to vacate promptly after learning of the fraud.
Texting Witness About Answers During Testimony Constituted Fraud
The Eleventh Circuit uses a three-part test to determine if an arbitration award should be vacated due to fraud.[vi] The test requires: “(1) “the movant must establish the fraud by clear and convincing evidence,” (2) “the fraud must not have been discoverable upon the exercise of due diligence prior to or during the arbitration,” and (3) “the person seeking to vacate the award must demonstrate that the fraud materially related to an issue in the arbitration.”[vii]
NuVasive showed and the district court found that the witness’s testimony regarding compliance agreements was consistent with the contemporaneous text messages. The district court found the fraud could not have been discovered before the three-month deadline and it was materially related to an issue in the arbitration. This satisfied the three-part test for setting aside the arbitration award for fraud.
Fraud Need Not Change Hearing Outcome
Defendants argued because the fraud did not change the outcome of the hearing, the award should not be vacated. However, the Bonar case holds that the materiality element, “does not require the movant to establish that the result of the proceedings would have been different had the fraud not occurred.”[viii] The corrupted testimony related to compliance agreements which were at the heart of liability issues in the case and were a “material issue” to the arbitration.
Court Has Discretion to Direct Rehearing
Defendants argued the trial court should have directed rehearing the case to the arbitration panel. The Eleventh Circuit affirmed the trial court’s refusal to do this, noting, “The FAA provides that ‘[i]f an award is vacated . . . the court may, in its discretion, direct a rehearing by the arbitrators.’ ”[ix] The record showed the District Court carefully considered how to proceed after looking at the entire record in the case and did not abuse its discretion by retaining control of the case after vacating the arbitration award.[x]
Takeaways
Virtual arbitration hearings gained popularity during the pandemic and remain popular because they are convenient and cost-effective. However, virtual hearings have some inherent risks.[xi] As NuVasive shows, witness coaching may occur without detection in a virtual hearing, even when the witness swears that he or she is alone and is not communicating with anyone during testimony.
If counsel suspects improper communication occurred during witness testimony, they should promptly notify the arbitrators or the court and request supporting information (such as texts, Zoom chats, emails, etc.) from the other party. If there is sufficient evidence to support a fraud claim, counsel should move promptly for appropriate relief either from the arbitration panel[xii] or, if found after the award, from the court under the FAA.
[i] See The Florida Bar v. James, 329 So.3d 108 (Fla. 2021)https://casetext.com/case/the-fla-bar-v-james (attorney suspended for 91 days for texting answers to client during deposition); State Bar of Arizona v. Claridge (No: 20-2214) https://images.law.com/contrib/content/uploads/documents/292/107097/CLARIDGE-PDJ-2021-9088.pdf (attorney suspended for sending client answers to deposition questions via chat on Zoom). See also, ABA Standing Committee on Ethics and Professional Responsibility, Formal Opinion 508 (August 5, 2023).ABA issues ethics guidance outlining model rule guardrails when lawyers prepare witnesses (americanbar.org)
[ii] 71 F. 4th 861 (11th Cir. 2023)https://casetext.com/case/nuvasive-inc-v-absolute-med-3
[iii] The court compelled arbitration as to a portion of the dispute and stayed the rest of the case until arbitration was completed. After the arbitration award, the parties renewed discovery.
[iv] 9 U.S.C.§12 states: “Notice of a motion to vacate modify or correct an award must be served . . . within three months after the award is filed or delivered.”https://www.law.cornell.edu/uscode/text/9/12
[v] This was a case of first impression in the 11th Circuit, which approved the trial court’s reliance on the 9th Circuit’s opinion in Move, Inc. v. Citigroup Global Mkts, 840 F.3d 1152 (9th Cir. 2016) holding the Federal Arbitration Act was subject to equitable tolling.
[vi] Bonar v. Dean Witter Reynolds, 835 F.2d 1378 (11th Cir. 1988).James W. Bonar and Beverly J. Bonar, Plaintiffs-appellees, v. Dean Witter Reynolds, Inc., John S. Mc Nally, Jr.,defendants-appellants,ed Leavenworth, Defendant, 835 F.2d 1378 (11th Cir. 1988) :: Justia
[vii] Id.at 1383.
[viii] Id.
[ix] 9 U.S.C. § 10(b) (emphasis in original). 9 U.S. Code § 10 – Same; vacation; grounds; rehearing | U.S. Code | US Law | LII / Legal Information Institute (cornell.edu)
[x] Specifically, the District Court took into account, “the facts leading to the vacatur; the defendants’ past misconduct throughout the litigation, including intentional destruction of “vast amounts of evidence,” Doc. 371 at 21, by defendants and their counsel which led to spoliation sanctions; and finally, the unlikelihood that a remand to the arbitration panel could cure the harm from the defendants’ misconduct.” Nuvasive, supra note ii, at 880.
[xi] Future posts will discuss additional safeguards for virtual arbitration hearings.
[xii] For example, Rule 29, JAMS Construction Arbitration Rules allows arbitrators to impose sanctions, including drawing adverse inferences or determining issues adversely to a party for failure to comply with its obligations under the Rules. https://www.jamsadr.com/rules-construction-arbitration/#Rule-29. See also, AAA Construction Industry Arbitration Rule R-61, Sanctions. https://www.adr.org/sites/default/files/ConstructionRules_web.pdf
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