Opinion ID: 2805465
Heading Depth: 4
Heading Rank: 1

Heading: Discovery Limitations and Confidentiality

Text: Limitations on discovery serve an important purpose in arbitration because “the underlying reason many parties choose arbitration is the relative speed, lower cost, and greater efficiency of the process.” Kona Vill. Realty, Inc. v. Sunstone Realty Partners, XIC, LLC, 123 Hawai#i 476, 477, 236 P.3d 456, 457 (2010) (internal citation omitted). By agreeing to arbitrate, a party “trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 105 S. Ct. 3346, 3354 (1985). Thus, reasonable limitations on discovery may be enforceable in accordance with our recognition of the strong federal policy in favor of arbitration. At the same time, adequate discovery is necessary to provide claimants “a fair opportunity to present their claims” in the arbitral forum. Gilmer v. Interstate/Johnson Lane, Corp., 111 S. Ct. 1647, 1655 (1991). Although the amount of discovery that is adequate to sufficiently vindicate a party’s claims does 24  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  not mean unfettered discovery, see Armendariz, 6 P.3d at 684-86 (stating that a party can agree to something less than the full panoply of discovery permitted under the California Arbitration Act), discovery limitations that unreasonably hinder a plaintiff’s ability to prove a claim are unenforceable. See, e.g., In re Poly-America, L.P., 262 S.W.3d 337, 357-58 (Tex. 2008) (collecting cases). In addition, some limitations on discovery that might otherwise prove unenforceable have been held enforceable because the arbitrator maintained the ability to order further discovery upon a showing of need. See, e.g., Dotson v. Amgen, Inc., 181 Cal.App.4th 975, 982-84 (2010) (holding that limiting discovery to two depositions was not unconscionable where additional discovery was available upon a showing of need). As is the case with discovery limitations, a “[c]onfidentiality provision by itself is not substantively unconscionable[.]” Davis v. O’Melveny & Myers, 485 F.3d 1066, 1079 (9th Cir. 2007) overruling on other grounds recognized by Ferguson v. Corinthian Colleges, Inc., 733 F.3d 928, 933-34 (2013). However, where an arbitration clause contains severe limitations on discovery alongside a confidentiality provision, the plaintiff may be deprived of the ability to adequately discover material information about his or her claim. See id. at 1078-79 (holding unconscionable a confidentiality provision in an 25  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  employment contract because it “would handicap if not stifle an employee’s ability to investigate and engage in discovery”); see also Grabowski v. Robinson, 817 F.Supp.2d 1159, 1176-77 (S.D. Cal. 2011). Here, the discovery limitations and confidentiality provision unconscionably disadvantage the Homeowners. The discovery limitations only allow the arbitrator to order the parties to turn over “nonrebuttable exhibits and copies of witness lists,” and precludes the arbitrator from “order[ing] discovery or depositions unless and then only to the extent that all parties otherwise agree in writing.” Thus, the arbitrator does not have the ability to order additional discovery, even on a showing of need. The confidentiality provision further precludes the Homeowners from mentioning “the facts of the underlying dispute without prior written consent of all parties, unless and then only to the extent required to enforce or challenge the negotiated agreement or the arbitration award, as required by law, or as necessary for financial and tax reports and audits.” If the arbitration clause were enforced as written, the Homeowners would have virtually no ability to investigate their claims, and thus, would be deprived of an adequate alternative forum. These provisions are therefore 26  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  unconscionable.4