Court rejects bright-line or categorical approaches when assessing the acceptability of ediscovery misconduct, preservation efforts, or sanctions

Rimkus Consulting Group, Inc. v. Cammarata, 2010 WL 645253 (S.D.Tex. February 19, 2010)

The Rimkus decision will likely prove to be one of the most important ediscovery decisions announced in 2010. The decision was written by Judge Lee H. Rosenthal, who chairs the Judicial Conference Committee on Rules of Practice and Procedure. It is a decision that merits the attention of any serious ediscovery practitioner.

The blogosphere has been all “a twitter” about Judge Shira Scheindlin’s recent opinion in Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, 2010 WL 184312 (S.D.N.Y. January 5, 2010). However, Rimkus may ultimately prove to have more lasting and widespread significance.

Pension Committee addressed when the failure to properly preserve and collect ESI justifies the sanction of an adverse inference instruction. In a recent blog post about the Pension Committee decision, we raised several concerns about the opinion’s analysis and conclusions. While Rimkus involved allegations of wilful misconduct, including the intentional destruction of emails and other ESI after a duty to preserve had been triggered, Judge Rosenthal noted that there were “some common analytical issues” between Rimkus and Pension Committee, which merited discussion. Judge Rosenthal’s discussion of those common analytical issues in Rimkus addressed several of the concerns we highlighted in our Pension Committee post.

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Court orders disclosure of metadata under New York’s Freedom of Information Law

Irwin v. Onondaga County Resource Recovery Agency, A.T., — N.Y.S.2d —, 2010 WL 462948 (N.Y.A.D. 4 Dept., Feb. 11, 2010)

Petitioner Irwin noticed that a local government agency used a picture of Irwin in an email “news blast.” He claimed the agency used the photo without his permission, and sought modest compensation for the use of the photo. When the agency refused, Irwin sought information about the agency’s collection of digital images under New York’s Freedom of Information Law (“FOIL”).

The request sought “[a]ll computer records that are associated with published [photographs] in all [of the agency's] publications, including [Web site] and e-mail activities, for the years 2005, 2006, and 2007.” The agency produced some photos that were of reduced quality and “bereft” of metadata.

Irwin filed a court action to compel, among other things, the disclosure of the metadata associated with the requested records. The trial court denied Irwin’s petition, and Irwin sought review with the appellate court. On appeal, the court amended the judgment to order the production of the metadata.
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Court orders second production of ESI in a reasonably usable form and rejects argument that foreign privacy laws or the Hague Convention bars production of personal information

AccessData Corp. v. ALSTE Technologies GMBH, 2010 WL 318477 (D.Utah Jan. 21, 2010)

AccessData is a software developer that entered into an agreement with ALSTE to sell its software products. AccessData brought a breach of contract action against ALSTE involving the sale of its forensic software. ALSTE claimed that the software was defective and filed a counterclaim asserting a breach of a technical support agreement. In discovery, AccessData sought production of information concerning customer complaints and any damages flowing from that counterclaim. ALSTE objected, arguing that the discovery requests were overbroad and the disclosure of information about the identities of third parties who voiced the complaints would violate German law. AccessData brought a motion to compel that information and also sought the reproduction of emails in their native format.
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PowerPoint Slides about the Seventh Circuit Ediscovery Pilot Program

The Seventh Circuit Electronic Discovery Pilot Program was developed as a result of continuing comments from the business and legal community about the need to reform the civil pretrial discovery process. A committee of trial judges, lawyers, academics and expert consultants met to consider how the cost and burden of electronic discovery can be reduced.

The committee developed a set of ediscovery principles intended to serve as supplemental guidelines to be followed by litigants participating in the program. These principles were codified into a standing order which is being used in selected cases to assess their effectiveness. Kenneth J. Withers, the Director of Judicial Education and Content for The Sedona Conference, and Rebecca L. Kourlis, the Executive Director of the Institute for the Advancement of the American Legal System at the University of Denver assisted in the process of drafting these principles.

What makes these principles unique is that they will be tested during phases of the Pilot Program. The results for Phase I of the program will be presented in May 2010 at the Seventh Circuit’s Annual Meeting. They will then be evaluated and refined. Phase II will then run from June 2010 to May 2011. At that juncture, the committee will present its findings and issue its final principles.

Below is to a set of PowerPoint slides addressing the program and the ediscovery principles that are currently being tested.

Court rules that emails are not reasonably accessible due to undue burden and cost under Rule 26(b)(2)(B)

Rodriguez-Torres v. Gov’t Dev. Bank of Puerto Rico, 2010 WL 174156 (D.P.R. Jan. 20, 2010)

Given the frequency that emails are requested in discovery, this decision merits your attention. In Rodriquez-Torres, the court denied plaintiffs’ motion to compel the production of emails about her, ruling they were “not reasonably accessible” under Rule 26(b)(2)(B).

Plaintiff and her husband brought an employment discrimination claim under ADEA, Title VII, the Lilly Ledbetter Fair Pay Act and 42 U.S.C. §1983. In discovery, plaintiffs sought “all email communications and calendar entries” for a three-year period “describing, relating or referring to plaintiff Vicki Rodriguez, both inbound and outbound” from the defendant’s “messaging system servers.” Plaintiffs requested that the data be produced in its “native electronic format with its original metadata” intact. Defendant objected, claiming plaintiffs’ request was overbroad. Defendant argued that compliance would likely produce “hundreds, if not thousands, of documents” that would include “irrelevant, confidential and potentially privileged information.” Plaintiffs brought a motion to compel and sought discovery sanctions.

The court initially directed the parties to provide information concerning the cost involved in producing the requested information. Plaintiffs were further directed to explain what information they anticipated finding in the native format documents. The parties submitted a report from an ediscovery vendor which estimated the cost of producing the ESI at approximately $35,000. The estimated costs included a $5,000 charge for the configuration and creation of a Concordance Database.

Based on this information, the court determined the emails that plaintiffs sought were not reasonably accessible. The court found that $35,000 was “too high of a cost for the production of the requested ESI in this type of action.” (In their prayer for relief, plaintiffs sought $1.4 million dollars in compensatory damages). Recognizing that the volume of information involved and its form makes privilege determinations more difficult and time-consuming, the court also expressed a concern over the additional cost that would be incurred in reviewing the requested emails for relevancy and privilege.

The court recognized that under Fed. R. Civ. P. 26(b)(2)(B) it could nonetheless order production of the emails if good cause was shown. In an attempt to show what information they could find in the emails, plaintiffs pointed to three articles which suggest that email usage encourages individuals “to write unguarded, unwise and often inappropriate comments.” That argument did not persuade the court that good cause warranted production of the emails. The court explained: “Just because emails are more likely to lead to inappropriate comments is not a sufficient basis to believe that the ESI requested here will lead to the discovery of the information Plaintiffs claim they will discover.” The court concluded that the plaintiffs’ request was merely a “fishing expedition” and denied their motion to compel.

Practical Ediscovery tip: The party asserting undue burden under Rule 26(b)(2)(B) bears the burden of proof. To succeed in establishing the requested discovery will be unduly burdensome or costly to produce, it is imperative that you provide the court with concrete information about the costs and/or personnel hours that will be required to obtain, review and produce the requested information. Vague and unsupported assertions of undue burden will inevitably be rejected by the court.

Oy Vey! Court attempts to define degrees of unacceptable ediscovery conduct and fashions a problematic adverse jury instruction in the process

Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010)

Pension Committee is an ediscovery opinion that is sure to garner a lot of attention. The opinion was written by Judge Shira Sheindlin, who authored the Zubulake decisions. Judge Scheindlin includes a subheading in Pension Committee that her decision is: “Zubulake Revisted: Six Years Later.” While noting that “[c]ourts cannot and do not expect that any party can meet a standard of perfection,” she nonetheless concludes “courts have a right to expect that litigants will take the necessary steps to ensure that relevant records are preserved when litigation is reasonably anticipated.”

In Pension Committee, ninety-six investors brought suit claiming the violation of federal securities law seeking to recover $550 million dollars in losses stemming from the liquidation of two British Virgin Island based hedge funds. Shortly after being retained, counsel telephoned and emailed the plaintiffs to begin document collection and preservation. Besides calling and emailing the clients, counsel also distributed memoranda instructing the plaintiffs to be over-inclusive, rather than under-inclusive in their efforts and noting that emails and electronic documents should be included in the production. After suit was filed, a stay of discovery was issued pursuant to the Private Securities Litigation Reform Act. However, a formal written litigation hold was not issued until after the discovery stay was lifted several years later. After discovery commenced, gaps were found in plaintiffs’ document productions, which prompted a motion for sanctions asserting plaintiffs failed to properly preserve and produce documents and electronically stored information.
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Court broadly allows a prevailing party to recover its ediscovery costs under 28 U.S.C. §1920

CBT Flint Partners, LLC v. Return Path, Inc., 2009 WL 5159761 (N.D.Ga. Dec. 30, 2009)

After prevailing on a patent infringement claim, the defendant sought the recovery of its attorney’s fees and expenses. One of the items of expense claimed was $243,453.02 paid to an ediscovery vendor that collected, searched, identified and helped to produce electronic documents from the defendant’s network files and hard drives in response to the plaintiff’s discovery requests. The district court in CBT Flint Partners allowed the taxation of those costs in full against the plaintiff.

In several prior blog posts, we noted the wide divergence in the opinions addressing the taxation of ediscovery costs under 28 U.S.C. §1920. In some instances, the outcome turned on the particular subdivision of §1920 that the recovery was sought under, in others the prevailing party failed to demonstrate to the court’s satisfaction that the costs were “necessarily incurred” for use in the case, and in others, the prevailing party failed to adequately support or explain why the ediscovery costs were recoverable under any subdivision of §1920. We also highlighted a split in the circuits over the meaning of “exemplification” as the term is used in §1920(4). However, several of the decisions are difficult to reconcile and perhaps are best explained by how receptive a particular court is to the recovery of these types of costs in post-judgment proceedings. The Supreme Court, in Crawford Fitting Co. v. J. T. Gibbons, Inc., 42 U.S. 437, 441-42 (1987), explained that a district court may not award costs falling outside of §1920’s statutory categories and may decline to award costs even when they fall within those categories. Under that standard, a district court has ample discretion to deny the taxation of ediscovery costs on the losing party.

In CBT Flint Partners, the court noted that the parties agreed that their respective document productions would be made in an electronic format. Thus, it appears those costs were “necessarily incurred” for use in the case. However, the court did not address whether the challenged ediscovery vendor costs fit within any of §1920’s recoverable categories. Rather, the decision appears to be heavily influenced by policy considerations. The district court in CBT Flint Partners concluded “taxation of these costs will encourage litigants to exercise restraint in burdening the opposing party with the huge cost of unlimited demands for electronic discovery.”

The district court did note the division of opinion as to whether these types of costs are recoverable under §1920. It observed that the defendant “asserted – without contradiction – that production in paper form of the 1.4 million documents plus six versions of source code would have cost far more than the fees sought for the e-discovery consultant.” After carefully reviewing the invoices that were submitted to it, the district court ultimately ruled that the services provided were “highly technical in nature,” and “not the type of services that attorneys or paralegals are trained for or are capable of providing.” Thus, the court allowed the taxation of the ediscovery vendor’s costs in full.

Perhaps the lesson to be learned from CBT Flint Partners, is to be careful what you ask for in discovery. The cost of ediscovery in many instances can be staggering and the possible recovery of those costs by a prevailing party is a factor that cannot be ignored when developing and implementing your discovery and litigation strategies. While district court decisions are not precedential, the policy view expressed by the district court in CBT Flint Partners may resonate with other district court judges and will likely raise the price of poker in federal litigation.

Identifying inaccessible sources of ESI just got a little easier

Fed.R.Civ.P. 26(b)(2)(B) explains that a party need not produce electronically stored information (“ESI”) from sources that are not reasonably accessible because of undue burden or cost. Parties are expected to produce relevant, non-privileged information from sources that are “reasonably accessible” subject to Rule 26(b)(2)(C)’s limitations that apply to all discovery under the federal rules. This “two-tier” approach to ediscovery is easy to recite but can be very difficult to apply in practice. At what point does a source of ESI cross the threshold from reasonable accessibility to inaccessibility under the Rule? Are there sources of information that parties can readily agree are not reasonably accessible? Alas, neither Rule 26(b)(2)(B) nor its accompanying committee note provide any helpful insight. Indeed, the 2006 Advisory Committee Note states “[i]t is not possible to define in a rule the different types of technological features that may affect the burdens and costs of accessing electronically stored information.”

The Report of the Judicial Conference Committee on Rules of Practice and Procedure (“Standing Committee Report”) which predated the enactment of the 2006 ediscovery amendments to the federal rules provided some insight. The Standing Committee Report did note that the features of an information system that make it burdensome or costly to access ESI can vary from system to system and will change over time. However, it provided several examples of “current technology” that do not generally fit under the rubric of reasonable accessibility. Those examples included “deleted information, information kept on some backup-tape systems for disaster recovery purposes, and legacy data remaining from systems no longer in use.” See THE NEW E-DISCOVERY RULES, Dahlstrom Legal Publishing, Inc. (2006) at p. 15. Unfortunately, that guidance was not carried over into the 2006 Advisory Committee Note to Rule 26(b)(2)(B).

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Rule 502(d) nonwaiver orders need not be limited to the “inadvertent” production of privileged or protected information

Callan v. Christian Audigier, Inc., 2009 WL 4844422 (C.D.Cal. Oct. 27, 2009)

If you were looking for an ediscovery opinion to lift your spirits during this wintery holiday season, stop, Callan is not the decision for which you’ve been waiting. After reading the opinion, Santa reportedly decided to deliver coal to lawyers who fail to follow Fed. R. Evid 502. The court’s decision in Callan focused on the issue of inadvertent waiver of privilege, and Rule 502(b). However, as we originally explained in one of our blog posts several months ago, the time and effort expended in addressing the issue of inadvertent waiver in Callan could have been avoided had the protective order been drafted in accordance with Fed. R. Evid. 502(d).

The proper framework for analyzing the inadvertent waiver of attorney-client privilege under Fed. R. Evid. 502(b) was discussed in one of our recent blog posts. In that post, we warned that when a party seeks the return of inadvertently produced privileged material under Fed R. Civ. P. 26(b)(5)(B), the failure to explain what steps the party took to prevent the disclosure of privileged information from occurring could result in a finding of waiver under Rule 502(b), no matter how inadvertent the disclosure. Unfortunately, defense counsel made that same mistake in Callan. The court noted that defendants failed to establish the documents in question were privileged and even failed to identify “what privileges purportedly apply to the documents [that were] allegedly inadvertently produced.” As a result, the court awarded attorney’s fees to the plaintiff under Rule 37(a)(5)(B) for responding to the motion. Thus, the failure to meet Rule 502(b)’s elements not only can result in a finding of waiver, it can also result in having to pay your opponent’s attorney’s fees for responding to such a motion. Obviously, care must be taken when seeking the return of inadvertently produced information under Rule 502(b).

The district court in Callan had entered a protective order under Fed. R. Civ. P. 26(c) that included a clawback provision which provided: “The inadvertent production of any discovery material by any party shall be without prejudice to any subsequent claim by the producing party that such discovery material is privileged or attorney-work product and shall not be deemed a waiver of any such privilege or protection.” So, what went wrong? The protective order was limited to the “inadvertent” production of discovery materials and defendants failed to show the materials were inadvertently produced or were privileged. More importantly however, the first misstep occurred in drafting that protective order. As explained below, the real lesson to be learned is that nonwaiver orders under Fed. R. Evid. 502(d) need not be limited to the “inadvertent” production of privileged or protected materials as in Callan.

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Protecting nonparties against undue burden or expense from subpoenas seeking ESI under Fed. R. Civ. P. 45

North American Rescue Products, Inc. v. Bound Tree Medical, LLC, 2009 WL 4110889 (S.D. Ohio Nov. 19, 2009)

Rule 45 contains several provisions that can protect third parties from undue burden or expense when responding to subpoenas for electronically stored information (“ESI”).  Fed. R. Civ. P. 45(c)(1) requires a party issuing a subpoena “take reasonable steps to avoid imposing undue burden or expense” on a non-party subject to that subpoena. Rule 45(c)(2)(B) authorizes the recipient of a subpoena to timely object and mandates that any subsequent order must protect the party receiving the subpoena “from significant expense resulting from compliance.”  Fed. R. Civ. P. 45(c)(2)(B)(ii). The Rule contains a third provision, subdivision (d)(1)(D), which provides that the recipient of a subpoena need not produce ESI from sources that are “inaccessible” because of undue burden or cost.

Despite these various protections that are woven into the fabric of Rule 45, the court in North American Rescue rejected a third-party’s request for reimbursement of approximately $24,930 in charges relating to the conversion of its native files to a reviewable format in response to a subpoena for documents. Why? Because the recipient of the subpoena did not follow Rule 45’s procedures. After objecting to the cost and burden of responding to that subpoena, it nonetheless produced the ESI without conditioning its compliance on the payment of its production costs.

The court in North American Rescue, noted that strict compliance with Rule 45’s procedures may be excused where the parties issuing and receiving the subpoena have reached an agreement concerning reimbursement of the costs of compliance. Because the party receiving the subpoena in North American Rescue failed to show the existence of such an agreement, the court concluded that by failing to wait for a court order before producing its ESI, the subpoena recipient forfeited its right to seek reimbursement under Rule 45 of the costs it incurred in complying with that subpoena.

The response of the subpoena recipient in North American Rescue should be contrasted against the approach taken in Guy Chemical Co., Inc. v. Romaco AG, 243 F.R.D. 310 (N.D.Ind. 2007). There, the court found compliance with a subpoena imposed an undue burden upon the nonparty and conditioned the production of any records pursuant to that subpoena upon reimbursement of the nonparty’s costs by the party issuing the subpoena. Simply put, the failure to follow Rule 45’s procedures can result in a waiver of its protection.

Several of Rule 45’s cost-protection provisions predate the 2006 ediscovery amendments to the Rule, and courts have not comprehensively addressed the interplay between the Rule’s pre and post-amendment cost provisions. The Advisory Committee Notes to Rule 45 broadly outline how to apply the Rule’s various cost protections, and the remainder of the post will provide a framework for their application.

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