Conundrum of preserving backup tapes and inaccessible sources of information

Forest Laboratories, Inc. v. Caraco Pharmaceutical Laboratories, Ltd., 2009 WL 998 402 (E.D. Mich. April 14, 2009)

By now, any attorney worth his or her salt knows that the federal rules have set up a two-tier system for the discovery of electronically stored information (“ESI”). Under Rule 26(b)(2)(B), a party need not produce ESI from sources that it “identifies as not reasonably accessible because of undue burden or cost.” The federal rules themselves do not provide any guidance as to what “sources” of ESI should be considered “inaccessible.” Indeed, the Advisory Committee Notes explain: “it 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.”

One of the conundrums created by the federal ediscovery rules is whether there is any duty to preserve ESI from a source that a party has designated as “inaccessible.” The Advisory Committee Notes to Rule 26(b)(2) explain that the identification of a source as inaccessible “does not relieve the party of its common law or statutory duties to preserve evidence.” The Advisory Committee Notes furnish no guidance for counsel in this scenario. The Notes to Rule 26(b)(2) state that whether a party is required to preserve ESI from an inaccessible source “depends on the circumstances of each case.” The Note then observes, “[i]t is often useful for the parties if you discuss this issue early in discovery.”

In Forest Labs, the defendants filed a spoliation motion claiming the plaintiff failed to preserve backup tapes concerning the drug it manufactured which was the focus of the litigation. The district court concluded that the backup tapes in question were inaccessible because they were used solely for disaster recovery purposes. Nonetheless, the court ordered that a hearing be held on the defendant’s spoliation motion. The court also noted that if ESI is destroyed intentionally or willfully, “that fact alone is sufficient to demonstrate [the] relevance” of the lost evidence, and would be sufficient to warrant the entry of sanctions. However, as our last post indicated, the Fifth Amendment’s Due Process Clause can limit the type of sanctions which may be imposed for the loss of ESI, and requires a nexus be demonstrated between the information destroyed, and the plaintiff’s claim or the defendant’s defense.

Read the rest of this entry »

Court acknowledges the Fifth Amendment’s Due Process Clause may limit the sanctions that can be imposed for destroying electronic documents

Preferred Care Partners Holding Corp. v. Humana, Inc., 2009 WL 982460 (S.D. Fla. April 9, 2009)

It is every trial lawyer’s worst nightmare. You are one month away from trial, drafting motions in limine, and preparing jury instructions when your client calls to advise that they just found over 10,000 pages of potentially responsive electronic documents and emails in folders that were never searched. And to make matters worse, you learn that those electronic documents may support the claim you are defending that your client improperly used proprietary information which was obtained from your opponent pursuant to a confidentiality agreement. What do you do? Do you immediately contact opposing counsel about the additional records? Do you notify the court and seek its guidance as to how best to approach the problem that has now arisen? Or, as occurred in Preferred Care Partners, do you simply destroy the electronic documents while preserving paper copies without first notifying opposing counsel or the court?

It should come as no surprise that in Preferred Care Partners, the court entered sanctions for the “clearly egregious manner in which the defendant carried out its discovery obligations.” The fact that the electronic documents in question should have been destroyed long before the suit was filed pursuant to the terms of the confidentiality agreement under which they were obtained did not change the analysis. The defendant’s “print and purge” strategy was clearly inappropriate. However, the court ultimately concluded that the defendant’s discovery “shortcomings were neither intentional nor done in bad faith, but rather resulted from the grossly negligent oversights of counsel.”

What makes Preferred Care Partners notable is the district court’s acknowledgment that in light of Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707 (1982), the Fifth Amendment’s Due Process Clause may limit the sanctions imposed for the loss of ESI. The court in Preferred Care Partners recognized that the Due Process Clause requires that discovery sanctions must not only be just, but also specifically related to the particular claim or defense affected by the misconduct. Therefore, due process requires a nexus between the lost or destroyed ESI, and either the plaintiff’s claim or the defendant’s defense.

Read the rest of this entry »

Undue burden argument prompts court to shift the cost of reviewing documents to the requesting party subject to a non-waiver order

In re Motor Fuel Temperature Sales Practices Litig., 2009 WL 959493 (D. Kan. April 3, 2009)

In this multi-district litigation, plaintiffs brought claims against the defendants asserting various state law theories because the defendants sold motor fuel at a specific price per gallon without adjusting for temperature expansion. In discovery, plaintiffs sought information concerning the defendants’ activities dating back to 1970. They noted that in 1974, the National Conference on Weights & Measures began considering the issue of temperature adjustments in the retail sale of motor fuel. During this time, the defendants allegedly contributed to industry studies on average fuel temperatures, and lobbied against temperature adjustments. Plaintiffs also claimed that during this time frame, the defendants created documents which acknowledged that when temperatures rise above 60 degrees Fahrenheit, selling motor fuel which has not been temperature adjusted unjustly enriches the seller. Additionally, in the 1990’s, the Canadian government passed legislation permitting the installation of automatic temperature compensation (“ATC”) equipment in retail gas stations.

Defendants initially objected to the plaintiff’s discovery requests about their activities prior to January 1, 2001 on the ground that it was unduly burdensome. The defendants subsequently agreed to provide plaintiffs with responsive, non-privileged pre-2001 documents found in their active files, but resisted searching for pre-2001 data or documents in their archived files.

While the defendants’ undue burden arguments did not convince the court that that the pre-2001 information did not have to be produced, it nonetheless fashioned a remedy attempting to balance the cost of that discovery, given the parties competing interests. While the court never mentioned Rule 26(b)(2)(b) or Fed. R. Evid. 502 in its decision, it essentially allowed the plaintiffs to have a “quick peek” of the requested information subject to a nonwaiver order. The decision provides a good example of the type of factual information that a party needs to provide when making an undue burden argument under Rule 26.

Read the rest of this entry »

Fed. R. Civ. P. 1 used to limit Rule 30(b)(6) depositions addressing a party’s email policies and search for responsive emails

Newman v. Borders, Inc., 2009 WL 931545 (D.D.C. April 6, 2009)

In Newman v. Borders, Judge John Fasciola relied upon Rule 1 of the Federal Rules of Civil Procedure to limit a party’s request for an additional 30(b)(6) deposition sought by the plaintiff in a motion to compel. Newman involved a racial discrimination claim where the discovery costs dwarfed the potential recovery. Thus, in order to bring the discovery dispute to “a just and inexpensive conclusion,” rather than allowing another costly 30(b)(6) deposition requested by the plaintiff, Judge Fasciola ordered the defendant to submit an affidavit from a knowledgeable company representative answering a series of nine questions which he outlined, addressing the issues that were the subject of the motion to compel.

In light of the costs of electronic discovery, given Rule 1’s mandate that the Federal Rules should be interpreted to secure the “inexpensive determination of every action and proceeding,” it should be part of any party’s playbook to control ediscovery costs. Frequently however, it seems that court and counsel lose sight of Rule 1’s approach. Perhaps Newman, and other likeminded decisions will signal the way to control the costs of discovery.

Read the rest of this entry »

Costs partially shifted to requesting party that delayed providing keywords

Surplus Source Group, LLC v. Mid America Engine, Inc., No. 08-049, 2009 WL 961207 (E.D. Tex. April 8, 2009)

Defendant Mid America Engine ran a keyword search on its electronically stored information and produced responsive documents to plaintiff Surplus Source Group. After Surplus Source complained about shortcomings in the production, Mid America asked for information from Surplus Source that would help Mid America conduct a second search. Six weeks later, Surplus Source’s lawyer responded by email, outlining the purported deficiencies. Mid America’s in house counsel replied that same day, asking for particular keywords with which to search. More than two weeks after that, Surplus Source provided those keywords. By that time, however, Mid America had already conducted the second search.

Surplus Source moved to compel Mid America to run a third keyword search using the terms Surplus Search had proposed. The court found that the additional discovery was warranted, but ordered Surplus Source to pay for the third search, up to the amount that the second search cost. Mid America would be responsible for the rest.

Read the rest of this entry »

What types of electronic discovery costs can a prevailing party recover under Fed. R. Civ. P. 54(d)?

Fells v. Virginia Dept. of Transp., 2009 WL 866178 (E.D.Va. March 25, 2009)

One of the latest ediscovery issues that courts have begun to struggle over is the nature and extent to which electronic discovery costs are recoverable by a prevailing party under Fed. R. Civ. P. 54(d). Because the costs of ediscovery in some instances can be staggering, the possible recovery of at least some of these costs has significantly raised the stakes of Rule 54(d) practice for both the prevailing and losing parties in federal court litigation.

In Fells, the district court refused to award costs associated with the initial processing of electronic records, including the expense of metadata extraction and data file conversion. While the district court’s stated rationale for denying these costs can be questioned, it probably reached the right conclusion. The ediscovery costs which the prevailing party sought to recover in Fells related to the first steps taken to create a database that would facilitate discovery. However, the defendant abandoned the database after the plaintiff refused to limit the scope of the data involved. Thus, it is doubtful that the defendant could establish that those costs were “necessarily obtained for use in the case,” which is a prerequisite to recovery. As outlined below, various courts have approved the recovery of certain types of ediscovery costs, but their rulings have only begun to scratch the surface of the relevant issues.

Read the rest of this entry »

Effective Project Management in Discovery

This is a guest post by Ashish Prasad. Mr. Prasad has served as the Executive Editor of the Sedona Principles: Best Practices Recommendations and Principles for Addressing Electronic Document Production, and is the CEO of Discovery Services LLC. Read Mr. Prasad’s full bio at the end of this post.

I. Introduction

Discovery is among the biggest risks facing modern litigants. Effective management of discovery can have an equal, or in some circumstances, greater effect on the outcome of litigation than the actual merits of the case. No one gets to summary judgment, trial, or in most cases, a settlement without first going through the discovery minefield.

Going through the discovery minefield without a plan means taking an unnecessary risk that something will “explode” and derail your litigation efforts and strategy. Not only can discovery errors result in excessive costs, affect the outcome of the case or result in monetary sanctions levied against a client, but courts can impose monetary sanctions on counsel for discovery mismanagement as well. Effective project management is the key to avoid sanctions and other bad things that happen to lawyers and clients en route to case resolution.

This article first briefly explains counsel’s duty to manage discovery, then through several case examples, provides a description of the problems clients and counsel can encounter during discovery, and finally, provides a model for effective project management in discovery.

Read the rest of this entry »