Defendant’s ESI self-collection inexperience rejected by the court in its undue burden analysis

August 24th, 2009 | By Steve Puiszis

Spieker v. Quest Cherokee LLC, 2009 WL 2168892 (D.Kan. July 21, 2009)

In Spieker, plaintiffs were current or former owners of mineral interests in lands burdened by the defendant’s oil and gas leases who claimed that defendant failed to properly pay them royalties. Plaintiffs sought to certify a class of owners of mineral and royalty interests subject to the defendant’s leases.

After defendants made written materials available for inspection and copying in discovery, a dispute arose over production of emails which prompted a motion to compel by the plaintiffs. The district court initially denied the motion without prejudice because the defendant estimated the cost of the requested ediscovery at between $82,000 and $375,000, and because the plaintiffs failed to explain how the disputed ESI was relevant to the issue of class certification. In denying the motion, the court noted that Fed. R. Evid. 502 had been recently enacted, and directed the parties to consider conducting computer searches using defendant’s in-house IT staff as well as Rule 502 in any future cost discussions. The parties again met and conferred, but could not resolve their disputes which prompted the filing of a renewed motion to compel.

Opposing the renewed motion to compel, the defendant argued that its in-house IT staff “had no internal experience in producing ESI in litigation,” and that the search and production process would “have to completed on nights and weekends.” Defendant argued that as a result, the cost and burden of in-house production of the requested ESI “would be even greater than using an outside vendor.” The court summarily rejected the defendant’s undue burden argument, finding its cost estimate “greatly exaggerated.” The court observed that it was “aware of no case where a party was excused from producing discovery because its employees ‘have not previously been asked to search for and/or produce discovery materials’”

Given the notable sanctions that can be imposed for the loss, mishandling or untimely production of ediscovery, the court’s decision in Spieker unfortunately appears to have given short shrift to the capabilities of the defendant’s in-house IT staff as well as the risks and burdens associated with ediscovery self-collection. The remainder of this post will discuss potential strategies and approaches to consider should you be confronted with this issue.

Risks of ESI Self-Collection

The court in Spieker characterized the defendant’s argument concerning its ability to properly produce the requested emails as “pessimistic” and “not persuasive.” However, notably absent from the court’s decision is any acknowledgment of the risks of self-collection of electronically stored information (ESI) – and there are many. Last year, Kroll Ontrack® noted that 25% of all ediscovery decisions addressed a request for sanctions. Many of those decisions involved the mishandling or failure to timely produce ESI.

In a recent You Tube video, Guidance Software discussed the risks associated with custodian self-collection. Those risks included: under-collection, metadata alteration, spoliation, chain of custody challenges and authentication. In any document intensive ediscovery matter, in-house counsel should assess the risks of self-collection. In addition to the obvious risk of sanctions, ESI self-collection opens employees to the specter of being deposed as to the process they followed and the instructions they were given. It also diverts their time and attention from company work, and can result in potential criticism by opposing counsel and the court. Given the increasing prevalence of ESI in litigation, outside counsel should endeavor to candidly discuss with the client, not only the risks of ESI self-collection, but also the capability of the client’s IT staff to timely collect and produce ESI.

Whenever a court or opposing counsel raises in-house collection as an option to reduce the cost of ediscovery, do not hesitate to discuss the risks of self collection. Point out that the use of an outside ediscovery vendor is an attempt to limit the risk of sanctions and the burdens imposed on the client’s in-house IT staff. While it is unlikely that a court will take kindly to an “I told you so argument” should an error in self-collection occur, proactively raising the risks of self-collection and production may assist in limiting the scope of the requested ESI or with your undue burden argument.

Remember that Rule 26’s focus is not limited to the cost of outside vendors. It also includes consideration of undue burdens imposed on the client. Thus, provide the court and opposing counsel with reasoned estimates as to the amount of time it would take the company’s in-house IT staff to collect, process and produce the requested ESI. Consider providing information about the projects the IT is working on, and put in “dollars and cents” terms, what it will cost your client to collect and produce the requested ESI “in-house” when confronting this issue.

Do Not Exaggerate When Raising Undue Burden or Cost

The court in Spieker concluded that the defendant’s ESI cost estimates were greatly exaggerated, and as a result, held the defendant failed to establish under Rule 26(b)(2)(B) that the requested ESI was not reasonably accessible. It appeared to the court that the defendant merely took the highest estimates possible in attempting to establish its undue burden argument. The court was highly critical of the defendant’s failure to offer any details as to how targeted searches or modifications to the requested ESI search parameters would reduce the estimated costs.

Obviously parties should provide the court with their worst-case argument, but alternatives should be provided whenever available. Taking an all-or-nothing approach in Spieker boomeranged on the defendant. Whether you are working with an outside vendor or in-house IT staff, explain to the court how modifications to a suggested list of keywords or custodians whose emails have to be searched will impact the volume of ESI likely to be generated and your ediscovery costs. Many district courts are sensitive to cost of ediscovery, and you are more likely to obtain a favorable ruling when you are reasonable in your approach than if you simply appear to be stonewalling your opponent.

Establishing Undue Burden

Another point notably absent in Spieker was the damage potential presented by the plaintiffs’ claims or the amount at issue. A court is more likely to view $75,000 in ediscovery costs as unduly burdensome when the amount at issue is $300,000, than if $30 million dollars was at stake. The problem, however, is that given the early attention to ediscovery required under the federal rules, ediscovery disputes now typically occur early in the life cycle of a case. As a result, undue burden arguments are frequently reviewed in a vacuum without the court having benefit of a reasoned assessment of the amount at stake in a given matter.

In a prior post, we noted a practical and common sense suggestion made in Mancia v. Mayflower Textile Servs. Co., 253 F.R.D. 354 (D.Md. 2008), which bears repeating. In Mancia, Judge Paul Grimm suggested that opposing counsel confer on the range of provable damages that reasonably could be awarded. He noted that discussion should “identify a foreseeable range of damages from zero if Plaintiffs do not prevail, to the largest award they could prove if they succeed,” and provide a “rough estimate” of “what is at stake” in a case. That type of damage estimate can assist a court in determining whether the requested ediscovey is unduly burdensome, and can provide a basis for the court to limit discovery or shift a portion of the costs under Rule 26(b)(2)(C).

Fed. R. Evid. 502 Can Limit the Cost of Privilege Reviews But Will Not Eliminate That Cost From the Undue Burden Equation

In Spieker, the largest expense cited by the defendant in its undue burden argument was the cost of reviewing the ESI for relevancy and privilege. Plaintiffs suggested that those costs could be minimized by producing all of the requested ESI pursuant to an agreement under Rule 26(b)(5)(B) and Fed. R. Evid. 502 that defendant has not waived the attorney-client privilege. However, the court noted that Rule 502(b) requires the holder of the privilege to take “reasonable steps to prevent disclosure,” and simply turning over the material to your opponent pursuant to such an agreement does not show that “reasonable steps” were taken to prevent disclosure of any privileged ESI. Thus, Rule 502 will not eliminate the cost of privilege reviews. However the cost may be limited to a properly designed keyword search augmented either by sampling for over or under inclusiveness, or the use of advanced analytical processes such as concept searching.

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