Requiring defendant to restore backup tapes would have violated proportionality standard

Madere v. Compass Bank, 2011 WL 5155643 (W.D.Tex. October 28, 2011)

Plaintiff sued her former employer for violation of the Family and Medical Leave Act. She requested defendant produce emails from 2007 and 2008 concerning her FMLA leave and termination. Defendant produced only those emails that someone had printed out and which had not been deleted under defendant’s email retention policy. Plaintiff moved to compel defendant to restore backup tapes to get the deleted email messages. The court denied the motion, based on proportionality.

The court looked to Fed. R. Civ. P. 26(b)(2)(C)(iii), which provides that a court is required to limit discovery if “the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.”

The parties presented conflicting expert declarations concerning the cost to restore the backup tapes. Defendant’s expert claimed it would cost $270,000, while plaintiff’s expert said it would cost less.

The court declined to resolve the conflicting expert assertions. It noted that the amount of controversy in the matter was much less than $270,000, and found that “even if the actual cost of restoring the backup tapes was only a fraction of that amount, it would still outweigh the amount [plaintiff sought] to recover.”

The unwillingness to order production from backup tapes showed the court’s preference for efficient ediscovery, especially in relation to the technological feasibility of the work to be done and the amount in controversy. Though the court does not cite to the Sedona Principles [PDF], the decision comports with the philosophy contained therein.

Sedona Principle no. 2 provides that:

When balancing the cost, burden, and need for electronically stored information, courts and parties should apply the proportionality standard embodied in Fed. R. Civ. P. 26(b)(2)(C) and its state equivalents, which require consideration of the technological feasibility and realistic costs of preserving, retrieving, reviewing, and producing electronically stored information, as well as the nature of the litigation and the amount in controversy.

Sedona Principle no. 8 expresses a disdain for going to backup tapes:

The primary source of electronically stored information for production should be active data and information. Resort to disaster recovery backup tapes and other sources of electronically stored information that are not reasonably accessible requires the requesting party to demonstrate need and relevance that outweigh the costs and burdens of retrieving and processing the electronically stored information from such sources, including the disruption of business and information management activities.

The decision likewise comports with several principles set forth in the Seventh Circuit’s Electronic Discovery Pilot Program [PDF]. First, Principle 1.03 provides that “[t]he proportionality standard set forth in Fed. R. Civ. P. 26(b)(2)(C) should be applied in each case when formulating a discovery plan.” Principle 2.04(d) further provides that backup data that is substantially duplicative of data that is more accessible elsewhere is generally not discoverable in most cases.

For other posts on proportionality from Practical Ediscovery, see:

• Court orders phased discovery under Rule 26′s proportionality principles pending resolution of dismissal motion
• Proportionality — don’t overlook Rule 26(b)(2)(C) when attempting to control your e-discovery costs
• Rule 26(b)(2)(c)’s proportionality standard triggers protective order

Model order for ediscovery is not just for patent troll cases

DCG Systems, Inc. v. Checkpoint Technologies, LLC, 2011 WL 5244356 (N.D. Cal. November 2, 2011)

In September 2011, the Federal Circuit promulgated a model order for courts to use in managing the high costs of ediscovery in patent cases. A key feature of the model order is restrictions on email production: requests to produce email must focus on particular issues. And the requesting party must further limit the requests by using a limited set of search terms, with production coming from a limited set of people (custodians).

Defendant Checkpoint asked the court to enter a version of the model order. (The proposed version differed from the model order in the number of keywords and custodians and on an issue of metadata.) The court granted defendant’s motion.

Plaintiff DCG objected to the entry of the order. It argued that since this was a case between competitors, and not a case brought by a nonpracticing entity (an “NPE,” or sometimes called a “patent troll”), the discovery would be improperly impeded by the model order’s limitations on email discovery.

NPE or patent troll cases often involve asymmetrical discovery – the plaintiff has few documents but the defendant has many. And some commentators have proposed that the model ediscovery order seeks to reduce the ill-effects of this asymmetry. In this case plaintiff argued that it would need discovery on legitimate issues that may have arisen with an actual competitor, e.g., whether defendant copied plaintiff’s technology and whether plaintiff was entitled to an injunction. Plaintiff’s argument presupposed that the model order’s limitations would cut into the scope of that purported legitimate discovery.

The court rejected plaintiff’s arguments. It found that: (1) nothing in the model order or the Chief Judge of the Federal Circuit’s speech unveiling the order suggested that it was intended only for NPE cases, and (2) there was no reason to believe that non-NPE (competitor) cases presented less compelling circumstances in which to impose reasonable restrictions on the timing and scope of email discovery.

The court also addressed the notion that the model order would help only in NPE cases or cases involving asymmetrical ediscovery. It observed that the model order could have double the benefit in competitor cases. If using the model order to relieve the burden on the producing party in an NPE case was a good thing, then using it in a suit between competitors benefit both sides and be twice as good.

Puiszis authors feature article on DRI Today about model orders governing electronic discovery

Hinshaw’s Steve Puiszis has written a feature article on DRI Today titled Groundbreaking Model Ediscovery Order In Patent Cases Is Announced. Puiszis observes that:

The model ediscovery order for patent cases is groundbreaking. Just as the federal discovery rules presumptively limit parties to ten depositions, the model order presumptively limits the number of custodians from whom email can be sought. Its cost-shifting provisions will require parties to carefully consider the discovery they seek. It should reduce discovery costs and limit the gamesmanship that occurs with ediscovery. Too frequently, we find parties serving overbroad discovery requests or engaging in discovery about discovery, where the ultimate end game is not getting to the merits of a lawsuit, but rather to obtain discovery sanctions or force a settlement to avoid the cost of ediscovery. The model order will help parties address the merits of a claim sooner and achieve a quicker, less costly resolution. Many have puzzled over why jury trials are disappearing in federal courts. A major contributor is the cost of discovery. Limiting excessive ediscovery costs can only help civil jury trials flourish in our federal court system.

Read the full text of the article here.

Privilege not waived where son of technologically unskilled parties opened email attachments

Green v. Beer, No. 06-4156, 2010 WL 3422723 (S.D.N.Y. August 24, 2010)

Plaintiffs were not computer savvy and did not know how to open email attachments. But their son was not so lacking in proficiency. So plaintiffs’ lawyers sent certain communications and documents to plaintiffs’ son, who then conveyed those materials to his parents.

In the course of litigation, defendants sought production of the information plaintiffs’ counsel had transmitted to them via their son. Plaintiffs objected by asserting the attorney-client privilege. But the magistrate granted the defendants’ motion to compel. Plaintiffs sought review of the magistrate’s order.

Finding the magistrate’s order on this point to be clearly erroneous, the district judge reversed as to the information transmitted through plaintiffs’ son. Because federal jurisdiction in this case was based on diversity, Fed. R. Evid. 501 was triggered, and the court looked to New York law as it related to attorney-client privilege. Under this analysis, although communications that include third-parties outside of the attorney-client relationship are generally not privileged, an exception to that waiver applies when:

• the client has a reasonable expectation of confidentiality with respect to the communication at issue, and
• disclosure to a third party is necessary for the client to obtain informed legal advice.

Adding to this second point, the attorney-client privilege is not waived where a confidential communication is disclosed to a party serving merely as an agent of either the attorney or the client.

New York also has a statute directed at this issue. N.Y. C.P.L.R. § 4548 says that:

No communication … shall lose its privileged character for the sole reason that it is communicated by electronic means or because persons necessary for the delivery or facilitation of such electronic communication may have access to the content of the communication.

In this case, the court found that the magistrate erred for two reasons. First, the magistrate judge erred when he failed to include Section 4548’s guidance in the analysis. Second, the magistrate erred by not finding that plaintiffs’ son served as an agent for plaintiffs, and that his involvement in the delivery of the otherwise confidential communications would not constitute a waiver of privilege.

Public policy also guided the court’s conclusion: “A client lacking proficiency in Internet technology should not be prevented from enjoying the advantages of email correspondence for fear that the necessary assistance of a third party — here, the [plaintiffs’] son — in sending or receiving such correspondence will lead to the forfeiture of the attorney-client privilege.”

Increasing rate of sanctions points to a need for changes to the federal ediscovery rules.

Next month, the Standing Committee on Rules of Practice and Procedure will meet at Duke University to consider possible amendments to the Federal Rules of Civil Procedure. Pursuant to 28 U.S.C. § 331, the Judicial Conference of the United States is required to “carry on a continuous study of the operation and effect of the general rules of practice and procedure.” The Judicial Conference is authorized to consider and recommend changes to the rules in order to promote simplicity, fairness, the just determination of litigation, and the elimination of unjustifiable expense and delay. Id. These factors, both individually and collectively, warrant a careful reexamination of the federal rules addressing electronic discovery.

As it now stands, electronic discovery is easier to get wrong than it is to get right under the existing rules. Kroll Ontrack is a national ediscovery consultant that tracks and summarizes decisions addressing electronic discovery issues. In January 2010, Kroll reported that from January 1, 2009 to October 31, 2009, 39% of all ediscovery decisions addressed sanctions. During that same timeframe in 2008, Kroll reported that 25% of ediscovery decisions addressed the issue of sanctions. See Case Law Update & Ediscovery News, January 2010, Vol. 10, Iss. 1 found here. Thus, even though parties and their counsel may be more familiar with the federal ediscovery rules and more knowledgeable about electronic discovery than in prior years, requests for sanctions are climbing at an alarming rate.
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Emails sent through Yahoo account using work computer protected under attorney-client privilege

The New Jersey supreme court has held that emails an employee sent to her lawyer using her company-issued computer and a personal Yahoo account are protected by the attorney-client privilege.

Stengart v. Loving Care Agency, Inc., — A.2d —, 2010 WL 1189458 (N.J. March 30, 2010)

The New Jersey courts have a reputation of being protective of “informational privacy.” See, e.g., State v. Reid. A recent decision concerning employee privacy in personal emails adds to that reputation.

Plaintiff-employee used a work-issued laptop to access her Yahoo email account, through which she communicated with her lawyer about her lawsuit against the employer. During the discovery phase of that employment discrimination lawsuit, the employer used computer forensics to recover those Yahoo emails that had been copied to the computer’s temporary internet files folder.

Counsel for plaintiff demanded that the employer turn over the recovered emails, arguing that the communications were protected by the attorney-client privilege. When the employer agreed to turn them over but not discontinue use of the information garnered from them, plaintiff sought relief from the court.

The trial court denied relief and plaintiff sought review with the appellate court. That court reversed, and the employer sought review with the state’s supreme court. You can read our prior blog post that discussed the appellate court’s decision here. The supreme court upheld the appellate court’s decision, holding that the employee had a reasonable expectation of privacy in the communications.

The employer relied on a broadly-written company policy through which the employer reserved the right to review and access “all matters on the company’s media systems and services at any time.” But the court rejected those arguments.

Framework for the analysis

The supreme court considered two aspects in its analysis: (1) the adequacy of the notice provided by the company policy, and (2) the important public policy concerns raised by the attorney-client privilege.

As for the adequacy of the notice provided by the policy, the court found that because the policy did not address the use of password-protected personal email accounts, the policy was “not entirely clear.” As for the importance of the attorney-client privilege, the court lavished it with almost-sacred verbal accoutrements, calling it a “venerable privilege . . . enshrined in history and practice.”

“Intrusion upon seclusion” as source for standard

The court noted that the analysis for a reasonable expectation of privacy in dealings between two private parties was a bit different than the analysis in a Fourth Amendment case. The common law source for the standard in this context is with the tort of “intrusion upon seclusion.” Under New Jersey law, that tort is committed when one intentionally intrudes, physically or otherwise, upon the solitude or seclusion of another or his private affairs or concerns, in a manner that would be highly offensive to a reasonable person. (This language comes from the Restatement (Second) of Torts § 652B.)

In this situation, the court found that plaintiff had both a subjective and objective expectation that the messages would be private. Supporting her subjective belief was the fact that she used a private email account that was password protected, instead of her work email account. And she did not store her password on the computer. Her belief was objectively reasonable given the absence of any discussion about private email accounts in the company policy.

Plaintiff’s expectation of privacy was also bolstered by the fact that the email messages were not illegal, nor would they impact the performance of the employer’s computer system. And they bore all the “hallmarks” of attorney-client communications.

For all these reasons, not the least of which the priority of the courts “to keep private the very type of conversations that took place here,” the court found that the conversations were protected by the attorney-client privilege.

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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Hinshaw partner Steve Puiszis authors ediscovery chapter in healthcare risk management treatise

The American Health Lawyers Association has published the first edition of its Enterprise Risk Management Handbook for Healthcare Entities. The work is a comprehensive treatise to assist healthcare entities implement an enterprise risk management system.

There is no doubt that ediscovery readiness is a critical feature of any enterprise risk management plan. Hinshaw partner and Practical Ediscovery editor-in-chief Steve Puiszis has written a chapter on that topic which is included in the book. The chapter addresses the substance of the federal rules pertaining to ediscovery and also discusses particular steps that healthcare entities can take to make electronic discovery issues part of their overall risk management plan.

Click here for more information.

Requesting party permitted to see only metadata and not substance of documents

Kravetz v. Paul Revere Life Insurance Co., 2009 WL 1639736 (D.Ariz. June 11, 2009)

Plaintiff sought disability benefits from defendant insurance companies, but the insurance companies denied the claim. So plaintiff sued. The insurance companies sought discovery of the hard drives and storage media plaintiff had used for business purposes.

After plaintiff objected to this discovery, defendants moved to compel. The court granted the motion, but added an unusual twist — it allowed the defendants to see the metadata from documents the plaintiff had worked on but prohibited review of the documents themselves.

The court found that the insurance companies “need not and may not review the substance of documents on plaintiffs’ hard drives and media devices.” Accordingly, the order permitted a third party consultant “only [to] extract metadata and other necessary electronic information regarding the amount of time spent on documents.”

While metadata may often be irrelevant to the claims or defenses in a matter, the court in this case recognized a limited purpose for which it may properly be discovered. The insurance company sought the information merely to ascertain how much time the plaintiff spent working on the computer. The actual content of the documents was apparently unrelated to the disability claims.

The plaintiff had challenged the metadata’s ability to show the number of hours he worked on the computer. But siding with the notion of broad discovery, the court advised that the plaintiff would be free to challenge the weight the information should be given at trial.

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.

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