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.

Court orders phased discovery under Rule 26′s proportionality principles pending resolution of dismissal motion

Tamburo v. Dworkin, 2010 WL 4867346 (N.D. Ill. Nov. 17, 2010)

Proving once again that it is a “dog-eat-dog world,” plaintiffs’ lawsuit stemmed from a dispute involving a dog-pedigree software program. Plaintiffs developed the software program from information found on the defendants’ web-sites, which plaintiffs claimed was in the public domain. Plaintiffs claimed that defendants subsequently “engaged in a concerted campaign of blast emails and postings on their websites,” which accused plaintiffs of stealing their information and “urging dog enthusiasts to boycott plaintiffs’ products.”

Over six years after plaintiffs filed their original complaint (that is more than 40 years in dog years), defendants filed a motion to dismiss plaintiffs’ seventh amended complaint and sought a stay of discovery. While the court recognized that motions to stay discovery may be appropriate when a claim is patently frivolous, a party raises a potentially dispositive threshold issue such as standing, pending resolution of the defense of qualified immunity, or in some antitrust actions, it refused to enter a discovery stay when the defendants’12(b)(6) motion did not involve or raise those types of issues. The court further observed that because plaintiffs’ claims had been pending for over six years, the motion to stay was unlikely to significantly expedite the ultimate resolution of those claims.

While the court rejected the requested discovery stay, it did explain that the proportionality principles set forth in Rule 26(b)(2)(C)(iii) provide judges with significant flexibility and discretion to limit discovery to insure that the “scope and duration” of discovery is “reasonably proportional” to the needs of the case. The court observed that when a lawsuit “is in its early stages,” phased discovery may be warranted beginning with “relevant information located in the most accessible and least expensive sources.” The court noted that phasing the discovery in this fashion could allow the parties to later determine if more burdensome or expensive discovery is actually required.

Noting that plaintiffs’ claims “have been in constant flux” and that the pending motion to dismiss could alter or limit the scope of discovery, the court directed the parties to engage in a “phased approach” to discovery. The court allowed only written discovery to be served on the named parties and directed that non-party discovery be postponed until a later phase of the case. The parties were further directed to focus their efforts on completing or updating their Rule 26(a) disclosures before proceeding to any other written discovery. The parties were also directed to identify those claims that were most likely to survive the pending motion to dismiss and to concentrate their discovery efforts on those claims. Finally, the court directed the parties to prioritize their efforts by focusing on discovery which was less expensive and burdensome.

To ensure that a phased discovery approach was followed, the parties were directed to meet in person and prepare such a discovery schedule, consistent with the case management procedures outlined in the Seventh Circuit’s Electronic Discovery Pilot Program Principles. The parties were also directed to become familiar with the Sedona Conference Cooperation Proclamation, and to “actively engage in cooperative discussions to facilitate a logical discovery flow.” The court reiterated that under Sedona’s Cooperation Proclamation “[c]ooperation [between attorneys] does not conflict with the advancement of their clients’ interests – it enhances them. Only when lawyers confuse advocacy with adversarial conduct are these twin duties in conflict.”

While Tamburo presents a unique fact pattern, the decision demonstrates how the use of Rule 26(b)’s proportionality principles can potentially limit ediscovery costs. The phased discovery approach taken by the court in Tamburo is one that should be considered when bringing a Rule 12(b)(6) motion to dismiss.

And, when it comes to dogs, always remember: “Never judge a dog’s pedigree by the books he does not chew.” Anonymous.

Stored Communications Act limits Gmail information obtainable pursuant to subpoena

Beluga Shipping GMBH & Co. KS Beluga Fantastic v. Suzlon Energy LTD., 2010 WL 3749279 (N.D. Cal., Sept. 23, 2010)

Court rules that under the Stored Communications Act, account holder consent is required to obtain copies of emails in Google’s possession. Before you issue a subpoena seeking copies of emails, read Beluga Shipping.

Suzlon is the third largest wind turbine manufacturer in the world. In an action pending in the Federal Court in New South Wales Australia, Suzlon brought cross claims for fraud and breach of fiduciary duty against several of its former employees who were imprisoned in India.

Suzlon believed that its former employees used internet mail accounts hosted by Google to perpetrate their fraud. Therefore, it filed a petition under 28 U.S.C. §1782 to obtain discovery from Google. 28 U.S.C. §1782 provides the means by which parties to a foreign proceeding can obtain discovery in the United States for use in that proceeding. The Federal Rules of Civil Procedure apply in §1782 proceedings unless the court prescribes a different procedure to follow. In Beluga Shipping, the district court applied the Federal Rules of Civil Procedure.

In its §1782 petition, Suzlon sought leave to issue subpoenas to Google to obtain all emails sent or received by its former employees using specific Gmail accounts. Suzlon also sought any records establishing when those Gmail accounts were created, the name provided to Google by the user of each account during the account creation process, the country in which each account was created, how Google stores or saves emails in its Gmail accounts and how information regarding when emails sent to and from a Gmail account is recorded and stored.

The district court permitted Google to intervene and oppose Suzlon’s petition. Google argued that under the Stored Communications Act, 18 U.S.C. §§2701-2712, consent of the individual account holders is required, and that unless their consent is obtained, it could not lawfully comply with Suzlon’s subpoena.

In response, Suzlon cited Zheng v. Yahoo, Inc., 2009 U.S. Dist. LEXIS 111886 (N.D. Cal., Dec. 2, 2009), and argued that the Stored Communications Act does not apply to foreign citizens. Therefore, Suzlon argued that Google was obligated to comply with its subpoena. However, the district court found Zheng inapplicable because “the email interceptions and disclosures occurred outside of the United States by a company whose servers were located outside the United States.” In the court’s view, these factors led to Zheng’s conclusion that the Stored Communications Act does not apply to foreign nationals. However, because Google and its servers are located in the United States, the district court concluded that the Stored Communications Act was applicable in the case before it.

Because Suzlon had not obtained the consent of its former employees, the district court denied, its petition to subpoena the emails of those employees, without prejudice to a renewed showing that the account holders’ consent had been obtained. The court did direct Google to produce documents which established when the specific Gmail accounts in question were created, the actual names of the email account holders provided to Google during the account creation process and the countries from which the specific Gmail accounts were created. The court further directed Google to continue to preserve the emails contained in the specific Gmail accounts in question pending a showing of consent by the account holders.

Despite the unusual procedural context in which this decision arose, the Beluga Shipping decision is significant for any litigant who seeks information from a provider of internet email service such as Google, Yahoo or Hotmail. Without the consent of the account holder, parties may be unable to obtain by subpoena emails that were sent or received by the account holder. So, first seek the consent of the account holder and if that fails, consider a motion asking the court to compel the account holder’s assent. Additionally, when communications occur through applications found in the “cloud,” the Stored Communications Act can raise a similar impediment to obtaining communications stored in the cloud.

Ediscovery ethics – use of clawback agreements – don’t forget to protect yourself when protecting your client’s information

The comments to Model Rule 1.6 explain that a lawyer “must act competently to safeguard” client information against the inadvertent or unauthorized disclosure by a lawyer or anyone who is subject to the lawyer’s supervision. The use of clawback agreements in electronic discovery has become commonplace given the exponentially greater volume of information typically involved and the heightened risk that privileged or protected information will be inadvertently disclosed. While the terms of clawback agreements can widely vary, under a typical clawback, the parties agree that if privileged or protected information is disclosed, it will be returned pursuant to that agreement.

The problem with clawback agreements is that they are not enforceable against third parties. If your client is involved in related litigation involving similar issues, should the parties involved in that litigation learn of the disclosure of privileged information in your case, they could seek its production, irrespective of your clawback, by arguing they were not parties to your agreement and that the privilege was waived by your disclosure. Indeed, that limitation is codified in Fed. R. Evid. 502(e) which provides: “[a]n agreement on the effect of disclosure in a federal proceeding is binding only on the parties to the agreement.” So while clawback agreements serve a worthwhile purpose, they are not risk free. Better protection against third-party waivers in a federal proceeding can be obtained if a federal court enters a nonwaiver order under Fed. R. Evid. 502(d). However, many states have not adopted the equivalent of Rule 502(d), and it remains an open question whether a non-waiver order entered in one state-court proceeding is enforceable in other state-court proceedings. See Hopson v. City of Baltimore, 232 F.R.D. 228 (D.Md. 2005).

Thus, there is a continuing need for clawback agreements, especially in state-court litigation. But before entering into a clawback agreement with your opponent, also consider protecting yourself against potential criticism over its use. In document intensive cases, or suits where a significant amount of ediscovery will be sought, discuss the use of a clawback agreement with your client, including its risks and benefits. Obtain your client’s consent before using a clawback. A best practices approach would involve written consent from the client to the use of a clawback agreement before it is entered into with opposing counsel. This can avoid any after-the-fact controversy over the nature of your discussions with the client or the decision to use a clawback to protect the confidentiality of your client’s information.

Proportionality — don’t overlook Rule 26(b)(2)(C) when attempting to control your e-discovery costs

Bellinger v. Astrue, 2010 WL 1268063 (E.D.N.Y. April 2, 2010)

Some lawyers take a “Turkish Bazaar” approach to discovery requests, seeking more than they really need while willing to negotiate down to what they want. Other lawyers lace their otherwise reasonable discovery requests with magnifying terms such as “any and all,” “touching upon,” or “relating to” a particular topic or subject matter.

Lawyers responding to these types of requests will typically, and rightfully, object to the requests as being overbroad and unduly burdensome. Principle 1.03 of the Seventh Circuit’s Electronic Discovery Pilot Program further provides that requests for production of electronic information should be “reasonably targeted, clear and as specific as practicable.” That principle provides another basis to object to burdensome discovery requests.

But how many lawyers think to raise Rule 26(b)(2)(C)’s proportionality standard when addressing a burdensome discovery request? Rule 26 applies to all discovery, not just to inaccessible information. Attorneys who fail to consider Rule 26’s proportionality standard are overlooking an important tool in controlling ediscovery costs, as the decision in today’s post explains.

Bellinger involved a Title VII claim in which plaintiff alleged that she was denied a promotion and received unequal pay because of her gender. In discovery, plaintiff sought “detailed information about the job status and career histories” of various groups of other employees. The district court sustained the defendant’s objection, noting that the burden of complying with the interrogatory seeking this information was “substantial” and that “[t]he likely benefit of the discovery . . . is slight or non-existent, particularly in light of the narrow scope of plaintiff’s claims and the broad range of discovery that has already been produced.”

Additionally, plaintiff in Bellinger sought “detailed and technically complex” information about the defendant’s electronically stored information. Again, notions of proportionality prevailed. The court concluded that responding to those interrogatories would be “extremely burdensome” and that the information sought in those interrogatories was “unlikely to be of significant value, especially in light of the discovery that the defendant has already provided.”
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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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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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Failing to follow Rule 34′s procedures can result in having to produce ESI a second time in a different format

Covad Communications Co. v. Revonet, Inc., 260 F.R.D. 5 (D.D.C. 2009); Cenveo Corp. v. Southern Graphic Systems, 2009 WL 404 2898 (D. Minn. Nov. 18, 2009)

Because the production of electronically stored information (ESI) can occur in various formats, Rule 34 sets up a process through which the parties are supposed to resolve their disputes over the format of production. Rule 34(b)(1)(C) permits the requesting party to specify the format in which to produce the requested ESI. The producing party can either agree to produce the ESI in the requested form or can object to the proposed format. Rule 34(b)(2)(D) specifies that when either the requesting party fails to specify a production format in its request for documents or when the producing party objects to a specified format, the producing party is obligated to identify the format in which it proposes to produce the requested ESI. If the parties are unable to agree on a format, the Rule contemplates that a court will then resolve the issue, but is not bound by either party’s proposed production formats.

Rule 34 contemplates that the parties will resolve their disputes over the format of production before any production occurs. Indeed, the Advisory Committee Note to Rule 34 explains: “Stating the intended form before production occurs may permit the parties to identify and seek to resolve disputes before the expense and work of the production occurs.”

When a party unilaterally produces ESI in a format of its choice without providing the prior notice contemplated by Rule 34(b)(2)(D), the Advisory Committee Note to the Rule further explains that the producing party runs the risk that a court may conclude the ESI was produced in a format that was not reasonably usable and may order that it be reproduced in a different form. That very nightmare occurred in both of today’s featured decisions and the Covad Communications decision provides a textbook example of the type of problem that can occur when a party has to produce its ESI a second time in a different format.

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