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 »

The Secret’s out – if you want to lower your ediscovery and litigation costs – seek F.R.E. 502 non-waiver orders

Heriot v. Byrne, 2009 WL 742769 (N.D. Ill. March 20, 2009)

Heriot addresses the inadvertent production of privileged materials by an ediscovery vendor. Because the law firm that retained the vendor had taken reasonable steps to review the documents prior to their production, and took prompt steps to rectify the inadvertant disclosure once they learned of it, the court ruled the disclosure was inadvertent and did not result in a waiver attorney-client privilege under Fed. R. Evid. 502(b). The decision also serves as a stark reminder of the care which must be taken in selecting an ediscovery vendor, and the American Bar Association Ethics Opinion addressing a lawyer’s obligations when outsourcing legal and nonlegal services.

However, after reading the court’s analysis of the parties’ Rule 502(b) arguments, I was struck by how unnecessary it all was. I tried to imagine the number of hours the district court spent reviewing the documents which had been submitted for an in camera inspection, reviewing the parties’ briefs, and then drafting its opinion resolving the Rule 502(b) issues that were presented. I thought of the hours, and literally the thousands of dollars that were wasted litigating the inadvertent waiver issue. Much of that time, money and effort could have been avoided had the parties simply entered into a non-waiver order under Fed. R. Evid. 502(d).

So, before stepping off the soap box and getting back to Heriot, let us provide a practical suggestion to lower your ediscovery and litigation costs – enter into non-waiver orders under Fed. R. Evid. 502(d). The Note to Rule 502(d) explains that once a non-waiver order is entered in a federal proceeding, “its terms are enforceable against non-parties in any federal or state proceeding.” That Note further explains the agreement of the parties is not a condition to the entry of, or the enforceability of a non-waiver order. As indicated in one of our prior posts, Rule 502 non-waiver orders are the gold standard to follow when seeking protection against the inadvertent waiver of privilege.

Read the rest of this entry »

A practical tip for keyword searching

Wm. A. Gross Constr. Assocs. v. American Mfrs. Mutual Ins. Co., 2009 WL 724954 (S.D.N.Y. March 19, 2009).

When the opening line of an ediscovery decision is: “This Opinion should serve as a wake-up call to the Bar in the District,” visions of another Qualcomn blowup immediately come to mind. When you realize the decision is about “the need for careful thought, quality control testing, and cooperation with opposing counsel in designing search terms or key words,” you guess this is another decision addressing the inadvertent waiver of privilege. Because ediscovery is easier to get wrong than it is to get it right, lawyers – being the cynical lot we are – immediately think the worst.

 Well, luckily for those involved in Gross Construction Associates, the decision’s opening salvo was a reflection of the judge’s frustration over having to design a keyword search when the parties could not agree on the terms to employ. While much of the decision retraces the same ground covered by the Victor Stanley and Equity Analytics decisions, the court does provide several interesting insights, and one practical tip to help prevent keyword searches from disintegrating into a game of Scrabble.

The decision arises out of a construction defects and delay claim involving the development of the Bronx County Hall of Justice. The Dormitory Authority of the State of New York (“DASNY”) was the “owner,” and employed Hill International as its construction manager on the project. Hill was not a party to the lawsuit.

DASNY agreed to produce Hill’s project-related documents and ESI to the other parties in the litigation. The issue confronting counsel, and the court, however, was how to segregate Hill’s project-related e-mails from those that were unrelated. Thus, the parties proposed to use the use of keyword searches to filter out the unrelated e-mails.

Read the rest of this entry »

If John Constantine had been a lawyer, these sanctions would be his vision of ediscovery hell

Bray & Gillespie Management LLC v. Lexington Ins. Co., 2009 WL 546429 (M.D. Fla., March 4, 2009)

In the movie Constantine, Keanu Reeves plays an occult detective with the ability to detect demonic beings on earth, and to see into hell. Had his character been a lawyer rather than an occult detective, he would simply have to read the Bray & Gillespie decision to see what a vision of ediscovery hell looks like.

The Bray & Gillespie decision addressed some basic ediscovery mistakes involving a request for production of ESI in its native state with its accompanying metadata. However, those mistakes were compounded by what the Magistrate Judge described as material misrepresentations and omissions by counsel for the party producing that data. The decision also stands as a stark reminder that a supervising partner, and his firm can be held liable for the ediscovery snafus of their local counsel and predecessor counsel.

The court recognized that any motion for sanctions, even one which names only the party, puts both the party and its attorney on notice that the court may access sanctions against either or both of them, absent a showing of substantial justification for the conduct at issue. In Bray & Gillespie, the court determined that it was not appropriate to require the client to pay for the sanctions resulting from the decisions made by its outside counsel. Rather, the court sanctioned outside counsel and his firm, and also issued a Rule to Show Cause why another attorney from that firm should also not be personally sanctioned for his conduct in the case. Even more chilling is the fact that the Magistrate Judge indicated that she was willing to entertain additional sanctions, including a request that the court dismiss the case, if the data she ordered produced contained more metadata than what the sanctioned attorneys offered to produce in discovery.

Read the rest of this entry »

Email cc’d to non-lawyer forfeited attorney-client privilege, but work product doctrine saved the day

Schanfield v. Sojitz Corp. of America, 2009 WL 577659 (S.D.N.Y. March 6, 2009).

Sojitz Corporation fired its employee Schanfield. Six months later, Schanfield sued for wrongful termination. As many litigants do prior to filing suit, Schanfield sought the advice – via email – of two attorneys in his family. These communications discussed the facts of the case, underlying strategy, and thoughts on retaining counsel. Schanfield copied his non-lawyer sister on these messages.

Schanfield withheld these emails from production. Sojits moved to compel. Schanfield argued that the messages were protected by the attorney-client privilege because they were “confidential and explicitly for the purpose of procuring legal advice about his claims in [the] litigation and the retention of counsel.”

The court found that by copying his non-lawyer sister on these communications, Schanfield forfeited the attorney-client privilege. However, the court also found that the emails were protected by the work product doctrine. The messages were “clearly prepared in anticipation of litigation,” and by sending them to his close relatives, Schanfield did not significantly increase the likelihood that Sojitz would obtain the information. Absent a showing of substantial need for the messages, the court denied Sojitz’s motion to compel.

The obvious lesson to be learned from the case is that one must use discretion in deciding who to copy on email messages. Lawyers are expected to understand the contours of the attorney-client privilege and avoid unnecessary cc-ing. But prudent counsel will instruct and remind his or her clients of how easy the protection of the attorney-client privilege can be destroyed, as this case demonstrates. This is an issue which should be included in any corporate email risk management training or program.

A lawyer’s Seven Step Program for preserving and producing transitory electronic data

Arista Records, LLC v. USENET.Com, Inc., 2009 WL 185992 (S.D.N.Y. Jan. 26, 2009).

Arista Records is yet another decision where sanctions were imposed, including the issuance of an adverse inference instruction, for the failure to properly preserve and produce electronic information. The case is significant because the decision focused on requests for transitory server log data and information on dynamic web pages.

It would be a gross oversimplification to say Arista Records merely stands for the proposition that sanctions can be imposed when a party disables features of its computer system or reconfigures its servers in a way that results in the loss of electronic data. While that indeed was the court’s ultimate ruling, the Arista Records decision raises a number of important issues. Therefore, we have distilled several of the more important points from Arista Records into what we call our Lawyer’s Seven Step Program for the Preservation and Production of Transitory Electronic Data:

• Step 1: Know what to preserve and when to preserve it.
• Step 2: Communicate with your client.
• Step 3: Bring a motion for a protective order concerning inaccessible sources of information.
• Step 4: Confirm in writing before taking any ediscovery measures.
• Step 5: Exercise extreme caution in what you say or agree to produce.
• Step 6: Use a technologist or expert wisely.
• Step 7: Avoid system changes that can result in the loss of data.

Let’s take a more detailed look at these steps below.
Read the rest of this entry »

Neither trade secrets nor licensing agreements prevent production of proprietary software

Opperman v. Allstate New Jersey Ins. Co., 2008 WL 5071044 (D.N.J. Nov. 24, 2008).

Not even Dennis Haysbert could have prevented this production.

So who is Dennis Haysbert and what does he have to do with an ediscovery case involving propietary software and trade secrets you ask? Well, here is a hint; he played the vodoo practicing outfielder, Pedro Cerrano, in the movie Major League. Still haven’t figured out the connection to this case? Well continue reading because the answer is spelled out below.

Opperman is a decision about which all insurance carriers should take note. However, it has ramifications that extend beyond the insurance industry.

Read the rest of this entry »

Rhoads decision first to apply FRE 502

Federal Rule of Evidence 502 was recently enacted to address the inadvertent waiver of privilege. Rhoads v. Building Materials Corp. of America, 2008 WL 4916026 (E.D. Pa. Nov.14, 2008) is the first case to address Rule 502 and its application to inadvertently produced electronic data.

Read the rest of this entry »