Rimkus Consulting Group, Inc. v. Cammarata, 2010 WL 645253 (S.D.Tex. February 19, 2010)

The Rimkus decision will likely prove to be one of the most important ediscovery decisions announced in 2010. The decision was written by Judge Lee H. Rosenthal, who chairs the Judicial Conference Committee on Rules of Practice and Procedure. It is a decision that merits the attention of any serious ediscovery practitioner.

The blogosphere has been all “a twitter” about Judge Shira Scheindlin’s recent opinion in Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, 2010 WL 184312 (S.D.N.Y. January 5, 2010). However, Rimkus may ultimately prove to have more lasting and widespread significance.

Pension Committee addressed when the failure to properly preserve and collect ESI justifies the sanction of an adverse inference instruction. In a recent blog post about the Pension Committee decision, we raised several concerns about the opinion’s analysis and conclusions. While Rimkus involved allegations of wilful misconduct, including the intentional destruction of emails and other ESI after a duty to preserve had been triggered, Judge Rosenthal noted that there were “some common analytical issues” between Rimkus and Pension Committee, which merited discussion. Judge Rosenthal’s discussion of those common analytical issues in Rimkus addressed several of the concerns we highlighted in our Pension Committee post.

Judge Rosenthal observed that the rules surrounding the duty to preserve ESI and spoliation are not controversial. However, she recognized that applying them “to determine when a duty to preserve arises in a particular case and the extent of that duty requires careful analysis of the specific facts and circumstances.” She then observed:

It can be difficult to draw bright-line distinctions between acceptable and unacceptable conduct in preserving information and in conducting discovery, either prospectively or with the benefit (and distortion) of hindsight. Whether preservation or discovery conduct is acceptable in a case depends on what is reasonable, and that in turn depends on whether what was done – or not done – was proportional to that case and consistent with clearly established applicable standards.

The Seventh Circuit’s Electronic Discovery Pilot Program recognizes that Rule 26(b)(2)(B)’s principle of proportionality applies to the duty to preserve ESI. Principle 2.04(a) of the Seventh Circuit’s Pilot Program provides that parties and their counsel “are responsible for taking reasonable and proportionate steps to preserve relevant ESI ‘within its possession custody or control.’” Judge Rosenthal endorses that approach to preservation efforts in Rimkus. She cites THE SEDONA PRINCIPLES: SECOND EDITION, BEST PRACTICES RECOMMENDATIONS & PRINCIPLES FOR ADDRESSING ELECTRONIC DOCUMENT PRODUCTION 17, cmt. 2.b. (2000), as support for her conclusion on this point. In that comment, the Sedona Principles explain “electronic discovery burdens should be proportional to the amount in controversy and the nature of the case. Otherwise, transaction costs due to electronic discovery will overwhelm the ability to resolve disputes fairly in litigation.”

Judge Rosenthal further recognized that applying a categorical approach to the issue of sanctions can be difficult for similar reasons. When determining if sanctions are warranted and the nature of any sanctions to be imposed “requires a court to consider both the spoliating parties’ culpability and the level of prejudice to the party seeking discovery.” In other words, a court’s response to the loss of ESI depends on both the degree of culpability involved and the extent of any prejudice that results. Even with the intentional destruction of potentially relevant information, if no prejudice to the opposing party results, that should influence the sanctions that are imposed. Judge Rosenthal also recognized that even with an inadvertent loss of ESI, severe prejudice to the opposing party will influence the appropriate response to a request for sanctions, assuming there is some degree of culpability involved.

As a result, even though the defendants in Rimkus intentionally destroyed ESI in bad faith and provided false testimony about the destruction of that evidence, Judge Rosenthal refused to impose terminating sanctions. She noted that between the information the defendants did produce and the records plaintiff obtained through the issuance of subpoenas to several internet service providers, plaintiff had extensive evidence to present at trial. While acknowledging that plaintiff had suffered some prejudice, it was far from irreparable, and the issuance of a terminating sanction (dismissal or a default judgment) is appropriate only if the spoliation of evidence results in “‘irreparable prejudice’ and no lesser sanction would suffice.” Judge Rosenthal did authorize the issuance of an adverse inference instruction, but unlike Pension Committee, the court made the preliminary findings necessary to submit the spoliation evidence and the adverse inference instruction to the jury.

Judge Rosenthal also noted that the Fifth, Seventh, Eighth, Tenth, Eleventh and D.C. Circuits all appear to require evidence of “bad faith” before an adverse inference instruction can issue. She further observed that while the First, Fourth and Ninth Circuits do not necessarily require bad faith if severe prejudice is demonstrated, decisions from those Circuits frequently emphasize bad faith. She further explained that in the Third Circuit, courts balance the level of fault against the resulting prejudice. Thus, Judge Rosenthal concluded that the circuit differences on the degree of culpability necessary to warrant the issuance of an adverse inference instruction, limits the applicability of the approach taken in Pension Committee. And, following the Supreme Court’s decision in Chambers v. NASCO, Inc., 501 U.S. 32, 43-46 (1991), something more than negligence may be required when sanctions are imposed under a district court’s inherent authority.

Intentional deletion of emails and ESI bars the application of issue and claim preclusion.

Several former employees left Rimkus to start their own competing company offering similar investigative and forensic engineering services. Shortly after the new startup company was formed, those former employees filed a declaratory judgment action in Louisiana claiming that the forum-election, choice-of-law, non-competition and non-solicitation provisions in the employment agreements they had signed with Rimkus were unenforceable. Subsequently, Rimkus sued those employees in two separate lawsuits in Texas (that were ultimately consolidated before Judge Rosenthal) alleging they breached the non-competition and non-solicitation covenants of their employment contracts and that they used trade secrets and proprietary information in setting up their competing company.

The former employees were successful in their Louisiana declaratory action. There the court concluded that the challenged provisions of the employment contracts were unenforceable under Louisiana law. In the subsequently filed Texas federal suits, the former employees argued that it should be dismissed based on the preclusive effect of the Louisiana state-court decision which invalidated the non-compete, non-solicitation, forum-election and choice-of-law provisions in the employment contracts. That motion was denied because even if those provisions were unenforceable in Louisiana under Louisiana law, that finding did not make them invalid in all states.

Subsequently however, in the Louisiana state-court action, Rimkus filed an answer and a “reconventional demand,” which is similar to a counterclaim, asserting claims for breach of the employment agreement, breach of fiduciary duty and disparagement, arguing those claims should be governed under Texas state law. The trial court in the Louisiana action granted summary judgment to the former employees on those claims, which set the stage for what came next. The former employees then moved for summary judgment in the Texas federal court action on the grounds of res judicata.

Judge Rosenthal denied that summary judgment motion based on the spoliation of evidence that had occurred. She noted that the Restatement (Second) of Judgments provides, “that fraud, concealment or misrepresentation provide a basis to depart from claim preclusion.” She explained: “Issue preclusion does not apply when one party ‘conceal[s] from the other information that would materially affect the outcome of the case.’ Restatement (Second) of Judgments, §28(f), cmt. j. As a result, after weighing the policies underlying the law of preclusion against the defendants spoliation of evidence relevant to Rimkus’ claims, Judge Rosenthal concluded that exceptional circumstances existed and ruled that neither issue nor claim preclusion could be applied.

The record on summary judgment clearly demonstrated that the defendants had not only deleted emails and other ESI after a duty to preserve had arose, they also delayed producing documents, which demonstrated that information had been taken from Rimkus that was used in setting up the competing company. The defendants also provided incomplete information about their discovery efforts, which would have revealed the spoliation. Because none of the destroyed evidence was available to Rimkus during the course of the Louisiana action, Judge Rosenthal concluded that Rimkus did not have a full and fair opportunity to litigate the misappropriation, breach of fiduciary duty, and disparagement claims in the Louisiana lawsuit.

Rule 37(e)’s “safe harbor” provision was inapplicable.

Judge Rosenthal concluded that a duty to preserve was triggered no later than “when the defendants were about to ‘preemptively’ sue Rimkus” in the Louisiana state-court action. At that point, the defendants had an obligation to preserve documents and information, including ESI, relevant to the dispute with their former employer.

Fed. R. Civ. P. 37(e) precludes the imposition of sanctions where the loss of information results from the routine operation of a party’s computer system, when operated in good faith. The court concluded that Rule 37(e) was inapplicable in Rimkus. One of the former employees testified that he and the others decided on a “policy” of deleting emails more than two weeks old. Such a policy, which was put into place after a duty to preserve had arisen, did not constitute the “routine, good-faith operation of a computer system,” thereby vitiating Rule 37(e)’s protection. Additionally, information presented to the court established that the defendants selectively deleted emails that would have disclosed their activities, which further precluded the potential application of Rule 37(e).

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.

The court emphasized that the decision was limited to its facts. But the case is worth reading because of its concise yet thorough explanation of the various types of metadata and their discoverability.

In this case, the court found that the scope of the petitioner’s request included “system metadata,” which are things such as file names and extensions, sizes, creation dates and latest modification dates. The court noted that FOIL’s scope generally includes electronic records. It then compared system metadata to the notes on a file folder describing attributes of the documents stored in that folder. Drawing on these notions, the court found that the agency should disclose system metadata associated with the requested computer files.

The disclosure of metadata appears, at a superficial level, to present a paradox. Some courts, such as the ones in Kentucky Speedway, LLC v. NASCAR, Inc., 2006 U.S. Dist LEXIS 92028 (E.D. Ky.2006) and Michigan First Credit Union v. CUMIS Insurance Society, 2007 WL 4098213 (E.D. Mich. Nov. 16, 2007) have essentially found a presumption that metadata is not subject to disclosure because of the likelihood of its irrelevance.

But a look at emerging technologies such as those underlying the “semantic web” — an aspect of the World Wide Web in which data are encoded so that the various machines on the network can “understand” the data and thereby undertake the more mundane tasks of finding, sharing and combining information – underscore the potential importance of metadata.

Insightful counsel can break this paradox by remaining mindful of the need for metadata based on the claims and defenses raised in the matter. Hopefully the days of blanket requests for metadata, without a principled basis for such requests are over. Just like any other sort of information that pertains to a case, metadata has no inherent relevancy. Instead, the question of whether it should become a part of the record depends on its meaning. Metadata’s discoverability (or amenability to disclosure under freedom of information laws) should depend not on the fact that it is “metadata,” but on how it can serve to explain the scenario underlying the dispute.

Interested readers should also be aware of related opinions from other states. For example, the Arizona Supreme Court has held in (Lake v. City of Phoenix) that metadata is subject to disclosure under the state’s open records statute. Given the burden to governmental agencies tasked with responding to public requests, the issue of metadata’s discoverability is unlikely to disappear soon.

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.

Failing to follow Rule 34’s requirements triggers order to reproduce ESI in a reasonably useable form.

In several of our prior blog posts which you can read here and here, we discussed Rule 34’s process for addressing the format of ESI production. Rule 34(b)(2)(D) requires the party responding to a production request to inform the requesting party of the format in which it proposes to produce its ESI in two scenarios – when the producing party objects to the requested production format specified in the production request or if no form is specified in that request. That is precisely what occurred here. AccessData did not specify a format in its Rule 34 production request. ALSTE scanned hard copy printouts of emails and other documents rather than produce them in their original electronic format. Apparently, Optical Character Recognition (“OCR”) was not added to the PDF images because AccessData argued that the documents were not reasonably usable because they were not “searchable.”

ALSTE argued that it would be unnecessarily burdensome and expensive to now extract specific information to make the emails text searchable and pointed to Rule 34(b)(2)(E)(iii) which provides that a party is not obligated to produce the same ESI in more than one form.

The court was not persuaded by these arguments. It noted that ALSTE failed to follow Rule 34’s requirements by failing to notify the plaintiff of the format it intended to use in producing the requested discovery. As the Advisory Committee Notes to the 2006 Amendment to Rule 34 explains:

Stating the intended form before the production occurs may permit the parties to identify and seek to resolve disputes before the expense and work of the production occurs. A party that responds to a discovery request by simply producing electronically stored information in a form of its choice, without identifying the form in advance of the production and the response required by Rule 34(b), runs the risk that the requesting party can show that the produced form is not reasonably usable and that it is entitled to production of some or all of the information in an additional form.

Fed.R.Civ.P.34(b) Advisory Comm. Notes to 2006 Amendment

Rejecting ALSTE’s argument, the court pointed to another statement appearing in the Advisory Committee Notes to Rule 34 that warns:

If the responding party ordinarily maintains the information it is producing in a way that makes it searchable by electronic means, the information should not be produced in a form that removes or significantly degrades this feature.

Id. The court in AccessData concluded that the scanned PDF’s were not reasonably usable and ordered the defendant to reproduce the electronic discovery in its native format or in a reasonably usable form.

German Data Protection Act and Hague Convention did not bar disclosure of personal third-party information.

ALSTE argued that German law prohibited the production of third-party personal information and suggested that if it complied with the plaintiff’s discovery requests, it would be subject to civil and criminal penalties. The district court rejected that argument and noted that one provision of the German Data Protection Act specifically provides that transfers of “personal information to countries that do not have the same level of data protection ‘shall be lawful, if … the data subject has given his/her consent [or] … the transfers are necessary or legally required… for the establishment, exercise or defense of legal claims.’”

Additionally, the court observed that in Societe Nationale Industrielle Aerospatiale v. United States District Court, 482 U.S. 522, 544 n.29 (1987), the Supreme Court held: “It is well settled that such [blocking] statutes do not deprive an American court of the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate the statute.” Moreover, the Supreme Court cited the American Law Institute’s Restatement which explains:

When a state has jurisdiction to prescribe and its courts have jurisdiction to adjudicate, adjudication should (subject to generally applicable rules of evidence) take place on the basis of the best information available …. [Blocking] statutes that frustrate this goal need not be given the same deference by courts of the United States as substantive rules of law at variance with the laws of the United States.

Id. (quoting Restatement of Foreign Relations Law of the United States (Revised) § 437, Reporter’s Note 5 (1986)).

ALSTE suggested that plaintiff must comply with the rules set forth in the Hague Convention for Taking Evidence Abroad with respect to the private information about the defendants’ customers. The district court summarily rejected that argument by again pointing to the Supreme Court’s Societe Nationale decision where the Court held “we cannot accept petitioners’ invitation to announce a new rule of law that would require first resort to [Hague] Convention procedures whenever discovery is sought for my foreign litigant.” Id.

Under the holding of Societe Nationale, parties might have to comply with Hague Convention procedures where suits involve foreign states or if “the additional cost of transportation of documents or witnesses to or from foreign locations … increase[s] the danger that discovery [is] sought for [an] improper purpose.” Id. at 546. Because neither scenario was presented by the plaintiff’s breach of contract action, the district court in AccessData ruled that the Hague Convention procedures were inapplicable.

Laptop photo courtesy Flickr user Mike Licht under this Creative Commons license.

The committee developed a set of ediscovery principles intended to serve as supplemental guidelines to be followed by litigants participating in the program. These principles were codified into a standing order which is being used in selected cases to assess their effectiveness. Kenneth J. Withers, the Director of Judicial Education and Content for The Sedona Conference, and Rebecca L. Kourlis, the Executive Director of the Institute for the Advancement of the American Legal System at the University of Denver assisted in the process of drafting these principles.

What makes these principles unique is that they will be tested during phases of the Pilot Program. The results for Phase I of the program will be presented in May 2010 at the Seventh Circuit’s Annual Meeting. They will then be evaluated and refined. Phase II will then run from June 2010 to May 2011. At that juncture, the committee will present its findings and issue its final principles.

Below is to a set of PowerPoint slides addressing the program and the ediscovery principles that are currently being tested.

Given the frequency that emails are requested in discovery, this decision merits your attention. In Rodriquez-Torres, the court denied plaintiffs’ motion to compel the production of emails about her, ruling they were “not reasonably accessible” under Rule 26(b)(2)(B).

Plaintiff and her husband brought an employment discrimination claim under ADEA, Title VII, the Lilly Ledbetter Fair Pay Act and 42 U.S.C. §1983. In discovery, plaintiffs sought “all email communications and calendar entries” for a three-year period “describing, relating or referring to plaintiff Vicki Rodriguez, both inbound and outbound” from the defendant’s “messaging system servers.” Plaintiffs requested that the data be produced in its “native electronic format with its original metadata” intact. Defendant objected, claiming plaintiffs’ request was overbroad. Defendant argued that compliance would likely produce “hundreds, if not thousands, of documents” that would include “irrelevant, confidential and potentially privileged information.” Plaintiffs brought a motion to compel and sought discovery sanctions.

The court initially directed the parties to provide information concerning the cost involved in producing the requested information. Plaintiffs were further directed to explain what information they anticipated finding in the native format documents. The parties submitted a report from an ediscovery vendor which estimated the cost of producing the ESI at approximately $35,000. The estimated costs included a $5,000 charge for the configuration and creation of a Concordance Database.

Based on this information, the court determined the emails that plaintiffs sought were not reasonably accessible. The court found that $35,000 was “too high of a cost for the production of the requested ESI in this type of action.” (In their prayer for relief, plaintiffs sought $1.4 million dollars in compensatory damages). Recognizing that the volume of information involved and its form makes privilege determinations more difficult and time-consuming, the court also expressed a concern over the additional cost that would be incurred in reviewing the requested emails for relevancy and privilege.

The court recognized that under Fed. R. Civ. P. 26(b)(2)(B) it could nonetheless order production of the emails if good cause was shown. In an attempt to show what information they could find in the emails, plaintiffs pointed to three articles which suggest that email usage encourages individuals “to write unguarded, unwise and often inappropriate comments.” That argument did not persuade the court that good cause warranted production of the emails. The court explained: “Just because emails are more likely to lead to inappropriate comments is not a sufficient basis to believe that the ESI requested here will lead to the discovery of the information Plaintiffs claim they will discover.” The court concluded that the plaintiffs’ request was merely a “fishing expedition” and denied their motion to compel.

Practical Ediscovery tip: The party asserting undue burden under Rule 26(b)(2)(B) bears the burden of proof. To succeed in establishing the requested discovery will be unduly burdensome or costly to produce, it is imperative that you provide the court with concrete information about the costs and/or personnel hours that will be required to obtain, review and produce the requested information. Vague and unsupported assertions of undue burden will inevitably be rejected by the court.

Pension Committee is an ediscovery opinion that is sure to garner a lot of attention. The opinion was written by Judge Shira Sheindlin, who authored the Zubulake decisions. Judge Scheindlin includes a subheading in Pension Committee that her decision is: “Zubulake Revisted: Six Years Later.” While noting that “[c]ourts cannot and do not expect that any party can meet a standard of perfection,” she nonetheless concludes “courts have a right to expect that litigants will take the necessary steps to ensure that relevant records are preserved when litigation is reasonably anticipated.”

In Pension Committee, ninety-six investors brought suit claiming the violation of federal securities law seeking to recover $550 million dollars in losses stemming from the liquidation of two British Virgin Island based hedge funds. Shortly after being retained, counsel telephoned and emailed the plaintiffs to begin document collection and preservation. Besides calling and emailing the clients, counsel also distributed memoranda instructing the plaintiffs to be over-inclusive, rather than under-inclusive in their efforts and noting that emails and electronic documents should be included in the production. After suit was filed, a stay of discovery was issued pursuant to the Private Securities Litigation Reform Act. However, a formal written litigation hold was not issued until after the discovery stay was lifted several years later. After discovery commenced, gaps were found in plaintiffs’ document productions, which prompted a motion for sanctions asserting plaintiffs failed to properly preserve and produce documents and electronically stored information.

Monetary sanctions were awarded against thirteen plaintiffs in Pension Committee for failing to timely issue a written litigation hold. An adverse inference instruction was also issued against a smaller group of plaintiffs found to be grossly negligent for engaging in “careless and indifferent collection efforts after the duty to preserve arose.”

A plaintiff’s duty to preserve evidence is typically triggered before a lawsuit commences because the duty is triggered when a party reasonably anticipates litigation and the plaintiff controls the decision to file and the timing of the suit. Judge Sheindlin concluded that counsel’s initial instructions did not meet the standard for a litigation hold because they did not direct the plaintiffs’ employees “to preserve all relevant records – both paper and electronic” and because they did not “create a mechanism for collecting the preserved records so that they could be searched by someone other than the employee.”

The court was also critical of placing “total reliance on the employee to search and select what the employee believed to be responsive records without any supervision from counsel.” Ultimately, the court found the conduct of several plaintiffs to be grossly negligent because they failed to execute a comprehensive search of documents and/or failed to sufficiently supervise or monitor their employee’s document collection efforts.

Pension Committee is remarkable for Judge Scheindlin’s attempt to define degrees of unacceptable conduct in an ediscovery context. When the most severe sanctions for spoliation are sought, e.g. dismissal or the issuance of an adverse inference instruction, a court must consider whether the missing evidence was “relevant” and whether the party seeking the sanctions suffered any prejudice as a result of the loss. However, relevance and prejudice may be presumed when the spoliating party acted in bad faith or in a “grossly negligent” manner. Thus, whether a court labels a party’s alleged discovery failures as negligent or grossly negligent will impact the availability of terminating sanctions or the issuance of an adverse inference instruction as well as the burden of proof required to obtain those sanctions. Acknowledging that concepts of negligence, gross negligence and willfulness have no clear definition in the context of discovery misconduct, the approach Judge Scheindlin proposes to define these terms itself proves to be problematic.

Conflict with the Advisory Committee Notes to Rule 26(g).

After announcing her original opinion criticizing counsel’s failure to supervise the client’s collection efforts, Judge Scheindlin withdrew that decision and replaced it with an amended opinion in which she added “not every employee will require hands on supervision from an attorney. However, attorney oversight of the process, including the ability to review, sample and spot-check the collection efforts is important.” While softening the duty imposed on an attorney to monitor a client’s collection and production efforts, the decision nonetheless still appears to go well beyond the “reasonable inquiry” approach historically espoused in the Advisory Committee Notes to Rule 26(g) which provide: “The duty to make a ‘reasonable inquiry’ is satisfied if the investigation undertaken by the attorney and the conclusions drawn therefrom are reasonable under the circumstances.” The Notes further state: “In making the inquiry, the attorney may rely on the assertions by the client and on communications with other counsel in the case as long as that reliance is appropriate under the circumstances.” The Notes highlight that an attorney’s signature “certifies that the lawyer has made a reasonable effort to assure that the client has provided all the information and documents available to him that are responsive to the discovery demand.”

Generalizations about degrees of unacceptable ediscovery failures should be avoided.

Initially, Judge Scheindlin cites Prosser & Keeton’s venerable treatise on Torts in an attempt to delineate negligence from gross negligence and willful misconduct in an ediscovery context. However, that treatise undermines her approach because it explains: “Although the idea of ‘degrees of negligence’ has not been without its advocates, it has been condemned by most writers … as a distinction ‘vague and impracticable in [its] nature, so unfounded in principle,’ that it adds only difficulty and confusion to the already nebulous and uncertain standards which must be given to a jury.” Prosser & Keeton on Torts §34 at 210. That treatise further provides “[t]here is no generally accepted meaning” to the term gross negligence. Id. at 212.

Moreover, the Seventh Circuit in Archie v. City of Racine, 847 F.2d 1211, 1219 (7th Cir. 1988), concluded that a line could not be clearly drawn between negligent and grossly negligent conduct explaining:

Gross negligence blends into negligence; there is an indistinct and unusually invisible line between benefits exceeding the costs of precautions (negligence) and benefits substantially exceeding the costs (gross negligence). The malleable quality of these terms has produced scoffing among many, who see gross negligence as simply negligence “with the addition of a vituperative epithet.”

Thus, the applicable standards are not only vague and nebulous, but the distinction between negligence and gross negligence is also unworkable. Judge Scheindlin further acknowledges that the decision to award sanctions is “inherently subjective” and recognizes that discovery misconduct “cannot be measured with exactitude and might be called differently by a different judge.” She also notes: “Each case will turn on its own facts and the varieties of efforts and failures are infinite.” Because any sanctions inquiry by necessity requires a fact-driven approach, the search for consensus as to what type of conduct constitutes gross negligence as opposed to mere negligence, is like searching for the pot of gold at the end of the rainbow, enticing, but always out of reach.

In Judge Scheindlin’s view, once conduct is found unacceptable “the only question is how bad is the conduct.” While acknowledging that the terms negligence and gross negligence have no generally accepted meaning in a discovery context, Judge Scheindlin notes they “describe a continuum.” As an abstract principle she is right, but given the endless varieties of information systems and document retention practices, these concepts are context specific and generalizations should be avoided. Judge Scheindlin recognizes these points when she writes: “while it would be helpful to develop a list of relevant criteria a court should review in evaluating discovery conduct, these inquiries are inherently fact intensive and must be reviewed case by case.”

Nevertheless, she expresses the view that “[a]fter a discovery duty is well established, the failure to adhere to contemporary standards can be considered gross negligence.” She then states that under this contemporary standards approach, when a duty to preserve is triggered, the failure to: 1) issue a written litigation hold; 2) identify the key players and ensure their electronic and paper records are preserved; 3) cease the deletion of email or to preserve the records of former employees; and 4) preserve backup tapes when they are the sole source of relevant information or when they relate to key players if their relevant information is not obtainable from readily accessible sources, will support a finding of “gross negligence.”

In addition to the problems noted above, another difficulty with the contemporary standards approach to defining gross negligence in this context is that most ediscovery decisions are decided at the district court level. However, district court decisions are not considered precendential and do not clearly establish the law. See, e.g., Anderson v. Romero, 72 F.3d 518, 525 (7th Cir. 1995) (explaining district court decisions are “not authoritative as precedent, and therefore, do not establish the duties of nonparties”); Futuresource, LLC v. Reuters. Ltd., 312 F.3d 281, 283 (7th Cir. 2002) (observing “[t]he reasoning of district judges is of course entitled to respect, but the decisions of district judges cannot be controlling”); Colby v. J.C. Penny, 811 F.2d 1119, 1124 (7th Cir. 1987) (concluding district court judges “must not treat the decisions of other district judges … as controlling”).

Additionally, the proposed contemporary standards view of gross ediscovery negligence from Pension Committee fails to give any consideration to Rule 26(b)(2)(C)’s proportionality standard that applies to all discovery efforts under the federal rules. The Seventh Circuit’s Electronic Discovery Pilot Program has developed a series of principles which have been codified into a standing order. Principle 2.04, entitled Scope of Preservation, provides that parties “are responsible for taking reasonable and proportionate steps to preserve relevant and discoverable ESI.” One of our recent posts addresses Principle 2.04(d), which identifies categories of ESI that are not generally discoverable in most cases. Principle 2.04(e) requires that in the event of a dispute concerning the scope of a party’s preservation efforts, the parties must meet and confer to explain their reasons for believing that “additional efforts are not reasonable and proportionate pursuant to Rule 26 (b)(2)(C).

Take the two examples outlined below and ask for example, whether a failure to identify all key players amounts to gross negligence. The first example involves a family-owned business with a relatively small work force that has a practice of retaining all paper and electronic documents and emails. Contrast that small company that retains everything, with a Fortune 100 corporation that has a sophisticated IT department and follows a practice of automatically deleting all emails after 120 days unless they are moved to a folder by an employee. I can see how the failure to identify key employees in the later scenario could potentially result in the loss of information but not the former. Moreover, is Judge Scheindlin correct when she writes, “the failure to issue a written litigation hold constitutes gross negligence because the failure is likely to result in the destruction of relevant information,” in both of the examples described above? With the small company that has a practice of retaining everything, I think not. In the Fortune 100 scenario, a written litigation hold and even more may be advisable because the risk of loss is much greater. So, generalizations should be avoided even when from an esteemed Judge as Judge Scheindlin. Attempts to define ediscovery conduct that is negligent or grossly negligent simply should not be separated from the information system and data retention context in which that conduct occurs.

Obviously, attorneys should endeavor to issue written litigation hold directives in their cases. However, should such a failure occur, the totality of the circumstances should be examined before any conclusions are drawn or labels affixed to that failure.

Adverse inference instruction may result in a mini-trial about discovery failures.

Perhaps even more problematic for trial attorneys is the adverse inference instruction that will be given to the jury in Pension Committee as to those plaintiffs found to be grossly negligent. That adverse inference instruction allows the jury to decide if the missing evidence was “relevant” and would have been favorable to the defendants. In making those determinations, the jury is permitted to take into account the “egregiousness of the plaintiffs’ conduct in failing to preserve the evidence.” You can read that instruction here. That instruction will likely shift the jury’s focus from the merits of the plaintiffs’ claims to their efforts to preserve and produce relevant information.

While the court provided plaintiffs with the opportunity to rebut the adverse inference, wouldn’t a better approach allow the plaintiffs this opportunity at a pretrial hearing rather than at trial? Generally, evidence must be relevant to be admissible. Even relevant evidence may be excluded when the danger or prejudice or confusion outweighs its probative value. Typically, a judge makes these rulings, but that all changes with this instruction. The role of the judge is taken over by the jury which must determine whether the missing evidence is relevant. If evidence is not relevant, it should not be presented to the jury, missing or not. And, the test for relevancy in this context “means something more than sufficiently probative to satisfy Rule 401 of the Federal Rules of Evidence. Residential Funding Corp. v. De-George Fin. Corp., 306 F.3d 99, 108-09 (2d Cir. 2002). How is a jury supposed to make that determination? The proposed instruction provides no guidance. A mini-trial about the missing evidence and the parties attempts to preserve it will ensue, making a difficult case even more problematic to try.

In Pension Committee, the defendants were permitted to take discovery about the missing discovery and with the proposed instruction, now a trial about that missing discovery. How is that approach consistent with Rule 1 of the Federal Rules of Civil Procedure, which requires they be “construed and administered to secure the just, speedy and inexpensive determination of every civil action and proceeding”?

Practical ediscovery tip: In light of Judge Scheindlin’s view that the failure to identify key players and preserve their information constitutes “gross negligence,” be sure to cover this issue with opposing counsel at your initial Rule 26 conference. If opposing counsel agrees on those data custodians or key persons whose information should be preserved and produced, counsel will be hard pressed to later claim that additional persons should have been included.

After prevailing on a patent infringement claim, the defendant sought the recovery of its attorney’s fees and expenses. One of the items of expense claimed was $243,453.02 paid to an ediscovery vendor that collected, searched, identified and helped to produce electronic documents from the defendant’s network files and hard drives in response to the plaintiff’s discovery requests. The district court in CBT Flint Partners allowed the taxation of those costs in full against the plaintiff.

In several prior blog posts, we noted the wide divergence in the opinions addressing the taxation of ediscovery costs under 28 U.S.C. §1920. In some instances, the outcome turned on the particular subdivision of §1920 that the recovery was sought under, in others the prevailing party failed to demonstrate to the court’s satisfaction that the costs were “necessarily incurred” for use in the case, and in others, the prevailing party failed to adequately support or explain why the ediscovery costs were recoverable under any subdivision of §1920. We also highlighted a split in the circuits over the meaning of “exemplification” as the term is used in §1920(4). However, several of the decisions are difficult to reconcile and perhaps are best explained by how receptive a particular court is to the recovery of these types of costs in post-judgment proceedings. The Supreme Court, in Crawford Fitting Co. v. J. T. Gibbons, Inc., 42 U.S. 437, 441-42 (1987), explained that a district court may not award costs falling outside of §1920’s statutory categories and may decline to award costs even when they fall within those categories. Under that standard, a district court has ample discretion to deny the taxation of ediscovery costs on the losing party.

In CBT Flint Partners, the court noted that the parties agreed that their respective document productions would be made in an electronic format. Thus, it appears those costs were “necessarily incurred” for use in the case. However, the court did not address whether the challenged ediscovery vendor costs fit within any of §1920’s recoverable categories. Rather, the decision appears to be heavily influenced by policy considerations. The district court in CBT Flint Partners concluded “taxation of these costs will encourage litigants to exercise restraint in burdening the opposing party with the huge cost of unlimited demands for electronic discovery.”

The district court did note the division of opinion as to whether these types of costs are recoverable under §1920. It observed that the defendant “asserted – without contradiction – that production in paper form of the 1.4 million documents plus six versions of source code would have cost far more than the fees sought for the e-discovery consultant.” After carefully reviewing the invoices that were submitted to it, the district court ultimately ruled that the services provided were “highly technical in nature,” and “not the type of services that attorneys or paralegals are trained for or are capable of providing.” Thus, the court allowed the taxation of the ediscovery vendor’s costs in full.

Perhaps the lesson to be learned from CBT Flint Partners, is to be careful what you ask for in discovery. The cost of ediscovery in many instances can be staggering and the possible recovery of those costs by a prevailing party is a factor that cannot be ignored when developing and implementing your discovery and litigation strategies. While district court decisions are not precedential, the policy view expressed by the district court in CBT Flint Partners may resonate with other district court judges and will likely raise the price of poker in federal litigation.

The Report of the Judicial Conference Committee on Rules of Practice and Procedure (“Standing Committee Report”) which predated the enactment of the 2006 ediscovery amendments to the federal rules provided some insight. The Standing Committee Report did note that the features of an information system that make it burdensome or costly to access ESI can vary from system to system and will change over time. However, it provided several examples of “current technology” that do not generally fit under the rubric of reasonable accessibility. Those examples included “deleted information, information kept on some backup-tape systems for disaster recovery purposes, and legacy data remaining from systems no longer in use.” See THE NEW E-DISCOVERY RULES, Dahlstrom Legal Publishing, Inc. (2006) at p. 15. Unfortunately, that guidance was not carried over into the 2006 Advisory Committee Note to Rule 26(b)(2)(B).

The difficulty identifying and then proving that a particular source of information was inaccessible under the Rule has resulted in decisions such as Starbucks Corp. v. ADT Sec. Services, Inc., 2009 WL 4730798 *6 (W.D.Wash. April 30, 2009), where one court concluded:

The Court cannot relieve Defendant of its duty to produce those documents merely because Defendant has chosen a means to preserve the evidence which makes ultimate production of relevant documents expensive…. To permit a party to ‘reap the business benefits of such technology and simultaneously use technology as a shield in litigation would lead to incongruous and unfair results.

All is not lost, help has arrived. The task of identifying sources of ESI that are inaccessible has been streamlined by one of the principles promulgated in the Seventh Circuit’s Electronic Discovery Pilot Program. One of our prior blog posts highlighted the main features of the Seventh Circuit’s Pilot Program [Info about the program - PDF] which was developed in response to comments by the business community and practicing attorneys that the civil justice system’s pretrial discovery process is in need of reform. The purpose of the Seventh Circuit’s Pilot Program is to assist courts in the administration of Fed.R.Civ.P. 1 and secure “the just, speedy, and inexpensive determination” of every civil case.

A series of ediscovery principles were developed and codified into a standing order that is used as part of the Seventh Circuit’s Pilot Program. Principle 2.04(d) addresses the scope of preservation and identifies categories of ESI that are generally not discoverable in most cases. Those categories of ESI are:

• “Deleted,” “slack,” “fragmented,” or “unallocated” data on hard drives;
• Random access memory (RAM) or other ephemeral data;
• On-line access data such as temporary internet files, history, cache, cookies, etc.;
• Data in metadata fields that are frequently updated automatically, such as last-opened dates; and
• Backup data that is substantially duplicative of data that is more accessible elsewhere;
• Other forms of ESI whose preservation requires extraordinary affirmative measures that are not utilized in the ordinary course of business.

Principle 2.04(d) further provides that if any party intends to request the “preservation or production of these categories” of ESI, then that should be discussed at the party’s initial meet and confer conference or as soon thereafter as practicable. Obviously, Principle 2.04(D) streamlines the process of identifying inaccessible sources of information. While it does not categorically prohibit discovery of ESI from those sources, it suggests that discovery from them will not be permitted unless a good reason or compelling need is shown.

While this principle will primarily benefit those attorneys practicing in district courts within the Seventh Circuit’s boundaries, attorneys practicing outside of the Seventh Circuit’s “friendly confines” should be aware of principle and consider raising it as persuasive authority when resisting attempts to obtain discovery from those sources of ESI identified in Principle 2.04(d).

Please remember however, that identifying a source of ESI as inaccessible under Rule 26(b)(2)(B) does not obviate the client’s need to preserve that information. The Advisory Committee Note to Rule 26(b)(2)(B) highlights that conundrum by explaining: “whether a responding party is required to preserve unsearched sources of potentially responsive information that it believes are not reasonably accessible depends on the circumstances of each case.” Thus, the need to continue to preserve ESI from inaccessible sources should be another topic of potential discussion with opposing counsel at

Photo courtesy Flickr user eurleif under this Creative Commons license.

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.

Nonwaiver orders under Fed. R. Evid. 502(d) should not be limited to the “inadvertent” production of privileged information or attorney work product.

Before drafting your next protective or nonwaiver order, take another look at Subdivision (d) of Rule 502. It provides:

A Federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court—in which event the disclosure is also not a waiver in any other Federal or State proceeding.

Note that unlike Subdivision (b) of the Rule, which is specifically restricted to the “inadvertent” disclosure of privileged information and requires a showing of reasonable care, Rule 502(d) is not so limited. The word “inadvertent” appears nowhere in the text of Rule 502(d). Also, Rule 502(d), unlike Rule 502(b), does not require that reasonable care be exercised when a production occurs pursuant to this part of the Rule.

The primary rule of statutory construction is to apply the plain language of a statute as written. See, e.g., United States v. Ron Pair Entrers. Inc., 489 U.S. 235, 242 (1989)(explaining the “plain meaning of legislation should [generally] be conclusive” on the issue of legislative intent). Rule 502(d) simply does not require that a court order mandate that reasonable care be taken before it can be entered. Another recognized rule of statutory construction is that the inclusion of a requirement in one section of a statute but not in another section of the same statute signals a different result was intended. Duncan v. Walker, 533 U.S. 167, 173 (2001) (observing “where Congress includes particular language in one section of a statue but omits it in another section of the same Act, it is generally presumed that Congress. acts intentionally and purposely in the disparate inclusion or exclusion”) (internal quotation omitted).

Had the drafters of Subdivision (d) intended to limit Rule 502(d) nonwaiver orders to only the inadvertent production of privileged material or to only those instances where reasonable care was taken, they could have easily mimicked the requirements found in Subdivision (b) of the Rule. Because they did not do so, Rule 502(d) orders are not limited by Rule 502(b)’s requirements. This conclusion is borne out by the Explanatory Note to Subdivision (d) of Rule 502 which explains “the court order may provide for return of documents without waiver irrespective of the care taken by the disclosing party” (emphasis added).

So, take advantage of Rule 502(d). When drafting a nonwaiver order, make it applicable to any production of any discovery material and do not limit it to merely an inadvertent production like the parties in Callan.

It is not uncommon, when drafting nonwaiver orders, to seek the approval of your opponent to the proposed language of the order. Some may even suggest such collaboration is required in light of various “cooperation proclamations.” However, the Explanatory Note to Subdivision (d) provides your opponent’s agreement is not a precondition to the entry of a Rule 502 nonwaiver order. The Note unequivocally states:

Under the rule, a confidentiality order is enforceable whether or not it memorializes the an agreement between the parties to the litigation. Party agreement should not be a condition of enforceability of a federal court’s order.

In theory, given a district court’s inherent authority to control its docket and the scope of discovery in matters pending before it, a court should be able to enter a Rule 502(d) nonwaiver order sua sponte without even requiring a motion from the parties. Nevertheless, it would be a wise to endeavor to gain your opponent’s agreement to the entry of such an order. Should your opponent object to the breadth of your proposed order, explain that it will ultimately benefit both parties and point to the quoted provisions from Rule 502(d)’s Explanatory Note.

Protective/nonwaiver orders are controlling.

The court in Callan made an important point that also merits your attention. The court noted that the defendants, as the moving party, bore the burden of proving they inadvertently disclosed privileged documents to the plaintiff within the meaning of the court’s protective order. The court observed that because the protective order did not address the parties’ burden of proof regarding the alleged inadvertent disclosure, it adopted the “standard practice” which is to place the burden on the party claiming inadvertent disclosure.

Implicit in that ruling is that if the protective order had not been limited to the inadvertent production of discovery materials, the party that bore the burden of proof would not be an issue. More importantly, Callan explains that the terms of the protective order are controlling as to which party bears the burden of proof and suggests that the parties are free to allocate that burden as they see fit. Accordingly, should a court in exercising its discretion limit the entry of a Rule 502(d) nonwaiver order to only the inadvertent production of privileged information, then you should endeavor to address the burden of proof issue in the order. Nothing prevents the parties from shifting the burden to the receiving party to demonstrate that reasonable precautions were not taken.

Accordingly, broadly draft your Rule 502(d) nonwaiver orders so that you can avoid the type of outcome that occurred in Callan and hopefully next year you can avoid Santa delivering coal to your stocking.

Rule 45 contains several provisions that can protect third parties from undue burden or expense when responding to subpoenas for electronically stored information (“ESI”).  Fed. R. Civ. P. 45(c)(1) requires a party issuing a subpoena “take reasonable steps to avoid imposing undue burden or expense” on a non-party subject to that subpoena. Rule 45(c)(2)(B) authorizes the recipient of a subpoena to timely object and mandates that any subsequent order must protect the party receiving the subpoena “from significant expense resulting from compliance.”  Fed. R. Civ. P. 45(c)(2)(B)(ii). The Rule contains a third provision, subdivision (d)(1)(D), which provides that the recipient of a subpoena need not produce ESI from sources that are “inaccessible” because of undue burden or cost.

Despite these various protections that are woven into the fabric of Rule 45, the court in North American Rescue rejected a third-party’s request for reimbursement of approximately $24,930 in charges relating to the conversion of its native files to a reviewable format in response to a subpoena for documents. Why? Because the recipient of the subpoena did not follow Rule 45’s procedures. After objecting to the cost and burden of responding to that subpoena, it nonetheless produced the ESI without conditioning its compliance on the payment of its production costs.

The court in North American Rescue, noted that strict compliance with Rule 45’s procedures may be excused where the parties issuing and receiving the subpoena have reached an agreement concerning reimbursement of the costs of compliance. Because the party receiving the subpoena in North American Rescue failed to show the existence of such an agreement, the court concluded that by failing to wait for a court order before producing its ESI, the subpoena recipient forfeited its right to seek reimbursement under Rule 45 of the costs it incurred in complying with that subpoena.

The response of the subpoena recipient in North American Rescue should be contrasted against the approach taken in Guy Chemical Co., Inc. v. Romaco AG, 243 F.R.D. 310 (N.D.Ind. 2007). There, the court found compliance with a subpoena imposed an undue burden upon the nonparty and conditioned the production of any records pursuant to that subpoena upon reimbursement of the nonparty’s costs by the party issuing the subpoena. Simply put, the failure to follow Rule 45’s procedures can result in a waiver of its protection.

Several of Rule 45’s cost-protection provisions predate the 2006 ediscovery amendments to the Rule, and courts have not comprehensively addressed the interplay between the Rule’s pre and post-amendment cost provisions. The Advisory Committee Notes to Rule 45 broadly outline how to apply the Rule’s various cost protections, and the remainder of the post will provide a framework for their application.

Reconciling Rule 45’s cost-saving provisions

Rule 45(c)(1) obligates the party issuing a subpoena to avoid imposing undue burden or expense upon its recipient. Typically, when determining if a subpoena is unduly burdensome under subdivision (c)(1), a court will review various factors including “relevance, the need of the parties for the documents, the breadth of the document request, the time period covered by it, the particularity with which the documents are requested and the burden imposed. Whitlow v. Martin, 2008 WL 2414830 at *3 (C.D.Ill. 2008). Many of those factors can be found in Rule 26(b)(2)(C)(iii)’s proportionality standard and the 2006 Advisory Committee Notes to Rule 26. Indeed, the Seventh Circuit in Northwestern Memorial Hosp. v. Ashcroft, 362 F.3d 923, 927-28 (7th Cir. 2004), endorsed the notion that a subpoena may be quashed where the burden of compliance would exceed the benefit obtained by production of the material sought in the subpoena, which inherently requires a balancing analysis.

Rule 45(c)(2)(B) requires a written objection to a subpoena be served by the time for compliance specified in the subpoena or 14 days after its service, whichever is earlier. The filing of a timely objection to a subpoena forces the subpoenaing party to seek an order compelling production. The party that issued the subpoena seeking the documents bears the burden of persuasion on the motion to compel. E.g., Whitlow, 2008 WL 2414830 at *4.

The term “undue burden or cost” is also found in subdivision (d)(1)(D) of Rule 45 relating to inaccessible ESI. However, unlike subdivisions (c)(1) and (c)(2)(B), Rule 45(d)(1)(d) requires the recipient of a subpoena to initially demonstrate that compliance would be unduly burdensome or costly when objecting to the production of ESI from an inaccessible source. Several district courts have recognized, however, that “[n]on-party status is a significant factor … in determining whether the burden imposed by a subpoena is undue.” Guy Chemical, 243 F.R.D. at 313, citing United States v. Amerigroup Ill., Inc., 2005 WL 3111972 at *4 (N.D.Ill. 2005).

The threshold for establishing undue burden under subdivision (d)(1)(D) does not appear difficult to meet. In Guy Chemical, the cost to search and produce the subpoenaed ESI was approximately $7,000, which led the court to conclude the information was “not reasonably accessible absent undue burden.” 243 F.R.D. at 312. The court in Guy Chemical also concluded that good cause was shown for the materials because there was no other source from which that discovery could be obtained. 243 F.R.D. at 313.

Rule 45 provides that if a showing of good cause is made, a court may order a nonparty to produce its ESI from an inaccessible source after consideration of the “limitations” imposed by Rule 26(b)(2)(C)’s proportionality standard. This is where Rule 45(c)(2)(B)(ii)’s protection against “significant expense” comes back into play when ESI is subpoenaed. The 2006 Advisory Committee Note to Rule 45 explains that if good cause is found, an order commanding production of ESI from an inaccessible source can issue “on terms that protect a nonparty against significant expense.” Circling back to Guy Chemical, the court there held that if the party issuing the subpoena had been able to demonstrate the cost of compliance was de minimis, then the recipient of the subpoena would have to bear its own costs of complying with the subpoena. However, because the issuing party failed to make such a showing, it had to pay for the discovery it sought from the nonparty. 243 F.R.D. at 313.

Given the cost and burdens of ediscovery, timely objections to subpoenas seeking ESI should be asserted whenever appropriate

While subdivision (c)(2)(B) predated the 2006 amendments to Rule 45, given the cost and burden of ediscovery, its mandatory protection against the imposition of “significant expense” has taken on added importance in today’s digital era. All grounds supporting an objection to a subpoena must be asserted or they may be considered waived. Additionally, failing to timely file a written objection can result in a finding of waiver. Thus, if ESI is sought via a subpoena from an inaccessible source, or where a subpoena is overbroad and unduly burdensome, the subpoena recipient should timely object. But remember, “no good deed goes unpunished” and don’t forget the holding from North American Rescue. Do not produce any ESI before a court order is entered or the party issuing the subpoena agrees in writing to the payment of your compliance costs.

Finally, the parties in North America Rescue disputed whether a letter sent by the recipient of the subpoena constituted a valid objection under Rule 45(c)(2)(B). The court did not reach the issue because the recipient of the subpoena did not wait for a court order before beginning the production process. However, Tuite v. Henry, 98 F.3d 1411, 1416 (D.D.C. 1996), held that a nonparty properly objected to a subpoena by timely sending a letter of objection to the party that had issued the subpoena.

So there you have our framework for applying Rule 45’s cost-protection provisions, which can potentially result in significant savings to your client when they are timely raised and properly applied.