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

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.

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.

Read the rest of this entry »

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

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

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

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

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

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

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

Electronic discovery costs recoverable by a prevailing party under 28 U.S.C. §1920

Kellogg Brown & Root, Intern., Inc. v. Altanmia Commercial Mktg. Co. W.L.L., 2009 WL 1457632 (S.D. Tex. May 26, 2009)

In one of our prior posts, we discussed the types of ediscovery costs that a prevailing party can recover under Fed. R. Civ. P. 54. The Kellogg Brown & Root (“KBR”) decision addresses that issue. Much of the ediscovery costs which the prevailing party in KBR sought to recover were incurred either before the opposing party issued its discovery requests or after the court entered summary judgment for the prevailing party. Thus, Kellogg Brown, as the prevailing party, could not demonstrate that those ediscovery costs were “necessarily obtained for use in the case.”

The KBR decision was written by the highly respected Judge Lee Rosenthal, who chairs the Judicial Conference Committee on Rules of Practice and Procedure. In KBR, Judge Rosenthal comprehensively reviews the relevant decisions which have addressed the recovery of ediscovery costs under 28 U.S.C. §1920, and identifies a “circuit split” on one point directly relevant to the types of costs that may be recovered under §1920(4). Accordingly, KBR is a decision well worth your time to review when addressing the issue of recoverable ediscovery costs.

Read the rest of this entry »

Failure to timely object to production format constitutes a waiver

Ford Motor Co. v. Edgewood Properties, Inc., 2009 WL 1416223 (D.N.J. May 19, 2009)

This lawsuit arose out of the distribution of contaminated concrete following the demolition of a Ford assembly plant in Edison, New Jersey. Edgewood entered into a contract with Ford to haul 50,000 cubic yards of concrete from that site which turned out to be contaminated. Ford then brought a claim against Edgewood under CERCLA and the New Jersey Spill Act for contribution and indemnification of all costs as provided under the contract.

In discovery, Edgewood demanded that Ford produce documents in their native format with accompanying metadata. Ford objected and affirmatively indicated that it would produce documents in a tagged image file format (“TIFF”) with accompanying searchable text. Apparently, the parties never agreed on a production format, and Edgewood waited approximately eight months before objecting to Ford’s production. It then waited two additional months to bring their objection to the court’s attention. This delay led the court to conclude that Edgewood had waived any objection to Ford’s production format.

Because the production of electronically stored information (ESI) can occur in various formats, Rule 34 sets up a process through which parties are supposed to resolve disputes over production. Rule 34 requires the parties to dance with one another – the requesting party specifies the format to produce the ESI, the producing party can agree or object and must then indicate the format in which it will produce the ESI, and where the parties cannot agree on a production format they are to let the court decide. We refer to it as Rule 34’s “cha-cha.” Rule 34’s dance is supposed to occur before any production occurs, and Edgewood Properties demonstrates that any misstep with Rule 34’s requirements can result in you stepping on your partner’s toes. The rule is not difficult to follow, but like high school freshmen, many parties appear reluctant to get involved in the dance.

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 »

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 »

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 »