In Fulton v. Livingston Financial LLC, 2016 WL 3976558 (W.D. Wash. July 25, 2016), U.S. District Judge James L. Robart sanctioned a defense lawyer who “inexcusabl[y]” relied on outdated case law and pre-2015 amendments to Federal Rule of Civil Procedure 26(b) in motion practice before the court.

On April 13, 2015, Plaintiff (Richard Fulton) filed suit against Defendants for allegedly violating the Fair Debt Collection Practice Act (“FDCPA”) 15 U.S.C. § 1692, et seq., and several Washington statutes.

On March 17, 2016 (after the Federal Rules were amended), Defendants moved to either compel discovery or exclude medical evidence presented by Mr. Fulton. Specifically, Defendants argued that Fulton “stated on numerous times since the beginning of this case that he was not seeking recovery for any medical condition, so his medical records and treatment were not in issue.”* Judge Robart found defense counsel’s inference “so unreasonable as to constitute a misrepresentation to the court,” as the plaintiff did seek recovery for emotional distress. Id. at *6, *8. More important to this Blog post, however, was Judge Robart’s finding that defendant’s counsel had “misstate[d] the law” regarding discovery by citing cases analyzing pre-amendment Rule 26. Id. at *7. And further finding, defense counsel proceeded to misstate the law in their reply brief continuing to rely upon case law that existed before the highly publicized amendments that took effect December 1, 2015. Judge Robart declared that such citations to outdated case law were “inexcusable” and “inexplicable.” Id. at *7, *8.

Judge Robart then proceeded to sanction defense counsel in an oral ruling. In addition to awarding Fulton his fees and costs incurred in litigating the motion, Judge Robart ordered defense counsel to provide a copy of his offending motion to the supervising members of his firm, with the explanation that the court had entered sanctions against him “for quoting provisions of the civil rules that are badly out of date, and also making direct misrepresentations to the court.” Id. at *8. Judge Robart also threatened an additional sanction of requiring defense counsel to report this sanction on future pro hac vice applications. Id.

Before determining whether to require counsel to report the sanction on future pro hac applications, defense counsel filed a supplemental memorandum in response to the court’s oral ruling, stating that he had acted in good faith and noting that his conduct did not affect the administration of justice in the case. For these reasons, defense counsel requested that the court exercise its discretion in not taking disciplinary action or, in the alternative, limiting the disciplinary action to an informal, private admonition that would not need to be reported on future pro hac vice applications. Id. As the defense counsel’s memorandum was not denominated a motion for reconsideration, Judge Robart declined to reconsider his oral ruling and instead considered only whether to impose the additional pro hac vice reporting sanction. Id. at *8.

Judge Robart rejected as “post hoc speculation” defense counsel’s claim that because pre-amendment Rule 26 could have applied “insofar as just and practicable,” his citation to pre-amendment cases was in good faith. Id. The court held that by relying on pre-amendment cases in an argument on discoverability and making “no reference to the proportionality requirement,” counsel “misrepresented the scope of discoverable information in a motion to compel or exclude evidence” and then failed to “own[] up to his misrepresentation,” which was “tantamount to bad faith.” Id.

In conclusion, Judge Robart noted that despite [defense counsel’s] flawed efforts to excuse his comportment, the previously issued sanctions (i.e., providing a copy of offending motion to supervising members of firm and awarding plaintiff his fees and costs in litigating this motion) “nearly suffice” to deter counsel from misrepresenting facts or the law in the future and thus decided that counsel did not need to report the sanctions on future pro hac vice applications. Id. Judge Robart did add, however, an additional sanction, requiring counsel to disclose the sanctions imposed if, at any point in the next five years, a federal court threatened or imposed sanctions on him. Id. In Judge Robart’s view, “[t]his requirement will alert courts presiding over future cases that [defense counsel’s] misrepresentations in this case constitute strikes one and two against him. Future courts will then be sufficiently informed to properly sanction any further bad faith by [defense counsel].” Id.

This case serves as an important reminder of our obligations to remain current with and conversant in an organic and evolving body of rules and decisions.

*This conclusion was based on Fulton’s statements that “he did not seek formal medical treatment for stress, worry and inconvenience brought on by Defendants’ conduct.”

 

The Federal Rules are undergoing more changes!  And, effective December 1, 2017, there will be two new Federal Rules of Evidence (Rules 902[13], [14]) that will directly impact e-discovery in the federal courts.  These Rule changes are critical because, as aptly put by recently retired Magistrate Judge John Facciola, “[t]he Federal Rules of Evidence were…established to create uniformity in evidence law by providing guidance for every evidentiary problem that could be reasonably expected to occur at trial…But, as our tangible world has grown increasingly virtual, so too has the evidence,…[which] the [existing federal] rules are ill-designed to accommodate.”  Thus, the new rules deal directly with e-discovery and forensic collection processes and the authentication of same in federal litigation. The proposed Rules are designed to bridge this gap and demonstrate an important step toward updating the FRE to be more in sync with the increasingly digital world in which we live.

Specifically, Rule 902(13) provides for a certification process for ESI, produced by a computer system or computer process (analogous to Rule 902[11]’s certification of business records).

And, FRE 902(14) provides that electronic data recovered “by a process of digital identification” is to be self-authenticating, thereby not routinely necessitating the trial testimony of a forensic or technical expert where best practices are employed, as certified through a written affidavit by a “qualified person.”   Here, the authentication of the file would be established using the file’s hash value (i.e., the digital fingerprint).

Familiarity with the proposed changes are important for a number of reasons.

First, although the Rules aren’t expected to take effect for almost a year, ESI collected in a Rule 902(14) compliant manner any time prior to the Rule’s effective date (i.e., today) can be subject to the new Rule’s provisions once the Rule goes into effect. This is important, because digital evidence is routinely collected well in advance of trial.  So, practitioners need to understand and account for Rule 902(14) immediately given that electronic evidence that is collected today may not be used at trial until sometime after December 1, 2017.

Second, the expectation is that the new Rules will provide a streamlined and efficient process to establish a foundation for ESI collected in a Rule 902(14) compliant manner. This will increase predictability by eliminating surprise challenges, and will encourage the use of  ESI practitioners by allowing written certifications in the place of expensive and time-intensive in-person testimony.  Indeed, the ability to eliminate foundational testimony will undeniably result in significant cost savings to one’s client and help promote judicial efficiency.  (However, this necessarily presupposes that practitioners in the federal courts will understand what a 902(14) compliant collection means.)

For anyone who has interest in reading a very educating and comprehensive Law Review article about the proposed Rule 902(13) and (14), check out, “Law of the Foal:  Careful Steps Towards Digital Competence in Proposed Rules 902(13) and 902 (14),” 1 GEO. L. TECH. REV. 6 (2016), written by Hon. John M. Facciola & Lindsey Barrett.

Armstrong Pump, Inc. v. Hartman, No. 10-CV-446S, 2016 WL 7208753 (W.D.N.Y. Dec. 13, 2016)

In this case, pending before the Court was a motion by Armstrong Pump Inc. (“Armstrong”) to compel formal production of certain documents that defendant Optimum Energy LLC (“Optimum”) considered the functional equivalent of its proprietary source code.  This “formal production” Armstrong sought to compel consisted of 46 documents (305 pages) that Armstrong previously viewed during a “document and source code review” conducted pursuant to a strict protocol.  During that review Armstrong was permitted to attend with two outside counsel and two experts.  Moreover, Armstrong was able to print – also under strict protocol – certain of those documents.

In support of its motion to compel, Armstrong now argues that the reviewed documents did not contain “actual programming” and thus were able to be produced under the parties’ protective order for discovery without any additional protections designed to protect source code. Optimum argued in response that the documents were “functionally equivalent to source code” and should not be subject to production.  Specifically, Optimum contended that the documents contained enough technical information including (in detail) the functions, logic and algorithms implemented in Optimum’s products to “allow a software engineer to build its proprietary source code based on that information.”

Ultimately, the Court reasoned that discovery had “reached the point of diminishing returns” and declined to compel production, with limited exceptions.

In reaching this conclusion, the court first addressed the effects of the 2015 amendments to Federal Rule 26, reasoning that “proportionality has assumed greater importance in discovery disputes” and that the amended rule is intended to encourage more aggressive efforts from the judiciary to discourage discovery overuse. The court continued:

Discouraging discovery overuse does not end with the early stages of a case, however. Implicit in both the language and the spirit of the 2015 Amendments is the obligation, at any stage of a case, to prevent parties from expending increasing time and energy pursuing diminishing returns. Calling a halt to the pursuit of diminishing returns often will overlap with an assessment of duplicate or cumulative discovery. Sometimes the additional discovery sought technically would provide nominally probative information not yet in the parties’ hands. Either way, when adding a few more pages of documents requires five or six inches of motion papers, and when those few more pages would be added to over one million pages of total discovery, numerous pages of expert reports, and transcripts from depositions of all of the relevant players, there exists a point beyond which courts have to tell the parties that if they cannot yet prove their claims then they probably never will. See Alaska Elec. Pension Fund v. Bank of Am. Corp., No. 14-CV-7126 (JMF), 2016 WL 6779901, at *3 (S.D.N.Y. Nov. 16, 2016) (“Rule 26(b)(1)’s proportionality requirement means [that a document’s] ‘marginal utility’ must also be considered.”) (citations omitted); Updike v. Clackamas County, No. 3:15-CV-00723-SI, 2016 WL 111424, at *1 (D. Or. Jan. 11, 2016) (“There is a tension, however, among the objectives of Rule 1. As more discovery is obtained, more is learned. But at some point, discovery yields only diminishing returns and increasing expenses. In addition, as more discovery is taken, the greater the delay in resolving the dispute. Finding a just and appropriate balance is the goal, and it is one of the key responsibilities of the court in managing a case before trial to assist the parties in achieving that balance.”).

The court then turned to the discovery specifics in the underlying case and concluded that discovery had “reached the point of diminishing returns.” Indeed, discovery had been ongoing for six years and the parties exchanged more than 1,600,000 pages of documents.  The Court listed a litany of critical case development failures along the 6 year discovery path and concluded it hard to believe that 150 pages of already reviewed but not printed documents would definitively prove what six years of discovery could not.

This case serves as a further reminder that discovery is not limitless.  Indeed, there is little tolerance for cumulative discovery and proportionality is the key inquiry under new federal landscape.

It is the beginning of a new year and I thought it the ideal time to list out those steps that are absolutely critical when an attorney is confronting his/her obligation to produce e-discovery in connection with a litigation.  Bear in mind, the below list is not exhaustive and each step is replete with technical and tactical sub-steps and decisions.  However, the nine steps below are a useful road map to get started.

  • Assess whether your case involves e-discovery. In today’s technology-laden world where emails are ubiquitous and many of us interface daily with the internet of things, chances are your case will involve e-discovery.
  • Implement (or cause to be implemented) a comprehensive and appropriate ESI preservation protocol.  Remember, it is wise to cast a large net when it comes to preserving data.  That strategy likely changes when it comes time to collect/process data.  Make sure to familiarize yourself with the client’s deletion policies, backup tapes, and shredding procedures.  See next step.  The scope of your hold notice is necessarily informed by your client’s data including its location.
  • Understand the client’s ESI systems and storage.  Remember, data maps can be helpful but are often out of date.
  • Understand (and educate your client about) the various options available for collecting ESI (i.e., self-collection vs retaining a vendor; targeted collection vs robust collection).
  • Identify the various custodians (and meet with/conduct collection interviews of live custodians) who may have potentially relevant ESI and understand the various media on which that ESI resides.
  • Meet and confer with opposing counsel to develop a mutually agreeable discovery plan that addresses common ESI issues including production costs and deduplication methods.
  • Collect ESI (ideally using a vendor especially when the custodians include complex or dynamic databases or servers) in a manner that is defensible and preserves the integrity of the data (for example, do not forensically image the hard drive of a Mac using a tool designed for Windows or run the risk of overwriting the hard drive’s boot sector).
  • Explore ways to minimize the review costs associated with reviewing for production the collected documents.
  • Finally, produce responsive non-privileged ESI in a recognized and appropriate manner.

As discussed in past blog posts, it is critically important for counsel to be involved in each step of the process as the recent case law makes plain that Courts expect counsel to be actively involved in collection/review and production.  Indeed, we have seen a spate of case law from 2016 where the Court imputes a client’s failures on counsel and sanctions both!  Finally, if you feel incapable of handling any of the above steps, get help!  Various ethics opinions (not yet adopted in New York) suggest an attorneys’ duty of competence owed to one’s client includes being competent in matters of ESI.

When collecting electronically stored information (“ESI”) from multiple custodians (i.e., various individuals/ different sources), there will necessarily be duplicative documents collected in the process.  In company-wide e-mail chains, for example, a message is sent to multiple recipients and stored within each recipient’s mailbox.  Consider the following: I send an email to two colleagues; a copy of the very same email now exists in each colleague’s mailbox.  Depending on the company’s data retention policies, copies of that same e-mail file may also reside on the employee’s (or employees’) hard drive(s), the company’s file server, and/or the company’s backup system.

For the attorney tasked with identifying, collecting and reviewing ESI in response to an actual or threatened litigation, an exhaustive review of a “document set” that is replete with duplicates threatens the cost effectiveness and efficiency of the project. These efficiency concerns intensify during document review, where duplicate documents increase the overall review time.  And, duplicates pose the added risk of the review team applying inconsistent privilege and responsiveness decisions on identical documents.  As a result, it is a wise decision to de-duplicate one’s collection of ESI at the processing stage.

And so, practitioners should consult with their vendors and educate themselves about the various de-duplication technologies available.  When used effectively, de-duplication reduces the number of documents to be reviewed by, on average, 30 or 40 percent.

To determine whether two files are identical, each file’s binary stream is hashed with an algorithm to get a digest value.  The most common algorithms used for this purpose are MD5, SHA-1 and SHA-256. The digest value is then considered as the file’s fingerprint.   The resultant fingerprints are measured against one another to determine which documents are exact duplicates.

What are my de-duplication options and the effect of each?

  • No de-duplication: All documents, irrespective of duplicates, are provided for attorney review.  This will result in producing the largest number of documents for review. This method is strongly discouraged for cases involving voluminous amounts of data.  Choosing not to de-duplicate also increases the likelihood that inconsistent coding among identical documents.
  • Global or horizontal de-duplication: As each file is uploaded, it is compared to the entire data set for the project. Typically, you rank the custodians (i.e., Senior VP, VP, Junior Analysts, Admin).  Then, only the first instance of each unique document is provided for review and categorization, resulting in the fewest number of documents for review.  For example, if both the Senior VP and the Junior Analyst have the same document, the iteration of the document that resides in the SVP’s files will be the unique document reviewed.
  • Per custodian or vertical de-duplication: Each file is uploaded and compared to a limited set of documents from the same document custodian, time period, or other data slice segment of documents. Only the first instance of each unique document per custodian or data slice will be provided for review. However, the same document may exist in other custodians or data slices and may then be provided for independent review. This type of de-duplication is particularly useful when processing multiple sources for the same custodians over time.

The deduplication options above are applied to documents as they are processed. Additionally, as documents are reviewed, they can be identified for relative similarity, called “near dupes,” which ascertains similar documents that differ by simple formatting, document type or other semantic differences. These documents are often identified and grouped by one document—the “core” of the group. All related near-duplicate documents are compared to this core document. Near duplicate identification can help the reviewer better understand the relationship between the documents, allowing for group coding/decisions based upon observed similarities.

Regardless of the method chosen, de-duplication can result in tremendous savings when properly leveraged to meet the needs of a project. However, it can also be wrought with complexity and pitfalls if improperly utilized.

In Arrowhead Capital Fin. Ltd. v. Seven Arts Entertainment, Inc. 2016 U.S. Dist. LEXIS 126545 (S.D.N.Y. Sept. 16, 2016), District Judge Katherine Polk Failla imposed significant sanctions upon both the Chief Executive Officer (“CEO”) and the lawyer for defendant Seven Arts Entertainment Inc. (“SAE”).

Background

Arrowhead Capital Finance, Ltd. (“Arrowhead”) sued SAE in 2014 seeking to enforce a judgment it had little ability to enforce because all of the assets held by the debtor had been sold to SAE.  SAE filed a motion to dismiss, arguing the Court lacked personal jurisdiction.  The Court denied the motion pending discovery.

In a letter dated September 21, 2015, Plaintiff claimed SAE and its counsel had engaged in various misconduct during discovery.  The violations alleged to have been undertaken to slow down discovery included:

  • SAE inflated their document productions with nonresponsive documents;
  • SAE refused to produce critical responsive documents;
  • SAE’s discovery responses were incomplete and replete with improper objections; and
  • SAE refused to produce key witnesses for deposition.

The Court held a conference to address Arrowhead’s complaints.  During that conference, SAE’s counsel acknowledged he had not reviewed the discovery responses interposed by his client and merely forwarded to his attorney the materials he received from SAE’s CEO.

As a result of this admission, the Court stated it had no confidence SAE would meet its discovery obligations and ordered SAE’s CEO to personally appear to testify concerning the alleged misconduct.  The Court also ordered SAE to produce the responsive documents Arrowhead requested but never received.

Notwithstanding the Court’s various orders, SAE refused to produce witnesses for deposition or produce the required documents.

Because the Court deemed SAE’s CEO to be directing counsel not to comply with the Court’s orders, Arrowhead moved for sanctions.  In response, the CEO testified his offices were “paperless” and the third-party server upon which documents were maintained was destroyed as a result of SAE’s failure to pay its bills (which he claimed was unintentional).  The CEO also cast blame on various staff people to whom he had purportedly delegated the task of complying with the Court’s orders.

The Court concluded SAE was willfully making misrepresentations to the Court and showed “flagrant disregard for” Court orders for the purpose of withholding information from Arrowhead.  As a result, the Court held SAE forfeited its jurisdictional arguments due to non-compliance with Court orders.  The Court further determined a spoliation instruction would be provided in connection with any claims ultimately submitted to the jury.  Defendants’ CEO also was ordered to pay Arrowhead’s costs in association with bringing its various motions and was ordered to retain separate legal counsel to conduct a thorough review of SAE’s files to assess whether additional responsive information remained to be produced.  Defendants’ counsel, who was deemed complicit in the violations,  was ordered to pay a portion of Plaintiff’s costs.

Conclusion

This decision reinforces that counsel may not turn a blind eye to a client’s behavior nor may counsel simply follow the instructions of clients.  Rather, counsel has a duty to ensure that good faith efforts are taken to comply with discovery obligations.  This case also reminds us that the amended Rule 37(e) does not lessen punishments for willful or intentional e-discovery misconduct.  Rather, bad faith behavior will be met with sanctions, not only for the party, but for counsel as well.

A key word search is a basic search technique that involves searching for one or more words within or across a collection of documents/files. Typically, the purpose of a key word search in a litigation is to limit the universe of potentially responsive data that one must process and review in order to prosecute/defend a lawsuit.  (Note, this blog relates to processing and reviewing data.  It presupposes counsel has preserved data in a robust and comprehensive manner).   Limiting the volume of data you process and review can result in tremendous cost savings to one’s client.  However, it must be done well so as to avoid pitfalls and resulting costs.   Below are some tips that can be helpful when thinking about key word search terms.   For example, one wants to give thought to their key words so as to avoid – to the greatest extent possible – “false hits” (a search term “hit” within a document, but not for the meaning that was intended).  For example, the term “comp*” would return “compensation” and “comp” (the intended terms), but would also return “computer” (not intended). Computer would be the “false hit.”

1. Terms of four or fewer characters often result in false hits.  Consider, for example, if one were to use “IT” as a search term hoping for hits relevant to information technology.  However, “IT” appears in so many other words the results of such a search would include many false hits.  This in turn, would increase the cost/time to review the hits to assess same for responsiveness.  

2. Searching for numbers can return unwanted results. This can be relevant if a patent is in issue or zip codes are being searched, etc.  If the numerical term is not quoted properly, the result may be skewed. Also, like (1) supra, searching for 1,000 will also return 1,000,000.

3. Avoid using wildcards. If you want to find “contract” or “contracts” then don’t use “contract*” as a search term. Simply provide both variations of the word. If you must use a wildcard, refrain from leading with a wildcard character. You may get the result you are looking for, but you will also bring a lot of unwanted hits with it.

4. Searching for custodian names is ill advised especially if that individual is part of the collection. Think about it – if you search for John Doe and all of John’s emails were collected as part of the process, you are going to get “hits” on ALL OF John’s documents. 

5. Sample documents with the proposed terms. Before deciding on search terms with the opposing party, try to actually sample documents with the proposed terms.

6. Give some thought to your search hit expectations. For example, did you expect a 20% return rate and you are getting 90%, or vice versa? If so, reconsider your terms.

7. Always consider a “file type exclusion” list.  For example, if there are no audio files or photos at issue in the lawsuit, then eliminate .wav and .jpegs.  Other files types to consider excluding are EXE, DLL, and system files.

8. Use the “w/2” proximity search between the first and last names of persons.  (John w/2 Doe) will pull back John Doe; Doe, John; John P. Doe; Doe, John P.

9. Suggest expanding first names with known nicknames. “Bill Johnson” could be searched with ((Bill OR William OR Will) w/2 Johnson). You will obviously need to gather any special nicknames from the client (this would be true of project names or code names assigned to different contracts, too etc).

10. Use domain names when searching for/identifying potentially privileged documents. The term (“farrellfritz.com”) for example would pick up all email addresses from that domain. Great search to identify communications with outside counsel.

Developing effective key words is very much an iterative and thought intensive process.  These tips will be helpful but I strongly advise sampling “hits” before committing to search terms.

 

Lawyers often worry about their obligation to preserve relevant information.  As a result, one may direct their client to collect all potentially responsive information.  However, over-collecting is a significant cause of costly e-discovery.  So, what is a lawyer to do?

It is critical not to conflate preservation and collecting. 

While collecting is one way to preserve information, it is a very costly and inefficient preservation strategy.  Think of preservation as a means to ensure potentially relevant information is not deleted or discarded. This is a process driven exercise (i.e., suspend auto-deletion, cease recycling backup systems).   Collection, on the other hand, is a much more active exercise and should be thought of as the first link in a chain toward producing documents to your adversary.   In other words, collection involves “collecting” data from the universe of what has been preserved but it does not necessarily mean you will collect everything you preserved.   And, remember, not every document collected will be produced.  Rather, collected material must be processed, and then reviewed for responsiveness and privilege.   

The amendment to Federal Rule of Civil Procedure 26(b)(1) (which defines the scope of permissible discovery) did away with the timeworn “reasonably calculated to lead to the discovery of admissible evidence” standard.  In its place is now the “proportionality standard,” which explicitly imposes a responsibility on litigants to tailor their discovery requests to account for the significance of the information requested, and the cost of gathering responsive information:

Parties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.

Fed. R. Civ. P. 26(b)(1). (emphasis added)

Although many courts have applied the revised Rule 26 during 2016, the District Court in the Eastern District of Pennsylvania recently reminded practitioners that proportionality is a critical factor.  In First Niagara Risk Mgmt. v. Folino, 2016 U.S. Dist. LEXIS 106094 (E.D. Pa. Aug. 11, 2016), which involved the purported violation of a non-compete agreement, the plaintiff moved the Court to compel a discovery request. Specifically, the plaintiff requested that the Court allow its e-discovery vendor to search the defendant’s personal electronic devices and email accounts for a particular set of agreed upon search terms. The defendant objected stating that “the request is overly-broad, costly, and burdensome.”  Although the Court agreed with defendant that the “request was rather broad,” the Court found the request “proportional to the needs of this case.” After verifying that the information requested by the plaintiff was relevant to the case, the Court considered the individual factors in FRCP 26(b)(1).

Specifically, using the factors set forth above, the Court found the issues were “of grave importance” to the plaintiff, the defendant is the sole source of access to the important information, and the plaintiff “needs to conduct broad discovery to uncover the scope of [defendant’s] misdeeds.” The Court granted the motion to compel, and explained that, “[w]eighing these factors makes it clear that the potential harm [plaintiff’s] discovery requests may impose on [defendant] does not outweigh the presumption for disclosure of these requests.”

On October 4, 2016, District Judge Jon S. Tigar issued an opinion every federal court practitioner should read (Rodman v Safeway, Inc., [11-cv-03003] [N.D. Ca.] [JST]).  The decision serves as an important reminder that counsel has an obligation to assist their client when identifying and collecting  electronic documents responsive to discovery demands.  Indeed, it is not sufficient or defensible to have a non-IT savvy individual search electronic media for responsive materials and to do so without meaningful oversight and involvement of counsel.

The Rodman case is a certified class action for breach of contract.   Defendant, Safeway, Inc. (“Safeway”), entered with customers an online contract that determined pricing and delivery fees associated with online grocery shopping.  The essence of the allegations before the Court were that Safeway breached the contract by charging prices on Safeway.com that were materially different than those charged (for the same items) in the physical store from which the groceries were selected and delivered.

After multiple summary judgment motions, one issue remained for trial: whether class members who registered for the delivery service prior to 2006 agreed to the same contract as class members who registered after 2006?    As a result of this remaining issue, class representative Rodman requested documents showing the terms and conditions and registration process in effect from 2001 through 2005 (“Special Terms”).  On March 9, 2015, Safeway responded to this discovery demand advising that it did not have access to the Special Terms and subsequently reported (on April 7, 2015) that it could not locate any documents responsive to this request.

Seven days before trial, Safeway produced 10 highly responsive documents related to Safeway’s Special Terms.  These documents were found on a “legacy” hard drive and were found by Safeway’s Director of Marketing – Steve Guthrie – when he was prepping for the trial (more than 5 months after discovery closed).   Guthrie – who was designated to testify concerning all steps taken to locate documents and persons knowledgeable about the pre-2006 processes and Special Terms, previously testified that he had searched the legacy hard drive using “key word searches” and did not locate any responsive documents.    

Given the highly relevant nature of the documents produced, the Court continued trial for two months and permitted Plaintiff to take additional discovery.  Eventually, a judgment was entered against Safeway. That judgment is now on appeal before the Ninth Circuit.  

On April 6, 2016, however, and as is relevant to this blog, Rodman filed a motion for discovery sanctions.  Judge Tigar’s decision, granting in part and denying in part the sanction motion, entered on October 4, 2016, imposed a sanction in the amount of $516,484.00 against Safeway.

LEGAL STANDARD FOR DISCOVERY

In reaching its decision, the Court began by reciting the standard under FRCP 26(g) – that a “signing attorney [must] certify that a reasonable inquiry has been made with respect to the factual and legal basis for any discovery request or response.”  The Court further found that when an attorney makes a certification that violates this rule and does so without “substantial justification,” the Court “must impose an appropriate sanction on the signer, the party on whose behalf the signer was acting, or both.” (Rule 26(g)(3)). (emphasis added).

Plaintiff moved for sanctions based upon Safeway’s false statement that no documents responsive to his demand for the pre ’06 Special Terms existed.  Safeway responded that sanctions were not warranted because it made a reasonable inquiry into the basis for its response, including interviewing individuals, and searching the legacy drive for documents.  Safeway argued these steps were comprehensive and thus reasonable.

The Court disagreed and concluded that Safeway’s initial search of the legacy drive was unreasonable for at least three reasons.

First, the Court found “there [was] no indication that Safeway’s counsel guided or monitored Mr. Guthrie’s search of the legacy drive in any significant way.”  Rather, counsel relied on Guthrie’s own determination and seems not to have questioned the thoroughness of Guthrie’s search.  The Court found this “lack of guidance and oversight sufficient to “support” a finding of unreasonableness.”

Second, because there is no evidence that Guthrie had any experience in conducting searches of large document repositories, such as the approximately 300 GB legacy drive, the search was unreasonable.  Indeed, the Court found that Safeway’s counsel could have, but failed to, request a member of Safeway’s IT department (or anyone else familiar with modern e-discovery) conduct the search.

Third, the evidence indicates the search was objectively unreasonable. For example, this was not the case of Safeway being asked to locate the proverbial needle in a haystack.  Rather, many of the electronic file folders (now known to contain the responsive documents) had names like, “Special Terms,”  and “OldSiteDesign” – names that should have signaled to anyone conducting an adequate search that the folder was likely target rich.  Instead, Mr. Guthrie searched for the key words only in a file’s name (rather than in the body of, or content of the file or folder).  This too, shows counsel failed to guide, monitor or inform what Guthrie did.

Clearly if we are to internalize any lesson from this decision it is the obligation of counsel to actively participate in the discovery process.  We cannot allow our client(s)/clients’ employees to collect responsive information in a vacuum.  Rather, we must actively participate in the process and we must secure the expertise of individuals steeped in modern e-discovery when we or client lacks the expertise.  In fashioning the one half-million dollar sanction, the Court found it telling that a substantial part of the legal work Plaintiff sought the cost of performing (additional discovery, unnecessary trial preparation.) would have been avoided had a reasonable search – meaningfully informed by counsel – been conducted on the legacy drive.