Electronic discovery (a/k/a ediscovery and e-discovery) is the process of identifying, preserving, collecting, preparing, reviewing and producing electronically stored information (“ESI”) in the context of a legal or investigative process.   In order that counsel may bring discovery issues (including e-discovery issues) to the forefront early on in the development of a case, the Federal Rules of Civil Procedure impose on counsel certain obligations.  These obligations include, but are not limited to, requiring counsel to participate in a Rule 26(f) conference, and requiring counsel to making certain initial disclosures pursuant to Rule 26(a).  Note that these obligations are imposed upon counsel irrespective of whether there is ESI relevant to the dispute.  However, competent counsel should be prepared to attend the 26(f) conference educated as to their client’s electronic data content and infrastructure, including any data that may be difficult or costly to produce, and should be further prepared to discuss issues like inadvertent production of privileged materials and phasing of discovery.

Rule 26(f) Conference

While the precise timing of the conference will depend on the individual Court’s scheduling orders and local practice, the 26(f) conference will inevitably give rise to one of the earliest opportunities for the parties to engage in comprehensive discussions regarding discovery, including issues relating to ESI.  Moreover, there is an expectation that the parties will exchange certain information, and reach agreement on many discovery-related topics.  Thus, it is critical that the attorney attending this conference be knowledgeable about his/her the client’s data, electronic storage systems and data retention.  

At the conference, counsel should discuss, among other things, the subjects on which discovery may be needed, when discovery will be completed, and whether discovery can and should be phased or limited to particular issues.  For example, as it relates to ESI, it may be most efficient to start with a discrete list of ESI sources (i.e., 5 custodians rather than 50), review fully that material, and agree to include additional sources at a later date if necessary. 

Relatedly, it is highly advisable to discuss the format of the eventual production(s) at this early stage. Even though production may not occur for many weeks / months, the ultimate format will aid in creating processing and review plans.  For example, without knowing the production format, one party may convert or otherwise manipulate its ESI in a way that is incompatible with the ultimately required production format.

Additionally, claw back agreements or protective orders dealing with inadvertent productions of privileged materials should be addressed at the 26(f) conference.  In almost all cases, the parties should agree to a process by which each side would have the right to identify and request the return of such material without the production resulting in a waiver. This agreement — commonly referred to as a claw back agreement—should always be incorporated into a court Order, either as part of the protective order or through another type of routine court order. The issuance of such an order should always precede any production in the case. Under Federal Rule of Evidence 502, if a court orders this kind of agreement, the order will protect the parties from claims of waiver if, among other things, the disclosure is inadvertent.  And, by creating this framework to resolve a potential inadvertent disclosure issue early on, it will inevitably reduce the potential for a dispute.

ESI and Rule 26(a) Disclosures

Rule 26 also imposes certain disclosure obligations on litigants.  Specifically, Rule 26(a)(1) requires each litigant to disclose to its opponent various types of information before any formal discovery requests are served in the case. The idea behind this “initial disclosure” is to require parties to be forthcoming with information relevant to the matter and to streamline the discovery process.  According to subsection (A)(ii) of the rule, each party must provide a copy — or a description by category and location — of all documents, ESI, and tangible things that the disclosing party has in its possession, custody, or control and may use to support its claims or defenses. Identifying specific custodians and non-custodial sources of ESI (i.e., departmental share drives or database programs) that are expected to be searched for relevant data should also occur at this stage.  It is critical to note that if you plan to argue that certain data is  not reasonably accessible for production due to the burden and/or expense of restoring/producing that data (i.e., legacy data or backup media), it must be disclosed to your adversary.   In fact, Rule 26(b)(2)(B) includes a provision related to “not reasonably accessible” ESI, which anticipates possible cost-shifting under particular circumstances. Under this provision, a party need not produce any ESI from sources that it deems to be not reasonably accessible so long as the party identifies the source with particularity to its opponent.  A source can be considered not reasonably accessible on the basis of “undue burden or cost.”*

Notwithstanding the obligations Rule 26 imposes, many lawyers enter a lawsuit (specifically as it relates to ediscovery) without a detailed understanding of their client’s ESI or a specific execution plan in mind. That’s a mistake that often proves to be costly.  Educating one’s self as to one’s clients’ ESI will inevitably result in a more efficient process, and may also help reduce discovery disputes and—most importantly—get parties to the litigation’s most relevant information faster.

* Note, however, once the source is identified as “not reasonably accessible,” the requesting party may nevertheless move to compel production from the identified source, but will need to make a showing of “good cause” to require it. If the court determines that good cause has been shown, it may in addition require the requesting party to bear the reasonable costs of production under the proportionality rule.

 

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.”

 

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.

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.