Cooperative

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In 2012, Klipsch Group Inc. (“Klipsch”), a manufacturer of sound equipment, filed a complaint against ePRO E-Commerce Ltd. (“ePRO”), alleging an ePRO subsidiary was selling counterfeit headphones.  Through discovery demands, Klipsch called for the production of information relevant to the sale of the allegedly infringing product, including emails and specific sales data.    Eventually, however, it became clear that ePRO was not engaging in a cooperative discovery process but instead was avoiding its discovery obligations.  For example, ePRO:  failed to implement an appropriate legal hold notice even after having been directed by the Trial Court to do so; limited vendor access to electronic data; failed to produce many responsive documents; and (as demonstrated by a forensic examination authorized by the Court) engaged in routine and systematic deletion of thousands of files and emails using a data wiping software long after the suit had commenced.

Because of the numerous and continuous discovery failures, Klipsch moved for sanctions and ultimately filed an ex parte motion seeking additional relief.  The District Court concluded that ePRO willfully spoliated evidence and it imposed various sanctions on ePRO including:

(1)   a jury instruction requiring the jury find that ePRO destroyed relevant emails and related data;

(2)  a jury instruction permitting the jury to infer that the destroyed evidence would have been favorable to Klipsch; and

(3)  Klipsch’s reasonable costs and fees, which the Court ultimately concluded was $2.7 million necessitated by ePRO’s obstructionist behavior.

ePRO filed an interlocutory appeal, arguing that the District Court’s $2.7 million sanction in the case where damages were, at most, $20,000 was impermissibly punitive and grossly disproportionate.

In January, the Second Circuit upheld the District Court’s sanction.  In doing so, the Circuit held that discovery sanctions should be commensurate with the costs occasioned by the sanctionable behavior, not the value attributable to the alleged (or even proven) compensatory damages.  To allow otherwise would, according to the Circuit, force a litigant to a small value dispute to beat risk to suffer blatant and egregious discovery misconduct.  And so, sanctions must be proportionate to the costs inflicted on a party – irrespective of total case value – by virtue of that party having to remediate discovery misconduct by its adversary.

Consistent with the theme of cooperative discovery, the Second Circuit noted that “the integrity of our civil litigation process requires that the parties….carry out their duties to maintain and disclose the relevant information in their possession in good faith.”    Like the countless other cases I have blogged about since December 2015, this decision serves as another reminder that judges expect cooperation between the parties and their attorneys during the litigation process to achieve orderly and cost-effective discovery; indeed, it is a priority.  Had ePRO and its counsel simply cooperated with their adversary and engaged in good faith discovery, the outcome here would have been entirely different.*

 

 

* Cooperation among counsel is critically important and the means to insure compliance with Rule 1’s mandate that the parties are responsible for securing the “just, speedy and inexpensive determination” of a civil litigation.  Indeed, the revised committee notes state, “[m]ost lawyers and parties to cooperate to achieve these ends” and “[e]ffective advocacy is consistent with – and indeed depends upon – cooperative and proportional use of procedure.”

In Youngevity Intl’s Corp. v. Smith (No: 16-cv-00704 [SD CA December 21, 2017]), defendants sought an Order pursuant to Federal Rules of Civil Procedure 26(g) and 37.  The Order required Plaintiffs to remediate an improper discovery production to pay for Defendants’ costs for bringing the motion to compel and for the cost to review various improper prior productions.  Specifically, in connection with the discovery of electronically stored information (“ESI”), Defendants proposed a three-step process by which: “(i) each side proposes a list of search terms for their own documents; (ii) each side offers any supplemental terms to be added to the other side’s proposed list; and (iii) each side may review the total number of results generated by each term in the supplemented lists (i.e., a ‘hit list’ from our third-party vendors) and request that the other side omit any terms appearing to generate a disproportionate number of results.”

Approximately one week later, Plaintiffs advised in writing that they were “amenable to the three step process described in your May 9 e-mail.”  The parties then exchanged lists of proposed search terms to be run through their own ESI and the ESI of their opponent.

Pursuant to the agreed-to three-step process, Defendants provided to Plaintiffs its “hit list.”  Plaintiffs, however, never produced its “hit list.”  Instead, Plaintiff produced two large caches of documents – the first consisting of approximately 1.9 million pages and the second production consisting of approximately 2.3 million pages.   Upon receipt by Defendants, it became clear that the productions had been bulk coded with a CONFIDENTIAL legend and in some instances also with an ATTORNEYS’ EYES ONLY designation.  The produced materials also contained non-responsive documents.  A few months later, defendants advised they inadvertently failed to produce an additional 700,000 documents due to a vendor error.  Although the parties attempted to resolve amicably their differences, they were unsuccessful.

As a result, Defendants’ filed the instant motion to compel proper production and for costs.

In granting Defendants’ motion, Magistrate Judge Jill L. Burkhardt concluded, “the record indicates that Youngevity did not produce documents following the protocol to which the parties agreed.”  Specifically, “Youngevity failed to produce its hit list … and instead produced every document that hit upon any proposed search term” thus conflating “a hit on the parties’ proposed search terms with responsiveness.”  Moreover, the Court observed “the parties negotiated a stipulated protective order, which provides that only the ‘most sensitive’ information should be designated as AEO.”  As a result, Judge Burkhardt gave the plaintiffs two options for correcting their discovery productions with specific deadlines:

“1) By December 26, 2017, provide its hit list to Defendant; by January 5, 2018, conclude the meet and confer process as to mutually acceptable search terms based upon the hit list results; by January 12, 2018, run the agreed upon search terms across Plaintiff’s data; by February 15, 2018, screen the resulting documents for responsiveness and privilege; and by February 16, 2018, produce responsive, non-privileged documents with only appropriate designations of “confidential” and “AEO” (said production to include that subset of the not-previously-produced 700,000 documents that are responsive and non-privileged); or

2) By December 26, 2017, provide the not-previously-produced 700,000 documents to Defendant without further review; pay the reasonable costs for Defendant to conduct a TAR of the 700,000 documents and the July 21, 2017 and August 22, 2017 productions for responsiveness; by January 24, 2018, designate only those qualifying documents as “confidential” or “AEO”; by that date, any documents not designated in compliance with this Order will be deemed de-designated.”

Judge Burkhardt also ordered Plaintiffs to pay for the reasonable expenses, including attorney’s fees, for bringing the motion and for the expenses incurred by Defendants “as a result of Youngevity’s failure to abide by the Stipulated Protective Order.”

Conclusion

This case is another reminder of what appears to be the well-embraced theme in Federal discovery – cooperation.  The 2015 amendments made plain that cooperation between the parties and their attorneys during the litigation process to achieve orderly and cost-effective discovery is a priority.  Indeed, mutual knowledge of the relevant facts is essential to proper litigation; and therefore the process of obtaining those facts (i.e., discovery) should be a cooperative one.  Had counsel simply abided by the three-step process and stipulated protective Order it willingly entered, there would be no need to defend against (and foot the bill for) the motion to compel.

 

Themis Bar Review, LLC v. Kaplan, Inc., WL 3397877 (S.D. Cal. May 26, 2015).

In this action, defendant served plaintiff with a request for production that sought, among other things, documents related to the plaintiff’s pass rate and the data substantiating the pass rates posted in the plaintiff’s advertising materials. The plaintiff produced the relevant data in a PDF format from Microsoft Excel spreadsheets.  This format, in turn, stripped the documents of all their “user friendly” capabilities (i.e., the ability to filter, sort, and/or search the excel charts).

The defendant complained that the PDF format was not the native format the data was kept in by plaintiff.  Defendant further stated that the plaintiff also failed to respond to any of its many requests during a meet and confer conference wherein defendant asked for the metadata and related email documents.  In response, plaintiff argued that they would comply with defendant’s request to produce the emails and metadata in native form only if defendant paid for the associated costs.

Under Federal Rule Civil Procedure 34, the production of documents or ESI must be produced in “a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms.” As such, the court found that the defendant had notified the plaintiff of the need to produce the spreadsheets and emails in an Excel format, and had tried to meet and confer as contemplated by the parties jointly submitted “Discovery Plan.”

Not surprisingly, given the judicial desire for a cooperative discovery process, the court ordered the plaintiff to reproduce the emails and the associated metadata in searchable format and further ordered plaintiff to pay for the costs of reproduction.  This case, like many others in recent months, serves as a good reminder that often the client is best served by a counsel willing to cooperate during discovery.  What’s more – a cooperative counsel often retains credibility in the eyes of the Court.

In a previous post we discussed generally the idea of a cooperative discovery process and highlighted how the proposed amendments to the Federal Rules embrace this principal (see, e.g., proposed amendments to Federal Rule Civil Procedure [“FRCP”] 1).  Here, we discuss how the concept of a cooperative discovery process– even apart from the specific mandates in the FRCP – is expected by the Courts.

Consider, for example, the several districts that have adopted local rules and standards for e-discovery that promote cooperation.  In the Eastern and Southern Districts of New York, for example, “[c]ounsel are expected to cooperate with each other, consistent with the interests of their clients, in all phases of the discovery process” (Local Rule 26.4).  Additionally, the Seventh Circuit, the Southern District of Illinois, the Northern District of California, and other federal Courts have adopted similar rules and guidelines. And, as recent developments in case law have shown (see, e.g., Boston Scientific Corp. v. Lee, 2014 WL 3851157 [N.D. Cal. 2014]), counsel is wise to adopt a cooperative approach to the discovery process.  Indeed, clients are best served by an attorney who is a master of dialogue rather than simply a master of debate.

In Boston Scientific, the Company brought suit against a former employee who began employment with a competitor immediately after resigning from Boston Scientific.  The new employer, after learning about the lawsuit, segregated defendant’s laptop and sent it to a third party e-discovery vendor.  Plaintiff sought forensic images of two laptops; the first that was initially segregated and a replacement laptop, both of which the former employee had been using.  As confirmed by the vendor, the second laptop contained trade secrets and other confidential information from a previous user. When the employer offered to have the first laptop reviewed for pertinent information, Boston Scientific declined the offer.   Thereafter, the court held that neither laptop was discoverable.  Not surprisingly, in the face of this ruling Boston Scientific sought promptly to accept the previous offer which the court would not allow.  The court notably stated:

“This case illustrates a recurring problem in all civil discovery, … A party demands the sun, moon and stars in a document request or interrogatory, refusing to give even a little bit. The meet and confer required by a court in advance of a motion is perfunctory at best, with no compromise whatsoever. But when the parties appear before the court, the recalcitrant party possesses newfound flexibility and a willingness to compromise. Think Eddie Haskell singing the Beaver’s praises to June Cleaver, only moments after giving him the business in private.”

Here, had counsel for Boston Scientific engaged in a cooperative approach to the discovery process, undoubtedly Boston Scientific would have been better served and likely counsel would have maintained credibility in the eyes of the Court.*

*For other decisional law illustrating the Courts’ frustrations with obstreperous or unreasonable discovery anticssee also Brown v. Tellermate Holdings Ltd., 2014 WL 2987051 (S.D. Ohio 2014); Straight Path IP Group, Inc. v. Blackberry Ltd., 2014 WL 3401723 (N.D. Cal. 2014); In re Domestic Drywall Antitrust Litig., 2014 WL 1909260 (E.D. Pa. 2014).

A little more than three years ago, federal Magistrate Judge Andrew J. Peck (SDNY), issued a seminal decision in Da Silva Moore v. Publicis Groupe & MSL Group, 11 Civ. 1279 (February 24, 2012).  Indeed, in that ruling, Judge Peck sent a message that predictive coding and computer assisted review is an appropriate tool that should be “seriously considered for use” in large data-volume cases and attorneys “no longer have to worry about being the ‘first’ or ‘guinea pig’ for judicial acceptance of computer-assisted review.”    Judge Peck went on to encourage parties to cooperate with one another and to consider disclosing the initial “seed” sets of documents.  In doing so, he recognized that sharing of seed sets is often frowned upon by counselors who argue that these sets often contain information wholly unrelated to the action, much of which may be confidential or sensitive.  Specifically Judge Peck stated: “This Court highly recommends that counsel in future cases be willing to at least discuss, if not agree to, such transparency [with seed sets] in the computer-assisted review process.”

Since Da Silva,  many cases have successfully employed various forms of technology assisted review (“TAR”) to limit the scope of documents actually reviewed by attorneys.  It is well-embraced that the upside of utilizing TAR is to make document review a more manageable and affordable task.  Moreover, Courts routinely embrace TAR for document review  See, e.g., Rio Tinto PLC v. Vale S.A., S.D.N.Y. No. 14 Civ. 3042 (RMB)(AJP) (March 3, 2015) (“the case law has developed to the point that it is now black letter law that where the producing party wants to utilize TAR for document review, courts will permit it”).

In Rio Tinto, Judge Peck revisited his DaSilva decision. And, while most of Rio Tinto discusses the merits of transparency and cooperation in the development of seed sets, Judge Peck notes there is no definitive answer on the extent of transparency and cooperation required.   Citing to his opinion in DaSilva and other cases, Judge Peck makes clear that he “generally believe[s] in cooperation” in connection with seed set development. Nevertheless, Judge Peck notes there is no absolute requirement of transparent cooperation.  Rather, “requesting parties can insure that training and review was done appropriately by other means, such as statistical estimation of recall at the conclusion of the review as well as by whether there are gaps in the production, and quality control review of samples from the documents categorized as now responsive.” (emphasis added)

The decision goes on to emphasize that courts and litigants should not hold predictive coding to a so-called “higher standard” than keyword searches or linear review. Such a standard could very well dissuade counsel and clients from using predictive coding, which would be a step backward for discovery practice overall.

In today’s litigious world, discovery is costly and can be perilous. Exacerbating this landscape is the fact that sanctions are imposed for discovery violations more than any other litigation error. Not surprisingly, avoidable discovery mistakes lead to client dissatisfaction.  Below are ten critical tips to avoid discovery sanctions and to remain compliant with discovery obligations.

  1. Implement Timely Litigation Holds Be sure your legal hold is implemented as soon as litigation is reasonably anticipated. Be certain that your hold notice is sufficiently broad, is sent to the right custodians, receipt is acknowledged, and it is updated as needed.
  2. Conduct Key Custodian Interviews A lawyer cannot rely only on the hold notice.  Rather, custodial interviews with key players, IT personnel and anyone else with information relevant to the dispute or the client’s network architecture should be conducted.  Minimally, these interviews will confirm the suspension of auto-delete protocols and will help identify all relevant information for preservation and collection.
  3. Be Proactive Because in today’s technology-intensive world there are substantial quantities of ESI, if you want to receive a document demand before preserving and collecting documents, you may not have time to respond to those demands.  Anticipate document demands so you can start the interview, identification and collection process.  You will have a better handle on the documents (what does and does not exist), and your client’s story such that you will be in the best position to comply with discovery and meet discovery challenges.
  4. Honesty is the Best Policy When Dealing with the Courts and Opposing Parties Never make a factual representation about the status of preservation, collection, or production efforts without confirming the underlying facts with original sources. While a client will rarely mislead their lawyer intentionally, it is common for clients to have incomplete information or operate under a misunderstanding of fact when information is communicated second- hand.   Moreover, courts and opposing parties understand that mistakes can happen at various stages of the discovery process.  Such issues must be addressed immediately and head-on.  Usually the optimal strategy is full disclosure along with remedial measures.
  5. Always Budget Obtain a realistic budget before proceeding with ESI collection processing and/or review.  This is a costly area of litigation and lawyers must manage client expectations. Update the budget as needed to accommodate changes attributable to collection volume or other factors.
  6. You Get More Bees with Honey… Seek a cooperative approach irrespective of how unpleasant or unreasonable opposing counsel may be. Indeed, a cooperative approach to discovery will invariably reduce disputes and expenses. Take the higher road and assume that every email and letter you write to opposing counsel may end up in front of the judge, so adopt a cooperative approach and reasonable tone in all communications with opposing counsel.    As one of our earlier blog posts showed (see Armstrong Pump, Inc. v. Hartman, No. 10-CV-446S, 2014 WL 6908867 (W.D.N.Y. Dec. 9, 2014)), Judges have very little patience for uncooperative behavior during a lawsuit’s “search for the truth.”
  7. There’s No Longer Room For Boilerplate Discovery The amended FRCP 26(g)(1)(B)(iii) provides that every discovery request and response must be signed by at least one attorney of record, and by signing you certify that the discovery request or response is proportional – meaning “neither unreasonable nor unduly burdensome or expensive considering the needs of the case, prior discovery in the case, the amount in controversy, and the importance of issues at stake….”  The Rule goes on to state that “[i]f a certification violates this rule without substantial justification, the court must impose an appropriate sanction on the signer, the party on whose behalf the signer was acting, or both.”
  8. Be Careful What You Wish For…Lest You Receive It In Return Never send a discovery request to an adversary that you or your client would be uncomfortable complying with were opposing counsel to author a reciprocal request to you.
  9. Carefully Devised Search Terms Are Critically Important The judgment of your legal team is a good starting point for crafting search terms, but is far from sufficient.  Review a preliminary “hit-by-term” report from your ESI vendor so you can appreciate which terms are too limiting or overbroad.  During custodial interviews (see supra) ask about project code names, and other unique search terms.  Then sample, sample, sample!  Sampling the documents—both the hits and the non-hits—can help refine search terms and validate the terms chosen.
  10. Wise Use of Technology Can Be a Litigator’s Best Friend ESI processing, review (even with contract attorneys) and production is among the most costly elements of any litigation.  When used efficiently and wisely, technology can significantly reduce those costs. Consider early data assessment, filtering and predictive coding technology as appropriate for each matter.