Under the New York State Supreme Court Commercial Division Rules counsel are expected to agree at the Preliminary Conference as to the method and manner of their e-discovery (“ESI”) production.  Counsel will sometimes readily agree to produce emails in their native format, with attendant metadata, without knowing whether or not their clients are able comply with such requirements.

 This appears to have been what occurred in 595393 Alberta Ltd v. Fossil Industries, Inc. (2014 NY Slip Op 32406(U))  where production of emails with attendant metadata was definitely in dispute.  It appears that the defendant agreed in its preliminary conference order to produce emails “in their native electronic format, together with their associated meta-data.”  The defendant failed to furnish the emails in that format.

 In trying to explain the failure the defendant provided the affidavit of its president explaining that the defendant “utilized a software known as Filemaker for its emails and storage of other electronic data” and that the software “bundles emails into a ‘contacts’ file upon sending and transfers the emails from a particular contact into a ‘note field.”  The defendant’s president continued to claim that “[t]his is the native format” but “the metadata is not preserved in this format.”

 The plaintiff countered with the affidavit of a computer expert who explained that the “Filemaker” software is not the native email tool, but rather a “storage or archiving tool.”  This was the case because Filemaker is not an email system.  The forensic expert continued to explain that the metadata for the underlying emails were once contained in an email system, such as Outlook.   However, when the emails were combined in the Filemaker system it “will in every instance change the file creation date and the file last modification date usually disclosed in a Windows system.”  The expert further took note that the defendant never explained what email system it used, or whether archive or backup copies of the emails were available.

 Justice Whelan found that the defendants discovery responses were inadequate and warranted the inference of willful conduct which frustrated the discovery schedule agreed to by counsel.  The Court took the drastic step of finding that “the answer served by the defendant shall be dismissed unless it furnishes the e-mails in the format agreed to and full and complete responses to the discovery demands of the plaintiff that are the subject of” the motion.

 The lesson learned here is to ensure that your client maintains emails with metadata before agreeing to its production in a preliminary conference order.

In a case that helps clarify what discovery-specific activities constitute the practice of law, District Court Judge Richard Sullivan – a judge in the Southern District of New York – ruled that contract attorneys performing document review for a law firm are not entitled to overtime pay because they are engaged in legal work.

Specifically, the case involved a collective action initiated by contract attorney David Lola in July 2013 against law firm Skadden Arps Slate Meagher & Flom (“Skadden”) and Tower Legal Staffing (“Tower”) arising from work he performed for Tower over the course of 15 months as a contract attorney in North Carolina. Although Lola is a licensed attorney in California, he is not licensed to practice in North Carolina or the Northern District of Ohio, where litigation involving a Skadden client necessitated the review work.

Lola performed elementary review that consisted of identifying search terms appearing in documents, marking those documents for responsiveness, and, occasionally, redacting materials according to protocols Tower and Skadden provided. He earned $25 per hour working 45 to 55-hour weeks. His fellow contract attorneys received similar wages, with no increase in pay for hours worked in excess of 40 hours per week.  Lola claims the legal industry has been exploiting for years contract attorneys who conduct document review projects for extended hours at a time and without overtime compensation. Though Tower hired and paid the contractors working on the Skadden project, it was Skadden that oversaw the work and provided coding protocols and guidelines. Skadden also had the authority to terminate reviewers.

Skadden moved to dismiss the suit last October, arguing that, as a licensed attorney, Lola was exempted from overtime pay under the Fair Labor Standards Act (“FLSA”), and that he had failed to show that Skadden actually employed him.

Under the FLSA, the Department of Labor, which has the authority to exempt employees working in a “in a bona fide… professional capacity,” does not require employers to pay overtime to “holder[s] of a valid license or certificate permitting the practice of law… and is actually engaged in the practice thereof.”

Lola’s counsel argued that “When one’s job consists solely of searching keywords and categorizing those documents based on those keywords, it is absolutely not the practice of law.” Adding, “It involves no legal analysis, judgment, discretion or advice, and can be performed by a non-lawyer.” Skadden argued that, though the tasks are not glamorous, review work represents a core attorney function on par with drafting pleadings and memoranda of law, and conducting legal research.  Skadden also emphasized that the North Carolina Bar acknowledges document review is legal work.

Calling upon professional and ethical codes of North Carolina, where the contract attorneys were conducting their document review, Judge Sullivan determined that document review rises to the level of legal practice — irrespective of its simplicity/complexity or the legal credentials of those performing it. The application of legal judgment, Judge Sullivan said, is not a prerequisite for an activity to be deemed “practice of law.”  Judge Sullivan reasoned that document review is a legal task, like double-checking citations while drafting a brief, that often requires little to no legal judgment.  Judge Sullivan continued, “Document review is the practice of law, regardless of who conducts it. The only difference between lawyers and non-lawyers is that the former can lawfully perform document review without supervision, while the latter cannot.”  Judge Sullivan’s ruling to dismiss Lola’s case weighs heavily on the many licensed lawyers who rely on document review projects as a way to make a living. For law firms, contract attorneys provide a reputable source of credentialed, cost-effective attorneys who spare the client from higher-priced associates, and spare those associates from a discovery obligation that many deem menial.

The question of what actually constitutes the practice of law has only been posed to two other district judges — in the Southern District of Texas in Oberc v. BP PLC  and in the Southern District of New York in Henig v. Quinn Emanuel Urquhart & Sullivan. In the Henig case, whose facts mirror the Skadden dispute, District Judge Ronnie Abrams has allowed discovery to determine whether the plaintiff in the case, William Henig, practiced law under the FLSA while working as a reviewer under the supervision of Quinn Emanuel.

The Department of Labor has given no guidance on what constitutes the practice of law and David Lola’s appeal was argued to the Second Circuit only in January.  In the argument before the Court of Appeals, Skadden argued that both common sense and the FLSA contradicted Lola’s position that document review is not the practice of law.  Lola, in turn, argued that the lower court erred by applying the definition of practicing law in North Carolina – where he conducted the document review – and irrespective of that definition, he was not practicing law. He went on to argue for the adoption of a federal definition of “practice of law.”  Check back here for the Second Circuit’s decision when available.

Lola vs. Skadden Arps – Judge Sullivan 9-16-14 Opinion and Order

Judge Kimba M. Wood found for the first time in the Second Circuit in Dorchester Financial Holdings Corp. v Banco BRJ, S.A. that a party must not destroy a “crashed” computer, or it will be subject to a punitive adverse   inference.  One of the issues in the case was the propriety of certain documents which the defendant claimed were forged.  In 2002, before plaintiff filed its lawsuit, its principal collected all of the materials the plaintiff had on the hard drive of his personal computer.  Sometime between 2002 and 2012 this principal transferred the files to the hard drive of a new personal computer.  Then tragedy struck.

After filing suit, while the dismissal of the complaint was on appeal, the hard drive of the personal computer “crashed.”  The principal asked his brother in law “who lacked any formal computer training to examine the computer.”  The brother in law advised that the computer “was basically gone.”  Instead of then consulting a computer specialist (or advising the opposing party or the court) the principal destroyed the computer.  Because the plaintiff had never made a back-up of the hard drive, all metadata and all files which had not been printed out were lost entirely.

The Magistrate Judge assigned to the litigation reviewed the spoliation dispute and suggested issuing a preclusion order.  Upon review, the District Judge modified that finding to a mandatory adverse inference, holding that spoliation had definitely occurred in a grossly negligent manner relating to relevant information.

Specifically, the Court found that, at the time the computer was destroyed, the plaintiff was under a duty to preserve because it was actively litigating the appeal of the dismissal of its complaint.  The court further found (for the first time in the Second Circuit) that the “fact that a personal computer stops functioning is by no means a death knell for the data it contains.”  Therefore, the plaintiff had an obligation to preserve the “crashed” computer.  The Court’s sanction not only included a mandatory adverse inference that will compel the factfinder “to infer that [the plaintiff] destroyed electronic evidence, including emails and metadata, favorable to [defendant’s] claim that it did not participate in the transaction at issue in this action” but also required the plaintiff to pay the defendants “reasonable attorney’s fees and costs in connection with the spoliation dispute.”

While it might seem obvious to a computer savvy person, not everyone understands that information can be retrieved from a “crashed” computer.  Once a party is under an obligation to preserve discovery it must make sure that it preserves electronic devices that it believes are inoperable or face a possible spoliation motion.

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.