FRCP

Subscribe to FRCP

Often viewed as a necessary evil, the Rule 26(f) conference can serve as an invaluable opportunity to meaningfully discuss discovery such that the process is streamlined and seeks to avoid unnecessary (and often costly) disputes.   Generally speaking, Rule 26(f), among other things, sets the deadline for the conference as soon as practicable and at least 21 days before the scheduling conference, and lists several required topics for the conference, including preserving discoverable information. Although a litigant should use the Rule 26(f) conference to reduce the risk of spoliation claims through agreements on preservation, as well as reduce costs by limiting the scope of e-discovery, achieving results is almost entirely dependent on the attorney’s preparation.  Indeed, being well informed about your client, its documents ‒ including ESI ‒ and its goals will allow for a productive discussion rather than an empty formality.  But, how exactly do you prepare and what should you think about before the conference?

To prepare for the conference, it helps to think about the end game and to formulate the steps necessary to get there.  The below thoughts on preparation/topics are intended merely as a guidepost and are not exhaustive.

  • Understand your client’s ESI:  What kind of ESI is required to prosecute the client’s claims and defend against those of the adversary?  Where does that ESI reside?  To this end, it is important to become familiar with your client’s network architecture, including what hardware exists, and where.   You should strive to understand the client’s knowledge management (when/how is ESI stored), system knowledge (what is stored and where) and who is responsible for maintaining and storing data.  For example, are there physical email servers on site, or are the servers virtual?  What is necessary to access and collect data from each server?  Relatedly, give thought to addressing admissibility and how authenticity may be established over the documents (See “The New Rules of Federal Evidence Have Arrived“).
  • Identify Custodians:  Take time to identify employees/custodians likely to have potentially responsive ESI.  Preservation comes at a cost and if you fail to understand your custodians, you may over-preserve.  Consider, for example, if the client is a national organization with offices throughout the U.S.  If all of the relevant custodians work out of the Omaha office, with all of the potentially responsive data located on a particular server, is there need to preserve the content of all other servers?  Consider interviewing those custodians to identify other relevant custodians.
  • Understand the timing and execution of Hold Notices, and Related Thorny Issues: At the conference the parties should determine the scope of the duty to preserve.  For example, be prepared to disclose (and ask adversary about) the status of the litigation hold.  Has one been issued?  If so, when and who received it.  If not, why not?  You may even seek to inquire about what subjects and sources the Hold covers and if there is any procedure in place for auditing compliance.  Are there any time-sensitive data sources involved and if so, have auto-delete and auto-archive functions been turned off for those data sources?  Is data from third-parties potentially responsive?  And, if so, what steps, if any, have been taken to preserve that data?   Have any key custodians left the company or potentially leaving?  If so, what steps are being taken to preserve his/her data?  Because of the large increase in e-data and the various locations where that data may reside, think about ways to narrow defensibly the scope of what you preserve.
  • Understand Collection:   While you may agree to preserve all of Katy Cole’s emails from 2010 to the present, that doesn’t mean you are agreeing to review for production all of that data.  What will be done to identify the materials that will be reviewed?  Can the parties agree upon search terms, date delimiters and other methodologies to limit the universe of material? Consider entering an agreement as to appropriate date ranges, custodians, systems, file types, and search terms.
  • Understand Privilege Obligations:  You should also discuss privilege during the Rule 26 conference.  Consider seeking a stipulation or Rule 502(d) order stating that disclosure of privileged information does not constitute a waiver of the attorney-client privilege in the instant or another proceeding.  Discuss whether a traditional privilege log is practical or burdensome for large volumes of ESI. Would it be preferable to log privileged emails by thread groups (i.e., a message and its attachments; related messages in a string of replies and forwards)?  Or are categorical logs (i.e., those that describe withheld categories instead of listing withheld records) preferable?
  • Understand Production Format:  Don’t leave format to the whim of your adversary.  Discuss expectations.  Indeed, there is little worse than receiving a thumb drive that contains various unsearchable PDFs (well, maybe a paper production is worse).  Discuss your production specifications and be prepared to produce in the same format you demand production.  Relatedly, is there any paper in the production?  If so, be certain to request that Optical Character Recognition (OCR [i.e., the process by which paper documents are converted into editable, searchable computer files]) be applied for ease text-search ability.  And, are you producing in a fell swoop or will the parties engage in phased discovery?

A meaningful and productive Rule 26(f) conference can streamline discovery, avoid unnecessary costs and avoid spoliation concerns.  It should be embraced as an opportunity to reach agreement and engage in a cooperative discovery process that will promote proportionality.

Have questions?  Please contact me at kcole@farrellfritz.com.

For a long time, New York state and federal courts were out of sync with one another with regard to a litigant’s discovery obligations. For example, the state courts in New York required a party to take steps to preserve discovery materials upon the commencement of a litigation, while the federal courts required preservation upon the reasonable anticipation of litigation.  This divergence in standards placed counsel in a quagmire when advising clients, because a party did not necessarily know if their anticipated litigation would eventually be commenced in New York state or federal court.

The Appellate Division, First Department, put an end to this debate in 2012, when it adopted in VOOM HD Holdings LLC v. EchoStar Satellite L.L.C., the federal standard.  Specifically, the Appellate Division adopted the  standard for preservation set forth in Zubulake v UBS Warburg LLC (220 FRD 212 [SD NY 2004]) that, “[o]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.”  The Voom court also adopted a negligence and gross negligence standard in analyzing ESI spoliation, holding that “[s]ince EchoStar acted in bad faith or with gross negligence in destroying the evidence, the relevance of the evidence is presumed.”

The Court of Appeals in Pegasus Aviation further adopted the negligence standard applied in Zubulake to determine if a party should be held liable for failing to timely issue a litigation hold.

Specifically, the Court of Appeals held that:

A party seeks sanctions for spoliation of evidence must show that the party having control over the evidence possessed an obligation to preserve it at the time of its destruction, that the evidence was destroyed with a “culpable state of mind,” and “that the destroyed evidence was relevant to the party’s claim or defense such that the trier of fact could find that the evidence would support that claim or defense.” On the other hand, if the evidence is determined to have been negligently destroyed, the party seeking spoliation sanctions must establish that the destroyed documents were relevant to the party’s claim or defense.

Pegasus Aviation, however, did not acknowledge that the holdings in Zubulake were recently undermined by changes to Federal Rule of Civil Procedure 37(e) effective, December 1, 2015.  The change was adopted to establish a uniform standard in light of conflicting standards between the Federal Circuits: the Second, Sixth and Ninth Circuits on the one hand, which had authorized sanctions for negligent destruction of e-mails, and the First, Fifth and Tenth Circuits on the other hand which had held that mere negligence was not sufficient to obtain sanctions.  The new rules provides:

(e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(A) presume that the lost information was unfavorable to the party;

(B) instruct the jury that it may or must presume the information was unfavorable to the party; or

(C) dismiss the action or enter a default judgment.

This new standard allows an adverse inference instruction only upon a finding that a party “acted with the intent to deprive another party of the information’s use in the litigation” (emphasis added).  The new Rule 37(e) removes any negligence from the standard.

Indeed, Judge Shira Scheidlin recognized that the new rule was out of step with her prior holding in Zubulake and other Second Circuit precedence.  In Sekisui American Corp. v. Hart, she noted that “[u]nder the proposed rule, parties who destroy evidence cannot be sanctioned . . . even if they were negligent, grossly negligent, or reckless in doing so” and “would require the innocent party to prove that it has been substantially prejudiced by the loss of relevant information, even where the spoliating party destroyed information willfully or in bad faith.”  This would be a change from existing Second Circuit law in that it would “abrogate” the Second Circuit’s holding in Residential Funding insofar as the Second Circuit previously held “that sanctions may be appropriate in instances where evidence is negligently destroyed.”

While the New York Court of Appeals may have intended to bring New York in line with Federal practice, and adopt what was the-then Second Circuit negligent spoliation standard, it failed to do so in as much as the Federal Rules changed just two-weeks before it issued the Pegasus Aviation decision.  Only time will tell if the Court of Appeals will revisit this issue in light of the new Federal Rules.

After sitting on the sidelines for years, the New York Court of Appeals (the highest appellate court in New York) has finally ruled on the standard to be applied to claims alleging spoliation of ESI. The decision, however, which was late in coming, places New York at odds with the new Federal Rules of Civil Procedure.  This post will address Pegasus Aviation I, Inc. v Varig Logistica, S.A. Next week’s post will address how Pegasus is at odds with the new Federal Rules of Civil Procedure.

Pegasus Aviation I, Inc. v Varig Logistica, S.A. involved litigation spanning multiple continents, and attendant discovery failures.  The underlying dispute arose from the leasing of cargo airplanes in Brazil, a Brazilian bankruptcy and a shareholder dispute.  The plaintiffs not only sued the company to whom they loaned money (the “VariLog Defendants”), but also a number of third parties who purchased the assets out of bankruptcy – the “MP Defendants.”

During discovery the VariLog Defendants advised that one or more computer “crashes” impaired their ability to produce ESI. The VariLog Defendants further explained that during the operative period the company did not have an email preservation system in place, emails were stored on local machines and employee computers were routinely returned “empty.”  These practices were later halted, but subsequent computer “crashes” resulted in the loss of much of the requested ESI.

The Trial Court found that the VariLog Defendants’ failure to issue a litigation hold amounted to gross negligence, and as such relevance of the missing ESI was presumed. The Trial Court further found that because the MP Defendants had been charged by a Brazilian Court with managing and administering VariLog, they were in control of VariLog for purposes of instituting the litigation hold.  The Trial Court sanctioned the defendants by striking Varilog’s answer and imposing an adverse inference sanction against the MP Defendants.

The Appellate Division reversed the sanction. While the Appellate Division agreed on the “control” issue, it differed with the Trial Court finding that there wasn’t a showing of gross negligence, because the issuance of a litigation hold cannot be considered gross negligence per se.  The Appellate Division further placed the burden on the movant to establish that the lost ESI would have supported its claims, and failing to have done so, an adverse inference sanction was not required.  Notably, the Appellate Division decision included a concurring and a dissenting opinion.

The Court of Appeals agreed with the Trial Court and Appellate Division’s findings that the MP Defendants were sufficiently in control of VariLog to trigger an ESI litigation hold. The Court of Appeals also agreed with the Appellate Division that the failure to issue a litigation hold does not amount to gross negligence per se, but was merely one factor to be considered when determining the spoliator’s culpable state of mind.  The Court of Appeals differed, however, with the Appellate Division’s determination that the movant did not show relevance.

Specifically, the Court of Appeals found that:

A party that seeks sanctions for spoliation of evidence must show that the party having control over the evidence possessed an obligation to preserve it at the time of its destruction, that the evidence was destroyed with a “culpable state of mind,” and “that the destroyed evidence was relevant to the party’s claim or defense such that the trier of fact could find that the evidence would support that claim or defense.” On the other hand, if the evidence is determined to have been negligently destroyed, the party seeking spoliation sanctions must establish that the destroyed documents were relevant to the party’s claim or defense.

The Court of Appeals remanded the litigation to the Trial Court for a determination as to whether the negligently destroyed evidence was relevant to the claims against the defendants, and if so, the appropriate sanction (if the Trial Court deems one warranted).

In reaching its decision the Court of Appeals relied on the Appellate Division, First Department’s decision in VOOM HD Holdings LLC v EchoStar Satellite L.L.C. (93 AD3d 33, 45 [1st Dept 2012]), and the Southern District’s Zubulake v UBS Warburg LLC (220 FRD 212, 220 [SD NY 2004]).  The Zubulake burden shifting rubric has been placed into doubt by recent amendments to the Federal Rules of Civil Procedure.  More on that next week

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).