E-Discovery Law Review : Electronic Discovery Lawyers & Attorneys : Cozen O'Connor Law Firm : Data Preservation & E-Discovery Disputes

On February 8, 2012, Magistrate Judge Andrew J. Peck heard arguments in Da Silva Moore v. Publicis Groupe, No. 11-CV-1279 (S.D.N.Y.) addressing the use of predictive coding as an alternative to an eyes-on review of millions of documents. To utilize predictive coding, an attorney must manually review a small subset of the total amount of documents that are potentially involved in the litigation. As the attorney codes or “tags” documents as relevant, the predictive coding software is “trained” as to the characteristics that make a document relevant and, at the end of that review, the software is fully “trained” to predict how the attorney will tag documents and able to review and tag the entire set of documents itself.

            At the February 8 hearing in Da Silva, Judge Peck discussed the review of 2.5 million documents. It was agreed that 2,399 documents would be manually reviewed for relevance and that the use of predictive coding remained subject to court approval. The parties were asked to submit an E-Discovery protocol, which will include predictive coding, as early as Thursday, February 16, 2012. Given Judge Peck’s statement: “[t]his may be for the benefit of the greater bar, but I may wind up issuing an opinion on some of what we did today,” we expect to see an opinion addressing predictive coding in the near future. This opinion is likely to be one of the first addressing this topic. Stay tuned to ediscoverylawreview.com for further details and analysis of this emerging issue.

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We live in a digital world where smartphones are the norm and email access is seemingly as important as food and water. This increase in usage of email and the amount of electronic data requires companies to develop ways to collect and store a significant amount of data. Inevitably, this data will have to be searched, reviewed, and produced to opposing parties in the event of litigation and often at great cost to the producing party. Fortunately for one plaintiff, however, this is a cost that it will not have to incur.

In I-Med Pharma Inc. v. Biomatrix, Inc., 2011 U.S. Dist. LEXIS 141614 (D. N.J. Dec. 9, 2011), Judge Debevoise was asked to consider whether the plaintiff was required to produce documents from so-called “unallocated space” areas on its computers, namely, the area of the computer where deleted files and temporary data are stored. The parties stipulated that the defendants would hire an expert to conduct a “forensic investigation” and keyword search of the plaintiff’s entire computer system, using over 50 search terms. This search was not limited to specific custodians or time periods and, in the unallocated space alone, the search terms yielded an estimated 65 million “hits,” or 95 million pages of files. In light of this, the Magistrate Judge modified a previous order, which required the plaintiff to produce the results of the forensic investigation and allowed the plaintiff to exclude data from the unallocated space.

In reviewing the Magistrate Judge’s modification, the Court acknowledged the overwhelming burden to the plaintiff if it had to review the documents from the unallocated space. The Court further explained that a “privilege review of 65 million documents is no small undertaking” and that “[e]ven if junior attorneys are engaged, heavily discounted rates are negotiated, and all parties work diligently and efficiently, even a cursory review of that many documents will consume large amounts of attorney time and cost millions of dollars.”

The Court also recognized that the defendants did not show the likelihood that relevant and non-duplicative information was stored in the unallocated space. Additionally, the Court found that the money the defendants spent to obtain the data “pale[d] in comparison” to the cost the plaintiff would incur to review the data.

Finally, the Court addressed the proposed search terms and discussed five factors to consider when analyzing whether those terms were reasonable: “(1) the scope of documents searched and whether the search is restricted to specific computers, file systems, or document custodians; (2) any date restrictions imposed on the search; (3) whether the search terms contain proper names, uncommon abbreviations, or other terms unlikely to occur in irrelevant documents; (4) whether operators such as ‘and’, ‘not’, or ‘near’ are used to restrict the universe of possible results; [and] (5) whether the number of results obtained could be practically reviewed given the economics of the case and the amount of money at issue.” The Court examined all of these factors and stated that although the plaintiff should have “known better than to agree to the search terms . . . the interest of justice and basic fairness are little served by forcing Plaintiff to undertake an enormously expensive privilege review of material that is unlikely to contain non-duplicative evidence.”

The plaintiff in I-Med Pharma Inc. was fortunate in that the Court did not force it to review and produce all of the data in the unallocated space. Not all parties, however, will always be as fortunate. When negotiating with the adverse party regarding the search terms to be utilized for a document production, the following steps may avoid situations similar to those facing the parties in I-Med Pharma Inc.:

·         Know your client’s data system. This may be the most obvious, but most important, advice. To negotiate effectively, you must know certain aspects of the data storage system, such as how much data is contained there, how many potential custodians exist, how long is data retained, and where potentially duplicative data resides.

·         Negotiate for the use of restricting terms. This is especially true with frequently used words. For example, in I-Med Pharma Inc., one of the search terms was the word “return.” Negotiate for the use of search operators, such as “and,” “not,” or “near” in an attempt to further limit your results.

·         Do a sampling first. If possible, run a search with proposed terms to determine what types of “false positives” may result. This will enable the parties to further analyze the negotiated search terms and their effectiveness.

·         Determine relevant time periods and custodians. Limit searches to only those individuals who had a role in the subject matter of the litigation and to only that time period in which relevant documents may exist.

·         Be willing to seek the Court’s assistance. I-Med Pharma demonstrates the efficacy of seeking the Court’s involvement early on to limit the costs associated with e-discovery. When doing so, however, make sure you have done your proverbial homework and are able to educate the Court as to your client’s data systems and what the search proposed by the opposing side truly entails.

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Monetary sanctions, attorneys fees, and adverse inference jury instructions are the more common type of sanctions imposed on litigants for the spoliation of evidence, or not producing relevant documents. Recently, however, a court has increased the severity and impact of sanctions by applying them not only to current litigation, but also to a party’s future litigation, with the effects lingering for years to come.

The Underlying Suit

“Any competent electronic discovery effort would have located this email.” These words were written in an opinion by a United States District Judge in the Eastern District of Texas, filed on March 1, 2011, in Green v. Blitz U.S.A., Inc., No. 2:07-CV-372, 2011 U.S. Dist. LEXIS 20353 (E.D. Tex., Mar. 1, 2011)

Green involved a product liability suit in which the requirement of a flame arrester was in dispute. The jury returned a defense verdict, and the plaintiff collected a low settlement amount as part of a high-low settlement agreement. During discovery in a subsequent case with the same defendant and plaintiff’s counsel, counsel learned of documents that were not produced in Green. The plaintiff then filed a motion for sanctions against the defendant in Green and a motion to re-open the Green case. While the court denied the motion to re-open because the statute of limitations had expired, the court did impose sanctions for the discovery abuse.

The Defendant’s Failure to Conduct Adequate Discovery in Green

After 2004, the defendant had just one employee, Mr. Chrisco, who was responsible for searching for, and collecting, documents relevant to the litigation. Mr. Chrisco would meet with the defendant’s national counsel, go through the claims, and develop an understanding of what he would be searching for. He would then go to various departments, explain what he was looking for, and ask the departments to look for, and collect, documents. As the litigation was about flame arresters, any documents pertaining to that subject were relevant.

This is where Mr. Chrisco’s preservation and collection efforts ended and where his employer’s e-discovery troubles began. The defendant did not “institute a litigation-hold of documents, do any electronic word searches for emails, or talk with the IT department regarding how to search for electronic documents.” As a result an email entitled “FW: Flame Arrester,” of which Mr. Chrisco was a recipient, was never produced. Not disclosing this email showed “the gravity of [the defendant’s] discovery violations for failing to produce relevant documents.”

The court found it even “more shocking” that this email could have been discovered by a simple word search for the “obvious term,” flame arrester. Even worse was that the individual tasked with the defendant’s e-discovery efforts, Mr. Chrisco, admitted to being “about as computer . . . illiterate as they get.” The court concluded that one did not have to look any further than not searching for the phrase, “flame arrester,” to determine that the defendant did not make a reasonable effort to produce relevant documents.

The court also found that the defendant did not properly preserve documents. Instead of issuing a litigation hold, the defendant asked employees to delete electronic documents at least ten times during the two year period that the defendant was in litigation. Moreover, the defendant rotated its backup tapes every two weeks, causing any deleted emails to be permanently deleted.

Imposition of Sanctions

The court imposed three sets of sanctions against the defendant, each seemingly more severe than the previous. First, the court fined the defendant $250,000 to be paid to the plaintiff, the amount by which the court estimated the plaintiff was damaged by not seeing the documents during settlement discussions. Second, the court sanctioned the defendant an additional $500,000, which was to be tolled for thirty days. The court agreed to lift this fine if, in those thirty days, the defendant was able to prove that it issued a copy of the court’s memorandum and opinion to any plaintiff in each lawsuit in which it was involved for the past two years, or in which it is currently involved. Third, the court ordered the defendant to file a copy of the court’s memorandum and order with its “first pleading or filing” in any case in which the defendant was involved, “whether plaintiff, defendant, or in another official capacity,” for the next five years.

No litigant would want an e-discovery violation to be a recurring nightmare, as it was for the defendant in Green. The following are some ways that a party may fulfill its e-discovery obligations and avoid the result in Green.

• Put the Right Employees in Charge. Strategically choose the individual or individuals that are in charge of collection efforts in house (for example, do not choose an individual who is not familiar with the company’s technology).

• Take Advantage of Counsel’s Expertise. Engage in communications with counsel who has experience and expertise in e-discovery issues. This will ensure that obligations at each stage of the process are complied with and can be defended later.

• Issue Litigation Holds. Make sure that a plan is developed to identify triggering events that would give rise to the obligation to issue a litigation hold to your employees and ensure that the litigation holds are promptly issued and include a specific instruction not to delete documents.

The court’s sanctions are becoming increasingly harsh. The sanctions in Green had the same effect as publishing the defendant’s e-discovery violations in a newspaper. The above guidelines can help you avoid becoming the next headline.
 

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A corporate defendant discovers that it will be subject to litigation, yet it actively destroys probative, relevant evidence. Many of us have read, or heard of, opinions where judges have punished a spoliating-defendant by issuing sanctions anywhere from an adverse inference instruction to an entry of default judgment. In recent years, however, it is not only the client that has felt the weight of the responsibility in discovery matters. Starting with Zublake v. UBS Warburg (“Zublake V”), 229 F.R.D. 422 (S.D.N.Y. 2004), courts all over the country have emphasized the duty placed on counsel—both in-house and outside—to ensure that clients comply with their discovery obligations.

Many courts have quoted Zubulake V’s famous line, stating that counsel “must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched.” In Qualcomm Inc. v. Broadcom Corp., 05-cv-1958, 2008 U.S. Dist. LEXIS 911 (S.D. Ca., Jan. 7, 2008), for example, the Southern District of California found Qualcomm’s counsel responsible for a “monumental discovery violation” because counsel “did not conduct a reasonable inquiry into the adequacy of Qualcomm’s document search and production.”

This responsibility is not restricted to outside counsel. In Danis v. USN Communications, Inc., No. 98 C 7482, 2000 U.S. Dist. LEXIS 16900 (N.D. Ill. Oct. 23, 2000), the court recognized that in-house counsel did not establish any meaningful document retention program. In-house counsel failed to: 1) give notice to employees to preserve documents; 2) provide criteria as to what should and should not be saved; 3) review any documents that were being thrown away; and 4) review existing practices related to document retention.

Although both in-house and outside counsel can be, and have been, sanctioned for failing to adequately monitor their clients’ compliance with discovery obligations, the following are some steps that can be taken to avoid this result:

• Be proactive. Identify the triggering events that give rise to the duty to preserve. Once that obligation is triggered, issue a timely and comprehensive litigation hold.

• Communicate effectively and often. Do not assume that employees understand what the litigation entails, what their obligations are under the litigation hold, or what documents may be relevant to the litigation.

• Identify and interview key employees. Focus on employees who are likely to have relevant information to: educate them as to the case; learn about, and preserve, relevant information; and ensure compliance with your litigation hold.

• Contact opposing counsel. Explain your process for collecting relevant information to opposing counsel. If the other side has any issues with your process, it is better to resolve these sooner rather than later.

• Communicate frequently. Do not assume that once you issue a litigation hold, your obligations are fulfilled. Do frequently follow-up to ensure that all employees are preserving potentially relevant documents and data.

• Consider the Court’s involvement. One of the clearest ways to ensure that your clients’ discovery obligations, and yours, are fulfilled is to ask the court to set specific standards with respect to the scope and duration of preservation and how data will be reviewed and produced. Being willing to seek court intervention early on will educate the court as to the volume of information and the cost involved and may lead the court to set limits on ongoing preservation and document production.

The responsibility for compliance with the rules with respect to discovery is shared between the client and their counsel. In-house and outside counsel and the various custodians of potentially relevant information need to work as a team and keep the lines of communication open to ensure that their obligations are fulfilled. This allows all involved to comply with their discovery obligations and to identify key documents—favorable and unfavorable—early on and develop their litigation strategy accordingly.
 

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Being a party to litigation often means devoting significant amounts of time and resources to complying with an opposing party’s extensive requests for e-discovery. But is e-discovery compliance a sunk cost? Not necessarily. More and more commonly, federal courts have been willing to allow prevailing parties to recover the costs of certain e-discovery compliance efforts. By carefully documenting the processes and costs necessary to produce responsive electronic data, you provide the court with a solid basis for restitution of those costs. In Race Tires America, Inc. v. Hoosier Racing Tire Corp., No. 07-1294, 2011 U.S. Dist. LEXIS 48847 (W.D. Pa. May 6, 2011), for example, the court reimbursed the successful defendants for over $367,000 in e-discovery costs.

28 U.S.C. § 1920 dictates what costs may be recovered by a prevailing party in federal court. For e-discovery costs, courts tend to focus on Section 1920(4), which allows a court to assess “[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.” Section 1920(4) was specifically amended by Congress in 2008 to allow the assessment of e-discovery costs, in particular by changing the phrase “copies of papers” to “copies of any materials.” As U.S. District Judge Terrence McVerry noted in the Race Tires case, however, even before the 2008 amendment, “courts in many jurisdictions had come to recognize that ‘exemplification’ in the modern era, includes electronic copying.”

The Race Tires opinion provides a good survey of the types of e-discovery costs that have been assessed against losing parties by federal courts. Examples include costs for electronic scanning, use of a third-party vendor to collect and identify network files, and costs for the conversion of paper documents into electronic files where the parties agreed that responsive documents would be produced in electronic format.

Some courts, by contrast, take a narrower view of Section 1920(4). Some refuse to assess e-discovery costs where the work done by a third-party vendor resembles the work that would be done by paralegals and attorneys in a non-electronic case (and, therefore, would be unrecoverable under Section 1920). Others have found that the scanning of documents is a convenience for counsel, rather than a necessary expense.

Judge McVerry observed that the distinction between non-recoverable and recoverable electronic costs can lie in whether the costs “tend to serve a party’s aesthetic preferences rather than exemplification of evidence.” For example, steps taken to improve the format and design of electronic evidence may be found to merely serve aesthetic preferences, while processes such as scanning and conversion of non-electronic materials are more likely to represent recoverable exemplification costs.

In Race Tires itself, the parties’ mutually agreed-upon discovery plan was crucial to the court’s analysis. The parties agreed to conduct discovery electronically at the outset of the litigation and the plaintiff then “aggressively pursued e-discovery” from the defendants, asserting 119 separate requests for documents and electronically stored information that imposed over 442 search terms. The defendants used third-party vendors to produce the requested electronic documents, and sought to recover those costs after prevailing on summary judgment. The court noted that the vendor costs represented highly technical services, not akin to the work of attorneys or paralegals, and that there was no indication that electronic scanning was used merely for the convenience of the parties or their attorneys. In light of the parties’ agreement and the plaintiff’s discovery requests, “the requirements and expertise necessary to retrieve and prepare [the] e-discovery documents were an indispensable part of the discovery process.”

In order to ultimately recover your e-discovery costs, Race Tires and other federal decision suggest several best practices:

• Agree on an e-discovery plan with the opposing party. This is an excellent way to later establish that your electronic production costs were necessarily incurred.
• Thoroughly document the work done by any vendors or consultants who identify, preserve, and collect your electronic data. Make sure this work is documented separately from the quintessential work of attorneys, such as a review for privilege and responsiveness.
• Be mindful of the distinction between electronic production and electronic enhancement. Essentially, this is a question of “For whom?” Was the cost incurred necessary to give the opposing party what it asked for, or does it serve your own case in some way?

In the end, with a careful approach, your e-discovery costs need not be sunk costs.
 

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