The electronic discovery-related amendments to the Federal Rules of Civil Procedure have now been in place for over three years, and 2009 brought many significant court opinions applying and interpreting the rules. Below are 10 of the most significant cases from the past year, several of which involved courts criticizing (and sometimes sanctioning) parties and counsel for not handling electronic discovery properly under the spirit and letter of the Federal Rules.
Duty to Preserve Electronically Stored Information ("ESI")
KCH Servs., Inc. v. Vanaire, Inc., No. 05-777-C, 2009 WL 2216601 (W.D. Ky. July 22, 2009) (Judge Coffman).
Plaintiff brought a motion for sanctions for defendants' spoliation of ESI. A month before filing the complaint, plaintiff's president telephoned defendant Vanegas, an official at defendant Vanaire, Inc., to inform Vanegas that Vanaire, Inc. was illegally using plaintiff's software. Following the call, Vanegas instructed Vanaire employees to delete from Vanaire's computers any software Vanaire did not purchase or own. The court found that plaintiff's phone call to Vanegas "should have put the defendants on notice that issues of software may be relevant to future litigation" and therefore defendants should not have deleted the software. Moreover, plaintiff sent defendants a preservation letter following the phone call that provided defendants notice that email and other ESI "were relevant to litigation." Nevertheless, defendants failed to preserve email and other ESI "by continuing to delete and overwrite, even after receipt of a preservation letter." The court found that the "defendants' conduct in regard to electronically stored evidence falls beyond the scope of 'routine, good faith operation of an electronic information system'" under the FRCP 37(e) safe harbor and ordered that an adverse inference instruction be read to the jury to "compensate the plaintiff for lost evidence that may have been presented to the jury."
Early Meeting of the Parties/Discovery Plan, FRCP 26(f)
Wells Fargo Bank, N.A. v. LaSalle Bank Nat'l Ass'n, No. 3:07-cv-449, 2009 WL 2243854 (S.D. Ohio July 24, 2009) (Magistrate Judge Merz).
Plaintiff brought a motion to compel defendant to search several
backup tapes and produce relevant email. Defendant responded that
the email on backups was not readily accessible under FRCP
26(b)(2)(B) because "it would take six months and almost half
a million dollars to restore the backup tapes." The court
refused to force defendant to restore the backup tapes, chiefly
because plaintiff did not bring the motion until more than four
months after the discovery cutoff and one month after learning that
defendant had not searched the backup tapes for email. The court
criticized the parties for failing to discuss adequately the backup
tapes and other issues concerning ESI early in the case, citing the
parties' sparse reference to ESI in their FRCP 26(f) report.
The court commented that "[t]he current dispute is a mild
example of the sorts of problems which result when counsel do not
deal systematically with ESI problems and possibilities at the
outset of litigation, instead of filing one-paragraph boilerplate
statements about ESI and waiting for the explosion later." The
court found that the cost of restoring the backup tapes would be
"disproportionate to the likely utility of doing so,"
denied the motion, and ordered the parties to pay their own fees
and costs associated with the motion because "the parties
could have avoided the expenses of this Motion by conferring
appropriately early in the case about ESI."
Extent of Production, FRCP 26(b)(2)(B)
William A. Gross Constr. Assocs., Inc. v. Am. Mfrs. Mut. Ins. Co., 256 F.R.D. 134 (S.D.N.Y. Mar. 19, 2009) (Magistrate Judge Peck).
Magistrate Judge Peck dubbed this opinion a "wake-up
call" to attorneys "about the need for careful thought,
quality control, testing, and cooperation with opposing counsel in
designing search terms or 'keywords' to be used to produce
emails or other electronically stored information." The case
involved a dispute over alleged defects and delays in the
construction of a courthouse. The construction manager for the
project, Hill International, was not a party to the suit but agreed
to produce relevant email from its servers. To identify relevant
email for production, the parties proposed to Hill thousands of
search terms, which were so broad they "would require
production of the entire Hill email database, since Hill's
business is construction management, and those terms would be used
for any construction project." Hill did not want to produce
email that was unrelated to the courthouse project, but it did not
provide any suggestions as to how to narrow the search terms to
identify only relevant email. The court was left "in the
uncomfortable position of having to craft a keyword search
methodology for the parties, without adequate information from the
parties (and Hill)." The court criticized the attorneys'
lack of cooperation and careful thinking in developing search
terms, stating that the "case is just the latest example of
lawyers designing keyword searches in the dark, by the seat of the
pants, without adequate (indeed, here, apparently without any)
discussion with those who wrote the emails.... Electronic discovery
requires cooperation between opposing counsel and transparency in
all aspects of preservation and production of ESI. Moreover, where
counsel are using keyword searches for retrieval of ESI, they at a
minimum must carefully craft the appropriate keywords, with input
from the ESI's custodians as to the words and abbreviations
they use, and the proposed methodology must be quality control
tested to assure accuracy in retrieval and elimination of
'false positives.'"
Sec.
& Exch. Comm'n v. Collins & Aikman
Corp., 256 F.R.D. 403 (S.D.N.Y. Jan.
13, 2009) (Judge Scheindlin).
"Several discovery disputes" arose in this securities
fraud action brought by the SEC. One of the disputes stemmed from
the SEC's refusal to produce any email sent or received by the
SEC. The SEC claimed that "nearly all" such
communications would be "privileged, protected, or
non-substantive" and therefore would be too "costly and
time-consuming" to search and review in comparison to the
likely benefit to be gained by producing a few possible relevant,
non-privileged email messages. The court rejected the SEC's
arguments, finding that "[b]ecause e-mails are inherently
searchable, the SEC's blanket refusal to produce any incoming
or outgoing emails is unacceptable. Without even an attempt to
negotiate search terms that would weed out privileged, protected,
or irrelevant e-mails, the SEC cannot reasonably assert that a
routine aspect of modern discovery — search and review of
a party's email — is beyond its capability." The
court ordered the parties to meet and confer "to negotiate a
reasonable search protocol (considering the use of appropriate
search terms and appropriate limitations of subject matter and
date) and then to consider applying this search protocol to a
segment of the SEC's e-mail collection to determine whether
relevant nonprivileged material might be identified and
produced."
Calixto
v. Watson Bowman Acme Corp., No.
07-60077-CIV, 2009 WL 3823390 (S.D. Fla. Nov. 16, 2009) (Magistrate
Judge Rosenbaum).
Plaintiff moved to compel defendant to restore and search thirty
month-end backup tapes for responsive email. Analyzing the motion
under FRCP 26(b)(2)(B), the court found that the backup tapes were
not reasonably accessible because of undue burden or cost because
defendant would have to spend $40,000 to restore the tapes, which
contained data "in a compressed form that is not accessible
unless it is reformatted." In determining whether there was
good cause to compel defendant to restore and search the tapes, the
court reviewed the steps defendant had taken to search for and
produce email from sources other than backup tapes. The court noted
that defendant "identified and contacted" all employees
who possibly had information concerning the lawsuit, instructed
those employees to search their hard drives and other computer
media for relevant documents, had its IT department search for
relevant email in the mailboxes on defendant's email server for
the identified employees, and had its IT department use search
terms to search its shared network drives for relevant documents.
The court found defendant's search to be comprehensive, stating
"no significant gaps in the methodology are obvious to the
Court." The court further found important the fact that
plaintiff never objected to the list of employees defendant
identified nor to the search terms used to identify relevant
documents: "In view of the fact that a search of the restored
back-up tapes would involve use of the same keywords already
employed, and further, because [plaintiff's] failure to object
to the list of employees placed on a litigation hold suggests that
[defendant] would be unlikely to find responsive" documents
from the backup tapes "that have not already been
produced." The court therefore found that plaintiff had not
demonstrated good cause under FRCP 26(b)(2)(B) to compel defendant
to restore all thirty backup tapes. With respect to one historical
backup tape, however, the court found that good cause existed
because relevant email of a former employee — whose email
account defendant's IT department had routinely deleted when
the employee left and before any duty to preserve data attached
— had not been collected from other sources and therefore
would not be duplicative discovery.
Possession, Custody, or Control, FRCP 34(a)
Sec.
& Exch. Comm'n v. Strauss, No.
09 Civ. 4150, 2009 WL 3459204 (S.D.N.Y. Oct. 28, 2009) (Magistrate
Judge Pitman).
One of the defendants in this accounting fraud action served
discovery requests on the SEC seeking, inter
alia, access to a database containing outside auditor
work papers. The SEC had obtained remote access to this database
through an access agreement with the outside auditor and a
third-party litigation support company that hosted the database.
The SEC paid $2,500 a month for its remote access, which included
receiving user names and passwords. The SEC also paid a one-time
charge of $66.00 for each of the four security key fobs it received
to use in conjunction with the user names and passwords to access
the database. Defendant argued that the database was within the
SEC's "possession, custody, or control" within the
meaning of FRCP 34(a) and therefore the SEC should be required to
give him one of their key fobs and login credentials so that he
could access the database. The court found that while the SEC did
not have "physical possession of the database," its
arrangement with the outside auditors and litigation support
company "gives it complete and immediate access to the
contents of the database via the web portal.... [A]n agreement with
a third-party processor granting a party access to documents, along
with an actual mechanism for getting the documents, gives that
party the 'practical ability to obtain' the documents and
so is sufficient to establish that party's control" within
the meaning of FRCP 34(a). In addition, the court found that the
SEC had "the legal right to obtain the materials in the
database by virtue of its agreement" with the outside
auditors. These factors led the court to find that the SEC had
"control" over the materials in the database "for
the purposes of Rule 34(a)." The court rejected the SEC's
argument that providing defendant with one of its key fobs would
violate its access agreement with the outside auditors: "[A]ny
prohibition the agreement imposes on turning over a key fob to
another entity is not significant here, because discovery
obligations under the Federal Rules of Civil Procedure trump most
other commitments." Nevertheless, the court ultimately denied
defendant's motion, finding that under FRCP 26(b)(2)(C)(i), the
database was available to defendant in a way that would be more
convenient and less burdensome on the SEC. The court reasoned that
defendant could serve a third-party subpoena on the outside auditor
and enter into his own agreement to pay for and access the database
remotely. Forcing "the SEC to share its access with
[defendant] would limit its own access" because it would have
to give up one of its four key fobs. In addition, the court found
persuasive that compelling the SEC to provide free access to
defendant in this fashion would "force the SEC to
finance" defendant's litigation and "may have the
effect of requiring it to purchase extra key fobs for its
adversaries in the future."
Protection of Privileged Materials, FRCP 26(b)(5)(B), FRCP
45(d)(2)(B), and FRE 502
Alamar
Ranch, LLC v. County of Boise, No.
CV-09-004-S-BLW, 2009 WL 3669741 (D. Idaho Nov. 2, 2009) (Judge
Winmill).
Plaintiff in a Fair Housing Act suit subpoenaed a third party,
Kirkpatrick, along with Ms. Kirkpatrick's attorney and her
employer, seeking relevant email. Ms. Kirkpatrick's employer
produced email from her account that was stored on its servers,
including privileged email that Ms. Kirkpatrick had sent to her
attorney using her work email account. Ms. Kirkpatrick brought a
motion seeking return of the privileged email, claiming that she
did not know that her employer routinely monitored email sent by
employees using their work email accounts. The court found that Ms.
Kirkpatrick had waived the privilege for messages she sent using
her work email account because she was subject to the
employer's written policy guidelines, which were provided to
all employees. The court found that the policy guidelines "put
all employees — including Kirkpatrick — on
notice that their emails would (1) become [the employer's]
property, (2) be monitored, stored, accessed and disclosed by [the
employer], and (3) should not be assumed to be confidential."
The court rejected Ms. Kirkpatrick's claims of ignorance
concerning the employer's storing and monitoring of her email,
stating that "[i]t is unreasonable for any employee in this
technological age — and particularly an employee
receiving the notice Kirkpatrick received — to believe
that her e-mails, sent directly from her company's e-mail
address over its computers, would not be stored by the company and
made available for retrieval." Likewise, the court found that
the privilege had been waived in messages sent by Ms.
Kirkpatrick's attorney to her work email address because
"[e]mployer monitoring of work-based e-mails is so ubiquitous
that [the attorney] should have been aware that [the employer]
would be monitoring, accessing, and retrieving e-mails sent to that
address."
Infor
Global Solutions (Michigan), Inc. v. St. Paul Fire & Marine
Ins. Co., No. C 08-02621, 2009 WL
2390174 (N.D. Cal. Aug. 3, 2009) (Magistrate Judge
Trumbull).
Plaintiff moved for a protective order seeking the return of
privileged emails it inadvertently produced to defendant on a DVD.
Plaintiff claimed that it was facing looming court-imposed
deadlines to produce the emails and, due to technological problems
and time constraints, "it was unable to view the files because
of the substantial size of the folders containing emails in .pst
form that needed to be viewed" using Microsoft Outlook. Thus,
plaintiff produced the DVD to defendant without first reviewing the
emails for privilege and "based on a reasonable belief that
[the DVD] did not contain any privileged materials." Defendant
reviewed the emails on the DVD and discovered that some privileged
documents had been produced. Defendant notified plaintiff regarding
the privileged materials, which led the parties to seek a ruling
from the court as to whether plaintiff had waived privilege.
Analyzing the waiver issue under Fed. R. Evid. 502(b), the court
found that plaintiff "has not shown that it undertook any
reasonable steps to prevent disclosure" of the privileged
materials. "Rather, plaintiff Infor admits that it took a
chance that privileged documents would not be on the compact disc
it produced because privileged documents had not been located
during past reviews of previously produced documents." The
court noted that even if plaintiff was facing technological
problems in viewing the DVD, it did not seek relief from the court
concerning the production deadlines, nor did plaintiff review the
DVD after producing it to defendant. Therefore, the court found
that since plaintiff did not take reasonable steps to prevent the
disclosure of the privileged emails, under Fed. R. Evid. 502(b)
plaintiff had waived the privilege concerning the emails at issue
on the DVD.
Sanctions
Kipperman v. Onex Corp., 260 F.R.D. 682 (N.D. Ga. May 27, 2009) (Judge Forrester).
Plaintiff brought a motion for sanctions for defendant's
multiple discovery abuses, including defendant's handling of
searching for email on backup tapes. Over the course of protracted
discovery fights, the court had ordered defendants to pay for the
restoration of two backup tapes and run plaintiff's search
terms to identify potentially relevant email. Instead of searching
the entire backup tapes, however, defendants "unilaterally
decided to search seven witnesses' mailboxes rather than the
entire tape and decided to redact documents." Plaintiff then
filed a motion to compel defendants to comply fully with the
court's order (that is, to run the search terms over all
mailboxes on the two tapes). In addition, plaintiff discovered that
the two backup tapes did not cover the timeframe that defendants
had represented, which meant there were gaps in the email found on
the tapes. Plaintiffs argued that defendants should be forced to
restore an additional tape to fill in the gaps, but defendants
claimed that any email found on the additional tape would be of
little value because the email previously restored from the two
tapes were of little relevance. The court reviewed examples of
email restored from the two tapes and commented, "I don't
consider myself enough of an expert on the law in this area to
declare these to be smoking guns but they certainly are hot and
they certainly do smell like they have been discharged
lately." The court ordered defendants to search additional
mailboxes on the two tapes and to restore an additional tape.
Defendants began producing email from the additional tape
restorations, but withheld documents it claimed were
"irrelevant." The court disagreed with defendants'
assessment of relevance, finding that "some of the most
interesting evidence in this matter has come from e-mail
production. The court is deeply disturbed by Defendants'
handling of this production.... [T]he court does not fault
Defendants for their initial refusal to produce electronic
discovery from the so-called 'backup tapes' or for
asserting legitimate legal arguments under Fed.R.Civ.P.
26(b)(2)(B).... The court does condemn Defendants, however, for
making blatant misrepresentations about the value of e-mail
discovery in this case in an effort to influence the court's
ruling, for refusing to follow the court's ruling once made,
and for behaving as if they, and not the court, got to decide what
electronic material was relevant and discoverable under Rule 26 and
what material was not." The court found that "[l]ooking
at the state of the record as a whole, it now appears that defense
counsel's statements were either purposefully misleading or
made with a reckless disregard for the truth." After finding
that defendants had engaged in several other discovery abuses, the
court granted plaintiff's motion and ordered defendants to pay
plaintiff $1,022,700 for plaintiff's attorneys' fees and
other costs associated with addressing defendants'
misconduct.
"Zubulake Revisited: Six Years
Later"
Pension
Comm. of the Univ. of Montreal Pension Plan v. Banc of Am.
Sec., LLC, No. 05 Civ. 9016, 2010 WL
184312 (S.D.N.Y. Jan. 15, 2010) (Judge Scheindlin).
Although not issued in 2009 (it missed 2009 by about two weeks),
this opinion by Judge Scheindlin — author of the seminal
Zubulake opinions in 2003 and 2004 — is worth
including in this year's summary of significant cases because
it is likely to become another landmark e-discovery opinion. In a
lengthy, comprehensive order, the court granted sanctions against
several plaintiffs for their failure to properly preserve, collect,
and produce electronic documents. The court lamented that six years
after Zubulake, in which the court established many rules
and guidelines for handling electronic discovery, lawyers continue
to conduct electronic discovery in an "ignorant and
indifferent fashion." The court reviewed the steps a party is
required to take in preserving electronic evidence and laid out a
framework for determining when, and to what degree, sanctions are
appropriate against a party that fails to take the proper steps in
preserving ESI. The most significant errors that the Pension
Committee plaintiffs committed were failing to issue timely written
litigation hold notices to employees, failing to identify and
preserve sources of potentially relevant ESI, including backup
tapes, and failing to collect responsive electronic documents. The
court also reprimanded some of the plaintiffs for filing false or
misleading declarations concerning preservation and collection of
ESI and for presenting declarants at deposition who were
ill-prepared and had little or no personal knowledge of the
preservation and collection efforts about which they had declared.
The court ordered monetary sanctions against the offending
plaintiffs and ordered that an instruction applying a new
burden-shifting test for spoliation be read to the jury.
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