pdf

Electronic Discovery in Federal Court: Top 10 Cases from 2009

January 1, 0001

 

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.