January 15, 2014
In contrast with prior years, 2013 was notable for the general absence (with at least one exception) of blockbuster cases involving huge sanctions or imposing new e-discovery obligations. Instead, the focus has largely been on companies’ efforts to proactively develop and implement systems and protocols for avoiding the e-discovery pitfalls of the past and on preempting future issues. Much of the action in the e-discovery area, consequently, has been outside of the reported judicial decisions. Accordingly, you will find our sanctions discussion–which was often the lead story in our prior year-end reports–at the end of this report and information governance at the top.
Many companies in 2013 focused on developing defensible information governance programs. Commentators (and, to some extent, courts) issued new guidance on the preservation and production of different types of electronic data (including social media and text and instant messages) and forms of data storage (“BYOD” and cloud storage). Although much discussed by commentators (and vendors of the technology), it is unclear to what extent predictive coding and other data analytics are being used to limit the costs and burdens of document review. Indeed, the use of search terms and human review remains the methodology used in the vast majority of cases. Undoubtedly, though, predictive coding is being used by some. Additionally, the Civil Rules Advisory Committee released for public comment proposed amendments to the Federal Rules of Civil Procedure, many of which address issues relevant to e-discovery.
This apparent general shift in focus–to the proactive rather than the reactive–is likely because many companies have recognized the importance of having policies, procedures and an infrastructure that ensure the defensible preservation–and deletion–of data. Nevertheless, while companies have been focused on implementing processes and systems to be able to comply with these obligations in good faith, they have also been faced with the sometimes enormous costs of doing so–particularly where hundreds or even thousands of a company’s employees may be subject to legal holds at any given time. As a result, some companies and their counsel are becoming increasingly vocal–and rightfully so–about what they perceive as unreasonable burdens imposed by a “broken system.” Although companies and their counsel take a much more reasoned approach, of course, the strong feelings can be reminiscent of the line from the 1976 film Network, “I’m mad as hell and I’m not going to take this anymore.”
Consequently, 2013 on the one hand appears to have been somewhat of a turning point for e-discovery, ushering in an era when many more litigants are aware of their e-discovery obligations than in the past and seek in good faith to comply with them. On the other hand, following the “great recession” that began in 2008, corporate legal departments have been under much more pressure than in the past to control legal spend, and companies are finding that the costs of fulfilling the requirements of the most demanding of the many inconsistent judicial decisions–particularly in an era of dramatically expanding data volumes and data sources–can be exorbitant.
We believe that companies in the coming year will increase their focus on not only complying with e-discovery obligations, but also on doing so in a manner that controls the enormous costs that can be involved. In part, they will seek to achieve this through the use of new technologies and more efficient workflows, such as through the use of predictive coding and other data analytics, and in part by seeking reform of a still-flawed system, such as through the proposed amendments to the federal rules.
Last year some predicted that information governance would be the hot topic of 2013. In many respects, they were right. Companies are increasingly recognizing the real costs and risks entailed with the proliferation of data–estimated to have grown approximately 40 to 60 percent for most companies in 2013 alone. Companies are also recognizing the significant benefits that can be achieved through properly managing its creation, organization and deletion. See generally Charles R. Ragan, Information Governance: It’s a Duty and It’s Smart Business, 19 Rich. J.L. & Tech. 12 (2013).
Of course, there are incremental costs of physically storing data (e.g., server space, electricity, etc.), but there are other less obvious costs associated with increased storage, such as additional expenditures on sophisticated IT software solutions, added security costs, capacity balancing costs, slower system performance, database management costs, and more expensive data migration. These costs add up–which is why nearly half of information technology professionals in a recent Microsoft survey described managing large data volumes as “extremely challenging.” See Microsoft, Global Enterprise Big Data Trends: 2013.
Moreover, having large volumes of uncontrolled and unorganized data can make e-discovery extremely costly. Recent studies have shown that effective information governance can save companies significant sums during e-discovery, by decreasing the volumes of data that must be reviewed for production purposes and by allowing companies to more efficiently search through these documents. This is particularly true of email communications, which can easily proliferate, and can lead to significant and unnecessary costs during e-discovery, and can effectively be managed through archiving, centralized and uniform retention periods, and even through end-user inbox control measures.
Although it may be counterintuitive, controlling and organizing a company’s data allows a company to decrease its risk of spoliation, simply by having less data that could be overlooked when instituting a litigation hold or collecting documents to disclose. A number of courts over the past year chided parties for failing to properly manage and organize their information, leading to potential spoliation issues. Controlling the proliferation of data, and making sure that data is organized and readily accessible in the event of litigation, can reduce the risks of spoliation. Poorly designed or ineffectively implemented information governance strategies can have serious consequences, and companies should make sure to consult with experienced and knowledgeable counsel when making decisions about information governance.
Additionally, as has become clear with the number of high-profile data breach incidents over the past few months alone, having more data can increase the consequences of a data breach, because more individuals’ records can be at risk, and as a result, the potential liability in any subsequent litigation, as well as the more immediate costs of providing notice and credit monitoring services, will likely be greater. By managing the creation, organization and retention of data, companies can minimize their exposure in the event of a data breach.
On top of managing and organizing their information, another considerable trend this year has been companies’ growing focus on implementing defensible deletion strategies to help reduce their stores of data, without subjecting themselves to sanctions for spoliation, which can come into play when a company implements a deletion policy in an indefensible manner–i.e., one that could be construed as non-content neutral and intended to delete potentially troublesome documents prior to litigation.
Given the ever-changing landscape in this area, and the significant (and potentially case-dispositive) sanctions that can result if courts believe a policy was either not designed or not implemented in a defensible fashion, companies should consult with informed counsel, either inside or outside, in order to make sure that their deletion policies are carefully calibrated to realize the efficiency benefits of deletion without subjecting themselves to unnecessary risks and potential costs.
Notwithstanding efforts to defensibly slim down retained data, the use and maintenance of electronic data are a necessary part of business. The types of electronic data and the locations on which it is stored continue to proliferate and change, thereby posing new questions for courts and litigants about the scope of litigants’ duties. Reflecting developments in technologies and our use of them, courts have over the past year issued decisions regarding the preservation and production of social media, text messages, and data contained on employees’ personal devices.
The number of cases involving social media evidence continues to skyrocket. For example, social media evidence played a key role in approximately 88 published cases in the month of September 2013 alone. This is a sharp increase from the first half of 2012, when evidence from social networking sites played a significant role in an average of 53 published cases per month.
Commentators and courts alike have noted that the use of social media evidence has become commonplace across all types of litigation. For example, plaintiffs are increasingly using social media evidence to attempt to establish minimum contacts for jurisdictional purposes (see, e.g., Daniels Agrosciences, LLC v. Ball DPF, LLC, No. CA 13-268 ML, 2013 WL 5310208, at *7 (D.R.I. Sept. 20, 2013)), and social media has become a regular source of more “traditional” evidence such as photos and messages.
While courts have become more familiar with social media evidence in general, they also continue to grapple with issues that are unique to social media, including the duty to preserve social media evidence, whether users have a privacy interest in their social media accounts, and the showing required for social media evidence to be admissible. In addition, given the increasing volume and costs of electronic discovery generally, and the privacy interests implicated in social media in particular, courts have continued to take innovative approaches to the collection of social media data.
Courts in 2013 particularly focused on the extent to which parties have an obligation to preserve social media during litigation, and whether the modification of social media constitutes sanctionable spoliation. Because social media is dynamic, account holders may delete information from their page or cancel their account altogether, without realizing that the information could be relevant to an anticipated or pending matter. In determining whether to award sanctions for spoliation of social media, courts focus on whether it was reasonably foreseeable that the information would be sought in discovery, and whether the users had a duty to preserve their account at the time the evidence was deleted. See, e.g., Gatto v. United Air Lines, Inc., No. 10-CV-1090-ES-SCM, 2013 WL 1285285, at *3-4 (D.N.J. March 25, 2013) (Mannion, Mag. J.).
Two courts recently held that sanctions were appropriate when the user deleted a Facebook account after receiving a discovery request for social media. See, e.g., Allied Concrete Co. v. Lester, 736 S.E.2d 699, 702, 705, 709 (Va. 2013) (upholding award of sanctions to the defendant, including an adverse inference jury instruction and $722,000 to cover the defendant’s fees and costs in defending against the misconduct, in part because the plaintiff acted “intentionally and improperly”); Gatto, 2013 WL 1285285, at *5 (granting adverse inference instruction without monetary sanctions when the plaintiff was “not . . . motivated by fraudulent purposes or diversionary tactics….”). Both courts found that, because the user clearly knew that the information was being sought in discovery, the duty to preserve the account had been triggered. In contrast, when a plaintiff deleted conversations on her Facebook account as part of her “normal practice,” prior to receiving discovery requests for social media, the court found that sanctions were not appropriate. Osburn v. Hagel, No. 2:12CV349-MHT, 2013 WL 6069013, at *3 (M.D. Ala. Nov. 18, 2013).
Another issue that courts dealt with was an individual’s privacy interest in social networking accounts and the effect, if any, of privacy settings on an opposing party’s ability to obtain social media data. Courts have continued to be overwhelmingly opposed to the notion that any protectable privacy interest exists in material posted on social network sites. See Nola Spice Designs, LLC v. Haydel Enters., Inc., No. 12-2515, 2013 WL 3974535, at *1 (E.D. La. Aug. 2, 2013) (Wilkinson, Mag. J.) (stating that the plaintiff was “certainly correct in its citation . . . to various court decisions holding that there is no protectable privacy or confidentiality interest in material posted or published on social media.”). See also Higgins v. Koch Dev. Corp., No. 3:11-cv-81-RLY-WGH, 2013 WL 3366278, at *2 (S.D. Ind. July 5, 2013) (Hussman, Mag. J.) (stating that no court has found privacy settings to make a difference to admissibility of social media content). For example, in Fawcett v. Altieri, the court reasoned that, “if you post a tweet, [it is] just like you scream it out the window, [and] there is no reasonable expectation of privacy.” 960 N.Y.S.2d 592, 596 (N.Y. Sup. Ct. 2013). The Fawcett court went on to hold that the personal privacy settings on an individual’s social networking account have no bearing on the admissibility analysis. Id. at 596–97.
The court in Higgins v. Koch Development Corporation applied the same reasoning to Facebook photos. In Higgins, the plaintiffs argued that granting the defendants’ request for full access to their Facebook pages would violate the privacy rights of third parties who had “tagged” the plaintiffs in their Facebook photographs and other information. 2013 WL 3366278, at *1. The court disagreed, concluding instead that “once the plaintiff was tagged in the photos, they became in plaintiff’s possession, custody, or control” and, thus, discoverable regardless of the third party’s own privacy settings. Id. at *3 (internal quotation marks omitted).
Although courts generally have found that privacy interests have no effect on admissibility, they have required a “threshold” showing of relevancy for evidence to be admissible. Johnson v. PPI Tech. Servs., L.P., No. 11-2773, 2013 WL 4508128, at *2 (E.D. La. Aug. 22, 2013) (Knowles, Mag. J.) (requiring a threshold showing so that the party seeking discovery is not granted “unfettered access” to the opposing party’s social networking accounts); see also Salvato v. Miley, No. 5:12-CV-635-Oc-10PRL, 2013 WL 2712206, at *2 (M.D. Fla. June 11, 2013) (Lammens, Mag. J.) (deeming overbroad a discovery request for all user names and passwords for every social media site as well as all communications sent or received through social networking sites because such requests “essentially sought permission to conduct a ‘fishing expedition.'”).
Courts have differed in their approaches to determining what constitutes the requisite “threshold” showing. The Fawcett court, for example, held that a party wishing to compel discovery of a private social media account must simply establish “some credible facts” showing that the content posted by the adverse party is relevant to the case at hand. 960 N.Y.S.2d at 597. Another court, however, found that the party seeking production must show more–that the publicly available information on a social media site undermines the opposing party’s claim or defense. Holder v. AT&T Servs., Inc., No. 3:11-0076, 2013 WL 5817575, at *3 (M.D. Tenn. Oct. 29, 2013) (Knowles, Mag. J.).
The question of who should bear the burden of collection and review also becomes more important as the volume and costs of electronic discovery increase. Most courts in 2013 required the account holder to gather and review the data from social networking accounts, and provide it directly to the defendant. See, e.g., Giachetto v. Patchogue-Medford Union Free Sch. Dist., 293 F.R.D. 112, 117 (E.D.N.Y. 2013) (Tomlinson, Mag. J.) (requiring the plaintiff’s counsel to review the plaintiff’s social network postings for relevance). This approach makes sense, given that it is typical of how most discovery is conducted, and it protects the account holder’s privacy to the extent possible.
Courts also sometimes grant themselves the authority to conduct an in camera review in the first instance to determine the relevance of the social media content being sought. See, e.g., Nieves v. 30 Ellwood Realty LLC, 966 N.Y.S.2d 808 (App. Term 2013) (requiring the court to review a plaintiff’s Facebook records in camera but noting that the court could instead order the plaintiff to review her own account); Pereira v. City of New York, No. 26927/11, 975 N.Y.S.2d 711 , at *2 (N.Y. Sup. Ct. 2013) (stating that the court would conduct an in camera inspection because of the likely presence of material that was private in nature and irrelevant to the litigation). Another option courts have employed is to appoint a neutral third party special master to collect and review social media data (E.E.O.C. v. Original Honeybaked Ham Co. of Georgia, Inc., No. 11-cv-02560-MSK-MEH, 2012 WL 5430974 (D. Colo. Nov. 2, 2012) (Hegarty, Mag. J.)) but shift the cost burden onto the party seeking discovery (E.E.O.C. v. Original Honeybaked Ham Co. of Georgia, Inc., No. 11-cv-02560-MSK-MEH, 2013 WL 753480, at *1 (D. Colo. Feb. 27, 2013) (Hegarty, Mag. J.)).
In general, courts have been reluctant to permit (or require) parties to obtain data directly from site hosts, on the ground that the account holder of the social media site is better positioned to produce the discoverable material. In fact, in Giachetto, the court held that there was no reason for the defendant to go through a third party site to access the plaintiff’s social networking postings when the plaintiff had direct access to the information herself. 293 F.R.D. at 117.
Text and instant messages are becoming an increasingly common form of communication and may be the subject of litigation holds and discovery requests when they are relevant to the issues in dispute. Of course, many or even all of these messages, even in the work context, may be non-substantive and personal, such as where to meet for lunch. See Gareth Evans, Embracing the Use of Mobile Devices in E-Discovery; Gareth Evans & Lauren Eber, Is Instant Messaging the Next Email?
As discovery disputes concerning text and instant messages have increased, however, so have decisions on whether there was a duty to preserve and produce this type of data under the circumstances of the case. See, e.g., Ewald v. Royal Norwegian Embassy, No. 11–CV–2116 SRN/SER, 2013 WL 6094600 (D. Minn. Nov. 20, 2013) (holding that the plaintiff was entitled to discovery of text and voice messages contained on the company-issued mobile phone of the defendant’s employee). In In Re Pradaxa (Dabigatron Exterilate) Prods. Liab. Litig., MDL No. 22385, 2013 WL 6486921 (S.D. Ill. Dec. 9, 2013), the court found there was a duty to suspend auto-delete systems that operate on relevant text messages and imposed nearly $1 million in sanctions for having failed to do soon company-issued smart phones, among other things. The court found that the plaintiffs had expressly requested the text messages by asking for text messages in the boilerplate definition of “document,” but the defendants failed to halt the auto-programmed delete function for text messages once a litigation hold was in place.
The case law so far remains consistent with the guidance issued by The Sedona Conference® in 2011 that there is no duty to preserve instant or text messages if a party does not routinely save those messages and litigation is not anticipated. In PTSI, Inc. v. Haley, 71 A.3d 304, 317 (Pa. Super. Ct. 2013), the court denied a spoliation motion where the defendants “routinely deleted text messages, often on a daily basis, so as not to unduly encumber their iPhones.” The court found that, because of the presumed “volume of text messages that are frequently exchanged by cell phone users and the limited amount of storage on cell phones, it would be very difficult, if not impossible, to save all text messages and to continue to use the phone for messaging.” The court further reasoned that “[h]ere, there has been no showing that the innocent clean-up of personal electronic devices to allow them to function was unusual, unreasonable or improper under the circumstances.”
Although courts have acknowledged the difficulty of preserving text and instant messages and the possibility of accidentally losing data, some have nonetheless been willing to grant sanctions for negligence in the failure to preserve relevant messages. See, e.g., Christou v. Beatport, LLC, No. 10-CV-02912-RBJ-KMT, 2013 WL 248058 (D. Colo. Jan. 23, 2013) (denying a motion for an adverse inference instruction but granting the lesser sanction of admitting evidence of a party’s failure to follow the litigation hold notice, when the party had negligently or accidentally lost his cell phone, with all text messages, but where no evidence existed to suggest that relevant text messages actually existed); but see also Lakes Gas Co. v. Clark Oil Trading Co., 875 F. Supp. 2d 1289 (D. Kan. 2012) (declining to deny the plaintiff’s summary judgment motion as a sanction for destroying instant messages and emails, where there was no showing of bad faith, and the relevance of the instant messages and emails was only speculative).
The rising popularity of Bring Your Own Device (BYOD) programs, which allow employees to use their personal devices for business purposes, raises a host of additional discovery issues. BYOD programs blur the lines between employee and employer property with the comingling of personal and work data. The question of whether discovery obligations attach to personal devices generally turns on whether the device in question is within the “possession, custody, or control” of the employer, under Federal Rule of Civil Procedure 34. The particular legal standards vary by jurisdiction, but courts have generally shown an inclination to impose preservation and production obligations on employees’ mobile devices, where those devices were used for business purposes. See, e.g., In Re Pradaxa, 2013 WL 6486921, at *18.
The reverse is also true. Where employees’ mobile devices were not used for business purposes, some courts have found that they are not in the “possession, custody, or control” of the employer. In Cotton v. Costco Wholesale Corp., Case No. 12-2731, 2013 WL 3819975 (D. Kan. July 24, 2013) (Sebelius, Mag. J.), for example, the court held that because the plaintiff could not show either that the personal phones under dispute were issued by Costco or that the employees used their personal cell phones for any work purpose, the phones were not within Costco’s “possession, custody or control.” The court implied that if the employees had used their personal devices for work, then the company would have had a duty to preserve the data. Similarly, in Han v. Futurewei Technologies, Inc., No. 11–CV–8310-JM (JMA), 2011 WL 4344301 (S.D. Cal. Sept. 15, 2011) (Adler, Mag. J.), the court denied a motion to get discovery of personal laptops, after files had been deleted from a company-issued laptop, where the personal laptops were not used for business purposes.
BYOD programs raise a host of additional issues, including when deletion software may be used on lost, stolen, or surrendered devices, and whether an employee’s consent is necessary to retrieve data from their devices (which can be addressed with a BYOD policy). These issues are among those courts are likely to address over the coming years.
The emergence of predictive coding–and the approval of its use in several decisions–was the big story in 2012. So what happened with predictive coding in 2013? Precious little it would seem, at least from a superficial view, as very little appeared about predictive coding in decisions that saw the light of day.
Predictive coding utilizes machine-learning technologies to categorize an entire set of documents as responsive or nonresponsive, based on human review of only a subset of the documents, known as “sample sets.” It has been reported that through use of a proper process, including validation through statistical sampling, predictive coding can achieve rates of recall (how well a process retrieves relevant documents) and precision (how well a process retrieves only relevant documents) at least equal to that of traditional “manual” (i.e., human) review, while substantially reducing the overall costs of review. Of course, results may vary and putting a large volume of documents into a predictive coding tool itself can be prohibitively expensive at current rates.
Why, then, has the predictive coding front appeared to be so quiet this past year? We suspect that part of the story is that predictive coding may be becoming less often a matter of dispute between the parties. Given that the results of predictive coding can be tested, and those results are generally reported to be at least equal to the commmonly used approach of reviewing “hits” on keywords, predictive coding is claimed to offer advantages to both the responding party (cost savings, accuracy and speed) and the requesting party (accuracy–i.e., avoiding “document dumps”–and speed). Consequently, predictive coding protocols are, in at least some matters that we are aware of, being quietly agreed to by the parties without any fanfare.
Slow adoption of a new technology may also be part of the story. Although predictive coding and other forms of computer assisted review–e.g., various forms of data analytics–have received a lot of attention within the “bubble” of the e-discovery community, awareness outside of it still appears to be quite limited, and growing at what can seem like a very slow pace. Changing the habits of attorneys accustomed to having used (for two or more decades, in some cases) an established process built around the use of search terms is turning out to be slow going.
Clearly, another part of the story is that the hype of 2012 is wearing off and the traditional approach of using key words and human review works very well in most cases. It is the responding parties’ right, of course, to decide which methodologies and technologies they may employ to identify and produce relevant and responsive documents. As The Sedona Conference® has recognized, “[r]esponding parties are best situated to evaluate the procedures, methodologies and technologies appropriate for preserving and producing their own electronically stored information.” The Sedona Principles: Best Practices, Recommendations & Principles for Addressing Electronic Document Production, Principle 6.
Although predictive coding can be attractive to companies dealing with large data volumes and extremely expensive document review costs, it should come as no surprise that they many companies may consider the demands of some plaintiffs’ counsel to get intimately involved in the predictive coding process–even participating in the review of sample sets–to be a non-starter. Indeed, it was likely not helpful that defendants had voluntarily agreed to such terms as a condition for using predictive coding in some of the early reported decisions in 2012. In any event, arguments in favor of having access to the entire sample set–or to participate in its review–seem to hold little, if any, water. In a traditional “manual” review, for example, the requesting party is not entitled to see irrelevant documents or to train the responding party’s reviewers.
The tide seemed to be turning in that regard in 2013. In In Re: Biomet M2A Magnum Hip Implant Products Liability Litig., No. 3:12-MD-2391, 2013 WL 6405156 (N.D. Ind. Aug. 21, 2013), the court rejected the plaintiffs’ request to review the entire seed set–including documents determined to be irrelevant–used for training the predictive coding tool. Commenting that “I’m puzzled as to the authority behind [the plaintiffs’] request,” the court observed that Federal Rule of Civil Procedure 26(b)(1) only makes relevant, non-privileged information discoverable. The best that plaintiffs could muster was that the defendant purportedly was not proceeding “in the cooperative spirit” that The Sedona Conference’s “Cooperation Proclamation” and the Seventh Circuit’s e-discovery Pilot Project recommend. Although the court agreed with plaintiffs that the defendant’s cooperation was lacking, it held that the defendant was correct that it did not have to produce the seed set. See Matt Nelson & Adam Kuhn, In Re: Biomet Order Addresses Hot Button Predictive Coding Issue.
Similar to Biomet, the court in Gordon v. Kaleida Health, No. 08-CV-378S(S), 2013 WL 2250579 (W.D.N.Y. May 21, 2013), denied plaintiffs’ motion to compel defendant to permit plaintiff to be involved in the details of the predictive coding process. See John Tredennick, None of Your Beeswax! (Or, Do I Have to Invite Opposing Counsel to my Predictive Ranking Party?).
Another factor slowing widespread adoption of predictive coding has been that vendor pricing for using such tools has, at times, been viewed as unappealingly high–particularly in the large document volume cases where predictive coding is most needed. Fortunately, pricing appears to be coming down.
We expect the use of predictive coding and other analytics to increase in 2014, although at a slower pace than generally expected in the heady days of 2012 when judicial decisions first approved its use.
The proposed amendments to the Federal Rules of Civil Procedure addressing discovery issues, which have been in the works since the so-called “Duke Conference” in 2010, reached an important juncture this past year, with a package of proposed amendments released for public comment on August 15, 2013. See generally Thomas Y. Allman, The ‘Package’ of Discovery Amendments Released for Public Comment on August 15, 2013. The following proposed amendments garnered the most attention:
Rule 1 currently provides that the Federal Rules are to be “construed and administered” to achieve “the just, speedy, and inexpensive determination of every action and proceeding.” In 2012, the Civil Rules Advisory Committee was considering adding a requirement that the parties “cooperate to achieve these ends.” Following substantial opposition at the 2012 Mini-Conference in Dallas, arising out of concerns that cooperation is an amorphous concept and the language would only give rise to more disputes (e.g., with the parties accusing each other of “failing to cooperate”), the Committee dropped that language. Instead, the Committee has opted to propose language that the FRCP are to be “employed by the court and the parties” to secure the just, speedy and inexpensive determination of each matter.
Timing of Document Requests
To help focus discussion at the Rule 26(f) early meeting of counsel, the current prohibition under Rule 26(d)(1) against serving document requests before that meeting would be eliminated; but the time to respond would not begin running until after it takes place.
Preservation and Claw Backs
The 2006 Amendments to the FRCP encouraged parties to discuss “issues about preserving discoverable information” in Rule 26(f) meetings of counsel. The Committee has proposed adding to that a requirement in Rule 26(f) that the “discovery plan” that the parties must prepare for the Rule 16 scheduling conference must include any unresolved issues about preservation and whether the parties seek court approval of any privilege claw back agreements under Federal Rule of Evidence 502. Proposed amendments to Rule 16(b)(3) provide for these topics to be included in scheduling orders.
Scope of Discovery
The Committee has proposed amending the scope of discovery under Rule 26(b)(1) to limit it to matters relevant to any party’s claim or defense “and proportional to the needs of the case” considering the proportionality factors currently set forth in Rule 26(b)(2)(C)(iii) (i.e., the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake, and the importance of the discovery in resolving the issues). The Committee Note states that limiting the scope of discovery to what is proportional to the needs of the case is necessary because “excessive discovery occurs in a worrisome number of cases, particularly those that are complex, involve high stakes, and generate contentious adversary behavior.”
The proposed amendments would delete the current language in Rule 26(b)(1) permitting, for good cause, a court to order discovery of any matter “relevant to the subject matter” of the action. They would also remove the language that relevant information need not be admissible at trial if it “appears reasonably calculated to lead to the discovery of admissible evidence.” The Committee Note clarifies that discovery is not justified “simply because it is ‘reasonably calculated’ to lead to discovery of admissible evidence.” Rather, a matter would only be discoverable when it is “otherwise within the scope of discovery,” i.e., when it is “relevant to a party’s claim or defense and proportional to the needs of the case.”
Limits on Depositions, Interrogatories and RFAs
The proposed amendments would significantly reduce the presumptive number of oral depositions from the current ten to five, with the time limited to one six-hour day (instead of the current seven). Interrogatories would be reduced from 25 to ten. Requests for admission, which currently have no limit, would be limited to 25 (except as to those regarding the genuineness of any described document).
Rule 26I currently provides that a court, for good cause and to protect a responding party from undue burden or expense, may “specify terms” for the discovery. It does not explicitly state that such terms include cost shifting, although some courts have recognized that courts have that authority. The Committee has proposed amending Rule 26I to expressly acknowledge that a court may protect a party from undue burden or expense by an “allocation of expenses.” The proposed Committee Note states that “courts are coming to exercise this authority” and its explicit recognition “will forestall the temptation some parties may feel to contest” it.
The Committee has proposed an overhaul of Rule 37(e) designed to impose a uniform national standard for spoliation sanctions and to preclude the imposition of sanctions based upon negligence. Many commentators have questioned whether the proposed amendment would achieve those goals.
Proposed Rule 37(e) would take a bifurcated approach to address a party’s failure to preserve discoverable information “that should have been preserved.” On the one hand, the court could order “curative measures” (including, but not limited to, additional discovery or payment of reasonable expenses, including attorney’s fees) without any showing of culpability of the responding party or prejudice to the requesting party. On the other hand, to order a sanction set forth in Rule 37(b)(2)(A)–e.g., evidence preclusion, claim preclusion, and case terminating sanctions–or an adverse inference jury instruction, the court would be required to find that the responding party’s actions either (i) “caused substantial prejudice” and were “willful or in bad faith;” or (ii) that they “irreparably deprived a party of any meaningful opportunity to present or defend against the claims.”
The proposed rule also provides a list of factors that the court should consider in determining whether the failure was “willful or in bad faith.” Those factors include “the extent to which the party was on notice that litigation was likely and that the information was discoverable;” “the reasonableness of the party’s efforts to preserve information;” whether the party received a preservation request; and “the proportionality of the preservation efforts.”
Most of the written comments submitted to the Rules Committee about the proposed rules have been from self-identified plaintiffs’ lawyers, very few of whom have expressed support for the amendments. They have particularly objected to the proposed limitations on the scope of discovery, including the proportionality requirement, and the limits on the number of depositions, interrogatories and requests for admission. There has been some level of criticism from all sides regarding proposed Rule 37(e), including that “willful” could include negligence in some jurisdictions–thus defeating the goals of national uniformity and precluding sanctions based on negligence–and that many “remedial” measures could be indistinguishable from “sanctions,” yet no finding of culpability or prejudice would be required.
The first public hearings on the proposed package of amendments took place on November 7, 2013, and additional hearings are scheduled in January and February 2014. Public comment on the proposed amendments will be accepted until February 15. If the proposed amendments–subject to whatever further revisions the Committee makes–are approved by the Judicial Conference, the Supreme Court and Congress, they would take effect on or after December 1, 2014.
While 2013 for the most part did not feature the same sort of “blockbuster” sanctions decisions as in prior years, this year’s sanctions opinions reinforce several themes from prior years: Courts are generally addressing e-discovery issues with increased sophistication and nuance, and they expect parties to fulfill all e-discovery responsibilities.
Various decisions highlighted the need for parties to consider adjustments to automatic deletion policies as part of litigation-related preservation obligations. See Pillay v. Millard Refrigerated Servs., No. 09 C 5725, 2013 WL 2251727, at *5 (N.D. Ill. May 22, 2013) (allowing adverse inference instruction following automatic deletion of computer data if jury found deletion was intentional or reckless and in bad faith). Other normal procedures may also need tweaking; the operation of the corporate technology policy earned sanctions for the defendant in EEOC v. Ventura Corp., 11-1700 (PG), 2013 WL 550550 (D.P.R. Feb. 12, 2013). There, a software migration caused the loss of emails and an office restructuring caused further document loss, after a duty to preserve had arisen in connection with reasonably anticipated litigation. Id. at *2. The court ordered preclusion of certain defense evidence and an adverse inference instruction. Id. at *7.
Perhaps the only “blockbuster”-type sanctions opinion came late in 2013. Repeatedly missing discovery deadlines, among other issues that started small and ballooned into bigger problems, led to significant sanctions in the nationwide multi-district litigation over the pharmaceutical Pradaxa. Chief Judge David Herndon imposed nearly $1 million in sanctions against the drug maker for what the court characterized as “astounding” and “egregious” discovery violations in bad faith–but without an explicit finding that any evidence had been destroyed. In re Pradaxa Prods. Liab. Litig., MDL No. 2385, 2013 WL 6486921 (S.D. Ill. Dec. 9, 2013). See also Gareth Evans, Perils of E-Discovery Reflected in Sanctions Opinion.
The court faulted the defendants for failing to timely identify a key custodian of relevant evidence; failing to impose a broad enough litigation hold on all relevant sales representatives; failing to produce documents (through a vendor) from all parts of their computer networks; and failing to preserve text messages on relevant employees’ phones. Id. at *18-20. The plaintiffs were fastidious in documenting and reporting to the court each instance of the defendants’ alleged discovery shortcomings. And the court lambasted the defendants for failing to adhere to discovery orders, disbelieving the defendants’ claim that they were unprepared for the sheer size and scope of the litigation and that their vendors and IT departments had made errors, including failing to provide the vendor with a password. Id. at *6-7.
The defendants added that they had not immediately recognized their obligation to produce text messages because of the medium’s lesser prominence as a form of communication and its being buried within the plaintiffs’ boilerplate definition of “document.” Id. at *16-17. The court rejected this excuse so late in the litigation after months of discovery disputes and orders, emphasizing that document production must be an active process in which counsel and party ensure the production of relevant documents. Id. at *17-19.
The number and frequency of the violations ultimately exhausted the court’s patience. Having issued a $29,000 fine in September (id. at *4) the court in December addressed the “cumulative effect” (id. at *2) of alleged violations, stating that the defendants’ continuing conduct suggested “a failed strategy regarding production evasion,” and convinced the court that “such maneuvers are by design” (id. at *15-16). In addition to ordering reimbursement of plaintiffs’ costs and fees in bringing the sanctions motion, the court ordered $931,500 in sanctions (apparently payable to the court) to send a “forceful message” to the defendants that “compliance with the Court’s orders is not an optional part of litigation strategy.” Id. at *20. The defendants have appealed the decision.
The Pradaxa case makes clear that e-discovery errors, left to fester, can swell into large sanctions awards, and seeking forgiveness for missed discovery deadlines may be as costly as the sheer failure to produce at all.
Other cases, too, showcased courts insisting on active participation in discovery and refusing to let counsel off the hook for delay–including a rare opinion on e-discovery sanctions from a federal appellate court. In Moore v. CITGO Refining & Chemicals Co., 735 F.3d 309, 316-17 (5th Cir. 2013), the Fifth Circuit affirmed the lower court’s dismissal of an employment class action due to the plaintiffs’ failure to preserve ESI (largely personal emails) among other e-discovery failures. And in a surprising order, the appellate court (over a dissent) increased the district court’s cost award to the defendant, finding that the comparative wealth of the parties was an improper basis to reduce the cost award. Id. at 319-20.
Moore was not the only decision where the plaintiff came under fire for failure to preserve–a switch from the more common scenario of sanctions for e-discovery violations falling on the defendant. In Branhaven, LLC v. Beeftek, Inc., 288 F.R.D. 386, 388-89 (D. Md. 2013), the court imposed attorney’s fees jointly and severally against the plaintiff and its counsel after plaintiff’s counsel certified under Fed. R. Civ. P. 26(g) that the lawyer had received access to all relevant client documents–despite the lack of such access, particularly to email servers. The court faulted the plaintiff and its counsel for delaying in retaining an e-discovery vendor and for delaying in undertaking the work necessary to provide a reasonable response to the defendant’s discovery requests. Id. at 390. And similar costs were imposed on the defendant in Peerless Indus. v. Crimson AV, LLC, No. 1:11-1768, 2013 WL 85378 (N.D. Ill. Jan. 8, 2013), faulted for, in the court’s view, having taken an unacceptable “hands-off approach” to the production of documents from a non-party supplier closely linked (by a common principal) to the defendant.
Although the ever-changing nature of technology necessarily means that the law of e-discovery must also constantly evolve, 2013 witnessed what may be the beginning of a new era of stability, foresight, and proactivity. The developments in the law of e-discovery that have occurred over the last several years have shed enough light on the uncertainty that previously enshrouded e-discovery that litigants now have the opportunity and means to be proactive and mitigate against some e-discovery risks. Based on the relative absence of blockbuster cases in 2013, it appears that many litigants are taking full advantage of the lessons of the past. New challenges have arrived already, however, such as the proliferation of mobile computing devices and increased use of cloud storage. More are certain to come.
Additionally, the legal regime in which litigants must operate remains deeply flawed. Established notions of the scope of discovery date back to a time of paper documents and are not well tailored to the enormous volumes and complexity of electronic data. Moreover, there is a lack of uniformity in the legal standards used to judge litigants’ efforts, and the thresholds for imposing harsh sanctions can be very low. While there is no question that reform through amendments to the Federal Rules of Civil Procedure is needed, it is not at all apparent whether the amendments currently being proposed will achieve their intended effect of fixing a broken system.
Gibson Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. The Electronic Discovery and Information Law Practice Group brings together lawyers with extensive knowledge of electronic discovery and information law. The group is comprised of seasoned litigators with a breadth of experience who have assisted clients in various industries and in jurisdictions around the world. The group’s lawyers work closely with the firm’s technical specialists to provide cutting-edge legal advice and guidance in this complex and evolving area of law. For further information, please contact the Gibson Dunn lawyer with whom you work or any of the following Co-Chairs of the Electronic Discovery and Information Law Practice Group:
Gareth T. Evans – Orange County (949-451-4330, email@example.com)
Jennifer H. Rearden – New York (212-351-4057, firstname.lastname@example.org)
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