July 16, 2014
The developments in the first half of 2014 demonstrate that this is an exciting–and ever more challenging–time to be involved in e-discovery. E-discovery is being impacted like never before by the revolution in big data analytics and new forms of communicating and interacting, such as text messaging, instant messaging and social media–so much so that if current trends continue through the second half of the year, which we expect, then 2014 will be, in our view, the "year of technology" in e-discovery.
The broader availability and increased use of powerful new data analytics tools for investigating and identifying the important facts early in a matter are a major development in the first half of this year. Although predictive coding technology has been around for some time, and there continue to be few reported decisions about it, anecdotal evidence suggests that there has been a notable increase in litigants’ consideration of predictive coding in 2014.
Information governance and defensible deletion of unnecessary data have remained a very hot topic for companies in the first half of 2014, perhaps even eclipsing 2013, and much of the discussion has related to the use of technology in implementing information governance programs.
New e-discovery software and hosting solutions delivered through the cloud, while giving rise to their own risks, now allow companies and law firms to insource e-discovery technical work without having to make the enormous investments in hardware, software and support that previously would have been required for an "on premises" solution. Companies, for their part, are insourcing more of the e-discovery process, while e-discovery service providers (aka vendors) are changing their pricing models to better fit a rapidly evolving market.
Many of the reported decisions in e-discovery now involve technologies and trends that largely post-date the era when email was the only or primary means of electronic messaging and interaction–e.g., text messaging, instant messaging, personal devices, BYOD, and social media. That said, email continues to be the primary means of business communication.
Additionally, in a landmark decision, the United States Supreme Court unanimously held in Riley v. California on June 25, 2014, that the Fourth Amendment generally requires law enforcement to obtain a warrant before reviewing digital information that is stored on a smart phone seized incident to arrest. In its opinion, the Court emphasized the privacy interests involved, stating that "it is no exaggeration to say that more than 90% of American adults who own a cellphone keep on their person a digital record of nearly every aspect of their lives." See Riley v. California, No. 13-123, slip op. at 9, 19-20 (June 25, 2014). See generally U.S. Supreme Court Extends Fourth Amendment Protection to "Digital" Searches for the First Time in Landmark Decision. While the impact of the Supreme Court’s decision on e-discovery in civil litigation remains to be seen, it has already been cited in at least one lower court decision denying the plaintiffs’ request to inspect the data from the cell phones of several of the defendant’s employees on the ground that the request was overly broad and too intrusive.
As always, sanctions remain an important topic. But they are being overtaken by a heightened focus on new technologies for dealing with the challenges of e-discovery, such as dramatically increasing data volumes, along with the challenges of new technologies being used for communication and work in our society.
Finally, the proposed Federal Rule Amendments have entered their next phase, with further revised proposed amendments recently being issued and approved by the Committee on Rules of Practice and Procedure of the Judicial Conference. Most noteworthy is a complete reworking of the proposed amendment to the Rule 37(e) sanctions provisions intended to address concerns raised during the public comment period last year. The next step in the process will be the Judicial Conference’s approval of a set of proposed amendments in September 2014.
We invite you to review our analysis of developments in the e-discovery areas below.
Table of Contents
This year is shaping up to be the year of technology in e-discovery. Powerful new data analytics tools are becoming available. More litigants appear to be considering using predictive coding. E-discovery technology provided through the cloud has hit the market, allowing companies and law firms to insource e-discovery services without having to make considerable investments in hardware and software. Companies are leveraging technology to insource more of the e-discovery process and providers of technical e-discovery services are adjusting their pricing and service models. Effectively using emerging technologies, however, requires the advice of counsel and technical personnel with the appropriate knowledge, skills and experience, both in their use and in evolving best practices and judicial standards.
The availability and increased use of powerful new data analytics tools for investigating and identifying the important facts early in a matter are a major development. Big data analytics capabilities that are now being incorporated into some e-discovery applications can provide powerful insights into large document populations and significant advantages to those who effectively use them.
Although often inaccurately used as a synonym for predictive coding, technology assisted review, or "TAR," in fact more broadly encompasses leveraging various smart technologies in analyzing, searching and reviewing electronically stored information. Visual analytics is one such smart technology that appears to provide capabilities that "early case assessment" or "ECA" applications promised a few years ago but largely did not deliver–i.e., allowing early analysis of a large document population and finding important facts promptly.
Unlike earlier ECA tools, which generally provided relatively limited information about the document population based on metadata, visual analytics tools use latent semantic analysis and other algorithms to analyze the content of documents and group them by various criteria, such as subject matter. These tools can provide visual summaries of the grouped documents that the user can then use to "drill down" to various levels, including individual documents.
Such tools can be effective in quickly identifying key information, which can be valuable in understanding the facts at the outset, developing a case strategy, and producing responsive documents expeditiously. In addition to being used in litigation, such tools can be well suited to in internal and regulatory investigations, where getting to the key facts quickly not only will be beneficial but also may be critical.
Although predictive coding technology has been around for several years, there continue to be few reported decisions about it. Anecdotal evidence suggests, however, that it is more frequently being considered as a methodology for review. That said, the use of predictive coding has not yet become widespread–far from it. Yet, litigants and their counsel appear to be gaining more familiarity with predictive coding as an option, and also with the types of factors that should be considered in whether it might be appropriate (or not) for their cases..
The apparent increase in litigants’ consideration of predictive coding likely arises from many factors, but it may have been assisted, at least in part, by last year’s decision in In Re: Biomet M2A Magnum Hip Implant Products Liability Litig., 2013 WL 6405156 (N.D. Ind. Aug. 21, 2013), that parties are not required under the Federal Rules of Civil Procedure to share with opposing counsel the sets of documents used to train the predictive coding tool. Calls to permit the requesting party to see and even to participate in the review of training sets–made generally by plaintiffs’ class counsel with few documents to produce themselves and an incentive to make the process more burdensome–have undoubtedly dampened enthusiasm for predictive coding. In Biomet, Judge Ronald J. Miller of the Northern District of Indiana rejected plaintiffs’ request to review the training sets, holding that the request was "well beyond the scope of any permissible discovery by seeking irrelevant or privileged documents used to tell the algorithm what not to find. That [plaintiffs have] no right to discover irrelevant or privileged documents seems self-evident."
Additionally, various courts’ favorable statements about the technology this year and in the past also may have allayed some of the concerns companies and their counsel may have about the technology. For example, in Federal Housing Finance Agency v. JPMorgan Chase & Co., Inc., et al., 2014 WL 584300, at *3 (SDNY Feb. 14, 2014), District Judge Denise Cote indicated in a reported decision this year that she had approved the use of predictive coding over the objections of the plaintiff at a hearing earlier in the case. At that earlier hearing, Judge Cote is quoted in the transcript as having stated that "[i]t seems to me predictive coding should be given careful consideration in a case like this, and I am absolutely happy to endorse the use of predictive coding and to require that it be used as part of the discovery tools available to the parties." Id. (transcript of Jul. 24, 2012 hearing at 8). Additionally, in Progressive Casualty Ins. Co. v. Delaney, 2014 WL 2112927, at *8-9 (D. Nev. May 20, 2014), Magistrate Judge Peggy Leen described in very positive terms the potential effectiveness of predictive coding and stated that she would not have hesitated to approve a predictive coding protocol had it been submitted earlier in the case.
The Progressive decision highlights, however, that parties seeking to use predictive coding (or to compel its use by the other side) may be well advised not to raise the issue late in the document review and discovery process. The parties in Progressive had earlier agreed to a stipulated electronically stored information ("ESI") protocol that provided for the use of search terms and human review, not predictive coding. Several weeks before the discovery cutoff, and in opposition to a motion to compel, the plaintiff disclosed for the first time its proposal to use predictive coding to review the 565,000 documents that hit the agreed upon search terms. The court rejected the plaintiff’s proposal, holding that it could not unilaterally and at such a late time "abandon" the search terms plus human review protocol to which it had previously agreed. See id. at *9-11. As discussed below, several aspects of the Progressive decision are controversial and have been rightly criticized. But, in its best light, Progressive is somewhat reminiscent of the well-known Kleen Products decision in 2012, in which Magistrate Nan Nolan of the Northern District of Illinois rejected plaintiffs’ late request to compel defendants to use predictive coding.
There have been a couple of other references to TAR in reported decisions so far this year. In Chen-Oster v. Goldman, Sachs & Co., 2014 WL 716521 (S.D.N.Y. Feb. 18, 2014), plaintiffs sought to compel Goldman Sachs to produce all documents hitting agreed-upon search terms without further review. Magistrate Judge James Francis IV of the Southern District of New York observed that with technology-assisted review (Judge Francis considered the use of search terms to be a form of TAR), parties can agree to produce documents without human review, but the parties had not done so in this case. Absent such an agreement, Judge Francis held the parties’ mere agreement to a search-term protocol did not override the defendant’s right to review the search term hits to ensure that it was producing only documents that were non-privileged, relevant, responsive and not subject to its objections. See id. at *1.
Predictive coding also was mentioned in United States v. ExxonMobil Pipeline Co., 2014 WL 2593781 (E.D. Ark. Jun. 10, 2014). In an increasingly common scenario, the defendants sought an extension of the deadline to produce documents in response to the plaintiff’s requests and, as a result, a potential extension of the entire case schedule, due to the burden of reviewing a large volume of documents. The defendants informed the court that they had proposed to the plaintiff using predictive coding, but the plaintiff had not yet agreed. The court declined to rule on using predictive coding, however, because there was "no indication in the parties’ submissions that they seek the Court to resolve disputes as to the method of review to be utilized[.]" Id. at *2. As in Progressive, ExxonMobil reflects the importance of developing a workable search and review methodology early rather than late in the discovery process.
Although predictive coding has been available for e-discovery for several years, some misconceptions about its use appear to persist and may cause litigants to be wary of using the technology. One all-too-common misconception is that parties seeking to use predictive coding are required to allow the requesting party to be involved in the process, including reviewing and having input into the coding of the training sets. Unfortunately, the court in Progressive further propagated that misconception by stating that in the reported decisions that have approved predictive coding, "the courts have required the producing party to provide the requesting party with full disclosure about . . . the documents used to ‘train’ the computer." See Progressive, 2014 WL 2112927, at *10 (emphasis added) (citing Da Silva Moore and In re: Actos).
In both Da Silva Moore and In re: Actos, however, and in the other early cases in which predictive coding took its first, tentative steps, however, the producing parties in fact voluntarily agreed to disclose the training sets–an important distinction from Judge Leen’s assertion that the courts "required" disclosure. That assertion, moreover, ignores the holding in Biomet that irrelevant documents in training sets need not be disclosed. So long as this misconception persists, particularly among courts, parties will likely be concerned about how training sets will be treated by courts in a predictive coding process.
Another concern that litigants considering predictive coding may have is that they may be required to produce without further review all documents that the tool identifies as likely relevant and responsive–a thought that understandably makes many shudder with anxiety about documents being produced sight unseen to a hostile party. Judge Francis’ decision in Chen-Oster holding that, unless a party expressly agrees otherwise, it is entitled to review its own documents identified by a TAR process as potentially responsive, provides some ammunition to rebut any argument that the party using predictive coding should not be permitted to review the documents that the tool identifies as likely responsive.
A still enduring concern among non e-discovery practitioners appears to be that the technology is somehow suspect and that judges will not approve it. Dispelling that notion was clearly one of Magistrate Judge Andrew Peck’s motivations in issuing his DaSilva Moore opinion in 2012, and several other decisions quickly followed. Since that time, a number of other judges have spoken favorably of predictive coding both in written decisions and on the record in hearings.
We expect that the trends in TAR that we have seen in the first half of this year–the appearance of more powerful analytics tools and an apparent increase in the consideration of predictive coding–will continue and gain additional steam. With the increased consideration and use of predictive coding, we also expect that counsel and the courts will develop a more sophisticated understanding and treatment of the issues associated with it.
Information governance and defensible deletion of unnecessary data have remained a very hot topic for companies in the first half of 2014, perhaps even eclipsing 2013 (which we identified in our 2013 Year-End Update as having reached a "tipping point"). While TAR seeks to address the burdens and costs associated with large document volumes in the e-discovery process, information governance seeks to deal with the problem by implementing policies, procedures and technologies that enable companies to delete in a defensible manner and no longer hoard data that they neither need nor are required to keep (recent studies have shown that, on average, 70% of the data companies keep is unnecessary).
Developing an effective information governance program usually means taking a multi-disciplinary approach that breaks through the silos of legal, RIM (records and information management) and IT departments, and then implementing reliable, repeatable systems and processes for the disposal of data that no longer has a business or legal purpose.
Strategies for better information governance may include (1) linking business processes in legal, RIM and IT to provide structural collaboration and transparency; (2) modernizing the company’s records management program so that it can provide reliable, actionable information for IT execute upon; (3) using automation and technology to implement data retention and disposal; and (4) enabling IT to determine in real time how to more efficiently and precisely manage data for the enterprise. As emails (and documents attached to email) are usually by far the largest source of documents produced in litigation, significant gains can be made simply by developing an email retention policy and implementing automated solutions for the defensible deletion and retention of email.
Technology may be a key component of an effective information governance program. Tools are becoming available that provide transparency into the data on companies’ information systems and allow actions–whether retention, archiving or disposal–to be taken upon the data. One of the significant trends this year has been an increasing interest in using predictive coding and other analytics tools to automatically classify documents for retention or disposal. While the actual use of these analytics tools for information governance purposes has not yet approached their use in litigation, we expect that will eventually change, as more software solutions incorporating the technology for information governance purposes become available.
Another technology-related development this year has been the introduction of e-discovery tools provided through the cloud. These offerings allow companies and law firms to insource e discovery technical work without having to make the considerable investments in hardware, software and support that would be required for an "on premises" solution. The difference between operating one’s own system and such software-as-a-service (or "SaaS") offerings has been likened to the difference between buying, maintaining and operating one’s own jet aircraft versus purchasing airline tickets. It’s not an entirely apt analogy, as the purchaser of the tickets–so to speak–will also be providing the pilots and crew.
The potential benefits of the SaaS model include having a turn-key solution, access to more robust servers and network systems, the most up-to-date software, and savings on IT equipment, software licensing and personnel overhead. The potential downsides may include less flexibility, less support, and less cost predictability than with an on-premises or vendor-hosted solution. Additionally, users of cloud-based e-discovery tools–like those of on-premises solutions–should strive to have skilled and experienced personnel to operate the system and manage the workflow consistent with defensible practices, which itself can be a tall order.
While it is too early to tell to what extent e-discovery through the cloud will catch on, one additional development that is apparent is that more companies are insourcing more of the e discovery process than ever before, and many companies that are regularly involved in litigation are staffing their own internal e-discovery teams.
One 2014 survey found that 90% of responding companies have internal teams handle preservation and collection rather than an outside service provider. Exceptions were noted for high-stakes matters where a third-party expert may need to testify on the defensibility of the collection process, matters where compliance with foreign data privacy regulations is an issue, and social media platforms and "bring your own device" environments involving more complex collection issues. Additionally, many companies are now handling data processing for e-discovery internally, which has been estimated to account for almost 20% of e-discovery costs.
While many companies are finding that preservation and collection may be well-suited to be managed in-house, they continue to outsource other aspects of the e-discovery process. The same survey, for example, found that 83% of respondents outsource review and production. Respondents cited staffing and internal budget limitations–as well as the expertise of outside providers–among the reasons for the ongoing need to outsource.
Meanwhile, service providers–also known as e-discovery vendors–are responding to increased insourcing, downward pressure on pricing and intense competition by seeking exclusive or preferred provider relationships with companies and also offering services at a flat rate, such as through annual subscriptions, rather than the traditional "pay as you go" or a la carte pricing models.
Companies thus have many more options now in how they obtain technical e-discovery services, and selecting the right vendor, methodology and pricing model remains as important as ever.
Text and instant messages have become 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, as texts and IMs tend to be used for particularly informal communications. 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 involving 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., Calderon v. Corporacion Puertorrique a de Salud, Civ. No. 12-1006 (FAB), 2014 WL 171599, at *2 (D.P.R. Jan. 16, 2014) (finding the plaintiff had a duty to preserve text messages on his phone relevant to his discrimination claim); 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).
As demonstrated by three recent rulings, where a party’s failure to preserve cell phone information such as text messages in the face of anticipated litigation has been deemed intentional or in bad faith, courts have not shied away from issuing significant spoliation sanctions. In Hosch v. BAE Systems Information Solutions, Inc., No. 1:13-cv-00825 (AJT/TCP), 2014 WL 1681694, at *2 (E.D. Va. Apr. 24, 2014), the court adopted the magistrate judge’s findings that the plaintiff had engaged in a series of intentional and bad faith discovery violations, including the permanent deletion of all text messages and voicemails, by wiping his iPhone just two days before turning it over to counsel. The court dismissed the plaintiff’s action with prejudice and awarded the defendant attorney’s fees and costs incurred in bringing motions to compel and a motion for sanctions. Id.
In an employment discrimination case from the U.S. District Court for the District of Puerto Rico, the court held that an adverse inference instruction against the plaintiff was appropriate where the plaintiff had only selectively preserved relevant text messages between himself and a third-party. See Calderon v. Corporacion Puertorrique a de Salud, Civ. No. 12-1006 (FAB), 2014 WL 171599 (D.P.R. Jan. 16, 2014). The court found that the plaintiff’s failure to preserve more than 38 text messages prejudiced the defendants by precluding a complete review of potentially relevant conversations and pictures sent via text messages. Id. at *3. The court viewed the plaintiff’s actions as a "conscious abandonment of potentially useful evidence," indicating that "he believed those records would not help his side of the case." Id. at *2.
In In Re Pradaxa (Dabigatran Etexilate) Prods. Liab. Litig., MDL No. 22385, 2013 WL 6486921 (S.D. Ill. Dec. 9, 2013), the court held that the defendant had a duty to suspend an auto-delete function that operated on relevant text messages and imposed nearly $1 million in sanctions for having failed to do so on company-issued smart phones, among other things. The court found that the plaintiffs had expressly requested the text messages by including 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 defendants sought to quash the sanctions by seeking a writ of mandamus from the U.S. Court of Appeals for the Seventh Circuit, but on the issue of the monetary sanctions imposed in part for the failure to suspend the text message auto-delete function, the court denied the writ. See In re Petition of Boehringer Ingelheim Pharm., 745 F.3d 216, 218 (7th Cir. 2014) ("The sanctions include fines, totaling almost $1 million, that the judge imposed for various abuses; this part of his order is not so questionable (if it is questionable at all) as to be a plausible candidate for mandamus"). See also Gareth Evans, Perils of E-Discovery Reflected in Sanctions Opinion (discussing the District Court’s Pradaxa decision).
In another recent decision, however, a court declined to impose spoliation sanctions against a defendant for failure to preserve the contents of a cell phone because the plaintiff failed to produce sufficient evidence of prejudice. See Ewald v. Royal Norwegian Embassy, No. 11-CV-2116 (SRN/SER), 2013 WL 6094600 (D. Minn. Apr. 1, 2014). The plaintiff presented evidence relating to just one lost but potentially relevant text message, and the plaintiff had failed to pursue other avenues of discovery (e.g., deposition testimony) relating to that message or the existence of others. Id. at *2. The court further found that, even if the plaintiff were prejudiced, sanctions would not be appropriate: There was only about $100,000 at stake yet the parties had incurred costs and fees exceeding $1 million. Because "monetary sanctions [were] unlikely to deter either party," they were not warranted. Id.
The phenomenon of "bring your own device" ("BYOD"), in which employees use their personal electronic devices for work purposes, has become very common in business. Consequently, among myriad other issues, courts have been called upon to decide if–and when–discovery obligations attach to personal devices, whether sanctions should be applied when data is erased or otherwise removed from such devices, which party should bear the costs of searching personal devices, and employees’ privacy rights.
Reflecting the significance of mobile devices in our society, the United States Supreme Court issued a landmark decision in the first half of the year, unanimously holding in Riley v. California that the Fourth Amendment generally requires law enforcement to obtain a warrant before reviewing digital information that is stored on a smart phone seized incident to arrest. In its opinion, the Court emphasized the privacy interests involved in accessing the contents of modern cellphones. See generally U.S. Supreme Court Extends Fourth Amendment Protection to "Digital" Searches for the First Time in Landmark Decision.
The Court observed that modern cellphones have the capacity to store "millions of pages of text, thousands of pictures or hundreds of videos" and thus "implicate privacy concerns far beyond those implicated by the search of a cigarette pack, a wallet, or a purse." See Riley v. California, No. 13-123, slip op. at 16-18 (June 25, 2014). The Court also stated that "it is no exaggeration to say that more than 90% of American adults who own a cellphone keep on their person a digital record of nearly every aspect of their lives." See id., slip op. at 9, 19-20 (June 25, 2014).
The Court further stated that a cellphone’s immense storage capacity, "has several interrelated consequences for privacy. First, a cellphone collects in one place many distinct types of information–an address, a note, a prescription, a bank statement, a video–that reveal much more in combination than any isolated record. Second, a cell phone’s capacity allows even just one type of information to convey far more than previously possible." Id. at 18. The Court further recognized that, "[a]lthough the data stored on a cell phone is distinguished from physical records by quantity alone, certain types of data are also qualitatively different." Id. at 19. The Court referred to Internet search and browsing history that may reveal an individual’s private interests and concerns, such as "symptoms of disease, coupled with frequent visits to WebMD." See id.
While the impact of the Supreme Court’s decision on e-discovery in civil litigation remains to be seen, it has already been cited in at least one lower court decision denying the plaintiffs’ request to inspect the data from the cell phones of several of the defendant’s employees on the ground that the request was overly broad and too intrusive. In Bakhit v. Safety Marking, Inc., 2014 WL 2916490 at *2 (D.Conn. Jun. 26, 2014), the court found that the "implication of the individual defendants’ privacy interests in the data stored on their cell phones" persuaded the court to deny the motion, particularly as the plaintiffs had failed to demonstrate that they were unable to obtain the targeted information through other discovery methods. The court stated that "[t]his conclusion is further reinforced by the recent Supreme Court ruling in Riley v. California, Nos. 13-132 and 13-212, 573 U.S. __ (June 25, 2014), which recognized, albeit in the criminal context, the privacy concerns implicated by the modern cell phone." See id.
Additionally, three cases decided thus far in 2014 shed light on the issues of costs, preservation of work materials on personal devices, and spoliation. In Network Cargo Sys. U.S.A., Inc. v. Pappas, No. 13 C 9171, 2014 WL 1856773 (N.D. Ill. May 7, 2014), the plaintiff sought a preliminary injunction, demanding the return of materials that the defendant, a former employee, allegedly downloaded from the plaintiff’s system before leaving the company on June 30, 2013. The parties retained an independent e-discovery vendor to image the three personal devices the defendant used between April 1, 2013 and February 14, 2014. During the imaging, the vendor found that three flash drives had been connected to the personal devices during the relevant time period.
The court permitted review of the flash drives, but acknowledged that their utility might be limited. The defendant had not connected the drives to her personal devices until two months after she left the company, thus "[t]he likelihood that [defendant] was using these flash drives to transfer [plaintiff’s] confidential information would seem to become more remote with the passage of time." Id. at *2. Due to "the likely limited usefulness of searching the three flash drives," the court held that the plaintiff was responsible for the costs of searching for the information. Id.
In Benedict v. Hewlett-Packard Co., No. 13-CV-00119 (LHK), 2014 WL 234218 (N.D. Cal. Jan. 21, 2014), one of defendant’s former employees had used his company-issued laptop as his primary computer for both work and personal purposes, and a few days before leaving the company he made two complete copies of its hard drive. In addition to these two copies, he also preserved company data on other personal devices and removed confidential information that he had not been authorized to access during his time at the company.
The court found that the former employee "had the technological knowledge and ability to segregate and separately save any personal information from his [company]-issued laptop", but failed to do so. Id. at *2. Consequently, the court denied the former employee’s motion to dismiss the defendant’s counterclaim in replevin, finding that he "currently possesses [company] property, and . . . he has the power to deliver [company] property to [the company]". Id. at *9.
In U.S. Legal Support, Inc. v. Hofioni, No. 13-cv-1770 (E.D. Cal. Jan. 15, 2014), defendants continued to use their personal electronic devices after a stipulated preliminary injunction provided that they were obligated to preserve–and not alter or destroy–any documents that could be relevant to the plaintiff’s claims, including any materials on their electronic devices. Plaintiff’s two experts submitted declarations that "discuss[ed] the memory capabilities of these sorts of devices and what could potentially be lost through continued use" but neither expert examined the devices at issue to determine whether any actual data had been lost. Id. at *4. Accordingly, without proof that any relevant evidence was lost or that the plaintiff experienced any prejudice by the defendants’ continued use of their devices, the court concluded that the plaintiff’s spoliation arguments were premature.
In the remainder of 2014, we expect to continue seeing more cases examining the contours of the duty to preserve as applied to personal devices used for work purposes.
The number of cases focusing on the discovery of social media continued to skyrocket in the first half of 2014. Reflecting that the use of social media continues to proliferate in business and social contexts, courts and commentators alike have noted that discovery of social media is now routine. However, as reflected by the volume of reported decisions relating to social media, courts are still struggling to develop rules and protocols applicable to social media evidence, including whether special authentication rules should govern social media evidence, and what threshold showing of relevance must be made before discovery of personal social media data should be allowed.
Courts have taken two basic approaches to the authentication of social media evidence, which the Delaware Supreme Court recently coined "the Maryland approach" and "the Texas approach." Parker v. State, 85 A.3d 682, 684 (Del. 2014). Under the Maryland approach, there are three permissible methodologies for authenticating social media evidence: "the testimony of the creator, documentation of the internet history or hard drive of the purported creator’s computer, or information obtained directly from the social networking site." Id. at 683 (citing Griffin v. State, 19 A.3d 415 (Md. 2011)). Unless the proponent can "convince the trial judge that the social media post was not falsified or created by another user" via one of these methods, the evidence "will not be admitted and the jury cannot use it in their factual determination." Id.
Conversely, under the Texas approach, "a proponent can authenticate social media evidence using any type of evidence so long as he or she can demonstrate to the trial judge that a jury could reasonably find that the proffered evidence is authentic." Id. (citing Tienda v. State, 358 S.W.3d 633 (Tex. Crim. App. 2012)). The Parker court explained that, "[t]he Texas approach involves a lower hurdle than the Maryland approach, because it is for the jury–not the trial judge–to resolve issues of fact, especially where the opposing party wishes to challenge the authenticity of the social media evidence," and found that the Texas approach "better conforms to the requirements" of the Delaware Rules of Evidence. Id.
Applying the Texas approach, the Parker court determined that testimony from a witness who viewed a Facebook post, as well as circumstantial evidence such as the related profile picture, were sufficient to authenticate the Facebook entries in question. Id. at 688. See also State v. Jones, No. 109,027, 2014 WL 802022, at *4-6 (Kan. Ct. App. Feb. 28, 2014) (finding that where the "Defendant admitted the Facebook page was his," it was for the jury to decide whether the Defendant actually authored the posts in question).
The Mississippi Supreme Court, considering similar facts, implicitly followed the Maryland approach, holding that to authenticate social media evidence, the proponent must make a showing that the account in question belongs to the purported creator, and the purported creator also authored the content in question. Smith v. State, 136 So.3d 424, 433 (Miss. 2014). The court explained, "[t]he authentication of social media poses unique issues regarding what is required to make a prima facie showing that the matter is what the proponent claims. Creating a Facebook account is easy. . . . [b]ecause anyone can create a fictitious account and masquerade under another person’s name or can gain access to another’s account by obtaining the user’s username and password. . . . The potential for fabricating or tampering with electronically stored information on a social networking site is high." Id. at 432.
The court found that where the wife of the purported creator of Facebook messages testified she received the messages from her husband, and where the related Facebook page featured the purported creator’s name and picture, the State failed to authenticate the Facebook messages. Id. at 434. In so holding, the court also considered the fact that "no testimony regarding the security of or access to [the] Facebook account was elicited." Id. at 435.
The Maryland approach sets a high bar to authenticating social media evidence, particularly if the purported user claims not to have created the account or content in question. One way to authenticate social media evidence in such circumstances is via Federal Rule of Evidence 902(11), which authorizes the admission of business records maintained in the regular course of business. Fed. R. Evid. 902(11); United States v. Hassan, 742 F.3d 104, 132-34 (4th Cir. 2014) (finding YouTube videos and Facebook pages were self-authenticating as certified domestic business records).
In Hassan, the government presented certifications from the records custodians of Facebook and Google, which verified that the evidence in question had been maintained as business records in the course of regularly conducted business activities. Id. The government then tracked the Facebook pages and accounts to the mailing and email addresses of the purported creators via internet protocol addresses. Id. The court found that this two-step process fulfilled the requirements of Federal Rule of Evidence 902(11). Id. See also Randazza v. Cox, No. 2:12-cv-2040-JAD-PAL, 2014 WL 1407378, at *4 (D. Nev. Apr. 10, 2014) (finding YouTube video was not authenticated where plaintiffs did not proffer the certificate of YouTube’s custodian verifying the page had been maintained as a business record in the course of regularly conducted business activities).
Courts generally continue to require a "threshold" showing of relevance before social media evidence can be obtained in discovery, as one party "’does not have a generalized right to rummage at will’" through another litigant’s social media accounts. Palma v. Metro PCS Wireless, Inc., No. 8:13-cv-698-T-33MAP, 2014 WL 1877578, at *1 (M.D. Fla. Apr. 29, 2014) (Pizzo, Mag. J.) (quoting Davenport v. State Farm Mut. Auto. Ins. Co., No.3:11-cv-632-J-JBT, 2012 WL 555759, at *1 (M.D. Fla. Feb.21, 2012)).
As with more traditional forms of evidence, whether the social media evidence sought is relevant and therefore subject to discovery depends on the claims at issue in the case. As one court noted, "it is the nature of the claims and defenses and not merely the form of medium that define the bounds of relevancy and courts have declined to permit far-roving discovery into social media accounts where the inquest does not meet the basic tenants of [Federal Rule of Civil Procedure 26]." Ogden v. All-State Career School, 2014 WL 1646934, at *2 (W.D. Pa. Apr. 23, 2014).
In Palma, the court denied all discovery of plaintiffs’ social media accounts, finding that such information was irrelevant to the claims at issue in the case (unpaid overtime wages under the Fair Labor Standards Act). Palma, 2014 WL 1877578 at *1-2. The court held that "Defendant’s speculation that the social media messages might include a party admission, without more, is not a sufficient reason to require Plaintiffs to provide Defendant open access to their communication with third parties." Id. In reaching its decision, the court considered the burden on Plaintiff, finding that reviewing "all of [Plaintiffs’] postings on potentially multiple social media sites over a period of four years . . . would be ‘an extremely onerous and time-consuming task.’" Id. at *2 (quoting Jewell v. Aaron’s, Inc., No. 1:12-cv-0563, 2013 WL 3770837, at * 3 (N.D. Ga. July 19, 2013)).
Other courts have similarly denied all discovery of social media accounts because of an insufficient threshold showing of relevance to the claims at issue. See, e.g., Root v. Balfour Beatty Const. LLC, 132 So.3d 867, 871 (Fla. Dist. Ct. App. 2014) (quashing discovery order requiring Plaintiff to produce social media related to past and present personal relationships and mental health because such information is irrelevant to negligence claim or affirmative defenses at issue in the case); Pecile v. Titan Capital Group, LLC, 979 N.Y.S.2d 303, 303 (N.Y. App. Div. 2014) ("Regarding [D]efendants’ demand for access to [P]laintiffs’ social media sites, they have failed to offer any proper basis for the disclosure, relying only on vague and generalized assertions that the information might contradict or conflict with plaintiffs’ claims of emotional distress."). See also D.O.H. ex rel. Haddad v. Lake Central School Corp., No. 2:11-CV-430, 2014 WL 174675, at *2 (N.D. Ind. Jan. 15, 2014) (Rodovich, Mag. J.) (holding that where plaintiff brought claims that he was subject to bullying and harassment by fellow students, defendants were entitled to limited discovery of social media data related only to plaintiff’s emotions, feeling, or mental state); Ogden, 2014 WL 1646934, at *5 (finding that "Defendant is no more entitled to such unfettered access to plaintiff’s personal email and social networking communications than it is to rummage through the desk drawers and closets in plaintiff’s home," and allowing Defendant only limited discovery of Plaintiff’s social media data related to conduct underlying the complaint).
We expect that discovery of social media will continue to be a hot topic in the remainder of this year and in years to come.
Following a theme we noted in our 2013 Year-End Report, we have continued to see sanctions awarded against plaintiffs, particularly related to social media and mobile devices. See, e.g., Painter v. Atwood, No. 12-01215, 2014 WL 1089694, at *4-6 (D. Nev. March 18, 2014) (granting adverse inference sanction where plaintiff deleted social media posts and text messages that defendant argued contradicted her sexual harassment claims); Calderon v. Corporacion Puertorriquena de Salud, No. 12-1006, 2014 WL 171599, at *5 (D. P. R. Jan. 16, 2014) (granting adverse inference sanction where plaintiff destroyed text messages).
Additionally, the scope of the duty to preserve has been a major theme in noteworthy sanctions decisions decided thus far in 2014. In two separate cases, courts considered whether the duty to preserve for unrelated but similar litigation filed years earlier could constitute a duty to preserve for later actions.
In the controversial decision of In re Actos (Pioglitazone) Prods. Liab. Litig., MDL No. 11-2299, 2014 WL 2921653 (W.D. La. June 23, 2014) (supplementing and amending 2014 WL 355995 (W.D. La. Jan. 30, 2014), the court held that the continuing obligations of a litigation hold issued for a 2002 lawsuit concerning the company’s bladder cancer drug mandated preservation for a later MDL proceeding involving the same product and similar allegations. Id. at 5. In 2002, the defendant had issued a broad litigation hold that the court determined applied in the later-filed MDL proceedings, in part because the company never withdrew that hold and instead "refreshed" it at least five times over the next nine years. Id. at *5. Despite the hold, the files of 46 custodians with information subject to the original hold were lost or destroyed over time, generally as employees departed the company. Id. at *3.
The Actos decision is controversial because the court held that the 2002 lawsuit and resulting preservation obligations made the later litigation "reasonably anticipated" and thus within the scope of the defendant’s preservation obligations. The court also faulted the defendant for allegedly "obfuscat[ing]" its spoliation in part by offering as its 30(b)(6) witness on document retention issues an IT consultant, who had never worked for the company. The court found that the consultant had no personal knowledge of any of the company’s policies and gave conflicting, contradictory testimony that reflected his lack of familiarity with the testimony topics. Id. at *6-7.
In a bellwether case trial in the Actos MDL, the court read a permissive adverse inference instruction, allowing the jury "to infer those [destroyed] documents and files would have been helpful to the plaintiffs or detrimental to [defendant]." Id. at *18. The jury returned a damages award against the company of $6 billion, in addition to compensatory damages. In advance of future trials, the court ordered defendant to continue work to reconstruct all deleted files "at its sole cost," id. at *10, 60, and invited plaintiffs to seek cost shifting with respect to depositions taken to establish spoliation. Id. at *60. The court deferred a full ruling on attorney fees. Id. at *61.
In re Ethicon, Inc. Pelvic Repair Sys. Prod. Liab. Litig., MDL No. 2327, — F.R.D. –, 2014 WL 439785 (S. D. W. Va. Feb. 4, 2014), presented a similar question of whether preservation obligations for prior litigation could "continue." In Ethicon, the court held that a litigation hold issued for a case filed in March 2003 and resolved in January 2004 had not triggered the duty to preserve for later-filed cases involving the same line of medical devices. Id. at *8.
The court noted that "an isolated lawsuit, or even two, would not reasonably lead [a party] to believe that large scale nationwide products liability litigation was down the road." Id. at *11. The "broad" preservation notice issued for this case specified the data to be preserved, however, as well as a beginning date, yet spoliation nevertheless occurred. Id. at 13 ("the scope of the preservation was established by [the defendant’s] in-house counsel in the document preservation notices"). The court granted monetary sanctions to compensate plaintiffs "for the additional time spent by their counsel piecing together missing custodial files" and also allowed the potential for adverse instructions on a case-by-case basis. Id. at *1, 22.
On the same theme, and demonstrating that the preservation obligation can arise before the filing of a complaint, one court granted summary judgment against a defendant who had "destroyed all the possible evidence relevant to establish whether or not he had infringed" plaintiff’s copyright, despite having a duty to preserve it. Slep-Tone Enter. Corp. v. Granito, No. 12-298, 2014 WL 65297, at *8 (Jan. 8, 2014). His duty to preserve arose–and his bad faith spoliation occurred–before plaintiff’s commencement of the lawsuit but after the defendant learned that plaintiff was suing others in his industry and would likely file suit against him as well. Id. at *2.
Over the past six months, the proposed amendments to the Federal Rules of Civil Procedure have evolved significantly and materially. In August 2013, the Civil Rules Advisory Committee released a package of proposed amendments for public comment. See generally Thomas Y. Allman, The ‘Package’ of Discovery Amendments Released for Public Comment on August 15, 2013. These amendments predominantly addressed Rules 1, 4, 16, 26, 30, 31, 33, 34, and 37, with the most significant changes affecting sanctions under Rule 37(e). The public comment period closed in February 2014, and the proposed amendments have now been revised–particularly with respect to Rule 37(e). In general, the newest changes to the proposed rules reflect movement away from relatively bright-line rules and enumerated factors, and toward more flexible standards.
These revised proposed amendments have been approved by the Judicial Conference’s Committee on Rules of Practice and Procedure. They now must be approved by the Judicial Conference in September 2014. Any approved amendments likely would not become effective until 2015.
Although courts and commentators continue to endorse cooperation as a fundamental principle that should guide all discovery–most notably in The Sedona Conference’s® influential "Cooperation Proclamation"–the proposed amendments do not go so far as to explicitly include any references to or requirements for cooperation. For example, although the proposed amendments to Rule 1 generally provide that the Federal Rules are to be "employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action," the Standing Committee rejected an amendment that would require parties to "cooperate to achieve these ends" on the grounds that the concept of cooperation is amorphous, and that the addition of such language could lead to wasteful disputes between the parties based on alleged "failures to cooperate."
Nonetheless, the proposed Committee Note explaining the amended rule endorses cooperation: "Effective advocacy is consistent with–and indeed depends upon–cooperative and proportional use of procedure." As always, the devil will be in the details; although most litigants, courts, and commentators agree in principle about the value of cooperation, the question will be whether courts will tolerate "litigation about cooperation."
Current Rule 26(b)(2)(C)(iii) reflects a proportionality principle, at least indirectly, by providing that the court may limit discovery if "the burden or expense of the proposed discovery outweighs its likely benefit," and then listing a number of factors to consider in undertaking the proportionality inquiry. Before the public comment period, the proposed amendment made proportionality explicit, limiting discovery to matters relevant to any party’s claim or defense "and proportional to the needs of the case."
Following public comment, the proposed Committee Note was amended: (1) to make clear that "the change does not place the burden on the party seeking discovery the burden of addressing all proportionality considerations" (Report of the Advisory Committee on Civil Rules, at 23 (page 83 of 1132) (emphasis added)); (2) to place greater emphasis in evaluating proportionality based on "the importance of the issues at stake in the action;" and (3) to add a new proportionality factor, adopted from the Utah discovery rules, requiring consideration of "the parties’ relative access to relevant information."
In general, these proposed "proportionality" amendments should give courts some tools to address the situation, common in some large-scale, complex litigation, where the burdens of discovery are sharply unequal. The proposed amendments also raise several questions that will need to be addressed. For example, the party seeking discovery does not have "the burden of addressing all proportionality considerations" (emphasis added), but the use of the word "all" implies that the requesting party does bear some burden. Courts likely will also have to grapple with just how much detail responding parties are required to provide to establish that a given discovery request is not "proportional" and is therefore inappropriate.
Thus, while the "proportionality" amendments are a positive step toward imposing a reasonable scope on e-discovery obligations, they also are likely to incite additional litigation to define their precise contours.
The proposed amendments to Rule 16(b)(3) (pretrial conferences) and Rule 26(f) (conference of the parties)–which were not changed in response to public comment–specifically direct the court and the parties to consider whether an order pursuant to Federal Rule of Evidence 502(d), providing for non-waiver of the attorney-client privilege and work product production where privileged or protected documents are disclosed (regardless of whether the disclosure was inadvertent). These proposals–which seem to enjoy broad support among bench and bar–reflect a sense, particularly among judges, that Federal Rule of Evidence 502(d) is underused. As we have noted previously, Rule 502(d)’s provisions can be especially important in the context of e-discovery, as they pave the way for reliance on alternative discovery methodologies such as predictive coding because they can ensure that disclosure of privileged or protected information will not constitute a waiver, regardless of whether the disclosure is inadvertent and without litigation over the "reasonableness" of a party’s actions and whether they acted "promptly," which would otherwise be the case under the default rule (i.e., Rule 502(b), which applies in the absence of a Rule 502(d) order).
Following public comment, the Advisory Committee abandoned the stricter limits on depositions, interrogatories, and requests for admission proposed earlier in the amendments to Rules 30, 31, 33, and 36 released in August 2013 (however, the preexisting limits remain in place). The Advisory Committee’s report states that existing limitations have worked well, and that any potential benefit the proposed stricter limitations would have been outweighed by increased motion practice from parties seeking relief from the limitations.
One proposed amendment that has received relatively little attention is the revision to Rule 34(b)(2)(C). This amendment provides that a party objecting to document requests "must state whether any responsive materials are being withheld on the basis of that objection." Although seemingly minor, this amendment may have a significant impact depending how it is interpreted, especially in litigation involving a large volume of documents.
Parties may propound requests for documents very early in the litigation, and responses are due 30 days after the service of the request (absent agreement extending that deadline). Rule 34(b)(2)(A). Given these realities, it is not unusual for a party to serve its responses and objections to document requests before the party has reviewed all of its potentially responsive documents. If the proposed amendment is interpreted to require specificity as to the volume, nature, or type of documents that are being withheld on the basis of privilege, this may impose significant (and likely unintended) burden on litigants to review all potentially responsive documents before serving responses to document requests.
If courts take this approach, the proposed amendment may, as a practical matter, be challenging at best and unworkable at worst, particularly in large and complex cases where document review and production can span months or years. However, if courts decide that a party’s representation that, "subject to and without waiving the foregoing objections, documents responsive to this request will be produced," is a sufficient "statement" for Rule 34(b)(2)(C) purposes, then the rule will likely have relatively modest impact. These issues, though, have not been fully vetted or addressed by the Advisory Committee, and thus may be the subject of disputes if this proposed amendment is enacted.
The proposed amendment to Rule 37(e), dealing with the imposition of sanctions, has received a tremendous amount of attention in the public comment process. Current Rule 37(e) provides the following limited safe harbor for failure to preserve ESI: "Absent exceptional circumstances, a court may not impose sanctions . . . for failing to provide [ESI] lost as a result of the routine, good faith operation of an electronic information system." The Advisory Committee considered this current version to be too restrictive, and further viewed it as inappropriately limiting a court’s ability to exercise discretion in dealing with the panoply of circumstances in which a party may have failed to properly preserve relevant ESI.
The latest proposed amendment, modified in response to public comment, replaces this safe harbor with guidelines for actions that a court may take in response to lost relevant and responsive ESI, and reads "Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court may: (1) upon finding prejudice to another party from loss of the information, order measures no greater than necessary to cure the prejudice; or (2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation: (A) presume that the lost information was unfavorable to the party; (B) instruct the jury that it may or must presume the information was unfavorable to the party; or (C) dismiss the action or enter a default judgment." The evolution of this amendment from its original iteration through the public comment period reflects the widely varied opinions in the legal community as to the propriety of sanctions for ESI missteps.
The public comments asserted a number of potential problems with the August 2013 version of the proposed amendment to Rule 37(e). For example, at least some curative measures, as described above, could have been ordered with no finding of prejudice or improper conduct whatsoever. In particular, it permitted a court to take certain remedial actions "[i]f a party failed to preserve discoverable information." This provision was not tied to any particular level of culpability and was, in effect, a strict liability standard. Additionally, those measures were not explicitly required to be proportional to the harm caused.
The August 2013 version of proposed Rule 37(e) permitted courts to award "sanctions" if they found willful or bad faith conduct by the party that lost the data, or if the loss irreparably deprived a party of meaningful opportunity to present or defend against a claim. It listed five factors to be considered in evaluating whether a party’s conduct was willful or in bad faith. As many commentators pointed out, the term "willful" is not defined uniformly across the courts and in some jurisdictions includes negligence. Additionally, according to the Advisory Committee, the proposed "five factors" that were to be considered in evaluating the propriety of sanctions, although potentially helpful to courts, ran the risk of creating additional confusion. Report of the Advisory Committee on Civil Rules, at 44-45 (pages 315-16 of 1132).
The latest proposed amendment to Rule 37(e) addresses each of these three concerns. First, it only permits a court to order curative measures "upon finding prejudice to another party from the loss of the information." Report of the Advisory Committee on Civil Rules, at 47 (page 318 of 1132). Second, the rule contains an explicit proportionality requirement: the measures ordered must be "no greater than necessary to cure the prejudice." Id. Third, the more severe sanctions–such as an adverse inference or dismissal–may be ordered "only upon a finding that the party acted with intent to deprive another party of the information’s use in the litigation." This avoids the ambiguity in the word "willful" that was identified in the prior version.
The current form of the proposed amendment to Rule 37(e) is intended by the Advisory Committee to resolve a circuit split regarding when these most severe of sanctions are appropriate, allowing imposition of these sanctions only when a party acts intentionally. See Report of the Advisory Committee on Civil Rules, at 50 (page 321 of 1132). C.f. Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir. 2002) (explaining the negligence/gross negligence standard applied in the Second Circuit and rejected by the new proposed rules). The Advisory Committee has endorsed the higher standard for sanctions because it believed that the negligence standard would often go beyond restoring the evidentiary balance in a case, it could be too harsh considering the ease with which ESI is lost, and could lead to costly over-preservation.
Even with these new revisions, some jurists remain concerned about the text of the proposed amendment to Rule 37(e). At the May 2014 meeting of the Standing Committee on Rules and Practice, Judge Richard Wesley of the Second Circuit expressed concern that the proposed amendment permits severe sanctions when a party intentionally deprives its adversary of the "information’s use in litigation." Because discoverable information need not be admissible, there is some ambiguity as to whether a party is denied the "use" of information if that information would otherwise be inadmissible anyway. In addition, Judge Susan Graeber of the Ninth Circuit expressed concern that proposed Rule 37(e)(2)’s list of curative measures seemed to be a closed set. She argued that courts should be free to match a specific harm with a specific action, for example removing a single claim or defense from the litigation. In short, although many believe that the latest version of Rule 37(e) is an improvement over the public comment version, unresolved questions remain, and litigation about those questions seems likely.
The developments discussed above demonstrate, in our view, that this year is shaping up to be the year of technology in e-discovery. Obtaining advice from counsel and technical personnel who are well versed in e-discovery technologies and the legal and practical issues associated with them is more important than ever. Gibson Dunn will continue to track the latest developments and trends. Please look for our updates and our attorneys’ articles, and for our 2014 Year-End E-Discovery Update, which will be published in the first quarter of 2015.
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:
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