Electronic Discovery Law

U.S. International Trade Commission Adopts e-Discovery Rules

K&L Gates — Thu, 23 May 2013 10:38:28 -0800

The U.S. International Trade Commission has adopted “final rules related to its e-discovery practices.” “The new rules will be effective 30 days after publication in the Federal Register and are applicable to investigations instituted 30 days after publication in the Federal Register”—a Federal Register notice was issued on May 15, 2013.

The newly adopted rules address issues including the discovery of inaccessible information and limitations to discovery similar to those found in Fed. R. Civ. P. 26(b)(2)(C). The newly adopted rules also add new provisions addressing privileged information and work product, including requiring the production of privilege logs and providing procedures for addressing the inadvertent production of privileged materials.

For more information, visit the Commission’s website, here.

Case Update: For Spoliation, Court Orders $250,000,000 "to be applied as a credit against Rambus's [$349 million] judgment against SK hynix"

K&L Gates — Wed, 22 May 2013 11:16:07 -0800

SK Hynix, Inc. v. Rambus, Inc., No. C-00-20905 RMW, 2013 WL 1915865 (N.D. Cal. May 8, 2013)

In this ongoing patent infringement action, a major question has been whether Rambus’s destruction of documents constituted spoliation and, if so, what sanctions should be imposed. Different courts considering the same facts (but involving different plaintiffs) came to different conclusions. Upon its initial consideration of the question, the district court in the Northern District of California determined that “Rambus had not spoliated documents” and that there was “no factual basis for an unclean hands defense” as asserted by SK hynix. (See summary here.) A jury subsequently returned verdicts in favor of Rambus and the court therefore “entered final judgment of infringement with respect to ten Rambus patent claims” and awarded judgment of “$349,035,842 after a remittitur plus prejudgment interest, and required SK hynix to pay specified royalties to Rambus on an ongoing basis.” A district court in the District of Delaware (in a case involving Plaintiff Micron Technology, Inc.) disagreed, however, and found that sanctions were warranted for Rambus’s spoliation of documents. (See summary here.) The court therefore declared the patents in suit unenforceable against the plaintiff in that case.

Upon appeal (of both cases) to the Federal Circuit, the court addressed the competing holdings of the two cases and affirmed the findings of the Delaware court that Rambus had engaged in spoliation. (See summary here.) The district court in California was therefore instructed to reconsider the question of spoliation in accordance with the relevant analysis in the Delaware case. Upon remand, the district court in California concluded that Rambus had committed spoliation and determined that the appropriate sanction was to “strike from the record all evidence supporting a royalty in excess of a ‘reasonable and non-discriminatory royalty.’” (See summary here.) Thus, the parties were ordered to submit briefing on the question of what a reasonable, non-discriminatory royalty rate would be.

Upon review of the parties’ submissions, however, the court was persuaded that “trying to fashion an after-the-fact evidentiary exclusion is not the most appropriate mechanism by which to sanction Rambus.” Rather, the court concluded that “a monetary sanction that takes into account the royalty rates negotiated and paid by SK hynix’s primary competitors [wa]s a more appropriate and straightforward way to mitigate the prejudice to SK hynix caused by Rambus’s spoliation.” Thus, following analysis of the relevant rates negotiated and paid by SK hynix’s competitors (which were not specifically revealed), the court determined that “a monetary sanction of $250,000,000 to be applied as a credit against Rambus’s judgment against SK hynix recognizes that Rambus’s conduct was inexcusable but not so egregious as to justify dismissal of its infringement case.”

Imposition of a monetary sanction is an imprecise, imperfect process. After considering all of the evidence and argument submitted by the parties, and the relevant authorities, the court concludes that a monetary sanction of $250,000,000 to be applied as a credit against Rambus's judgment against SK hynix recognizes that Rambus's conduct was inexcusable but not so egregious as to justify dismissal of its infringement case. This sanction applies a royalty rate of between .80% and .85% to Rambus's total United States sales. Although slightly in excess of what SK hynix's major competitors paid, this rate is not so great as to put SK hynix at a significant competitive disadvantage. It also takes into account that the rates actually negotiated with SK hynix's competitors were higher than the ERRs for reasons that are not clear. The amount of the sanction is severe and would be excessive if such amount were not necessary to mitigate the presumed prejudice resulting to SK hynix from Rambus's spoliation. It also strikes the appropriate balance between acknowledging that the majority of Rambus's patents have been determined to be valid and recognizing that Rambus's spoliation of evidence must be redressed in meaningful way. The sanction will unquestionably deter Rambus and others from engaging in similar conduct in the future. Finally, from the public's standpoint, imposition of this sanction lays to rest years of complicated and expensive litigation.

A copy of the court’s Order is available here.

For Good Cause Shown, Plaintiffs No Longer Required to Utilize Predictive Coding

K&L Gates — Fri, 17 May 2013 07:33:46 -0800

EORHB, Inc. v. HOA Holdings, LLC, No. 7409-VCL, 2013 WL 1960621 (Del. Ch. May 6, 2013)

Previously, the court ordered the parties to “retain a single discovery vendor to be used by both sides” and to “conduct document review with the assistance of predictive coding.” (See summary, here.) On May 6, the court entered a new order, stating that Defendants could retain their chosen vendor and utilize computer assisted review but that the parties would not be required to retain a single vendor to be used by both sides and that “Plaintiffs may conduct document review using traditional review methods.”

The short text of the order reads as follows:

WHEREAS, on October 15, 2012, the Court entered an Order providing that, “[a]bsent a modification of this order for good cause shown, the parties shall (i) retain a single discovery vendor to be used by both sides, and (ii) conduct document review with the assistance of predictive coding;”

WHEREAS, the parties have proposed that HOA Holdings LLC and HOA Restaurant Group LLC (collectively, “Defendants”) retain ediscovery vendor Kroll OnTrack for electronic discovery;

WHEREAS, the parties have agreed that, based on the low volume of relevant documents expected to be produced in discovery by EORHB, Inc., Coby G. Brooks, Edward J. Greene, James P. Creel, Carter B. Wrenn and Glenn G. Brooks (collectively, “Plaintiffs”), the cost of using predictive coding assistance would likely be outweighed by any practical benefit of its use;

WHEREAS, the parties have agreed that there is no need for the parties to use the same discovery review platform;

WHEREAS, the requested modification of the Order will not prejudice any of the parties;

NOW THEREFORE, this –––– day of May 2013, for good cause shown, it is hereby ORDERED that:

(i) Defendants may retain ediscovery vendor Kroll OnTrack and employ Kroll OnTrack and its computer assisted review tools to conduct document review;

(ii) Plaintiffs and Defendants shall not be required to retain a single discovery vendor to be used by both sides; and

(iii) Plaintiffs may conduct document review using traditional methods.

Although replicated above, a copy of the order is available here.

Upcoming Event: eDiscovery Project Management 2013 (organized by eDiscovery Intelligence)

K&L Gates — Tue, 07 May 2013 08:04:14 -0800

“Learn how to Bring Agility and Clarity to the Management of your eDiscovery Process”

May 21-22, 2013
Marriot City Center
Pittsburgh, PA

“The mastery of electronic discovery is a necessary component in the changing business of litigation. The tools for the seamless management of e discovery workflow are imperative for success. This is not a vendor-led discussion. Rather, it's two full days of CLE accredited implementable strategy you won't want to miss.”

You can expect to learn more about: Big data, Information Governance and eDiscovery; Technology Assisted Review; Corporate IT Policies, and The Cross-Border eDiscovery Conundrum.

Join K&L Gates’ Partner Thomas J. Smith and others for a discussion about “Making Your Process Faster, Easier, Safer and More Cost-Effective” and “hear proposals for increased agility in the management of your in-house procedures, making up-front process pay off in the long run.”

To learn more about this conference, or to register, click here.

Fourth Circuit Addresses Taxable Costs Related to ESI

K&L Gates — Fri, 03 May 2013 07:34:00 -0800

Country Vintner of North Carolina, LLC v. E & J Gallo Winery, Inc., ---F. 3d.---, 2013 WL 1789728 (4th Cir. Apr. 29, 2013)

In this case, the Fourth Circuit clarified “what expenses related to electronically stored information (“ESI”) are taxable under the federal taxation-of-costs statute as '[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case'” and affirmed the district court’s order “taxing only the costs of converting electronic files to non-editable formats, and transferring files onto CDs.”

The parties in this case “clashed over the discovery of ESI.” Ultimately, Gallo moved for a protective order and Country Vintner filed a motion to compel. The district court denied Gallo’s motion for a protective order, granted Country Vintner’s motion to compel, and adopted Country Vintner’s proposal for handling ESI. As a result, Gallo took the necessary steps to meet its discovery obligations, including collecting more than 62 GB of data which were then sent to counsel for processing and review.

Less than two months after Gallo began producing documents, the district court granted Gallo’s motion to dismiss certain claims and ultimately granted summary judgment on the remaining claims in favor of Gallo. Thereafter, Gallo filed a bill of costs, seeking to recover $111,047.75 “for charges related to ESI” including:

• “$71,910 for ‘flattening’ and ‘indexing’ ESI;”
• “$15,660 for ‘Searching/Review Set/Data Extraction;’”
• “$178.59 for ‘Tiff Production’ and ‘PDF Production;’”
• “$74.16 for electronic ‘Bates Numbering;’”
• “$40 for copying images onto CD or DVD;” and
• “$23,185 for ‘management of the processing of the electronic data,’ ‘quality assurance procedures,’ ‘analyzing corrupt documents and other errors,’ and ‘preparing the production of documents to opposing counsel.’”

Adopting the reasoning of the Third Circuit in Race Tires America, Inc. v. Hoosier Racing Tire Corp, 674 F.3d 158 (3d Cir. 2012) the district court “concluded that, under 28 U.S.C. § 1920(4), ‘a prevailing party may recover costs associated with copying or duplicating its files, but it may not receive reimbursement for any other ESI-related expenses,’” and found that, in this case, “the only tasks that involve[d] copying [we]re the conversion of native files to TIFF and PDF formats and the transfer of files onto CDs” and awarded only $218.59 in ESI-related costs. “The district court also concluded that none of the ‘ESI-related costs in this case . . . qualif[ied] as fees for exemplification under any established construction of the term.”

On appeal, the circuit court considered Gallo’s argument that its “ESI processing charges” were taxable under the statute as both “costs of making copies of any materials where the copies are necessarily obtained for use in the case,” and “[f]ees for exemplification . . . of any materials” but was not “persuaded.” With regard to discussion of whether the processing charges were properly considered as the “costs of making copies … necessarily obtained for use in the case,” the court relied in large part upon the Third Circuit’s decision in Race Tires America, Inc., which supported the conclusion "that, in this case, subsection (4) limits taxable costs to those identified by the district court: converting electronic files to non-editable formats, and burning the files onto discs." The court also reasoned that the fact that Gallo would recover only a fraction of its costs “[did] not establish that our reading of the statute is too grudging in an age of unforeseen innovations in litigation-support technology.” To that point, the court noted that the Supreme Court has acknowledged that “costs almost always amount to less than the successful litigant’s total expenses” and that “the presumption is that the responding party must bear the expense of complying with discovery requests.” Notably, the court instructed that to the extent costs are excessive, a party may seek a protective order (which Gallo did) and that “[w]hen, as here, a district court denies a protective order, the movant can appeal that decision” but “it cannot obtain the same relief from § 1920 which “impose[s] rigid controls on cost-shifting in the federal courts.”

With regard to the meaning of “exemplification” under the statute, the court noted a split among other circuits, but held that it need not endorse either interpretation where neither applied to the charges at issue in this case.

Thus, the court affirmed the district court’s findings.

A copy of the court’s opinion is available here.

Citing Proportionality, Court Declines to Require Defendant to Redo Discovery Utilizing Only Predictive Coding

K&L Gates — Tue, 23 Apr 2013 11:33:50 -0800

In re: Biomet M2a Magnum Hip Implant Prods. Liab. Litig., NO. 3:12-MD-2391 (N.D. Ind. Apr. 18, 2013)

In this product liability case, Plaintiffs’ Steering Committee objected to Biomet’s reliance on keyword searching to initially reduce the volume of information it then subjected to predictive coding and sought to require Biomet to start again and to utilize only predictive coding, with plaintiffs’ input. The court concluded that Biomet’s efforts complied with its discovery obligations under the civil rules.

Despite being told “(occasionally in forceful terms)” by some plaintiffs’ counsel “not to begin document production until the Judicial Panel on Multidistrict Litigation decided whether to centralize,” Biomet, “neither sold on centralization nor free of judicial exhortations in other cases against it, started the process of identifying and producing documents” (in cases eventually centralized in the summer of 2012). Biomet first utilized “keyword culling” to reduce its universe of documents and attachments from 19.5 million to 3.9 million and, after removing duplicates, was left with 2.5 million documents which were then subjected to predictive coding. “To date, Biomet’s e-discovery costs are about $1.07 million and will total between $2 million and $3.25 million.”

Biomet invited the Steering Committee to suggest more search terms and “offered to produce the rest of the non-privileged documents from the post-keyword 2.5 million so the Steering Committee can verify that Biomet is producing the relevant documents.” The Steering Committee declined. Instead, “[t]he Steering Committee [argued that] Biomet’s initial use of the keyword approach ha[d] tainted the process” and sought to require Biomet to redo its discovery, utilizing only predictive coding. The Steering Committee also wanted plaintiffs to be involved in “entering the ‘find more like this’ commands” in the predictive coding process. In response to Biomet’s objections based on the significant cost, the Steering Committee argued that “Biomet gambled when it spent millions on document production that several of plaintiffs’ counsel warned Biomet not to undertake until the Panel had centralized the cases.”

As stated by the court, the issue before it was not “whether predictive coding is a better way of doing things than keyword searching prior to predictive coding,” but rather, “whether Biomet’s procedure satisfies its discovery obligations, and, if so, whether it must also do what the Steering Committee seeks.” The court concluded that “[w]hat Biomet has done complies fully with the requirements of Federal Rules of Civil Procedure 26(b) and 34(b)(2).” In so deciding, the court reasoned that it saw no inconsistency with the Seventh Circuit’s Principles Relating to the Discovery of Electronically Stored Information, and more specifically noted that while Principle 1.02 requires cooperation, it does not require “counsel from both sides to sit in adjoining seats while rummaging through millions of files that haven’t been reviewed for confidentiality or privilege.” Nor, the court concluded, did Biomet’s approach run afoul of any of the principles set forth by the many Sedona Conference materials cited by both sides. In contrast, the court reasoned that the Steering Committee’s proposal to essentially start again (utilizing the initial set of 19.5 million documents) “[sat] uneasily with the proportionality standard in Rule 26(b)(2)(C)” and further noted that starting again would “entail a cost in the low seven-figures” and that the “confidence tests” run by Biomet “suggest a comparatively modest number of documents would be found.”

Addressing proportionality more specifically, the court acknowledged that the use of predictive coding from the beginning may have identified additional relevant documents, but concluded that it could not find that the likely benefits of starting again would outweigh the burden, considering the factors identified in Rule 26(b)(2)(C). Additionally, the court rejected the Steering Committee’s assertion that Biomet was precluded from relying on proportionality arguments because it began discovery “in disregard” of warnings from counsel for plaintiffs in individual cases.

Concluding its opinion, the court indicated its assumption that Biomet remained open to conferring on additional search terms and producing the “non-privileged documents included in the statistical sample,” but instructed that if the Steering Committee wished for Biomet to redo discovery in its preferred manner, it would have to bear the expense.

A copy of the court’s order is available here.

Volume, Expense Insufficient to Show ESI is Inaccessible, "Rather, the cost or burden must be associated with some technological feature that inhibits accessibility."

K&L Gates — Fri, 19 Apr 2013 08:17:12 -0800

W Holding Co., Inc. v. Chartis Ins. Co. of Puerto Rico, No. CIV. 11-2271 GAG, 2013 WL 1352426 (D.P.R. Apr. 3, 2013)

In this case the court addressed competing proposed protocols for the discovery of electronically stored information and declined to approve a provision that would require cost-shifting, among others. Notably, the court rejected the argument that the at-issue ESI was inaccessible (thus justifying cost-shifting) because the responding party did not show “that access to [the data] is hindered by any unique technological hurdles.”

“This action involves numerous claims among the FDIC as receiver of Westernbank (“FDIC-R”), former directors and officers of Westernbank (collectively, “D&Os”), various insurers, and the FDIC in its corporate capacity (“FDIC-C”).” Prior to the initial scheduling conference, FDIC-R and “certain D&Os” filed competing proposed protocols for the discovery of Westernbank’s ESI, which at the time the FDIC stepped in as receiver equaled approximately 6.8 terabytes plus 921,000 paper documents, a subset of which had been scanned and processed to be text searchable. “Most” of the ESI had also been loaded into an internal database (DMS) operated through a contractor. “By this point” the FDIC had spent $2.1 million although, because “the contracts and subcontracts for DMS are not litigation specific,” more detailed cost estimates were “impractical.” As part of its protocol, FDIC-R proposed using a second contractor-maintained system to give opponents “searchable access to selected data” and asserted that it would have to pay $450 per gigabyte to transfer the data from the current database and estimated its costs for production would include “$0.185 per page for scanning paper documents and generating searchable text; $0.025 per page for Bates and confidentiality stamping; $325 per gigabyte for imaging native-format ESI into TIFF files; and $35 to $300 per labor-hour for technicians, quality control, and management staff.”

FDIC-R’s proposed protocol sought to recover six cents per page “for all ESI production beyond its initial disclosures.” Among other reasons allegedly justifying such cost-shifting, FDIC-R argued that the ESI was not reasonably accessible. The court disagreed. First, the court cited the recent case of Chen-Oster v. Goldman Sachs & Co., 285 F.R.D. 294 (S.D.N.Y. 2012), for the proposition that inaccessibility must be tied to “some technological feature that inhibits accessibility:”

Rule 26(b)(2)(B) takes a categorical approach: it invites the classification of [ESI] as either “accessible” or “not reasonably accessible.” While cost and burden are critical elements in determining accessibility, a showing of undue burden is not sufficient by itself to trigger a finding of inaccessibility. For example, the sheer volume of data may make its production expensive, but that alone does not bring it within the scope of Rule 26(b)(2)(B). Rather, the cost or burden must be associated with some technological feature that inhibits accessibility.

The court went on to reason that no such technological issue had been identified and that, in fact, FDIC-R had indicated that the relevant ESI was already uploaded into a “retrieval system (DMS) that is both searchable and organized into meaningful databases.”

The court rejected FDIC-R’s argument that another decision from the District of Puerto Rico had “recognized that high production costs are sufficient to render ESI ‘not reasonably accessible’ under the rule.” Instead, the court reasoned that although the court in Rodriguez-Torres v. Gov’t Dev. Bank of P.R., 265 F.R.D. 40 (D.P.R. 2010) recognized that “an estimated $35,000 cost of production, exclusive of privilege review costs, was excessive” in a case alleging age and sex discrimination and cited Rule 26(b)(2)(B), “its rationale did not address accessibility so much as proportionality, which is not relevant to Rule 26(b)(2)(B)’s purpose and function.” The court concluded:

In short, I reject the contention that Rule 26(b)(2)(B)—and its shifting burden to justify production requests—kicks in any time that discovery implicates both (1) electronically stored information and (2) large volumes of data, even where the volume renders review costly.

Because FDIC–R has not shown that access to the Westernbank data is hindered by any unique technological hurdles, it has failed to trigger Rule 26(b)(2)(B). It is therefore not entitled to categorically label the DMS databases “not reasonably accessible.”

Turning to application of the seven cost-shifting factors established in Zubulake III (216 F.R.D. 280), which FDIC-R argued would also justify cost-shifting, the court (prompted by the D&Os) noted that “the [Zubulake] court tailored these factors to allocate the cost of retrieving data that is not readily accessible,” and “[i]n light of the accessibility analysis discussed above,” was “persuaded that the Zubulake analysis does not apply per se.” Thus, the court indicated its intention to focus on the proportionality considerations under Rule 26(b)(2)(C), but, citing an absence of evidence to justify the request, ultimately declined to shift costs: “Until the parties take affirmative steps to conduct discovery—perhaps after test runs, for instance—there is no ground for the court to dramatically alter the defaults under the Federal Rules of Civil Procedure.”

The court also rejected FDIC-R’s argument that cost-shifting was appropriate “because (1) producing parties are not ordinarily burdened with the cost of making copies, and (2) ESI production costs are sometimes taxed under 28 U.S.C. § 1920 by analogy to its provision for copying costs.”

Also in this opinion, the court declined to require FDIC-R to organize and label its production according to each request and declined FDIC-R’s request for an order requiring “defendants’ written discovery requests to be consolidated in light of the number of people it ha[d] sued.”

A copy of the court’s opinion is available here.

A copy of the Order Governing Discovery of Electronically Stored Information from FDIC-R is available here.

Court Imposes Adverse Inference for Failure to Preserve Facebook

K&L Gates — Fri, 12 Apr 2013 09:51:27 -0800

Gatto v. United Air Lines, Inc., No. 10-cv-1090-ES-SCM, 2013 WL 1285285 (D.N.J. Mar. 25, 2013)

In this personal injury action, the court imposed spoliation sanctions for Plaintiff’s failure to preserve his Facebook account.

Plaintiff alleged that as the result of a work-related accident he sustained numerous injuries that rendered him permanently disabled. Defendants sought production of information related to Plaintiff’s social media accounts and online business activities such as eBay. In response, Plaintiff provided signed authorizations for the release of information from certain sites, but did not include authorization for the release of records from Facebook.

Subsequently, Plaintiff was ordered to execute an authorization for the release of Facebook records. Plaintiff also agreed to change his Facebook password. Although there are conflicting accounts of whether Defendants’ attorneys were authorized to access Plaintiff’s profile directly, at least one attorney for Defendant United Air Lines did so, “to confirm the password was changed.” That attorney also printed certain pages from the account which were alleged to contradict Plaintiff’s claims. In response to an inquiry from Plaintiff’s counsel, prompted by Plaintiff’s receipt of an alert that his account had been accessed from an unfamiliar IP address, Defendant’s counsel confirmed that he had accessed the account.

Ultimately, despite receiving Plaintiff’s authorization and a subpoena, Facebook refused to produce certain data, citing the Federal Stored Communications Act. Thereafter, Plaintiff’s counsel agreed to download and produce the requested account information. Approximately two weeks later, however, Defendants were advised that Plaintiff’s Facebook account had been deactivated and that all data had been lost. Efforts to reactivate the account were unsuccessful allegedly because Facebook had automatically deleted the account fourteen days after its deactivation. Although there was a question of whether Plaintiff merely deactivated his account or permanently deleted it, the court indicated it made no difference as “either scenario involve[d] the withholding or destruction of evidence.”

Plaintiff argued that he had not intentionally destroyed evidence or violated a court order. He explained that he had recently been involved in contentious divorce proceedings during which his account had been “hacked into” on a number of occasions and that he therefore acted reasonably by deactivating his account following notice that it had been accessed by an unknown IP address. He further asserted that the loss of data was “entirely the result” of Facebook automatically deleting the account. In support of these claims, Plaintiff’s counsel alleged that Plaintiff had not been “personally advised” that it was defense counsel who had accessed his account until after the account was deleted.

As to the question of spoliation and more specifically the possibility of imposing an adverse inference, the court turned to the relevant four-factor analysis ((1) the evidence was within the party's control; (2) there was an actual suppression or withholding of evidence; (3) the evidence was [sic] destroyed or withheld was relevant to the claims or defenses; and (4) it was reasonably foreseeable that the evidence would be discoverable) and indicated that factors 1, 3, and 4 were “clearly” satisfied. Thus, the court focused on the question of whether there was “actual suppression or withholding of evidence.” Notably, as to the question of forseeability (factor 4), the court pointed out that Defendants had requested Plaintiff’s Facebook information nearly five months before it was deactivated and that Plaintiff had been ordered to sign the Facebook authorization during a December 1 settlement conference; Plaintiff deactivated his account on December 16.

“The court [was] not persuaded by Plaintiff’s arguments regarding whether the evidence at issue was intentionally suppressed,” and found that a spoliation inference was appropriate. First, the court cited Mosaid Techs. v. Samsung Elecs., 348 F. Supp. 2d 332 (D.N.J. 2004) for the premise that “so long as the evidence is relevant, the ‘offending party’s culpability is largely irrelevant,’ as it cannot be denied that the opposing party has been prejudiced.” The court then reasoned that even if Plaintiff did not intend to deprive Defendants of relevant evidence, there was no dispute that Plaintiff intentionally deactivated the account and further reasoned that Plaintiff’s failure to reactivate the account in a timely manner resulted in the account’s permanent deletion. Moreover, no explanation, including that defense counsel had inappropriately accessed the account or that Plaintiff had attempted to reactivate it “negate the fact that Plaintiff failed to preserve relevant evidence.” As a result, Defendants were prejudiced and sanctions were warranted.

Accordingly, the court imposed an adverse inference, but declined to impose monetary sanctions.

A copy of the court’s order is available here.

Da Silva Moore: Second Circuit Denies Petition for Writ of Mandamus Compelling Recusal of Magistrate Judge Peck

K&L Gates — Fri, 12 Apr 2013 08:24:55 -0800

In what is possibly the final chapter to last year's Da Silva Moore predictive coding saga, the Second Circuit has denied Plaintiffs' petition for a writ of mandamus compelling the recusal of Magistrate Judge Andrew Peck. For those unfamiliar with the issues in this case, copies of the underlying decisions from both Magistrate Judge Peck and District Court Judge Carter are available here and here. While a copy of the Second Circuit's denial is available below, the full text of the order states:

Petitioners, through counsel, petition this Court for a writ of mandamus compelling the recusal of Magistrate Judge Andrew J. Peck. Upon due consideration, it is hereby ORDERED that the mandamus petition is DENIED because Petitioners have not “clearly and indisputably demonstrate[d] that [Magistrate Judge Peck] abused [his] discretion” in denying their district court recusal motion, In re Basciano, 542 F. 3d 950, 956 (2d Cir. 2008) (internal quotation marks omitted) (quoting In re Drexel Burnham Lambert Inc., 861 F.2d 1307, 1312-13 (2d Cir. 1988)), or that the district court erred in overruling their objection to that decision.

A copy of the court's order is available here.

"Post-Public Comment" Version of The Sedona Conference® Commentary on Proportionality in Electronic Discovery Now Available

K&L Gates — Fri, 05 Apr 2013 16:04:22 -0800

In January, The Sedona Conference® made available the "post-public comment" version of its Commentary on Proportionality in Electronic Discovery, first published in 2010. The publication is available for download, here.

Availability of Clawback Order Thwarts Claim of Undue Burden Based on Cost to Review

K&L Gates — Wed, 03 Apr 2013 10:18:08 -0800

In re Coventry Healthcare, Inc. ERISA Litig., No. AW 09-2661, 2013 WL 1187909 (D. Md. Mar. 21, 2013)

In this brief opinion, the court considered Defendants’ claim that the burden of producing the requested ESI outweighed its potential benefit to the class action plaintiffs and granted Plaintiffs’ motion to compel. Specifically, Defendants claimed that Plaintiffs’ search terms, as applied to the ESI of selected custodians from the relevant discovery time frame, “hit” on approximately 200,000 documents and that it would cost approximately $388,000 “to process host and review the data for responsiveness and privilege.” Defendants did not, however, suggest alternative measures to accommodate Plaintiffs’ discovery needs “other than negotiating more refined search terms.”

Addressing Defendants’ claim, the court first noted that Plaintiffs had agreed to shorten the discovery period in an effort to reduce Defendants’ burden. The court then turned to a discussion of the case of Adair v. EQT Prod. Co., 2012 WL 1965880 (W.D. Va. May 31, 2012), in which the court contemplated the question of “whether production of accessible documents should not be ordered because of the high cost of reviewing those documents for privileged or responsive information” and relied (in part) upon then-Magistrate Judge Grimm’s rationale in yet another case that “the more practical approach is to avoid the necessity of an expensive and time-consuming privilege review by entry of a court order with a clawback provision that protects against a claim of waiver by production of a privileged document.” In Adair, the court entered an order that stated that “any production made without a privilege review ‘shall not be deemed to have waived any privilege . . . .' ” The Adair court also emphasized the producing party’s ability to filter its ESI by date or custodian, for example, and to conduct keyword searches (to ensure responsiveness).

In the present case, the court reasoned as follows:

In this case, Defendants' claimed cost to review the requested ESI for responsiveness and privilege will be somewhat reduced now that Plaintiffs have narrowed the discovery time period by approximately three months. More importantly, however, a clawback order can protect Defendants against a claim of waiver, such that Defendants need no longer bear the cost of reviewing the ESI for responsiveness and privilege. FN8 To further reduce any undue burden, Plaintiffs may need to refine their proposed search terms to narrow the pool of potentially relevant documents. FN9 In light of these options, Defendants have not shown that producing the requested ESI will be unduly burdensome.

(Emphasis added.) Accordingly, the court granted Plaintiffs’ motion to compel the at-issue discovery noting that “[i]f the Defendants choose to seek a clawback order, they may confer with Plaintiffs and submit one for court approval.”

A copy of the court's opinion is available here.

Court Imposes Rule 16(f)(1) Sanctions against EEOC for Causing Unnecessary Burdens and Delays

K&L Gates — Wed, 27 Mar 2013 10:34:58 -0800

EEOC v. The Original Honeybaked Ham Co. of Georgia, Inc., No. 11-cv-02560-MSK-MEH (D. Colo. Feb. 27, 2013)

Previously in this case, the court ordered broad discovery of the claimants’ social media, text messages and email. (See a summary of that opinion, here.) In this opinion, the court imposed sanctions for the EEOC’s actions which resulted in unnecessary delays and expense for the defendant, including actions related to the facilitation of the court ordered discovery. Notably, the sanctions were imposed pursuant to Rule 16(f), based on the Tenth Circuit’s “broader” interpretation of its application.

Defendant moved for sanctions arguing that the EEOC had engaged in bad faith during discovery. While ultimately declining to find bad faith, the court agreed that as to the discovery of emails, texts, etc., the EEOC had made “this endeavor more time consuming, laborious and adversarial than it should have been” and more specifically that the EEOC had been “[i]n certain respects … negligent in its discovery obligations, dilatory in cooperating with defense counsel, and somewhat cavalier in its responsibility to the United States District Court.” Notably, the court repeatedly made clear its belief that the problems were caused not by the trial attorneys, but by “ ‘the powers that be’ (as Defendant describes them) in the higher echelons of the EEOC [who] keep interfering with the promises and commitments that the trial attorneys are making.”

Despite declining to go into great detail, the court noted, for example, that the EEOC had requested that the court allow it to use its own information technology personnel to engage in forensic discovery of the claimants’ social media, contrary to the court’s original order appointing a special master, but later “reneged on this representation,” causing the court and Defendant to “go back to the drawing board.” The court also noted that after “lengthy negotiation and agreement with Defendant concerning the contents of a questionnaire … designed to assist in identifying the social media that would be forensically examined,” the EEOC “changed its position,” thus requiring the defendant to “pay its attorneys more than should have been required” and “multipl[ying] and delay[ing] these proceedings unnecessarily.”

As to the question of sanctions, the court acknowledged that a “hurdle” for Defendant was that while the EEOC’s conduct had been “inappropriate and obstreperous,” it did not “rise to a level that is sanctionable under most rules governing the litigation process,” including Rule 37. Indeed, the court acknowledged that it had, “for some time, believed that the EEOC’s conduct was causing the Defendant to spend more money in this lawsuit than necessary,” but that it had “not known how to control it other than with criticism and veiled threats.” Finally, however, the court discovered one remedy “that appears appropriate and necessary to me in this circumstance: a ‘sanction’ under Fed. R. Civ. P. 16(f)(1)” which, although seemingly limited on its face, has been given “a broader, more practical application” by the Tenth Circuit.

The court’s opinion quoted at length from the relevant Tenth Circuit case. Sparing those details, the bottom line of the Tenth Circuit’s analysis was that the intent behind Rule 16(f) was “to give courts very broad discretion to use sanctions where necessary to insure not only that lawyers and parties refrain from contumacious behavior, already punishable under the various other rules and statutes, but that they fulfill their high duty to insure the expeditious and sound management of the preparation of cases for trial.”

In the present case, the court reasoned that the EEOC’s actions had “[w]ithout a doubt” “negatively affected the Court’s management of its docket” and “caused unnecessary burdens on the opposing party” and delays in the court’s own preparation of the case for trial. Thus, citing the Tenth Circuit’s instruction that a court should “impose only so much of a sanction as is necessary to ensure that the offending conduct stop,” the court indicated its belief that “awarding Defendant its reasonable fees in prosecuting this Motion will suffice for that purpose” and went on to note that the sanction was imposed specifically “for the unnecessary waste” that the EEOC had caused.

A copy of the court’s opinion is available here.

Court Denies Motion for Protective Order or Cost-Shifting Related to Request to Utilize Sixty-Seven Search Terms

K&L Gates — Fri, 15 Mar 2013 12:58:54 -0800

Juster Acquisition Co., LLC v. N. Hudson Sewerage Auth., No. 12-3427 (JLL), 2013 WL 541972 (D.N.J. Feb. 11, 2013)

In this case, the court denied Defendant’s motion for a protective order “regarding the sixty-seven (67) electronic word searches” demanded by the plaintiff. It also denied Defendant’s request that the cost of running those searches be shifted to the plaintiff.

Plaintiff’s first Request for Production included a list of 67 proposed search terms to be run against Defendant’s ESI. In response, Defendant sought a protective order or, alternatively, an order shifting the costs associated with the search, arguing it was “entitled” to a protective order because it had already produced 8000 pages of responsive documents (in hard copy) and because, in its view, the requested search terms were “quite broad and vague.”

The court quickly denied the motion for a protective order, however, finding the defendant had “failed to provide any law or analysis in support of its request . . . .” Among the court’s reasons for denying the motion were Defendant’s failure to show “how it would be unreasonably cumulative or duplicative to perform the requested discovery search” and Defendant’s failure to provide certification that it had conferred or attempted to confer with the plaintiff to resolve the dispute.

Addressing Defendant’s alternative request for cost-shifting, the court noted that “cost-shifting should only be considered when electronic discovery imposes an undue burden or expense on the responding party” and that “[a]s a preliminary matter, ‘[c]ost shifting is potentially appropriate only when inaccessible data is sought.’” In this case, the court determined that the defendant “failed to satisfy its burden” of showing that the ESI sought was inaccessible, reasoning, in part, that by “asserting that it ha[d] hired an outside vendor to perform the word searches,” Defendant had “acknowledged that the ESI is accessible.”

Continuing its analysis, the court stated that Defendant “also failed to show that the ESI sought by Juster impose[d] an ‘undue’ burden or expense” and found that Defendant sought “merely to avoid the cost associated with what it presumes to be duplicative and expensive word searches.” “As a result,” the court could not find that the requested ESI “[fell] into either category of ‘inaccessible’ electronic data” and concluded that Defendant “must bear the attendant discovery costs.”

Although the court determined that these factors were sufficient to deny the defendant’s motion, it went on to “nonetheless” provide additional reasons for its denial and turned to the seven-factor cost-shifting test set forth by the Zubulake court (“(1) the extent to which the request is specifically tailored to discover relevant information; (2) the availability of such information from other sources; (3) the total cost of production, compared to the amount in controversy; (4) the total cost of production; (5) the relative ability of each party to control costs and its incentive to do so; (6) the importance of the issues at stake in the litigation; and 7) the relative benefits to the parties of obtaining the information”).

Summarizing broadly, the court determined that “on balance,” these factors did not support cost-shifting. The court reasoned, in part, that it was “irrelevant that [Defendant] ha[d] already turned over 8000 pages of documents to [Plaintiff] because ‘production of information in ‘hard copy’ documentary form does not preclude a party from receiving that same information in computerized/electronic form.'” Moreover, while the defendant alleged that it would cost between $6,000 to $16,000 to “process the word searches and eliminate duplicates,” the amount Plaintiff alleged it was owed was “not less than $41 million”; the court also considered the defendant's ability to bear the costs. Notably, the court also pointed out that the defendant had agreed bear its own discovery costs after it had been provided with Plaintiff’s proposed terms.

Finally, the court found that its denial of Defendant’s cost-shifting motion was further supported by the principles of fundamental fairness, relying on Defendant's agreement to pay for its own discovery costs and the “comparable” nature of the amount of discovery requested of each party (Defendant had, itself, requested the results from one hundred search terms).

A copy of the court’s full opinion is available here.

In Minnesota, Amendments to the Rules of Civil Procedure Highlight Proportionality

K&L Gates — Tue, 12 Mar 2013 12:04:39 -0800

On February 4, 2013, the Supreme Court of the State of Minnesota adopted amendments to the Rules of Civil Procedure, including those affecting discovery. Of particular note were amendments to Rules 1 and 26. Specifically (and significantly), Rule 1 was amended to state that it is the responsibility of the parties and the court to assure proportionality throughout the litigation. Accordingly, Rule 1 now states (new language is underlined):

These rules govern the procedure in the district courts of the State of Minnesota in all suits of a civil nature, with the exceptions stated in Rule 81. They shall be construed and administered to secure the just, speedy, and inexpensive determination of every action.

It is the responsibility of the court and the parties to examine each civil action to assure that the process and the costs are proportionate to the amount in controversy and the complexity and importance of the issues. The factors to be considered by the court in making a proportionality assessment include, without limitation: needs of the case, amount in controversy, parties’ resources, and complexity and importance of the issues at stake in the litigation.

Similarly, in addition to other significant amendments to Rule 26, Rule 26.02(b) has been amended to require that the scope of discovery “comport with the factors of proportionality, including without limitation, the burden or expense of the proposed discovery weighed against its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.” While such limitations to discovery were previously acknowledged, the amended rule more strongly emphasizes the importance of proportionality.

Significant amendments to other rules were also adopted. Notably, an order attaching “corrective amendments” was entered several days later. Those orders are available HERE and HERE. The newly adopted amendments become effective July 1, 2013.

Court Awards Millions in Attorneys' Fees for Document Review Conducted by Contract Attorneys and Use of Computer-Assisted Review

K&L Gates — Mon, 04 Mar 2013 08:34:36 -0800

Gabriel Techs., Corp. v. Qualcomm, Inc., No. 08CV1992 AJB (MDD), 2013 WL 410103 (S.D. Cal. Feb. 1, 2013)

Following entry of judgment in their favor in this patent infringement case, Defendants filed a motion seeking attorneys’ fees, including $391,928.91 for document review conducted by an outside provider of discovery services and $2,829,349.10 “attributable to computerassisted [sic], algorithm-driven document review” utilized to reduce the number of documents requiring manual review. The court found these amounts reasonable and granted the motion in part. Ultimately, the court awarded Defendants a total of $12,465,331.01.

Defendants alleged that Plaintiffs “pursued objectively baseless patent and misappropriation claims in bad faith” and thus sought attorneys’ fees “with regard to Plaintiffs’ patent claims under 35 U.S.C. § 285 and with regard to Plaintiffs’ misappropriation claims under Section 3426.4 of CUTSA” (California’s Uniform Trade Secrets Act). Sparing the details, the court concluded that an award of attorneys’ fees was appropriate under each statute and further determined that because “each one of Plaintiffs’ claims [was] covered under the ambit of one of the statutes, the Court need not apportion Defendants’ attorneys’ fees to the particular cause of action it addressed.” Accordingly, the court indicated it would determine “the reasonable amount of the award using the lodestar determination.”

In addition to the fees attributable to lead counsel, Defendants sought recovery of fees related to the document review undertaken by an outside discovery service provider (using contract attorneys) and of fees “attributable to computerassisted [sic], algorithm-driven review.” Specifically, after collecting almost 12 million records (mostly ESI), Defendants relied on an outside vendor to “employ its proprietary technology to sort the[ ] records into responsive and non-responsive documents” and then provided those documents identified as responsive to a separate discovery service provider whose attorneys manually reviewed them for “confidentiality, privilege and relevance issues.”

Addressing first the fees requested for document review conducted by a discovery service provider, the court noted that Plaintiffs’ initial claims involved 92 patents “resulting in voluminous document production,” and reasoned that if lead counsel had performed the review, “the resulting attorneys’ fees would have undoubtedly been exponentially higher . . . .” Thus, “in light of the circumstances,” the court concluded that the rates charged and the hours spent for document review were “reasonable” and that the lodestar amount of $391,928.91 was reasonable as well.

As for those fees attributed to the computer-assisted review, the court reasoned that the technology provider and the document reviewers “accomplished different objectives with the H5 electronic process minimizing the overall work” for the review attorneys and found lead counsel’s decision “to undertake a more efficient and less time-consuming method of document review,” to be “reasonable under the circumstances.” The court further reasoned that the approach “seemingly reduced the overall fees and attorney hours required” and thus found the requested amount of $2,829,349.10 to be reasonable.

Ultimately, the court awarded a total of $12,465,331.01 including fees for the work of lead counsel and the fees related to discovery as discussed above. Plaintiffs were ordered to pay $12,401,014.51.

The court also awarded $64,316.50 in attorneys’ fees against local counsel, upon finding that sanctions were warranted under Rule 11 for for counsel's failure to conduct sufficient inquiry into the merits of Plaintiffs’ case, particularly after the judge “warned of substantial deficiencies in Plaintiffs’ case” and ordered a bond of $800,000.00.

It should be noted that the total award reflected a $1,000,000.00 reduction in the total amount requested by Defendants, as a result of the court's determination that it was "appropriate to limit the imposition of fees to those incurred after the entry of the bond order."

A full copy of the court’s opinion is available here.

Court Considers the "Persnickety, but Persistent Question" of What Qualifies as "Content" Under the Stored Communications Act

K&L Gates — Wed, 20 Feb 2013 09:45:22 -0800

Optiver Australia Pty. Ltd. & Anor. v. Tibra Trading Pty. Ltd. & Ors., No. C 12-80242 EJD (PSG), 2013 WL 256771 (N.D. Cal. Jan. 23, 2013)

In this case, the court granted in part Defendant’s Motion to Quash upon finding that Google’s production of metadata related to communications containing certain search terms and production of subject lines would violate the Stored Communications Act (“SCA”).

Before the court in this case was “the persnickety, but persistent, question of exactly what qualifies as ‘content,’ whose disclosure by service providers is prohibited under the Stored Communications Act.” Specifically, the court considered Defendant’s motion to quash a subpoena served by the plaintiff upon Google, Inc. to obtain discovery for use in a foreign proceeding. The subpoena sought information related to “a number of electronic communications sent or received by certain Gmail accounts allegedly used by employees of Tibra,” including metadata related to messages containing certain search terms and the subject lines of those messages and others which met certain criteria (e.g. sent within a certain time frame, received by certain people).

Addressing first Plaintiff’s request for production of metadata related to communications containing certain terms, the court reasoned that the SCA “prohibits any knowing disclosure by service providers of the content of electronic communications, no matter how insignificant,” that the proposed search would necessarily reveal that certain communications contained certain words (the search terms), and that such terms constitute “content, or information concerning the ‘substance, purport, or meaning’ of the communications” which, “[h]owever trivial,” are “exactly the sort of information the SCA sought to protect.” Thus, the motion to quash this request was granted.

Turning to Plaintiff’s request for the production of subject lines of certain communications, the court concluded that it was “clear from the purpose and nature of the subject line that it is ‘content’ intended to fall under the protection of the SCA.” In so concluding, the court reasoned that the subject line serves to “convey a substantive message about the body of the email” and further stated that “[i]n fact, a message’s subject line is nothing less than a pithy summary of the message’s content.” Moreover, the court noted that “[m]aterials from the U.S. Department of Justice and the legislative history of the SCA underscore the notion that subject lines are content,” and provided examples. Accordingly, those portions of the requests seeking the production of subject lines were also quashed.

Despite doubts about its usefulness, however, the court noted that the Plaintiff was entitled to receive certain non-content metadata. Accordingly, Google was ordered to produce that information.

A copy of the court’s opinion is available here.

Upcoming Events

K&L Gates — Wed, 20 Feb 2013 08:00:48 -0800

Compliance, Governance and Oversight Council, Summit 2013 - Stemming the Rising Tide of Data, Cost and Risk

March 14-15, 2013
The Resort at Pelican Hill
22701 South Pelican Hill Road
Newport Beach, CA

Join K&L Gates Partner, Martha J. Dawson and her fellow speakers for their discussion of “eDiscovery Law Today and Its Trajectory,” as part of a larger program entitled “Quantifying and Mitigating Information Risk.”

For more information about this program or others, or to register for this event, click here.

Washington Association of Public Records Officers (WAPRO) – Spring Conference

Tuesday April 30, 2013
Holiday Inn Downtown
3105 Pine Street
Everett WA 98201
8:45 AM – 4:30 PM

Join K&L Gates Partner, Julie Anne Halter and her fellow speakers for a discussion of “e-Discovery, Metadata & the PRA” (Public Records Act).

For more information visit the WAPRO website, here.

Court Awards Sanctions for Discovery Violations, Including Wrongful Certification Pursuant to Rule 26(g)

K&L Gates — Fri, 08 Feb 2013 10:22:52 -0800

Branhaven LLC v. Beeftek, Inc., ---F.R.D.---, 2013 WL 388429 (D. Md. Jan. 4, 2013)

In this case, the court imposed sanctions for discovery violations, including wrongful certification pursuant to Fed. R. Civ. P. 26(g) and violations of Fed. R. Civ. P. 34(b) addressing the appropriate format of production. Notably, the award was made jointly and severally against Plaintiff and counsel.

In response to each of Defendants’ Requests for Production, Plaintiff stated: “[Branhaven] will make the responsive documents available for inspection and copying at a mutually convenient time.” The responses were signed by Plaintiff’s counsel pursuant to Rule 26(g), thus certifying that “the lawyer has made a reasonable effort to assure that the client has provided all the information and documents available to him that are responsive to the discovery demand.” At the time of the response and certification, however, counsel had done little more than forward the requests to his client and had not yet been provided with any discovery responses. Indeed, several of the primary sources for the ultimately produced data—two email servers and two laptops—had not yet been accessed, let alone searched. Moreover, “counsel essentially admitted” that his response was intended to “buy time and technically comply with Rule 34” and also admitted that the “response was essentially meaningless in terms of identification and production of responsive documents.”

When the requested information was eventually produced (the bulk of it “only a couple of business days before [Plaintiff’s] 30(b)(6) depositions”) it was in PDF format, without complete Bates stamping. Defendants moved for sanctions.

Summarizing broadly, the court ultimately found that “plaintiff’s counsel in their execution of the Response to the requests for production wrongly certified that they were responding to the document requests ‘to the best of [their] knowledge, information and belief after reasonable inquiry.” The court reasoned (in part) that “Branhaven essentially misled defendants and their counsel, in its affirmative statement that responsive documents would be ‘available for inspection and copying at a mutually available time,’ while in fact not knowing what if any responsive documents there might be and when if ever they would be identified and produced.” Specifically addressing Plaintiff’s delay in accessing the relevant email servers, the court reasoned that “[t]here is no more obvious and critical source of information in the 21st century than a company’s email accounts” and concluded that “Plaintiff’s counsel’s failure to identify and produce this discovery in a timely fashion and in an acceptable form and manner while suggesting—if not misleading defendants—that it had identified responsive documents is sanctionable.” The court also noted that at the time of his certification, counsel was unaware what, if any, information would be found on the laptops, in large part due to his failure to adequately follow up on his client’s discovery efforts.

Following discussion of the certification issue, the court turned its attention to Plaintiff’s chosen format of production, namely PDF “without complete Bates stamping." Once again sparing the details, the court ultimately concluded that the PDF format “appear[ed] to violate Rule 34 and appear[ed] contrary to customary and reasonable practice especially in voluminous productions and further complicated defendants’ review of the documents, causing further expense and delay.” The court also indicated that Defendants had successfully demonstrated that “without Bates stamping and .tiff format, the data was not reasonably usable and therefore was insufficient under Rule 34.”

In response to Plaintiff’s counsel’s assertion that neither client nor counsel had “intentionally concealed any discoverable material” nor taken actions “that were designed to frustrate these proceedings or the discovery process in particular,” the court reasoned:

That, however, is not the standard. As plaintiff's counsel has an affirmative duty to assure that their client responds completely and promptly to discovery requests. Their inaction seriously frustrated the defense of this case. The record here demonstrates a casualness at best and a recklessness at worst in plaintiff's counsel's treatment of their discovery duties. I agree with defense counsel that the attorneys abdicated their responsibilities while representing that they had not. If all counsel operated at this level of disinterest as to discovery obligations, chaos would ensue and the orderliness of the discovery process among counsel in federal courts, which is exquisitely dependent on honorable attorney self-regulation, would be lost.

For Plaintiff’s “document dump” (PDF production), the court indicated it would award costs and fees related to “time spent by the litigation support analysts in receiving the document production and converting it to a reviewable format” and limited fees related to the “time spent by attorneys in drafting, filing, and prosecuting the Motion for Sanctions.” As to Defendants’ request for attorneys’ fees and costs pursuant to Rule 26(g), the court indicated it would impose an appropriate sanction “which in the Court’s opinion are the manpower and equipment costs defendants incurred as a result of the last minute and inadequate form and manner of the document production and reasonable fees in bringing this violation to the court’s attention”—essentially the same sanctions awarded related to the format of production violation. The court also indicated its intent to “make the award jointly and severally” against both Plaintiff and counsel.

Despite noting that counsel “acted in callous disregard for their responsibilities under the rules,” that “[t]hey clearly had not made a reasonable investigation at [the time of the certification] and clearly were ‘buying time’ through their misleading response to the requests for production of documents,” and that their actions “all speak of ‘recklessness or indifference to the law'” the court declined to impose additional sanctions pursuant to 28 U.S.C. § 1927 because defendants had already been afforded relief.

A copy of the court’s full opinion is available here.

502(d) Order Provides Right to Claw Back "No Matter What the Circumstances" that Resulted in Production

K&L Gates — Thu, 31 Jan 2013 12:21:02 -0800

Brookfield Asset Mgmt., Inc. v. AIG Fin. Prods. Corp., No. 09 Civ. 8285(PGG)(FM), 2013 WL 142503 (S.D.N.Y. Jan. 7, 2013)

Upon receipt of “dueling letters” concerning the inadvertent production of privileged information (which had been redacted but could be viewed in the metadata), the court noted that such an event emphasized “the need for counsel for a producing party to keep a watchful eye over their e-discovery vendors,” but found that privilege was not waived because a Rule 502(d) order had been entered. Indeed, the court identified the “one decretal paragraph” that stated that “Defendants' production of any documents in this proceeding shall not, for the purposes of this proceeding or any other proceeding in any other court, constitute a waiver by Defendants of any privilege applicable to those documents, including the attorney-client privilege ....“ and concluded that, “[a]ccordingly, [Defendant] ha[d] the right to claw back the minutes, no matter what the circumstances giving rise to their production were.” (Emphasis added.)

For a full copy of this brief opinion, click here.

Court Concludes Defendants' Reliance on a Vendor to Accomplish Collections was "Insufficient"

K&L Gates — Fri, 25 Jan 2013 08:47:03 -0800

Peerless Indus., Inc. v. Crimson AV, LLC, No. 1:11-cv-1768, 2013 WL 85378 (N.D. Ill. Jan. 8, 2013)

In this case, the court concluded that Defendants’ reliance on a vendor to accomplish collections from a non-party whose documents were in Defendants’ control was “insufficient” and granted Plaintiff’s motion for sanctions. Specifically, the court ordered Defendants to “show that they in fact searched for the requested documents and, if those documents no longer exist or cannot be located," to "specifically verify what it is they cannot produce” and ordered Plaintiff to submit its bill of costs related to preparation of the motion.

Plaintiff alleged patent infringement and design patent infringement “arising out of defendants’ manufacture and sale of certain TV mounts.” “Closely related to this action, though not a party,” was Plaintiff’s former supplier of the at-issue mounts, Sycamore Manufacturing Co., Ltd. (“Sycamore”). Sycamore is located in China.

In the course of discovery, the court held that Defendant Crimson AV, LLC (“Crimson”) “was in control” of Sycamore’s documents and found that “the evidence suggested” that Tony Jin, the president of Sycamore, "was principal of both Crimson and Sycamore, and that he exercise[d] a considerable amount of financial and managerial control over both corporations.” The court further found that because of this control, “Crimson was ‘able to obtain the relevant documents from Sycamore.’” According to the court, “[t]his order of course required defendants to contact individuals at Sycamore and play a role in obtaining the necessary discovery.”

Turning to the present motion, Plaintiff argued that at the deposition of Crimson’s Managing Director/30(b)(6) Deponent (who was also a named party), “it became clear that defendant did not conduct a reasonable investigation regarding Sycamore’s document production or Sycamore’s document retention for purposes of this litigation.” Accordingly, Plaintiff filed its renewed motion for sanctions—the third motion filed by the plaintiff related to “essentially the same set of documents.” Sparing the details, Defendants and Sycamore asserted that certain documents in Sycamore’s possession had been produced, although, as Plaintiff (and the court) noted, they did not represent that all requested documents were produced or that they were searched for but no longer existed.

Noting the Managing Director’s deposition testimony that “there was a process outlined ‘I guess by the vendor,’” who “provided instruction to Mr. Jin on how to collect documents,” the court concluded that Defendants “took a backseat approach” and “let the process proceed through a vendor.” As a result, Crimson, “or at least” the Managing Director, “had no part in the process . . . .” Indeed the Managing Director was unable to answer questions about the non-party’s information systems, search efforts, custodians, preservation efforts, or whether any of Sycamore’s employees “were even contacted regarding plaintiff’s document requests.”

The court concluded that “such a hands-off approach [wa]s insufficient.” The court continued:

Because of the control or “close coordination” between the two companies, defendants were required to produce the requested information. Defendants cannot place the burden of compliance on an outside vendor and have no knowledge, or claim no control, over the process. Defendants must produce all responsive documents, even if those documents are held by Sycamore, because we have already determined that the separation of the two companies “‘cannot be used as a screen to disguise the coordinated nature’” of their business.

(Footnotes omitted.)

Ultimately, the court declined to accept Defendants’ assertions that they had “provided everything” absent additional information and ordered Defendants to “show that they in fact searched for the requested documents and, if those documents no longer exist or cannot be located, they must specifically verify what it is they cannot produce.” The court also granted Plaintiff’s motion for sanctions and ordered the submission of its bill of costs for the preparation of the motion.

A full copy of the court’s opinion is available here.