Electronic Discovery Law

Plaintiff Sanctioned for Burning Personal Computer

K&L Gates — Tue, 31 Jan 2012 10:06:56 -0800

Evans v. Mobile Cnty. Health Dept., No. CA 10-0600-WS-C, 2012 WL 206141 (S.D. Ala. Jan. 24, 2012)

In this case, the defendant sought to compel the production of additional information and sanctions for plaintiff’s destruction of her computer. Following its analysis of the facts, including plaintiff’s admission that the computer used during the time of her alleged harassment had been burned and replaced, the court granted defendant’s motions and compelled production of additional ESI as well as plaintiff’s new computer and imposed sanctions, including an adverse inference instruction.

Plaintiff sued the Mobile County Health Department alleging reverse discrimination. In the course of discovery, the defendant requested production of all documents, including ESI, related to the allegations contained in the complaint. Thereafter, the court entered a scheduling order which included specific instruction for plaintiff to preserve relevant information. Initially, plaintiff made no production, but eventually produced a small number of documents at her deposition and admitted to the existence of others, including emails. Despite the fact that plaintiff would ultimately claim that her computer had been destroyed, she did not reveal the destruction at her deposition.

Following plaintiff’s deposition, defendant revived its request that plaintiff produce ESI in her possession, including information she described at deposition, and requested that plaintiff allow defendant to inspect her personal computer. When repeated requests produced unsatisfactory results, defendant filed a motion to compel. Several days later, plaintiff’s counsel revealed the destruction of plaintiff’s computer for the first time. Subsequently, plaintiff revealed that that her 13-year-old computer had crashed sometime in June or July 2011, approximately eight months after her complaint was filed. She further alleged that after taking the computer to Best Buy’s “Geek Squad” she was advised to “just buy another computer” and thus burned her computer because of the personal information it contained and the “threat of identity theft.” She also purchased a new computer. Accordingly, defendant filed a motion for sanctions and requested dismissal of plaintiff’s case.

Addressing first defendant’s motion to compel, the court did not find plaintiff’s claims that she had produced all relevant information credible, particularly in light of her deposition testimony that additional responsive ESI existed which had not been produced. Accordingly, following the court’s discussion of plaintiff’s discovery violations and after noting the likely availability of additional relevant emails from plaintiff’s web-based email account (which would have been unaffected by plaintiff’s spoliation of her hard drive), the court ordered plaintiff to produce “all emails from her personal email account on ‘gmail.com’ that would be available through the provider regardless of when the computer was destroyed.” The court further ordered production of plaintiff’s new computer for inspection, production of a relevant notebook and that plaintiff pay defendant’s reasonable fees and expenses associated with the motion.

Turning then to defendant’s motion for sanctions, the court first identified the relevant legal standard and noted that because the Eleventh Circuit had not set forth specific guidelines for the imposition of sanctions, courts may look to state law, provided the law is consistent with federal standards that do exist—in this case, the law of Alabama. In the Eleventh Circuit, dismissal is a severe sanction only available upon a showing of bad faith. As the court explained, such a showing does not require malice, but rather, “in determining whether there is bad faith, a court should weight the degree of the spoliator’s culpability against the prejudice to the opposing party.”

According to the Alabama Supreme Court, the factors that must be applied when analyzing a request for spoliation sanctions are: the importance of the evidence destroyed, the culpability of the party, fundamental fairness, alternative sources for the information destroyed, and the possible effectiveness of sanctions less severe than dismissal. Taking those factors into account in the present case, the court determined that the plaintiff had spoliated evidence in bad faith (based on plaintiff’s “high level of culpability” combined with the prejudice to the defendant) but that dismissal was not warranted. Instead, noting that this was not a case in which the spoliation left the defendant unable to defend against plaintiff’s allegations, the court ordered an adverse inference instruction to be given at trial (provided plaintiff survived summary judgment) and that plaintiff pay the fees and costs associated with defendant’s motion for sanctions.

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

True Grit: Four Models to Rein in E-Discovery Costs

K&L Gates — Mon, 30 Jan 2012 09:12:16 -0800

By Robyn Weisman & Monica Bay
Law Technology News, January 30, 2012

Today's top law firms and their corporate clients are struggling to find the right combination of people, processes, technology — and facilities — to effectively control the quality and costs of electronic data discovery. The risks are acutely visible for those who stumble: not just court-ordered sanctions, but lost data, cases, clients, profits, and reputations. So how can major firms speed up the processes, hire the right personnel, meet ethical obligations to protect client confidentiality, cooperate with opposing counsel, maintain proportionality (i.e., not spend more on EDD than appropriate for the potential exposure of a case) — yet quickly find and process appropriate data? There's no "one size fits all" single answer, but four models seem to be developing as loose frames:

To read the entire article, click here.

D.C. Court of Appeals Committee on the Unauthorized Practice of Law Issues Opinion addressing "Discovery Services Companies"

K&L Gates — Tue, 24 Jan 2012 08:40:38 -0800

On January 12, 2012, the D.C. Court of Appeals Committee on the Unauthorized Practice of Law (“UPL Committee”) approved Opinion 21-12 addressing the applicability of D.C. Court of Appeals Rule 49 to “‘discovery services companies’—companies that state they offer comprehensive discovery services, including assistance with large scale document review, to legal services organizations.” Rule 49 prohibits the unauthorized practice of law. The Opinion specifically recognizes that in recent years such companies have “dramatically expanded the scope of their services” and have “begun to describe their services in increasingly broad language.” Accordingly, the UPL Committee, through Opinion 21-12, sought to clarify the proper scope of services that such companies may offer and how those services may be represented to potential clients.

Following its discussion of the circumstances that prompted this opinion, namely “[t]he expanded scope of services offered by discovery services companies and the way they are promoted,” the UPL Committee identified a number of principles to “provide guidance to discovery services companies regarding the permissible scope of services that may be performed without engaging in the practice of law and the extent to which the companies may promote their services without holding out as authorized to practice law in the District of Columbia . . . .”

Summarizing broadly, the principles prohibit discovery services companies from providing legal advice to their clients and provide specific guidance regarding what types of services are appropriately offered and how those services may be represented in marketing materials, etc. For example, the Opinion provides that “[t]he final selection of attorneys to staff a document review project must be made by a member of the D.C. Bar with an attorney-client relationship with the client, the attorney’s legal work must be directed or supervised by a D.C. Bar member who represents the client, and the discovery services company may not otherwise violate Rule 49 or attempt to supervise the document review attorney.” The Opinion makes clear, however, that “discovery services companies do not run afoul of Rule 49 by handling the administrative aspects of hiring and supervising a document review attorney,” e.g., creating a roster of attorneys available for a particular review project, providing a work space and equipment, providing salary and benefits, etc.

Specifically regarding marketing of services offered, the Opinion requires that discovery services companies “avoid making statements in their promotional materials that are ambiguous or misleading regarding their capabilities” e.g, describing the “document review” services offered as “end-to-end” or “soup-to-nuts.” Thus, “discovery service companies should avoid making such broad statements or at a minimum must include a prominent disclaimer stating that the company is not authorized to practice law or provide legal services in the District of Columbia, and that the services offered by the company are limited to the non-legal, administrative aspects of document review and discovery projects.” Such a disclaimer must “appear on the same page as the potentially misleading claim, must be in the same font size and in close proximity to the claim.” Similarly, when promoting the expertise of their staff (as opposed to the expertise of the attorneys they may provide for a review, for example), “statements regarding the legal experience of the companies’ staff must be accompanied by a prominent disclaimer that the company is not authorized to practice law or provide legal services … and that the company’s staff members cannot represent outside clients or provide legal advice.”

A copy of the full opinion is available here.

Failure to Produce Originals Could be Spoliation in Third Circuit

K&L Gates — Mon, 23 Jan 2012 11:22:58 -0800

Bull v. United Parcel Service, Inc., --- F.3d ---, 2012 WL 10932 (3d Cir. Jan. 4, 2012)

In this case, the appellate court concluded that “producing copies in instances where the originals have been requested may constitute spoliation if it would prevent discovering critical information,” but found that in the present case, the District Court abused its discretion in finding that spoliation had occurred and in imposing a sanction of dismissal with prejudice.

The plaintiff in this case failed to produce two original notes from her doctor (but did produce copies during discovery). During trial, when plaintiff’s counsel attempted to introduce a copy of one of the notes, defendant objected on the basis of best evidence. In the sidebar that followed and in subsequent questioning of the plaintiff by the court, it became clear that there was some confusion between plaintiff and counsel as to the existence of the originals. Ultimately, plaintiff indicated that the original note “should be” at her home and the there was no reason she did not search for it previously. This contradicted her attorney’s representation that the plaintiff had been asked for the originals and reported that she could not find them. Accordingly, the District Court declared a mistrial and invited the defendant to file a motion for sanctions. Plaintiff produced the original doctor’s notes to the court five days later. Thereafter, upon consideration of defendant’s motion for sanctions, the District Court invoked its inherent authority and ordered the case dismissed with prejudice. Plaintiff appealed.

The appellate court’s analysis was lengthy and detailed. Summarizing broadly, the appellate court first concluded “that–theoretically—producing copies in instances where the originals have been requested may constitute spoliation if it would prevent discovering critical information.” The court further concluded, however, that the District Court abused its discretion “in ruling that, within its spoliation analysis, Bull intentionally withheld the original documents from UPS.” A showing of bad faith/intentionality is required to establish spoliation in the Third Circuit. The appellate court’s finding was based in large part upon its determination that the record lacked a factual foundation to support the premise that plaintiff actually knew that the defendant wanted the originals.

In addition to the question of bad faith/intentionality, the appellate court’s analysis also focused on whether the plaintiff had a foreseeable duty to preserve and produce the original doctor’s notes. Ultimately, despite some reservations, the appellate court concluded that the District Court did not abuse its discretion in determining that there was a foreseeable duty to preserve the originals, noting that the question was not “whether a particular scenario is possible, but rather whether the duty was objectively foreseeable.” The appellate court recognized, in footnote, however, a “growing concern not implicated in this case”:

FN12. This highlights a growing concern for us that is not directly implicated in this case. As electronic document technology progresses, the concept of an “original” document is becoming more abstract. Moving from the more easily distinguishable photocopy or facsimile to documents created, transmitted and stored in an electronic form means that it will be increasingly difficult to ascertain where the boundary of an objectively reasonable duty to preserve such documents lies. There are—and increasingly will be—circumstances in which the foreseeability of a duty to preserve the information contained in a particular document is distinguishable—under an objective analysis—from the need to preserve that information in its “original” form or format. Indeed, arriving at a common understanding of what an “original” is in this context is challenging enough. Although it does, and always will rest with the courts to preserve the distinction between an objectively foreseeable duty and actual knowledge of such a duty, there is a concomitant obligation that counsel must assume to clearly and precisely articulate the need for parties to search for, maintain, and—where necessary—produce “original” or source documents. This case gives us one more opportunity to highlight our position that clarity in communications from counsel that establish a record of a party's actual knowledge of this duty will ensure that this technology-driven issue does not consume an unduly large portion of the court's attention in future litigation.

The appellate court’s opinion also addressed the District Court’s reliance on its inherent authority to impose terminating sanctions and determined that the court’s decision to dismiss with prejudice was an abuse of discretion. In addition to finding that several of the relevant factors analyzed by the District Court did not weigh in favor of dismissal, the appellate court also noted the defendant’s efforts “in obfuscating to the District court and this Court the details of its requests for the originals” and concluded that “apart from the merits of the appeal, without the benefit of unclean hands here, UPS should not be the beneficiary of a sanction that we are, under most circumstances, already loathe to affirm.” Accordingly, the case was reversed and remanded for a re-trial.

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

The Sedona Conference® Issues "International Principles on Discovery, Disclosure & Data Protection"

K&L Gates — Tue, 10 Jan 2012 16:36:49 -0800

In December, the Sedona Conference® made available its latest publication, International Principles on Discovery, Disclosure & Data Protection: Best Practices, Recommendations & Principles for Addressing the Preservation & Discovery of Protected Data in U.S. Litigation (Public Comment Version). Among the information included are six Principles and attendant commentary as well as a model protective order and a “model data process and transfer protocol for use by parties and courts to better protect litigation-related data subject to data protection laws within the ambit of traditional U.S. litigation and court discovery practices.”

From the Introduction:

Here, TSC advances its position that data protection and discovery must co-exist. Data Protection Laws, after all, are not inherently antithetical to U.S. preservation and discovery efforts. U.S. courts and parties often provide protections for personal, confidential, and sensitive information through the use of confidentiality agreements and protective orders. Courts, in fact, have denied discovery in circumstances where privacy rights are deemed more important than the discovery sought by litigants.

To this end, the International Principles envisions a three-stage approach for parties seeking to avoid or minimize the conflict that might otherwise arise: (1) a stipulation by the parties or an order from the U.S. court to extend special protections to data covered by data protection laws; (2) a scheduling order by the U.S. court that phases discovery to permit time to implement data protection processes and to determine whether the same or substantially similar information is available from non-protected sources; (3) implementation of a legitimization plan by the parties to maximize simultaneous compliance with the foreign data protection law and the U.S. discovery obligation. The International Principles includes six definitions, six Principles, and a comment section under each Principle to elucidate the purpose of the Principle and provide references to supporting treaties, case law and other authorities. TSC believes it is time for a new roadmap, and it is our hope that the International Principles will help chart the new course.

A full copy of the publication is available for download from The Sedona Conference®, here.

Plaintiff "Entitled" to Search Non-Party's Personal Hard Drive Pursuant to Modified Subpoena

K&L Gates — Fri, 06 Jan 2012 09:42:40 -0800

Wood v. Town of Warsaw, N.C., No. 7:10-CV-00219-D, 2011 WL 6748797 (E.D.N.C. Dec. 22, 2011)

Defendant moved to modify a subpoena which sought access to a non-party’s personal hard drive. Upon plaintiff’s clarification that he would bear the costs of the search and cooperate to negotiate search terms and that he sought only the non-privileged ESI identified by search terms and not all contents of the drive, the court ordered that the non-party’s counsel could review the results before production and allowed the search to go forward.

In this employment discrimination case, defendant sought to modify a subpoena seeking inspection of a non-party’s personal hard drive and specifically objected that the subpoena was overly broad, unduly burdensome, not calculated to lead to the discovery of admissible evidence, and sought private, irrelevant information. The non-party was the former town manager and allegedly involved in plaintiff’s termination—the underlying issue in this case.

Beginning its discussion, the court first identified the appropriate considerations when addressing a motion to quash or modify a Rule 45 subpoena: 1) the relevance of the discovery sought, 2) the requesting party’s need, and 3) the potential hardship to the party subject to the subpoena. The court then turned to the specific objections.

Addressing the objections to the subpoena, the court identified several particularly pertinent facts, namely that plaintiff was willing to bear the costs of the search and to negotiate search terms and that he did not seek production of the entire contents of the drive, but only those non-privileged documents identified by the keyword search. Regarding the potential relevance of the drive’s contents, the court noted the non-party’s involvement in plaintiff’s termination and opined regarding the likelihood of recovering relevant evidence:

In this age of smart phones and telecommuting, it is increasingly common for work to be conducted outside of the office and through the use of personal electronic devices. Therefore, it is not unreasonable, despite Burrell’s assertion to the contrary, that some relevant information may be found on his personal computer’s hard drive.

The court further reasoned that a protective order and counsel’s review of the results before production would address any concerns regarding privacy. Accordingly, “having weighed the factors of relevancy, need, and burden” the court found that Plaintiff was entitled to search the non-party’s personal hard drive and that the “proposed search by a forensic expert is a reliable and efficient method to accomplish the search with minimal burden,” but modified the subpoena to clarify that the non-party’s attorney would review the results of the keyword search prior to production.

Interestingly, in response to the non-party’s assurances that he would produce any relevant information on his personal hard drive pursuant to specific requests for production within the subpoena, the court (agreeing with the plaintiff) reasoned that the requests pertained only to “tangible documents” and not to ESI and therefore would not “encompass the information sought by the request to search Burrell’s personal hard drive.” Among other things, the requests in question sought production of “Any and all letters … recordings, photographs, emails, texts, tweets, posting of any kind or nature, and other documents whether in printed, handwritten or other tangible format relating to the Plaintiff at any time during the period from January 1, 2007, to December 31, 2009[.]” (Emphasis added.)

A copy of the Order is available here.

The "American Rule" Rules: Court Declines to Compel Defendants to Share Cost of Plaintiffs' Subpoena

K&L Gates — Wed, 04 Jan 2012 11:30:11 -0800

Last Atlantis Capital LLC v. AGS Specialist Partners, No. 04 C 0397, 2011 WL 6097769 (N.D. Ill. Dec. 5, 2011)

In this case, Plaintiffs proposed that Defendants share in the cost of obtaining data that Plaintiffs subpoenaed. Obtaining the information at issue was described by the court as “the linchpin of this entire matter.” Moreover, the court had suggested (at a status conference) that it would be “reasonable” for Defendants to aid in half the costs. However, Defendants “steadfastly maintained that they ha[d] no independent need for the information, except for rebuttal purposes” and objected strongly to the proposed cost-sharing on the grounds that there was “neither reason nor precedent” for it. Noting that “the time to take definitive stance on the issue ha[d] arrived,” the court agreed.

In its analysis of Plaintiffs’ proposal, the court acknowledged their reliance on The Sedona Conference Commentary that advocated that parties “address” cost-sharing, but pointed out that the Commentary itself declared that cost-shifting was “inconsistent with the so called ‘American Rule’ that each party bears its own litigation costs” and that “‘[t]he party seeking cost-shifting … bears the burden of overcoming that presumption.’” The court went on to reject Plaintiffs’ assertions that Defendants’ need for the information was “much greater than they claim,” reiterating that it was Plaintiffs’ burden to prove their claims and to bear the costs of doing so. The court also acknowledged that Defendants had “substantially more resources,” but pointed out that this was a fact it could not consider. Accordingly, the court concluded that “it would not force Defendants to pay for the evidence that Plaintiffs need in order to prove their case against Defendants.” Plaintiffs’ proposal for cost-shifting was denied.

A copy of the full opinion is available here.

Court Grants Cross Motions for Spoliation Sanctions, Imposes Adverse Inference Against Both Parties

K&L Gates — Fri, 23 Dec 2011 07:51:10 -0800

Patel v. Havana Bar, Restaurant & Catering, No. 10-1383, 2011 WL 6029983 (E.D. Pa. Dec. 5, 2011)

In this opinion addressing the parties’ cross motions for sanctions, the court ordered an adverse inference for defendants’ failure to preserve relevant video surveillance footage and an adverse inference for plaintiff’s failure to preserve relevant witness statements. For plaintiff’s other discovery violations, including delayed and piecemeal production of witness statements and failure to timely produce a full copy of the relevant police report, as well as for the spoliation of witness statements, the court ordered re-deposition of several witnesses at plaintiff’s expense. The court also awarded defendants’ attorneys fees and costs “for the time and effort they expended in attempting to obtain discovery that they were entitled to receive.”

Plaintiff was injured when he “fell” from a second story balcony/loft at defendants’ bar and restaurant. Whether plaintiff fell or jumped was apparently in dispute. There was also a question as to whether plaintiff was intoxicated at the time of his “fall.”

Defendants recorded video surveillance near the time of plaintiff’s fall which was viewed by the restaurant owner on the night of the accident. He claimed the video did not reveal how the fall occurred. At deposition, the owner explained that he had attempted to copy the video but was unable, despite a call to the system’s provider. He further stated that although the system could print still images, he did not print any. Thus, the video was automatically recorded over and no footage was preserved. The court found that spoliation had occurred. Accordingly, following its identification of the relevant considerations and after noting that “even ‘negligent destruction of relevant evidence can be sufficient to give rise to the spoliation inference,” the court ordered an adverse inference instruction.

The court’s opinion also addressed defendants’ motion for sanctions. Specifically, it was revealed that a year after the accident, in September 2008, plaintiff’s sister solicited, via Facebook, witness statements in support of her brother’s case. Plaintiff’s sister was explicit regarding the type of information sought, specifically asking for comments refuting the idea that plaintiff was intoxicated. Approximately two years later (in 2010), plaintiff’s sister sought additional statements but this time asked for information indicating that plaintiff was intoxicated and that defendants “recklessly continued to serve him drinks.” She specifically indicated that any statements that accused plaintiff of jumping from the balcony would not be included in her collection.

Neither the 2008 nor 2010 statements were provided to defense counsel during the initial discovery period. When the existence of the statements was discovered during a deposition, they were produced in a “piecemeal” fashion, and only immediately prior to each witnesses deposition. No 2008 statements were ever produced and the family and counsel provided conflicting evidence over who had possessed the statements and when. Plaintiff’s counsel also failed to timely produce a police report of the incident and, when it was produced, failed to include relevant witness statements (which cast doubt on plaintiff’s claim that he fell) or plaintiff’s guest check from the evening of the accident. The court found this to be a violation of plaintiff’s Rule 26 obligations following discussion of the requirements for initial disclosures.

Regarding the 2008 witness statements, the court found that spoliation had occurred. Accordingly, an adverse inference instruction was warranted. Further, for the delay in production of the 2010 statements (and again noting the spoliation of the 2008 statements), the court ordered that several witnesses be re-deposed at plaintiff’s expense. The court also awarded defendants’ attorneys fees and costs “for the time and effort they expended in attempting to obtain discovery that they were entitled to receive.”

Although plaintiff’s counsel was not separately sanctioned, the court was clearly displeased with counsel’s discovery behavior and specifically took issue with counsel’s failure to initially disclose the existence of the witness statements and with the belated disclosure of those statements as well as the incomplete police report. The court also criticized counsel’s claims that the witness statements were work product in light of the delay in raising the claim and the absence of a privilege log.

A copy of the full opinion is available here.

Weighing the Burden, Court Excuses Plaintiff from Reviewing Millions of Pages from Unallocated Space

K&L Gates — Thu, 22 Dec 2011 09:13:18 -0800

I-Med Pharma, Inc. v. Biomatrix, Inc., No. 03-3677 (DRD), 2011 WL 6140658 (D.N.J. Dec. 9, 2011)

“This case highlights the dangers of carelessness and inattention in e-discovery.” In this case, the court affirmed the order of the Magistrate Judge which excused plaintiff from the obligation of reviewing and producing millions of pages of documents recovered from unallocated space files in light of the extreme burden and cost of such an undertaking.

Pursuant to a stipulation between the parties, defendants hired an expert to conduct a keyword search of plaintiff’s computer network, servers, and related storage devices. Per the court's order, plaintiff was to produce the results of the examination. There were more than 50 search terms, and many were also run in French. Moreover, “the search was not limited to targeted document custodians or relevant time periods. Indeed, the search was not even limited to active files.” The search was instead run “across all data on the computer system” including unallocated space. Unsurprisingly, the results were voluminous, returning 64,382,929 hits in unallocated space alone which represented approximately 95 million pages of data.

Following a telephonic hearing, the Magistrate Judge entered an order permitting plaintiff to withhold data found in the unallocated space and allowing defendants to seek reimbursement for the costs incurred in extracting and searching that data. Among other things, the order was based on findings that the burden of the review would outweigh any potential benefit and that the likelihood of finding relevant, admissible evidence was “minimal.”

On appeal, the court upheld the order of the Magistrate Judge. In short, the court found the benefit of the review was unlikely to justify the burden and expense that would be required to complete it. In addition to the expenditure of resources that would be required by the plaintiff to accomplish the review, the court considered the expenditure of resources by the defendants in obtaining the data, but determined it “pale[d] in comparison to the millions of dollars” that would be spent by the plaintiff to adequately review the material. The court also considered the “occurrence of intervening events,” namely the unanticipated volume of hits returned, noting the consideration only weighed “weakly” in favor of plaintiff where plaintiff “should have exercised more diligence before stipulating to such broad search terms.” The court went on to advise that when evaluating “whether a set of search terms are reasonable, a party should consider a variety of factors, including:”

(1) the scope of documents searched and whether the search is restricted to specific computers, file systems, or document custodians; (2) any date restrictions imposed on the search; (3) whether the search terms contain proper names, uncommon abbreviations, or other terms unlikely to occur in irrelevant documents; (4) whether operators such as “and”, “not”, or “near” are used to restrict the universe of possible results; (5) whether the number of results obtained could be practically reviewed given the economics of the case and the amount of money at issue.

Addressing the issue of modifying an agreement of the parties, the court counseled that “[w]hile courts should not casually discard agreements between the parties, nor should they abrogate their duty to balance both burden and the likelihood of uncovering relevant evidence merely because a party made an improvident agreement.”

The court concluded: “While Plaintiff should have known better than to agree to the search terms used here, the interests of justice and basic fairness are little served by forcing Plaintiff to undertake an enormously expensive privilege review of material that is unlikely to contain non-duplicative evidence.”

A copy of the full opinion is available here.

Court Finds Costs Related to Database "Used as Means of Document Production" are Taxable but Reverses Award in Light of Cost Sharing Agreement

K&L Gates — Fri, 16 Dec 2011 08:58:00 -0800

In re Ricoh Co., Ltd. Patent Litig., No. 2011-1199, 2011 WL 5928689 (Fed. Cir. Nov. 23, 2011)

In this case, Ricoh sought review of the district court’s award of costs to Synopsys related to the parties’ use of Stratify (“a third-party electronic database service”) for the production of email. The appellate court concluded that the district court did not err in determining that costs related to the database could be recovered pursuant to 28 U.S.C. § 1920(4), but reversed the lower court’s award in light of the parties' agreement to split the costs.

In the course of the underlying litigation, the parties were initially unable to agree on the form of production. Eventually, Ricoh suggested using Stratify, “a third party electronic database service,” and that the costs be divided between the parties. Synopsys agreed. After the case was resolved in favor of Synopsys, the district court awarded costs, pursuant to 28 U.S.C. § 1920, including costs related to Stratify. On appeal, Ricoh argued that the district court erred in awarding such costs.

Synopsys argued that because “Stratify was used as the exclusive means for producing e-mails,” the costs were fully taxable pursuant to 28 U.S.C. § 1920(4). Ricoh argued that Stratify did not fall under section 1920(4) “because it was a ‘document review database’ (as opposed to a form of document production) for the convenience of counsel and not necessary for use in the case.” Under section 1920(4), “exemplification and copying costs for producing documents in discovery are recoverable.” Similarly, N.D. Cal. Civil Local Rule 54-3(d)(2) permits taxing “[t]he costs of reproducing disclosure or formal discovery documents when used for any purpose in the case.” Because “the Stratify database was used as a means of document production in this case,” the appellate court determined that the district court did not abuse its discretion in concluding that “absent a contrary agreement such as we conclude existed in this case” the costs associated with Stratify were taxable.

The act of producing documents is not so narrowly construed as to cover only printing and Bates-labeling a document. See Black's Law Dictionary 1328 (9th ed. 2009) (defining “produce” as “[t]o provide (a document, witness, etc.) in response to subpoena or discovery request”). In the era of electronic discovery, courts have held that electronic production of documents can constitute “exemplification” or “making copies” under section 1920(4). See, e.g., BDT Prods., Inc. v. Lexmark Int'l, Inc., 405 F.3d 415, 420 (6th Cir.2005) (“[E]lectronic scanning and imaging could be interpreted as ‘exemplification and copies of papers.’ ”). Notably, in 2008, Congress amended section 1920(4) by replacing the phrase “copies of papers” with “making copies of any materials ” Judicial Administration and Technical Amendments Act of 2008, Pub. L. No. 110–406, § 6, 122 Stat. 4291, 4292 (emphasis added), to reflect the idea that “electronically produced information [is] [re]coverable in court costs,” 154 Cong. Rec. H10270, H10271 (daily ed. Sept. 27, 2008) (statement of Rep. Zoe Lofgren). Thus, the costs of producing a document electronically can be recoverable under section 1920(4).

Here, it was Ricoh that initially suggested using Stratify because it “addresses all of [ Synopsys's] integrity and security concerns, while allowing you to easily comply with the requirements for producing the email documents in native format.” J.A. 3070. The district court did not err in concluding that Synopsys's act of making available all of the requested e-mail to Ricoh through Stratify constituted electronic production of the e-mail. We do not consider any of the Stratify database costs to fall into the unrecoverable category of “intellectual efforts.” See Romero v. City of Pomona, 883 F.2d 1418, 1428 (9th Cir.1989), overruled in part on other grounds by Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1363 (9th Cir.1991). “Since the documents were produced in their native form via the database,” Taxation Order, slip op. at 13, we hold that the basic Stratify costs would be recoverable under section 1920(4), absent an agreement to the contrary. In light of our decision, we need not decide if the additional challenged items related to the database were improperly allowed.

In the present case, however, the parties agreed to share the costs of the Stratify database. Accordingly, the appellate court found that the cost-sharing agreement was controlling and reversed the lower court’s award.

A copy of the full opinion is available here.

District of Delaware Adopts Revised Default Standards for Discovery

K&L Gates — Fri, 09 Dec 2011 08:13:10 -0800

Effective yesterday, the District of Delaware has adopted revised default standards for discovery, including electronic discovery. The standards cover a broad range of e-discovery issues from cooperation and proportionality to preservation, privilege, and format of production, among others. Clearly intended to provide more than just general guidance to parties before the court, the default standards are quite specific (e.g, identification of categories of ESI not presumptively subject to preservation and mandated formats for production) and parties are therefore advised to carefully consult the guidelines when practicing in the District of Delaware.

A copy of the guidelines is available for download here.

Sanctions Ordered for Failure to Adequately "Preserve, Search for, and Collect Potentially Relevant Information"

K&L Gates — Thu, 08 Dec 2011 13:37:31 -0800

Naaco Materials Handling Group, Inc. v. Lilly Co., No. 11-2415 AV, 2011 WL 5986649 (W.D. Tenn. Nov. 16, 2011)

In this case, the court found that defendant “failed to take reasonable steps to preserve, search for, and collect potentially relevant information . . . after its duty to preserve evidence was triggered by being served with the complaint” which may have resulted in the destruction of relevant evidence. Further, defendant failed to present an adequately prepared and knowledgeable 30(b)(6) deponent. Accordingly, sanctions were imposed, including, among other things, additional discovery, additional forensic imaging at defendant’s expense, and monetary sanctions.

Plaintiff accused defendant of illegally accessing its proprietary website on over 40,000 occasions. Early in the litigation process, the court granted plaintiff’s motion for expedited discovery which resulted in an order allowing plaintiff’s expert to conduct a forensic examination of defendant’s computers to determine which, if any, were used to access plaintiff’s proprietary information and to make a copy of any hard drive on which such access was detected. Evidence of access was found on 17 of the 35 computers subject to examination. As litigation progressed, and in particular following the deposition of defendant’s 30(b)(6) deponent, plaintiff became concerned that relevant information had been lost and moved to prevent further spoliation and for defendant to bear many discovery-related costs.

The court’s opinion identified several discovery violations, including defendant’s failure to adequately and timely disseminate a legal hold notice; defendant’s failure to “to prevent emails from being deleted, to prevent data from being overwritten, or to identify and preserve backup tapes which might contain the only electronic evidence of access to [plaintiff’s] secure dealer website;” and defendant’s failure to “collect evidence from the key players or to search key players’ computers to see if ESI existed or had been deleted.” Further, defendant “left collection efforts to its employees to search their own computers without supervision or oversight from management” and took no effort to follow up with its employees or to document any of its search and collection efforts. Defendant also failed to provide an adequately prepared 30(b)(6) deponent. Accordingly, the court determined that defendant was “at a minimum, negligent in discharging its discovery obligations.” The court noted, however, that plaintiff did not produce proof that relevant evidence was in fact destroyed and that the extent of prejudice was therefore in question; more substantial sanctions were therefore not warranted. Nonetheless, the court found that lesser sanctions were appropriate.

Noting that the sanctions ordered were necessitated by defendant’s preservation and collection failures, the court ordered that defendant bear the cost of a second 30(b)(6) deposition; that defendant bear the cost of the forensic examinations and imaging already undertaken; that defendant bear the costs of additional analysis of nine of defendant’s employees’ computers which were used to access plaintiff's website; that defendant bear the costs of imaging of all computers in defendant’s service department (where plaintiff provided proof that certain software “which would only be needed by the service department” had been downloaded); and that defendant pay monetary sanctions equal to plaintiff’s reasonable costs, including attorney’s fees, associated with bringing the present motion. Defendant was further ordered to provide a detailed affidavit outlining its preservation and collection efforts and certification that automatic delete functions had been suspended and that backup tapes containing unique evidence were also preserved.

The court concluded:

Lilly failed to take reasonable steps to preserve, search for, and collect potentially relevant information, particularly electronic data, after its duty to preserve evidence was triggered by being served with the complaint. Lilly's failure to take steps to preserve evidence may have resulted in the destruction of relevant evidence. In addition, Lilly failed to present an adequately prepared and knowledgeable 30(b)(6) deponent. Therefore, the sanctions set forth in this order are appropriate.

A copy of the full order is available here.

Software Necessary to View Files Subject to Production under NY Freedom of Information Law

K&L Gates — Fri, 02 Dec 2011 08:07:20 -0800

TJS of New York, Inc. v. New York State Dep’t of Taxation and Fin., 932 N.Y.S.2d 243 (N.Y. App. Div. Nov. 3, 2011)

In this case, the court determined that the software program necessary to view certain files produced to the petitioner subject to New York’s Freedom of Information Law was a “record” for purposes of the law and was thus subject to production itself.

Pursuant to New York’s Freedom of Information Law, Petitioner requested and received records in connection with a sales tax audit performed by the Department of Taxation and Finance. However, certain data could not be viewed without a copy of the Department’s Audit Framework Extension software, which the Department refused to provide. Accordingly, Petitioner moved to compel production. The motion was denied, as was Petitioner's motion for reconsideration. Petitioner appealed.

Taking up the question, the court provided the broad definition of a “record” under the law, namely “any information kept, held, filed, produced, or reproduced by, with or for an agency …, in any physical form whatsoever ….” The Department argued that the software was not a record because it contained no information. Petitioner disagreed.

The court agreed with the petitioner:

The description of the software submitted by the Department and the reasoning and analysis contained in the advisory opinions relied on by petitioner lead us to conclude that the software at issue contains information and, thus, constitutes a record for FOIL purposes.FN1 Specifically, the affidavit submitted by the Department from an auditor involved in the design and development of the software program, as well as the attached training manual for the software, reveals that the software is the means for conducting an audit and that, based on data entered by an auditor, the program does reconciliations, creates letters, produces forms, determines taxes due or refunds owed and creates a comprehensive audit report. The June 1998 advisory opinion cited by petitioner concludes that software that enables an agency to manipulate data is a record pursuant to FOIL in the same way that a written manual describing a series of procedures would be subject to disclosure under FOIL (see Comm. on Open Govt. FOIL–AO Letter from Robert J. Freeman to George F. Supan [June 24, 1998]; see also Comm. on Open Govt. FOIL–AO–18079 [2010] ). The 2001 advisory opinion references a definition of software as “a series of instructions designed to produce information that can be seen on a screen, printed, stored, transferred and transmitted” and concludes that it is a record subject to FOIL (see Comm. on Open Govt. FOIL–AO–12920 [2001] ). Given these opinions and the Department's own description of the capabilities of the program, we conclude that it is more than just a delivery system or data warehouse and, instead, falls within FOIL's broad definition of a record subject to disclosure (see Public Officers Law § 86[4]; Matter of Data Tree, LLC v. Romaine, 9 N.Y.3d 454, 462, 849 N.Y.S.2d 489, 880 N.E.2d 10 [2007] ).

The court also found that the Department failed to meet its burden of demonstrating the applicability of the proffered statutory exemption.

A copy of the opinion is available here.

Southern District of New York Implements Pilot Program for Complex Cases, Requires Joint Electronic Discovery Submission for Cases Involving ESI

K&L Gates — Wed, 23 Nov 2011 09:26:34 -0800

The Southern District of New York has implemented a new Pilot Program for Complex Cases which became effective on November 1, 2011. The program was implemented in “response to the federal bar’s concerns about the high costs of litigating complex civil cases,” and is “designed to improve judicial case management of these disputes and reduce costs and delay.” More specifically, “the rules are intended to shorten the timeline for certain actions, reduce motion practice, and flag issues requiring judicial intervention at an earlier stage in the litigation process.” Fourteen types of civil lawsuits are designated as “complex cases,” including “stockholder’s suits, patent and trademark claims, product liability disputes, multi-district litigation, and class actions.” District Court judges may also “remove a case from the pilot, or they can designate a case as complex” if it does not fall within the other, enumerated categories.

Of particular interest to readers of this blog is the Joint Electronic Discovery Submission which must be submitted by parties who indicate a belief that “relevant information may exist or be stored in electronic format, and that this content is potentially responsive to current or anticipated discovery requests.” The joint submission will be the governing document by which electronic discovery is managed by the parties and the court and requires that the parties discuss issues surrounding preservation; methodologies or protocols for search and review; potential sources of ESI; the format of production; limitations on production, including the identity of custodians, potential date ranges, and the timing of production; inadvertent production; and cost allocation, among other things. The joint submission also requires counsel to “certify that they are sufficiently knowledgeable in matters relating to their clients’ technological systems to discuss competently issues relating to electronic discovery, or have involved someone competent to address these issues on their behalf.”

The program is currently slated to run for eighteen months.

A copy of a press release briefly describing the program is available here.

Standing Order M10-468 which provides all relevant details is available here.

Prosecution Not Required to Re-Produce Voluminous ESI in Categorized Batches

K&L Gates — Wed, 23 Nov 2011 07:59:37 -0800

United States v. Rubin/Chambers, Dunhill Ins. Servs., No. 09 Cr. 1058, 2011 WL 5448066 (S.D.N.Y. Nov. 4, 2011)

In this case, defendants were charged with crimes “arising out of an alleged conspiracy . . . to illegally rig bids, fix prices, and manipulate the market for investment instruments known as municipal derivatives.” Following the prosecution’s production of ESI, defendants sought to compel re-production in categorized batches relating to transactions with certain characteristics. Defendants’ motion was denied.

In the course of preparing for trial, the prosecution produced a large amount of electronic discovery. The information (the comprehensiveness of which was not in dispute), was “largely in searchable format” and included “searchable digests” of audio files. The Government also provided searchable metadata for the audio files and transcripts of the same when available. Despite this, defendants moved for an order, pursuant to Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10 L.Ed.2d 215 (1965), directing the Government to reproduce ESI in “categorized batches” that “related to transactions with certain characteristics.” Defendants “fram[ed] each of the four categories as including transactions that test or refute an aspect of the Government’s theory of collusion” and otherwise alleged that the evidence sought to be identified would be probative of their intentions and useful to impeach testimony of cooperating witnesses.

Taking up the issue, the court established that while Brady prohibits bad faith or deliberate efforts to conceal exculpatory material, "'it does not place any burden upon the Government to conduct a defendant’s investigation or assist in the presentation of the defense’s case.'" Specifically, “[t]he Government is under no general obligation to sort or organize Brady material disclosed to defendants"-- even when the material disclosed is voluminous. Moreover, defendants’ “bare, conclusory allegations” that the Government failed to identify Brady materials that it encountered during its review while "knowing full well that Defendants likely would be unable to find it once it was placed back into the mass of discovery later produced" did not justify ordering the Government to identify and organize Brady materials in its production. The court acknowledged, however, that some courts had invoked their discretionary authority to require the Government to identify Brady materials within voluminous productions.

The court distinguished the present case from United States v. Salyer, Cr. No. S-10-0061 LKK (GGH), 2010 WL 3036444 (E.D. Cal. Aug. 2, 2010), where the defendant’s motion for the identification of Brady material was granted. That case involved an individual defendant who was jailed pending trial (and thus was largely unable to assist in his defense) and was represented by a “relatively small defense team.” Further, there was no parallel civil litigation or corporate assistance to find necessary documents. In the present case, however, there were “several basic differences which compel[led] an opposite result,” including that the already disclosed materials were searchable, that defendants had access to corporate assistance, that there was ongoing parallel civil litigation and “multiple defendants” with “overlapping discovery needs,” that defendants were not incarcerated, and that “there [could] be no straight-faced claim of a ‘small defense team.’” Additionally, the court noted that the prosecution had taken “additional steps to relieve some of the burden” and that there was no assertion that defense counsel lacked access to the disclosed materials, or that they did not contain the information defendants sought to compel the Government to identify.

Accordingly the court concluded that Defendants had “failed to persuade the court than an exception to the general rule is warranted” and denied the motion.

A copy of the full opinion and order is available here.

Client & Counsel Sanctioned for Spoliation where Plaintiff was Instructed to "Clean Up" His Facebook Page

K&L Gates — Fri, 18 Nov 2011 08:54:38 -0800

Lester v. Allied Concrete Co., Nos. CL.08-150, CL09-223 (Va. Cir. Ct. Sept. 1, 2011); Lester v. Allied Concrete Co., Nos. CL08-150, CL09-223 (Va. Cir. Ct. Oct. 21, 2011)

In this case, significant monetary sanctions were ordered against the plaintiff and his counsel for egregious discovery violations, including intentional deletion of pictures on Plaintiff’s Facebook page per the instructions of Counsel and subsequent efforts to cover those instructions up, among others.

In this wrongful death case, Defendants sought production related to the contents of Plaintiff’s Facebook page, which were presumably relevant to the question of damages suffered by Plaintiff as the result of the tragic death of his wife. Attached to the request was a picture of the plaintiff "clutching a beer can, wearing a T-shirt emblazoned with 'I ♥ hot moms' and in the company of other young adults." Plaintiff's counsel (with the assistance of his paralegal) determined that the photo likely came from Facebook. Accordingly, Counsel accessed Plaintiff’s Facebook account and thereafter directed his paralegal to instruct Plaintiff to “clean it up” because “we don’t want blowups of this stuff at trial.”

Because the request for production specifically asked for the contents of Plaintiff’s account “on the day this request is signed,” Counsel also instructed Plaintiff to deactivate his account. Plaintiff’s response to the request for production, therefore, was that he had no Facebook account on the day the request was signed. The response was also signed by Counsel. Thereafter, upon being advised that he was obligated to produce the Facebook materials, Counsel instructed his client (through his paralegal) to reactivate the account. Plaintiff complied, and following the prior instruction to “clean up” his account, deleted 16 photos before the contents were printed for production by the paralegal (who claimed not to know of the deletions, as did Counsel). Later, testifying under oath, Plaintiff stated that he had never deactivated his account.

For reasons unknown, Plaintiff’s counsel later forwarded to the defense Plaintiff’s Facebook IP logs which he had acquired directly from Facebook. Upon examination of the logs, experts for both sides agreed that 16 photos had been deleted. Accordingly, the court ordered that an adverse inference instruction be given to the jury at trial.

Before trial, Defendants served the above mentioned paralegal with a subpoena duces tecum commanding production of all emails between herself and the plaintiff during the timeframe of the spoliation. The attendant privilege log and in camera production to the court omitted mention of the email in which the paralegal first instructed Plaintiff to delete photos from his account. The email was not disclosed until after trial, with the explanation that the omission was the fault of a different paralegal no longer with Counsel’s firm “when, in fact, [Counsel] knew his own misconduct caused the omission.”

At trial, Plaintiff was awarded a significant sum. Thereafter, Defendants filed several post-trial motions, including a Motion for Sanctions against Plaintiff and Counsel for the above-detailed behavior (among other reasons).

The court concluded that the actions of Counsel and the plaintiff warranted sanctions. Specifically, Counsel was ordered to pay monetary sanctions equal to the “reasonable expenses, including a reasonable attorneys fee, incurred by Defendants because of [Counsel’s] violation” of court rules by signing the dishonest discovery response. For Counsel’s omission of the incriminating email from his spoliation privilege log and in camera production and for Counsel’s dishonesty regarding the cause of the omission, the court ordered him to pay monetary sanctions equal to the “reasonable expenses, including a reasonable attorneys fee” incurred by the defendants as the result of his misconduct. Defendants’ Motion for Sanctions as to Plaintiff was also granted with the amount of the sanction to be determined.

Later, upon submission of Defendants’ Memoranda of Costs and Fees, the court issued a final order containing the specific amounts to be paid: Counsel was ordered to pay $542,000 and Plaintiff was ordered to pay $180,000. The court also indicated its intent to refer Counsel's violations of the Code of Professional Responsibilty to the Virginia State Bar and to refer "matters relating to allegations of perjury on the party of [Plaintiff] to the Commonwealth's Attorney for the City of Charlotte."

Copies of the court’s relevant orders are available here and here.

California Federal Court Grants Motion to Adopt Version of Model Order on E-Discovery in Patent Cases Promulgated by Federal Circuit

K&L Gates — Thu, 10 Nov 2011 07:58:05 -0800

DCG Sys., Inc. v. Checkpoint Techs., LLC, No. C-11-03792 PSG, 2011 WL 5244356 (N.D. Cal. Nov. 2, 2011)

In this patent case, Defendant sought an order adopting a modified version of the Model Order on E-Discovery in Patent Cases (“Model Order”) recently promulgated by a subcommittee of the Advisory Council of the Federal Circuit (available here). Significantly, the Model Order limits the discovery of email by placing limitations on the allowable number of custodians and search terms. According to the court, such limitations “are designed to address the imbalance of benefit and burden resulting from email production in most cases.” The order proposed by the Defendant similarly limited the discovery of email.

Plaintiff opposed the adoption of such an order and urged the court to impose any limits on email discovery pursuant to the applicable provisions of the Federal Rules. Plaintiff further argued that this case was unlike “those ‘actions brought by non-practicing entities where there are large imbalances in the cost and volume of discovery’” and instead involved direct competitors which “introduces issues in this case that are not contemplated by the Model Order” including, for example, “the issue of whether Checkpoint copied DCG’s products and whether DCG is entitled to an injunction.”

The court was not persuaded:

The court is not persuaded by DCG's argument for at least two reasons. First, although the undersigned will not presume to know whether Chief Judge Rader or any of the esteemed members of the subcommittee were focused exclusively on reducing discovery costs in so-called "NPE" cases, there is nothing in the language of the Chief Judge's speech or the text of the model order so limiting its application. Second, and more fundamentally, there is no reason to believe that competitor cases present less compelling circumstances in which to impose reasonable restrictions on the timing and scope of email discovery. To the extent DCG faces unique or particularly undue constraints as a result of the limitations, it remains free, under the Model Order, to seek relief from the court. But in general copying and the availability of an injunction are issues that are impacted by such restrictions no more than the myriad of other issues (e.g., inducement, state of the art, willfulness) that are present in just about all patent cases. And if competitor cases such as this lack the asymmetrical production burden often found in NPE cases, so that two parties might benefit from production restrictions, the Model Order would seem more appropriate, not less.

Perhaps the restrictions of the Model Order will prove undue. In that case, the court is more than willing to entertain a request to modify the limits. But only through experimentation of at least the modest sort urged by the Chief Judge will courts and parties come to better understand what steps might be taken to address what has to date been a largely unchecked problem.

A coy of the full opinion is available here.

The Rules Have Moved!

K&L Gates — Wed, 09 Nov 2011 14:46:30 -0800

If you’re looking for a list of State or Local District Court Rules addressing electronic discovery, please click the link “Local District Court Rules” or “State Court Rules” on the left-hand side of this page.

Court Denies Motion to Re-Tax Costs Related to Conversion of ESI, Including Costs for "Project Management"

K&L Gates — Wed, 02 Nov 2011 14:48:36 -0800

Jardin v. DATAllegro, Inc., No. 08-CV-1462-IEG (WVG), 2011 WL 4835742 (S.D. Cal. Oct. 12, 2011)

Here, the court denied Plaintiff’s “motion to stay, deny, or re-tax the Clerk’s taxation of costs awarded to Defendants.” Specifically, the court declined to deny or re-tax costs awarded for converting data to the .TIFF format or to deny or re-tax costs related to a project manager who “oversaw the process of converting data to the .TIFF format to prevent inconsistent or duplicative processing.” Regarding the latter, the court reasoned that “[b]ecause the project manager’s duties were limited to the physical production of data, the related costs are recoverable.”

“Rule 54(d) creates a presumption in favor of awarding costs to prevailing parties, and it is incumbent upon the losing party to demonstrate why the costs should not be awarded.” However, "the court's discretion in awarding costs . . . is limited to awarding costs that are within the scope of 28 U.S.C. § 1920." 28 U.S.C. § 1920 lists taxable costs, including “[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.”

After establishing the relevant legal standard, the court first addressed plaintiff's motion to deny costs entirely and quickly rejected plaintiff's arguments that costs should be denied because "he litigated the action in good faith," because "the issues in the case were close and difficult" or because "there is a significant economic disparity between Microsoft and him." The court then turned to the question of whether the costs should be reduced.

Addressing costs related to the conversion of data to the .TIFF format, the court recognized that “federal courts are divided over whether converting e-data from one format to another is a valid exemplification cost.” However, after noting that the Federal Rules require the production of ESI, the court recognized that “converting data into a format that all parties can utilize not only allows for more efficient and less expensive discovery, but is often necessary for any meaningful discovery at all” and that “the processes required . . . are ‘highly technical’ and ‘substantially different from ‘the types of services that attorneys or paralegals are trained for or capable of providing’’” and thus concluded:

Thus, a categorical rule prohibiting costs for converting data into an accessible, readable, and searchable format would ignore the practical realities of discovery in modern litigation. Therefore, where the circumstances of a particular case necessitate converting e-data from various native formats to the .TIFF or another format accessible to all parties, costs stemming from the process of that conversion are taxable exemplification costs under 28 U.S.C. § 1920(4).

In the present case, the court noted that the information sought in discovery included “massive” amounts of ESI stored in various digital formats (including formats that required special software and proprietary licenses), that “electronic conversion was ‘in lieu of making conventional copies,’” that “the parties agreed to produce documents in the .TIFF format because the .TIFF conversion made discovery easier, more efficient, and less expensive for all parties,” and that “”Defendants [sought] only those costs stemming from the conversion process itself” and not reimbursement for legal fees for the review of those documents. Thus, plaintiff’s motion was denied.

Turning to the “Project Management” costs, the court acknowledged that per the statute, fees are permitted “only for the physical preparation and duplication of documents, not the intellectual effort involved in their production.” However, the court also indicated that “where . . . a third-party technician is engaged to perform duties limited to technical issues related to the physical production of information, related costs are recoverable under § 1920.” In this case, the court noted that the “project manager did not review documents or contribute to any strategic decision-making; he oversaw the process of converting data to the .TIFF format to prevent inconsistent or duplicative processing.” Thus, “because the project manager’s duties were limited to the physical production of data, the related costs [were] recoverable.”

A copy of the full opinion is available here.

Court Acknowledges Calls for Caution when Applying "Proportionality Test" to Preservation, Denies Motion for Protective Order

K&L Gates — Fri, 21 Oct 2011 10:02:19 -0800

Pippins v. KPMG LLP, No. 11 Civ. 0377 (CM)(JLC), 2011 WL 4701849 (S.D.N.Y. Oct. 7, 2011)

KPMG sought a protective order to limit the scope of its preservation obligation or to shift a portion of its preservation costs to plaintiffs. At the time, the parties awaited ruling on plaintiffs’ Motion to Certify and KPMG was preserving more than 2,500 hard drives at a cost of more than $1,500,000. Following the court’s analysis, the motion was denied.

In this case, the plaintiffs, potential members of a nationwide FLSA collective and/or a putative New York State class, “challenge[d] KPMG’s treatment of certain accountants in its audit practice . . . .” Discovery was stayed pending determination of plaintiffs’ Motion to Certify. KPMG sought a protective order to narrow the scope of its preservation obligation as to the hard drives of former and departing associates. Specifically, KPMG sought an order that would require the preservation of only a random sample of 100 hard drives from among those it had already preserved for this and other litigation. Alternatively, KPMG sought to shift the cost of any preservation beyond the scope it had suggested. At the time of the motion, KPMG had already preserved more than 2,500 hard drives of Audit Associates at a cost of more than $1,500,000. Moreover, KPMG indicated that there were more than 7,500 potential opt-in plaintiffs to the FLSA collective nationwide and more than 1,500 putative class members in New York.

Plaintiffs responded that they were amenable to using sampling as a means to limit the scope of preservation but opposed KPMG’s methodology. Prior to the motion, the parties had engaged in extensive negotiations and mediation in an effort to reach agreement to no avail.

The court’s analysis considered whether the information on the hard drives was relevant, whether the information to be preserved was “created by or for the ‘key players’ in the litigation,” and whether the ongoing preservation was duplicative of other preservation efforts. Sparing the details, the court found that KPMG “failed to establish that the contents of the disputed hard drives were not relevant,” “failed to establish that the hard drives do not relate to ‘key players’ in the litigation” (reasoning that any of the individual Audit Associates could be a “key player” in “any one of many potential actions” if the Motion to Certify was denied), and that “KPMG ha[d] not demonstrated that the materials it [sought] to dispose of [were] duplicative of materials that are already subject to its preservation efforts.”

Considering the applicability of the principle of proportionality, the court indicated its reticence to apply the principle in the context of preservation:

However, courts have recognized that in the context of preservation, "this [proportionality] standard may prove too amorphous to provide much comfort to a party deciding what files it may delete or backup tapes it may recycle." Orbit One Commc'ns, Inc. v. Numerex Corp., 271 F.R.D. 429, 436 (S.D.N.Y.2010) (considering numerous preservation failures in the context of sanctions). Accordingly, "[u]ntil a more precise definition is created by rule," prudence favors retaining all relevant materials. Id. (citing Zubulake IV, 220 F.R.D. at 218).

The court later reiterated that “courts in this district have cautioned against the application of a proportionality test as it relates to preservation.”

The court further reasoned that it would be premature to permit the destruction of any hard drives without knowing what they contained and indicated its belief that KPMG’s burden was “self inflicted to a large extent” because of its own “reluctance to work with Plaintiffs to generate a reasonable sample. . . .” Specifically, the court indicated that the record suggested that “KPMG did not provide Plaintiffs with the opportunity to learn of the hard drive’s contents—such as by reviewing a handful of hard drives that counsel had vetted for privilege or created a log of contents—that might have enabled them to ‘propound targeted requests . . . . at lesser cost.’” Accordingly, the court encouraged the parties to continue to meet and confer to reach agreement on sampling but declined to grant plaintiffs’ request for the production of five hard drives for inspection.

The court also denied KPMG’s request to shift a portion of its preservation costs.

A copy of the full order is available here.