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Case Law

In False Claims Act Case, Reimbursement of eDiscovery Costs Awarded to Plaintiff – eDiscovery Case Law

In United States ex rel. Becker v. Tools & Metals, Inc., No. 3:05-CV-0627-L (N.D. Tex. Mar. 31, 2013), a qui tam False Claims Act litigation, the plaintiffs sought, and the court awarded, costs for, among other things, uploading ESI, creating a Relativity index, and processing data over the objection that expenses should be limited to “reasonable out-of-pocket expenses which are part of the costs normally charged to a fee-paying client.” The court also approved electronic hosting costs, rejecting a defendant’s claim that “reasonableness is determined based on the number of documents used in the litigation.” However, the court refused to award costs for project management and for extracting data from hard drives where the plaintiff could have used better means to conduct a “targeted extraction of information.”

One of the defendants, Lockheed Martin, appealed the magistrate judge’s award of costs on the grounds that the recovery of expenses should be limited to “reasonable out-of-pocket expenses which are part of the costs normally charged to a fee-paying client,” as allowed under 42 U.S.C. § 1988. As part of its argument, Lockheed suggested the following:

“(1) Spencer’s request to be reimbursed for nearly $1 million in eDiscovery services is unreasonable and the magistrate’s recommendation does not cite any authority holding that a request for expenses in the amount sought by Spencer for eDiscovery is reasonable and reimbursable; (2) an award of $174,395.97 for uploading ESI and creating a search index is unfounded and arbitrary because it requires Lockheed to pay for Spencer’s decision to request ESI in a format that was different from the format that his vendor actually wanted; and (3) the recommended award punishes Lockheed for Spencer’s failure to submit detailed expense records because the actual cost of uploading and creating a search index “may have been substantially less” than the magistrate judge’s $174,395.97 estimate.” {emphasis added}

The district judge found that the “FCA does not limit recovery of expenses to those normally charged to a fee-paying client”: instead, 31 U.S.C. § 3730(d)(1)-(2) provides that “a qui tam plaintiff ‘shall . . . receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys’ fees and costs. All such expenses, fees, and costs shall be awarded against the defendant.’” The district judge agreed with the magistrate’s finding, which allowed the recovery of these expenses. Although the defendant offered an affidavit of an expert eDiscovery consultant that suggested the amount the plaintiff requested was unreasonable, the magistrate found the costs of data processing and uploading and the creation of a Relativity index permissible; however, she denied the recovery of the more than $38,000 attributable to repairing and reprocessing allegedly broken or corrupt files produced by Lockheed because Lockheed had produced the documents in the requested format. She also found that Spencer “could have and should have simply requested Lockheed to reproduce the data files at no cost rather than embarking on the expensive undertaking of repairing and reprocessing the data.”

Because the plaintiff’s “billing records did not segregate the costs for reprocessing and uploading the data and creating a searchable index,” the magistrate judge apportioned the vendor’s expenses evenly between reprocessing, uploading, and creating an index. The district court agreed and rejected Lockheed’s argument that the actual cost “may have been substantially less” as “purely speculative.”

Lockheed also complained about the magistrate judge’s award of more than $271,000 for electronic hosting costs because the plaintiff failed to show that the expenses were “reasonable and necessarily incurred” and the magistrate’s report did not cite any authority showing that this expense was recoverable. Lockheed also argued that the vendor’s bill of “$440,039 for hosting of and user access to the documents produced in the litigation is unreasonable under the circumstances because Spencer used only five of these documents during the litigation and did not notice a single deposition.” {emphasis added}

The district judge found that the data-hosting expenses were recoverable because the FCA does not limit the types of recoverable expenses. The district judge also agreed with the magistrate judge’s reduction of the hosting fees requested by nearly 40 percent—over Spencer’s objection—by limiting the time frame of recovery to the time before settlement was on the table and the number of database use accounts requested. He rejected Lockheed’s “contention that reasonableness is determined based on the number of documents used in the litigation.” He noted that in this data-intensive age, many documents collected and reviewed may not be responsive or used in the litigation; however, this “does not necessarily mean that the documents do not have to be reviewed by the parties for relevance by physically examining them or through the use of litigation software with searching capability to assist parties in identifying key documents.”

The district court also agreed with the magistrate’s decision to uphold Lockheed’s objection to the amount Spencer spent on extracting ESI from hard drives and related travel costs. The magistrate found that Spencer did not need to review everything on the hard drives; instead, he should have conducted a “targeted extraction of information” like Lockheed did or conduct depositions “to determine how best to conduct more limited discovery” to save time and expense. The magistrate deducted nearly $65,000 from Spencer’s request, awarding him $20,000. The district court opined:

“With the availability of technology and the capability of eDiscovery vendors today in this area, the court concludes that it was unreasonable for Spencer to simply image all of the hard drives without at least first considering or attempting a more targeted and focused extraction. Also, lack of familiarity with technology in this regard is not an excuse and does not relieve parties or their attorneys of their duty to ensure that the services performed and fees charged by third party vendors are reasonable, particularly when recovery of such expenses is sought in litigation. The court therefore overrules this objection.”

Finally, the district court upheld the magistrate judge’s determination that Spencer was not entitled to recover his project management costs. Spencer argued that the “IT management of the electronic database is critical, especially when poor quality electronic evidence is produced. All complex cases of this magnitude require professional IT support.” Because Spencer failed to adequately describe the services provided and because the record did not support the need for a project manager, the magistrate declined to reimburse this expense.

Ultimately, the court reduced the costs by $1,650 and the fees by $85,883, awarding the plaintiffs more than $1.6 million in fees and nearly $550,000 in costs. In closing, the district judge warned the parties that if they filed a motion for reconsideration or to amend the judgment without good cause, he would impose monetary sanctions against them.

So, what do you think?  Were the right cost reimbursements awarded?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: Applied Discovery (free subscription required).  For eDiscovery news and best practices, check out the Applied Discovery Blog here.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

200,000 Visits on eDiscovery Daily! – eDiscovery Milestones

While we may be “just a bit behind” Google in popularity (900 million visits per month), we’re proud to announce that yesterday eDiscoveryDaily reached the 200,000 visit milestone!  It took us a little over 21 months to reach 100,000 visits and just over 11 months to get to 200,000 (don’t tell my boss, he’ll expect 300,000 in 5 1/2 months).  When we reach key milestones, we like to take a look back at some of the recent stories we’ve covered, so here are some recent eDiscovery items of interest.

EDRM Data Set “Controversy”: Including last Friday, we have covered the discussion related to the presence of personally-identifiable information (PII) data (including social security numbers, credit card numbers, dates of birth, home addresses and phone numbers) within the Electronic Discovery Reference Model (EDRM) Enron Data Set and the “controversy” regarding the effort to clean it up (additional posts here and here).

Minnesota Implements Changes to eDiscovery Rules: States continue to be busy with changes to eDiscovery rules. One such state is Minnesota, which has amending its rules to emphasize proportionality, collaboration, and informality in the discovery process.

Changes to Federal eDiscovery Rules Could Be Coming Within a Year: Another major set of amendments to the discovery provisions of the Federal Rules of Civil Procedure is getting closer and could be adopted within the year.  The United States Courts’ Advisory Committee on Civil Rules voted in April to send a slate of proposed amendments up the rulemaking chain, to its Standing Committee on Rules of Practice and Procedure, with a recommendation that the proposals be approved for publication and public comment later this year.

I Tell Ya, Information Governance Gets No Respect: A new report from 451 Research has indicated that “although lawyers are bullish about the prospects of information governance to reduce litigation risks, executives, and staff of small and midsize businesses, are bearish and ‘may not be placing a high priority’ on the legal and regulatory needs for litigation or government investigation.”

Is it Time to Ditch the Per Hour Model for Document Review?: Some of the recent stories involving alleged overbilling by law firms for legal work – much of it for document review – begs the question whether it’s time to ditch the per hour model for document review in place of a per document rate for review?

Fulbright’s Litigation Trends Survey Shows Increased Litigation, Mobile Device Collection: According to Fulbright’s 9th Annual Litigation Trends Survey released last month, companies in the United States and United Kingdom continue to deal with, and spend more on litigation.  From an eDiscovery standpoint, the survey showed an increase in requirements to preserve and collect data from employee mobile devices, a high reliance on self-preservation to fulfill preservation obligations and a decent percentage of organizations using technology assisted review.

We also covered Craig Ball’s Eight Tips to Quash the Cost of E-Discovery (here and here) and interviewed Adam Losey, the editor of IT-Lex.org (here and here).

Jane Gennarelli has continued her terrific series on Litigation 101 for eDiscovery Tech Professionals – 32 posts so far, here is the latest.

We’ve also had 15 posts about case law, just in the last 2 months (and 214 overall!).  Here is a link to our case law posts.

On behalf of everyone at CloudNine Discovery who has worked on the blog over the last 32+ months, thanks to all of you who read the blog every day!  In addition, thanks to the other publications that have picked up and either linked to or republished our posts!  We really appreciate the support!  Now, on to 300,000!

And, as always, please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Hard Drive Turned Over to Criminal Defendant – Eight Years Later – eDiscovery Case Law

If you think discovery violations by the other side can cause you problems, imagine being this guy.

As reported by WRAL.com in Durham, North Carolina, the defense in State of North Carolina v. Raven S. Abaroa, No. 10 CRS 1087 filed a Motion to Dismiss the Case for Discovery Violations after the state produced a forensic image of a hard drive (in the middle of trial) that had been locked away in the Durham Police Department for eight years.

After the state responded to the defendant’s March 2010 discovery request, the defendant filed a Motion to Compel Discovery in October 2012, alleging that the state had failed to disclose all discoverable “information in the possession of the state, including law enforcement officers, that tends to undermine the statements of or reflects negatively on the credibility of potential witnesses”.  At the hearing on the motion, the Assistant DA stated that all emails had been produced and the court agreed.

On April 29 of this year, the defendant filed another Motion to Compel Specific Items of Discovery “questioning whether all items within the state’s custody had been revealed, including information with exculpatory or impeachment value”.  Once again, the state assured the court it had met its discovery obligations and the court again denied the motion.

During pre-trial preparation of a former forensic examiner of the Durham Police Department (DPD) and testimony of detectives in the case, it became apparent that a hard drive of the victim’s that was imaged was never turned over to the defense.  On May 15, representatives of the DPD located the image from the victim’s hard drive which had been locked away in a cabinet for eight years.  Once defense counsel obtained a copy of the drive, their forensic examiner retrieved several emails between the victim and her former boyfriend that were exchanged within a few weeks of the murder that belied the prosecution’s portrayal of the defendant as an unfaithful, verbally abusive and controlling husband feared by his wife.  In testimony, the defendant’s forensic examiner testified that had he known about the hard drive in 2005, steps could have been taken to preserve the emails on the email server and that they could have provided a better snapshot of the victim’s email and Internet activity.

This led to the filing of the Motion to Dismiss the Case for Discovery Violations by the defense (link to the filing here).

As reported by WTVD, Judge Orlando Hudson, having been recently ruled against by the North Carolina Court of Appeals in another murder case where he dismissed the case based on discovery violations by Durham prosecutors, denied the defense’s requests for a dismissal or a mistrial.  Sounds like interesting grounds for appeal if the defendant is convicted.

So, what do you think?  Should the judge have granted the defense’s request for a dismissal, or at least a mistrial?  Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Never Mind! Plaintiffs Not Required to Use Predictive Coding After All – eDiscovery Case Law

Remember EORHB v. HOA Holdings, where, in a surprise ruling, both parties were instructed to use predictive coding by the judge?  Well, the judge has changed his mind.

As reported by Robert Hilson in the Association of Certified E-Discovery Specialists® (ACEDS) web site (subscription required), Delaware Chancery Court Vice Chancellor J. Travis Laster has revised his decision in EORHB, Inc. v. HOA Holdings, LLC, No. 7409-VCL (Del. Ch. May 6, 2013).  The new order enables the defendants to continue to utilize computer assisted review with their chosen vendor but no longer requires both parties to use the same vendor and enables the plaintiffs, “based on the low volume of relevant documents expected to be produced” to perform document review “using traditional methods.”

Here is the text of this very short order:

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.

Here is a link to the order from the article by Hilson.

So, what do you think?  Should a party ever be ordered to use predictive coding?  Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Google Compelled to Produce Search Terms in Apple v. Samsung – eDiscovery Case Law

In Apple v. Samsung, Case No. 12-cv-00630, (N.D. Cal., May 9, 2013), California Magistrate Judge Paul S. Grewal granted Apple’s motion to compel third party Google to produce the search terms and custodians used to respond to discovery requests and ordered the parties to “meet and confer in person to discuss the lists and to attempt to resolve any remaining disputes regarding Google’s production.”

In August of last year, a jury of nine found that Samsung infringed all but one of the seven patents at issue and found all seven of Apple’s patents valid – despite Samsung’s attempts to have them thrown out. They also determined that Apple didn’t violate any of the five patents Samsung asserted in the case.  Apple had been requesting $2.5 billion in damages.  Apple later requested additional damages of $707 million to be added to the $1.05 billion jury verdict, which was subsequently reduced to nearly $599 million, with a new trial being ordered on damages for 14 products.  This case was notable from an eDiscovery perspective due to the adverse inference instruction issued by Judge Grewal against Samsung just prior to the start of trial for spoliation of data, though it appears that the adverse inference instruction did not have a significant impact in the verdict.

Google’s Involvement

As part of the case, Apple subpoenaed Google to request discovery, though they did not discuss search terms or custodians during the meet and confer.  After Google responded to discovery requests, Apple requested search terms and custodians from Google used in responding to discovery requests, but Google refused, arguing that the search terms and choice of custodians were “privileged under the work-product immunity doctrine.”  Instead, Google asked Apple to suggest search terms and custodians, but Apple refused and filed a motion to compel Google to provide search terms and custodians used to respond to discovery requests.

Judge Grewal noted that Google’s arguments opposing Apple’s request “have shifted”, but that “[a]t the heart of its opposition, however, is Google’s belief that its status as a third party to this litigation exempts it from obligations parties may incur to show the sufficiency of their production, at least absent a showing by Apple that its production is deficient.”  Google complained that “the impact of requiring non-parties to provide complete ‘transparency’ into their search methodology and custodians in responding to non-party subpoenas whenever unsubstantiated claims of production deficiencies are made would be extraordinary.”

Judge’s Ruling

Referencing DeGeer v. Gillis, Judge Grewal noted that, in that case, it was ruled that the third party’s “failure to promptly disclose the list of employees or former employees whose emails it proposed to search and the specific search terms it proposed to be used for each individual violated the principles of an open, transparent discovery process.”

Therefore, while acknowledging that “Apple likewise failed to collaborate in its efforts to secure proper discovery from Google”, Judge Grewal ruled that “production of Google’s search terms and custodians to Apple will aid in uncovering the sufficiency of Google’s production and serves greater purposes of transparency in discovery.  Google shall produce the search terms and custodians no later than 48 hours from this order. Once those terms and custodians are provided, no later than 48 hours from the tender, the parties shall meet and confer in person to discuss the lists and to attempt to resolve any remaining disputes regarding Google’s production.”

So, what do you think?  Should a third party be held to the same standard of transparency, absent a showing of deficient discovery response?  Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Defendant Compelled by Court to Produce Metadata – eDiscovery Case Law

Remember when we talked about the issue of metadata spoliation resulting from “drag and drop” to collect files?  Here’s a case where it appears that method may have been used, resulting in a judgment against the producing party.

In AtHome Care, Inc. v. The Evangelical Lutheran Good Samaritan Society, No. 1:12-cv-053-BLW (D. ID. Apr. 30, 2013), Idaho District Judge B. Lynn Winmill granted the plaintiff’s motion to compel documents, ordering the defendant to identify and produce metadata for the documents in this case.

In this pilot project contract dispute between two health care organizations, the plaintiff filed a motion to compel after failing to resolve some of the discovery disputes with the defendant “through meet and confers and informal mediation with the Court’s staff”.  One of the disputes was related to the omission of metadata in the defendant’s production.

Judge Winmill stated that “Although metadata is not addressed directly in the Federal Rules of Civil Procedure, it is subject to the same general rules of discovery…That means the discovery of metadata is also subject to the balancing test of Rule 26(b)(2)(C), which requires courts to weigh the probative value of proposed discovery against its potential burden.” {emphasis added}

“Courts typically order the production of metadata when it is sought in the initial document request and the producing party has not yet produced the documents in any form”, Judge Winmill continued, but noted that “there is no dispute that Good Samaritan essentially agreed to produce metadata, and would have produced the requested metadata but for an inadvertent change to the creation date on certain documents.”

The plaintiff claimed that the system metadata was relevant because its claims focused on the unauthorized use and misappropriation of its proprietary information and whether the defendant used the plaintiff’s proprietary information to create their own materials and model, contending “that the system metadata can answer the question of who received what information when and when documents were created”.  The defendant argued that the plaintiff “exaggerates the strength of its trade secret claim”.

Weighing the value against the burden of producing the metadata, Judge Winmill ruled that “The requested metadata ‘appears reasonably calculated to lead to the discovery of admissible evidence.’ Fed.R. Civ.P. 26(b)(1). Thus, it is discoverable.” {emphasis added}

“The only question, then, is whether the burden of producing the metadata outweighs the benefit…As an initial matter, the Court must acknowledge that Good Samaritan created the problem by inadvertently changing the creation date on the documents. The Court does not find any degree of bad faith on the part of Good Samaritan — accidents happen — but this fact does weight in favor of requiring Good Samaritan to bear the burden of production…Moreover, the Court does not find the burden all that great.”

Therefore, the plaintiff’s motion to compel production of the metadata was granted.

So, what do you think?  Should a party be required to produce metadata?  Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Plaintiff Granted Access to Defendant’s Database – eDiscovery Case Law

Last week in the EDRM Annual Meeting, one of our group discussion sessions was centered on production and presentation of native files – a topic which has led to the creation of a new EDRM project to address standards for working with native files in these areas.  This case provides an example of a unique form of native production.

In Advanced Tactical Ordnance Systems, LLC v. Real Action Paintball, Inc., No. 1:12-CV-296 (N.D. Ind. Feb. 25, 2013), Indiana Magistrate Judge Roger B. Cosbey took the unusual step of allowing the plaintiff direct access to a defendant company’s database under Federal Rule of Civil Procedure 34 because the plaintiff made a specific showing that the information in the database was highly relevant to the plaintiff’s claims, the benefit of producing it substantially outweighed the burden of producing it, and there was no prejudice to the defendant.

In this case involving numerous claims, including trademark infringement and fraud, Advanced Tactical Ordnance Systems LLC (“ATO”) sought expedited discovery after it obtained a temporary restraining order against the defendants. One of its document requests sought the production of defendant Real Action Paintball’s OS Commerce database to search for responsive evidence. Real Action objected, claiming that the request asked for confidential and sensitive information from its “most important asset” that would give the plaintiff a competitive advantage and that the request amounted to “‘an obvious fishing expedition.”

To decide the issue, Judge Cosbey looked to Federal Rule of Civil Procedure 34(a)(1)(A), which allows parties to ask to “inspect, copy, test, or sample . . . any designated documents or electronically stored information . . . stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form.” The advisory committee notes to this rule explain that the testing and sampling does not “create a routine right of direct access to a party’s electronic information system, although such access might be justified in some circumstances.” Judge Cosbey also considered whether the discovery request was proportionate under Federal Rule of Civil Procedure 26(b)(2)(C)(iii), comparing the “burden or expense” of the request 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.”

Based on its analysis, Judge Cosbey permitted ATO’s request. The benefits of allowing the plaintiff to access the defendant’s OS Commerce database outweighed the burden of producing data from it, especially because the parties had entered a protective order. The information was particularly important to the plaintiff’s argument that the defendant was using hidden metatags referencing ATO’s product to improve its results in search engines, thereby stealing the plaintiff’s customers.

Despite the defendant company’s claims that the information the database contained was proprietary and potentially harmful to the business’s competitive advantage, the court found the company failed to establish how the information in the database constituted a trade secret or how its disclosure could harm the company, especially where much of the information had already been produced or was readily available on the company’s website. Moreover, the company could limit the accessibility of the database to “‘Attorneys’ Eyes Only.’”

So, what do you think?  Was it appropriate to grant the plaintiff direct access to the defendant’s database?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: Applied Discovery (free subscription required).  For eDiscovery news and best practices, check out the Applied Discovery Blog here.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

When Lawyers Get Sued, They Have Preservation Obligations Too – eDiscovery Case Law

In Distefano v. Law Offices of Barbara H. Katsos, PC., No. CV 11-2893 (JS) (AKT) (D. ED NY Mar. 29, 2013), New York Magistrate Judge A. Kathleen Tomlinson found that the defendant (an attorney who was being sued by the plaintiff she previously represented for breach of contract, negligence/legal malpractice, and breach of fiduciary duty/duty of care) had a duty to preserve information from a discarded computer and ordered a hearing for the defendant to address a number of questions to determine the potential relevance of the destroyed data and whether the defendant had a sufficiently culpable state of mind.

The plaintiff alleged professional negligence by the defendant related to her representation of his franchise business for Cold Stone Creamery stores.  During a Discovery Status Conference, it was revealed that the defendant had gotten rid of her computer before the litigation began, as she noted in her affidavit that she was advised by a third-party individual who fixed her office computers that they could not be repaired.  As she used AOL for email correspondence, she contacted AOL “to inquire if emails from several years ago could be recovered by AOL”, but was told that they “could not recover emails from several years ago for the stated email address”.  After receiving the defendant’s affidavit, the plaintiff filed a motion for spoliation.

With regard to the defendant’s duty to preserve information related to her representation of the plaintiff, Judge Tomlinson stated:

“The Court concludes that Katsos’ duty to preserve documents arose as early as late February 2009, when Michael DiStefano terminated the attorney-client relationship between Plaintiffs and Defendants.”  On February 24, 2009, the plaintiff send the defendant a letter terminating the representation “immediately” and stated that he would “communicate with you further, in writing, so as to explain the reasons why I am discharging you.”  Noting that the “language of Michael DiStefano’s letter gives the appearance that Distefano was not satisfied with Katsos’ work”, Judge Tomlinson also noted that “[i]n assessing whether litigation was reasonably foreseeable in these circumstances, the Court cannot ignore the fact that Katsos is an attorney and should have been attuned to the prospect of litigation.”

To determine the defendant’s culpable state of mind, Judge Tomlinson ordered a hearing on May 13 for the defendant to “be prepared to testify regarding, among other things, the following areas:

  1. Katsos’ normal document preservation/retention/deletion/destruction practices;
  2. the number of computers utilized in her office prior to 2009, when the computers were purchased, and the specific circumstances surrounding the breakdown of each of those computers;
  3. the service agreements for those computers and the vendor(s) used;
  4. whether Katsos maintained a network server;
  5. AOL’s automatic deletion policies to the extent they were explained to Katsos;
  6. a complete list of every email address used by Defendant Law Offices of Barbara H. Katsos, PC and Defendant Barbara Katsos or her staff to communicate with Plaintiffs;
  7. Katsos’ attempts to gain access to the email accounts used by her paralegals and interns referenced in Paragraph 5 of Katsos Aff. II and page 16 of Plaintiffs’ Memorandum;
  8. the document preservation steps undertaken by Katsos when Plaintiffs instituted an adversary proceeding against her in March of 2010;
  9. the retention and utilization of the services of Jan Sloboda.” (the third-party individual that advised her to replace her computers)

The plaintiffs were also ordered to identify “general categories of documents that have been adversely affected” to help determine the relevance of the data in question and were permitted to question the defendant at the hearing.

So, what do you think?  Was this an appropriate course of action to determine whether sanctions are appropriate?  Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Court Rejects Defendants’ Claim of Undue Burden in ERISA Case – eDiscovery Case Law
 

In the case we covered on Monday, the court ruled for the defendant in their effort to avoid what they felt to be undue burden and expense in preserving data.  Here is another case where the defendant made an undue burden claim, but with a different result.

In the case In re Coventry Healthcare, Inc.: ERISA Litigation, No. AW 09-2661 (D. Md. Mar. 21, 2013), Maryland Magistrate Judge Jillyn K. Schulze rejected the defendants’ claim of undue burden where they failed to suggest alternatives to using the plaintiffs’ search terms and where they could enter a clawback order to eliminate the cost of reviewing the data for responsiveness and privilege.

In this Employee Retirement Income Security Act (ERISA) class action, a discovery dispute arose when the defendants filed a motion to curtail the relevant time frame for discovery due in part to the burden it would impose on them. The plaintiffs sought discovery from February 9, 2007 to October 22, 2008; the defendants asked the court to limit it to January 1, 2008 to June 30, 2008.

The defendants relied on Rule 26(b)(2)(C)(iii) to establish that the burden of producing the data outweighed any benefit it offered the plaintiffs. Judge Schulze noted that the “party seeking to lessen the burden of responding to electronic records discovery ‘bears the burden of particularly demonstrating that burden and of providing suggested alternatives that reasonably accommodate the requesting party’s legitimate discovery needs’”.

Here, the defendants claimed they tested the plaintiffs’ proposed search terms on the custodians’ data and hit 200,000 documents. They claimed it would cost roughly $388,000 to process, host, and review the data for responsiveness and privilege. However, the defendants did not suggest “any alternative measures that could reasonably accommodate Plaintiffs’ discovery needs other than negotiating more refined search terms.”

In response, the plaintiffs argued they had tried to collaborate with the defendants to “develop appropriate searches for ESI by limiting the searches to certain designated custodians” and by shortening the discovery period by three months.

Judge Schulze found that the narrowing of the discovery period would reduce the costs, and that “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.” Finally, “[t]o further reduce any undue burden, Plaintiffs may need to refine their proposed search terms to narrow the pool of potentially relevant documents.”  With these options available, Judge Schulze found that the defendants had not met their burden to show that producing the evidence would be unduly burdensome.

So, what do you think?  Should the defendant’s request have been granted?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: Applied Discovery (free subscription required).  For eDiscovery news and best practices, check out the Applied Discovery Blog here.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Court Agrees with Defendant that Preserving 5 Terabytes of Data is Enough – eDiscovery Case Law

In United States ex rel. King v. Solvay, S.A., No. H-06-2662, 2013 U.S. Dist. LEXIS 30752 (S.D. Tex. Mar. 5, 2013), Texas District Judge Gray Miller granted the defendant’s request for a protective order where the plaintiffs only offered generalized, unsupported claims to support their request to extend and expand discovery.

In this False Claims Act, the plaintiffs, qui tam relators whose claims led to investigation by several state attorneys general, claimed the defendants engaged in off-label promotion of drugs, violated the anti-kickback statute, and retaliated against them.

The defendant, Solvay Pharmaceuticals, now doing business as Abbott Products (after Abbott acquired Solvay in 2010), filed a motion seeking a protective order from having to respond to the relators’ discovery requests about ongoing fraud, which it claimed were irrelevant to the claims in the lawsuit.

During the course of discovery, the company imposed a litigation hold and preserved more than 2,500 eMail backup tapes, more than 56,000 network share backup tapes, and roughly 5 terabytes of data on its network share drives—all dating from the 1990s through 2010 – and covering 89 custodians, both former and current employees. But the relators requested more. If the litigation hold were to expand to accommodate the relators’ requests, it would require the company to dedicate additional server space to store the data. Moreover, the company argued that it would cost at least $480,000 to process the eMails it was already preserving, and the review of those eMails would cost $2.3 million, excluding quality control, privilege review, and production costs. Adding the additional data from after Abbott acquired Solvay would drive these costs substantially higher. The relators objected, suggesting that the company’s “sweeping generalizations” about the potential burden were inaccurate. In the alternative, the relators agreed to an end date of December 31, 2012 or to depose witnesses to determine the appropriate cutoff.

Under Federal Rule of Civil Procedure 26(c)(1), courts can limit discovery to protect parties from undue burden or expense. Judge Miller agreed with the defendant that a few references that conduct was continuing “‘to the present’ in a 267-page complaint containing more than 768 paragraphs does not justify the burden and expense associated with unfettered discovery ‘to the present’ in a case in which discovery is already going to be incredibly expensive and time-consuming.” Although Judge Miller was willing to extend the relevant time frame to include some claims outside of the relators’ personal knowledge because the real party in interest was the United States, he was not willing to go so far as to permit the “generalized claims of ongoing conduct to form the basis for a fishing expedition.”  As a result, he granted the motion for a protective order, limiting the time frames for Solvay’s discovery obligations.

So, what do you think?  Was the judge right to limit the defendant’s discovery obligations?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: Applied Discovery (free subscription required).  For eDiscovery news and best practices, check out the Applied Discovery Blog here.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.