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Case Law

eDiscovery Year in Review: eDiscovery Case Law, Part 2
 

As we noted yesterday, eDiscovery Daily has published 65 posts related to eDiscovery case decisions and activities over the past year, covering 50 unique cases!  Yesterday, we looked back at cases related to eDiscovery cost reimbursement, form of production and international discovery issues.  But, there’s many more cases to recap.  As Lt. Col Frank Slade would say, “I’m just getting warmed up”.  Whoo Ah!

We grouped those cases into common subject themes and will review them over the next few posts.  Perhaps you missed some of these?  Now is your chance to catch up!

PRIVILEGE / INADVERTENT DISCLOSURES

Decisions regarding what information is privileged and whether privilege is waived when inadvertent disclosures occur is always a hot issue for debate.  That was no different in 2011.  And, if you receive an inadvertent disclosure and don’t disclose it, you can get kicked off the case.  Here are five cases related to privilege and inadvertent disclosures:

Privilege Waived for Produced Servers.  Fontainebleau Resort, LLC (FRLLC) produced two servers without conducting any review of the materials, at least one of which had previously been produced to other banks involved in the underlying litigation.  Would they be required to waive privilege on those servers?

When is Attorney-Client Communication NOT Privileged? One answer: When it’s from your work email account, and your employer has a written policy that company email is not private and subject to audit. Oh, and you’re suing your employer.

Read Inadvertent Email, Get Disqualified from Case.  Lesson of the day: When you receive an inadvertently sent privileged email, read it and don’t disclose receipt of it, you can get kicked off the case. In this case, the court disqualified defendant's in-house and outside counsel for their handling of a disputed privileged email that was inadvertently sent by the plaintiffs' counsel to the defendant and shared with defendant’s outside counsel.

Defendants' Privilege Waived for "Completely Ineffective" Discovery Procedures.  In a case over purported building and zoning code violations, an Illinois District Court has found the defendants responsible for inadvertently producing several privileged documents during discovery and for a failure to correct the problem in a timely manner, and has ordered the privilege to be waived.

Court Rules Against Exclusion of Privileged Email. A District of Columbia court has ruled against exclusion of a privileged email that was inadvertently produced by the defendant, ruling that the defendant's actions before and after the discovery of the email's production pursuant to Federal Rule of Civil Procedure 26(b)(5)(B) were not sufficient to ensure protections under Federal Rule of Exclusion (FRE) 502(b)(3), in a case involving alleged violations of the District of Columbia Whistleblower Act.

PROPORTIONALITY

With the explosion of data in the world and rising costs for preserving, collecting, reviewing and producing that data, it’s not surprising that eDiscovery costs are spiraling upward, causing many to cry “uncle” and making the word “proportionality” become quite trendy, with parties and even courts.  Here are four cases where proportionality of eDiscovery was an issue.  Oh, and if you can’t complete production until after the trial is over, that’s probably too late.

Completing Production AFTER Trial is Too Late.  In this case, Judge Royce C. Lamberth of the U.S. District Court for the District of Columbia denied the defendant’s request for consideration that the District had waived all objections, including privileges, and ordered production within one week of the close of trial. In denying the motion, the court likened the proposed production to “a plane with landing gear that deploys just after touchdown, or a stick of dynamite with a unique fuse that ignites only after it explodes.”

KPMG Denied in Request for “Proportionality Test” to Preservation.  In this case, KPMG sought a protective order to narrow its preservation obligation scope to only a random sample of 100 hard drives from among those it had already preserved for this and other litigation or shift the cost of any preservation beyond that requested scope. With that request in hand, the court considered KPMG's request for proportionality as it applied to its preservation obligations.

Court Grants Adoption of Model Order for Patent Case.  Model orders to limit discovery for patent cases have gained popularity in various jurisdictions, including a recent order proposed in Texas. Here’s one patent case where the defendant sought to adopt such a model order.

Plaintiff Not Required to Review Millions of Pages of Unallocated Space.  In this case, the court affirmed the Magistrate Judge’s order which excused plaintiff from having to review and produce millions of pages of documents recovered from unallocated space files due to the extreme burden and cost to do so.

EDISCOVERY SERVICE DISPUTES

It’s a darn shame when law firms can’t get along with their corporate clients or with the vendors they hired.  Perhaps the most discussed case of the year was the eDiscovery malpractice case involving McDermott, Will & Emery, with posts in eDiscovery Daily here, here and here.  Here are two cases where the actual eDiscovery services being provided were in dispute:

eDiscovery Malpractice Case Highlights Expectation of Higher Standards.  Having noted in eDiscovery Daily that competency ethics are no longer just about the law and that competency in eDiscovery best practices is expected from the attorneys and any outside providers they retain, this case may be the first eDiscovery malpractice case ever filed against a law firm (McDermott Will & Emery) for allegedly failing to supervise contract attorneys that were hired to perform the client’s work and to protect privileged client records.

Sometimes the Vendor Sues the Law Firm – And Wins!  The eDiscovery malpractice case involving McDermott, Will & Emery associated with inadvertent production of 3,900 privileged documents has captured considerable interest in the industry and this blog.  Sometimes, the “shoe is on the other foot”, so to speak.

Tune in tomorrow for more key cases of 2011 and see the topic that continues to generate more case law related to eDiscovery than any other!

So, what do you think?  Did you miss any of these?  Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Year in Review: eDiscovery Case Law, Part 1
 

Happy New Year from all of us at CloudNine Discovery and eDiscovery Daily!  If 2012 is like recent years, there should be plenty of interesting developments in the eDiscovery industry.

However, before we look ahead to the coming year, it’s worthwhile to look back at what transpired in 2011 to see what trends began to emerge last year.  And, there is no better way to do that than to review key cases during the year.  eDiscovery Daily has published 65 posts related to eDiscovery case decisions and activities over the past year, covering 50 unique cases!  Needless to say, a lot happened in the courtroom that impacted the eDiscovery world.

We grouped those cases into common subject themes and will review them over the next few posts.  Perhaps you missed some of these?  Now is your chance to catch up!

EDISCOVERY COST REIMBURSEMENT

One of the emerging trends for 2011 was the growing number of cases where the prevailing party was awarded reimbursement of eDiscovery costs.  Maybe that will change the “preserve and produce everything” mentality of some attorneys?  Here are four cases where this issue was addressed:

Sue Me and Lose? Pay My Costs.  In a ruling that may give some plaintiffs' lawyers pause, a federal judge in Pittsburgh has ruled that the winning defendants in an antitrust case are entitled to reimbursement of more than $367,000 in eDiscovery costs.

Plaintiff Responsible for Taxation of eDiscovery Costs.  It appears that making plaintiffs responsible for eDiscovery costs when they lose is becoming a trend. For this case, the Pennsylvania District Court denied the plaintiffs’ motion to eliminate or reduce many of the costs at issue related to electronic discovery but did disallow or reduce some costs, including those incurred for the convenience of counsel.

Another Losing Plaintiff Taxed for eDiscovery Costs.  As noted previously, prevailing defendants are becoming increasingly successful in obtaining awards against plaintiffs for reimbursement of eDiscovery costs. In this case, a California District Court granted the defendants summary judgment on non-infringement and dismissed their counterclaims. The judgment included eDiscovery costs as valid taxed costs against the plaintiff, based on Rule 54(d) which creates a presumption in favor of awarding costs to the prevailing party.

Award for Database Costs Reversed Due to Cost Sharing Agreement.  In this case, Ricoh looked to have the district court’s award of costs to Synopsys reversed for the parties’ use of Stratify for the production of email. While the appellate court decided that the district court properly decided that costs related to the database could be recovered pursuant to 28 U.S.C. § 1920(4), it nonetheless reversed the lower court’s award due to the parties' agreement to split the costs.

FORM OF PRODUCTION

There were several cases related to the form and format of produced ESI, with a number of key issues being debated in the courtroom.  Here are eight cases where production format decisions were made.

Responses to FOIA Requests Must Be Searchable.  Judge Shira A. Scheindlin ruled that federal agencies must turn over documents that include "metadata", which allows them to be searched and indexed.  Indicating that "common sense dictates" that the handling of FOIA requests should be informed by "the spirit if not the letter" of the Federal Rules of Civil Procedure, Judge Scheindlin indicated the government offered "a lame excuse" for delivering non-searchable documents.

Never Mind! Judge Scheindlin Withdraws FOIA Requests Opinion.  Four months later, Judge Scheindlin withdrew that opinion.

Facebook Did Not Deduce That They Must Produce.  In this case, United States Magistrate Judge Howard Lloyd of the Northern District of California compelled Facebook to produce ESI that was previously produced in a converted, non-searchable format and further ordered Facebook not to use a third-party vendor's online production software to merely “provide access” to it. The court’s order granting the plaintiff’s Motion To Compel Production addressed the importance of ESI Protocols, the requirement to produce ESI in native formats, and production of documents versus providing access to them.

Downloading Confidential Information Leads to Motion to Compel Production.  The North Dakota District Court has recently decided in favor of a motion to compel production of electronic evidence, requiring imaging of computer hard drives, in a case involving the possible electronic theft of trade secrets.

Are Attachments Part of the Email Or Are They Separate?  A Special Master recently investigated the legal standard concerning whether or not attachments must be produced with the emails to which they were attached in discovery proceedings, and determined that there is no certain answer to be found in case law precedent.

Court Says Lack of eDiscovery Rules for Criminal Cases is a Crime.  A New York district court recently ordered the United States Government to reproduce thousands of pages of electronic discovery materials in a criminal case involving the distribution of cocaine. In this case, the Government produced thousands of pages of electronic documents and a number of audio recordings, none of which were text searchable. The court ultimately decided that the onus of producing searchable materials for eDiscovery fell on the Government itself.

Produced ESI Doesn’t Need to be Categorized, Even When Voluminous.  In this case, the defendants sought to compel re-production by the Government of ESI in categorized batches relating to transactions with certain characteristics. Judge Victor Marrero of the Southern District of New York denied the defendants’ motion.

New York Supreme Court Requires Production of Software to Review Files.  In this case, the petitioner requested records from the Department of Taxation and Finance in New York that were responsive to petitioner's request under Freedom of Information Law (FOIL) for records related to sales tax audit. The petitioner then moved to compel production of the Department’s Audit Framework Extension software program in order to install it on his computer and view the electronic files. The petitioner's motion was denied, not once, but twice. Would a final appeal result in compelling production of the software?

INTERNATIONAL EDISCOVERY

As companies “go global” and more data is stored “in the cloud”, discoverability of ESI within international jurisdictions is becoming increasingly in dispute.  Here are two cases with global ramifications:

Bankruptcy Court Denies Foreign Access to Debtor's Emails.  A Southern District of New York United States Bankruptcy Court denied access to a debtor's emails on July 22, in a foreign request involving international eDiscovery. In this case, the U.S. Bankruptcy Court determined that to permit a relief request from a German insolvency administrator would directly contravene the "fundamental principles" of U.S. public policy by undermining the right to privacy in electronic communications and the right of parties involved in any court order to receive notice of such proceedings and of their involvement.

U.S. Court Rules on ECPA Protection of Emails in the Cloud.  An October 3 decision by the Ninth Circuit Court of Appeals offers new clarity in defining and protecting the eDiscovery rights of non-U.S. nationals using U.S. services online, by ruling that emails stored on servers located within the U.S. are protected by national laws on ESI.

Tune in tomorrow for more key cases of 2011!

So, what do you think?  Did you miss any of these?  Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: Court Grants Adverse Inference Sanctions Against BOTH Sides
 

Have you ever seen the video where two boxers knock each other out at the same time?  That’s similar to what happened in this case.

In Patel v. Havana Bar, Restaurant & Catering, No. 10-1383, (E.D. Pa. Dec. 5, 2011), a case of dueling claims of spoliation, the court imposed sanctions against both parties for failing uphold their duty to preserve relevant evidence.

The plaintiff was attending an engagement party when he fell from a second floor loft overlooking the dance floor. Whether the plaintiff fell due to intoxication or whether he intentionally jumped was a matter in dispute. During discovery, the parties filed cross-motions seeking sanctions for discovery violations.

The bar's video system recorded the evening's events, but the bar owner failed to preserve the recording. He attempted to copy the video before the system's automatic overwriting erased it, but he did not have the right equipment to make a copy. In addition, the system allowed him to print images from the recording, but he failed to take advantage of this feature. Thus, the court found that spoliation had occurred: even though the defendant took some steps to preserve evidence, his steps were inadequate. Thus, the court imposed an adverse inference sanction against the bar.

Additionally, the defendant sought spoliation sanctions against the plaintiff for failing to preserve statements of witnesses who attended the party. In 2008, the plaintiff's sister-in-law sent a message over Facebook asking attendees to write statements supporting the plaintiff's case that he was not intoxicated and that he was merely jovial. However, in 2010, the sister-in-law again asked attendees for statements via Facebook, this time requesting confirmation that the bar recklessly served the plaintiff alcohol and explaining that she would not use statements that the plaintiff jumped from the second floor. The plaintiff did not share any of the statements with the defendant until defense counsel discovered their existence during a deposition. Then, the plaintiff's counsel turned the 2010 statements over one by one as depositions occurred. The plaintiff never produced any of the 2008 statements, and family members offered conflicting stories as to their whereabouts.

The court imposed a number of sanctions on the plaintiff, finding that his behavior "ran completely afoul of the goals of discovery." The sanctions included an adverse inference sanction for failing to provide the statements. The court also ordered the plaintiff to pay for the costs of redeposing several witnesses. Finally, the court awarded the defendants fees and costs "for the time and effort they expended in attempting to obtain discovery that they were entitled to receive."

So, what do you think?  Did they both deserve what they got?  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).

eDiscovery Daily will take a break for the New Years holiday and will return next Tuesday, January 3.  Happy New Year from all of us at Cloudnine Discovery and eDiscovery Daily!

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.

eDiscovery Case Law: Plaintiff Not Required to Review Millions of Pages of Unallocated Space
 

While plaintiff “should have known better than to agree to search terms” that arguably resulted in recovery from unallocated space files of 65 million pages of documents for plaintiff to review for privilege, a magistrate judge in I-Med Pharma, Inc. v. Biomatrix, Inc., No. 03-3677 (DRD), (D.N.J. Dec. 9, 2011) properly excused plaintiff from its stipulation to produce such documents after reviewing them for privilege.

Plaintiff alleged that defendants breached a distribution agreement relating to eye-drops after one of the defendants was acquired by another defendant. A stipulation among the parties provided for a keyword search by defendants’ expert of plaintiff’s computer network, servers, and related storage devices using English and French terms, including “claim”, “revenue*”, and “profit*”. The search resulted in over 64 million hits just in unallocated space of plaintiff’s computer systems.

District Judge Dickinson Debevoise affirmed a magistrate judge’s order excusing plaintiff from a privilege review of the estimated equivalent of 65 million documents in the unallocated space that contained an agreed search term. Judge Debevoise stated its concern over the cost of such a review:

“A privilege review of 65 million documents is no small undertaking. Even if junior attorneys are engaged, heavily discounted rates are negotiated, and all parties work diligently and efficiently, even a cursory review of that many documents will consume large amounts of attorney time and cost millions of dollars.”

Judge Debevoise rejected defendant’s suggestion that plaintiff could simply review documents with the word “privileged” and produce everything else:

“Even when dealing with intact files, potentially privileged information may often be found in emails, memoranda, presentations, or other documents that are not explicitly flagged as privileged or confidential. And since the data searched here is likely to contain fragmented or otherwise incomplete documents, it is entirely possible for privileged material to be found without its original identifying information.”

Defendants had not shown that relevant, non-duplicate information likely would be found in the unallocated space, according to the court. Thus, plaintiff should have known better than to agree on the search terms, but requiring a privilege review of the results would not be fair or just. Judge Debevoise added a list of factors that parties should consider in evaluating reasonableness of search terms:

“In 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.”

So, what do you think?  Did common sense prevail or should the plaintiff have been held to the agreement?  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).

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.

eDiscovery Case Law: Award for Database Costs Reversed Due to Cost Sharing Agreement
 

An award of costs of $938,957.72, including the winning party’s agreed half share of the cost of a database or $234,702.43, was reversed in Synopsys, Inc. v. Ricoh Co. (In re Ricoh Co. Patent Litigation), No. 2011-1199 (Fed. Cir. Nov. 23, 2011). While the cost of the database could have been taxed to the losing party, the agreement between the parties on cost sharing controlled the ultimate taxation of costs.

After almost seven years of litigation, Synopsys obtained summary judgment and a declaration in Ricoh’s action against seven Synopsys customers that a Ricoh software patent on integrated circuits had not been infringed. During the litigation, Ricoh and Synopsis were unable to agree on a form of production of Synopsis email with its customers, and Ricoh suggested using an electronic discovery company to compile and maintain a database of the email. Synopsis agreed to use of the company’s services and to pay half the cost of the database. After Synopsis obtained summary judgment, the district court approved items in the Synopsis bill of costs totaling $938,957.72, including $234,702.43 for Synopsis’ half share of the cost of the database and $234,702.43 for document production costs.

The court on appeal of the taxation of costs agreed that 28 U.S.C.S. § 1920 provided for recovery of the cost of the database, which was used to produce email in its native format. According to the court, “electronic production of documents can constitute ‘exemplification’ or ‘making copies’ under section 1920(4).” However, the parties had entered into an agreement on splitting the cost of the database and nothing in the 14-page agreement or communications regarding the agreement indicated that the agreement was anything other than a final agreement on the costs of the database. Faced with “scant authority from other circuits as to whether a cost-sharing agreement between parties to litigation is controlling as to the ultimate taxation of costs,” the court concluded the parties’ cost-sharing agreement was controlling. It reversed the district court’s award of $234,702.43 for Synopsis’ half share of the cost of the database.

The court also reversed and remanded the award of an additional $234,702.43 for document production costs because those costs were not adequately documented. For example, many of the invoices simply stated “document production” and did not indicate shipment to opposing counsel. The court stated that the “document production” phrase “does not automatically signify that the copies were produced to opposing counsel.”

So, what do you think?  Should the agreement between parties have superseded the award?  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).

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.

eDiscovery Case Law: Lilly Fails to Meet its eDiscovery Burden, Sanctions Ordered

In Nacco Materials Handling Group, Inc. v. Lilly Co., No. 11-2415 AV, (W.D. Tenn. Nov. 16, 2011), the court required the defendant to bear the costs of discovery where its preservation and collection efforts were “woefully inadequate.” Parties must cooperate and voluntarily preserve, search for, and collect ESI to avoid the imposition of sanctions.

In this case, Nacco, a manufacturer and seller of lift trucks and aftermarket parts, accused Lilly, a former Nacco dealer, of illegally accessing its proprietary, password-secured website on over 40,000 occasions. Nacco asserted a host of claims, including violations of the Computer Fraud and Abuse Act, computer trespass, misappropriation of trade secrets, tortious interference with contract and business relations, and tortious interference with prospective economic advantage.

Nacco filed a motion seeking expedited discovery so that its forensic expert could search Lilly’s computers and determine which computers accessed Nacco’s proprietary information. The expert turned up evidence of inappropriate access on 17 of the 35 computers he examined.

As discovery continued, Nacco also requested the deposition of a 30(b)(6) witness. However, the witness Lilly offered was unprepared to answer questions on the topics outlined in the deposition notice. Based on the witness’s statements in the deposition and evidence found during the forensic examination, Nacco filed a motion to prevent the further spoliation of evidence and sought sanctions.

The court decided that Lilly’s attempts to preserve evidence were “woefully inadequate.” The company “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.” Specifically, U.S. Magistrate Judge Diane Vescovo found that the company “failed to timely issue an effective written litigation hold, to take appropriate steps to preserve any existing electronic records, to suspend or alter automatic delete features and routine overwriting features, and to timely and effectively collect ESI.”

The court explained that Lilly sent the litigation hold to seven of its 160 employees without adequate instructions—and the seven did not include the “key players” to the litigation. The company made no further efforts to prevent the deletion of e-mail, data, or backup tapes. Finally, the company apparently “left collection efforts to its employees to search their own computers with no supervision or oversight from management. Lilly did not follow up with its employees to determine what efforts were taken to preserve and collect relevant evidence, and Lilly failed to document any of its search and collection efforts.” Therefore, the court found that Lilly breached its duty to preserve relevant evidence.

After finding the company negligent, the court imposed sanctions against Lilly that included the expense of additional discovery, including the cost of a second 30(b)(6) deposition, the forensic examinations and imaging already complete, the costs of additional analysis of computers of the nine employees who accessed Nacco’s website, and the costs of imaging the computers in its service department. In addition, the court ordered Lilly to pay monetary sanctions equal to plaintiff’s reasonable costs, including attorney’s fees, in bringing the motion.

Finally, the court ordered Lilly to provide an affidavit describing its preservation and collection efforts and certifying that it had suspended its automatic delete functions and preserved backup tapes.

So, what do you think?  Were the sanctions justified? If so, did the court go far enough?  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).

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.

eDiscovery Case Law: Another Losing Plaintiff Taxed for eDiscovery Costs

As noted yesterday and back in May, prevailing defendants are becoming increasingly successful in obtaining awards against plaintiffs for reimbursement of eDiscovery costs.

An award of costs to the successful defendants in a patent infringement action included $64,295 in costs for conversion of data to TIFF format and $5,950 for an eDiscovery project manager in Jardin v. DATAllegro, Inc., No. 08-CV-1462-IEG (WVG), (S.D. Cal. Oct. 12, 2011).

Defendants in a patent infringement action obtained summary judgment of non-infringement and submitted bills of costs that included $64,295 in costs for conversion of data to TIFF format and $5,950 for an eDiscovery project manager. Plaintiff contended that the costs should be denied because he had litigated the action and its difficult issues in good faith and there was a significant economic disparity between him and the corporate parent of one of the defendants.

The court concluded that plaintiff had failed to rebut the presumption in Fed. R. Civ. P. 54 in favor of awarding costs. The action was resolved through summary judgment rather than a complicated trial, and there was no case law suggesting that the assets of a parent corporation should be considered in assessing costs. The financial position of the party having to pay the costs might be relevant, but it appeared plaintiff was the founder of a company that had been sold for $500 million.

Taxing of costs for converting files to TIFF format was appropriate, according to the court, because the Federal Rules required production of electronically stored information and “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.” The court stated: “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).”

The court also rejected plaintiff’s argument that costs associated with an eDiscovery “project manager” were not taxable because they related to the intellectual effort involved in document production:

Here, 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. Because the project manager’s duties were limited to the physical production of data, the related costs are recoverable.

So, what do you think?  Will more prevailing defendants seek to recover eDiscovery costs from plaintiffs? 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.

eDiscovery Case Law: Plaintiff Responsible for Taxation of eDiscovery Costs

Back in May, we discussed a case where the plaintiff, after losing its lawsuit, was responsible for repaying the defendant more than $367,000 in eDiscovery costs.  It appears that making plaintiffs responsible for eDiscovery costs when they lose is becoming a trend.

In re Aspartame Antitrust Litig., No. 2:06-CV-1732-LDD, (E.D. Pa. Oct. 5, 2011),a case with a “staggering” volume of discovery, successful defendants were awarded about $500,000 of their electronic discovery costs for a litigation database, imaging hard drives, keyword searches, de-duplication, and data extraction that allowed for cost-effective discovery. However, the court refused to award costs for defendants’ use of an eDiscovery program that provided visual clustering of documents and went beyond necessary keyword search and filtering functions.

Defendants in an artificial sweetener market allocation and price fixing class action obtained summary judgment against two representative plaintiffs that had not purchased the sweetener within the four-year statute of limitations. Defendants filed bills of costs, and the plaintiffs asked the court to deny or reduce those costs.

The court granted about $500,000 in disputed costs, most of which were incurred by defendants during electronic discovery. The volume of discovery was “staggering,” according to the court, and “in cases of this complexity, eDiscovery saves costs overall by allowing discovery to be conducted in an efficient and cost-effective manner.” Defendants’ use of third party vendors for keyword searches and culling of duplicates allowed one defendant to reduce over 366 gigabytes of potentially responsive data by 85%. The court stated:

“We therefore award costs for the creation of a litigation database, storage of data, imaging hard drives, keyword searches, de-duplication, data extraction and processing. Because a privilege screen is simply a keyword search for potentially privileged documents, we award that cost as well. In addition, we award costs associated with hosting data that accrued after defendants produced documents to plaintiffs because, as the plaintiffs themselves acknowledged earlier in the proceedings, discovery was ongoing in this case up until summary judgment was issued.”

The court also awarded costs for technical support and the creation of load files. However, it would “draw the line” at awarding costs for use of a “sophisticated eDiscovery program” that provided concept-based visual clustering of document collections. Such a service was “undoubtedly helpful,” but it was “squarely within the realm of costs that are not necessary for litigation but rather are acquired for the convenience of counsel.”

So, what do you think?  Should plaintiffs have to reimburse eDiscovery costs to defendants if they lose? 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.

eDiscovery Case Law: New York Supreme Court Requires Production of Software to Review Files

The petitioner – in 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) – brought article 78 proceeding to compel Department of Taxation and Finance to produce records that were responsive to petitioner’s request under Freedom of Information Law (FOIL) for records related to sales tax audit.  Some of the records, however, could not be reviewed without a copy of the Department’s Audit Framework Extension software, which the Department refused to provide.  The petitioner then moved to compel production of the software program in order to install it on his computer and view the electronic files. The court denied petitioner’s motion, concluding that the software program was exempt from disclosure and also denied the petitioner’s subsequent motion to renew.

The court determined that the term “record” was broadly defined as “any information kept, held, filed, produced or reproduced by, with or for an agency …, in any physical form whatsoever, including, but not limited to, reports, statements, examinations, memoranda, opinions, folders, files, books, manuals, pamphlets, forms, papers, designs, drawings, maps, photos, letters, microfilms, computer tapes or discs, rules, regulations or codes”.  However, the petitioner disagreed, “citing the Department’s own description of the software as well as advisory opinions in which the Committee on Open Government concludes that software can constitute a record under FOIL”.

The court agreed with that argument, noting:

  • “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.”
  • “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”.
  • “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”
  • “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”

So, what do you think?  Should producing parties be required to produce specialized software to review produced records? Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Best Practices: Production is the “Ringo” of the eDiscovery Phases
 

Since eDiscovery Daily debuted over 14 months ago, we’ve covered a lot of case law decisions related to eDiscovery.  65 posts related to case law to date, in fact.  We’ve covered cases associated with sanctions related to failure to preserve data, issues associated with incomplete collections, inadequate searching methodologies, and inadvertent disclosures of privileged documents, among other things.  We’ve noted that 80% of the costs associated with eDiscovery are in the Review phase and that volume of data and sources from which to retrieve it (including social media and “cloud” repositories) are growing exponentially.  Most of the “press” associated with eDiscovery ranges from the “left side of the EDRM model” (i.e., Information Management, Identification, Preservation, Collection) through the stages to prepare materials for production (i.e., Processing, Review and Analysis).

All of those phases lead to one inevitable stage in eDiscovery: Production.  Yet, few people talk about the actual production step.  If Preservation, Collection and Review are the “John”, “Paul” and “George” of the eDiscovery process, Production is “Ringo”.

It’s the final crucial step in the process, and if it’s not handled correctly, all of the due diligence spent in the earlier phases could mean nothing.  So, it’s important to plan for production up front and to apply a number of quality control (QC) checks to the actual production set to ensure that the production process goes as smooth as possible.

Planning for Production Up Front

When discussing the production requirements with opposing counsel, it’s important to ensure that those requirements make sense, not only from a legal standpoint, but a technical standpoint as well.  Involve support and IT personnel in the process of deciding those parameters as they will be the people who have to meet them.  Issues to be addressed include, but not limited to:

  • Format of production (e.g., paper, images or native files);
  • Organization of files (e.g., organized by custodian, legal issue, etc.);
  • Numbering scheme (e.g., Bates labels for images, sequential file names for native files);
  • Handling of confidential and privileged documents, including log requirements and stamps to be applied;
  • Handling of redactions;
  • Format and content of production log;
  • Production media (e.g., CD, DVD, portable hard drive, FTP, etc.).

I was involved in a case recently where opposing counsel was requesting an unusual production format where the names of the files would be the subject line of the emails being produced (for example, “Re: Completed Contract, dated 12/01/2011”).  Two issues with that approach: 1) The proposed format only addressed emails, and 2) Windows file names don’t support certain characters, such as colons (:) or slashes (/).  I provided that feedback to the attorneys so that they could address with opposing counsel and hopefully agree on a revised format that made more sense.  So, let the tech folks confirm the feasibility of the production parameters.

The workflow throughout the eDiscovery process should also keep in mind the end goal of meeting the agreed upon production requirements.  For example, if you’re producing native files with metadata, you may need to take appropriate steps to keep the metadata intact during the collection and review process so that the metadata is not inadvertently changed. For some file types, metadata is changed merely by opening the file, so it may be necessary to collect the files in a forensically sound manner and conduct review using copies of the files to keep the originals intact.

Tomorrow, we will talk about preparing the production set and performing QC checks to ensure that the ESI being produced to the requesting party is complete and accurate.

So, what do you think?  Have you had issues with production planning in your cases?  Please share any comments you might have or if you’d like to know more about a particular topic.