Their Impact on Labor Unions

Transcription

1 ESI: The New Federal Rules and Their Impact on Labor Unions ABA Section of Labor and Employment Law Annual CLE Conference Loews Hotel Philadelphia, Pennsylvania November 9,2007 Gwynne A. Wilcox, Esq. Dana E. Lossia, Esq. Levy Ratner, P.C. 80 Eighth Avenue, 8'h Floor New York, New York (21 2) (Worldox Filcs\nu9999\010\13\07047S21.DOC)

2 Effective December 2006, the Federal Rules of Civil Procedure have explicitly addressed the altered discovery landscape created by the emergence of electronically stored information ("ESI"). The amended rules place new obligations on the parties to meet and confer about electronic discovery within the very first weeks of litigation, which in turn places new pressures on businesses and other organizations to have a detailed understanding of the ways in which their electronic data systems operate to store, or destroy, various kinds of information. Where such information is not "reasonably accessible," the rules have inserted a costlbenefit balancing mechanism by which first the parties - and then, if necessary, the courts - weigh the value of the inaccessible information to the litigation, the cost of accessing it, and the fairest way to distribute those costs to the parties. Should the production of ESI be delayed, or the ESI be destroyed, the rules increase the threat of penalties and sanctions against both parties and counsel. This paper offers, in Part 1, some ideas for structuring ESI agreements between opposing parties at the initial meet and confer. Part 2 discusses the special burdens of electronic data management upon unions and not-for-profit organizations. In balancing the costs and benefits of ESI production, the limited resources of such organizations is, and should be, a key area of concern. Part 3 gives some simple guidelines for avoiding the destruction of responsive material and analyzes the very real risks that attend the (intentional or inadvertent) spoliation of discoverable ESI.

3 Part 1. The Initial Meet and Confer Under the amended Rule 260, even prior to the scheduling conference with the assigned judge, counsel must confer with respect to the form of ESI production, data presewation and privilege waiver. It will be useful to come to agreement on a number of issues up front, to avoid both delays in discovery and the need to involve the judge down the road. With respect to the form of production, the parties could come to an agreement similar to that below: 1. The parties agree that, to the extent that materials are produced in electronic format, the producing party will provide software (other than software that is currently commercially available) necessary to allow the other parties to access the information contained in the materials. To the extent that such software is commercially available, the producing party will identify the software necessary to access the information. If a producing party has in its possession, custody or control, the same discoverable materials in more than one format, the producing party will identify each of the formats to the requesting party prior to the date on which production of the materials is due and will then produce the materials in the format(s) specified by the requested party. However, if production of the materials in the format(s) requested would necessarily result in an unreasonable increase in the cost of production, the requesting party may be required to pay the

4 difference in cost.' The parties should also give thought to whether they should seek an agreement restricting the discovery of metadata, or requiring that if metadata is sought it be specifically requested. Amended Rule 34 allows a party to identify the form in which requested ESI is to be produced. Thus, absent agreement to the contrary, a party may request that ESI be produced in its "native format," which would include metadata, as well as embedded data and embedded edits. Metadata normally reveals substantially more information about the ESI document, including the electronic document type, creation date, file name, file location, source location, starting production number (in the case of "hashing"), ending production number, custodian, last date modified, author, and in the case of s, recipient($, document date (if different from create date), cc(s), bcc(s), subject, title, and attachment information. A no-metadata agreement might take the following form: 2. With respect to electronically-stored information, the parties agree that no discovery request or disclosure requirement shall be interpreted to require production or disclosure of embedded data or metadata (i.e., information describing the history, tracking or management of an electronically stored document) unless a specific request for such information is made. If a specific request is made, the agreement ' In order to facilitate the process described above, the parties may want to agree that counsel for the parties and representatives of their respective information technology staffs will meet as soon as possible to discuss the location and format of relevant electronically stored information. {Wwldox Ales\nu9999W10\13W7W75ZIIWC) 3

5 stated above shall not be interpreted as a waiver by any party of objection(s), privilege(s) or other exemption(s) from disclosure that otherwise would apply to the requested embedded data or metadata. The production of metadata is not without its benefits. An important benefit of metadata is that it can be used by the requesting party to authenticate the evidence when it is proffered at trial. As Magistrate Judge Grimm discusses extensively in Lorraine v. Markel American Ins. Co., 241 F.R.D. 534 (D. Md. 2007), parties intending to proffer ESI as evidence at trial need to authenticate it just as soundly as they would be required to authenticate paper documents. (Authentication of ESI raises its own particular issues, which are outlined in that opinion.) The parties may also want to specify that counsel's electronically stored case files are off-limits. For example: 3. The parties agree that no party shall request and no party shall be required to produce counsel's electronically-stored case files. However, information that would be discoverable and responsive to a discovery request or disclosure requirement if maintained outside counsel's electronically-stored case files shall not be made exempt from discovery or disclosure by being maintained therein. Or, parties may want to restrict access by the other side to communications between counsel and expert consultants or litigation witnesses over a specified period of time:

6 4. The parties agree that no party shall request production of, and neither party shall be required to produce, s to or from a party's counsel which were not communicated to or by any person or entity except counsel's staff or expert consultants or witnesses retained for purposes of the litigation [or, for example, for purposes of any EEOC investigation underlying the litigation]. For purposes of this, agreement, " " includes any embedded data or metadata. With respect to privilege waiver, the new Rules recognize that electronic discovery can often result in the unintended production of privileged material, and that reviewing large amounts of ESI for privileged documents can substantially delay discovery. Rule 26(b)(5)(B) therefore requires parties to discuss privilege waiver at their initial meet and confer. The parties should discuss whether they can agree on a procedure for asserting privilege after ESI has already been produced. If the parties cannot come to an agreement, the Rule provides a detailed default process. First, a party that has produced privileged ESI should notify the receiving party of their claim and the basis for it. The receivirlg party is then required to return, sequester or destroy the material. The material at issue cannot be used or disclosed to others after that time. If the receiving party disputes the assertion of privilege, it may submit the material to the court to decide whether it is privileged and, if so, whether the privilege has been waived. The receiving party must attempt to retrieve the disputed information from nonparties with whom it has already been shared, and the producing party must preserve the material until the court makes a ruling.

7 With the amended Rules as the impetus, creative and cooperative parties can resolve a number of potentially troublesome electronic discovery issues up front and make the discovely process less contentious. Part 2. Burdens on unions and not-for-~rofit oraanizations While agreements can often be reached to electronic discovery disputes, there is undeniably a new burden on counsel to engage in the initial conference with a relatively sophisticated undersmdhg of their client's information technology systems. The amended Rules thus, in turn, place a considerable new burden on unions and not-for-profit clients to have IT professionals on staff with a welldeveloped understanding of their own electronic data systems, and who are able to articulate to the organization's attorneys, and possibly to courts and opposing counsel, how ESI is created, accessed, preserved or destroyed, which formats it exists in, how it may be searched, and an estimate of the costs of retrieving and searching ESI that is not reasonably acce~sible.~ These IT experts may have a general sense of the ease or difficultly with which they expect to be able to navigate electronic systems in search of responsive material, and of the time involved in doing so. But, as a practical matter, many union locals have an ad hoc data storage system in which ESI is Establishing that ESI is not reasonably accessible generally involves submitting affidavits describing the costs involved in, for example, copying the relevant hard drives, recovering deleted information, and translating the recovered data into searchable and reviewable formats. See, e.a., Ameriwood Indus., Inc. v. Liberman, 2006 U.S. Dist. LEXIS (D. Mo. 2006) (ESI found not to be reasonably accessible due to undue burden and costs). (Worldox Files\nu9999\010\13W DOC~ 6

8 located on dozens of individual hard drives - many of which may or may not be currently in operation - rather than on a centralized network or server. Union organizers and officers, who continuously travel among the various institutions where they represent workers, may not maintain files in a traditional office setting. Their ESI may be located on their personal cell phones or pagers, their personal accounts or their home computers. Moreover, unions are run by and large by rank and file Union members who have been elected to office based on their skills and abilities in the realm of representing fellow workers over the terms and conditions of their employment. While top union officials are highly effective and productive leaders, they would not generally have education or expertise in the area of organizational administration. For smaller union locals, there is often no office manager, secretary or staff person to focus on the orderly retention of electronic data, and no one who could articulate to counsel the ways in which existent data may be searched, how lost data may be retrieved, or the various formats in which current files could be prod~ced.~ Given the fact that there may be ad hoc storage systems and no one qualified to assist counsel when an ESI issues arises, it is important to recognize This situation can create serious risks for union counsel. In Metropolitan Opera Association v. Local 100, Hotel Emolovees & Rest. Emoloyees Int'l Union, 212 F.R.D. 178,181 (S.D.N.Y. 2003), the court awarded sanctions against union counsel where "counsel knew the Union's files were in disarray and that it had no document retention policy but failed to cause a retention policy to be adopted to Drevent destruction of resoonsive documents. both oaoer and electronic." The lack bf such a policy thus puts'organizations in a difficult pdsition in responding to requests and leaves kounseiin a position of even greater responsibility to personally contact staff and ensure that relevant material is retained and produced.

9 that additional time will be necessary to address demands for ESI. While the Rules do not specifically address this issue, counsel may find it necessary to make. f- requests for* extension of time given the unsophisticated computer structures they may find in place. When courts, then, are balancing the costs and benefits of locating and producing ESI, it is important to take a realistic view of the financial and organizational resources and expertise available to each party. While certain union litigants may be highly sophisticated in their electronic data recovery ability, the majority of Union locals can be expected to lack ready access to such expertise, and the services of a computer systems consultant can run into the tens of thousands of dollars. Haka v. Lincoln County, 2007 U.S. Dist. LEXlS 64480,2-7 (D. Wis. 2007), is an example of the type of deliberate costlbenefit analysis that we can expect to see occurring more frequently in ESI disputes. Magistrate Judge Crocker was highly attuned to the impact on both parties of their limited financial resources. The plaintiff in sought the production of all ndocuments, notes, memos, s and metadata of any Lincoln County official... or any other Board member or officer regarding the reorganization or restructuring of the Lincoln County Child Support Agency." The defendant sought protection from the discovery demand under Rule 26(b)(2)(C), explaining that the responsive documents were stored electronically on hard drives containing four terabytes of data. Each terabyte, the court helpfully explains, is "1024 gigabytes, more than a trillion bytes, equivalent to 500 billion

10 typewritten pages". & at '2. The parties attempted 30 agree upon search terms that could be used to cull relevant documents from the tremendous amount of data stored on the drives," but despite what the court believed to be "good faith efforts to reach an agreement," there was no consensus regarding a list of terms "broad enough to satisfy plaintiff that they will catch all relevant documents but narrow enough to satisfy defendants' financial concerns." Id. at '3. To impart a sense of the costs involved, if the search was limited to only s on the hard drives, the cost estimate was $27,000 or more. In the alternative, an outside company could conduct the search, at an estimated cost of more than $55,000, and defendants could then review the documents for privilege and relevance, at an estimated additional cost of $10,000. The defendant, of course, asked the court to impose most, if not all, the anticipated costs on the plaintiff. In determining the appropriate course, the court took into account the amount at stake in the litigation, the reasonableness of the search demand, and the cost of compliance with the demand. The court found that while "the issues at stake in this lawsuit are important, the potential damages are low, so that the cost of engaging in the ESI search plaintiff needs is disproportionate to the available recovery." at *5. As the court notes: Neither litigant has deep pockets: plaintiff, a wageearner with minimal resources, is suing a sparsely populated rural county with minimal resources. Although the county has statutory record-keeping obligations, it is entitled to obtain fair reimbursement for production costs. The court ultimately ruled that plaintiffs search should initially be limited to s and ordered the plaintiff to "narrow his search terms to the narrowest set

11 with which he is comfortable." Haka at *7. The parties were ordered to split the costs of the search down the middle, with the defendant bearing the costs of their privilege and relevance review. Finally, the court ruled that "[ilf the parties cannot agree on which company should perform the search(es), they shall hire the lowest bidder." Id. In this way, the party being asked to conduct a difficult and costly search was sheltered somewhat from the financial impact of the litigation, while the plaintiff was able to discover evidence that may have existed to support his claims. It is likely that electronic discovely in litigation against local unions with limited resources will run up against similar cosffbenefits constraints, particularly where the ESI, while not gigantic in quantity, is spread over a number of disjointed technology systems and devices and the union lacks the in-house expertise to properly search for or recover potentially responsive material. On the other hand, of course, the emergence of ESI may, in some circumstances, save money for notfor-profit clients to the extent that ESI can be easier to search and to manipulate, and can decrease the time spent by counsel in building or defending a case.4 In 3M Co. v. Kanbar, 2007 U.S. Dist. LEXIS (D. Cal. 2007), the defendant failed to specifically request documents in an electronic format- rather than on paper - and then complained to the court when it was faced with sorting and searching each page by hand. The court, while reminding the defendant that it had caused the problem for itself, determined that it would not be burdensome to order plaintiff to re-produce responsive documents "in an electronic and reasonably usable format" within ten days, further ordering the lawyers "and their respective information technology consultants [to] immed%tely confer and agree upon what constitutes a 'reasonably useable format.'" Kanbar at *lo.

12 Part 3. Avoidina Suoliation: Document Retention Policies & Litiaation Holds Since long before the ESI amendments, all potential parties to litigation have been required to place litigation holds on the destruction of materials, including ESI, that are relevant to the subject matter of the reasonably anticipated suit. While the emergence of electronic discovery generally increases the costs associated with litigation for all parties, that increase is most burdensome to organizations with fewer resources at their disposal. Partly due to the high costs of keeping up with ESI preservation obligations, these clients can often find themselves making inadvertent errors that leave them with an increased risk of charges of spo~iation.~ The courts have demanded that counsel take a role in this process from the earliest anticipation of a potential legal claim: It is not sufficient to notify all employees of a litigation hold and expect that the party will then retain and produce all relevant information. Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched. Zubulake v. UBS Warbura LLC, 229 F.R.D. 422,432 (S.D.N.Y. 2004). Where no litigation hold is in place, a well-crafted document retention policy can be relatively aggressive in mandating the destruction of certain paper documents and the deletion of corresponding ESI. It is commonplace for "Spoliation is the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation." West v. Goodvear Tire & Rubber Co., 167 F.3d 776,779 (2d Cir. 1999); accord Allstate Ins. Co. v. Hamilton BeachlProctor Silex. Inc., 473 F.3d 450 (2d Cir. 2007).

13 document retention policies to list a retention timeframe for each of a number of types of information. After that period, documents must be destroyed. For example: id sched J rax srarements This list is not intended to reflect statutory requirements for the treatment of each category of document listed. Rather, it is an outline of the types of documents to consider in forming a retention policy and an example of timeframes that may be reasonable in terms of organizational best practices.

14 The policy should also include a general rule regarding , voic , instant messenger conversations, and text messages. While thirty to sixty days is standard for the deletion of system s, destruction of ernails could lawfully take place much more frequently, such as on a weekly basis, so long as proper maintenance of potentially responsive litigation documents is enforced. Voic s, instant messenger conversations and text messages should generally be deleted within 15 days, although, again, stricter timeframes are. lawful in conjunction with a properly enforced litigation hold procedure. The document policy should clearly and directly explain the concept of the litigation hold to all staff, and should emphasize that the obligation to preserve attaches whenever litigation is reasonably likely. For example: All employees must immediately report to their supervisors and legal counsel any notice of claim or litigation, even if informal, that is received. If material is relevant to an imminent or pending law suit in which the Union might be a party, we are legally required to retain all such material. None of it may be discarded. Once we have received notice of a claim or you have a reasonable expectation of possible litigation involving any subject matter referenced in documents, you must not discard any material which refers to the subject matter of potential litigation and counsel must be - involved in any decisions requiring further actions on such documents. Once any staff person becomes aware that litigation is reasonably likely, a litigation hold letter should be issued to all staff from the general counsel of the organization. The hold letter should briefly describe the subject matter of the anticipated litigation and list all the various type of information that could be relevant to the litigation and must be preserved. Make sure to let employees know (Worldox Fila\nu9999X)10\13W704752I.DOC) 13

15 that there could be serious consequences for the organization if relevant information is lost, and give the name and contact information of both an attorney and an IT staff person (if there is one) who employees can contact with questions. After the letter goes out, follow up with staff in person to make sure the hold is being respected. Rule 37(9 provides that with respect to ESI, 'Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system." Courts have already issued warnings to parties, however, to "be very cautious in relying upon any "safe harbor" doctrine as described in new Rule 37(9." Oklahoma ex rel. Edmondson, 2007 U.S. Dist. LEXIS at *22 (D. Okla. 2007). As noted above, reliance on the hold letter alone, without personal contact, will not be sufficient to protect the organization from an adverse inference andlor other penalties in court. In a recent case, the District Court for the Southern District of New York imposed an adverse inference instruction, and awarded attorney's fees and additional discovery costs, against a defendant that had delayed the production of ESI and allowed numerous pieces of ESI to be destroyed. See In Re NTL. Inc. Securities Litiaation, 2007 U.S. Dist. LEXIS 6198 (S.D.N.Y. January 30,2007). As the court noted, an adverse inference instruction can often end the litigation "because it is too difficult a hurdle for the spoliator to overcome" and therefore "should not be given lightly." NTL. Inc. at *48, citina Phoenix Four. Inc. v. Strateaic Res. Corp., 2006 WL at *4 (s.d:n.y. May

16 23, 2006) (auoting Zubulake v. UBS Warburg LLC, supra, at ). The party seeking the adverse inference must meet a three-part test: '(1) the party having control over the evidence had an obligation to preserve or timely produce it; (ii) the party that destroyed or failed to timely produce evidence had a 'culpable state of mind'; and (iii) the missing or tardily produced evidence is 'relevant' to the party's claim or defense 'such that a reasonable trier of fact could find that it would support that claim or defense." Phoenix Four, supra, at *4 (auoting Residential Fundina Corp. v. DeGeorqe Fin. Corp., 306 F.3d 99, 107 (2d Cir. 2002)). The "culpable state of mind" requirement sounds like a higher threshold than it actually is. In fact, it "is satisfied in this circuit by a showing of odinaly negligence," Phoenix Four, a, at *4 (emphasis added)? although in the NTL case, the court found that there had been gross negligence. NTL was sanctioned based on evidence that many of their employees never received the litigation hold memo, and were not reminded of 'The need to continue to preserve relevant documents and ESI." NTL, Inc. at * 71. NTL's IT department was outsourced to IBM, which was not informed of the hold and did not maintain it. Id. at *'72. Also, new employees had received new computers, and it was not clear whether s from the old computers were saved. informed of the litigation hold. Id. Id. Nor where these new employees 7 In other circuits, the standard is indeed higher. See. e.a., Greyhound Lines. Inc. v. Wade, 485 F.3d 1032 (8th Cir. 2007) ("A spoliation-of-evidence finding requires "a finding of intentional destruction indicating a desire to suppress the truth." auotinq Stevenson v. Union Pac. R.R., 354 F.3d 739,746 (8th Cir. 2004).

17 Organizations have likewise been found to be "grossly negligent" where, for example, they failed to prevent an employee from destroying documents at the time of her termination (Golia v. Leslie Fav Co., 2003 WL at * 8-9 (S.D.N.Y. August 7, 2003)), or where data is lost due to a defendant employee's unfamiliarity with the record-keeping policy where it was his responsibility to preserve and produce the material (Pastorello v. Citv of New York, 2003 WL at * 11 (S.D.N.Y. April 1,2003). Where a requesting party has reason to believe that the other side is not properly searching for or producing responsive ESI, a request may be made under amended Rule 34(b) for an on-site inspection. Such inspections, however, are highly limited, as are the on-site inspections of paper documents that the Rules originally contemplated. See. e.a., Suaaested Protocol for Discovery of electronic all^ Stored Information, issued by the United States District Court for the District of Maryland (http// On-site inspections of ESI under Fed.R.Civ.P. 34(b) should only be permitted in circumstances where good cause and specific need have been demonstrated by the party seeking disclosure of ESI (the "Requesting Party"), or by agreement of the parties. In appropriate circumstances the Court may condition on-site inspections of ESI to be performed by independent third party experts, or set such other conditions as are agreed by the parties or deemed appropriate by the Court. Ideally, of course, litigants will strive to avoid entering the,realm of spoliation, sanctions or on-site-inspection battles by straightfowardly advising their clients of their obligations and the risks of error, as well as by keeping opposing counsel and the judge informed of any obstacles in the way of a (Worldox Filcs\nu9999\010\13W704752l.DOC) 16

18 complete ESI searchlproduction as soon as those obstacles present themselves. The court will be in a position to balance each party's needs with the unique burdens upon them, and should bear in mind both the financial and organizational impediments being faced by smaller unions and non-profit groups whose IT systems -to the extent they exist at all - may not allow for the recovery of certain data without a substantial input of time and expense.