February Edition of Notable Cases and Events in E-Discovery
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1 FEBRUARY 7, 2012 E-DISCOVERY UPDATE February Edition of Notable Cases and Events in E-Discovery This update addresses the following recent developments and court decisions involving e-discovery issues: 1. A Model Order for e-discovery in patent cases proposed by the Chief Judge of the U.S. Court of Appeals for the Federal Circuit that seeks to reduce discovery costs for patent cases; 2. A Western Pennsylvania federal district court decision reallocating to defendant all the costs incurred by a Special Master who determined that many of the 573 documents listed on defendant s privilege log had been improperly withheld; 3. An Eastern Pennsylvania federal district court case resolving cross motions for discovery sanctions by imposing adverse inference instructions on both parties; and 4. A North Carolina district court order allowing the search of a non-party s hard drive, but limiting the subpoena to ESI responsive to a key word search of the hard drive and allowing the non-party s counsel to conduct a privilege and privacy review prior to production. 1. At the Eastern District of Texas Judicial Conference this past fall, Chief Judge Randall R. Rader of the U.S. Court of Appeals for the Federal Circuit introduced a new proposed Model Order to govern e-discovery in patent litigation. Use of the Model Order, which provides various limitations on production requests for Electronically Stored Information (ESI), has the potential to substantially reduce discovery costs for parties involved in patent litigation. In his remarks unveiling the Model Order on E-Discovery in Patent Cases, Chief Judge Rader explained that [t]he goal of this Model Order is to streamline e-discovery, particularly production, and require litigants to focus on the proper purpose of discovery the gathering of material information rather than on unlimited fishing expeditions. The State of Patent Litigation, Remarks of Chief Judge Randall R. Rader, United States Court of Appeals for the Federal Circuit, E.D. Texas Judicial Conference 9 (Sept. 27, 2011). He noted that the Model Order was designed to bring discipline to the disproportionally high discovery expenses in patent cases. The Model Order was drafted by a special subcommittee of the Federal Circuit Advisory Council and unanimously approved by the entire Advisory Council. The Court of Appeals for the Federal Circuit, however, has not yet approved the specific language of the Model Order. The Model Order provides that [g]eneral ESI production requests under Federal Rules of Civil Procedure 34 and 45 shall not include or other forms of electronic correspondence. Model Order at 6. Additionally, the Model Order excludes metadata from ESI production requested under Rules 34 and 45 but provides that fields showing the This Sidley update has been prepared by Sidley Austin LLP for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers. Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, and One South Dearborn, Chicago, IL 60603, Prior results do not guarantee a similar outcome.
2 Page 2 date and time that the document was sent and received, as well as the complete distribution list, shall generally be included in the production. Id. at 5. The Model Order also limits production requests to specific issues[ ] rather than general discovery of a product or business and precludes production requests prior to the exchange of core discovery, i.e., the patents, the prior art, the accused instrumentalities, and the relevant finances. Id. at 7-8. Paralleling the presumptive limits of Fed. R. Civ. P. 30 on the quantity and length of depositions, the Model Order presumptively limits the number of custodians and search terms for production requests. Each party seeking production is limited to five custodians per producing party and five search terms per custodian. Id. at The Model Order expressly promotes the combination of terms and other narrowing search criteria ( e.g., and, but not, w/x ), explaining that a conjunctive combination of multiple words or phrases... count as a single search term while a disjunctive combination... broadens the search, and thus each word or phrase shall count as a separate search term unless they are variants of the same word. Id. at 11. The Model Order also provides that search terms shall be narrowly tailored to particular issues, clarifying that [i]ndiscriminate terms, such as the producing company s name or its product name, are inappropriate unless combined with narrowing search criteria that sufficiently reduce the risk of overproduction. Id. The parties can agree to modify these limits or seek court modification for good cause. Id. at In addition, a party may exceed the discovery limits under the Model Order but must do so at its own expense. Id. In fact, the Model Order expressly provides for cost shifting for disproportionate ESI production requests and states that costshifting determinations will consider a party s conduct whether it constitutes nonresponsive or dilatory discovery tactics or efforts to promote efficiency and reduce costs as well as general compliance with the Model Order. Id. at 3-4. Finally, in consideration of the concerns regarding waiver issues and in order to minimize costly human pre-production review, the Model Order includes a provision pursuant to Federal Rule of Evidence 502(d) that provides protection for inadvertently produced privileged or work product-protected ESI. It also includes provisions providing that mere production does not constitute a waiver and that a party receiving privileged or work product-protected ESI may not use it to challenge the privilege or the protection. Id. at The Model Order is designed to be a helpful starting point for district courts to use in requiring the responsible, targeted use of e-discovery in patent cases. The Model Order is tailored for patent cases, where far reaching e-discovery, such as mass searches, is often tangential to adjudicating [the most consequential] issues. The Introduction to the Model Order makes clear that another goal of the Model Order is to encourage discussion and public commentary by judges, litigants, and other interested parties regarding e-discovery problems and potential solutions. Model Order, Introduction at In Southersby Development Corp. v. Borough of Jefferson Hills, 2011 WL (W.D. Pa. Dec. 13, 2011), Magistrate Judge Maureen P. Kelly granted plaintiff s motion to reallocate to defendant all the costs incurred by a court-appointed Special Master who determined that over half of the 573 documents listed on defendant s privilege log had been improperly withheld in whole or in part. The Court directed the Borough to submit a revised privilege log in response to plaintiff s initial motion to compel, and after its submission, plaintiff filed a second motion to compel claiming that the Borough s revised privilege log was insufficient to assess whether the attorney-client privilege or work product doctrine applied to any of the Borough s 573 withheld documents. Id. at *1. The Magistrate Judge appointed a Special Master to review the documents in dispute and advise the Court as to the propriety of their being produced. Id.
3 Page 3 The Special Master issued a Report and Recommendation setting forth his recommendation as to each of the 573 documents, which together contained over 3,000 s. Id. The Report chastised the Borough, noting the patent lack of privileged communications in hundreds of withheld s. Id. He also found a number of that were privileged and others that should be produced with redactions. Id. The Magistrate Judge adopted the Report and Recommendation of the Special Master as the opinion of the Court and granted in part, and denied in part, Southersby s second motion to compel. Id. at *2. The Borough was directed to produce the documents and make the redactions prescribed by the Special Master. Id. Southersby then filed the instant motion to reallocate the costs of the Special Master, requesting that the court require the Borough to pay all of the Special Master s fees and costs. Id. In determining whether to grant Southersby s motion, the Magistrate Judge noted that the Special Master had found that, of the 579 documents at issue, 79 should have been produced in their entirety and another 238 should have been produced with redactions. Id. at 3. As such, 317 documents well over half of the documents reviewed were found to have been inappropriately withheld by the Borough. Id. The Magistrate Judge also pointed out that the Special Master had found that, in many instances, communications contained nothing that even remotely implicate[ed] either the attorney-client privilege or work product doctrine. Id. Consequently, the Magistrate Judge held that Southersby should not be required to pay fifty percent of the costs incurred by the Special Master in reviewing documents that are obviously not protected and in assessing what portions of certain documents should be redacted. Id. Magistrate Judge Kelly also stated that the necessity of appointing a Special Master would likely have been avoided had the Borough properly produced the improperly withheld documents. Id. Therefore, the Magistrate Judge ordered that the Borough would be responsible for all the costs of the Special Master, which totaled $42,600. Id. at *4 The Magistrate Judge, however, declined to impose sanctions on the Borough other than the reallocation of costs, reasoning that Rule 37 permits sanctions only for a party s failure to obey an order to provide or permit discovery. Id. Magistrate Judge Kelly explained that the Borough ha[d] not, as of yet, disobeyed any court orders or failed to produce the documents that the Special Master recommends, and the Court presently orders, should be produced. Id. 3. In Patel v. Havana Bar, Restaurant and Catering, 2011 WL (E.D. Pa. Dec. 5, 2011), U.S. District Judge Mitchell Goldberg resolved cross motions for discovery sanctions by imposing adverse inference instructions on both parties. This case arose as a result of plaintiff s 2007 fall from a second-story restaurant balcony. As described by Judge Goldberg, the discovery process in the case was disorganized and confusing, id. at *1, resulting in cross motions for sanctions based on alleged spoliation of evidence, failure to provide required initial disclosures, and withheld evidence by both parties. Id. The discovery complications arose, in part, because the complaint itself was unclear as to the plaintiff s theory of liability. In the early phases of the litigation, the plaintiff argued that liability was based on the hazardous condition of the balcony railing; at later phases, however, the plaintiff focused on the alleged negligence of the bar s staff in continuing to serve plaintiff alcohol after he was visibly intoxicated. Id. As a part of the plaintiff s strategy, plaintiff s sister-in-law had, first in 2008, and again in 2010, solicited friends over Facebook to compose statements recounting their recollection of the incident. Id. at 2. In her first message, plaintiff s sister-in-law had implied that the message should confirm that the plaintiff was not intoxicated. Id. Her later request, however, asked her friends to edit [their statements] according to the new direction we re going in and re-send those. Id. at *3. Neither the 2008 nor the 2010 witness statements were provided to defense counsel during the initial disclosure period, and only when a witness acknowledged at her deposition that such statements were taken did plaintiff s counsel provide the statements, and even then only on a piecemeal basis and immediately prior to each witness s deposition. Id. at *4. None of the 2008 statements were ever produced, and while plaintiff s attorney and family members offered
4 Page 4 differing accounts of who possessed copies of the statements, it was clear to the Court that someone among plaintiff s attorneys and relatives possessed the statements at one time. Id. The plaintiff also failed to provide the defendant with a copy of the police report in its initial disclosures, which plaintiff s counsel conceded was in his possession. Id. at 5. Even when the report was finally produced, some two months late, the version produced by plaintiff s counsel was incomplete, omitting two appended witness statements that cast doubt on the plaintiff s theory. Id. At the same time, the defendant failed to produce the video surveillance footage of the plaintiff s fall. The bar s owner testified that he attempted to make copies of the surveillance video, but was unable to do so, despite a service call to the surveillance system s provider. Id. at *2. Although the system could also print still images, the bar s owner never did so. Id. Because the surveillance system was programmed to record over existing footage every three weeks, no footage of the night in question was preserved. Id. The Court next turned to whether these discovery shortcomings amounted to spoliation. Emphasizing that 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, id. at *5 (quotation omitted), the Court first found that the erasure of the video footage constituted spoliation because litigation was reasonably likely, and therefore the defendants were under an affirmative duty to preserve the evidence. Id. at *6. Failure to do so, or to take reasonable alternative measures to preserve the footage, was spoliation. Similarly, the plaintiff s loss of the 2008 witness statements was clearly spoliation. Id. Plaintiff or his family at one time had possession of the statements, and therefore plaintiff had an affirmative duty to preserve them. Id. Moreover, the plaintiff s claim of work product privilege [did] not obviate this duty. Id. The duty to preserve applies even where the evidence is marked as privileged, and Fed. R. Civ. P. 26(b)(5) requires a party who withholds information based on a claim of privilege to raise expressly that privilege and submit a privilege log. Id. at *7. The Court also concluded that plaintiff s counsel had acted improperly and contrary to the streamlin[ing] purpose of Rule 26 in his belated claims of attorney-client privilege, his piecemeal disclosure of the 2010 statements, his ultimate failure to produce the 2008 statements, and his failure to produce the complete police report. Id. at *7-8. This type of lawyering, the Court noted, is directly at odds with the purpose of Rule 26, which was designed to accelerate the exchange of basic information. Id. at *8 (citation omitted). The late appeal to the work product doctrine only compounds [the] discovery violations. Id. at *9. Finally, the Court considered the sanctions appropriate for the various discovery violations, noting it has broad discretion in selecting the type and degree of sanction appropriate under the facts and circumstances. Id. at *9 (quotation omitted). With regard to the loss of surveillance video, the Court found that an adverse inference instruction against the defendant was appropriate. Id. Such an instruction is imposed to level the playing field between the parties. Id. (internal quotation omitted). It should be imposed where the evidence was (1) in the party s control, (2) there was actual suppression or withholding, (3) the evidence was relevant to claims or defenses, and (4) it was reasonably foreseeable that the evidence would be discoverable. Id. There is no requirement that the spoliation be intentional, as even negligent destruction of relevant information can be sufficient. Id. The Court also found that the plaintiff s conduct ran completely afoul of the goals of discovery, and it had seriously considered dismissal of the plaintiff s case as a sanction. Id. at *10. Finding such a sanction too drastic, however, the Court instead imposed an adverse inference instruction on account of the spoliation of the 2008 witness statements, allowing the jury to draw its own conclusions as to the evidentiary value of how the evidence was handled. Id. The Court also ordered that the defendant be allowed to re-depose, at cost to the plaintiff, five witnesses to the accident. Lastly, the Court awarded the defendant attorneys fees and costs for the time and effort expended in attempting to obtain discovery, including the instant motion. Id. at *11.
5 Page 5 4. In Wood v. Town of Warsaw, North Carolina, 2011 WL (E.D.N.C. Dec. 22, 2011), Magistrate Judge David W. Daniel held that plaintiff was permitted to request the contents of a nonparty s personal computer, provided that the request was limited to ESI responsive to a search of relevant key words and the responsive data were first provided to the nonparty s counsel to conduct a review for privileged and unrelated personal information. In an employment discrimination case, plaintiff alleged that the town manager of the Town of Warsaw terminated his employment because of his age. Id. at *1. Plaintiff subpoenaed all computers used over a two-year period by the former town manager, James Burrell, who was not a party to the action. Defendant and Burrell objected to the request for Burrell s personal computer, claiming that the request was unduly burdensome, overly broad and not reasonably calculated to lead to the discovery of admissible evidence. They also argued that the request included private information unrelated to the case. The production of documents by nonparties is governed by Fed. R. Civ. P. 45. In considering a non-party document subpoena, a court must determine the relevancy of the discovery, the requesting party s needs, and the burden on the subpoenaed party. Id. Initially, plaintiff requested any and all computers, hard drives, thumb drives, flash drives, memory drives, magnetic tapes... used by Deponent at any time during the period from October 1, 2007, to September 30, Id. at *2. The dispute was narrowed to the request for Burrell s personal computer, with plaintiff stating that he would pay for a forensic expert to perform a search of the hard drive using negotiated search terms to minimize any hardship and expense. In plaintiff s view, any burden would be limited to a privilege review of any responsive ESI. Magistrate Judge Daniel agreed that the request for Burrell s entire hard drive was overly broad, but he determined that the request when limited to non-privileged documents identified by a search for key words was reasonably likely to lead to admissible evidence, assuming that the key words proposed are appropriately tailored to produce documents that are likely to be relevant to the claims and defenses asserted in this matter. Id. It was not unreasonable to expect relevant information to be found on Burrell s personal computer, especially [i]n this age of smart phones and telecommuting [where] it is increasingly common for work to be conducted outside of the office and through the use of personal electronic devices. Id. Finally, the Magistrate Judge determined that the request would not impose an undue burden because plaintiff agreed to pay for the forensic expert conducting the search. The Magistrate Judge held that, weighing the factors of relevancy, need, and burden, plaintiff was entitled to seek responsive ESI from Burrell s hard drive. The subpoena was modified to clarify that Plaintiff was not entitled to the entire hard drive and that the responsive documents must first be provided to Burrell s counsel to conduct a privilege review and redact documents containing personal information. If you have any questions regarding this update, please contact the Sidley lawyer with whom you usually work. The E-Discovery Task Force of Sidley Austin LLP The legal framework in litigation for addressing the explosion in electronic communications has been in flux for a number of years. Sidley Austin LLP has established an E-Discovery Task Force to stay abreast of and advise clients on this shifting legal landscape. An interdisciplinary group of more than 25 lawyers across all our domestic offices, the Task Force monitors and examines issues and developments in the law regarding electronic discovery. The Task Force works seamlessly with our firm s Litigators who regularly defend and prosecute all types of litigation matters in trial and appellate courts, federal and state agencies, arbitrations, and mediations throughout the country. The co-chairs of the E-Discovery Task Force are: Alan C. Geolot Colleen M. Kenney Joel M. Mitnick ageolot@sidley.com ckenney@sidley.com jmitnick@sidley.com To receive future copies of this and other Sidley updates via , please sign up at
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