By Cecil Lynn III & Alexandra Hicks
Law Technology News
January 9, 2009

In 2006, courts and litigants braced for the electronic data discovery amendments to the Federal Rules of Civil Procedure. Conventional wisdom suggested pandemonium would ensue as parties wrangled over the meaning and relative impact of the amended rules on their respective cases.

Instead, in 2007, courts quickly responded with several rulings that clarified the amended rules. Then in 2008, the EDD community saw its most active year to date, with opinions delving into the technology for search and retrieval, the meet-and-confer process and the enactment of Federal Rule of Evidence 502 to combat waiver of attorney-client privilege resulting from the inadvertent production of electronically stored information.

While the usual suspects — a small group of active judges — continue to write opinions that further guide and shape the preservation and production of ESI, several opinions in 2008 were drafted by relatively new players taking a more active role.

This article is broken down into the following categories:

FEDERAL RULE OF EVIDENCE 502
SEARCH & RETRIEVAL
FAILURE TO PRESERVE
SANCTIONS
COOPERATION PROCLAMATION
FORM OF PRODUCTION
ACCESSIBILITY & COST SHIFTING
SUBPOENAS
CRIMINAL LAW
WHAT THE FUTURE HOLDS

FEDERAL RULE OF EVIDENCE 502

Many of 2008’s “must read” opinions came from District of D.C. Magistrate Judge John Facciola and District of Maryland Judge Paul Grimm. Some have suggested the two have a friendly rivalry aptly called “the Battle of the Beltway,” however, the cases are more likely testament to both judges’ passion and expertise in the area.

The biggest event of 2008 was the Sept. 19 passage of FRE 502 that made uniform and codified the “middle of the road” approach to determining waiver of the attorney-client privilege and work-product doctrine in the event of an inadvertent production.

Under FRE 502(b), such a disclosure does not effectuate a waiver if the holder of the privilege took reasonable steps to prevent disclosure and promptly took reasonable steps to rectify the error.

In Rhoads Indus., Inc. v. Bldg. Materials Corp., 2008 WL 4916026 (E.D. Penn. Nov. 14, 2008), district court Judge Michael Baylson held the plaintiff had waived the attorney-client privilege to several inadvertently produced documents that did not appear on its privilege log. Although in analyzing FRE 502, and common law waiver principles, Judge Baylson found the plaintiff’s efforts to avoid inadvertent disclosure were not reasonable, he ruled that waiving the privilege would be unfair and inconsistent with the overriding interests of justice. The court criticized Judge Grimm’s analysis in another big case of 2008 discussed below, Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251 (D. Md. 2008), dismissing it as an “inappropriate application of hindsight.”

FRE 502 encourages parties to enter into non-waiver agreements by making them binding on third parties if incorporated into a court order. In Alcon Mfg., Ltd. v. Apotex, Inc., 2008 U.S. Dist. Lexis 96630 (S.D. Ind. Nov. 26, 2008) the court ordered the return or destruction of an inadvertently produced document that had been marked as an exhibit in two depositions before plaintiffs realized it was privileged and asked that it be returned or destroyed pursuant to the clawback agreement in the parties’ protective order. In enforcing the clawback agreement, Magistrate Judge Tim Baker ruled that it was consistent with FRE 502(d), noting “Perhaps the situation at hand could have been avoided had Plaintiffs’ counsel meticulously double or triple checked all disclosures against the privilege log prior to any disclosures. However, this type of expensive, painstaking review is precisely what new Evidence Rule 502 and the protective order, in this case, were designed to avoid.”

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Another big topic in 2008 centered on both the effective and ineffective use of search terms to fulfill a party’s obligation to conduct a diligent search for potentially relevant information.

First, Judge Facciola ruled that a party challenging the efficacy of an opposing party’s search terms must do so through expert testimony. See United States v. O’Keefe, 537 F. Supp. 2d 14, 24 (D.D.C. Feb. 18, 2008). He stated, “For lawyers and judges to dare opine that a certain search term or terms would be more likely to produce information than the terms that were used is truly to go where angels fear to tread.”

Judge Facciola also treaded lightly in Equity Analytics, LLC v. Lundin, 248 F.R.D. 331 (D.D.C. Mar. 7, 2008) in which he again required the party challenging the search terms to present expert testimony to explain their deficiencies. However, in D’Onofrio v. SFX Sports Group, Inc., 2008 WL 4737202 (D.D.C. Oct. 29, 2008), Judge Facciola rejected both parties’ experts’ proposed search protocol and instead created his own, deeming the parties’ efforts as little more than “highly restrictive and full of undefined ‘buzz words.'”

Judge Grimm addressed critics who disagreed with Judge Facciola’s analysis in both Equity Analytics and O’Keefe. In Victor Stanley, Judge Grimm found defendants had failed to demonstrate the keyword search they performed on text-searchable ESI was reasonable in light of the fact defendants neither identified the keywords selected nor the qualifications of the persons who selected them.

Defendants’ failure to do their homework on search and retrieval resulted in the waiver of the attorney-client privilege and work-product doctrine as to 165 electronically stored documents. Judge Grimm succinctly summarized, “The message to be taken from O’Keefe, Equity Analytics, and this opinion is that when parties decide to use a particular ESI search and retrieval methodology, they need to be aware of the literature describing the strengths and weaknesses of various methodologies.”

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In 2008, litigants, particularly corporate defendants, continued to cope with wide-ranging and often onerous requests for preservation. Parties concerned with the ramifications of failing to preserve relevant ESI sought the court’s guidance on the scope of ESI preservation.

However, in State of Texas v. City of Frisco, 2008 WL 828055 (E.D. Tex. Mar. 27, 2008), the court dismissed the state’s request for a declaratory judgment that the city’s preservation letter was overly broad. The court declined to intervene in the prospective case or issue an advisory opinion, noting that FRCP 37 required the parties to act in good faith with respect to the preservation and production of ESI.

Yet other courts have been willing to get involved at the earliest stages of litigation to ensure the preservation of evidence. In Xpel Tech. Corp. v. Am. Filter Film Distrib., 2008 WL 744837 (W.D. Tex. Mar. 17, 2008), the court ordered expedited forensic imaging of defendants’ systems to preserve dynamic and ephemeral data, including relevant system data and metadata.

Likewise, in Allcare Dental Mgmt., LLC v. Zrinyi, 2008 WL 4649131 (D. Idaho Oct. 20, 2008), when faced with evidence that the defendants had evaded service of process, the court called upon a neutral computer forensics expert to mirror image defendants’ hard drives.

Attempts by other litigants to block or impede court-ordered forensic investigations also proved costly. See, e.g., Square D. Co. v. Scott Electric Co., 2008 WL 2779067 (W.D. Pa. July 15, 2008) (court called defendants’ interference with the court-ordered inspection “just shy of conduct befitting default judgment”) and Sterle v. Elizabeth Arden, Inc., 2008 WL 961216 (D. Conn. Apr. 8, 2008) (court ordered revival of forensic inspection and further ordered defendants to pay all costs associated with expert’s prior inspection attempt as well as the cost of plaintiff’s motion).

Courts also stepped up their efforts to mirror image and forensically examine hard drives when an opposing party demonstrated that it was unable (or just unwilling) to preserve and produce evidence. In Canon USA, Inc. v. SAM, 2008 WL 2522087 (E.D. La. June 20, 2008), the defendant’s owner allegedly “forgot” that his company’s server was in his home. During discovery, he neglected to search for the information, instead of asking his wife and son to take a look when they had the time. The owner’s lackadaisical response to the discovery request prompted the court to order the defendant to employ a forensic specialist at its own expense to conduct a search of the company server.

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The year also produced several cases in which one party made unsubstantiated allegations of spoliation as a means to “Pass Go” and head directly for terminating sanctions.

In O’Keefe, Judge Facciola advised the parties of the seriousness of accusations of purposeful destruction of electronic evidence. He cautioned the defendants, “If you strike at a king, kill him,” noting that the parties’ failure to substantiate its claims hardly qualified as even a glancing blow. Yet courts had no problem doling out sanctions, including terminating sanctions for a party’s failure to adequately preserve relevant and responsive ESI. See e.g., Arteria Prop. PTY Ltd. v. Universal Funding VTO, Inc., 2008 U.S. Dist. Lexis 77199 (D. N.J. Oct. 1, 2008 (Unpublished); Pandora Jewelry, LLC v. Chamilia LLC, 2008 U.S. Dist. Lexis 79232 (D. Md. Sept. 30, 2008).

Often the failure to preserve evidence and discovery misconduct go together hand in hand. In Keithley v. The Home Store.Com, Inc., 2008 U.S. Dist. Lexis 61741 (N.D. Cal. Aug. 12, 2008), the court sanctioned the defendants for their “egregious” discovery misconduct and recommended that the district court give a tailored jury instruction to address their failure to preserve evidence until one year after plaintiff filed the complaint and three years after defendant received a demand letter threatening litigation.

Magistrate Judge Elizabeth LaPorte commented that despite plaintiffs being prose for a part of the time, “The failure to adequately search electronic media for responsive documents until several years into this litigation, and almost two years after plaintiffs retained counsel, is troubling.”

Similarly, in L.H. v. Schwarzenegger, 2008 WL 2073958 (E.D.Cal. May 14, 2008), Magistrate Judge Gregory Hollows awarded sanctions in the form of fees and costs for what he viewed as “purposeful foot-dragging on discovery” by the defendants. Judge Hollows found these sanctions to be appropriate because of the “litany of delays by the defendants,” including the electronic discovery being “improperly converted from [its] original format.”

Likewise, in Ajaxo, Inc., et. al. v. Bank of America Technology and Operations, Inc., et. al., 2008 U.S. Dist. Lexis 97602 (E.D. Cal. Dec. 2, 2008), the court sanctioned both plaintiffs and their counsel for the refusal to timely produce ESI in a searchable format pursuant to the court’s prior order.

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FRCP 26(f) requires parties to meet and confer in good faith regarding their respective ESI, but 2008 produced several cases in which parties failed to meet at all or reduced the conference to little more than a standoff.

One relatively late-breaking case served as a wake-up call to lawyers who refuse to cooperate to ensure the proper preservation and production of evidence. The ruling in Mancia v. Mayflower Textile Servs. Co., 2008 WL 4595175 (D. Md. Oct. 15, 2005), underscores counsel’s obligation to meet and confer in good faith pursuant to FRCP 26(f), with the court also ordering the parties’ respective counsel to meaningfully cooperate to advance discovery and comply with counsels’ obligations under FRCP 26(g).

This requires, among other things, that every disclosure and discovery request be signed by an attorney of record (or client), certifying that request is complete and correct to the best of the person’s knowledge, information, and belief, “formed after a reasonable inquiry.”

While Mancia did not involve an e-discovery dispute, Judge Grimm ruled counsels’ failure to engage in discovery as required by FRCP 26(g) likely is one reason the cost of discovery is so widely criticized as being excessive, citing The Sedona Conference Cooperation Proclamation 1 (2008): “The costs associated with adversarial conduct in pre-trial discovery have become a serious burden to the American judicial system.

“This burden rises significantly in discovery of ESI. In addition to rising monetary costs, courts have seen escalating motion practice, overreaching, obstruction and extensive, but unproductive discovery disputes in some cases precluding adjudication on the merits altogether …”

“At least one court, R&R Sails, Inc. v. Ins. Co. of the State of Penn, 251 F.R.D. 520 (S.D. Cal. Apr. 18, 2008), sanctioned a party under FRCP 26(g) for certifying compliance with discovery when the party failed to search for responsive ESI.

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An issue arising frequently in e-discovery cases in 2008 involves the format in which electronic data should be produced, otherwise known as the battle of native format (with metadata) versus another usable format.

In Aguilar v. Immigration and Customs Enforcement Div. of the U.S. Dept. of Homeland Security, 2008 U.S. Dist. Lexis 97018 (S.D.N.Y. November 21, 2008), Magistrate Judge Frank Maas referred to metadata as “the new black” with parties seeking its production in every case.

For example, in Autotech Tech. Ltd. P’ship v. Automationdirect.com, Inc., 248 F.R.D. 556 (N.D. Ill. April 2, 2008), the parties were embroiled in a discovery dispute regarding a Microsoft Word document that had been converted to a PDF document and disclosed on a disc.

The defendant argued this disclosure was insufficient because the PDF was not in the form in which the document was ordinarily maintained. In denying the defendant’s belated request for metadata, Magistrate Judge Jeffrey Cole held that the production complied with FRCP 34, noting the defendant “was the master of its production requests; [so] it must be satisfied with what it asked for.”

Similarly, in D’Onofrio, Judge Facciola denied a party’s request for the production of ESI in its native format with accompanying metadata, interpreting FRCP 34(a)(1) to mean “electronic data is subject to discovery if it is stored in a directly obtainable medium. If however, it is not stored in a directly obtainable medium, a request may be made of the responding party to translate the electronic data into a ‘reasonably usable form,'” but only “if the translation is necessary” because this places an extra burden on the responding party.

However, in White v. Graceland College Center, 2008 U.S. Dist. Lexis 63088 (D. Kan. Aug. 7, 2008) although the plaintiff did not specify the form in which the electronic information should be produced, Magistrate Judge David Waxse found defendants’ conversion of the e-mails and attachments to PDF documents and production of PDF documents in paper format did not constitute a reasonably usable form.

The court indicated FRCP 34 did not authorize the defendant to convert ESI from the form in which it is ordinarily maintained to a different one that makes it more difficult or burdensome to use the information efficiently in litigation.

The court also reached a more metadata-friendly result in Aguilar where the court granted plaintiffs’ request for the disclosure of metadata despite the defendants having already completed most of their document collection without it, due to the Sedona Principles recently emphasizing the need to produce it. However, the court specified that plaintiffs must pay all costs associated with a second production of the documents.

The application of FRCP 33(d) to e-discovery issues had previously been largely overlooked, but in Reedhycalog UK, Ltd v. United Diamond Drilling Services, Inc., 2008 U.S. Dist. Lexis 93177 (D. Tex. Oct. 3, 2008), U.S. District Court Judge Leonard Davis rejected the defendant’s production of 750 GB of data that allegedly included baby pictures, audio folders and pornography under the guise of FRCP 33(d), with the court calling it an “ocean of production … tantamount to a data dump with an instruction to ‘go fish.'”

The court noted the breakdown of the meet-and-confer process, granted the plaintiff’s motion to compel and issued an order prohibiting the defendant from relying on the documents it had produced, putting the parties “on notice that if the discovery games continue, sanctions may be the appropriate remedy.”

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Courts continue to assess the relative burden and expense of producing ESI under FRCP 26(b)(2)(B). In Petcou v. C.H. Robinson Worldwide, Inc., 2008 U.S. Dist. Lexis 13723 (N.D. Ga. Feb. 25, 2008), the court denied plaintiff’s motion to compel the production of e-mails going back eight years, noting such production would require a search through messages from 5,300 employees on backup tapes.

The courts also reinforced the underlying equity principles of cost shifting. See Pescoff v. Faber, 251 F.R.D. 59 (D.D.C. July 7, 2008) (court denied the responding party’s request to cost shift a forensic examination necessary to recover ESI, holding that the responding party contributed to the deletion of ESI that necessitated the additional cost of recovery).

Furthermore, in Cason-Merenda v. Detroit Med. Ctr., 2008 WL 2714239 (E.D. Mich. July 7, 2008), the court denied the defendant’s cost-shifting motion made after the costs had been incurred. Assuming the data was inaccessible, the court noted that the plaintiff would have needed to establish good cause, and even if it did, the proposed production may not have met the proportionality test.

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Few published cases in 2008 discuss the production of ESI by third parties. Courts have generally ordered the production of relevant information, placing conditions such as cost shifting in place to prevent overburdening the nonparty. See Dow Chemical Co. v. Reinhard, 2008 WL 1968302 (S.D.N.Y. Apr. 29, 2008).

In addition, courts continue to be sensitive to requests for competitive and confidential information from nonparties, particularly in cases involving allegations of trade secrets.

For example, in DaimlerTruck North America LLC v. Younessi, 2008 WL 2519845 (W.D. Wash. June 20, 2008), the court partially denied the nonparty’s motion to quash and instructed nonparty Cascadia International LLC to search its own computers for responsive information rather requiring it to grant the plaintiff direct access to its computer systems.

In lieu of direct access, parties have paid for the nonparty’s search. As another alternative, in Integrated Service Solutions, Inc. v. Rodman, 2008 WL 4791654 (E.D. Pa. Nov. 3, 2008), a neutral forensic expert paid by the plaintiff ran keyword searches on the nonparty’s computer system to satisfy the plaintiff’s subpoena.

However, the plaintiff balked when the nonparty claimed that none of the resulting documents were relevant to any issue raised in the litigation. The court denied plaintiff’s motion for production of the documents but did grant its request that the neutral expert prepare a report detailing its efforts.

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One of the new and most exciting developments is the application of EDD rules to criminal cases. Specifically, in O’Keefe Judge Facciola expanded the application of the FRCP EDD rules to criminal cases, stating, “It is far better to use these rules than to reinvent the wheel when the production of documents in criminal and civil cases raises the same problems.” Subsequently, U.S. District Court Chief Judge Sandra Beckwith followed suit, granting a motion to dismiss a criminal indictment on the grounds that the prosecutor’s delay in producing a large volume of electronic discovery violated the defendants’ rights to a speedy trial. See United States v. Graham, 2008 WL 2098044 (S.D. Ohio May 16, 2008). Judge Beckwith ruled that “the taxpayers should not be required to fund two separate means for managing and searching electronically recordable data — one for the government and one for the defense.”

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In 2008, Arizona, Indiana, Iowa, Kansas, Louisiana, Maryland, Montana, Nebraska, North Dakota and Ohio all amended their procedural rules to incorporate all or part of the EDD amendments to the FRCP or to fashion their own rules.

The new year also promises to bring more rulings on FRE 502 as well as continued dialogue and discussion on search and retrieval tools.

Commentators have also wondered aloud whether there will be more criminal cases relying on the FRCP, given the anticipated rise in such cases involving high volumes of ESI.

E-discovery is likely to continue to be a hot topic in 2009 as more proposed rules make their way through the state supreme courts and legislatures, with their adoption inevitably giving rise to a continued analysis of e-discovery issues.

Cecil Lynn III, a member of the Law Technology News Editorial Advisory Board, is of counsel at Ryely Carlock & Applewhite, based in Phoenix. Alexandra Hicks is an associate at the firm.

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