- A Southern District of New York decision in which the court applied the amended version of Rule 37(e) and its inherent authority to sanction plaintiffs for intentional spoliation of evidence in trying unsuccessfully to delete emails produced to defendants;
- A Southern District of Florida multi-district litigation decision that took account of the revised discovery rules and acknowledged defendants’ concerns over disclosure of competitively sensitive information in ruling that categories of irrelevant information could be redacted from produced documents and irrelevant parent and other documents could be withheld from relevant responsive families;
- A District of Connecticut ruling permitting defendant to make an initial document production based on its own proposed set of search terms, excluding only clearly and undeniably irrelevant or privileged documents, but allowing plaintiffs to seek additional documents if they deemed the production insufficient; and
- An Eastern District of Michigan decision denying defendant’s motion to have a court-appointed expert who conducted a forensic review of plaintiff’s computers testify at trial regarding his work.
1. In CAT3, LLC v. Black Lineage, Inc., 2016 WL 154116 (S.D.N.Y. Jan. 12, 2016), Magistrate Judge James C. Francis IV relied on the amended version of Rule 37(e) and the court’s inherent authority to sanction plaintiffs for intentional spoliation of evidence in trying unsuccessfully to delete emails produced to defendants.
Plaintiffs sued defendants for trademark infringement and other claims relating to use of a similar name and website. Id. at *1. During discovery, the defendants learned that plaintiffs had altered relevant emails before producing them, providing modified emails along with near-duplicate original versions that plaintiffs had attempted unsuccessfully to delete. Id. at *1-*3. Defendants moved for sanctions and requested dismissal of the complaint, adverse inference instructions or preclusion and an assessment of attorneys’ fees.
Before reaching the merits, Magistrate Judge Francis reviewed the 2015 amendments to the Federal Rules of Civil Procedure. The magistrate judge stated that the amendment to Rule 37(e) was adopted to “address concerns that parties were incurring burden and expense as a result of overpreserving data, which they did because they feared severe spoliation sanctions, especially since federal circuits had adopted varying standards for penalizing the loss of evidence.” Id. at *4. The amendment adopted the requirement that severe sanctions are appropriate only where there is an “‘intent to deprive another party of the information’s use in the litigation,’” thereby rejecting court decisions, such as Residential Funding Corp. v. DeGeorge Capital Corp., 306 F.3d 99, 108 (2d Cir. 2002), that allowed the imposition of severe sanctions upon a showing of negligence. CAT3, 2016 WL 154116, at *4 (quoting Fed. R. Civ. P. 37(e)(2)). The magistrate judge noted that the amendment did not, however, change the substantive obligation to preserve evidence, which is triggered when litigation is “reasonably anticipated.” CAT3, 2016 WL 154116, at *5. The magistrate judge also found that it would not be inequitable to apply the amendment to litigation initiated before final adoption of the amended rule because the amended sanction was more lenient. Id.
As applied to the facts here, Magistrate Judge Francis found that the plaintiffs could be sanctioned under Rule 37(e). As an initial matter, he rejected the plaintiffs’ arguments that Rule 37 did not apply because information had not been lost or stolen and that they were in effect the “‘gang that couldn’t spoilate straight.’” Id. (quoting Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 501 (D. Md. 2010)). He found instead that there was prejudice because information had been lost that deprived defendants of demonstrating the “‘overwhelming quantity of evidence it otherwise would have to support its case.’” CAT3, 2016 WL 154116, at *5 (quoting Victor Stanley, 269 F.R.D. at 503).
Further, Magistrate Judge Francis found that the failure to impose sanctions in this case would threaten “the integrity of judicial proceedings” and that the court had the inherent authority to impose appropriate sanctions. He acknowledged the advisory committee note that Rule 37(e) “forecloses reliance on inherent authority or state law to determine when certain measures should be used,” Fed. R. Civ. P 37(e) advisory committee note to 2015 amendment, but stated that a court had inherent authority “to impose sanctions for the bad faith spoliation of evidence” that would be available even if Rule 37(e) did not apply. CAT3, 2016 WL 154116, at *6 (citing Chambers v. NASCO, Inc., 501 U.S. 32 (1991)).
Magistrate Judge Francis reviewed the various standards of proof that could be applied to spoliation claims and determined that the clear and convincing evidence standard was most appropriate given the defendants’ request for terminating sanctions and the focus on plaintiffs’ state of mind. CAT3, 2016 WL 154116, at *8. He concluded that the defendants had satisfied that standard with “well-supported” expert witness testimony showing that the only way the emails could have been manipulated was through intentional acts, a showing the plaintiffs failed to rebut. Id. at *8-*9. The magistrate judge concluded that plaintiffs acted with “intent to deprive another party of the information’s use,” which entitled the defendants to relief under Fed. R. Civ. P. 37(e)(2). Id. at *9. He found that relief would also be appropriate pursuant to the court’s inherent authority, which requires a “particularized showing of bad faith,” a showing satisfied by the plaintiffs’ spoliation designed to deprive defendants of the use of evidence. Id. at *10.
In fashioning appropriate relief, Magistrate Judge Francis considered but rejected dismissal as too severe a remedy, noting that the “sanction should be molded to serve the prophylactic, punitive, and remedial rationales underlying the spoliation doctrine.” Id. (citation omitted). In this case, the magistrate judge imposed a “two-fold remedy” precluding plaintiffs from relying on their version of the emails at issue and requiring plaintiffs to bear the costs, including attorneys’ fees, incurred by defendants in establishing plaintiffs’ misconduct and in securing relief. Id.
2. In In re Takata Airbag Products Liability Litigation, No. 1:15-md-2599 (S.D. Fl. Mar. 1, 2016), District Judge Federico A. Moreno took account of the revised discovery rules and acknowledged defendants’ concerns over disclosure of competitively sensitive information in ruling that categories of irrelevant information could be redacted from produced documents and irrelevant parent and other documents could be withheld from relevant responsive families.
The special master in the multidistrict case against Takata Corp. regarding its airbags issued a report governing the production of documents and electronically stored information. The parties disagreed about its findings related to the redaction of irrelevant information from responsive documents and whether irrelevant documents in responsive document families could be withheld. The special master recommended that defendants be able to redact information relating to (1) pricing, profits and nonpublic financial information; (2) parts, supplies or costs; (3) design, development and engineering; (4) marketing and business strategy; (5) other makes and models; (6) non-U.S. products; and (7) service and quality issues. The special master also recommended that the producing party be able to withhold irrelevant parent documents from relevant responsive families of documents. In re Takata Airbag Products Liability Litigation, No. 1:15-md-2599, slip op. at 2 (Slip Op.).
The plaintiffs challenged the special master’s recommendations, stating that they had not consented to irrelevance redactions from relevant documents and that such redactions would deprive them of “highly relevant information from responsive documents [and] lead to unnecessary litigation over the redactions.” Slip Op. at 3. The defendants responded that without the redactions they would have to produce “copious amounts of information, potentially disclosing competitively sensitive information with no bearing on the case” that may be disclosed to competitors or the media, notwithstanding a protective order. Id.
The court first considered the standard of review. Federal Rule of Civil Procedure 53 governs matters relating to special master reports and provides that the court must conduct a de novo review of all findings of fact — unless otherwise stipulated by the parties — and conclusions of law. Fed. R. Civ. P. 53(f)(3), (4). A court reviews procedural matters on an abuse of discretion basis. Rule 53(f)(5). The parties disagreed on the appropriate standard of review, and the court found that in light of the recent rule changes to the scope of discovery, the appropriate standard was de novo review. Slip Op. at 3.
As to the merits, Judge Moreno began by taking note of the amendments to the Federal Rules of Civil Procedure. He quoted Chief Justice Roberts’ comments that “[t]he recently amended Rule 26(b)(1) of the Federal Rules of Civil Procedure ‘crystallizes the concept of reasonable limits on discovery through increased reliance on the common-sense notion of proportionality.’” Id. (quoting 2015 Year-End Report on the Federal Judiciary 6 (2015)). Given that a party is not entitled to receive every piece of relevant information, Judge Moreno stated that “it is only logical, then, that a party is similarly not entitled to receive every piece of irrelevant information in responsive documents if the producing party has a persuasive reason for why such information should be withheld.” Slip Op at 4.
Judge Moreno found defendants’ reasons persuasive, stating that disclosure of “competitively sensitive information” could negatively affect the defendants. Judge Moreno also determined, however, that the proposed list of categories could “contain highly relevant information” and amended the categories by adding that such information could be withheld only “so long as that information does not concern airbags.” Slip Op. at 5. This decision, the court found, “balances the producing parties’ desire to protect their competitively sensitive information, with the importance of the issues at stake in this action and the importance of the discovery in resolving the issues at hand.” Id. Redacted portions of documents would be marked with a stamp along with a listing of the category/type of redacted irrelevant information.
The court also found that the defendants could withhold irrelevant documents from responsive families, subject to the same limitation on information relating to airbags. The defendants would use a list or slip sheets for the removed documents and provide contextual information for any withheld parent document. Slip Op. at 5.
3. In Strauch v. Computer Science Corp., 2015 WL 7458506 (D. Conn. Nov. 24, 2015), U.S. Magistrate Judge Joan Glazer Margolis issued a ruling permitting defendant to use its own proposed set of search terms to make an initial production, excluding only clearly and undeniably irrelevant or privileged documents but allowing plaintiffs to seek additional documents if they deemed the production insufficient.
During discovery, the parties could not agree on search terms to be applied to data of defendant’s custodians, and both parties wrote letters to the court. Id. at *1. The magistrate judge noted that the court had been “forced into micro-managing virtually every pretrial aspect of this massive litigation, down to the smallest minutiae.” Id. at *1.
During the search-term negotiations, plaintiffs initially proposed 103 search terms, to which defendant objected on the basis of burden. Id. According to defendant, these proposed search terms hit on 961,463 documents, or “approximately 60% of the 1.5 million documents in the database.” Id. at *2. Alternatively, defendants proposed search terms that hit on only 61,859 documents. Id. Plaintiffs countered with three alternatives:
- “sampling and iterative refinement,” under which defendant would produce “small samples of documents containing the agreed-on search terms, followed by an iterative analysis of the documents to hone the search terms.” Id. at *1 (citations and internal quotations omitted). Under this approach, if a particular search “result[ed] in a purportedly unwieldy volume of hits,” then defendant would provide a statistically significant sample of those hits so the parties could then reevaluate and modify the search terms. Id. at *2 (citations and internal quotations omitted).
- “the virtual warehouse,” which constitutes “a quick-peek protocol by which [defendant] provides the entire corpus of documents collected from the custodians,” followed by plaintiffs’ search “for a limited number of relevant documents, akin to an old-fashioned search through paper files in a warehouse.” Id. at *1 (citations and internal quotations omitted). This option would allow plaintiffs to conduct a secure examination of all electronically stored information (ESI) in “an agreed-upon time period” and, after review, would designate a “limited number of documents for defendant to formally produce,” at which time defendant could conduct its privilege review. Id. at *2 (citations and internal quotations omitted).
- “complete production,” described by plaintiffs as a “straightforward production of all documents that hit on any search term with the use of a clawback agreement permitting [defendant] to retrieve any inadvertently produced documents.” Id. at *1 (citations and internal quotations omitted).
Further, defendant indicated in its letter to the court that after it rejected plaintiffs’ proposals and continued with several rounds of negotiations, plaintiffs’ final proposal would require defendant to review all documents where the search terms hit on fewer than 10,000 documents. Plaintiffs’ final proposal also would require defendant to review a statistically significant sample of documents where the search terms hit on more than 10,000 documents. Finally, it would require that defendant produce all non-privileged documents, whether relevant or not. Id. Defendant countered with an alternative approach. It would use plaintiffs’ search terms and review all documents for any search term that hit on fewer than 3,000 documents and produce any relevant, non-privileged documents. Id. For any search term that hit on more than 3,000 documents, defendant would consolidate all of the documents and pull a random sample, which then would be reviewed, and defendant would again produce all relevant, non-privileged documents. Id.
As the case involved 1,047 opt-in plaintiffs and a “possible verdict in eight or nine digits,” the magistrate judge rejected defendant’s proportionality argument. However, the magistrate judge did find that defendant “should not be obligated to disclose clearly irrelevant documents in an attempt ‘to [better] hone the search terms.’” Id. at *3 (citations omitted). To this end, the magistrate judge ruled that “defendant’s ESI search shall consist of the search terms proposed by defendant.” She went on to note that “because these are search terms proposed by defendant, there is a presumption of relevancy, and defendant may remove any documents only if they are clearly and undeniably irrelevant [or] privileged.” Id. The magistrate judge also indicated that “this conclusion is without prejudice to plaintiffs seeking additional documents, as approved by the court if no agreement is otherwise reached by the parties, in the event that they deem this initial production insufficient.” Id. (emphasis in original).
4. In Commercial Law Corp., P.C. v. Federal Deposit Ins. Corp., 2015 WL 7450149 (E.D. Mich. November 24, 2015), U.S. District Court Judge Sean F. Cox denied defendant’s motion to have a court-appointed expert who conducted a forensic review of plaintiff’s computers testify at trial regarding his work.
Plaintiff brought a breach of contract claim against the defendant for $176,000 in unpaid legal fees for services that it allegedly provided to Federal Home Savings Bank before the defendant placed the bank in receivership. Id. at *1. On November 11, 2011, defendant filed a motion seeking to compel plaintiff to produce copies of the computer hard drives on which plaintiff had created certain documents. Id. at *2.
In an opinion issued on January 18, 2012, the magistrate judge granted in part the motion for the imaging of plaintiff’s computers. Id. Because the computers belonged to an attorney in the case, however, the magistrate judge did not simply allow defendant’s vendor to image plaintiff’s computers on its own but instead established a protocol where a “forensic examiner would serve as a court-appointed expert, and would create digital images of Plaintiff’s computers.” Id. To safeguard against the disclosure of privileged material, the expert was “directed to provide the documents and data taken from the computers to the Court for in camera review, and also to Plaintiff’s Counsel.” Id. The expert ultimately completed the forensic imaging of plaintiff’s two computers and provided the court with documents and data recovered. Id. After objections by plaintiff and rulings on same, defendant ultimately was provided with certain documents and data from plaintiff’s computers. Id.
As trial approached, defendant filed several motions in limine, one of which was a request to call the forensic examiner as a “Court Appointed Expert witness.” Id. More specifically, defendant sought to confirm pursuant to Fed. R. Evid. 706(b)(3) that defendant may call the forensic examiner as “the Court Appointed Expert witness at trial, who will testify about his findings, present his report, and be subjected to cross examination pursuant to Fed. R. Evid. 706(b)(4).” Id.
The court took issue with this motion. It first noted that defendant never sought leave to file an amended witness list to name the forensic examiner, or any of its other employees, as either lay or expert witnesses. Id. In addition, the court pointed out that the magistrate judge, when engaging the forensic data analyst, ordered the analyst to do a forensic review of plaintiff’s computers so that defendant could obtain documents from plaintiff, but neither the magistrate judge nor the court appointed a “court-appointed expert witness” pursuant to Fed. R. Evid. 706. Id. at *2. The court also relied on precedent that stated the “[u]se of Rule 706 ‘should be reserved for exceptional cases in which the ordinary adversarial process does not suffice’ such as ‘complex mass tort’ actions where ‘epidemiological and other scientific questions are complex and riven with uncertainties and interdependent variables.’” Id. (quoting In re Johns-Manville Corp., 830 F. Supp. 686, 693 (S.D.N.Y. 1993). Because the motion was premised on the argument that the court appointed the forensic examiner as a “court-appointed expert witness” under Fed. R. Evid. 706, the court found the motion was “without merit” and denied defendant’s request. Commercial Law Corp., 2015 WL 7450149 at *3 & n.1.
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Sidley E-Discovery Task Force
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