July’s Notable Cases and Events in E-Discovery

1. In the Mandatory Initial Discovery Pilot Program (N.D. Ill. June 1, 2017), the U.S. District Court for the Northern District of Illinois entered a standing order as part of a three-year pilot program of accelerated e-discovery requirements to determine if the program reduces cost and delay in civil litigation.

The standing order applies to all cases filed on or after June 1, 2017, with no right to opt out by the parties. The following limited classes of cases are exempt from the standing order’s requirements:

• cases exempt from initial disclosure under Rule 26(a)(1)(B)
• actions under the Private Securities Litigation Reform Act
• patent cases governed by a local rule
• cases consolidated by the MDL panel

Parties must provide information called for by the standing order prior to proceeding with party-directed discovery under the Federal Rules of Civil Procedure. Responses must be based on information reasonably available to the party, must be signed under oath by the party certifying that they are complete and correct as of the time provided and must be signed under Rule 26(g) by the party’s attorney.

Mandatory initial discovery responses are due 30 days after the responsive pleading deadline. The responses must include information relevant to any party’s claims or defenses, favorable or unfavorable, “regardless of whether they intend to use the information in presenting their claims or defenses.” Id. para. 1.c. Mandatory initial discovery includes the following:

• Identification of individuals likely to have information relevant to any party’s claims or defenses and a description of the nature of the information.
• Identification of individuals who have given written or recorded statements relevant to any party’s claims or defenses and copies of such written or recorded statements.
• A list of documents, electronically stored information (ESI), land or other tangible items the party believes may be relevant to any party’s claims or defenses. Voluminous documents or ESI may be listed in categories with descriptions. Custodians of all items, documents and ESI should be identified.
  • Non-ESI documents must be produced with the mandatory initial discovery response, and tangible items must be made available for inspection on the date of the response.
• Relevant facts and legal theories for each of the party’s claims or defenses.
• Computation of damages claimed by the party and identification of insurance or agreements related to liability or indemnification of any judgment in the action.

A privilege log must accompany the responses, if any are limited on the basis of privilege or work product.

Mandatory initial discovery responses may be omitted if the Court approves a written stipulation by all parties that no discovery will be conducted in the case. The parties may receive a one-time 30-day extension for the responses if the parties jointly certify to the Court that they have a good-faith belief that the matter will be resolved by settlement within 30 days.

As part of the Rule 26(f) process and subsequent conference, parties must discuss the mandatory initial discovery responses listed in the standing order, seek to resolve any disagreements on scope and describe these discussions, including any remaining disputes, in their Rule 26(f) report.

Responsive pleadings must be filed even if a motion to dismiss is pending. Answers, counterclaims, cross-claims and replies must be filed as required by Fed. R. Civ. P. 12(a)(1) unless the motion to dismiss is for lack of subject matter jurisdiction, lack of personal jurisdiction, sovereign immunity, absolute immunity or qualified immunity of a public official. In those instances, Fed. R. Civ. P. 12(a)(4) will apply if the Court fails to set a deadline.

Production of ESI identified by the party in its mandatory initial discovery response must occur within 40 days of serving that response. A party must produce ESI in the form requested by the receiving party unless the parties agree otherwise, but no party need produce ESI in more than one form. A privilege log must accompany the production for any ESI withheld on the basis of privilege or work product.

The parties have a continuing duty to update, and each party must serve supplemental responses within 30 days of discovering new or additional information related to any of the requests in the standing order. However, if new information is revealed in a way that informs all parties, such as during a deposition, a supplemental response need not be filed.

Parties have a duty to confer promptly regarding preservation, disclosure and production of ESI, including ESI searches, search terms, custodians and use of technology-assisted review. Any unresolved dispute between the parties will be presented to the Court in a single joint motion that includes the parties’ positions and certifications required under Rule 26(g), or, if the Court prefers, a conference call.

The District of Arizona is also participating in this pilot program, and additional courts may participate in the future.

2. In In re State Farm Lloyds, 2017 WL 2323099 (Tex. May 26, 2017), the Texas Supreme Court ruled in the context of a metadata e-discovery dispute that courts should resolve such issues by application of the proportionality factors in Texas Rule of Civil Procedure 192.4 and whether the metadata is concretely linked to a claim or defense.

In two separate actions, residential homeowners sued their insurer, State Farm, alleging underpayment of hail-damage claims. Id. at *2. During discovery, the homeowners requested that State Farm produce ESI in a native or near-native form to preserve the visibility, utility and searchability of metadata. State Farm objected to these requests and offered instead to produce ESI in a searchable, but static, form. Id. at *3. State Farm produced evidence that its business practice is to consolidate information into a central repository that holds static, read-only copies of claim data from different native sources. State Farm emphasized the reasonableness of this practice and contended that producing claim data in a native or near-native form would be extraordinarily burdensome given its well-established practice.

The trial courts ordered State Farm to produce ESI in native or near-native form. Id. at *2. State Farm sought mandamus relief in both cases. The court of appeals denied mandamus relief, finding State Farm’s arguments of proportionality under Rule 192.4 and reasonableness under Rule 196.4 unpersuasive. Id. at State Farm petitioned for writ of mandamus to the Texas Supreme Court.

The Court consolidated the mandamus petitions, neither granting nor denying relief, but provided guidance on the standards for resolving electronic discovery disputes involving metadata. Id. at *7. To introduce the issue, the Court noted that while metadata is discoverable and unprivileged, requesting parties are not automatically entitled to ESI in native or near-native format. Id. at *6. On this issue, the Court cited a recent federal court ruling stating that “a weak presumption against the production of metadata has taken hold ... with parties increasingly seeking its production in every case, regardless of size or complexity.” Id. (quoting U.S. ex rel. Carter v. Bridgepoint Educ., 305 F.R.D. 225, 245-46 (S.D. Cal. 2015)).

The Court declared that neither the requesting party nor the producing party has a unilateral right to specify the format of ESI under Rule 196.4, which requires that production be achievable through “reasonable efforts.” Id. at *7. Furthermore, the Court stated that “reasonable efforts” naturally invoke the proportionality factors in Rule 192.4, which are:

1. the benefit of the requested discovery form
2. the needs of the case
3. the amount in controversy
4. the parties’ resources
5. the importance of the issues at stake in the litigation
6. the importance of the proposed discovery in resolving the litigation
7. any other articulable factor bearing on proportionality

Id. at *8-*12. The Court stressed that the relevance of metadata would need to be determined on a case-by-case basis and must be “obvious or at least linked, more or less concretely, to a claim or defense ... [and] not merely a helpful or theoretical issue” to support production of a metadata-accessible form of ESI. Id. at *9.

In accordance with this standard, the Court remanded the cases to the trial courts to allow State Farm to seek reconsideration of its objections. Id. at *15. In so doing, the Court noted the “parity” of electronic discovery practice under the Texas Rules of Civil Procedure and the Federal Rules of Civil Procedure, id. at *12-*14, and cited a “similar hail-storm lawsuit against State Farm involving a similar ESI protocol, [where] a federal district court exercised its discretion to deny the plaintiff’s request for native and near-native production.” Id. at *14.

3. In Duffy v. Lawrence Mem. Hospital, 2017 WL 1277808 (D. Kan. Mar. 31, 2017), Magistrate Judge Teresa James granted defendant’s request for a protective order permitting defendant to produce a statistically significant random sampling of 257 patient records from among the 15,574 patient records responsive to plaintiff’s discovery request.

Magistrate Judge James had previously ordered defendant to produce documents responsive to plaintiff’s second document request seeking records for all patients admitted or treated at Lawrence Memorial Hospital who presented with complaints of chest pain or acute myocardial infarction. Id. at *1. Defendant determined that compliance with this request would require it to locate and assemble 15,574 unique patient records and estimated that the process of collecting patient records — a process that could potentially interfere with employees’ day-to-day work and impede patient care — would require 7,878 worker hours at an estimated cost of $196,933. Once assembled, the patient records would also need to be reviewed for confidential patient information for redaction, an additional 14 days of work at a projected cost of $37,259. Citing the cost and burden, defendant moved for a protective order and proposed that Magistrate Judge James modify her previous discovery order and permit defendant to produce 257 randomly sampled patient records. Id. at *1-*2.

Plaintiff argued that the motion for a protective order was nonjusticiable because defendant failed to allege an attempt to meet and confer and untimely because the magistrate judge had already ordered the production of documents in response to this request. In addition, plaintiff challenged the adequacy of defendant’s random sampling and the need for any redactions to the documents. Id. at *2.

Magistrate Judge James granted defendant’s motion for a protective order, holding that defendant had demonstrated good cause pursuant to Rule 26(c)(1) for producing a sample of documents in light of the time and expense of a full production. Id. at *3. She noted that defendant had not waived its right to seek relief from her prior discovery order once defendant recognized “the enormity of the task” of responding to plaintiff’s discovery request. Id. at *2.

Magistrate Judge James also approved of defendant’s proposed sampling. Plaintiff claimed that the use of statistical sampling was “akin to giving her a raffle ticket,” but the magistrate judge found that the statistical sampling did not prejudice plaintiff. Defendant employed “RAT-STATS,” a statistical tool used by the U.S. Department of Health and Human Services Office of Inspector General and by healthcare providers to determine that a sample size of 252 plus five was sufficient to produce a statistically significant sample with a confidence level of 99 percent. Id. at *3-*4.

Finally, Magistrate Judge James approved defendant’s proposal to redact confidential patient information. Plaintiff claimed that confidentiality of patient records would be appropriately addressed by the protective order entered in the case, but the magistrate judge ruled that the data at issue related to patients who were not parties to the case and that defendant had a legal duty to safeguard their information. She indicated that plaintiffs would have the opportunity at a later date to challenge the redactions if there was a compelling need to view the redacted information that outweighed the patients’ privacy rights. Id. at *4.

4. In Excel Enterprises, LLC v. Winona PVD Coatings, LLC, 2017 WL 655861 (N.D. Ind. Feb. 17, 2017), Magistrate Judge Michael G. Gotsch Sr. rejected plaintiff’s motion to require defendant to provide documents as they are kept in the ordinary course after finding that plaintiff had failed to demonstrate any prejudice as a result of defendant’s actions and defendant had reproduced its original 30,000 document production in searchable formats requested by plaintiff with identifying information.

In this breach of contract case, plaintiff’s counsel informed defendant’s counsel that the documents in its original production were not searchable. Plaintiff’s counsel specified its preferred format for the documents, and in response, defendant converted the 30,000 responsive documents to plaintiff’s preferred formats and delivered them in the requested .pdf and .tiff formats within eight days. Id. at 1.

On that same day, plaintiff filed a motion to compel alleging that defendant had not complied with the production requirements in Fed. R. Civ. P. 34(b)(2)(E)(i) requiring parties to produce responsive documents “as they are kept in the usual course of business” or to “organize and label them to correspond to the categories in the request.” Plaintiff argued that defendant’s documents were not presented as they were kept in the usual course of business and asked the court to compel defendant to organize and label the documents so it was clear which document responded to which specific discovery request. Id. at *1.

The magistrate judge found that defendant’s assertion that it produced the documents as kept in the ordinary course of business was not supported by evidence and granted plaintiff’s motion, ordering defendant to supplement its production to identify by Bates numbers which documents were produced in response to which specific discovery requests. In response, defendant filed a motion to reconsider, presenting an affidavit from its director of information technology describing the process used to produce the ESI, and stated that the produced information included identifying information in an attempt to show that its production complied with Rule 34(b)(2)(E)(i) and did not prejudice plaintiff. Plaintiff contested this motion, arguing that the affidavit did not establish that defendant kept its ESI in .pdf or .tiff format in the ordinary course of its business. Id. at *1-*2.

Magistrate Judge Gotsch found that even with the affidavit, defendant had failed to show that it produced the ESI as it was kept in the usual course of its business. Id. at *2-*3. At the same time, however, the magistrate judge accepted defendant’s argument that plaintiff had not shown it had suffered prejudice as a result of defendant’s production. Noting that Fed. R. Civ. P. 26(b)(1) gives district courts broad powers to manage discovery in their cases, the magistrate judge stated that plaintiff’s demand for strict compliance with Rule 34(b)(2)(E)(i) amounted to a “form-over-substance argument,” and the cost and time defendant would expend to organize and label the 30,000 responsive documents would pose a burden that outweighed the potential benefit to plaintiff, particularly after defendant had converted its 30,000 documents into searchable formats that plaintiff had requested. Id. at *3-*4. As a result, the magistrate judge ruled that “the costs of organizing and labeling the documents, as this case is ready to proceed to the dispositive stage of litigation, create a burden on [defendant] that outweighs benefits [plaintiff] has not disclosed.” Id. at *4.