April's Notable Cases and Events in E-Discovery

1. In SodexoMAGIC, LLC v. Drexel University, No. 16-5144, 2018 U.S. Dist. LEXIS 29880 (E.D. Pa. Feb. 23, 2018), Judge Michael M. Baylson held, after an in camera review of a sample of withheld documents, that both parties had exceeded the allowable scope of the attorney-client privilege relating to internal communications with in-house counsel and provided a useful summary of the attorney-client privilege in this context.

In this case, both parties withheld internal emails on the grounds of the attorney-client privilege, and both parties challenged the other’s privilege log. Id. at *1. In connection with the privilege challenge, the parties produced a sample of 50 privileged documents for in camera review.

Reviewing the applicable Pennsylvania law, Judge Baylson explained that communications between corporate in-house counsel and the corporation are protected by the attorney-client privilege to the same extent as communications between the corporation and outside counsel. Id. at *1–*2. Along these lines, communications between in-house counsel and corporate employees are protected, though the privilege is to be narrowly construed.

With respect to internal communications, the corporation “must clearly demonstrate that the communication in question was made for the express purpose of securing legal not business advice.” Id. (quoting AAMCO Transmissions, Inc. v. Marino, No. 88-5522, 1991 U.S. Dist. LEXIS 13326, at *3 (E.D. Pa. Sept. 24, 1991)). “Where lawyers (or their non-lawyer subordinates) are acting in a purely ‘scrivener-like’ role, their emails and documents (including draft agreements) are themselves not privileged communications.” Judge Baylson also noted later in the opinion that draft contracts are not privileged under Pennsylvania law unless a party can show “that the draft contract was prepared for the purpose of obtaining legal advice and/or contains language the client considered but decided not to include in the final version.” Id. at *11–*12.

With these principles in mind, Judge Baylson outlined a set of hypothetical scenarios to help guide the parties in revisiting their privilege designations:

1. President of Food Service Corporation A sends email to General Counsel, “What are the requirements of a binding contract for food service contract with College X?”

2. General Counsel emails the President — with a list of the requirements for such a contract.

3. President to Corporation A’s VP, who as part of her job is engaged in negotiations with College X, “Our General Counsel has advised me that in order to form a binding contract with College X, we need to agree on requirements 1, 2 and 3.”

Emails 1, 2 and 3 are all privileged that can be appropriately withheld from production. Id. at *5-*6.

4. VP to Corporation A’s Sales Manager: “President has instructed us to proceed to negotiate a contract for food services with College X. Get to this ASAP.”

5. Sales Manager to VP: “I’ve just met with Manager of College X and we have a handshake deal. How much detail do we need in the written contract?”

6. VP to President: “Sales Manager reached a great deal for us. Let’s keep the written contract simple and direct to close the deal ASAP.”

Emails 4, 5 and 6 are not privileged because no legal advice is requested or provided. Id. at *6-*7.

7. President to General Counsel: “Draft this contract as quickly as possible. Draft a contract including 1, 2, 3 and also 4, 5 and 6.”

Email 7 is privileged because the President is asking the General Counsel for legal services. Id. at *6-*7.

8. General Counsel to in-house Paralegal: “The President wants a contract with 1 through 6. Please take language from our prior contract with College Z to get the process started.”

Email 8 is privileged because the General Counsel is communication with a paralegal to “get the process started” for drafting the contract. Id. at *6-*7.

9. VP to Paralegal: “I heard you are working on our contract with College X. Please write these exact words into provision 6: ‘It is hereby agreed that the amount is $400.’ ”

Email 9 is not privileged because the paralegal is “working as a scrivener, making changes that the VP requests but not providing legal advice.” Id. at *6-*7.

10. General Counsel to VP: “Here is my proposed contract attached to this email. Show this to College X, but tell them it is non-negotiable.”

Email 10 is a privileged communication between the General Counsel and VP in furtherance of legal services, but the attachment is not privileged. Id. at *6-*8.

11. VP to College X: “Here is our proposed contract. Our General Counsel says since we are giving you such a good deal, we must insist on these terms as written. Please send it back with your signature.”

Email 11 is not privileged because the email was sent to College X (a third party) and is no longer confidential. Id. at *7-*8.

12. Emails by non-lawyers within each party, and between Corporation A and College X, following execution of the contract, disputing its interpretation and at times indicating they rely on their counsel’s advice.

Email 12 is not privileged “even if the representatives rely on their in-house counsel’s prior privileged advice, unless the counsel’s interpretation is repeated in essentially verbatim language in the email. In this event, only the content of the communication with counsel is privileged and may be redacted. The rest of the document must be produced.” Id. *7-*8.

13. As a result of a dispute on contract interpretation between the parties, VP discusses this with President and then contacts General Counsel about her interpretation of the contract and GC responds. VP forwards this email to College X.

Email 13 would be privileged only as to the communication with counsel and while confidential within Corporation A. Once sent to College X, it loses its privileged status.” Id. at *7-*8.

Turning to the 50 documents submitted for in camera review, Judge Baylson held that the parties overdesignated many of these documents as privileged where the document was not privileged or where redactions could be applied. Id. at *8. Examples of nonprivileged correspondences noted by Judge Baylson in his opinion:

• A Sodexo email was not privileged because there was no lawyer on the chain and Sodexo failed to show that a lawyer had provided legal advice during this communication.
• Another Sodexo email was not privileged where the lawyer was inputting edits from businesspeople.
• A Drexel email was not privileged because it was addressed to a large group of individuals, including lawyers, though it was not for the primary purpose of seeking legal advice. Id. at *9.
• A Drexel calendar appointment in which a lawyer was invited was also not privileged because there was no request for legal advice associated with the meeting request.

Judge Baylson also noted in cases where employees in a business function are following up on an earlier email from counsel, the privilege “does not carry forward to every ‘downstream’ communication resulting from, or even following up on, or relying on, the client’s request for advice or the lawyer’s advice.” In these circumstances, the producing party should redact the privileged communication rather than withhold the entire email chain.

Ultimately, Judge Baylson ordered the parties to produce the documents deemed not privileged and submitted a “revised (and presumably much reduced) privilege log to other side” within 14 days. Id. at *5.

2. In Diamond Offshore Services Ltd. v. Williams, 2018 WL 1122368 (Tex. March 2, 2018), the Texas Supreme Court held that the trial court must generally view video evidence before ruling on its admissibility and further determined that it was a harmful error for the trial court to exclude without reviewing video evidence depicting plaintiff’s physical abilities where the evidence was relevant to plaintiff’s credibility and claimed injuries.

In this personal injury suit arising from a workplace accident, defendant hired an investigator to conduct surveillance and record plaintiff engaging in physical activities over the course of two days. Id. at *1. Plaintiff hurt his back while working on a heavy piece of machinery on an offshore drilling rig. Id. at *2. After two back surgeries, plaintiff never returned to work, and his treating physician declared him “totally disabled.” Plaintiff brought a negligence claim against his employer, alleging that he continued to suffer physical limitations as a result of the accident.

Defendant argued at trial that plaintiff was overstating his pain and downplaying his ability to return to some level of work. After the accident, plaintiff underwent a functional capacity evaluation that noted various physical restrictions and found that plaintiff could perform “medium-level physical labor within those restrictions.” Defendant’s investigator surveilled plaintiff and amassed about an hour of video recording over the course of two days. In the video, plaintiff was clearing a rundown mobile home, operating a mini-evacuator, bending over several times, and working on his lifted truck.

At trial, plaintiff testified that he had “constant pain” in his back and was unable to maintain any type of job because of his pain, physical restrictions and pain medication. With regard to the video, plaintiff testified that while he would attempt to do the sorts of activities portrayed in the video, he could not engage in those activities for as long as he could before the workplace accident. Several of plaintiff’s friends and family members also testified about the lasting impact of the accident.

At a motion in limine hearing before trial, the trial judge stated that she had not reviewed the video and ruled that she would consider the admissibility of the video if plaintiff opened the door. Id. at *3. At trial, defendant offered the surveillance video on three occasions as both impeachment evidence and substantive evidence. The trial court denied each request after a brief exchange with counsel.

After the close of evidence and deliberations, the jury ruled in plaintiff’s favor and awarded him $10 million. The court of appeals affirmed the jury’s verdict in a split decision, and defendant appealed to the Texas Supreme Court.

On appeal, the Texas Supreme Court first held that the trial court abused its discretion in ruling on the admissibility of the video without first watching it. While trial courts have “extensive discretion in evidentiary rulings,” this is a situation where the trial court “could not have properly exercised its discretion.” As a “general rule,” the court stated that the trial court should review video evidence before ruling on its admissibility, though the court noted that there may be cases where viewing the evidence is “unnecessary or extremely onerous.” Id. at *5. For example, there may be instances where the evidence is clearly prejudicial or the exigencies of trial making viewing impractical.

None of these exceptions applied in this case, where the admissibility of the video arose before trial, counsel’s descriptions of the video could not substitute for review, and the video was relatively short. In these circumstances, the Texas Supreme Court concluded that the trial court judge “should have assessed the video for herself rather than relying on counsel’s descriptions and arguments.”

The Texas Supreme Court next concluded that the video should not have been excluded from trial. Id. at *6. The video was probative of plaintiff’s physical abilities and associated pain — both issues relevant to trial. In terms of prejudice, plaintiff failed to establish that the video was cumulative of his own testimony because video evidence is “qualitatively different” from oral testimony. In addition, while the video may be prejudicial (i.e., damaging) to plaintiff’s case, it was not overly prejudicial. Id. at *7. Plaintiff also argued that the video was misleading because it offered only a partial view of plaintiff’s daily life. But omissions from video evidence go to the weight of the evidence, not admissibility. The court also noted that plaintiff had not alleged any specific omissions from the video that would render it misleading. Id. at *8.

Finally, the Texas Supreme Court held that the exclusion of the video was not harmless and reversed and remanded for a new trial. The video would have been just as probative as plaintiff’s testimony regarding the lasting physical impact of the accident. The video also could have supported defendant’s argument that plaintiff was exaggerating his symptoms and undermined plaintiff’s credibility. Id. at *9. With respect to the jury’s ultimate verdict, the video was relevant to the measure of damages.

3. In Par Pharmaceutical, Inc. v. Express Scripts Specialty Distribution Services, Inc., 2018 WL 264840 (E.D. Mo. Jan. 2, 2018), Judge Ronnie L. White held that a subpoena seeking confidential patient information as part of a patent infringement lawsuit was not proportional to the needs of that litigation and denied the serving party’s motion to compel.

This dispute arose out of a patent infringement lawsuit pending in the District of New Jersey involving Par Pharmaceutical, Inc.’s effort to develop, market and sell a generic version of a drug known as Xyrem, used to treat sleep-related illnesses and which contains GHB, the “date-rape” drug. The New Jersey litigation related to two patents concerning the safe administration of Xyrem when co-administered with a drug called valproate.

Express Scripts, the respondent in the Missouri proceeding, is a specialty pharmacy that works to ensure safe distribution of pharmaceuticals such as Xyrem. According to Par, Express Scripts maintained a database listing the names of customers taking Xyrem, as well as the doctors who prescribed that drug. Par issued a subpoena for this information, believing that this database would provide it with information showing that the two patents concerning valproate were invalid based on prior art.

Judge White cited Fed. R. Civ. P. 26 and explained that despite the broad reach of discovery, courts “may forbid disclosure or discovery in order to protect a person ‘from annoyance, embarrassment, oppression, or undue burden or expense.’ ” Id. at *2 (quoting Fed. R. Civ. P. 26(c)(1)(A)). Further, under Rule 45 governing third-party subpoenas, “a court must quash or modify a subpoena that ‘requires disclosure of privileged or other protected matter, if no exception or waiver applies’ or ‘subjects a person to undue burden.’ ” Id. (quoting Fed. R. Civ. P. 45(d)(3)(A)(iii) & (iv)). Judge White explained that, “[w]here, as here, discovery is sought from a non-party, courts have wide latitude in deciding motions regarding non-party subpoenas, and courts are directed to ‘give special consideration in assessing whether the subpoena subjects a non-party to annoyance or an undue burden or expense.’ ” (quoting Enter. Holdings, Inc. v. McKinnon, 2014 WL 5421224, at *1 (E.D. Mo. Oct. 23, 2014)).

With this backdrop, Judge White took note of the parties’ competing claims. On one hand, Par argued that the records would show whether the methods used to enhance the safe administration of the drugs were available to the public before the dates of the patents at issue, while Express Scripts responded that the production of 15 years of confidential patient records would require manual work and hamper its operations because the information was not available through database searches. Weighing the competing claims, the court concluded that compliance with the subpoena would impose an undue burden and expense on Express Scripts and that disclosure of confidential patient information was not proportional to the needs of the New Jersey patent litigation. The court therefore denied Par’s motion to compel.

4. In Alarm Grid, Inc. v. AlarmClub.com, Inc., 2018 WL 1175254 (S.D. Fla. March 5, 2018), Magistrate Judge William Matthewman denied a motion challenging defendant’s confidentiality designation of a phone call recording.

This dispute arose in connection with a copyright dispute about a photograph of a Honeywell alarm product displayed on defendant’s website. Plaintiff initially sent defendant a letter requesting removal of the photograph and demanded $50,000 in damages. Id. at *1. Defendant immediately took the photo down and began investigating when the photo was first posted but refused to pay any damages.

Plaintiff sued, and 10 days after the complaint was filed, one of defendant’s employees called a copyright service agent named Image Rights International, Inc. (ImageRights), ostensibly to figure out when the photo had been posted on defendant’s website. That call was recorded. Later, in response to plaintiff’s discovery requests, defendant withheld the recording but provided a brief summary of the subject matter in its privilege log. Plaintiff disagreed with the privilege designation and filed a motion to compel, contending that the recording was discoverable.

Defendant objected that the recording was protected by the work product privilege because the call had been made in support of the ongoing litigation. The court initially agreed and denied the motion. On a motion to reconsider, however, the court changed course, having listened to the recording, which was submitted ex parte for the judge’s in camera review. Defendant then provided the recording to plaintiff but marked it as “confidential” under the parties’ agreed confidentiality order.

Plaintiff disagreed with this designation and filed the instant motion seeking to have the confidentiality label removed, claiming that the recording did not contain any trade secrets and that as a conversation with a third party, anything that would have been secret lost that protection as it had been disclosed. Id. at *2. Plaintiff also argued that refusal to disclose the conversation ran afoul of the Florida Bar’s Rule of Professional Conduct 4-4.1 because it contained evidence of defendant’s criminal behavior.

Defendant responded that the designation was proper because the recording was derived from its business activities and fell within the confidentiality order’s protection of “trade secrets, proprietary research, design, development, financial, technical, marketing, planning, personal, or commercial information.” Id. at *3. Defendant claimed that plaintiff’s sole motivation for the motion was harassment and that the Florida Rules of Professional Conduct did not require disclosure because counsel was not assisting a client in the furtherance of any ongoing criminal or fraudulent conduct. Defendant noted that plaintiff’s counsel and ImageRights had a business relationship and that ImageRights had a financial interest in the outcome of the litigation. Finally, defendant pointed out that the recording had been listed on its privilege log, so there could be no claim that defendant failed to make a timely disclosure.

In resolving the issue, Magistrate Judge Matthewman first noted judicial records are presumptively public, but discovery materials not filed with the court are not “judicial records.” Id. at *4. He then considered Federal Rule of Civil Procedure 26(c), noting that, in light of the confidentiality order, the burden of showing “good cause” for continued protection fell on the defendant as the party making the confidentiality designation.

The magistrate judge concluded that defendant had met its burden. The magistrate judge explained that while he had reviewed the recording ex parte, the recording was produced solely in connection with the earlier motion to compel; therefore, it was not subject to the common-law right of public access. Id. at *5 (citing In re Alexander Grant & Co. Litig., 820 F.2d 352, 356 (11th Cir. 1987)). He pointed out that “[t]he recording has not been entered into evidence in this case at this juncture, and is not a matter of public record.” He balanced the respective rights and interests of the parties at this stage of the litigation as follows:

Defendant maintains that the recording is that of a business activity — a phone call — conducted in order to investigate how certain images are discovered online. Defendant argues that it has an interest in keeping a recorded telephone conversation between its representative and the representative of another company private because it constitutes proprietary research, and technical marketing, and commercial planning. Further, Plaintiff has solely stated that it wants to give the recording to ImageRights, who is not a party to this action. In balancing Defendant’s request to keep the recording confidential at this juncture of the case with Plaintiff’s desire to deem the recording non-confidential so it can share the recording with non-party ImageRights, Inc., the Court finds that the recording should remain confidential. Id.

The magistrate judge concluded that while the recording might later lose its protection if disclosed, it was at this stage “merely discovery material, and the confidentiality designation shall remain unless and until the Court orders otherwise at a later point in this litigation.” Finally, the magistrate judge held that the crime/fraud prohibition did not require any additional disclosure as defendant had properly disclosed the recording on its privilege log.

The magistrate judge therefore denied plaintiff’s motion challenging the confidentiality designation relating to the recorded telephone conversation.