This Sidley Update addresses the following recent developments and court decisions involving e-discovery issues:
- a U.S. District Court for the District of New Jersey ruling that a responding party was best situated to determine how to carry out its discovery obligations and therefore would not be compelled to use technology-assisted review
- a U.S. District Court for the Eastern District of Virginia decision largely upholding a magistrate judge’s order granting plaintiff’s motion to compel, finding several of defendant’s claims to be “threadbare at best” but rejecting plaintiff’s request for sanctions because defendant’s new counsel did not act unreasonably after taking over the defense
- a Delaware Chancery Court order resolving a plaintiff’s motion to require defendant to use a third-party e-discovery vendor by ruling that the cost of such a vendor would be allocated to the plaintiff unless the vendor identified issues with the defendant’s initial production, in which case the costs would be shifted to the defendant
- a U.S. District Court for the Middle District of Florida granting the parties’ joint motion for entry of a Fed. R. Evid. 502 nonwaiver order but rejecting the parties’ request to include confidential or proprietary information as part of the order
1. In In re Mercedes-Benz Emissions Litigation, 2020 WL 103975 (D.N.J. Jan. 9, 2020), Special Master Dennis M. Cavanaugh, acknowledging that technology-assisted review (TAR) offered cost and efficiency advantages in discovery, ruled that (1) a responding party was best situated to determine how to carry out its discovery obligations and would not be compelled to use TAR and (2) plaintiffs would have to undergo transparent validation of their document production set.
In this environmental litigation, plaintiffs argued that defendants should be compelled to use TAR to complete its document review. Id. at *1. Plaintiffs contended that TAR “yields significantly better results than either traditional human ‘eyes on’ review of the full data set or the use of search terms.” Defendants countered, arguing that there was no “authority for imposing TAR on an objecting party” and that particular issues within the data set would make the use of TAR particularly challenging.
While expressing reservations, Special Master Cavanaugh permitted the defendants to “evaluate and decide for themselves the appropriate technology for producing their ESI” (electronically stored information). Id. at *2. Special Master Cavanaugh noted that TAR is widely recognized as “cheaper, more efficient and superior to keyword searching.” Id. at *1 (quoting Hyles v. New York City, 2016 WL 4077114, at *2 (S.D.N.Y. Aug. 1, 2016)). But he noted that “courts also recognize that responding parties are best situated to evaluate the procedures, methodologies, and technologies appropriate for producing their own electronically stored information.” In permitting defendants to use custodian-and-search term review, Special Master Cavanaugh admonished that he would “not look favorably on any future arguments related to burden of discovery requests, specifically cost and proportionality, when Defendants have chosen to utilize the custodian-and-search term approach despite wide acceptance that TAR is cheaper, more efficient and superior to keyword searching.” Id.at *2.
Special Master Cavanaugh also addressed defendants’ proposed adjustments to plaintiff’s proposed protocol to validate its production. Specifically, defendants took “issue with the fact that Plaintiffs’ proposal states that ‘Plaintiffs will not be obligated to collect or sample ESI that does not contain a search term.’ ” Id. at *3. Plaintiffs argued that they could not feasibly apply the same validation protocol as defendants because of the “highly personal nature of Plaintiffs’ email collections and the relatively small size of those collections.” Special Master Cavanaugh recognized that using identical validation protocols might not be practicable but that the plaintiff’s proposal did not “articulate how it will perform appropriate sampling and quality control measures to achieve the appropriate level of validation.” Therefore, Special Master Cavanaugh adopted defendants’ protocol to the extent that it required the parties to meet and confer concerning the application of validation procedures.
Special Master Cavanaugh also addressed the parties’ disagreement about how to handle known or presumptively responsive material. The protocol required production of “all documents and ESI ‘known’ to be responsive, regardless of how or by whom the materials are ‘known’ to be responsive.” Defendants argued that as phrased, the protocol “provides no clear standard for the court to administer or the parties to apply.” Special Master Cavanaugh agreed and modified the protocol to require only “production of materials that are ‘reasonably known’ to be responsive.”
Finally, Special Master Cavanaugh addressed plaintiff’s request that defendants produce in their entirety “folders or collections of information that are known to contain documents likely to be responsive to a discovery request.” Id. at *4. Defendants argued that the request was overbroad and not proportional. Special Master Cavanaugh required the parties to collect folders or collections of documents and noted that “to the extent the folder or collections contain an extensive volume of material, ... [he would] require the parties to meet and confer if a party believes a discrete document folder or collection of information that is relevant to a claim or defense is too voluminous to make review of each document proportional to the needs of the case.”
2. In Navient Solutions, LLC v. The Law Offices of Jeffrey Lohman, 2020 WL 1917837 (E.D. Va. Apr. 20, 2020), Judge Leonie M. Brinkema largely upheld a magistrate judge’s order granting plaintiff’s motion to compel, finding several of defendant’s claims to be “threadbare at best” but denied plaintiff’s request for sanctions because defendant’s new counsel did not act unreasonably after taking over the defense.
In this case, plaintiff Navient Solutions, LLC, asserted claims against a group of defendants, primarily debt counseling companies, law firms, and individuals affiliated with those entities, alleging that they conspired together to defraud the plaintiff out of millions of dollars in outstanding student loan debt. Id. at *1. Plaintiff’s claims included allegations that the defendants manufactured federal lawsuits and arbitration claims against the plaintiff for purported violations of the Telephone Consumer Protection Act (TCPA).
In the course of the litigation, the plaintiff filed a motion to compel seeking production of “all documents withheld by [one of the law firm defendants] on the basis of the attorney-client privilege,” including documents withheld by the law firm defendant’s former and current employees. Id. at *2. The plaintiff narrowed its request to defendant’s communications with the student loan debtors who had been referred to it as clients. According to the plaintiff, the communications were discoverable under the crime-fraud exception to the attorney-client privilege. Defendant responded that the crime-fraud exception did not apply to the communications in question because only the attorneys, and not the clients, had purportedly committed a crime or fraud.
While the parties briefed the motion to compel, a potential conflict of interest arose, which defendants decided warranted separate counsel for some of them on substantive matters. Around a month later, “a substantial, actual conflict arose between [one of the law firm defendants] and [its counsel].” Thereafter, the new counsel took over discovery-related matters for the law firm defendant. Together with plaintiff’s counsel and the magistrate judge, defendant managed to narrow the issues raised in plaintiff’s motion to compel. Also, the law firm defendant’s new counsel filed a supplemental brief in opposition to the motion to compel in which it continued to argue that the crime-fraud exception was inapplicable where only the attorney had purportedly committed a crime or fraud.
The magistrate judge granted the plaintiff’s motion to compel, and the law firm defendant filed an objection to that decision. The objection raised two arguments, neither of which had been raised to the magistrate judge: “(1) that plaintiff had not made the requisite prima facie showing that [the law firm defendant] had committed a crime or fraud; and (2) that [the law firm defendant] was immune from liability under the Noerr-Pennington doctrine.” Id. (emphasis in original). These arguments were premised on the law firm defendant’s assertion that the only purportedly criminal or fraudulent conduct in which it had engaged was litigation activity, such as advising clients and filing federal lawsuits. But in the objection, the law firm defendant “did not inform the Court of the change of counsel that had occurred during the briefing on the Motion to Compel.” Judge Brinkema then remanded the objection to allow the magistrate judge to address the law firm defendant’s new arguments in the first instance and to consider an explanation for why these new arguments were not raised initially. Id. at *3.
The magistrate judge gave the parties one week to file a second round of supplemental briefing and announced that the objection would be construed as a motion for reconsideration and that in accordance with Judge Brinkema’s remand order, sanctions were authorized, if necessary. On March 11, 2020, the magistrate judge issued a memorandum opinion and order requiring the law firm defendant to “produce all responsive documents withheld on the basis of the attorney-client privilege.” The magistrate judge rejected both of the law firm defendant’s new arguments, holding that the plaintiff had made the requisite showing that the law firm defendant had committed a crime or fraud and that the invocation of the Noerr-Pennington doctrine was premature. The magistrate judge also imposed sanctions on the ground that the defendant and its new counsel had “needlessly increased litigation costs.” The magistrate judge’s decision prompted another objection, which was the subject of the instant decision.
The law firm defendant made three claims in arguing that the magistrate judge erred in applying the crime-fraud exception to its privileged communications with the student loan debtors. First, the law firm defendant argued that the crime-fraud exception does not apply where the attorney alone purportedly committed a crime or fraud. Judge Brinkema explained that this issue was “a question of first impression in the Fourth Circuit” and observed that both circuit and district courts had reached conflicting conclusions on this issue. After comparing the competing lines of authority, Judge Brinkema ultimately found “application of the crime-fraud exception where the attorney alone purportedly committed a crime of fraud is entirely consistent with the purpose of the attorney-client privilege” and “would both serve the public good and advance the search for the truth.” Id.at *5-*6. Therefore, because the magistrate judge reached the same conclusion (based on many of the same cases) as Judge Brinkema, that conclusion was not clearly erroneous or contrary to law. Id. at *6.
Second, the law firm defendant argued that the plaintiff failed to make a prima facie showing either that the law firm defendant had engaged in criminal or fraudulent conduct or that the privileged communications sought bore a close relationship to that conduct. Specifically, “[a]s to the former,” the law firm defendant “argue[d] that the evidence cited by the magistrate judge ‘merely indicate[d] that [it] [was] being a zealous advocate for [its] clients.” “As to the latter, [the law firm defendant] argue[d] that the evidence cited by the magistrate judge ‘d[id] nothing to establish a direct link’ between the purportedly criminal or fraudulent conduct and the communications sought.” Judge Brinkema disagreed, however, finding that the magistrate judge properly concluded that the plaintiff made a prima facie showing that the law firm defendant had engaged in criminal or fraudulent conduct — that is, mail fraud and wire fraud — by asserting its conspiracy allegations and that the plaintiff presented emails and deposition testimony corroborating both the existence of the alleged scheme and the law firm defendant’s involvement therein. Id. at *7. She also concluded that the magistrate judge properly found that “there is a close relationship between the privileged communications sought and the purported criminal or fraudulent conduct” because the evidence plaintiff sought — communications with the student loan debtors regarding “ ‘(1) the consequences of defaulting on student loans, (2) resolution of debt-relief matters or TCPA claims, and (3) [the student loan debtors’] satisfaction with the resolution of debt-relief matters or TCPA claims’ ” — constituted “the building blocks of the scheme and [of] [p]laintiff’s case.” Accordingly, Judge Brinkema found that the magistrate judge’s ruling on this issue was not clearly erroneous or contrary to law.
Third, the law firm defendant invoked the Noerr-Pennington doctrine, arguing that the doctrine “bars application of the crime-fraud exception.” Id. at *8. As Judge Brinkema explained, “[t]he Noerr-Pennington doctrine ‘safeguards the First Amendment right to petition the government for a redress of grievances ... by immunizing citizens from the liability that may attend the exercise of that right.” But, as the magistrate judge and Judge Brinkema both agreed, the doctrine “is by definition an exemption from ... liability, and does not apply to discovery” disputes. Accordingly, Judge Brinkema refused to disturb the magistrate judge’s ruling on that issue.
Last, as to sanctions, Judge Brinkema overruled the magistrate judge’s imposition of sanctions because she herself erred in the first instance in instructing the magistrate judge that sanctions might be warranted. Id. at *9. Specifically, “[w]hen the Court issued its remand order” with suggestions that the magistrate judge consider imposing sanctions, “it had not been made aware of the circumstances surrounding [the law firm defendant’s] change of counsel.” As Judge Brinkema now recognized, from the date that the law firm defendant’s new counsel took over discovery-related matters, the new counsel “worked diligently to narrow the issues presented by plaintiff’s Motion to Compel.” In the end, because the law firm defendant’s new counsel “did not act unreasonably under the circumstances,” Judge Brinkema sustained the law firm defendant’s objections on this issue. However, she concluded her decision with a warning. Because the legal bases for arguments advanced by the law firm defendant (as well as some of the other defendants in this action) were often, in Judge Brinkema’s view, “threadbare at best,” including the law firm defendant’s incorrect invocation of the Noerr-Pennington doctrine, she put the defendants “on notice that the Court will not hesitate to impose sanctions for the assertion of any frivolous arguments.” Id. at *10.
3. In McCabe’s Mechanical Service Inc. v. Ballweg, 2020 WL 1848082 (Del. Ch. Apr. 9, 2020), the Court of Chancery of Delaware resolved a plaintiff’s request to require defendant to use a third-party e-discovery vendor by ruling that the cost of such a vendor would be allocated to the plaintiff unless the vendor identified issues with the defendant’s initial production, in which case the costs would be shifted to the defendant.
The plaintiff filed a motion requesting that the defendant be required to retain a third-party vendor to search his ESI instead of accepting the self-production offered by the defendant. The defendant argued that his self-production was adequate and retaining a third-party vendor would create unnecessary expenses given the scope of the claim. Id. at *1.
The court ordered the defendant to submit an affidavit to the plaintiff affirming that he had fully responded to all relevant document requests. If, after receiving this affidavit, the plaintiff still felt that involving a third party was necessary, then the parties would agree on an acceptable vendor, with the plaintiff responsible for any associated costs. However, if the vendor identified spoliation of evidence or an incomplete production, these costs would be shifted to the defendant.
4. In Proxicom Wireless, LLC v. Target Corp., 2020 WL 1671326 (M.D. Fla. Mar. 25, 2020), Magistrate Judge Leslie R. Hoffman granted the parties’ joint motion for entry of a Fed. R. Evid. 502 nonwaiver order but limited its scope to exclude confidential or proprietary information.
In this patent action, the parties jointly moved for entry of an order pursuant to Fed. R. Evid. 502(d) that inadvertent production of a privileged document would not constitute a broader waiver of privilege. The parties had previously entered into a confidentiality agreement with clawback provisions but sought added protection from the court. In support of this motion, the parties cited the large volume of ESI to be produced, the plaintiff’s intent to file similar lawsuits, and the need “to promote efficiency in discovery to prevent exhaustive, expensive privilege review efforts, to make the parties’ nonwaiver agreement binding on third parties, and to otherwise provide the parties with the maximum protection available under the law.” Id. at *1.
Rule 502(d) gives a federal court discretion to enter an order that privilege will not be waived by disclosure connected with the pending litigation. Magistrate Judge Hoffman found that such an order was appropriate in this case to make discovery more efficient and to provide a protection against the waiver of privilege in the other cases filed by the plaintiff. However, Magistrate Judge Hoffman limited the parties’ proposed language, finding it overly broad. The parties had sought to extend the protection to proprietary and confidential documents or materials, whereas Magistrate Judge Hoffman determined that Rule 502 applied only to documents afforded the attorney-client privilege or work-product protection. Magistrate Judge Hoffman therefore limited the scope of the protection to privileged documents and granted the motion. Id. at *2.
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