December's Notable Cases and Events in E-Discovery

1. In In re: Search Warrant Issued June 13, 2019, 2019 WL 5607697 (4th Cir. Oct. 31, 2019), the Fourth Circuit reversed an order denying a law firm a preliminary injunction that would bar the government from using a “filter team” to review materials seized pursuant to a search warrant for privilege.

In this criminal case, the government was investigating a client of a Maryland lawyer for potential drug dealing. Id. at *1. The government also suspected the lawyer had obstructed the government’s investigation and opened a separate investigation into the lawyer. As part of the investigation, the government obtained a search warrant for the lawyer’s firm to seize materials concerning the representation of this particular client.

The magistrate judge who approved the warrant also approved on an ex parte basis the government’s proposed procedures for reviewing the seized materials. As part of those procedures, the government would use a “filter team” of lawyers, agents and support personnel not involved in the investigation that would separate privileged and potentially privileged materials from nonprivileged materials. Nonprivileged materials would be turned over directly to the investigative team. Privileged and potentially privileged materials would be reviewed to determine whether they were responsive to the search warrant. Responsive materials would then be placed into one of three categories: (1) privileged and could not be redacted, (2) privileged and could be redacted or (3) potentially privileged, including materials subject to the crime-fraud exception. The filter team would seek agreement with counsel for the lawyer regarding any redactions or potentially privileged documents, with disagreements being submitted to a court for resolution.

In executing the search warrant, the government seized voluminous materials from the law firm’s offices, including the iPhone and computer belonging the lawyer under investigation. Evidence suggested that the vast majority of the seized materials did not involve the client who was also the target of investigation. For example, the government seized the lawyer’s email inbox containing 37,000 emails, only 62 of which were from the target client or mentioned the target client.

Shortly after the search warrant was executed, the law firm sent the government a letter objecting to, among other things, the filter team procedures. Id. at *3. The law firm requested that the government return the seized materials or, at a minimum, delay its review until the law firm had a chance to complete its review of the seized materials. When the government failed to respond, the law firm sought injunctive relief, moving for a preliminary injunction under Fed. R. Civ. P. 65 and for the return of property under Fed. R. Crim. P. 41(g). The district judge denied the motion, concluding that the law firm had failed to show that it would be irreparably harmed by the filter team procedures. Id. at *4. 

The law firm appealed and, in an opinion written by Judge Robert Bruce King, the Fourth Circuit reversed. Id. at *5. In an interim order issued after oral argument, the Fourth Circuit directed that the magistrate judge review all the seized materials, identify materials not related to the target client and return them to the law firm, and conduct a privilege review of the remaining materials. In a written opinion following the interim order, the Fourth Circuit explained why the law firm was entitled to a preliminary injunction barring the government’s proposed filter team procedure. In order to prevail on a request for a preliminary injunction, the law firm was required to establish (1) it is likely to succeed on the merits, (2) it is likely to suffer irreparable harm absent the requested preliminary relief, (3) the balance of the equities weighs in its favor and (4) a preliminary injunction is in the public interest. Id. at *6 (citing Centro Tepeyac v. Montgomery Cty., 722 F.3d 184,188 (4th Cir. 2013) (en banc)).

The Fourth Circuit first addressed irreparable harm because that was the sole basis for the district judge’s decision to deny the requested injunctive relief. Id. at *7. The Fourth Circuit concluded that the district judge abused his discretion by ignoring evidence that the vast majority of the seized materials did not relate to the target client. Indeed, some of the materials related to other clients who were also under investigation by the government. The district judge thus failed to appreciate the scope of the harm that would be inflicted and likewise gave “short shrift” to the important legal principles that protect attorney-client relationships. As the Fourth Circuit summarized, the attorney-client privilege and work product doctrine are important privileges that promote broader public interests in the administration of justice. Id. at *8-*9. When these privileges are given the proper weight, the Fourth Circuit held that the law firm would be irreparably harmed by permitting the filter team to review privileged materials. Id. at *9.

The Fourth Circuit next concluded that the law firm was likely to succeed on the merits, explaining that the magistrate judge had made several legal errors in approving the filter team procedures. Id. at *10. To begin, the magistrate judge delegated judicial functions to the filter team by having the executive branch (in this case the filter team) review materials for privilege when such privilege reviews are traditionally within the judiciary’s purview. The Fourth Circuit likewise noted its concern that filter teams are not perfect and errors will happen, whether the result of honest differences of opinion regarding the scope of privilege or mistakes or neglect. The magistrate judge further erred by approving the filter team procedures in an ex parte proceeding instead of an adversarial proceeding where the law firm could raise objections and arguments. Id. at *12. Moreover, the magistrate judge had approved a procedure that permitted the government to contact the law firm’s clients ex parte and seek waivers of the attorney-client privilege, a potential violation of the Model Rules of Professional Conduct that bar communications with represented parties. Id. at *13. This demonstrated a “lack of respect” for both the attorney-client privilege and the law firm’s duty of client confidentiality. Id. at *14.

With respect to the balance of the equities, the Fourth Circuit concluded that the balance tipped in the law firm’s favor. Id. Specifically, the harm to the law firm and its clients outweighed any harm to the government’s investigation. The government argued that a preliminary injunction would delay its criminal investigation, but the Fourth Circuit noted that it was the government’s choice to proceed with a search warrant and filter team.

Finally, the Fourth Circuit concluded that a preliminary injunction was in the public interest because the filter team procedures created an appearance of unfairness to the law firm’s other clients. Id. at *15. For example, the government did not disclaim its ability to rely on evidence unrelated to the target client that it saw as part of the filter team process in other investigations.

2. In Public Service Electric and Gas Co. v. Newport Associates Development Co., 2019 WL 4010780 (D.N.J. Aug. 26, 2019), Magistrate Judge James B. Clark granted in part a party’s motion for a protective order to limit broad discovery requests relating to a dispute over leaks of dielectric fluid from a cable located in the Hudson River.

Consolidated Edison Co. of New York, Inc. (Con Edison) and Public Service Electric and Gas Co. (PSE&G) jointly own and operate a pair of high-voltage transmission feeders (the Cables). Id. at *1. Part of the Cables’ route takes them through the marine environment at the bottom of the Hudson River, where they run parallel to Jersey City’s Sixth Street Pier. The Sixth Street Pier, and much of the surrounding land above and below water, is owned by Newport Associates and Development Co. and Newport Associates Phase I Developers Limited Partnership (Newport).

On October 3, 2016, a leak of dielectric fluid into the Hudson River was discovered near the Sixth Street Pier and Newport Marina. Id. at *2. Con Edison and PSE&G each sent out teams of engineers and divers to investigate and repair the leak, but they quickly discovered “enormous concrete segments, rip-rap, and other debris ... resting on the riverbed” near the Cables. Con Edison and PSE&G contended that the leak was caused by “Newport’s failure to properly maintain the Pier,” while Newport maintained that the leak was caused by “the Cables’ flawed design and [Con Edison’s and PSE&G’s] ‘reckless’ failure to maintain, repair, and protect the Cables since their installation.” Id. at *3. PSE&G filed suit against Newport, and Newport impleaded Con Edison as a third-party defendant. Id. at *1.

During discovery, Newport served Con Edison with document requests and interrogatories seeking information falling into three general categories: “(1) information related to any leaks of dielectric fluid in Con Edison’s facilities; (2) all documents concerning the Cables; and (3) all documents concerning a 1994 consent decree that resolved charges against Con Edison brought by the New York State Department of Environmental Conservation (NYSDEC) for actions including alleged illegal discharge of dielectric fluid into the Hudson River (‘the Consent Decree’).” Id. at *4. In response, Con Edison filed the instant motion for entry of a protective order preventing Newport from obtaining its requested discovery on the grounds that Newport’s requests were “wildly disproportionate” and the information it sought was largely “irrelevant.” Id. at *3.

Magistrate Judge Clark began his analysis by stating the general rule that discovery extends to all relevant, nonprivileged matters. Id. at *4. But, he clarified, even though relevance is a broader inquiry at the discovery stage than at trial and “[w]hile relevant information need not be admissible at trial in order to grant disclosure, the burden remains on the party seeking discovery to show that the information sought is relevant to the subject matter of the action and may lead to admissible evidence.” Id. (internal quotation marks omitted). Pursuant to Fed. R. Civ. P. 26(c), courts may issue an order to protect a party from “annoyance, embarrassment, oppression, or undue burden or expense.” When a party files a motion seeking a protective order, it “must show good cause by demonstrating that disclosure will cause a clearly defined and serious injury.” In making that showing, “[b]road allegations of harm, unsubstantiated by specific examples ... will not suffice.” Id. (internal brackets omitted). After setting forth the applicable legal standards, Magistrate Judge Clark turned to the three broad categories of Newport’s requests.

With regard to Newport’s first category of requests, Con Edison argued that Newport’s requests lacked proportionality under Rule 26 or any nexus to Newport’s claims that the cause of the leak was a defective weld and that having to respond to the requests in this category would be extremely burdensome given the scale of Con Edison’s operations. Rather than provide all of the information Newport requested in this category, Con Edison suggested that these requests be limited to information regarding those leaks involving welded couplers and submarine cables of the same type. Magistrate Judge Clark concluded that while “Newport’s requests in this Category [were] outside of the bounds of discovery permitted under Rule 26,” he also agreed with Newport that “Con Edison fail[ed] to demonstrate that the submarine condition of the Cables render[ed] discovery as to leaks involving terrestrial” cables irrelevant to Newport’s claims. Magistrate Judge Clark therefore granted in part Con Edison’s motion for a protective order as to the first category, limiting Newport’s inquiries as Con Edison suggested, but rejected Con Edison’s requested distinction between submarine and terrestrial cables.

As to Newport’s second category of requests, “a wholesale request for all documents concerning” the Cables, Con Edison argued that much of Newport’s requested information was irrelevant to its claims because the particular section of the Cables at issue was buried directly into the riverbed, making it distinct from the remaining sections. Id. at *6. Con Edison suggested that Newport’s requests in this category should be limited to information regarding the Hudson River section of the Cables. Magistrate Judge Clark agreed with Con Edison on the overly broad scope of information sought by Newport in this category, stating that he “fail[ed] to understand how information related to sections of the Cables which were designed, constructed, and maintained in a completely different fashion than the section in which the leak at issue occurred will aid the parties and the Court in making a determination as to what caused the leak and which party ultimately bears responsibility.” He also concluded that because the relevant inquiry in this case was which utility company had possession over the Hudson River portion of the Cables, Con Edison’s suggested limitation was appropriate.

Finally, on Newport’s third category of requests relating to a NYSDEC complaint against Con Edison and subsequent 1994 consent decree in connection with “illegal discharges of dielectric fluid,” Con Edison argued that the requested documents had no connection to Newport’s claims and were a “distracting sideshow.” Id. at *7. In Newport’s view, however, “leaks of dielectric fluid from Con Edison’s cables and Con Edison’s concealment of such leaks” was at the heart of the prior complaint and information regarding the prior proceedings was “important to understanding Con Edison’s environmental controls and leak history during the period preceding the alleged pier collapses.” Id. (internal quotation marks omitted). Newport also argued that the requests in this category concerning Con Edison’s compliance with Appendix D of the consent decree were relevant and necessary because they would shed light on the “applicable standard of care for the Cables and demonstrate whether Con Edison complied with that standard.” Id. (internal quotation marks omitted). Ultimately, Magistrate Judge Clark found that “Newport’s wide-ranging and intrusive request seeks information that is largely irrelevant to the claims in this matter.” In his view, the only relevant requests in this category were impermissibly duplicative of other requests, as Con Edison was already required to produce documentation regarding every relevant leak of dielectric fluid. As to the requests concerning Con Edison’s compliance with Appendix D, Magistrate Judge Clark generally agreed with Newport on the relevance of the requested information, but he limited Newport’s requests in this regard to documents detailing Con Edison’s Appendix D compliance with respect to the Hudson River portion of the Cables.

3. In Universal Standard Inc. v. Target Corp., 2019 WL 19383944 (S.D.N.Y. May 6, 2019), Magistrate Judge Gabriel Gorenstein ruled that emails among a company, its attorneys and a public relations firm discussing a public relations strategy for responding to a lawsuit were not protected by the attorney-client privilege or work product doctrine because the public relations firm was a third party that broke privilege.

In this trademark litigation, plaintiff, a clothing manufacturer, sued a retailer for creating a brand of clothing with a similar name and “brand concept” that would, in plaintiff’s view, cause market confusion and damage its reputation. Id. at *1. During the deposition of plaintiff’s chief of staff and in-house counsel, defendant began questioning the witness about a series of emails from June 2018 in which plaintiff, its outside counsel and a public relations firm discussed a public relations strategy for filing the instant lawsuit against defendant. Id. at *2, *6. The emails were listed on plaintiff’s privilege log but had apparently been produced by the public relations firm. Id. at *2. Plaintiff objected to the questioning, sought to claw back the documents at issue and filed a motion asking for a ruling that the emails were irrelevant or protected by the attorney-client privilege or the work product doctrine. The disputed emails were also produced for in camera inspection by the magistrate judge. Defendant opposed the motion, arguing that plaintiff waived the privilege by failing to adequately identify the disputed emails in its privilege log and that the emails were not, in any event, privileged.

Magistrate Judge Gorenstein first addressed the relevance of the emails. Because the documents had been produced, he would need to reach the privilege issue “as long as one of the emails [was] relevant” to the pending litigation. Magistrate Judge Gorenstein had little trouble concluding that at least one of the emails, if not more, was relevant because it expressed the view of plaintiff as to how defendant was causing consumer confusion.

Turning to the privilege issue, defendant argued that plaintiff had waived any privilege claim because the entries on the privilege log for these documents omitted the names of the public relations firm employees. Id. at *3. The local civil rules required a party to list “any sender or recipient of a document” on the log along with a description of “the relationship of the author, addresses, and recipients to each other” when that relationship was not already “apparent.” Defendant thus argued that plaintiff failed to comply with the requirements for a valid log and, by omitting the names of third parties, made it impossible for defendant to see that there was a potential waiver argument.

As Magistrate Judge Gorenstein explained, failure to provide sufficient information in a log may result in a waiver when the violations are “flagrant,” an analysis that turns on “such factors as the length of the delay, the willfulness of the transgression, and the harm to other parties.” Plaintiff claimed that its failure to include the names of the public relations firm employees copied on the emails was inadvertent because the firm used a common email address. Magistrate Judge Gorenstein found this explanation “nonsensical” because the relevant employees had their own email addresses that also appeared in the to/from/cc fields. Plaintiff’s failure to provide a reasonable explanation for the omission of the names of the public relations employees thus suggested that the violation was flagrant. Id. at *4. Nonetheless, Magistrate Judge Gorenstein decided to not reach the waiver issue because, as described below, the documents were not in fact protected by either the attorney-client privilege or the work product doctrine.

Beginning with the attorney-client privilege, Magistrate Judge Gorenstein concluded that the emails were not privileged because they were shared with the public relations firm, a third party, and sharing a communication between lawyer and client with a third party generally waives the privilege because the communication is no longer confidential. Id. at *5. Plaintiff noted three exceptions to the general rule regarding communications shared with third parties but found that none applied to this case.

First, courts have not found a waiver “where the presence of a third party is needed to allow the client to communicate information to an attorney, such as where a translator is used or where an accountant supplies specialized knowledge to allow an attorney to understand the client’s situation.” This exception did not apply here because plaintiff did not need the public relations firm to communicate with its counsel — it could have made a direct request to counsel for legal advice regarding the press release and media strategy — and the firm “did not serve to improve counsel’s understanding” of a request for legal advice.

Second, courts have not found a waiver where the third party at issue is deemed the “functional equivalent” of an employee of the client. Id. at *6. Magistrate Judge Gorenstein concluded that the employees of the public relations firm were not de facto employees of plaintiff, noting that plaintiff hired the firm pursuant to a six-month contract, the firm had very limited decision-making authority and there was no evidence that the firm maintained an office at plaintiff or otherwise spent a substantial amount of time working for plaintiff. Id. at *7.

Third, courts have not found a waiver when the third party is a consultant retained by the lawyer to aid in legal tasks. Id. at *9. Magistrate Judge Gorenstein explained that communications with a public relations firm could be privileged when engagement of the firm was necessary for the lawyers to perform “fundamental client functions — such as (a) advising the client of the legal risks of speaking publicly and of the likely legal impact of possible alternative expressions, (b) seeking to avoid or narrow charges brought against the client and (c) zealously seeking acquittal or vindication.” Id. (quoting In re Grand Jury Subpoenas Dated Mar. 24, 2003, 265 F. Supp. 2d 321, 330 (S.D.N.Y. 2003)). This line of cases did not apply here where plaintiff hired the public relations firm for “business purposes” and there was no evidence that the purpose of the communications with the firm was to “assist counsel in engaging in a legal task as opposed to allowing [plaintiff] to make a decision about the nature of publicity that should be sought.” In these circumstances, the public relations firm was not being used to “implement a specific legal strategy that required use of a public relations consultant.”

Finally, Magistrate Judge Gorenstein concluded that the emails were not protected by the work product doctrine. Id. at *10. In support of its work product claim, plaintiff had given a “generic recitation of law governing [the] work product doctrine” and claimed in a single sentence that the documents were prepared in anticipation of litigation and reflected the opinions of counsel. Magistrate Judge Gorenstein rejected this argument as “simply a conclusory recital of the governing test” and noted that “many cases have rejected work product protection for material relating to public relations activities.”

4. In Brave Law Firm, LLC v. Truck Accident Lawyers Group, Inc., 2019 WL 4573413 (D. Kansas Sept. 20, 2019), Magistrate Judge James P. O’Hara granted (1) a motion for sanctions for counsel’s failure to make a reasonable inquiry in claiming initially all responsive documents were being withheld but later stating the party had no responsive documents and (2) a motion for a protective order after finding that a party used confidential information disclosed pursuant to a protective order to locate a public filing and therefore could not disclose information from the public filing.

In this litigation between competing personal-injury law firms, plaintiff alleged that defendants falsely claimed in advertisements to have won settlements for clients that never existed. Id. at *1. Plaintiff requested documents providing that defendants “received and/or deposited funds received” in connection with an alleged $9.5 million settlement. Defendants responded by withholding all documents responsive to the request because disclosure was “prohibited by contract” and would “invade the privacy rights” of nonparties. Plaintiff moved to compel, and Magistrate Judge O’Hara overruled defendants’ objections to the requests and ordered defendants to produce responsive documents. Defendants then submitted a “supplemental response” to the discovery request, stating that defendants had “searched diligently” for responsive documents but were “not in possession, custody, or control of any responsive documents.”

Plaintiff moved for sanctions, asking Magistrate Judge O’Hara to compel defendants to fully respond to the document request and award plaintiff reasonable attorney’s fees. Id. at *2. Magistrate Judge O’Hara first noted that defendants’ explanation for its shifting position — that a diligent search found no responsive documents — was “wholly unpersuasive.” The more plausible inference was that “defendants and their lawyer were intentionally obtuse and evasive in originally answering” the document request, “essentially inviting plaintiff’s counsel (and the court) to go down a rabbit hole.” Defendants also claimed in the briefing on the motion for sanctions that documents responsive to the request were produced in response to other requests for production, and these documents should have, in hindsight, been identified as responsive to the disputed request. But Magistrate Judge O’Hara found that the settlement documents that defendants belatedly identified were not, in fact, responsive because they did not show whether defendants received or deposited funds from the settlement. Magistrate Judge O’Hara therefore concluded that defendants and their counsel had violated Rule 26(g)(1), which “places an obligation on counsel signing a discovery response to conduct a ‘reasonable inquiry’ into whether his client has discoverable information.”

In terms of a remedy, plaintiff requested that defendants be ordered to provide a complete response to the discovery request and pay plaintiff’s attorney’s fees. Magistrate Judge O’Hara determined that it would be “impossible” to compel defendants to provide a complete response because defendants had asserted they had no responsive documents in their possession and explained in the briefing that they had no “legal or practical ability to obtain bank records or other documents that might reflect defendants’ receipt of funds.” Magistrate Judge O’Hara did award plaintiff reasonable attorney’s fees and set a schedule for the parties to meet and confer on the exact amount of fees that would be awarded. Id. at *3.

In addition to the motion for sanctions, Magistrate Judge O’Hara also considered defendants’ request for a protective order prohibiting plaintiff from disclosing the names of the parties from the settled lawsuit. Plaintiff opposed the request for a protective order because the names appear on the publicly filed judgment that was issued in the lawsuit. Defendants argued that plaintiff was able to find the judgment only after reviewing a copy of the confidential settlement agreement that defendants produced pursuant to a protective order. Stating that this was a “close call,” Magistrate Judge O’Hara granted the motion for a protective order and prohibited plaintiff from disclosing the identity of the parties. “As a matter of basic fairness, practicality, and respect for court orders,” Magistrate Judge O’Hara concluded that “a litigant may not use confidential information that the court has specifically ruled subject to the court’s protective order to obtain documents and then use those documents to publicize the very confidential information that the court protected.” Id.