January's Notable Cases and Events in E-Discovery

1. In Lawson v. Spirit AeroSystems, Inc., 2020 WL 1813395 (D. Kan. Apr. 9, 2020), Magistrate Judge Angel Mitchell of the District of Kansas held that potentially responsive documents remaining in a TAR set need not be reviewed, as the TAR had already reached a sufficient threshold “recall” rate.

In this breach-of-contract litigation, plaintiff, the former CEO of defendant, entered into a noncompete agreement, which defendant alleges he breached. Id. at *1. Plaintiff sued and sought far-reaching discovery from defendant.

The parties had engaged in a lengthy and protracted discovery process, with plaintiff initially identifying nearly 70 custodians and about 90 search terms. Id. at *2. Defendant countered, arguing that plaintiff had made “no effort to identify and remove duplicative or tangential custodians” and that plaintiff’s proposed search terms such as “fuselage,” “bulkhead,” and “pylon” were “equally overbroad and unworkable.” Id. (internal quotations and ellipses omitted). Defendant identified eight custodians and ran plaintiffs’ search terms over its documents, which returned over 320,000 documents. After reviewing a sample set, defendant determined that 85% of the documents were irrelevant.

Magistrate Judge Mitchell then established an ESI protocol designed to take “an iterative process in which the parties would work together to formulate more effective search terms ... and try to achieve an estimated responsive hit rate of at least 85%.” Id. at *3. After initial progress in negotiations, however, the parties reached an impasse on identifying a final list of search terms and custodians, after running various search terms that had a responsiveness rate ranging from 0.5% to 13.5%.

Given the impasse, the parties decided to transition to conducting a TAR review of the 320,000 documents identified by defendant using plaintiff’s original search terms. Id. at *4. The parties agreed that the initial review of the TAR documents would be conducted by defendant’s contract attorneys with a second-level review by attorneys at defendant’s retained firm. Defendant initially stated that it planned to end the TAR process after achieving a 65% recall rate. Plaintiff indicated that a 65% recall rate was inadequate and indicated that 75% to 85% was more typical. Defendant ultimately expanded its review to reach an 80% recall rate. Upon reaching an 80% recall rate, approximately 800 potentially responsive documents remained in the TAR set. Id. at *1.

Plaintiff and defendant disagreed on how to handle the remaining 800 potentially responsive documents. Id. at *5. Plaintiff stated that the residual documents should be produced, but defendant countered that the documents had been through only a first-level review and that they needed to go through second-level review. Additionally, defendant noted that “that engaging in the second level of review and preparing the residual TAR documents for production [was] not proportional to the needs of the case,” citing “the relatively small number of responsive documents found in the 322,000-document set and describ[ing] the costs incurred in producing those documents.” Defendant explained that reviewing these additional documents would cost an estimated $40,000. Plaintiff contended that the documents were critical to the viability of his case. During a discovery conference, Magistrate Judge Mitchell asked whether plaintiff would consent to bear the cost of the discovery of these materials, but plaintiff refused and filed the instant motion to compel.
In denying plaintiff’s motion to compel, Magistrate Judge Mitchell highlighted that TAR “is an acceptable way to search for relevant ESI in appropriate cases.” Id. at *6. (quoting Da Silva Moore v. Publicis Groupe, 287 F.R.D. 182, 183 (S.D.N.Y. 2012)). Courts have not required that parties achieve a 100% recall rate when engaging in a TAR review. Rather, Magistrate Judge Mitchell noted, recent guidance suggests recall rates between 75% and 85% are appropriate in many cases. Id. at *8. Magistrate Judge Mitchell found defendant’s TAR protocol reasonable. In responding to plaintiff’s position that defendant should forego the second-level review and produce any documents found responsive by the contract attorney review team, Magistrate Judge Mitchell explained that “[c]ourts have found a second-level manual review following a TAR to be reasonable” and pointed out that plaintiff agreed to a second-level review protocol and could not renege on their agreement.

In addressing plaintiff’s contention that the documents were “critical” to his case, Magistrate Judge Mitchell noted that defendant had already expended a significant amount of money to produce a relatively small proportion of documents. Id. at *9. Additionally, Magistrate Judge Mitchell found “telling” that despite labeling the documents as “critical,” plaintiff would not cover the cost of their production. Magistrate Judge Mitchell concluded by noting that he had “considered the remaining proportionality factors, including the amount in controversy and the parties’ resources.” He recognized that the resources of the parties and the amount in issue are relevant but not determinative to the analysis and denied plaintiff’s motion, concluding that requiring review and potential production of the 800 documents would not be proportionate to the needs of the case.

2. In Corker v. Costco Wholesale, 2020 WL 1987060 (W.D. Wash. Apr. 27, 2020), United States District Judge Robert S. Lasnik granted the plaintiffs’ motion to compel production of an unredacted spreadsheet but recognized defendants’ claim that protection was appropriate for commercially sensitive information and concluded that the entered protective order provided appropriate protection by allowing defendants to restrict access to documents designated for “plaintiffs’ outside counsel only.”

In this matter, the plaintiffs requested from BCC Assets documents sufficient to identify the volume and price of Kona coffee it sold. BCC produced summary documents supposedly providing such information, and the plaintiffs objected. BCC then produced a 2,269-page document that appeared to be a spreadsheet converted into a static PDF. The document included significant redactions of information related to non-Kona brands. The plaintiffs filed a motion to compel production of the spreadsheet as it was kept in the ordinary course of business and without redactions. BCC sought a protective order given that the spreadsheets contained “irrelevant and confidential commercial information.” Id. at *1.

Judge Lasnik addressed the two issues raised by BCC’s production. The first issue related to the conversion of a functional spreadsheet into a series of image files. Under the Federal Rules of Civil Procedure, parties are required to produce ESI “in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms.” Id. (quoting Fed. R. Civ. P. 34(b)(2)(E)(ii)). As clarified by the advisory committee, the option to provide the information in a reasonably usable form instead of the form in which it is ordinarily maintained “does not mean that a responding party is free to convert electronically stored information from the form in which it is ordinarily maintained to a different form that makes it more difficult or burdensome for the requesting party to use the information efficiently in the litigation.” Id. (quoting Fed. R. Civ. P. 34 advisory committee’s note (2006)). Neither of BCC’s productions (the summary form or the PDF) met these criteria. Neither was in the format ordinarily maintained, and neither allowed the plaintiffs to efficiently use the information. While the PDFs were searchable, the filtering and sorting mechanisms provided by the spreadsheet were not available, rendering them not “reasonably usable.”

Seemingly acknowledging the functional limitations of the PDF, BCC offered, in its motion for a protective order, to produce an Excel report with all irrelevant and commercially sensitive information filtered out. This raised the second issue: “[I]s a party permitted to redact material from responsive documents?” Id. at *2. When the redaction is based on the producing party’s sole determination of relevance, the answer is generally no. Id. (citing Toyo Tire & Rubber Co. v. CIA Wheel Grp., 2016 WL 6246384 (C.D. Cal. Feb. 23, 2016); Bonnell v. Carnival Corp., 2014 WL 10979823 (S.D. Fla. Jan. 31, 2014). However, courts had not yet fully explored this rule as it applies to Excel workbooks. Although Excel spreadsheets are considered a single document, per discovery rules, they are designed to store significant amounts of information related to varying topics. For this reason, at least one court had recognized that if entire sections are irrelevant, they can be redacted by the producing party. Id. (citing Evon v. Law Offices of Sidney Mickell, 2010 WL 455476 ) (E.D. Cal. Feb. 3, 2010)).

The court determined that it did not need to resolve this issue because, in this case, BCC’s request for a protective order was not based solely on relevance grounds. BCC also argued that the information it sought to withhold was confidential, and disclosure would cause BCC to be at a competitive disadvantage. Pursuant to Rule 26(c)(1)(G), a court can place restrictions on the disclosure of confidential commercial information. The court found that BCC had shown good cause for preventing disclosure of the information related to non-Kona brands. Moreover, the general protective order previously entered in the matter covered BCC’s concerns by allowing BCC to designate the information as for “plaintiffs’ outside counsel only” to protect the disclosure of competitive or proprietary information. BCC did not show why these agreed restrictions were insufficient to address its current concerns and therefore denied the defendant’s motion.

3. In United States ex rel. Nargol v. DePuy Orthopaedics, Inc., 2020 WL 3840900 (D. Mass. July 8, 2020), Magistrate Judge Page Kelley of the District of Massachusetts held that relators, who had been barred by a protective order from using information obtained as expert witnesses in separate litigation, had to provide defendants all the materials they gave to their experts in this case to determine whether they used protected material.

In this False Claims Act qui tam action, in which the Department of Justice declined to intervene, the relators alleged that defendants promoted and sold metal-on-metal hip replacement devices that fell outside of Food and Drug Administration-approved manufacturing specifications, causing submissions of false Medicare and Medicaid claims. Id. at *1. Relators alleged that they had conducted a research study on patients with the hip replacement devices and found that they contained greater metal ion concentrations than in patients who used competing hip replacement devices. Id. at *2. Relators concluded that the reason for the greater metal ion concentration was that the metal components of the hip replacement device rubbed against one another.

Prior to this action, defendants were party to a number of personal injury and product liability lawsuits related to the hip replacement device. Id. at 3. Relators served as testifying experts or fact witnesses for plaintiffs in many of those lawsuits, including in multidistrict litigations. In the course of their work as experts and fact witnesses, relators obtained information about and from the defendants subject to protective or confidentiality orders. At issue in the instant case was the protective order issued by Judge David A. Katz in the Northern District of Ohio prohibiting relators from sharing or using the information they received. The order also prohibited relators from sharing the information with any third party.

Despite Judge Katz’s protective order, relators used the confidential information in drafting their first complaint in the instant case. Relators were ordered to file a second complaint omitting any allegations containing the confidential information. Relators did so and filed an affidavit swearing that they did not use any confidential documents in violation of any protective order. In the course of discovery, defendants provided relators the same information that had been provided in the multidistrict litigation but did not give relators permission to use any of the confidential information.

Eventually, defendants came to believe that relators gave their experts information that relators learned in the multidistrict litigation. Id. at 4. Defendants served relators with discovery requests to ascertain whether, among other things, relators had violated Judge Katz’s protective order, but relators failed to respond to those requests.

In the face of defendants’ motion to compel. Magistrate Judge Kelley explained that Judge Katz’s protective order remained binding on relators. Magistrate Judge Kelley noted that the protective order clearly prohibited relators from “us[ing] the confidential knowledge they received as experts ‘for their own benefit.’ ” Id. at *5. Further, Magistrate Judge Kelley noted that it was clear that defendants did not intend relators to use the “confidential information in the present litigation.” Id. at *6. Magistrate Judge Kelley noted that First Circuit case law was not clear on whether the court could modify another judge’s order. Regardless, Magistrate Judge Kelley explained, principles of equity demanded that Judge Katz’s order be binding: “[A]llowing relators to use confidential information in this litigation, which would not have been available to them but for their role as experts in the [multidistrict] litigation, would create distrust between parties exchanging confidential information in future, similar litigation.”

Magistrate Judge Kelley ordered relators to turn over to defendants all materials that they provided to their expert, including information they received or generated as experts in the multidistrict litigation. Additionally, Magistrate Judge Kelley permitted defendants to depose one of the expert’s employees to determine what information was produced to the expert and when. “Knowing which of the confidential ... documents were provided to [the expert], and when, will enable [defendants] to determine whether relators violated Judge Katz’s confidentiality order, and, if so, file any appropriate motion to strike or dismiss.”

4. In Kologik Capital, LLC v. In Force Technology, LLC, 2020 WL 1169403 (D. Mass. Mar. 11, 2020), Magistrate Judge Marianne Bowler awarded sanctions under Fed. R. Civ. P. 37(e)(1) that (a) directed defendants to take responsibility for recovering from third parties lost or destroyed ESI that should have been preserved and (b) waived defendants’ right to raise authenticity and business record objections to defendants’ ESI recovered from third parties by subpoena.

This case resulted from an alleged breach of a professional services agreement by defendant Brandon-COPsync LLC (BCS). Before this litigation began, on June 2, 2017, an attorney representing COPsync, Inc. (COPsync), notified defendants that BCS was in default of the agreement. Id. at *1. According to plaintiff, who purchased COPsync’s assets after COPsync filed for bankruptcy on September 29, 2017, the notice of default resulted from BCS’s purported “failure to remit payments from customers using COPsync services and products to COPsync.” Id. at *1-2. Because defendants received COPsync’s notice of default, Magistrate Judge Bowler found that defendants “reasonably anticipated this litigation involving, inter alia, conversion and unjust enrichment claims based on the failure to remit payments from customers using COPsync software.” Id. at *1.

Although the decision does not describe the circumstances of defendants’ preservation failures, Magistrate Judge Bowler noted that defendants failed to preserve ESI with third-party customers purportedly using COPsync software. Id. at *2. In late September and October of 2019, defendants’ counsel told plaintiff that “everything had been produced,” which Magistrate Judge Bowler viewed as “essentially denying the ability to restore the information.” Plaintiff then issued third-party subpoenas directly to customers and uncovered emails between defendants and their customers that were formerly in defendants’ possession, custody, or control. Magistrate Judge Bowler noted that under Rule 37(e) “the routine, good-faith operation of an electronic information system” is “a relevant factor for the court to consider in evaluating whether a party failed to take reasonable steps to preserve lost information.” However, she concluded that the circumstances did not support the notion of defendants’ “good-faith operation” of their electronic information system. Accordingly, Magistrate Judge Bowler found that the plaintiff had established each of the requirements for a sanction under Rule 37(e)(1), “including defendants’ failure to take reasonable steps to preserve electronically stored communications with third-party customers purportedly using COPsync software.”

In response to the motion for sanctions, defendants asserted merits-based arguments, “including the assertion that the professional services agreement was never terminated,” and further argued that “spoliation requires that they acted with the ‘intent to destroy the evidence.’ ” Magistrate Judge Bowler rejected the defendants’ merits-based argument, agreeing with plaintiff that none of those arguments “obviate[s] the requirement to preserve discovery materials.” Magistrate Judge Bowler also rejected defendants’ assertion regarding their lack of intent to destroy evidence, concluding that “[t]he plain language of [the recently amended] Rule 37(e) ... does not require a showing of intent except with respect to the choice of certain severe sanctions listed in Rule 37(e)(2).”

Finally, Magistrate Judge Bowler considered what sanctions or measures to impose for defendants’ preservation failures. Id. at *3. As an initial matter, “[w]here electronically-stored information is lost due to the negligence or gross negligence of a party, amended Rule 37(e)(1) permits only the imposition of sanctions that are no greater than necessary to cure the prejudice.” Id. (internal quotation marks omitted). In determining what sanction to impose, courts also consider the “importance of ... the lost information to claims and defenses in the litigation.” Magistrate Judge Bowler found that the prejudice to plaintiff included “engaging in months of fact discovery trying to recover documents defendants failed to preserve, preparing for depositions without electronically stored documents, and loss of goodwill with plaintiff’s current and potential customers who are being pulled into this litigation.” Id. (internal quotation marks omitted).

Magistrate Judge Bowler thereby (i) directed defendants to “take responsibility for recovering additional lost or destroyed [electronically stored] documents that should have been preserved” regarding third-party customer communications after June 2, 2017, and (ii) ruled that defendants had “waive[d] objections as to authenticity and business record status for [d]efendants’ [ESI] with third parties recovered through subpoenas.” Id. (internal quotation marks omitted). But Magistrate Judge Bowler denied plaintiff’s request for monetary sanctions without prejudice, stating that plaintiff could renew the issue at the conclusion of the case, and reserved for the trial judge plaintiff’s request for a jury instruction or an order allowing plaintiff to present evidence about the destruction of evidence at trial.