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Top 10 e-discovery developments and trends in 2013: Part 2

Posted in Electronic Discovery, Information Technology, Privacy

Following is Part 2 of my third annual list of the top 10 e-discovery developments and trends from the past year. Read Part 1.

6. “It is malpractice to not seek a 502(d) order from the court before you seek documents.” U.S. Magistrate Judge Andrew Peck began last year at Legal Tech providing his thoughts on the importance of orders entered pursuant to Federal Rule of Evidence 502(d). He said: “I’ll give you a fairly straight takeaway on 502(d). In my opinion it is malpractice to not seek a 502(d) order from the court before you seek documents. That doesn’t mean you shouldn’t carefully review your material for privileged documents before production, but why not have that insurance policy?” Other judges echoed these sentiments as the year progressed.

As if hearing federal judges say malpractice and Rule 502(d) orders in the same sentence were not enough to convince federal court litigants to use them, cases throughout the year further highlighted the importance of securing these orders. Magistrate Judge Waxse enforced a Rule 502(d) order over the objection of the party that originally requested it in Rajala v. McGuire Woods, LLP, 08-2638 (D. Kan. Jan. 3, 2013). Earlier in the case, the defendant moved for a protective order that contained a clawback provision pursuant to Rule 502(d). Magistrate Judge Waxse entered the order which included language stating that “[t]he inadvertent disclosure or production of any information or document that is subject to an objection on the basis of attorney-client privilege or work-product protection … will not be deemed to waive a party’s claim to its privileged or protected nature or estop that party or the privilege holder from designating the information or document as attorney-client privileged or subject to the work product doctrine at a later date.”

Despite this language, the defendant later tried to prevent the plaintiff from clawing back a privileged document that had been produced. The defendant argued that the plaintiff should not be able to reply on the order because it engaged in a “document dump” with no pre-production privilege review. Magistrate Judge Waxse rejected the defendant’s argument and enforced the plain language of the Rule 502(d) order because the production was inadvertent and there was no evidence that the plaintiff had intended to overwhelm or burden the defendant with documents largely irrelevant to the litigation. “The order is designed to reduce the time and costs attendant to document-by-document privilege review, and was entered with the express goal of eliminating disputes regarding inadvertent disclosure of privileged documents, which would disrupt the discovery process and cause the attorneys in this case to expend significant resources and time arguing about what steps were taken to prevent disclosure and to rectify the error.”

U.S. Magistrate Judge Frank Maas said that under a Rule 502(d) order he had entered the defendants had the right to claw back privileged documents “no matter what the circumstances giving rise to their production were.” Brookfield Asset Management, Inc. v. AIG Financial Products Corp., No. 09-8285 (S.D.N.Y. Jan. 7, 2013). He explained that “even if AIG or its counsel had dropped the ball (which they did not), the parties at my urging had entered into a Rule 502(d) stipulation which I so ordered on February 11, 2011. See Fed. R. Evid. 502(d). That stipulation … contains one decretal paragraph, which provides that ‘Defendants’ production of any documents in this proceeding shall not, for the purposes of this proceeding or any other proceeding in any other court, constitute a waiver by Defendants of any privilege applicable to those documents, including the attorney-client privilege.’”

In Great-West Life & Annuity Ins. Co. v. Am. Econ. Ins. Co., No. 11-2082 (D. Nev. Sep. 23, 2013), the court rejected the argument that the parties’ Rule 502(d) order did not supplant the default procedures set forth in Rule 502(b) because the order used the term “inadvertent” but did not define it. “Such an outcome defeats the purpose of Rule 502.” In RIPL Corp. v. Google Inc., No. 12-2050 (W.D. Wash. Dec. 17, 2013), the court likewise stated that “[t]here is no requirement that, in order to supplant Rule 502(b), an agreement provide adequate detail regarding ‘what constitutes inadvertence, what precautionary measures are required, and what the producing party’s postproduction responsibilities are to escape waiver,” and held that the receiving party violated the parties’ protective order by failing to return or destroy privileged documents.

For those looking for sample Rule 502(d) orders, the Fordham Law Review published a Model Draft of a Rule 502(d) Order that was created during a symposium on Rule 502 sponsored by the U.S. Judicial Conference Advisory Committee on Evidence Rules. The purpose of the symposium was to address the lack of use of Rule 502 by courts and litigants. The Seventh Circuit Electronic Discovery Pilot Program published a Model Case Management Order containing a non-waiver and claw back protocol pursuant to Rule 502(d).

7. The proposed discovery amendments to the Federal Rules of Civil Procedure were posted for public comment. The U.S. Judicial Conference Advisory Committee on Civil Rules proposed amendments to the Federal Rules of Civil Procedure and posted them for public comment on Aug. 15, 2013. The proposed amendments contain a number of changes to the discovery rules which would impact e-discovery. If approved, the proposed amendments would not become effective until Dec. 1, 2015.

Rule 26(b) would bring the principle of proportionality into the definition of what the proper scope of discovery is. Rule 26(c) would state that a court could issue a protective order allocating discovery expenses. Rule 26(f) would state that the parties’ discovery plan should state their views on the preservation of ESI and whether they should ask the court to issue an order under Evidence Rule 502. Likewise, Rule 16 would state that scheduling orders may provide for the preservation of ESI and include agreements reached by the parties under Evidence Rule 502.

A party responding to a document request would be permitted under Rule 34 to produce documents or ESI at a “reasonable time” later than the time stated in the request. Any objections to a request would have to state whether any responsive documents or ESI were withheld on the basis of those objections. “Examples would be a statement that the search was limited to materials created during a defined period, or maintained by identified sources.”

Rule 37(e) would be completely rewritten to address a party’s failure to preserve discoverable information. Rule 37(e) has received the most attention because it is designed to address concerns raised about the increasing burden of preserving ESI for litigation. It is supposed to provide a uniform standard for determining whether a party should be sanctioned for failing to preserve discoverable ESI and what sanctions should be imposed. The Advisory Committee has invited public comment on five specific questions concerning proposed Rule 37(e).

Hundreds of public comments have been received already, including from federal judges, attorneys, law professors, bar associations, legal interest groups, corporations and e-discovery thought leaders. Although many view Rule 37(e) as an improvement over the current situation, concerns have been raised that the meaning of the term “willful” is ambiguous and that the “no-fault exception” for imposing sanctions could become problematic and undercut the purpose of the new rule. Various concerns also have been raised about the factors listed to evaluate a party’s conduct and failure to preserve information, and some have recommended that these factors be deleted from the proposed rule altogether. Others have been disappointed by the Advisory Committee’s decision not to define a trigger for the duty to preserve and its scope.

In addition to formal public comments, U.S. District Court Judge Shira Scheindlin made headlines when she issued a decision on the same day the public comment period began that openly disagreed with the proposed changes to Rule 37(e). She stated: “I do not agree that the burden to prove prejudice from missing evidence lost as a result of willful or intentional misconduct should fall on the innocent party. Furthermore, imposing sanctions only where evidence is destroyed willfully or in bad faith creates perverse incentives and encourages sloppy behavior. Under the proposed rule, parties who destroy evidence cannot be sanctioned (although they can be subject to ‘remedial curative measures’) even if they were negligent, grossly negligence, or reckless in doing so.” Sekisui American Corp. v. Hart, No. 12 Civ. 3479 (S.D.N.Y. Aug. 15, 2013).

Moreover, the Senate Committee on the Judiciary held a hearing of the Subcommittee on Bankruptcy and the Courts discussing the proposed amendments. The Subcommittee entitled the hearing “Changing the Rules: Will limiting the scope of civil discovery diminish accountability and leave Americans without access to justice?”

If you want to weigh in on the proposed amendments, the public comment period for them runs until Feb. 15, 2014.

8. The new Benchbook for U.S. District Court Judges added a section on e-discovery. Incorporating key e-discovery concepts found in the proposed civil rule amendments, the Benchbook for U.S. District Court Judges added a new section on civil case management, including how to address e-discovery issues. The Benchbook acknowledges that “[e]xcessive discovery is one of the chief causes of undue cost and delay in the pretrial process,” and that e-discovery alone “is often a source of dispute, excessive costs, and delays.”

The Benchbook identifies three issues relating to ESI that should be addressed during the case-management conference to see if the parties can reach an agreement:

  1. the form in which ESI will be produced;
  2. whether the discovery of ESI can be limited to certain sources or custodians; and
  3. what search terms or methods will be used to find responsive ESI.

It also recommends that federal judges advise the parties that current Civil Rules 26(b) and 26(g) require discovery to be proportional to the needs of the case and that the parties will be asked about proportionality at the case-management conference. According to the Benchbook, “parties are not entitled to all discovery that is relevant to the claims and defenses. The judge has a duty to ensure that discovery is proportional to the needs of the case.”

The Benchbook also embraces the concept of cooperation during the discovery process: “The discovery process is adversarial in the sense that the adversaries make choices about what information to seek and how to seek it. But that does not mean that lawyers cannot cooperate or that they must act in a hostile and contentious manner while conducting discovery.”

The Benchbook also notes that many parties are still unaware of the availability of a “non-waiver order” under Evidence Rule 502(d). “This order, which does not require party agreement, precludes the assertion of a waiver claim based on production in the litigation. It avoids the need to litigate whether an inadvertent production was reasonable.” Accordingly, the Benchbook recommends that judges consider entering a Rule 502(d) non-waiver order as a means “for reducing the cost of discovery by reducing privilege review.”

9. The U.S. International Trade Commission adopted final rules for e-discovery in Section 337 proceedings. The ITC noted that the production of ESI has become expensive and time-consuming for parties involved in litigation before courts and in Section 337 proceedings before it, yet usually only a small percentage of ESI produced in discovery is ultimately admitted into evidence. According to the ITC, its new e-discovery rules are intended to cut costs for parties in Section 337 investigations, lessen discovery-related burdens for parties, reduce the number of discovery-related disputes, reduce the number of discovery motions before ALJs and speed up the resolution of Section 337 proceedings. Specifically, the new rules incorporate the principle of proportionality and state that a person need not provide discovery of ESI from sources that are not reasonably accessible because of undue burden or cost. The new rules also incorporate procedures for the handling of privileged documents, including a clawback provision and an obligation to prepare privilege logs.

The Securities and Exchange Commission (SEC) also examined the impact e-discovery is having on parties involved in litigation outside of court. It approved a proposal by the Financial Industry Regulatory Authority, Inc. (FINRA) to update the Discovery Guide and provide guidance on e-discovery issues in customer arbitration proceedings. The updated Discovery Guide now encourages the parties to discuss the form in which they intend to produce documents and agree on a form of production. It also requires parties to produce ESI in a “reasonably usable format.” It also provides guidance to arbitrators about how to resolve disputes involving the form of production and the cost and burden of producing ESI.

Similarly, the American Arbitration Association (AAA) also updated its Commercial Arbitration Rules to give arbitrators greater control over the exchange of information with a view toward achieving an economical resolution, while also balancing each party’s ability to present its case. Among other things, the updated rules encourage the parties to agree on “reasonable search parameters” that balance the need for the production of ESI relevant and material to the outcome of the arbitration against the cost of locating and producing them. If the parties cannot agree, the arbitrator may determine what search parameters the parties should use and require the parties to produce ESI “in the form most convenient and economical for the party in possession of such documents, unless the arbitrator determines that there is good cause for requiring the documents to be produced in a different form.”

10. The Sedona Conference® Working Group on Electronic Retention & Production published the Commentary on Information Governance. “Information governance” as used by The Sedona Conference® means “an organization’s coordinated, interdisciplinary approach to satisfying information compliance requirements and managing information risks while optimizing information value.” It “encompasses and reconciles the various legal and compliance requirements and risks addressed by different information-focused disciplines, such as records and information management (RIM), data privacy, information security, and e-discovery. Understanding the objectives of these disciplines allows functional overlap to be leveraged (if synergistic); coordinated (if operating in parallel); or reconciled (if in conflict).”

In its commentary, The Sedona Conference® recommends a comprehensive approach to information governance and explains why “traditional, siloed approaches to managing information have prevented adequate consideration of information value, risk, and compliance for the organization as a whole,” how costs and risks accumulate for organizations lacking adequate control of their information, how information governance benefits an organization and why senior leadership support on this issue is essential.

According to The Sedona Conference®, “[t]he effective, timely, and consistent disposal of physical and electronic information that no longer needs to be retained should be a core component of any Information Governance program.” Timely disposal of information provides many benefits to an organization, including reduced storage and labor costs, reduced e-discovery costs and risks, and reduced data security and privacy risks.

There were a few decisions last year showing that organizations can defensibly delete data they no longer need. In another decision arising from the In re Pradaxa (Dabigatran Etexilate) Products Liability Litigation, the court held that the defendant did not spoliate evidence by destroying emails and documents in accordance with the company’s record retention policies for former employees. The defendant’s document retention policy provided that when an employee left its employment, it would leave all of the employee’s email, user share, and hard drive documents in place until 30 days after the employee’s final day. After that 30-day period, the defendant would delete the former employee’s documents unless they were subject to an existing litigation hold. When a litigation hold was released, the defendant deleted all the documents maintained exclusively under the hold within 24 hours. In re Pradaxa (Dabigatran Etexilate) Products Liability Litigation, MDL No. 2385 (S.D. Ill. Sept. 25, 2013).

Another court held that the City of Las Vegas properly applied its practice of having its email system automatically purge all emails after a 45-day period unless the emails were affirmatively transferred to a personal PST folder by the custodian. “The record in this case is insufficient to support a finding that the City was on notice [the plaintiff] contemplated litigation sufficient to trigger a duty to preserve electronically stored information by suspending its then-existing practice of automatically purging emails after 45 days.” Hixson v. City of Las Vegas, No. 12-871 (D. Nev. July 11, 2013).

Another court held that the defendant did not spoliate evidence by reformatting a former employee’s laptop computer and deleting his email archives 30 days after his departure. AMC Technology, LLC v. Cisco System, Inc.,  No. 11-3403 (N.D. Cal. July 15, 2013). The court found that the defendant did not destroy the former employee’s documents with a culpable state of mind because the disposal of the documents was routine and done in accordance with established company procedure.

Importantly, the court also explained that a party’s duty to preserve evidence “is not limitless:”

A litigant has an obligation to preserve only evidence “which it knows or reasonably should know is relevant to the action.” This duty requires a party to “identify, locate and maintain information that is relevant to specific predictable and identifiable litigation,” which includes identifying “key players” who may have relevant information and taking steps to ensure that they preserve their relevant documents. It is critical to underscore that the scope of this duty is confined to what is reasonably foreseeable to be relevant to the action. Requiring a litigant to preserve all documents, regardless of their relevance, would cripple parties who are often involved in litigation or are under the threat of litigation.

As part of the creation of a defensible deletion strategy, an organization should create written records retention policies built around its business needs and all applicable legal, regulatory and contractual requirements. It also should develop litigation hold and release policies. Once in place, an organization can follow these policies to dispose of information it no longer needs.