In a very recent case, Jannx Med. Sys. v. Methodist Hosps., Inc., 2010 U.S.Dist. LEXIS 122574 (N.D. Ind. Nov. 17, 2010), the requesting party did not specify the format of the documents it was requesting. Seizing upon this perceived “opening,” the producing party delivered documents in PDF format.

Was the receiving party stuck? No. First, the court agreed with the requesting party that the ESI that had been produced did not comply with Rule 34, in that the ESI had not been produced “in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms.” Fed. R. Civ. P. 34(b)(2)(E)(ii).

But, more to the point, the court referred to Paragraph 13 of the Advisory Committee’s Notes to the 2006 ESI amendments. The Advisory Committee cautioned that

the option to produce in a reasonably usable form 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.

via ESIgns: E-Discovery Food for Thought: Unless You Ordered PDFs or TIFFs, Send Them Back.

Plaintiff opposed the court’s proposal to order defendant’s production of backup tapes pursuant to an order of non-waiver and argued that defendant should have to search and produce its own electronically stored information (“ESI”) and that the burden and cost of doing so should not be shifted to plaintiff.  Rejecting the notion that such an order amounted to cost-shifting and upon finding the ESI “not reasonably accessible,” the court ordered the tapes’ production pursuant to an order under Rule 502(d).*

In the course of discovery, disagreement arose regarding the production of ESI on backup tapes.  The court proposed production of the tapes subject to an order under Rule 502(d) which would preserve defendant’s claims of privilege.  Plaintiff objected, arguing that the defendant “should be required to search its own ESI and produce discoverable materials — just as [plaintiff] did — and that the burden and cost of doing so should not be shifted.”  Specifically, plaintiff argued that “(i) the College should bear its own cost of production; (ii) the College has not met its burden of showing that producing the [ESI on backup tapes] would create an undue burden; (iii) producing the [backup tapes] violates rule 34(b)(2)(E) of the Federal Rules of Civil Procedure; (iv) producing all the [backup tapes] amounts to an impermissible “data dump”; and (v) rule 502 is not a cost-shifting tool.”

The court addressed each of plaintiff’s arguments in turn and ultimately rejected each.  Responding to plaintiff’s argument that such an order constituted cost-shifting, the court reasoned that it did not, because defendant would bear the cost of producing the backup tapes and must produce all of its ESI.  The court recognized that by ordering defendant to turn over the tapes unreviewed, it was “in effect forcing [Plaintiff] to bear the costs of that review if it wants certain data,” but reasoned that “[s]uch a protective order is not . . . a traditional cost-shifting order.”

via Court Orders Production of Backup Tapes Pursuant to Order of Non-Waiver Under Rule 502(d) : Electronic Discovery Law.

Defendants sought production of electronically stored information for a period of 18 years – a significant departure from the default period of five years previously imposed.  Upon plaintiffs’ showing that retrieval of the additional data by a vendor would cost approximately $1 million to $1.5 million (not including the cost of review), the court found the information was “not reasonably accessible”.  However, the court also found that defendants had shown good cause to compel the requested production.

via Court Compels Production of ESI for a Period of 18 Years, Shifts Majority of Costs to Requesting Party : Electronic Discovery Law.

RELEVANT COURT RULES REGARDING E-DISCOVERY

Courts have recognized the importance of technological advancements in litigation by implementing rules that require parties to produce electronic information in discovery. Indeed, both the Federal Rules of Civil Procedure and the New Jersey Rules of Court (collectively, the “court rules”) require parties to produce their electronically stored information during litigation. Federal Rules 26(a)(1) and N.J. Rules 4:18-1(a).

In federal actions, parties are required to disclose, among other things, documents and other objects within their possession that may be used to support their claims or defenses prior to receiving a discovery request. Federal Rules 26(a)(1)(A)(ii). As of December 1, 2006, the term “documents” has been expanded to include ESI among the type of information and documents produced in litigation. Similarly, the N.J. Rules provide that a party may request ESI from its adversary. N.J. Rules 4:18-1(a).

Although not formally defined in either set of the court rules, in practice it is understood that ESI includes information “created, manipulated, communicated, stored, and best utilized in digital form, requiring the use of computer hardware and software.” “Electronically Stored Information: The December 2006 Amendments to the Federal Rules of Civil Procedure,” Kenneth J. Withers, Northwestern Journal of Technology and Intellectual Property, Vol.4 (2), 171, 173. Although the most commonly requested form of ESI is e-mail, the court rules require production of electronic data in formats other than e-mail.

The court rules have attempted to provide some limitations to the production requirements of electronic discovery, presumably in an effort to achieve fairness and balance. For example, in the context of a federal case, “[a] party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost.” Federal Rules 26(b)(2)(B). However, even with limitations, the production of ESI can be very expensive and onerous.

via Mechanisms That Help Reduce the Cost of E-Discovery.

Passlogix, Inc. v. 2FA Tech., LLC, 2010 WL 1702216 (S.D.N.Y. Apr. 27, 2010)

Upon finding that defendants spoliated relevant information, including emails, Skype messages, and computer logs, the court declined to order an adverse inference, to preclude defendants from the presentation of arguments implicating the discarded documents, or to order defendants to pay plaintiff’s costs, but ordered monetary sanctions in the amount of $10,000, after balancing “2FA’s litigation conduct with its status as a small corporation.”

In this opinion, the court addressed plaintiff’s allegations that defendants, specifically defendant Gregory Salyards, committed fraud on the court by creating and sending an anonymous email “in an effort to expand discovery, cause Passlogix competitive harm, and garner a favorable settlement.”  Defending against the accusation, Salyards proffered the affirmative defense of IP spoofing, “stating that a Passlogix employee may have ‘spoofed’ his IP address in an effort to impersonate him on the internet.”  Passlogix also sought spoliation sanctions arguing that defendants failed to implement a legal hold and took part in intentional spoliation of data, including emails and text messages.

Although beyond the scope of this summary, the court’s lengthy discussion of the anonymous email(s) and Salyards’ defense of “IP spoofing” is fascinating and showcases how ever-advancing technology has created scenarios for consideration that, not long ago, seemed more the stuff of spy novels than of litigation in our federal courts.

via Court Orders Monetary Fine for Gross Negligence and Intentional Spoliation of ESI, Including Emails, Text-Messages, and Skype Messages : Electronic Discovery Law.

Why are the problems and issues different in court and arbitration? To begin with, despite the pressure in some quarters to mirror litigation, most arbitrators are sensitive to the need to keep arbitration faster and cheaper than court. One important method of doing that is to suppress discovery, a material cause of runaway costs in litigation. While California law has always encouraged full discovery, and Federal Law only ameliorates it in certain specific ways (e.g. the number of interrogatories permitted), the rules of most arbitration tribunals either ignore specific references to discovery or permit very limited discovery (for example, JAMS Rule 17 (b) permits one deposition of an opposing party). Instead, the published arbitration rules generally combine a required voluntary exchange of documents and discretionary discovery to ensure that the parties have what they need to try their case.

While the Federal and State statutory framework for discovery has been modified to address electronic discovery (see, Fed. Rule of Civil Proc. 26 and Cal. Code Civ. Proc. Secs. 2031.010 et seq.), arbitration rules either give a token nod to the existence of ESI (See, JAMS Rule 17 [a]) or ignore it altogether. This leaves the entire issue in the hands of the parties and the Arbitrator. The task in arbitration is to balance the realistic discovery needs of the parties with a rational cost-suppression regime. T

via E-Discovery In Arbitration.

Related articles by Zemanta

• Big Jump Predicted in Use of e-Discovery, CompTIA Survey Reveals (eon.businesswire.com)
• Singapore Law Watch | Electronic Discovery Civil Procedure (asialegaltech.com)

Most attorneys understand that if they advise a client on how to rob a bank or perpetrate a fraud, their communications will not be shielded by the privilege. Yet, few attorneys realize that there is an increasing risk that their adversaries in litigation may use the crime-fraud exception to strip away the privilege protecting attorney-client communications in civil discovery. Most attorneys would view such an intrusion as an assault on the basic structure of the privilege. Without a strong, clear standard against such efforts in the civil arena, we expect there to be more attempts to expand the application of the crime-fraud exception to collateral litigation-related conduct in civil cases: particularly in the fast-evolving area of e-discovery and the unfamiliar and intimidating realm of information technology.

The strategy works as follows. The attorney planning to strip the privilege serves a typically overbroad set of document requests. She then follows up with a Federal Rules of Civil Procedure §30(b)(6) (or state law equivalent) deposition of the company’s representative to determine the failures or weaknesses in the company’s preservation, search, and production of electronically stored information. Technological advances have significantly increased the ways in which ESI can be saved, including but not limited to folders on various network drives that reside on different servers, hard drives, laptops, hand-held devices, home computers, and external storage applications. This increasing complexity is compounded by hardware and software that is constantly being updated or replaced. Personnel changes can also result in leaving no one with knowledge of each employee’s record-keeping habits. Faced with a broad-ranging document request, an attorney’s task of preserving and locating all relevant data becomes extraordinarily challenging. To make matters worse, the opposing counsel may then move to compel the production of documents under the low threshold of what is discoverable, which does not require proof of actual relevancy or admissibility at trial. The purpose is to create the impression that documents are missing or have been withheld.

Attorneys opposing this sort of motion to compel then face the difficult task of proving that all relevant documents were in fact preserved and produced, while at the same time ensuring the judge understands the company's technology infrastructure. Notwithstanding an attorney's reasonable and good faith effort to preserve and produce relevant documents, sources of potentially relevant data will inevitably go undiscovered. Or, the scope of preservation will be inadequate. If the opposing counsel obtains a sanctions order, it will characterize the discovery-related conduct as a “fraud,” and seek to pierce the attorney-client privilege by invoking the crime-fraud exception.

via When E-Discovery Is Used as a Weapon.

Related articles by Zemanta

• EU Court Rejects Expanding Attorney-Client Privilege (online.wsj.com)
• Employers Have Limited Access To Workers’ Personal Emails, Ruling Suggests (huffingtonpost.com)
• NJ court: Employee-attorney e-mails are private (seattletimes.nwsource.com)
• eDiscovery Compliance and Its New Requirements: The IT Manager (apache.sys-con.com)
• Protecting Attorney Client Privilege (supportingsaferhealthcare.com)

On February 9, a class action and derivative lawsuit was filed by a public unitholder of Eagle Rock Energy Partners, L.P. (Eagle Rock) in the Court of Chancery of the State of Delaware against the partnership, the partnership’s general partner, Eagle Rock Energy GP, L.P. (GP), and certain affiliates of GP. The complaint alleged, among other things, that (1) the previously announced proposed recapitalization transactions are unfair to the partnership’s public unitholders, (2) the preliminary proxy statement filed on January 14 in connection with the proposed recapitalization transactions contains material misstatements and omissions, and (3) the defendants breached their fiduciary duties to the partnership’s public unitholders in connection with the proposed recapitalization transactions. During confirmatory discovery, a dispute arose regarding collection of emails from the Conflicts Committee, which consisted of three members of the Eagle Rock board of directors.

Defense counsel informed the court that two of the three members had self-collected and foldered documents relevant to the transaction at issue. Counsel argued that it would be unnecessary to collect from the third committee member because he was simply copied on all the same emails sent and received by the other two members. Counsel stated that, aside from being redundant, it would be costly and burdensome to collect records from the third member, who was located in an area of the country remote from Delaware (Tulsa, Oklahoma) and had a habit of keeping emails related to the matter on his personal computer interspersed with personal and other business emails.

Vice Chancellor Laster ruled that confirmatory discovery is discovery, and that attorneys may not rely upon a defendant to search his/her own email. The Vice Chancellor held that attorneys appearing before the Court of Chancery have an affirmative obligation to go wherever the electronically stored information is located, to be physically present to ensure that the collection is done properly, and to collect relevant documents even if located on a personal computer.

With regard to preservation, the Vice Chancellor expressed concern as to whether adequate measures had been taken to ensure that relevant electronic information had been properly preserved. The Vice Chancellor recommended (but did not require) that defense counsel take additional steps to image the computer drives in question, perform forensic checks, and conduct searches, to make sure that relevant data had not been lost. He further advised counsel to check auto-delete settings during the course of the collection process.

via Lexology – Ruling on confirmatory discovery: defendant’s attorney must be present during collection of ESI.

Editor: Describe cases in which extensive e-discovery was threatened but which were settled in order to avoid discovery costs.

Naar: E-discovery is a fact of life in all litigation today and has been for some time now. One trend is to notify an adversary at the time litigation is filed, or even earlier, of the need to establish a litigation hold – if one has not already been put in place because of the anticipation of litigation – regarding certain documents and other materials maintained or stored in both hard copy and in electronic format. Litigators no longer wait until initial discovery requests are served, and rule changes now require counsel to meet and confer immediately upon the commencement of litigation to discuss issues involving electronically stored information (“ESI”). As a result, the cost benefit analysis engaged in by parties and their counsel as to whether to litigate or settle occurs earlier in litigation or even before litigation is filed. The costs and anticipated costs of e-discovery has thus had an impact on the settlement calculus. While the cost of discovery has always been a significant factor in the determination of whether or when a case should be settled, the costs related to extensive e-discovery have further pushed the scales toward settlement even when the producing party can make a convincing argument that all or some of those costs should be shifted to the party seeking the discovery. At the same time, parties seeking extensive e-discovery argue, based upon discovery of the adversary’s computer systems and back-up protocols, that the discovery sought should be easier and cheaper to produce because it doesn’t have to involve the production of a room full of boxes of hard copy documents, but can be burned to computer disks at the push of a button. These issues have brought about new twists to traditional issues such as the inadvertent production of privileged materials and the entry of protective orders. As a result, lawyers are spending more and more time speaking to their clients, their adversaries, and the courts to resolve the multitude of issues that now arise because most documents and materials are generated and stored electronically. It is unclear whether recent calls by reputable groups such as the American College of Trial Lawyers for fact-based pleading, limited discovery, and mandated proportionality will have an impact on the run-away train of e-discovery. One thing remains clear: an even greater percentage of cases are likely to settle because of e-discovery issues.

[continued]  The Impact Of E-Discovery On Litigation Trends.

In making rulings on disclosure, the tribunal should bear in mind the high cost and burdens associated with compliance with requests for the disclosure of electronic information. … E-mail and other electronically created documents found in the active or archived files of key witnesses or in shared drives used in connection with the matter at issue are more readily accessible and less burdensome to produce when sought pursuant to reasonably specific requests. Production of electronic materials from a wide range of users or custodians tends to be costly and burdensome and should be granted only upon a showing of extraordinary need. Requests for back-up tapes, or fragmented or deleted files should only be granted if the requesting party can demonstrate a reasonable likelihood that files were deliberately destroyed or altered by a party in anticipation of litigation or arbitration and outside of that party's document-retention policies operated in good faith.

The term “extraordinary need” is not defined in the institute's protocol.

The protocol does address various “modes” of electronic disclosure, ranging from minimal to extensive, and directs the parties to meet and confer as to an agreed “mode” prior to the first scheduling conference, and to take up the matter with the panel at that conference.

In August 2008, the International Chamber of Commerce‘s International Chamber of Commerce’s Task Force on Production of Electronic Documents in Arbitration began its work. It was tasked to study the effects of e-discovery in international arbitration and to make recommendations on the subject of production of electronically stored information in such proceedings. A recently issued draft report suggests addressing e-discovery in arbitration as early as possible. Among other questions, the report suggests parties ask whether there will be e-discovery, how electronic documents will be preserved, where they will be pursued and what procedures parties will follow in requesting and responding to discovery requests. In addition, parties should determine in what form the documents will be produced and whether any privilege and waiver agreements will apply during the process.

The draft report identifies techniques for managing ESI production, including limiting the scope and source of production, excluding metadata or data embedded in documents, restricting dates, using specific search terms and data sampling, and disclosing and inspecting electronic sources. In addition, it suggests using independent electronic document experts. It also suggests shifting costs, so that discovery is shared more equally by the parties.

via E-Discovery Threatens to ‘Litigize’ Arbitration.