Court Holds Defendants Exceeded Authority of “Order,” Requires Defendants to Pay Extra Costs of Searches, Issues Show-Cause Order Regarding Privileged Emails

Henry v. Quicken Loans, Inc., Case No. 04-40346 (E.D. Mich. February 15, 2008)

Fresh on the heels of Judge Facciola’s “where angels fear to tread” comment in the O’Keefe case, referring to disputes over which search terms are more likely to produce information, we find Magistrate Judge Steven D. Pepe dealing with an agreement on search terms gone wrong. Disco-man here suggested that an agreement on these terms is essential. Quicken Loans says not so fast mister; your partner might be dancing to a different tune. Bottom line: Don’t rely on a hearing transcript that is subject to differing interpretation by opposing parties, include every party on communications with a shared expert, and be aware that privilege review presents a whole set of problems separate from and additional to relevance review. This case suggests that privilege review based upon word searches to narrow the volume of emails, coupled with a claw-back arrangement, has a great deal of appeal to at least one court. The pending amendment to Rule 502 will likely cement that appeal.

This is a Fair Labor Standards Act overtime collective action involving approximately 422 Plaintiffs who worked as “loan consultants” for Defendants Quicken Loans and Daniel B. Gilbert. Plaintiffs allege that during their employment as loan consultants they were denied overtime pay for hours worked in excess of 40 hours per week. Plaintiffs initially sought a large number of emails contained on backup tapes, but later agreed to limit the relevant time period to three months in 2004. They proposed a claw back arrangement involving an initial review by plaintiffs to determine relevancy, with a subsequent review by defendants to determine privilege or other objections. Defendants’ fear of waiver in later state court proceedings (see discussion of pending amendments to Federal Evidence Rule 502 which deals with this issue here) unless they physically reviewed every email for privilege, caused them to reject that approach.

In response to a motion to compel, the court held a hearing and ordered a protocol “intended to balance the concerns and needs of both sides at what was hoped to be manageable costs.” Slip Opinion at 3.

Under the terms of this protocol the Plaintiffs’ computer forensic expert, Mark Lanterman of Computer Forensic Services in Minnesota, was to retrieve from Defendants’ computer back up tapes all of the e-mails for the months of April, May and June of 2004. Based on search terms and methods to be worked out by the attorneys for both sides, Mr. Lanterman, “at Plaintiffs’ reasonable expense for his services and the electronic copying expenses,” was to filter this database for the team leaders and hundreds of opt-in Plaintiffs. Under the order, Mr. Lanterman was to act under the “direction and control” of defense counsel in retrieving the requested e-mails from the backup tapes. The searching and filtering of Defendants’ database by Mr. Lanterman would be limited to the terms agreed upon by the parties.

The court issued an order covering this protocol, which was amended on several occasions (order #2 and order #3). But to quote defense counsel in its objections to the Order under discussion, “Defendants suggested that the ‘transcript will – speak for itself,’; a proposal to which the Court agreed.” Defendants’ Objections at 7. In other words, the transcript, which obviously includes the parties arguing back and forth, would govern the protocol. The parties subsequently met and agreed upon search terms and exclusionary terms. Although the search terms included both fist and last names of the legal personnel, according to the court, “Defendants never proposed using first and last names of their legal personnel as separate exclusionary terms during any of the communications between counsel regarding screening terms. This was not discussed at the hearing nor did the orders indicate that the first and last names of legal personnel were to be used as separate screening terms.” Slip Opinion at 4. Defendants vehemently disagreed with the court’s conclusion:

Defendants specifically argued this point, and Defendants believed that the name-screening issue had been resolved:

The search terms for privilege would be certainly lawyer’s last names, but then let me also deal, because I know having looked at this stuff, its going to be a real issue. If you will, the two Richards, that issue. There are going to be emails that are going to refer to Richard. Until we look at those that are identified and presumably Mr. Lanterman can identify them, . . . I won’t be able to determine whether that Richard is . . . the lawyer Richard, or whether he is the non-lawyer manager, Richard.

(emphasis added). Defendants were on record that it was necessary for Mr. Lanterman to screen email by attorney’s first and last names separately. Defendants’ understanding that the Court approved this method was confirmed when the Magistrate directed Defendants to take “every feasible means to screen out attorney/client privilege before anything was turned over to the [P]laintiffs.” (emphasis added)

Defendants’ Objections at 6.

The problem that later arose began at the hearing, Defendants heard the court agree with them, but that’s not what the court thought it was saying. The court wrote:

At the April 17, 2007, hearing, after the discussion of why the Defendant did not want to turn over the back-up tapes of the e-mail without some screening for privilege, and the risks of other courts determining a waiver occurred if only a claw-back agreement was used, the thorough and thoughtful defense counsel, Robert Davis, mused about the screening. He noted there might be two “Richards,” one an attorney the other a manager being screened (April 17, 2007, hearing transcript, at 55) (Richard Chyette is Defendant's Vice-President and heads the legal department and was one of the names screened. There was no manager involved named Richard). Nothing more came of this as Mr. Davis turned to discussing and conceding the reasonableness of Plaintiffs' request to screen in e-mails using the terms "overtime exempt" or "non-exempt."

Slip Opinion at 4 n.2. 

The court believed that screening by first and last names would lead to over-exclusion, while defendants expected to hand review the excluded emails and merge incorrectly screened emails back into the production set, which is what they actually did. See Defendant’s Objection at 10-11. Unfortunately, this process does not appear to have been clearly communicated to the computer expert. And the problem only worsened after counsel met to decide search terms:

The parties’ agreed-upon search and screening terms were sent to Mr. Lanterman in a July 10, 2007, letter from Defendants’ attorney. This letter required Mr. Lanterman to work under the “direction and control” of defense counsel and “not turn to Plaintiffs’ counsel for confirmation, additional instruction, or the final go-ahead to proceed with particular steps in this process.” It set out the “specific parameters” for the screening process. Defendants also identified fourteen members of its legal department as personnel whose e-mails would be screened. In outlining the steps for Mr. Lanterman to follow during the e-mail search and filtering process, the letter noted Mr. Lanterman was to screen out e-mails including “the names of identified company legal personnel” whose first and last names were attached in Exhibit 6 to the letter. The letter did not address screening the e-mails using the first and last names of these fourteen individuals as separate screening terms to omit an e-mail. Nor did the letter suggest that attachments to e-mails, and e-mails within e-mails (“nested” e-mails), would be screened, regardless of the author or recipient. Again, the letter reiterated that Mr. Lanterman would be acting under the “direction and control” of defense counsel and was not to have any contact with Plaintiffs’ counsel regarding his work.

Slip Opinion at 5.

Upon receiving the first screening, defendants realized that the expert had not screened email attachments and had not screened for first and last names of legal personnel separately. A third screening was required for nested emails, which had not been screened in the second screening. Defendants then requested yet another screening which had the effect of putting back into the mix those emails of non-legal personnel who had the same first names as legal personnel. Defendants then hand screened those emails for privilege, combined the results with the earlier screenings and produced the combination.

When plaintiffs received the bill for these multiple screenings, they were somewhat perturbed. Their motion followed.

The court held that defendants had exceeded their authority in screening by first and last name, ordered defendants to pay for the second, third and fifth screenings, and issued an order to show cause why defendants should not be required to produce the results of the first screening. The show cause order obviously puts the privilege at issue for some emails.

There are a number of ways to look at these issues. It will be interesting to see how the District Court views them.

Read the decision

Read Protocol Order #1

Read Protocol Order #2

Read Protocol Order #3

Read Defendants' Objections

Read Response to Order to Show Cause