E-discovery is especially challenging in healthcare related litigation due to the healthcare industry’s reliance on electronically stored information (ESI), the volume of medical records often at issue in health care litigation, especially, qui tam litigation, the time periods often at issue given the lengthy statutes of limitations and the relevance of the information that the records contain. A May 8, 2014, Report and Recommendation (Report) on a motion for sanctions alleging spoliation of medical records, in U.S. ex. rel. Elin Baklid-Kunz v. Halifax Hospital Medical Center et. al., offers a cautionary tale for both in-house and retained counsel about the importance of a coordinated and meticulously executed plan for producing electronically stored information (ESI). After summarizing the underlying claims and discovery issues, this article offers guidance for laying the foundation of a sound, manageable ESI production plan.
The relator’s complaint alleged that the defendant violated the False Claims Act, 31 U.S.C. §3729et. seq. and the Stark Act, 42 U.S.C. §1395nn, by submitting false claims to Medicare for short stay inpatient admissions without meeting the criteria required for inpatient stays. Understandably, the Relator sought documents including medical records for short stay admissions at Halifax.
The magistrate-judge found that despite multiple productions, numerous requests for production from Relator and commitments from Halifax to produce requested records, Halifax’s productions contained numerous deficiencies including, illegibility, lack of proper patient identification, and missing information. See Report at 2-7. Most serious, however, Halifax eventually disclosed thatall of the relevant records for 2002-2004 had been destroyed in 2012 despite implementation of a litigation hold in 2009. Id., at 7. The court found that “[d]espite instituting a litigation hold in 2009, Halifax failed to preserve three years of short stay medical records that were relevant to this case. The court also found Halifax failed to timely produce medical records to Relator. After the records were requested, Halifax failed to promptly inform Relator they had been destroyed. And, Halifax gave Relator the false impression that it had produced records that were not, and could not have been, produced because they had already been destroyed.” Id at 9. The magistrate-judge labelled the conduct “reprehensible” and recommended sanctions. The district judge accepted the recommendation and ordered Halifax to pay Relator’s fees incurred in seeking the discovery. Relator’s counsel forecasted that when compiled Relator’s incurred fees will be in the six figures.
The Need for an ESI Plan.
The Halifax Report is a cautionary tale that counsel litigants and their counsel to develop and implement a feasible plan for collecting, reviewing and producing ESI. For defense counsel, ESI discovery continues to be both the bane of our existence and the Achilles heel of our clients. The failure to properly manage ESI discovery can trigger a protracted and expensive distraction from resolving the litigation on its merits. In Halifax, motions for sanctions resulted in extended negotiations, briefings, and hearings all of which generated legal fees, exclusive of the sanctions award. ESI issues can also undermine a defendant’s defense. They can result in adverse evidentiary inferences against the offending party. Less formal but potentially no less consequential, they taint the offending party in the eyes of the court. To use the discovery record as recited in the Report, one could hardly blame a judge or jury for thinking that a defendant that disregarded clear, well-established discovery obligations was at least as likely to approach Medicare billing requirements with the same cavalier disregard. Effective advocacy requires an element of trust between the advocate and his or her client, on the one hand, and the court and jury on the other. A finding that evidence has been intentionally or recklessly spoliated undermines that trust, perhaps irretrievably.
Those of us who have dealt with massive ESI discovery can certainly sympathize with the challenges its presents. Additionally, experienced trial counsel are also all too well aware that the facts of a dispute as characterized in an opinion are shaped to support the court’s ruling and invariably do not include all of the important facts. (Who is the litigator who has not read an opinion on a motion he or she has briefed and wondered whether the court was talking about the same case?). Nevertheless, these are the realities of litigation, which must be anticipated and addressed; but how? What lessons does the Halifax Report offer client and counsel?
First, while clients are understandably concerned about the exorbitant costs of discovery they must recognize they are less than the evidentiary and financial cost of a spoliation finding. Counsel must impress upon his or client the critical importance of investing in the tools and processes necessary to manage ESI discovery—a classic pay now or pay later scenario. The Halifax report is just one of the cautionary tales that counsel may need to share with a client that seems not to appreciate adequately the risks it faces if it does not devote the resources, external and internal, necessary to meet its ESI discovery obligations.
A common approach that clients often propose is to have their internal personnel handle ESI. This can be a delicate request for counsel. On the one hand, retained counsel does not want it to appear reluctant to agree to what on its faces seems like a cost-saving approach to handling ESI. Yet, experience teaches that the savings can be illusory. Clients often do not appreciate the amount of time or the meticulous attention to detail that document search and collection can take. Adding this responsibility to employees whose plates are no doubt already full creates the potential for delays, shortcuts and errors that may not be revealed until it is too late, as may well have happened in Halifax. On the other hand, the client knows its recordkeeping systems and capabilities better than counsel. When successful, the cost savings from having the client to assume a substantial portion of the e-discovery burden can be substantial. Consequently, allowing the client to handle some or all of ESI production is a request that must be analyzed carefully and, if adopted, closely monitored. At the first sign that the plan is not working as envisioned, counsel must alert the client, identify the problem and find a solution.
Second, it is essential that counsel understand a client’s ESI storage systems and capabilities as well as its records retention policies and practices. (Note: A company’s retention policies and practices may be two very different animals). This understanding enables counsel to negotiate a manageable discovery plan. Too often counsel agree to deadlines and demands that are simply not feasible, which inevitably incurs the opposing party’s ire and can lead to motions to compel or for sanctions, as occurred in Halifax. Counsel should be prepared to educate the plaintiff and potentially the court to the ESI challenges his or her client faces and to justify the reasonableness of its ESI discovery proposal. Courts generally will be more receptive to front-end explanations of discovery challenges even though they may prolong discovery than they will be of excuses that unsettle the opposing party’s expectations and potentially the court’s scheduling order.
Third, ESI search, collection and production must be meticulously tracked, especially given the life span of discovery. Questions about what was produced and when often are not asked until years later; and sometimes they are asked under oath, not just in a deposition in civil cases but before a grand jury in criminal cases. A detailed record of the search, collection, review and production is critical to both managing costs but also to answering questions the requesting party is entitled to ask.
Fourth, cost-effective ESI discovery management requires a working partnership, between counsel and client and with opposing counsel. The client cannot abdicate to its counsel complete responsibility for ESI discovery any more than counsel can rely completely on the client to meet its ESI discovery obligations. ESI search and collection all too often presents a host of unanticipated challenges that can disrupt the most carefully constructed ESI discover plan. Overcoming the known and unknown challenges requires open lines of communication, clearly assigned responsibilities and a willingness to partner to find fair and cost-effective solutions to e-discovery challenges. It is in the parties’ mutual interest to address cost-effectively and efficiently the e-discovery process to allow the parties to focus their attention and resources on their substantive claims and defenses. Neither side should attempt to use e-discovery as a brick bat to beat the other side into submission.
On a positive note, there may be some relief on the horizon. Proposed amendments to the Federal Rules of Civil Procedure are intended to reign in overbroad discovery. The proposed amendments call for, among other changes requiring that discovery be “proportional to the needs of the case” and limiting the circumstances in which sanctions can be imposed for failure to preserve ESI, in an attempt to alleviate pressure on counsel and litigants to over-preserve to avoid the risk of sanctions. See generally, Report of the Advisory Committee on Civil Rules, May 8, 2013 (last viewed June 8, 2014). Whether, when and in what form the amendments may ultimately be adopted is still to be determined. Nevertheless, the thorough and insightful analysis underlying the proposals is a resource that companies and their counsel can invoke to limit discovery and defend attacks on their preservation and production efforts.
Although meeting e-discovery obligations is often a task that is easier said than done, it can be done. The lessons offered in this article provide the fundamental elements of a cost-effective, efficient and manageable e-discovery plan that can be tailored to the needs of the case.