This Sidley Update addresses the following recent developments and court decisions involving e-discovery issues:
- A California State Bar opinion warning that attorneys lacking expertise in electronic discovery risk violating ethical duties of competence and confidentiality unless they (1) acquire sufficient learning and skill before performance is required; (2) associate with or consult technical consultants or competent counsel; or (3) decline the client representation;
- A Southern District of Florida order granting a motion for leave to depose a court-appointed forensic expert regarding the non-movant’s deleted ESI;
- A Northern District of California order granting a motion to compel a patent plaintiff to supplement its damages-related disclosures under Rule 26(a)(1)(A)(iii) and to respond to defendants’ interrogatory regarding the damages plaintiff allegedly sustained; and
- A Southern District of California decision denying plaintiffs’ demands that defendants restore ESI contained on disaster recovery backup tapes and ruling that TIFF images were a reasonable format for production of emails.
1. In Formal Opinion No. 2015-193 (issued June 30, 2015), the California State Bar issued an opinion warning that attorneys lacking expertise in electronic discovery risk violating ethical duties of competence and confidentiality unless they (1) acquire sufficient learning and skill before performance is required; (2) associate with or consult technical consultants or competent counsel; or (3) decline the client representation.
The State Bar analyzed a hypothetical in which an attorney defended a client in a litigation filed by the client’s competitor. The attorney agreed to implement an electronically stored information (ESI) “discovery protocol” pursuant to which the competitor would search the client’s computer network using jointly-agreed search terms. The parties further agreed that client could claw back inadvertently produced ESI protected by the attorney-client privilege or work product doctrine. Id. at 1-2.
Prior to implementing the ESI protocol, the client incorrectly told the attorney that there was no relevant ESI on the network that the client had not already provided to the attorney. Relying on that representation and the negotiated clawback agreement, the attorney did nothing to supervise the e-discovery process, other than to instruct the client to provide the competitor with direct access to the client’s network. The attorney did not review the documents retrieved from the network by the competitor. Id. at 2.
The attorney later received a letter from the competitor accusing the client of spoliation, prompting the attorney to hire an e-discovery expert. The attorney learned from the expert that privileged and proprietary client information was provided to the competitor and that potentially relevant ESI was routinely deleted from the client’s computers. Id.
The State Bar opined that the foregoing facts could support a finding that the attorney’s failure to associate with an expert early in the case, failure to supervise the e-discovery process, and the resulting spoliation of evidence and disclosure of privileged and confidential information could support a finding that the attorney violated ethical duties of competence and confidentiality. Id. at 2-7 (citing Cal. R. Prof. Conduct 3-100, 3-110; Bus. & Prof. Code § 6068(e); Cal. Evid. Code §§ 952, 954, 955). The State Bar advised that any attorney lacking e-discovery expertise must either: (1) acquire sufficient learning and skill before performance is required; (2) associate with or consult technical consultants or competent counsel; or (3) decline the client representation. Formal Opinion No. 2015-193 at 3-5.
The State Bar also provided guidance on the type of expertise necessary to conduct competent e-discovery. Attorneys handling e-discovery should be able to: (1) initially assess e-discovery needs and issues; (2) implement/cause to implement appropriate ESI preservation procedures; (3) analyze and understand a client’s ESI systems and storage; (4) advise the client on available options for collection and preservation of ESI; (5) identify custodians of potentially relevant ESI; (6) engage in competent and meaningful meet and confer with opposing counsel concerning an e-discovery plan; (7) perform data searches; (8) collect responsive ESI in a manner that preserves the integrity of that ESI; and (9) produce responsive, non-privileged ESI in a recognized and appropriate manner. Id. at 3-4.
Moreover, under Rule of Professional Conduct 3-110, attorneys must remain regularly engaged in an ESI expert’s work: “The attorney should issue appropriate instruction and guidance and, ultimately, conduct appropriate tests until satisfied that the attorney is meeting his ethical obligations prior to releasing any ESI.” Id. at 5-6.
Finally, the State Bar noted that, in order to avoid breaching the duty of confidentiality, an attorney must make a reasonable effort to minimize the risks of disclosing privileged and confidential information. A clawback agreement, standing alone, is likely insufficient to protect a client’s rights because, even if a client can retrieve the information, the client may never “un-ring the bell” after confidential documents are disclosed. Moreover, the opposing party could argue that disclosures were not “inadvertent” under the circumstances, exposing the client to a potential dispute as the direct result of the attorney’s actions. Id. at 6-7.
2. In Procaps S.A. v. Patheon Inc., 2015 WL 1880346 (S.D. Fla. Apr. 24, 2015), Magistrate Judge Jonathan Goodman allowed a defendant to depose a court-appointed forensic expert regarding the plaintiff’s document retention and destruction.
In this antitrust lawsuit, as a result of various findings of shortcomings in plaintiff’s discovery obligations,see Procaps S.A. v. Patheon, Inc., 2014 WL 800468 (S.D. Fla. February 28, 2014), Procaps S.A. v. Patheon, Inc., 2014 WL 1047748 (S.D. Fla. March 18, 2014), the Magistrate Judge had appointed a neutral forensic expert to analyze plaintiff’s ESI retention and destruction. The retention and destruction shortcomings included plaintiff’s failure to implement a formal litigation hold for 14 months after filing suit, the failure of its US-based counsel to meet with plaintiff’s Colombia-based IT team to determine where or how relevant ESI could be located, and ESI searches that were conducted by plaintiff’s custodians without first reviewing defendant’s document requests or receiving a list of search terms from counsel. Procaps, 2015 WL 1880346, at *1.
The court-appointed expert, Setec Investigations, prepared a report after investigating these issues, finding that 200,000 files were deleted, including 5,700 files with a search term in the file name, and a court-appointed special master was named to address and resolve technical issues that might arise during discovery. Id. at *1 -*2. The parties filed comments on the reports, with defendant focusing on plaintiff’s destruction of ESI, and plaintiff noting that Setec had determined that duplicate files exist for most, if not all, of the deleted files. Id.
A year later, Patheon moved to depose Setec representatives regarding their report, and the plaintiff opposed the motion, claiming that the motion was untimely and that there was no reasonable justification for the deposition. Id. at *3.
Magistrate Judge Goodman granted Patheon’s motion finding that the deposition would assist him and the parties in the “daunting task” of “plung[ing] into the thicket of details surrounding Procaps’ ESI,” which he determined would be required because it was a “foregone conclusion” that Patheon “will either file a sanctions motion based on purported spoliation or will seek to introduce evidence of spoliation at trial.” Id. at *5. Magistrate Judge Goodman explained that Patheon, in any motion, would have to “demonstrate that the missing ESI was crucial to its ability to prove its defense.” Id. (citation omitted). Thus, a Setec deposition would be important in providing information on “whether the deleted files are available elsewhere, and, if so, how difficult it would be to locate them – factors which may well play a role in evaluating a sanctions motion based on a spoliation theory.” Id. Magistrate Judge Goodman further noted that a deposition may “provide information which could cause Pantheon to not file a sanctions motion,” and to seek instead to introduce evidence of deletions at trial. Id.
Magistrate Judge Goodman rejected Procaps’s argument that the deposition Patheon sought was rare or atypical, noting that “Federal Rule of Evidence 706(b)(2) expressly provides for them,” and that “there are published opinions discussing these types of depositions without critical comment.” Id. at *6. Procaps also argued that Patheon’s motion should be denied as untimely under Local Rule 26.1(i)—which requires discovery motions to be filed within 30 days “of the occurrence of the grounds for the motion”—because Patheon did not file its motion until over a year after Setec issued its report. Magistrate Judge Goodman noted that the grounds for Patheon’s motion “may well have occurred in early April 2015 (less than 30 days before the instant motion was filed), when Procaps rejected Patheon’s suggestion, apparently made for the first time, to take Setec’s deposition.” Id. at *6. But regardless of whether Patheon’s motion was untimely, Magistrate Judge Goodman found that “reasonable cause” existed for a later filing. Id. at *7.
3. In Corning Optical Communications Wireless Ltd. v. Solid Inc., 306 F.R.D. 276 (N.D. Cal 2015), Magistrate Judge Paul S. Grewal granted defendants’ motion to compel a patent plaintiff to supplement its damages-related disclosures under Rule 26(a)(1)(A)(iii) and to respond to defendants’ interrogatory regarding plaintiff’s damages theory.
Plaintiff stated in its initial disclosure that “[n]o documents related to [its damages] calculation exist at this time,” and responded to defendants’ interrogatory requesting information on the amount of damages that plaintiff claimed, and its methodology for doing so “essentially [by stating] ‘wait until we serve our expert report.’” Id. at 279 (citation omitted).
Magistrate Judge Grewal noted at the outset that Rule 26(a)(1)(A)(iii), which requires a plaintiff to disclose its damages computation, is typically subverted in patent cases, where “it has been the norm to bludgeon [in discovery] first, and value [patent claims] second,” because, “[t]o provide meaningful calculations, patentees need lots of information from accused infringers.” Id. at 278. Magistrate Judge Grewal found that plaintiff’s initial disclosure and interrogatory response were “plainly insufficient.” Id. at 279. Magistrate Judge Grewal emphasized that, to resolve the parties’ various discovery-related disputes, the court would need to know the value of plaintiff’s case, because “[p]roportionality is part and parcel of just about every discovery dispute.” He further noted that while “new information may come to light as the case proceeds that might drastically alter [plaintiff’s damages] positions. . . . Rule 27(e) provides a solution for that: supplementation.” Id.
Accordingly, Magistrate Judge Grewal granted defendants’ motion to compel and ordered plaintiff to supplement its Rule 26(a)(1)(A)(iii) disclosure and respond to defendants’ interrogatory with information on, among other things, the amount of damages plaintiff claimed under each of its theories and the documents and witnesses it intended to rely upon in support of its damages claim. Id.
4. In United States ex rel. Carter v. Bridgepoint Educ., Inc., 305 F.R.D. 225 (S.D. Cal. 2015), the United States District Court for the Southern District of California denied plaintiffs’ demands that defendants restore ESI contained on disaster recovery backup tapes for production of documents and emails with metadata, finding that the data on the backup tapes was inaccessible as part of defendants’ typical data retention program. The court also held that TIFF images were a reasonable format for production of emails, and if plaintiffs wanted the inaccessible ESI on the backup tapes produced in native format, they were responsible for the cost.
Plaintiffs requested that defendants produce “all documents within [their] control,” including the contents of defendants’ disaster recovery backup tapes and active emails. Id. at 233. Defendants objected to this request, noting that many of their databases were stored in backup tapes and were therefore not reasonably accessible because of undue burden and cost. Id. Plaintiffs claimed that defendants were subject to several investigations and had altered the format of their data to attempt to make the data unavailable. Id. Plaintiffs also requested that defendants “produce each original document with all non-identical copies and drafts of that document.” Id. Defendants offered to produce this material in TIFF format, but Plaintiffs demanded native format, including metadata. Id.
The court first addressed the question of the backup tapes’ inaccessibility. The court reasoned that “regardless of the cause of their inaccessibility, ‘[b]ackup tapes are considered an inaccessible format, and thus, shifting the costs of producing data from backup tapes may [always] be considered.’” Id. at 240-41 (citing Quinby v. WestLB AG, 245 F.R.D. 94, 101–02 (S.D.N.Y. 2006) (both brackets in original)). The court, weighing the data’s present status and the defendants’ general storage policies, found that defendants had met their burden of showing this particular ESI’s inaccessibility, noting that “[a]gain and again, ‘district courts have recognized the unique burden of producing documents stored on backup tapes and, by invoking Rule 26(c) to fashion orders to protect parties from undue burden or expense, have conditioned production on payment by the requesting party.’” Bridgepoint, 305 F.R.D. at 241 (citing Hagemeyer N. Am., Inc. v. Gateway Data Scis. Corp., 222 F.R.D. 594, 601 (E.D. Wis. 2004)).
Having found the backup data inaccessible, the court then considered which party should bear the expense of that data’s production. Applying the factors set forth in Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003), the court found that shifting the cost to plaintiffs as to any ESI from additional backup tapes was appropriate “based on both the Backup Data’s minimal apparent relevance and Defendants’ adherence to a [sic] common ESI policies.” Bridgepoint, 305 F.R.D. at 242 (relying on Zubulake, 217 F.R.D. at 322).
Regarding plaintiffs’ insistence on the production of documents on the backup tapes in native format, the court reasoned that TIFF images were “widely used” and concluded:
“[T]he Rules do not compel Defendants to produce inaccessible ESI in the form most helpful for Plaintiffs’ case at Defendants’ expense. No, the Rules compel no more than production of ESI in its usual form, with Plaintiffs themselves obligated to pay for the production of inaccessible ESI in an accessible form.” Bridgepoint, 305 F.R.D. at 242.
Using similar reasoning, the court then addressed the dispute over the format of production for defendants’ active emails, stating that the “dispute over the proper format … is governed by a similar cost-shifting analysis.” Id. at 244. The court addressed the reasonableness of the TIFF format, including the reminder that “Rule 34(b)(2)(ii) allows its use in the absence of a request that does not specify a particular form.” Id. Ultimately, the court approved of defendants’ production in TIFF, reasoning that TIFF was “a suitable and proper response to a generic request for ‘original documents,’” that plaintiffs had not shown the TIFF production had “denuded Defendants ESI” of valuable information, and that, pursuant to Rule 34, “[a] party need not produce the same electronically stored information in more than one form.” Id. at 245.
As a last issue, the court denied plaintiffs’ request for metadata, pointing out that plaintiffs failed to ask for metadata up front and provided no “precise reason why the metadata of any ESI [was] specifically relevant to a claim or a defense.” Id. at 246. For these reasons, the court was “unpersuaded by Plaintiffs’ threadbare reasoning for forcing the production of any metadata belonging to ESI already provided by Defendants.” Id. at 247.
Accordingly, the court denied, without prejudice, plaintiffs’ requests for the production of the backup databases, documents in native format and metadata.