Take Away: A litigant’s production of huge volumes of responsive documents and ESI is not always sufficient to comply with today’s discovery obligations. Particularly when faced with discovery requests seeking ESI, a litigant’s willingness to cooperate – or at least attempt to cooperate – with the opponent on search and production issues is often necessary to comply with the litigant’s discovery obligations and to contain costs. An unwillingness to do so may lead to a court order requiring additional search efforts and supplemental document productions, at the litigant’s own expense.

If you think the best approach to your opponent’s eDiscovery requests is to muscle your way through them without dialogue, not to mention cooperation, with opposing counsel, you need to think again. Courts continue to crack down on litigants who ignore their adversary and try to avoid their eDiscovery obligations by taking either a “produce nothing” or “bury-them-in-paper” approach. In an earlier post we noted that “cooperation” was last year’s major theme in eDiscovery cases and predicted that courts will be less inclined to blindly accept “business as usual” avoidance tactics by producing parties (read post here). In a recent decision, a federal agency learned this lesson the hard way.

In SEC v. Collins & Aikman Corp. (S.D. N.Y. Jan. 13, 2009), 2009 U.S. Dist. LEXIS 3367, the Securities and Exchange Commission (“SEC”) responded to the defendant’s discovery requests with a huge “document dump.” The defendant cried foul and the court agreed; the SEC failed to honor its obligation to produce responsive documents, including electronically-stored information (“ESI”), in accordance with the Federal Rules of Civil Procedure. The SEC’s unwillingness to cooperate with the defendant was the root cause of most of its discovery shortcomings.

In Collins & Aikman, the SEC brought a civil securities fraud action against the defendant. In discovery, the defendant sought production by the SEC of documents and ESI supporting the factual allegations in the SEC’s complaint. After asserting numerous objections to the discovery requests, the SEC produced 1.7 million documents (10.6 million pages) that had been maintained in 36 databases. The defendant took issue with the SEC’s production, claiming it did not meet the SEC’s discovery obligations. The SEC produced “an omnibus collection” of documents from databases that did not match the defendant’s document requests. The SEC made no effort to identify which documents were responsive to which request, despite having already segregated its documents into 175 file folders that correlated to specific factual allegations in its complaint. The defendant also took issue with the SEC’s failure to produce any e-mail sent or received by the SEC, arguing that the SEC’s complete unwillingness to conduct any searches of its own e-mail was a violation of its discovery obligations.

The SEC also failed to produce any documents pertaining to the subject of rebates, which undeniably was relevant to the SEC’s claims against the defendant. The SEC objected to this group of requests as being overbroad and unduly burdensome. The SEC further objected to some of these requests on the additional grounds of being vague, ambiguous, and lacking reasonable particularity. In response, the defendant offered to establish a search protocol that would balance identification and disclosure of relevant documents against any strain on the agency’s resources. The SEC rejected the defendant’s offer and instead unilaterally limited its search, which resulted in the SEC finding no responsive documents to produce.

The SEC defended the format of its document production, claiming that the documents were produced in the manner in which they were kept “in the usual course of business.” The SEC also suggested that the defendant could use search terms to find documents in the production that were responsive to the particular document requests. Further, the SEC stood by its objection that the defendant’s requests for the SEC’s own e-mail were “overbroad.” The SEC contended that the requests would require a search of the e-mails of hundreds of attorneys and accountants over an indefinite period of time.

The court considered the arguments and agreed with the defendant that the document production fell short of the SEC’s obligations in discovery. You may be scratching your head and wondering: “How could a production of this magnitude be lacking?” The answer: the SEC’s approach to discovery was unreasonable and uncooperative.

First, the SEC’s manner of production was improper. While a litigant is permitted to produce responsive documents in discovery “as they are kept in the usual course of business,” (read Rule 34(b)(2)(E) of the Federal Rules of Civil Procedure here), the SEC’s document production did not fall within this approach. In the court’s view, since many, if not most, of the records at issue were collected by the SEC acting in its investigatory role, the SEC did not keep them in “the usual course of business.” Also, given that the SEC had previously organized the records according to the pertinent factual allegations, the court viewed it “patently inequitable to require a party to search ten million pages to find documents already identified by its adversary as supporting the allegations of a complaint.” Id. at 20.

The court readily rejected the notion of requiring the defendant to undertake a manual search of the millions of documents as this would “constitute[] ‘undue hardship’ by any definition.” Id. at 19. The court also rejected key-word searching of the production as a reasonable alternative for the defendant, commenting that “the inaccuracy of such searches by now is relatively well-known.” Id. at 19. Upon concluding that “[t]he documents can only be provided in a useful manner if the agency organizes or labels them to correspond to each demand,” the court ordered the SEC to produce the documents in that manner. Id. at 27.

The court then scolded the SEC for its unwillingness to cooperate with the defendant in the development of search protocols for several of the requests at issue. For example, as to the defendant’s requests pertaining to rebates, “[t]he SEC’s blanket refusal to negotiate a workable search protocol responsive to these requests is patently unreasonable.” Id. at 30. The court reached a similar conclusion as to the defendant’s requests for the SEC’s e-mail. While the court agreed with the SEC that some of the requests for e-mail were overbroad, “[b]ecause e-mails are inherently searchable, the SEC’s blanket refusal to produce any incoming or outgoing e-mails is unacceptable.” Id. at 39. The court ordered the SEC to negotiate with the defendant in the development of reasonable search protocols for these requests. Id. at 30-31, 40.

In fact, the court faulted both parties for failing to “meet & confer” and to prepare a discovery plan, as required by Rule 26(f) of the Federal Rules of Civil Procedure (read text of Rule 26(f) here). The court noted the possibility that “[h]ad this been accomplished, the court might not [have been] required to intervene in this particular dispute.” Id. at 30. The court also referred to the Cooperation Proclamation, recently issued by the Sedona Conference (read here). As noted by the court, the Cooperation Proclamation “urges parties to work in a cooperative rather than an adversarial manner to resolve discovery issues in order to stem the ‘rising monetary costs’ of discovery disputes.” Id. The Proclamation recognizes that courts see the discovery rules “as a mandate for counsel to act cooperatively.” Id.

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