In Re. Goetz, Case No. 3:98-0168 (M.D. Tenn. October 9, 2007)

District Judge William J. Haynes, Jr., relying on the Kemper Mortgage decision by Magistrate Judge Merz of the Southern District of Ohio adopting Zubulake IV, has gone one step further, adopting the extensive affirmative duties to implement and monitor compliance with preservation obligations that Zubulake V imposed on outside counsel. The court postponed any consideration of sanctions until after completion of production, when a better understanding of exactly what evidence has been lost can be gleaned. Nonetheless, the decision cannot be ignored, particularly in light of the court’s suggestion that the Zubulake opinions are authoritative in the Sixth Circuit. The 187 page decision delves into numerous aspects of electronic discovery and presents a textbook exercise in lawyers’ inability to put aside an adversarial approach and adopt cooperative measures, as required in order to conduct electronic discovery in the modern age.

The decision arose out of a class action lawsuit brought on behalf of 550,000 children in the State of Tennessee, seeking to enforce federal law requiring Tennessee State agencies to provide various medical services to the plaintiffs. A consent decree was entered certifying the class and providing the remedies sought. To assure compliance with the consent decree, plaintiffs were entitled to periodic review of agency records. Discovery disputes arose, followed by show cause and contempt hearings. The Judge originally assigned to the case held that the State agencies had repeatedly violated the terms of the consent decree, as well as a number of his orders. His attitude toward the defendants and their hardball tactics deteriorated to such an extent that he eventually recused himself and Judge Haynes took over the case.

In this latest dispute, plaintiffs sought records they contended were necessary to assess the defendants’ contention that they were in compliance with the consent decree. Defendants objected to the scope and cost of the production sought. Defendants’ managed care contractors (“MCCs”), who had been retained to provide the required medical care, also objected to the cost and burden involved in responding to the requested discovery.

In April, the court ordered the parties and the MCCs, who were not parties, as well as the IT representatives of both, to attend an in-court discovery conference. Judge Haynes then dismissed counsel from the conference, and conducted an all day on-the-record conference with the IT personnel. The IT personnel reached agreement on a number of issues, including the fifty keywords that would be used to search the defendants’ computers. The agreement was then reduced to a stipulated order. Unfortunately, when the defendants actually conducted the search, they departed dramatically from their agreement, using but two search terms and imposing date limitations on the search. Defendants argued that they were rushed for time because of an impending hearing, and that the fifty-word search would be too costly and produce far more ESI than the State could afford to review. So the court once again ordered an experts-only conference, which again went well until the lawyers got involved in preparing a summary of the parties’ agreement, when “disputes resurfaced.”

At that point, the court surrendered, and ordered a full evidentiary hearing on electronic discovery issues. The hearing lasted a week and resulted in this 187-page opinion. The court found that the 1998 consent decree required production of the defendants’ electronic records as required to verify compliance, but that defendants did not send out a legal hold notice until 2004. There was no follow-up, no real attempt to implement the hold, and no monitoring:

[T]he proof is that Defendants left their employees to decide on their own what to retain without evidence of any written instructions or guidance from counsel on what is significant or material information in this complex action.

Slip Opinion at 126. There was significant evidence of computers being wiped, key custodians having no recollection of even receiving a notice, a general lack of any effort to preserve relevant evidence, and a failure to suspend the six-month ESI retention policy. Because of the expense of reviewing ESI for privilege, no ESI was ever produced in electronic format.

Defendants estimated that the fifty keyword search would produce 493 gigabytes of ESI, which would cost them $10 Million to review. The Judge found this to be approximately $16.66 per plaintiff class member, which was not unreasonable, particularly given the repeated findings of defendants’ violations of the rights of the plaintiff children. The court found that the benefits of the discovery far outweighed the burden to the State, and that defendants’ request that the plaintiffs pay for some of the cost to be “outrageous.”

The opinion contains a lengthy discussion of electronic discovery issues (Slip Opinion at 102-85), including the amended Federal Rules, as well as many privilege related issues (Slip Opinion at 53-176). The opinion relies heavily on the Zubulake opinions, which it adopts whole-heartedly. The court order indicates that the Judge is considering the appointment of a monitor, a growing trend in cases with substantial electronic discovery disputes. A monitor was later appointed

In a subsequent order, the court allowed the plaintiffs’ computer expert to make forensic copies of the State’s computer system and any computers of the fifty key custodians that contain relevant information.

Read the Opinion: Vol. 1; Vol. 2; Vol. 3; and Vol. 4

Read the Order

Read the Supplemental Order