This update addresses the following recent developments and court decisions involving e-discovery issues:
- A Ninth Circuit decision dismissing a putative class action under the Stored Communications Act, holding that the disclosure of subscriber information pursuant to a subpoena that the disclosing party believed in good faith to be valid entitled the disclosing party to immunity under the Act;
- A Northern District of California case denying a request for adverse inference instructions relating to deletion of an employee’s ESI because there was no duty to preserve the ESI in question at the time of its disposal, the defendant did not have a culpable state of mind in deleting the ESI, and the plaintiff did not establish that the deleted ESI was relevant to its claims or defenses;
- A Delaware Chancery Court order revising a prior order that had required the use of predictive coding to permit the parties to use “traditional methods” to conduct a document review; and
- A Middle District of Tennessee ruling denying defendant’s request for discovery of plaintiff’s Facebook pages because defendant had not made an evidentiary showing that plaintiff’s social media pages would lead to the discovery of admissible evidence.
- In Sams v. Yahoo! Inc., 2013 WL 1501889 (9th Cir. Apr. 15, 2013), the United States Court of Appeals for the Ninth Circuit affirmed the dismissal with prejudice of a putative class action, ruling that the good-faith immunity provision of the Stored Communications Act (SCA) applied to the production of basic subscriber information by an Internet Service Provider (ISP) in response to a state grand jury subpoena.
The case arose when, in 2008, Yahoo! received two grand jury subpoenas from a Georgia state district attorney. Id. at *1. The subpoenas requested "any and all records regarding the identification" of a particular user, which was later determined to be Sams. Id. The cover letter for each subpoena stated that Yahoo! "may wish to voluntarily provide copies of this evidence to [a particular employee] at the District Attorney's Office." Id. The subpoenas also stated that, by providing the materials early, the produced information could be reviewed in advance, which might obviate the need for someone from Yahoo! to appear in person. Id.Yahoo! provided the requested information early, and no witness for Yahoo! was required to testify before the grand jury. Id.
Based on these events, Sams filed a putative class action in Georgia state court, purporting to represent a class of plaintiffs whose information Yahoo! had allegedly disclosed to law enforcement in violation of the SCA. Id. Yahoo! had the matter removed to Georgia federal court, then transferred to federal court in the Northern District of California, and argued that it was immune to suit based on its good faith belief in the validity of the Georgia state subpoenas seeking basic subscriber information about a customer. Yahoo! prevailed on this basis on a motion to dismiss before the California federal district court. Id. at *2.
The Ninth Circuit affirmed. Judge Milan D. Smith, Jr., began by explaining that the SCA protects the privacy of electronic communications by placing limits on the government's ability to compel ISPs to disclose certain information about their customers and restricting the ability of ISPs to voluntarily disclose information about their customers to the government. Id.Under the express terms of the SCA, however, the government can obtain by subpoena basic subscriber information (e.g., subscriber name, address, telephone connection records, length of service, assigned network address, and means and source of payment), in which case the provider is immune to suit. Id. at *3.
Sams argued that Yahoo! was not entitled to immunity because the information was produced pursuant to invalid subpoenas. According to Sams, Yahoo! was not a citizen of Georgia, even if it had a physical presence in Georgia, and therefore could be served with a grand jury subpoena only in accordance with Georgia law relating to service of subpoenas on out-of-state companies. Id. The court of appeals disagreed, noting that no Georgia court had considered the issue of service on an out-of-state corporation that had a physical presence in the state. Id. In any event, the Ninth Circuit concluded that Yahoo! was entitled to immunity.Id.
According to the Ninth Circuit, a "good faith reliance on . . . a grand jury subpoena" serves as “a complete defense” to any action under the SCA. Id. The court found that "good faith" included both subjective and objective elements:
“the good faith defense under 18 U.S.C. § 2707(e) is met when the defendant complies with a subpoena . . . that appears valid on its face, in the absence of any indication of irregularity sufficient to put the defendant on notice that the subpoena may be invalid or contrary to applicable law. A defendant may not benefit from the good faith defense, however, if the defendant actually knew that the subpoena . . . was invalid under the applicable law.” Id. (emphasis in original).
Both factors were met by Yahoo! here. The subpoenas bore “all of the indicia of lawful authority," and there was no indication in Sams's pleadings that Yahoo! actually knew that the subpoenas were invalid. Id. at *4.
Finally, the court concluded that Yahoo!'s early production of the documents did not change the analysis. Id. at *5. Sams cited no authority to support this position, and in the court’s view, such a rule would "defy common sense" by “outlaw[ing] the negotiated resolution of discovery disputes, and related cooperation among counsel to minimize inconvenience and cost to the parties." Id. Yahoo!'s production in this case was not an "unlawful 'voluntary' disclosure under the SCA," as nothing in the record indicated that Yahoo! did not "feel itself legally bound to produce the subpoenaed documents." Id.
- In AMC Technology, LLC v. Cisco Systems, Inc., 2013 WL 3733390 (N.D. Cal. July 15, 2013), Magistrate Judge Paul S. Grewal denied plaintiff’s request for adverse inference instructions relating to the deletion of an employee’s ESI because there was no duty to preserve the ESI in question at the time of its disposal, the defendant did not have a culpable state of mind in deleting the ESI, and the plaintiff did not establish that the deleted ESI was relevant to its claims or defenses.
AMC Technology, LLC signed an agreement with the defendant to permit the defendant to license and sell software products produced by AMC. The dispute turned on whether a particular product was included in this agreement. On July 11, 2011, AMC filed suit, and on November 3, 2011, the parties exchanged information on custodians. At that time, neither party listed Terry McKeon, one of defendant’s product managers who worked on the contested product but had retired on July 7, 2011, four days after AMC initiated its lawsuit. A year later, on July 17, 2012, AMC requested data relating to McKeon, but the defendant had deleted his information thirty days after his retirement pursuant to company policy. AMC sought adverse inference instructions against defendant establishing defendant’s liability with respect to the product at issue, alleging that defendant was reckless in its deletion of McKeon’s documents.
The Magistrate Judge denied AMC’s request for adverse inference instructions. ApplyingZubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003), the Magistrate Judge considered whether AMC had established:
“‘ (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a culpable state of mind; and (3) that the evidence was ‘relevant’ to the party's claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.’”AMC Technology, 2013 WL 3733390, at *2 (quoting Zubulake, 220 F.R.D. at 220).
Reviewing first the issue of control, the Magistrate Judge held that, at the time that McKeon’s documents were deleted, the defendant had no duty to preserve them. The defendant had a general duty to preserve documents at the time it deleted McKeon’s ESI, as it was aware of AMC’s suit, which had been filed thirty-four days prior. “But the scope of this duty is not limitless,” the Magistrate Judge noted, and “requires a party to ‘identify, locate, and maintain, information that is relevant to specific, predictable, and identifiable litigation,’ which includes identifying ‘key players’ who may have relevant information and taking steps to ensure that they preserve their relevant documents.” AMC Technology, 2013 WL 3733390, at *3 (quoting Apple Inc. v. Samsung Electronics Co., Ltd., 881 F. Supp. 2d 1132, 1138 (N.D. Cal. 2012)). The Magistrate Judge indicated that defendant likely would not have regarded McKeon as a “key player” because he did not participate in negotiations on the relevant agreement and likely possessed only documents that were tangentially related to claims that had yet to be made in the complaint. “Because Cisco could not reasonably have known that McKeon’s documents would be at all relevant to the litigation when those documents were destroyed, there was no duty to preserve them at that time.”AMC Technology, 2013 WL 3733390, at *3.
On the culpability issue, the Magistrate Judge found that the defendant did not delete McKeon’s ESI with a culpable state of mind. The deletion was pursuant to company policy and was not performed in conscious disregard of the litigation. Furthermore, the defendant preserved and delivered “many communications sent to and from McKeon held by other document custodians,” suggesting that the defendant “did not act with a conscious disregard for documents relating to McKeon.” Id. at *4.
Finally, the Magistrate Judge determined that the deleted ESI was not relevant to AMC’s claims or defenses. The burden was on AMC to “‘establish a reasonable possibility, based on concrete rather than a fertile imagination that access to the lost material would have produced evidence favorable to [its] cause.’” Id. (quoting Gates Rubber Co. v. Bando Chem. Industries, Ltd., 167 F.R.D. 90, 104 (D. Colo. 1996)). In making this determination, courts consider whether the documents were produced by key decisionmakers, whether the subject matter of the documents overlaps with the litigation, and whether the time period is relevant. The Magistrate Judge ruled that, although the documents were created in the relevant time period, McKeon did not play a key role in negotiating the agreement, did not participate in activities that may have influenced Cisco’s decisionmaking, and did not likely create documents that would be relevant. Any potential documents that may be relevant, the Magistrate Judge noted, “do not appear to be unique” and would be similar to documents already produced to AMC. AMC Technology, 2013 WL 3733390, at *4.
Based on the record presented, the Magistrate Judge stated that the requested sanctions seeking full liability for the breach would be “wholly inappropriate” because they would be “disproportionate and unfair” to the defendant. Id.
- In EORHB, Inc. v. HOA Holdings LLC, 2013 WL 1960621 (Del. Ch. May 6, 2013), Vice Chancellor J. Travis Laster of the Delaware Chancery Court revised a prior order requiring use of predictive coding to permit the parties to use “traditional methods” to conduct document review.
The case is a complex commercial indemnity suit involving the sale of a chain of restaurants. On October 15, 2012, the Delaware Chancery Court ordered the parties to hire the same vendor and to use predictive coding. EORHB, Inc. v. HOA Holdings LLC, CA No. 7409-VCL (Del. Ch. Oct. 15, 2012).
Vice Chancellor Laster modified his October 2012 order to permit the parties to use different vendors and to permit the use of traditional methods of document review. The Chancery Court found that there was a low volume of relevant documents and that “the cost of using predictive coding assistance” would likely be higher than “any practical benefit of its use.” Id.at *1. The parties also agreed that there was no need for them to use the same review platform.
- In Potts v. Dollar Tree Stores, Inc., 2013 WL 1176504 (M.D. Tenn. Mar. 20, 2013), U.S. District Chief Judge William J. Haynes, Jr., denied defendant’s request for discovery of plaintiff’s Facebook pages because the defendant had not made an evidentiary showing that plaintiff’s social media pages would lead to the discovery of admissible evidence.
Holly Potts brought harassment and discrimination charges against defendant, seeking a declaratory judgment and damages. During discovery, the defendant filed a motion to compel, claiming that plaintiff had not produced all requested materials, including inter alia, all relevant documents on her computer; all relevant emails stored in any online email account; any computers or digital storage devices used by the plaintiff; documents and photographs concerning defendant’s stores or plaintiff’s claims; plaintiff’s tax forms and attachments; plaintiff’s Social Security application for disability benefits; and Facebook and other social media data. Id. at *1. In response, plaintiff claimed that she had produced all relevant documents, that defendant was not entitled to access her Facebook pages, and that physical production of her computer would be unduly burdensome. Id. at *2.
The court determined that the defendant had not made the requisite showing for full access to plaintiff’s Facebook pages. Noting that the Sixth Circuit has yet to rule on the scope of discovery of private social media pages, the court applied a rule from other courts that material posted on “‘a private Facebook page, that is accessible to a selected group of recipients but not available for viewing by the general public, is generally not privileged,’” but there is no “‘generalized right to rummage at will through’” such information. Consistent with Fed. R. Civ. P. 26(b), defendant must make the “‘threshold showing that the requested information is reasonably calculated to lead to the discovery of admissible evidence.’” Id. at *3 (quoting Thompkins v. Detroit Metro. Airport, 278 F.R.D. 387, 388 (E.D. Mich. 2012)). The court held that defendant had failed to make the necessary evidentiary showing that the requested Facebook or other social media pages contained information that will lead to the discovery of admissible evidence. Potts, 2013 WL 1176504, at *3.
The court further determined that the information stored on plaintiff’s computer could reasonably lead to the discovery of admissible evidence, but he ordered that the parties agree on search terms to be used to search the computer and select a neutral third party to conduct the search. The court also ordered the production of plaintiff’s complete tax returns and attachments and applications to the Social Security Administration in connection with her claim for disability benefits. Id.