Studeo Legal

eDiscovery – Cost Shifting May Be Possible (With A Texas Perspective)

We are all aware of the tremendous growth (and related cost) of electronic discovery in recent years.  Corporate defendants in particular believe that they are adversely affected given the number of times that they must pay for eDiscovery, especially when those requests may be overly broad in their application.

There are times when you will be responsible for the expenses in eDiscovery productions and some indications that under limited circumstances, cost shifting to the requesting party may help ease the financial burden.  Both the Federal Rules of Civil Procedure and the Texas Rules of Civil Procedure have language that allows the shifting of costs to the requesting party.

Federal Rules

The Federal Rule that directly addresses this issue is 26(b)(2)(B).  The key language states that:

A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause considering the limitations of Rule 26(b)(2)(C). The court may specify conditions for the discovery.

In conjunction with this rule, it is important to examine the notes of the advisory committee form the 2006 amendments which provide some direction in how they expected the implementation of the rule to affect eDiscovery.  There are a series of factors that will help the court make the correct determination and guide the interpretation of the required analysis of this issue. The factors are:

1. the specificity of the request
2. the quantity of available information from other sources that may be easily accessible
3. the failure to produce once easily accessible information that is no longer (emphasis added) easily accessible
4. the likelihood of locating the relevant information that cannot be found on easily accessible sources
5. the prediction further information will be relevant and important (emphasis added)
6. the importance of issues at stake in the litigation
7. the parties’ individual resources

So, while it is most commonly thought that a responding party is responsible for the costs of producing eDiscovery merely because the requesting party asks for it, the reality can be a little different.  Although the Courts have not shifted the burden of costs very often at this point in time, the groundwork has been laid with the 2006 rules for force the requesting party to justify the expenses rather than provide an automatic expectation of payment.   The rules explicitly authorize the court to specify the conditions for discovery.  A responding party should not hesitate to ask the requesting party to pay the costs when the factors discussed above indicate that the costs should be shifted.

Texas Rules

There is a corollary to the FRCP under Texas Rule of Civil Procedure 196.4, Electroni8c or Magnetic Data, which was actually passed in 1999, long before the Federal Rules.  The rule states in part;

…The responding party must product the electronic or magnetic data that is responsive to the request and is reasonably available to the responding party in its ordinary course of business.  If the responding party cannot – through reasonable efforts – retrieve the data or information request3ed or produce it in the form requested, the responding party must state an objection complying with these rules.  If the court orders the responding party to comply with the request, the court must also order that the requesting party pay the reasonable expenses of any extraordinary steps required to retrieve and produce the information.

It was not until 2009 that the Texas Supreme Court issued the first ruling interpreting this rule, in In Re Weekley Homes.  The Court ruled that the trial Judge had exceed her authority in that turning over computers with the possible hope to find deleted emails from more than 2 years earlier was too extreme since there was no specific request under Rule 196.4 for deleted emails. The purportedly deleted emails were not necessarily at the crux of the case so the Supreme Court compared the facts in this case to other rulings where the ESI sought related to the critical evidence of metadata associated with the exact contract in dispute.

The Texas Supreme Court stated that parties have an obligation to share information about ESI in discovery to help avoid discovery disputes.  Just like the FRCP, a party has the right to search its own ESI and determine what exists, but getting unlimited access to the opposing party’s computer system is an extreme intrusion. The Texas Court created some specific guidelines for discovery of ESI in Texas State Courts:

•  The party seeking to discover electronic information must make a specific request for that information and specify the form of production. TEX. R. CIV. P. 196.4.
•  The responding party must then produce any electronic information that is “responsive to the request and . . . reasonably available to the responding party in its ordinary course of business.” Id.
•  If “the responding party cannot — through reasonable efforts — retrieve the data or information requested or produce it in the form requested,” the responding party must object on those grounds. Id.
• The parties should make reasonable efforts to resolve the dispute without court intervention. TEX. R. CIV. P. 191.2.
•  If the parties are unable to resolve the dispute, either party may request a hearing on the objection, TEX. R. CIV. P. 193.4(a), at which the responding party must demonstrate that the requested information is not reasonably available because of undue burden or cost, TEX. R. CIV. P. 192.4(b).
• If the trial court determines the requested information is not reasonably available, the court may nevertheless order production upon a showing by the requesting party that the benefits of production outweigh the burdens imposed, again subject to Rule 192.4’s discovery limitations.
• If the benefits are shown to outweigh the burdens of production and the trial court orders production of information that is not reasonably available, sensitive information should be protected and the least intrusive means should be employed. TEX. R. CIV. P. 192.6(b). The requesting party must also pay the reasonable expenses of any extraordinary steps required to retrieve and produce the information. TEX. R. CIV. P. 196.4.
• Finally, when determining the means by which the sources should be searched and information produced, direct access to another party’s electronic storage devices is discouraged, and courts should be extremely cautious to guard against undue intrusion.”
   

The Take Away

 As the responding party to eDiscovery requests, you do have many obligations to produce information that is requested.  However, that request is not unlimited in scope and there are some specific rules in place that you should strongly request be enforced when you think the requesting party is overstepping its bounds and causing your client to incur unnecessary expenses.  Similarly, as the requesting party you need to more carefully craft your discovery requests based on these guidelines to ensure that the court will view them as “reasonable”

Data Mining goes Primetime – the U.S. Supreme Court Begins to Address “Customer Information”

The old adage “it’s not what you know but who you know” has been turned on its head because data mining information has become the  raison d'etre.  Companies spend millions to obtain, manage and control customer information, considered by many to be the ‘lifeblood of marketing’.  With the recent growth of Face book, Twitter and other social marketing mediums, it is becoming clear that customer information or profiles are at the root of advertising messages and promotions as we move into the next phase of our economy. 

The problem?  Some of that information is ‘private’ and should not be shared.  The issue?  Making that determination.

HIPAA (The Health Insurance Portability and Accountability Act), was passed in an attempt to regulate the use and transfer of information about medical patients and their records.  HIPAA recognized that as we moved further into the creation of automated data systems, patient records would contain immense volumes of data that could be commercialized, easily revealing information long considered private. 

Despite the intent of HIPAA, many other medical care providers have been looking for ways to mine or commercialize related data so that marketing campaigns could be more targeted and effective.  One method involved obtaining information from pharmacists concerning the prescription practices of the physicians while omitting patient identifying information.
The US Supreme Court held, in Sorrell v. IMS Health Inc. (June 23, 2011), that a Vermont law that precluded pharmacies from selling information on physician drug-prescribing practices for marketing purposes violated the First Amendment of the Constitution.  The exchange of information about the prescriber (rather than the patient), more than regulating a commodity transaction, involves protected “commercial speech”.  The State of Vermont had asserted that the law was necessary to protect medical privacy.

Conclusions of the Court
The test applied by the Court requires that the government prove that the regulation “advances a substantial governmental interest and that the measure is drawn to achieve that interest.”  The Court determined that the law was not needed to protect medical privacy because the prescriber data did not contain any patient information (confidential or otherwise) and the State already allowed the exchange of this type of information for other than marketing purposes.  Enforcement of the law would have created a class of “disfavored speakers”, the brand name drug marketers, which would have been unconstitutional.

Additionally, the Court also rejected the State’s claim that a ban on marketing information was required to protect the physicians from unsolicited marketing efforts and/or attempts to get them to use low-cost generic drugs.  These purposes could be better achieved by using far less restrictive measures at the States disposal.

The Court did acknowledge that given current technology capabilities to data mine personal information from both non-governmental and governmental records that there remained serious issues regarding personal privacy that were not addressed by the State of Vermont.  The dissenting judges discussed the concept that data mining can be used for “secret and manipulative activities” by marketers.

The Take Away?
The Court may have left the door open for a broader attack on the unrestricted concept of data mining and privacy.  It is unclear today which concept will emerge victorious; a more restrictive environment regarding privacy or whether commercial free speech, which seems to be an area that the current Court is expanding, will continue it’s increased position in public policy.

 

Sanctions are Denied Because Dupont Follows Reasonable and Professional Steps to Preserve Information

In one of the clearest examples to cross my desk in some time regarding the proactive measures that a company can take to protect itself against sanctions in eDiscovery, DuPont successfully fought back against a spoliation charge.  On April 27, the US District Court denied defendant Kolon Industries, Inc’s motion for sanctions against E.I. DuPont for alleged spoliation of the email accounts and documents pertaining to trade secret misappropriation and theft of confidential information of four employees, E.I. du Pont De Nemours and Co. v. Kolon Industries, Inc., Civil Action No. 3:09cv58, 2011 U.S. Dist. LEXIS 45888, (E.D. Va. Apr. 27, 2011).  In summary, the Court concluded that DuPont had not spoliated any evidence because of their “reasonable” efforts to properly implement and update litigation hold measures, in addition to the company’s commitment to enforcing electronic discovery obligations.

Essentially, the litigation was based upon the alleged actions of a former DuPont employee, who had signed a nondisclosure agreement when he was hired and an employee termination statement upon his separation from DuPont in which he affirmed that he had returned all documents and would not divulge any trade secret or confidential information.  Subsequently, he became a consultant for Kolon and it was determined that he had in fact retained some computer files that contained secret and confidential information.

DuPont became aware of these conditions in April or May of 2007 and issued its first Hold Order in June 2007, which identified 18 “key individuals” in the related business unit.  Subsequently they issued a second Hold Order to 2,500 employees when it filed the litigation in February 2009 and a third Litigation Hold in April 2009, shortly after Kolon filed its Answer and Counterclaim.  In addition, consistent with its e-mail deletion policy, DuPont had deleted the former employee’s emails and documents.

What did Kolon allege?
Kolon alleged the following:
• that DuPont issued its first Litigation Hold Order over a year to late;
• that the first Hold should have been more widely circulated to a larger group of employees; and
• that the deletion of one former employee’s e-mail account occurred under “ rather suspicious circumstances".

What did the Court Conclude?
The Court ruled that DuPont did not violate its duty to preserve documents. The Court stated that DuPont had no reason to know that the documents and information allegedly within the possession of its former employees would be relevant to the litigation against the former employee or Kolon. The first Hold Order satisfied DuPont’s duty to preserve because it reasonably represented the universe of their knowledge of the litigation at that point in time and it had no reason to identify the four former employee’s as “key”.  The Court further concluded that DuPont did not have a duty to preserver the former employee’s e-mails or documents and that it was following a written document management plan.

What is the Take Away?
While there is not a defined set of rules on exactly how to protect a corporation against spoliation, there are some fairly strong guidelines that have emerged from recent rulings that help define what is considered “reasonable” by the courts. Having a set of written guidelines on document preservation and litigation hold procedures will go a long way towards insuring that spoliation sanctions will be denied.  The courts do not expect perfection at all times, they recognize that documents may sometimes be lost or destroyed that would have been useful in a litigation.  What the courts do not like to see are random, inconsistent and therefore unexplainable actions by a company or counsel.  The key concept to remember is “reasonable and professional” actions and procedures. 

• At the first sign of litigation, hire counsel to assess litigation hold obligations and draw up a plan of action.
• Litigation hold plans should be viewed as an iterative process. Revisit your litigation hold actions periodically to make sure that the original actions were sufficient.  If needed, immediately implement an expanded litigation hold procedure whenever new information indicates that it is needed.
• Given today’s global economy, make sure that any foreign affiliates are aware of the litigation hold and of any local obligations they have in regards to US law.
• Make sure your company has a formal email and document destruction policy in place for former employees, that the policy appears reasonable on its face and that the policy is implemented universally and consistently.

 

SWEEPING JURY REFORMS IN MICHIGAN

 This is a guest blog written by David Giles, the well know litigation consultant, as part of our recurring guest blogger program.  We hope you enjoy it!

The Michigan Supreme Court announced sweeping changes that the way jurors can participate in Michigan’s legal cases.  The rule changes, which take effect on 1 September, can be implemented at the trial judge's discretion, and include:

• Jurors can submit questions to witnesses in civil and criminal trials.

• Jurors can take notes during the case and use them in deliberations.

• Jurors in civil cases can discuss the evidence among themselves, when all are present, in the jury room before the conclusion of the case.

• Jurors will be given pretrial instructions covering their duties, trial procedures and the applicable law.

• Attorneys may give an interim commentary or recap during the trial, as well as their traditional opening statements and closing arguments.

• Judges must give juries a written copy of the final instructions and must invite jurors to ask questions to clarify the instructions.

• Judges may present an impartial summation at the conclusion of the trial.

• If there is an impasse during deliberations, a judge may invite jurors to list the outstanding issues if he or she can help "in clarifying or amplifying the final instructions."

 Michigan’s Chief Justice Robert Young Jr. believes that the new rules are designed to reflect how adults learn and make decisions and will enhance the ability of jurors to do what trials are all about, and that is to find the truth.

 The new rules come after 12 Michigan judges tried them out during a two-year pilot project.

Under these reforms, judges will have to give certain instructions at the beginning of the trial. Judge Thomas Boyd of Michigan’s 55th District Court observed that jurors in civil cases won't have to wait until a trial is over to discuss it and that they can discuss the information while it is “fresh in their minds.”  Judge Boyd noted that,  "The reality is we know jurors were doing this anyway."

"As the information is fresh in their mind, when they're all together, they can talk about it," he said. "The reality is we know jurors were doing this anyway."  "It's still the judges responsibility to make sure the evidence presented to the jury is consistent with the rules, but it gives the jury a more proactive, interactive opportunity to understand the evidence," said Judge Boyd.

These types of jury reforms have been underway in a number of states across the country.  In states where jury reforms have been enacted, the jurors I encounter seem to be more engaged and have less of a “sit-back-and-watch the performance” approach to their duties as jurors. One area of concern, however, is that these changes also empower judges with option to summarize the attorney’s arguments to the jurors.  This reform invites considerable bias and influence to be inserted into the trial process. 

It’s rewarding to see some states exploring how to improve our jury system rather than simply taking the path of eliminating litigation or moving toward “professional jurors.”  Thomas Jefferson’s trusted his fellow citizens and his words warned us, "I consider trial by jury as the only anchor yet devised by man, by which a government can be held to the principles of its constitution."

 David A. Giles, Ph.D.

President and Chief Litigation Consultant

Giles Group

dgiles@gilesgroup.net

 

Hyperlinked Electronic Briefs, Not Just for Appeals Anymore

When I first started creating hyperlinked electronic briefs (EBriefs) in the late 1990’s, very few litigators had heard of them or knew how effective they could be as a form of presentation advocacy. (For information on these topics please visit my previous blogs on Hyperlinked EBriefs). They were somewhat complicated to create and took anywhere from 4 days to two weeks to complete, depending on the length of the underlying documents.  So the early impediments to EBriefs were threefold: awareness, time to create and the high cost.

This is the primary reason that the early use of EBrief technology focused on the Practice of Appellate Law.  Federal and state appeals courts have extensive rules in place that provide a regimented timeline for a briefing schedule, unlike the trial courts.  The document population was fixed from the beginning of the appeals process and the established schedules allowed service bureaus the time to create a quality end product.  This led to the establishment of a dedicated core group of EBrief users, and just as importantly, a group of judges who began to understand the advantages that the technology offered to the courts.  The question for early providers like me has been how to expand the market of users.

After over 12 years in the industry it boiled down to the three original impediments; increasing acceptance by firms, clients and courts, shortening the time frame to create them and lowering the cost to produce them.  Easier said than done.  But in fact, that is exactly what has been accomplished over the last decade.  We have spent a lot of time providing seminars, webinars and CLE programs to lawyers and judges to demystify the technology so people understand their utility.  We have spent countless hours refining our internal processes, developing new software and training staff so that the service can be delivered on a timelier basis. What used to take my team 5-6 days to produce can now be achieved in 24 hours so the types of cases they can be effectively used on have grown.  All of these improvements have translated into lowering the cost to produce a quality product.

What does this all mean?

Focusing on the original core impediments and solving the issues have changed the application of this technology, once reserved for the appeals process.  It now makes perfect sense to present your documents at all levels of advocacy, from pretrial motions through post-trial hearings and everything in between.  We now regularly file EBriefs for clients at all levels of federal and state courts, throughout the entire litigation process.  They are as effective in a discovery motion as they are in a patent filing or a complicated post-trial filing.  The Chart below is a visual representation of all areas of the law where EBriefs improve the presentation of your filing by the court.

 

Remember some key facts when determining how you can improve your method of presentation to the court and provide the most effective advocacy for your clients.  Don’t take the chance that all of your hard work on a trial or set of briefing papers might go to waste because a judge gets lost in a voluminous, dry paper record.

• Over 90 % of all cases never go to trial and are decided on the full briefing schedule alone.
• Up to 1/3 of all cases are modified and/or reversed on appeal.
• Courts rarely have the opportunity to review all the documentation submitted in paper form due to volume and time restraints.
• Electronic Briefs increase the effectiveness of court review by providing instant access to all cited documents in context.

In addition to the more traditional legal uses mentioned above, the same technology has been effectively used to create electronic versions of the following for improved document access:

• Trial record reviews
• Preparation for oral argument
• SEC filings
• Investigative reports
• Business transaction records
• Syndicated debt projects

Clearly, hyperlinked EBrief technology has gone far beyond the original Appeals market.