Archive for May 2014

Court Rejects Unilateral Decision to Apply Predictive Coding to Keyword Search Hits, Orders Production of All Hits Pursuant to Clawback Order as Stipulated

Progressive Cas. Ins. Co. v. Delaney, No. 2:11-cv-00678-LRH-PAL, 2014 WL 2112927 (D. Nev. May 20, 2014)

In this case, the parties agreed upon an e-discovery protocol which was memorialized in a court order.  Shortly into its review, Plaintiff determined that the agreed-upon methodology (manual review of search term hits) would be too time consuming and expensive and decided that it would instead apply predictive coding to those documents identified by the agreed-upon search terms—which it began doing without consulting the requesting party or the court.  The requesting party, FDIC-R (FDIC as Receiver), opposed Plaintiff’s unilateral action for several reasons, including the lack of transparency around the predictive coding methodology employed and that the predictive coding protocol did not comport with the recommended “best practices” for the chosen software program.  Ultimately, despite expressing support for the use of predictive coding in discovery, the court ordered Plaintiff to produce all of the documents identified by the agreed-upon keywords, subject to a clawback order, where such a production had been memorialized as an acceptable option in the stipulated order and where Plaintiff had abandoned the option it originally selected (manual review).  The court also noted the FDIC-R’s commitment to devoting the necessary resources to review the documents quickly and thus allow discovery—which had been “stalled for many months”—to move forward.

This case is one of nine declaratory relief actions filed by the plaintiff related to the coverage provided by certain previously issued insurance policies.  The parties submitted a joint Proposed ESI Protocol, which the court approved in a subsequent order.  Accordingly, the plaintiff applied agreed-upon search terms to the approximately 1.8 million documents it had collected, identified approximately 565,000 documents, and began a manual review—one of the two approved methodologies under the agreed-upon protocol.  Eventually, however, Plaintiff deemed the review too “time intensive and expensive” and began exploring its alternatives, including consultation with “a nationally-respected authority on e-discovery.”  Ultimately, Plaintiff determined that predictive coding would be more efficient.  Plaintiff then selected a software program and began to utilize predictive coding to identify relevant documents amongst those identified by the previous keyword search.  Plaintiff did not seek the agreement of the FDIC-R or the court.

The FDIC-R sought to compel Plaintiff to produce the nonprivileged keyword hits without review, subject to a clawback order—the second option contemplated by the stipulated ESI Protocol—or to require Plaintiff to proceed with predictive coding according to the FDIC-R’s suggested protocol, which included applying the methodology to the 1.8 million documents originally collected, and not just the keyword hits.  Among the reasons for the FDIC-R’s opposition to Plaintiff’s use of predictive coding was Plaintiff’s lack of cooperation or transparency around its predictive coding methodology, the likelihood of satellite disputes, and Plaintiff’s failure to adhere to the best practices recommended for the chosen software program.  Plaintiff also acknowledged that “applying predictive coding on top of search terms ‘is not always done.’”

In its analysis, the court plainly acknowledged its potential support for predictive coding and indicated that it would have approved a “transparent mutually agreed upon” predictive coding based protocol, had such a proposal been agreed upon from the outset, but took issue with Plaintiff’s refusal to “engage in the type of cooperation and transparency that its own e-discovery consultant has so comprehensibly and persuasively explained is needed for a predictive coding protocol to be accepted by the court or opposing counsel . . . .” (As the court noted, one of Plaintiff’s consultants was considered something of an e-discovery authority, and had previously written on both the need for cooperation and transparency in predictive coding and litigators’ reticence to accommodate that need.)

Noting its agreement with the FDIC-R that approval of Plaintiff’s proposal would result in more disputes and delay and reasoning that Plaintiff had “elected and then abandoned” the option to manually review the search hits, the court ordered that all of the hits be produced, subject to a clawback agreement.  The court indicated, however, that Plaintiff would be allowed to withhold documents identified by the use of privilege filters and provide a proper privilege log.  The court acknowledged that this would shift the cost of the review to the FDIC-R, but noted that the FDIC-R was “committed to devot[ing] the resources required to review the documents as expeditiously as possible” which would allow the long-stalled discovery to finally move forward.

A full copy of the court’s order is available here.

“Ignoring the capabilities which ESI allows the parties to search for and produce factual information in a case of this nature is like pretending businesses still communicate by smoke signals.”

In re Domestic Drywall Antitrust Litig., —F. Supp. 2d—, 2014 WL 1909260 (E.D. Pa. May 12, 2014)

The issue presented is whether Plaintiffs must provide facts supporting Plaintiffs’ allegations—a frequent issue in antitrust litigation. The Court concludes, because of Plaintiffs’ counsel’s felicitous access to electronically stored information, that Plaintiffs must provide a pretrial statement setting forth the facts they now have, and Defendants must subsequently reciprocate.

Ignoring the capabilities which ESI allows the parties to search for and produce factual information in a case of this nature is like pretending businesses still communicate by smoke signals.

In this case, Defendants moved to compel Plaintiffs to respond to interrogatories seeking disclosure of certain facts supporting the plaintiffs’ contentions.  Plaintiffs objected that the interrogatories were standard “contention” interrogatories and thus were premature at the early stage of litigation and also argued that additional review of the large volume of documents produced by the defendants was required.

Sparing the details, the court ultimately concluded that Defendants’ requests were not premature:

Because Defendants have represented that they have largely completed their document production and Plaintiffs have shown in some of their briefs that they have acquired detailed knowledge of some of the documents produced, the Court concludes that Defendants’ request is not premature, given the abilities of an ESI base and search program for finding documents.

The court further concluded that: “Plaintiffs should provide the facts currently available, from the information that has already been exchanged and from their own investigation.” Rather than compelling individual plaintiffs to answer Defendants’ interrogatories, however, the court ordered that Plaintiffs’ counsel submit a series of pretrial statements on specified issues, setting forth the facts in Plaintiffs’ possession and supporting the plaintiffs’ allegations.

Notably, the court’s analysis relied substantially on the notion that because a large portion of the discovery was in an electronic format, the burden of managing and searching the information was sufficiently low to justify the court’s order.  For example, the court stated (among other things):

  • The decisions cited above were mostly decided before the proliferation of computer programs which enable counsel to search a large collection of documents for specific facts, without significant burden. Although there is a significant expense factor in collecting the documents and having them appropriately entered into an electronic form, once that expense has been undertaken, which is a normal expense in complex litigation, the actual searching for documents for specific facts is not expensive.
  • ESI tools enable parties to use search terms and other methods to quickly identify relevant information and documents produced. The benefits of these ESI tools substantially reduce the burden on Plaintiffs to provide the facts that the Defendants have requested. 
    In this case, both Plaintiffs’ and Defendants’ counsel are using ESI.  The briefs show they are diligently using the information provided by their own clients, as well as discovery provided by opposing parties.  Rulings on discovery in 2014 must recognize we live in a world of ESI, which supports the Court’s requirement that counsel submit pretrial factual statements as part of discovery, in part because doing so is not burdensome.
  • Although ESI is often condemned as overly expensive and unproductive, there are some cases in which its benefits vastly outweigh its costs.  This case is likely such a case. . . . Given contemporary tools of discovery, ESI plays an important part, and must be considered in ruling on discovery disputes. In this case, the agreement of counsel for 1,100 search terms and the millions of documents produced as a result can only be reviewed, and the relevant information efficiently extracted, by the use of computer-based programs. There is no question that the availability of ESI has promoted a beneficial improvement in the productivity of lawyers.

A copy of the full opinion is available here.

Court Orders Forensic Examination for Inadequate Preservation & Collection, Confirms “Basic Rule” that Custodians must be Consulted for Input on Search Terms

Procaps S.A. v. Patheon Inc., No. 12-24356-CIV, 2014 WL 800468 (S.D. Fla. Feb. 28, 2014); No. 12-24356-CIV, 2014 WL 1047748 (S.D. Fla. Mar. 18, 2014)

In this pair of opinions, the court addressed the obligations of client and counsel with regard to the preservation and collection of electronically stored information and the obligation of counsel to obtain input from relevant custodians when crafting search terms.  In the first opinion, in light of deficient efforts to preserve and collect potentially relevant information, the court ordered an extensive forensic examination of Plaintiff’s data repositories by a neutral third party and crafted a protocol for the production of information identified by the search terms applied.  In the second opinion, the court confirmed the “basic rule” that “outside counsel ‘must carefully craft the appropriate keywords, with input from the ESI’s custodians as to the words and abbreviations they use’” and ordered Counsel to “obtain search word input from all the ESI custodians” and to pay a portion of the attorney’s fees awarded, with his firm to pay the rest.  The court was specifically critical of Plaintiff’s counsel’s communication (or lack thereof) with opposing counsel regarding how search terms were generated and whether Plaintiff’s custodians had been consulted, which caused Defendant to file its motion to compel.

In the first opinion, Defendant sought to compel forensic examination of Plaintiff’s electronic media based on the inadequacies of Plaintiff’s preservation and collection efforts, including: Plaintiff’s failure to issue a litigation hold; Counsel’s failure to travel to Colombia (where Procaps is based) to meet with IT personnel or others to discuss how discoverable ESI would be located; Counsel’s  failure to retain a consultant to assist with preservation and the search for relevant information; and Counsel’s failure to assist custodians in the collection of potentially relevant information, including failing to provide them with the relevant document requests or search terms to be utilized in their efforts.

As a result of these failures, the court arrived at the “indisputable conclusion that the ESI and document searches were inadequate—a scenario which strongly suggests that some (and perhaps even a significant amount of) responsive discovery from Procaps [was not] located . . . .”  Accordingly, the motion for forensic analysis was granted, pursuant to a protocol drafted by the court, which required the retention of a neutral, third-party forensic examiner.  Attorney’s fees were also awarded, to be split between Plaintiff and its counsel.

A copy of the full opinion is available here.

In the second opinion, the court addressed Defendant’s motion to compel Plaintiff to propose adequate search terms in furtherance of the forensic analysis discussed above.  Broadly stated, Defendant was concerned that Plaintiff’s counsel had not consulted with his client’s ESI custodians when generating search terms and was further concerned by Counsel’s failure to communicate regarding that issue, including failing to respond to specific inquiries.  Defendant initially became concerned when Plaintiff proposed only eight search terms, all in English, despite the fact that Plaintiff is headquartered in Colombia and that its employees speak Spanish.  Those concerns were not allayed by Plaintiff’s counsels’ assurances that they would confer with their client as to an appropriate translation of any agreed upon search terms.

When repeated emails to Plaintiff’s counsel failed to alleviate Defendant’s concerns, a motion to compel was filed.  At the hearing, Plaintiff’s counsel, for the first time, “agreed that the law requires him and his law firm to receive input from his client’s ESI custodians in order to determine appropriate search words” and further represented that such input was in fact elicited.  After the hearing, however, it was revealed that such efforts were undertaken only after the motion to compel was filed.  The court also noted some unresolved questions as to inconsistencies in some of Plaintiff’s counsel’s representations to the court.

Despite acknowledging that most of the disputed issues were moot, the court nonetheless granted the motion “and require[d] Procaps to have its counsel obtain search word input from all the ESI custodians.”  The court also found that Defendant was entitled to attorney’s fees and specifically criticized Plaintiff’s counsel’s unwillingness to meaningfully communicate, resulting in the impression that Counsel had not, and would not, obtain client input on suggested search terms.  This impression, in turn, “caused” Defendant to file its motion to compel.  Ultimately, the court awarded $3750 in fees and required that Plaintiff’s lead attorney be personally responsible for payment of $1000, with the remainder to be paid by his firm.

Notably, in both opinions, the court urged (but did not require) Plaintiff’s counsel’s law firm to investigate whether other attorneys (besides lead counsel) had caused or helped to cause the discovery problems and whether those attorneys should pay for all or some of the fees which were required to be paid by their firm.

A copy of the full opinion is available here.

Despite Alleged Budget Constraints, Government Ordered to Continue to Pay for Database to Avoid Prejudice to Criminal Defendants

United States v. Shabudin, No. 11-cr-00664-JSW-1 (NJV), 2014 WL 1379717 (N.D. Cal. Apr. 8, 2014)

In this criminal case, the Government was ordered to continue to maintain a Relativity Database (the “Database”) utilized by the parties to review documents produced by the Government and to continue to provide Defendants with the access and support that the parties had previously negotiated, despite the depletion of funding for the Database which was accelerated by the Government’s voluntary actions.

“The Government created the Database because it was in its interest to do so, as it needed to manage the vast quantities of documents being produced in this action.”  The parties thereafter negotiated an agreement allowing Defendants to access the Database and to utilize “project managers” for technical and substantive support.  Although the Database was “completed” in January 2013, “[t]he parties started gaining access to the Database” in February 2014.

In the course of preparing for trial, Defendants moved to compel the Government to upload additional information amounting to about one million pages.  In lieu of being ordered to do so, the Government agreed to voluntarily upload the information.  Approximately three weeks later, however, the Government announced for the first time that the efforts to upload the additional information were depleting the Database budget and that access would therefore end in June 2014- approximately “three months after the Government filed its superseding indictment and six months before the beginning of trial.”  At that time, the information would be transferred to a Concordance database to be maintained at Defendants’ expense.  It was later revealed that although “all document level fielded data that [was] currently viewable and searchable” would be transferred, the metadata created by the Database, including saved searches, for example, would not.  Defendants objected that the loss of such metadata would be significant, “eviscerating months of effort to build a defense.”   Upon Defendants’ opposition to the proposed end of access and the court’s inquiry into the possibility of extending the time and request for additional information, the Government “unilaterally decided to discontinu[e] paying for ‘non-technical support and paralegal services’ in order to extend the duration of the Database.”  The Government represented that the cost of operating the Database with the agreed upon level of service to Defendants was $66,132.87 per month, as opposed to the $27,947.71 per month required to operate a “bare bones version.”  Defendants argued that the discontinued services were “vital to their ability to use the Database.”

Notably, when asked to explain when it first notified the defendants or the court that the Database could be wound down before trial, “[t]he Government could not point to a single instance where it actually informed Defendants that this was a possibility.”  The Government nonetheless argued that Defendants should have been aware of the possibility, including by relying on the parties’ contemplation of a two year duration (relying on a June 2012 commencement date) and by implying that because Defendants understood that a $1.8 million budget had been allocated to the Database they should therefore have “expected that the allocated funds would be insufficient and that the Database would be shut down well in advance of trial.”

Taking up the issue of how to handle the Database, the court emphasized the Government’s voluntary decision to upload the additional documents (discussed above) and its failure to warn the defendants that the decision would “come at the steep price of curtailing meaningful access to the Database.”  Ultimately, the court made a number of findings, including that the Government never disclosed that the Database could wind down before trial, that the Government voluntarily undertook the uploading of additional information without warning Defendants of the potential impact to their use of the Database, that the Government did not establish that a transfer to Concordance could be effective or that Defendants could retain “meaningful access” to the Database without the project managers, that Defendants had no resources to fund a Concordance database, that the unilateral change to the Terms and Conditions for Access had prejudiced Defendants’ ability to prepare for trial and offended the court’s “notion of fairness,” and that winding down the Database before trial would prejudice Defendants’ ability to prepare for trial and “offend the court’s notion of fairness.”

Accordingly, “to avoid prejudicing the Defense and to follow through on the obligations the Government voluntarily undertook in this action,” the court ordered the Government to “continue to pay for the Database, through December 2014, providing the services agreed to by the parties in Terms and Conditions for Access to the [ ] Database.”

A complete copy of the court’s order is available here.

Proposed Rule 37(e) Draft Committee Note Now Available

As previously discussed on this blog, proposed amendments to the Federal Rules of Civil Procedure were recently approved by the Advisory Committee on Civil Rules for submission to the Committee on Rules of Practice and Procedure (the “Standing Committee”).  At the time of approval, the Committee Note for Proposed Rule 37(e) remained “under construction.”  The proposed note has now been drafted, however, and was published in the Agenda Book for the Standing Committee’s May meeting, to be held in Washington, D.C. on May 29-30.

A copy of the Agenda Book is available here.

State Bar of California Issues Interim Opinion on Attorneys’ Ethical Duties in the “Handling of Discovery of [ESI]” – Public Comment Invited

The State Bar of California Standing Committee on Professional Responsibility and Conduct has issued Formal Opinion Interim No. 11-0004 (ESI and Discovery Requests) for public comment.  By analyzing a hypothetical fact pattern, the interim opinion addresses the following question: “What are an attorney’s ethical duties in the handling of discovery of electronically stored information?” Public comment on the opinion is being accepted until June 24, 2014.  While this opinion will not directly affect practice outside of the State of California, it nonetheless may provide all attorneys with valuable insight into the duties of counsel in electronic discovery.  [Please Note: California has not adopted the Model Code of Professional Conduct.  Despite that, the opinion acknowledges that the authors “look[ed] to federal jurisprudence for guidance, as well as applicable Model Rules, and appl[ied] those principals [sic] based upon the California ethical rules and California’s existing discovery law outside the e-discovery setting.”]

Formal Opinion Interim No. 11-0004 begins as follows:

ISSUES:          What are an attorney’s ethical duties in the handling of discovery of electronically stored information?

DIGEST:        An attorney’s obligations under the ethical duty of competence evolve as new technologies develop and then become integrated with the practice of law. Attorney competence related to litigation generally requires, at a minimum, a basic understanding of, and facility with, issues relating to e- discovery, i.e., the discovery of electronically stored information (“ESI”). On a case-by-case basis, the duty of competence may require a higher level of technical knowledge and ability, depending on the e-discovery issues involved in a given matter and the nature of the ESI involved. Such competency requirements may render an otherwise highly experienced attorney not competent to handle certain litigation matters involving ESI. An attorney lacking the required competence for the e-discovery issues in the case at issue has three options: (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. Lack of competence in e-discovery issues can also result, in certain circumstances, in ethical violations of an attorney’s duty of confidentiality, the duty of candor, and/or the ethical duty not to suppress evidence.

INTERPRETED:          Rules 3-100, 3-110, 3-210, 5-200, and 5-220 of the Rules of Professional Conduct of the State Bar of California.
Business and Professions Code section 6068

Also notable in the interim opinion is the list of tasks that attorneys should be able to perform “either by themselves or in association with competent co-counsel or expert consultants”:

Taken together generally, and under current technological standards, attorneys handling e-discovery should have the requisite level of familiarity and skill to, among other things, be able to perform (either by themselves or in association with competent co-counsel or expert consultants) the following:

  1. initially assess e-discovery needs and issues, if any;
  2. implement appropriate ESI preservation procedures, including the obligation to advise a client of the legal requirement to take actions to preserve evidence, like electronic information, potentially relevant to the issues raised in the litigation;
  3. analyze and understand a client’s ESI systems and storage;
  4. identify custodians of relevant ESI;
  5. perform appropriate searches;
  6. collect responsive ESI in a manner that preserves the integrity of that ESI;
  7. advise the client as to available options for collection and preservation of ESI;
  8. engage in competent and meaningful meet and confer with opposing counsel concerning an e-discovery plan; and
  9. produce responsive ESI in a recognized and appropriate manner.

See, e.g., Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC (S.D.N.Y. 2010) 685 F.Supp.2d 456, 462-465.

For a full copy of the interim opinion and for more information regarding how to submit a public comment, click here.