Archive for September 2014

Court Approves Use of Predictive Coding Despite Objection to “Unproven Technology”

Dynamo Holdings Ltd. P’ship v. Comm’r of Internal Revenue, Nos. 2685-11, 8393-12 (T.C. Sept. 17, 2014)

In this case, the court approved petitioners’  (Dynamo Holdings Ltd. Partnership et. al.) use of predictive coding to identify potentially responsive and privileged data contained on two backup tapes, despite respondent’s  (Commissioner of Internal Revenue) objection that the technology was “unproven.”

In response to respondent’s motion to compel the production of information contained on two backup tapes, petitioners sought to have the motion denied as a “fishing expedition” or, alternatively, the court’s permission to utilize predictive coding “to efficiently and economically identify the nonprivileged information responsive to respondent’s discovery request.”  Respondent opposed the use of predictive coding, calling it “unproven technology” and argued that petitioners “need not devote their claimed time or expense to this matter because they c[ould] simply give him access to all data on the two tapes and preserve the right (through a ‘clawback agreement’) to later claim that some or all of the data is privileged information not subject to discovery.”

In the course of its analysis, the court noted the “somewhat unusual” nature of petitioners’ request:

In this respect, we note that this request is somewhat unusual.  Our Rules are clear that “the Court expects the parties to attempt to attain the objectives of discovery through informal consultation or communication” before resorting to formal discovery procedures. Rule 70(a)(1).  And although it is a proper role of the Court to supervise the discovery process and intervene when it is abused by the parties, the Court is not normally in the business of dictating to parties the process that they should use when responding to discovery.  If our focus were on paper discovery, we would not (for example) be dictating to a party the manner in which it should review documents for responsiveness or privilege, such as whether that review should be done by a paralegal, a junior attorney, or a senior attorney.  Yet that is, in essence, what the parties are asking the Court to consider — whether document review should be done by humans or with the assistance of computers.  Respondent fears an incomplete response to his discovery.  If respondent believes that the ultimate discovery response is incomplete and can support that belief, he can file another motion to compel at that time.  Nonetheless, because we have not previously addressed the issue of computer-assisted review tools, we will address it here.

Contrasting its unwillingness to order the petitioners to produce ESI without review with the “time and expense” of actually conducting such a review (which the court was also unwilling to require), the court indicated that it found predictive coding to be “a potential happy medium.”  In response to respondent’s assertion that the technology was “unproven,” the court disagreed, reasoning that “the understanding of e-discovery and electronic media has advanced significantly in the last few years, thus making predictive coding more acceptable in the technology industry than it may have previously been” and that “we understand that the technology industry now considers predictive coding to be widely accepted for limiting e-discovery to relevant documents and effecting discovery of ESI without an undue burden.” (Citations omitted.)  The court went on to conclude that “[w]here, as here, petitioners reasonably request to use predictive coding to conserve time and expense, and represent to the Court that they will retain electronic discovery experts to meet with respondent’s counsel or his experts to conduct a search acceptable to respondent, we see no reason petitioners should not be allowed to use predictive coding to respond to respondent’s discovery request.”

The court went on to summarize some of petitioners’ expert witness testimony, noting in footnote that respondent’s expert “did not persuasively say anything to erode or otherwise undercut” it.   Among the points highlighted were the expert’s conclusions that “the trend was in favor of predictive coding because it eliminates human error and expedites review” and that the proposed approach was “the most reasonable way for petitioners to comply with that request.”  Moreover, upon specific analysis of the parties’ “dueling approaches,” the expert concluded that:

[P]etitioner’s approach would reduce the universe of information on the tapes using criteria set by the parties to minimize review time and expense and ultimately result in a focused set of information germane to the matter.  He estimated that 200,000 to 400,000 documents would be subject to review under petitioners’ approach at a cost of $80,000 to $85,000, while 3.5 million to 7 million documents would be subject to review under respondent’s approach at a cost of $500,000 to $550,000.

Accordingly, the court concluded:

Our Rules, including our discovery Rules, are to be “construed to secure the just, speedy, and inexpensive determination of every case.”  Rule 1(d).  If, after reviewing the results, respondent believes that the response to the discovery request is incomplete, he may file a motion to compel at that time.  See Rule 104(b), (d).

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

Applying Proportionality, Court Denies Motion to Compel Additional Search for ESI, Reminds Parties of Other Discovery Tools

United States v. Univ. Nebraska at Kearney, No. 4:11CV3209, 2014 WL 4215381 (D. Neb. Aug. 25, 2014)

In this housing discrimination case, the parties disagreed regarding the proper scope of discovery and plaintiff’s proposed search terms.  Plaintiff sought the production of ESI related to requests for accommodation of a disability in every context (e.g., housing, academics, employment, etc.) while defendants sought to limit production to the “housing” or “residential” contexts.  The court found that plaintiff’s request was overly broad on its face and that the additional costs required by the requested searching would “far outweigh” anything that could be gained.  Moreover, the court agreed with defendants that even with a clawback order, review of potentially responsive documents would be required to protect students’ privacy interests.  Finally, in response to claims that defendants’ proposed search would miss responsive ESI, the court reasoned that “[s]earching for ESI is only one discovery tool,” and suggested that “[s]tandard document production requests, interrogatories, and depositions should suffice – and with far less cost and delay.”

Plaintiff alleged that defendants had “prohibited or hindered students from living with emotional assistance animals in university housing.”  Accordingly defendants produced those documents having to do with requests for reasonable accommodation in university housing.  Plaintiff was unsatisfied, however, and sought information related to requests for accommodation in all contexts.  Per their stipulation and order regarding the treatment of ESI, the parties attempted to negotiate appropriate search terms, but could not agree.

After negotiation, the dueling proposals stood as follows: plaintiff’s proposed search terms would yield 51,131 potentially responsive documents which would cost $155,574 to review while defendants’ proposed search would yield 10,997 documents.  When plaintiff suggested that the ESI could be produced without review, defendants objected that to do so would violate federal law by revealing students’ personal identifying information.  Plaintiff moved to compel. 

Before addressing  the motion, “[t]he court ordered the parties to provide answers to specific questions regarding their efforts at resolving  ESI as part of any motion to compel filed.”  Regarding plaintiff’s response, the court noted that it did not “include information comparing the cost of its proposed document retrieval method and amount at issue in the case, any cost/benefit analysis of the discovery methods proposed, or a statement of who should bear those costs.”

Upon taking up the motion, the court was “not convinced” that the scope of discovery should be expanded to include all requests for accommodation and found that plaintiff’s request was “on its face, overly broad, not ‘reasonably calculated to lead to the discovery of admissible evidence,’ …  and inconsistent with the goals” of Rule 1.  The court went on to reason that even if it assumed that the requested discovery may be relevant, it must weigh the burden versus the benefit pursuant to Federal Rule 26(b)(2)(C)(iii). Reasoning in part that defendants had already produced all documents relevant to requests for accommodation in housing, that the plaintiff had not established that evidence of a broader discriminatory attitude or practice may exist, and that defendants had already expended more than $100,000 to respond, the court further found that the additional costs of the proposed discovery would “far outweigh” what could be gained.

Turning briefly to plaintiff’s suggestion that the documents be produced without review subject to a clawback agreement, the court agreed with defendants that to do so would adversely impact the privacy interests of all who had requested accommodation and, again citing the burden of the proposed review, once again declined to compel production.

Finally, the court responded to plaintiff’s assertion that its broad proposed search was necessary because without it, “the ESI search w[ould] not reveal a complete set of documents”:

Searching for ESI is only one discovery tool. It should not be deemed a replacement for interrogatories, production requests, requests for admissions and depositions, and it should not be ordered solely as a method to confirm the opposing party’s discovery is complete. For example, the government proposes search terms such as “document* w/25 policy.” The broadly used words “document” and “policy” will no doubt retrieve documents the government wants to see, along with thousands of documents that have no bearing on this case. And to what end? Through other discovery means, the government has already received copies of UNK’s policies for the claims at issue. See Filing No. 104, at CM/ECF pp. 19–10).

The court concluded:

Having considered the allegations and docket filings, and absent any evidence that the defendants hid or destroyed discovery and cannot be trusted to comply with written discovery requests, the court is convinced ESI is neither the only nor the best and most economical discovery method for obtaining the information the government seeks. Standard document production requests, interrogatories, and depositions should suffice—and with far less cost and delay.

Defendant’s motion to compel was denied.

A full copy of the court’s Memorandum and Order is available here.

Another Milestone Passes: Judicial Conference Approves Federal Civil Rules Amendments

As reported by the National Law Journal (subscription required), the Judicial Conference has approved proposed changes to the Federal Rules of Civil Procedure.  No revisions to the proposals were reported.  The proposals will now go before the United States Supreme Court for review and, if approved, will take effect on December 1, 2015, absent any action by Congress to revise or reject the amendments.

The rules to be affected by the pending amendments include rules 1, 4, 16, 26, 30, 31, 33 and 34 (collectively known as the “Duke Rules Package”). The proposed amendments also include an entirely rewritten Rule 37(e) addressing preservation and sanctions.

For more information regarding specific proposed changes (including the proposed text of the rules), read the Summary of the Report of the Judicial Conference Committee on Rules of Practice and Procedure, HERE.

Court Allows Plaintiff to “switch horses in midstream” and Use Predictive Coding to Review Documents Initially Screened with Search Terms

Bridgestone Americas, Inc. v. Int. Bus. Machs. Corp., No. 3:13-1196 (M.D. Tenn. July 22, 2014)

In this case, the court approved plaintiff’s request to use predictive coding in reviewing over two million documents, despite defendant’s objections that the request was an “unwarranted change in the original case management order” and that it would be unfair to allow the use of predictive coding “after an initial screening has been done with search terms.”

In deciding to allow plaintiff to utilize predictive coding, the court reasoned:

Predictive coding is a rapidly developing field in which the Sedona Conference has devoted a good deal of time and effort to, and has provided various best practices suggestions. Magistrate Judge Peck has written an excellent article on the subject and has issued opinions concerning predictive coding. Certainly, this Magistrate Judge could try to write an extensive opinion, going into various cases which have allowed and denied predictive coding. In the final analysis, the uses of predictive coding is a judgment call, hopefully keeping in mind the exhortation of Rule 26 that discovery be tailored by the court to be as efficient and cost-effective as possible. In this case, we are talking about millions of documents to be reviewed with costs likewise in the millions. There is no single, simple, correct solution possible under these circumstances.

The Magistrate Judge will permit Plaintiff to use predictive coding on the documents that they have presently identified, based on the search terms Defendant provided.

The Magistrate Judge believes that he is, to some extent, allowing Plaintiff to switch horses in midstream. Consequently, openness and transparency in what Plaintiff is doing will be of critical importance. Plaintiff has advised that they will provide the seed documents they are initially using to set up predictive coding. The Magistrate Judge expects full openness in this matter.

The court went on to note that the defendant was a “sophisticated user of advanced methods for integrating and reviewing large amounts of data,” and indicated that the court expected the parties to communicate “through their attorneys and experts and companies doing the work, on a frequent and open basis.” The parties were further instructed to seek the court’s intervention upon reaching a “sticking point.”

Notably, although the defendant had advised the court that “they [were] somewhere between one-third and one-half completed with their manual review of their documents set,” the court closed its opinion by indicating that “[n]othing in this order is intended to prohibit Defendant from switching to predictive coding if they believe it would in the end be more efficient, given the Magistrate Judge’s order to allow the Plaintiff to use predictive coding.”

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

“The time to tap flexibility and creativity is during meet and confer, not after.” – Court Quashes Subpoena, Declines to Allow Plaintiff to Accept Prior Offer for Production

Boston Scientific Corp. v. Lee, No. 5:14-mc-80188-BLF-PSG, 2014 WL 3851157 (N.D. Cal. Aug. 4, 2014)

This case illustrates a recurring problem in all civil discovery, especially in intellectual property cases. A party demands the sun, moon and stars in a document request or interrogatory, refusing to give even a little bit. The meet and confer required by a court in advance of a motion is perfunctory at best, with no compromise whatsoever. But when the parties appear before the court, the recalcitrant party possesses newfound flexibility and a willingness to compromise. Think Eddie Haskell singing the Beaver’s praises to June Cleaver, only moments after giving him the business in private. Having considered the arguments, the court GRANTS Nevro’s motion to quash.

Boston Scientific Corp., 2014 WL 3851157, at *1.

In this case, the court addressed plaintiff’s subpoena seeking the production of a complete forensic image of two laptops utilized by the defendant, a former employee of the plaintiff, during his employment with plaintiff’s competitor, who the defendant began working for soon after resigning his position with the plaintiff. 

Shortly after the defendant was served with process in this case, his new employer, a non-party, segregated defendant’s first work-issued laptop in the hands of a third party e-discovery vendor and also produced to the plaintiff “forensic information about the contents of the first laptop in the form of file listing reports, which disclose extensive metadata of the files contained on the laptop, USB reports, and web browsing history reports.”  When pressed by the plaintiff, the third party also offered “to have an independent vendor review a full forensic image of the first laptop to search for pertinent information, including a review of any deleted files,” but the plaintiff refused. 

Because defendant’s employer had segregated his first laptop, it issued him a second.  Both the first and second laptops issued by the employer were utilized by the defendant in the course of his work and contained communications between the defendant and counsel.  The second laptop had also previously been used by an employee “who handled some of the Nevro’s most sensitive and confidential issues, and regularly communicated with in-house and outside counsel about legal matters.”

Thereafter, plaintiff issued a subpoena demanding “a complete forensic image of each” laptop.  The new employer moved to quash, arguing that the demanded inspection was unwarranted and risked disclosure of protected information that was not the subject of discovery in this case.

Taking up the motion, the court quickly determined that the second laptop, which had been issued after suit was filed, was “not discoverable.”  As to the first laptop, the court determined that the new employer “ha[d] the better of the argument” and went on to reason what while there was “[n]o doubt” that discoverable information existed on the two laptops, “by demanding nothing less than a complete forensic image of not just one but two laptops belonging to a direct competitor, [the plaintiff] demands too much.”  The court explained that the requested production would “disclose privileged communications . . . as well as irrelevant trade secrets from a nonparty-competitor” and that the subpoena thus sought “discovery of protected matter, something plainly not permitted under Rule 45, rendering the subpoena overbroad and imposing an undue burden . . . .”  Further, the court reasoned that “[t]he risks attached to forensic imaging are simply too great to permit unchecked discovery” and that the threat of accidental disclosure of “crown jewels” was “particularly pronounced in competitor-competitor litigation, like this one.”

Having lost the motion, plaintiff sought to take up the non-party’s prior offer to allow an independent vendor to review the first laptop for pertinent information.  Although “tempted to adopt this proposal,” the court declined:

But to allow Boston Scientific now to seek shelter from a fallback position that Nevro previously tendered in good faith would make a mockery of both parties’ obligation to meet and confer in good faith from the start. FN59 The time to tap flexibility and creativity is during meet and confer, not after.

        FN59. Drawing from a recent decision in this district, to accommodate Boston Scientific’s demand would “encourage litigants to demand the moon thinking they can always fall back to something reasonable. They should be reasonable from the start.” Straight Path IP Group, Inc. v. Blackberry Limited, Case No. 3:14–mc–80150–WHA, 2014 WL 3401723, at *1 (N.D. Cal. July 8, 2014).

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