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Four Cases Highlighting e-Discovery Trends in 2017

The article below was published in the March 2018 edition of Law Journal Newsletters Cyber Security Law & Strategy.

Four Cases Highlighting e-Discovery Trends in the Second Half of 2017

By Mike Hamilton

In the second half of 2017, case law served to clarify what does and does not constitute reasonable policies and procedures for preserving information subject to discovery — as well as the risks you run if you fail to follow through on those policies.

Sometimes Just Sending a Legal Hold Is Enough

Case: New Mexico Oncology and Hematology Consultants, Ltd. v. Presbyterian Healthcare Services (D. N. M. Aug 16, 2017)

Why This Case Is Important

Collecting everything isn’t necessary. If your preservation processes are “reasonable” under the circumstances, then simply sending detailed legal hold notices to key custodians may be sufficient.

Case Facts

In this antitrust and RICO dispute between healthcare organizations, the plaintiff moved for spoliation sanctions based on the defendant’s legal hold procedures. They had four qualms about the process:

  • Too much employee discretion given to determine relevance
  • Employees were forced to delete or archive potentially relevant emails based on their data retention policies
  • Not enough employees were initially placed on hold: 35 at the outset, but growing to 209 total
  • A server-side hold was put into place for all key custodians

Ruling

  • Rejected Motion Due to Lack of Prejudice. The court rejected most of the plaintiff’s arguments due to the lack of evidence to prove prejudice or bad faith.
  • Reasonableness, Not Perfection Required. Upon review, the court found that the plaintiff had a reasonable preservation process, including a detailed legal hold notice, which advised, “When in doubt, preserve” and instructed the first custodians on hold to refer other key custodians.
  • Implement a Server-Side Hold. Again, without evidence that the plaintiff was prejudiced by the defendant for not implementing a server-side hold, the court could not find sanctions. The court did however state, “the best approach is to implement a server-side hold on all digital data utilized by key employees and to later use search algorithms to parse relevance.”

Expert Opinion

“A lot of speculative motions were brought in the past, and unfortunately were granted. Even today I think that parties, particularly those who may not be as familiar with the requirements of the rule [FRCP 37(e)], or who may think that they have a judge who isn’t that familiar with the requirements of the rule, will still try to bring these motions to gain leverage in hard fought litigation … and I think it’s been very heartening to see there have been a number of decisions that have denied sanctions in speculative situations this year.”

— Gareth Evans, Esq., Co-Chair, e-Discovery Practice Group, Gibson Dunn.

Custodian Search for Responsive Data is OK if…

Case: Mirmina v. Genpact LLC (D. Conn. July 27, 2017)

Why This Case Is Important

Counsel-supervised custodian search for responsive data is a defensible process, especially if no factual evidence of foul play is presented.

Case Facts

The plaintiff filed a motion to compel the defendant to conduct an additional search for electronically stored information (ESI). Going outside the agreed e-discovery protocol, the plaintiff was “concerned” that the defendant withheld communications that were responsive. The defendant’s concerns centered around letting counsel rely “upon an employee directly involved in the underlying claims of the suit to search her own emails for responsive documents.”

In response, the defendant argued that the search for responsive files was “coordinated and overseen by counsel,” which complies with acceptable preservation practices.

Ruling

  • Plaintiff’s Motion Denied. No evidence was given to support the plaintiff’s assumption that the defendant “deliberately or by neglect” withheld communications.
  • Steps the Defendant’s Counsel Used to Supervise ESI Search. 1) Issued a timely legal hold; 2) Instructed custodians of search parameters; 3) Explained importance of search to custodians; and 4) Gave guidance when custodians had questions around the search.
  • No Evidence of Foul Play. As the court noted by citing several cases, parties cannot rely on speculation to warrant e-discovery orders or sanctions, especially as the defendant offered counsel’s sworn representation that all responsive documents were produced.

Expert Opinion

“Good supervision by counsel and really good tracking of that supervision, and the ability to speak to that supervision to the court, can overcome speculation about whether or not your searching has been adequate. It’s a pretty commonsense proposition, but supervision and careful tracking of that supervision are really important components of a defensible e-discovery plan.”

— Bree Kelly, Esq., Attorney, K&L Gates, and Editor, EDiscoveryLaw.com

The Duty to Preserve Extends to Third Parties

Case: Ronnie Van Zant, Inc. v. Artimus Pyle (S.D.N.Y. Aug 28, 2017)

Why This Case Is Important

With increasing amounts of information stored on various data sources, it’s paramount when placing legal holds to consider including third parties who may have relevant data.

Case Facts

In this action for a breach of a consent order involving the famous southern rock band, Lynyrd Skynyrd, the defendant was accused of failing to have a third party, the director of a documentary about the band, preserve relevant text messages when switching to a new phone after the lawsuit commenced.

The defendant argued that they should not be sanctioned for spoliation of the text messages because the director was a contractor, not an employee, and the alleged lost data was outside their custody or control. The court did not agree.

Ruling

  • Preservation Duty Extended to Third Party. Even though the third party was not a party in the case, the court imposed adverse inference sanctions on the defendant for the third party’s failure to preserve the text messages.
  • Defendant had “Control” of the Text Messages. Under FRCP 34, a party must produce documents in its “custody, possession, or control.” Based on the “practical ability” test for “control,” the judge ruled that the defendant had the practical ability to ensure the third party’s preservation of the text messages.
  • Intent to Deprive Based on Deletion of Texts, But Not Photos. To issue an adverse inference under FRCP 37(e), the judge must find that the offending party acted with an intent to deprive. The basis for this intent stemmed from the fact that the third party did not have the texts but kept photos from the phone, which was “evidence of deliberate behavior that sanctions are intended to prevent.”

Expert Opinion

“There’s little to lose anywhere in sending this kind of preservation notice to third parties because if they comply with it, then you’ve covered yourself and you’re not in trouble. If they don’t comply with it, you’ve covered yourself and you’re not in trouble, because the fact that you sent the notice and they didn’t comply with it proves that the documents weren’t within your care, custody or control. I would recommend that practitioners and in-house counsel modify their procedures to identify third parties that might have documents and really be very broad in sending preservation notices to third parties, because usually there’s little to lose and you can insulate yourself from these kind of spoliation claims.”

— David Cohen, Esq., Head of E-Discovery Group, Reed Smith LLP

Preservation Miscue Leads to E-Discovery Trainwreck

Case: Moody v. CSX Transp., Inc. (W.D.N.Y. Sep 21, 2017)

Why This Case Is Important

If you fail to put in place policies and procedures for taking “reasonable steps” to ensure the proper preservation of relevant data, then you’re leaving yourself open to spoliation sanctions under Rule 37(e).

Case Facts

In this case involving a railway accident, data from the involved train’s black box recorder was downloaded to a company laptop. According to the defendant’s policy that downloaded data should have been backed up to a central data repository.

But in the four years between the accident and the filing of the complaint, the company never transferred the data and the laptop crashed. Based on this loss of data, the plaintiff moved for spoliation sanctions, claiming the defendant did not take “reasonable steps” to preserve the lost electronic data.

Ruling

  • “Reasonable Steps” Not Taken. The importance of the lost data, the severity of the incident, the likelihood of litigation and the sophistication of the defendant’s IT infrastructure, all taken into consideration, made the court rule that the defendant did not use “reasonable steps” to preserve the relevant data.
  • Adverse Jury Instruction Awarded. Since the defendant did not take “reasonable steps” to preserve, the court ruled that FRCP 37(e) spoliation sanctions may apply. Based on the importance of the evidence and the egregious conduct that led to the spoliation activity, the court issued an adverse jury instruction against the defendant.
  • Proof Required. The court noted that the defendant, or anyone who has lost relevant data, must be prepared to offer proof that it took reasonable steps to avoid the loss. In this case, the defendant did not offer proof.

Expert Opinion

“Number one, have a policy. Number two, have a way to communicate it effectively. Also have a way to follow up on it … I would think you also have to monitor the hold; you have to be able to discipline people who fail in a hold.”

— Hon. Ronald Hedges, U.S. Magistrate Judge (Ret.), District of New Jersey

Conclusions

Several decisions from recent months have served to clarify the broad contours of reasonable, defensible preservation policies:

  • Send detailed legal hold notices to key custodians.
  • Supervise their preservation efforts — and document that supervision.
  • Speculative arguments about spoliation will not convince the court without evidence, especially if reasonable preservation policies are in place.
  • When in doubt, cast a broad net with your legal hold notices.
  • However, the best policies in the world won’t matter if you don’t follow them.

*****

Mike Hamilton is the Director of E-Discovery Programs at Exterro. With a legal and business background, Hamilton is experienced and passionate about creating thoughtful, out-of-the-box educational resources that help keep legal teams interested and on top of emerging need to know e-discovery issues.