Important Developments in Recent Ediscovery Case Law

Wednesday, February 16, 2011 by Thought Leadership Team

In the years since the 2006 amendments to the Federal Rules of Civil Procedure, keeping abreast of ediscovery developments has been no small feat, especially given the rapidly expanding body of case law. Each ediscovery dispute and corresponding opinion provides one small piece of a seemingly impossible puzzle, and litigants have struggled to find concrete definitions of duties and court expectations. However, as electronic discovery becomes the dominant form of discovery, definitions of related duties are beginning to take shape.

The Preservation Problem

One challenging aspect of the ediscovery process that parties continue to struggle with is the duty to preserve. On January 15, 2010, District Judge Shira Scheindlin of the Southern District of New York issued an opinion, Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC,1 that provides further guidance on a party’s preservation obligation. This case, which is sure to be one of the most cited cases of 2010 and beyond, reiterates the concept that the duty to preserve arises upon reasonable anticipation of litigation and provides definite “criteria a court should review in evaluating discovery conduct.” Specifically, Judge Scheindlin discussed the four factors necessary for consideration in determining whether a litigant’s conduct throughout the discovery process warrants the imposition of sanctions, including the party’s culpability, the interplay between the duty to preserve evidence and the spoliation of evidence, which party bears the burden of proving that evidence has been lost or destroyed and resulting consequences, and the appropriate remedy for the harm caused by the spoliation.

Perhaps one of the most important lessons from this opinion concerned Judge Scheindlin’s holding that the failure to issue a written litigation hold constitutes gross negligence. In this case, six of the thirteen plaintiffs subject to sanctions never issued a written hold at any time. Based on this conduct, Judge Scheindlin determined a permissive adverse inference sanction was warranted. Judge Scheindlin also found all thirteen plaintiffs worthy of monetary sanctions since they “conducted discovery in an ignorant and indifferent fashion,” and awarded the defendants reasonable attorneys’ fees and costs associated with the motion.

Judge Scheindlin noted that “[b]y now, it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve records – paper or electronic – and to search in the right places for those records, will inevitably result in the spoliation of evidence.” Following this landmark decision, the bar of acceptable behavior in the context of ediscovery has been raised, and it is clear that a party’s ignorance of its preservation obligations is absolutely no longer a viable defense to discovery violations.

Importance of Information Management

In Starbucks Corporation v. ADT Security Services, Inc.,2 the plaintiffs requested the production of e-mails from certain key players relating to a specified time period. Objecting to the production requests, the defendant relied on Fed.R.Civ.P. 26(b)(2)(B) and claimed that the location of the e-mails on the company’s “cumbersome” old archiving system made them not reasonably accessible. The defendant presented testimony from an information technology manager who testified that retrieval would be disruptive to business operations, would take nearly four years to restore and would cost $834,285. After noting that the defendant’s cost estimate had increased from $88,000 just six months earlier, the court found that the e-mails were readily accessible, and even if they weren’t, good cause existed to order production. The court held that the plaintiff should not be disadvantaged because the defendant, a “sophisticated” company, chose not to migrate the e-mails to the now-functional archival system.

Proper information management from the outset could have entirely avoided the issue the defendant faced in the Starbucks case, since there would have been no need to access the antiquated archiving system. As demonstrated by this case, poor or outdated IT infrastructure does not serve as an excuse to ESI request response. Thus, parties must use sound data management practices and take advantage of services, such as an archiving system, that can help reduce litigation expenses and strengthen defensibility.

Taxation of Costs

In CBT Flint Partners, LLC v. Return Path, Inc.,3 the defendants enlisted an ediscovery vendor to aid compliance with the production of 1.4 million electronic documents and six versions of source code. Due to the excessive cost and time connected with the collection of the documents, the defendants filed a motion to tax the costs associated with the use of the vendor. Overruling the plaintiff’s objections and ordering recovery of taxable costs, the court sent a strong message to ediscovery litigants. According to the court, the highly technical nature of ediscovery in the electronic age, more often than not, requires the use of outside vendors. Therefore the “[t]axation of these costs will encourage litigants to exercise restraint in burdening the opposing party with the huge cost of unlimited demands for electronic discovery.”

There is no doubt that the law of electronic discovery will continue to develop at a fast pace. Part of this progression will inevitably involve the reconfiguration of existing ediscovery duties as technology continues to advance. However, analysis of the existing case law provides a wealth of information that aids in determining current duties of litigants in ediscovery disputes. Education is essential, and parties must continue tracking the evolution of electronic discovery.

1 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010). 2 2009 WL 4730798 (W.D.Wash. Apr. 30, 2009). 3 2009 WL 5159761 (N.D.Ga. Dec. 30, 2009).