Lack Of Prejudice Results In Limited Sanction Against Defendant

In one of the first cases interpreting newly amended Fed. R. Civ. P. 37, F.T.C. v. DirecTV, Inc., 15-cv-01129-HSG, 2016 U.S. Dist. LEXIS 176873 (N.D. Cal. Dec. 21, 2016), Magistrate Judge Maria Elena James of the Northern District of California denied plaintiff’s motion to exclude spoliated evidence that was relied upon by defendant’s expert, reasoning that the plaintiff failed to show sufficient prejudice to warrant such a sanction.  The Court, however, did order that defendant’s expert sit for a four hour deposition to cure any prejudice resulting from defendant’s failure to engage in “best practices” related to the preservation of such evidence.

This is a lawsuit about DirecTV’s online marketing tactics. More precisely, plaintiff, the Federal Trade Commission (FTC), claims that defendant, DirecTV, deceptively and unfairly advertises its subscription services to consumers, in violation of the Federal Trade Commission Act (“FTC Act”) and the Restore Online Shoppers’ Confidence Act (“ROSCA”).

In its motion for sanctions under Fed. R. Civ. P. 37(e)(1), the FTC argued that despite being on notice since 2010, DirecTV failed to preserve three categories of ESI related to its website.

Interactive Versions of 2015 DirecTV website

The FTC argued that DirecTV did not preserve interactive versions of its 2015 website, which were relied upon by DirecTV’s expert. DirecTV responded by stating that it informed the FTC in June 2010 and February 2014 that it was not preserving all versions of its interactive website because it was technologically infeasible to do so.  Instead, in August 2013, DirecTV advised the FTC that it would produce monthly screenshots of its website, and ultimately made available source code and two 30(b)(6) experts on such code that would supposedly enable the FTC to reconstruct the website.

2011 – 2015 A/B Tests

The FTC also argued that DirecTV failed to preserve “thousands” of A/B tests that it conducted from 2011 until 2015. “A/B testing refers to the common practice of presenting different experiences to subsets of consumers and analyzing how consumers respond.”  DirecTV’s failure to preserve this ESI, the FTC argued, prejudiced its ability to compare DirecTV’s litigation evidence with similar evidence prepared in the ordinary course of business and has deprived the FTC of an opportunity to commission a counter-study.  DirecTV countered by explaining that it produced the single A/B test mentioned in its expert’s report and reminded the court that the parties already resolved this dispute in July 2016 when DirecTV agreed to produce other records relating to its consumer research studies.

Website Analytics Data

Finally, the FTC argued that DirecTV failed to preserve analytics data on the behavior of users navigating the company’s website. Without this data, the FTC argued that DirecTV should be precluded from using it to defend the case.  DirecTV responded by attacking the FTC’s delay in recognizing and raising this issue, and also alleged that the dispute was similarly resolved by the parties’ July 2016 agreement on consumer research studies.

In deciding the issue, the court stated that “[w]hile DIRECTV’s decisions may not constitute best practices, the Court finds that the FTC ultimately has not shown that it has been prejudiced to warrant exclusion of the information.” With regard to DirecTV’s failure to preserve interactive versions of its website for the time period used in the consumer surveys, the court stated that while plaintiff “may have preferred” preservation and production in a different format, plaintiff failed to show that DirecTV’s production of screenshots and source code was inadequate for its purposes.  With regard to the A/B tests, the court chastised plaintiff’s argument that “potentially relevant” data was lost, citing amended Rule 26(b)(1) to explain that the FTC was only allowed to seek information relevant to the claims and defenses, not information that “may lead to the discovery of admissible evidence,” an obsolete standard.  Finally, with respect to alleged lost website analytics, the court rejected plaintiff’s plea for evidence exclusion, noting the FTC’s delay in seeking sanctions on this issue and the lack of evidence that FTC’s experts needed additional data to evaluate defendant’s expert report.

Ultimately, the court denied the FTC’s request to exclude these categories of ESI, but did order that DirecTV produce its expert for a four hour deposition “should the FTC find this option useful” because the FTC was entitled to “confirm that the information [defendant’s expert] relied upon is consistent (in all material respects) with information from different time periods.”

The court’s refusal to impose a more severe sanction such as evidence exclusion highlights Rule 37(e)(1)’s requirement that the moving party has a burden to show prejudice. Further, the case reaffirms the rule’s directive that courts fashion remedies “no greater than necessary” to cure whatever prejudice identified.

Forensic Examination of Plaintiff’s Electronic Devices Disallowed Because It Was Not Proportional To The Needs of the Case

District Court Judge Jorge L. Alonso recently upheld Magistrate Judge Michael T. Mason’s ruling in a sex discrimination and hostile work environment case that forensic examination of a plaintiff’s electronic devices was not proportional to the needs of the case because any benefit the inspection might provide would be outweighed by the plaintiff’s privacy and confidentiality interests. 

At issue in Hespe v. City of Chicago et al., No. 13 C 7998, 2016 BL 417422 (N.D. Ill. Dec. 15, 2016) was the defendants’ request to inspect the plaintiff’s electronic devices for unproduced electronic communications between the plaintiff and her supervisor, the alleged harasser.  In response to discovery requests, the plaintiff had produced 850 text messages she had received from her supervisor.  The defendants later learned during the depositions of the plaintiff and her mother that the plaintiff’s mother was in possession of thousands of additional voice mail and text messages that the plaintiff had forwarded to her mother for safekeeping because she was running out of storage space on her computer.  In response to a subpoena, the plaintiff’s mother then produced 5,748 text messages, a number that dwarfed the 850 plaintiff had produced in the case.

The Court granted the defendants leave to depose the plaintiff for three additional hours to examine her with respect to the newly produced text messages.  Based on the plaintiff’s deposition testimony about the manner and completeness of her production of the text messages, the defendants took the position that they could not rely on the plaintiff’s representation that she had produced all of the ESI documenting her communications with her supervisor.  The defendants, therefore, moved to compel a forensic examination of the plaintiff’s electronic devices to search for unproduced ESI and attempt to recover any relevant ESI that may have been deleted.

Magistrate Judge Mason denied the motion to compel holding that “the requested forensic inspection of plaintiff’s electronic devices was not proportional to the needs of the case, especially considering plaintiff’s privacy and confidentiality interests in her personal devices.”  Noting that forensic inspection is not a routine right of discovery but rather an extraordinary remedy requiring a showing of good cause, District Court Judge Alonso affirmed Judge Mason’s ruling under Fed. R. Civ. P. 26 (b)(1) holding that defendants had not demonstrated that the contents of plaintiff’s devices were likely to go “to the heart of [the] case” (such as in trade secret cases) nor provided any compelling reason to believe that the plaintiff’s production was incomplete.  In so holding, Judge Alonso noted that the defendants had not requested to search for any specifically identified text messages with particular content shown to have existed at one point and that, if found, would conclusively resolve a contested issue in the case.  Since the issue of whether the forensic inspection might recover any lost or deleted ESI appeared to be little more than speculative, the Court found such an examination to be disproportionate when weighed against the plaintiff’s privacy interests.

 This case underscores that a party must show good cause to obtain a forensic examination of all the information on a person’s electronic device when it believes an opposing party’s production of ESI to be incomplete.  Good cause can be established by evidence that an opposing party’s search for relevant ESI was unreasonable and critical information was not produced.  Good cause also can arise from intentional spoliation where the remedy is part of a sanction. See Cohn v. Guaranteed Rate, Inc., No. 1:14-cv-9369, 2016 BL 408763 (N.D. Ill. Dec. 8. 2016).  Absent such a showing, as this case demonstrates, a Court likely would find a forensic examination to be disproportionate under Fed. R. Civ. P. 26 (b)(1).


Preservation Of ESI Is Still Paramount Under New Rule 37(e)

Magistrate Judge Paul M. Warner recently decided that sanctions, including attorney’s fees and costs, were appropriate as a result of evidence of a defendant’s failure to preserve relevant electronically stored information (“ESI”) after receiving a preservation letter from the plaintiff in a wrongful death action.

At issue in McQueen v. Aramark Corp., 2016 U.S. Dist. LEXIS 43958 (D. Utah, Nov. 29, 2016) was the discovery of certain work orders which the defendant’s employee had testified existed.  Following this testimony, and in response to a request for the production of the work orders from the plaintiff, the defendant stated that the work orders did not exist and submitted a declaration from its employee that he had been mistaken in his deposition.  The plaintiff then filed a motion to compel, citing the defendant’s employee’s deposition testimony and other evidence demonstrating the likely existence of the work orders.  The Court requested a “detailed explanation” from the defendant regarding the steps it had taken to preserve evidence after receipt of the plaintiff’s pre-suit preservation letter, as well as the discrepancy between the other evidence submitted by the plaintiff and the defendant’s statement that the work orders at issue “do not exist and have never existed.”  In response, the defendant conceded that ESI and other physical documents had been destroyed because it failed to relay necessary preservation instructions to the appropriate individuals.

Judge Warner analyzed whether spoliation sanctions were appropriate under the amended Federal Rule of Civil Procedure 37(e).  While the defendant argued that the work orders were not relevant to the litigation, the Court found it was unable to determine relevance because the defendant had not taken reasonable steps to preserve the ESI and physical documents at issue and no appropriate substitute existed to replace the ESI and physical documents.  The Court concluded that while the defendant acted with gross negligence, it did not act with the intent to deprive the plaintiff of the information’s use in the litigation.  The Court refused to grant the plaintiff’s request that the jury be specifically instructed regarding a presumption or inference regarding the destruction of those materials.  Instead, the Court ordered that the parties be permitted to present evidence to the jury regarding the spoliation of the work orders and ESI and to argue any inferences they wanted the jury to draw.  The Court also awarded the plaintiff attorney’s fees for bringing and arguing its Motion to Compel.

This case once again underscores the importance of notifying the appropriate individuals of pending or threatened litigation as soon as possible, as well as documenting all of the preservation efforts taken.  It may very well be that the defendant in this case could not have anticipated that the work orders at issue would become relevant to the case.  However, if the plaintiff placed the defendant on notice of litigation, the defendant was under an immediate obligation to take reasonable steps to ensure that ESI and physical documents were preserved.

Cooperation Imperative In Searching Electronically Stored Information

Senior United States District Judge Terrence McVerry granted a party’s motion to compel the opposing party to meet and confer regarding search terms to apply to electronically stored information.

In Pyle v. Selective Ins. Co. of Am., 2016 U.S. Dist. LEXIS 140789 (W.D. Penn. September 30, 2016), Plaintiff Pyle brought claims against former employer, alleging disability and age discrimination in violation of the Americans with Disabilities Act, the Age Discrimination in Employment Act, and the Pennsylvania Human Relations Act.  In discovery, the plaintiff served a document request on the defendant for “all emails, correspondence, memorandum, and/or other documents” from a number of the defendant’s employees.  In response, the defendant produced some documents and advised the plaintiff that “[i]n addition to the documents produced, additional email archives for various Selective employees have been retrieved.”  The defendant requested that the plaintiff agree on appropriate search terms to locate relevant documents from the emails that had been collected.  When the plaintiff refused, the defendant again asked the plaintiff for a “suggested list of search terms…so that we can agree on a common set of terms so that electronic records [Selective] has gathered can be searched for relevance.”  After the plaintiff again refused, the defendant brought a motion seeking an order compelling plaintiff to provide ESI search terms.

The Court found that the plaintiff’s argument “borders on being incomprehensible.”  Focusing on the Federal Rules of Civil Procedure’s meet and confer requirements and the “well settled” principle that electronic discovery should be party-driven, the Court granted the defendant’s motion and required the plaintiff to meet and confer regarding potential ESI search terms.

This case emphasizes the importance of cooperation in the electronic discovery process.  In particular, a party requesting ESI should be prepared to work cooperatively with its opponent to determine agreed search parameters.

Experts Praise Ralph Losey’s New Book: E-DISCOVERY FOR EVERYONE

edisc4everyone_front-cover-bigJackson Lewis’ National e-Discovery Counsel, Ralph Losey, has just released a new book, e-Discovery for Everyone. Experts are praising e-Discovery for Everyone as an important book for both pleasure and reference. As the title suggests, Ralph’s book is written for everyone with an interest in e-discovery. It is classified by the ABA as an introductory to intermediate level book. There are nineteen easy-to-read Chapters in 207 pages. Each Chapter is a stand-alone essay derived from Ralph’s personal blog. Ralph tried to make it a fun-read that will hold your interest and still have plenty of meat on the bones, including important chapters on the new rules, proportionality and ethics.

e-Discovery for Everyone can be purchased online directly from the publisher, the ABA. You can also call ABA Customer Service at 800-285-2221 Monday-Friday between 9:00 AM and 6:00 PM ET.

Foreword by Judge Paul Grimm

Judge_Paul_GrimmRalph Losey was honored to have Judge Paul Grimm write the Foreword to his book. In it Judge Grimm talks about the whole subject of e-discovery, new rules, digital explosion, the Bar, TAR, et al. The first half of Judge Grimm’s Foreword sets the stage for his two closing paragraphs about the book itself.

Enter Ralph Losey and the ABA with e-Discovery for Everyone, an introduction to e-Discovery that avoids over-technicality, without being substantively superficial, and manages to be interesting and at times even amusing. Ralph has been writing his e-Discovery Team blog since 2006, and e-Discovery for Everyone assembles many of his most helpful and recent blog posts in a collection that will be of value to newcomers to e-Discovery as well as seasoned practitioners. The book is written in a conversational style, and is divided into short chapters easily read in a relatively short sitting. Sprinkled throughout are very helpful references to cases, secondary sources and other materials that give the book depth beyond its relative brevity. A quick look at the table of contents shows an impressive inventory of the most important e-Discovery topics of the day: new methods of search and review, a discussion of the 2015 amendments to the Federal Rules of Civil Procedure, practical advice on litigation holds, how to evaluate the reasonableness of e-Discovery vendor bills, the advantages of transparency in selecting how to design a search for digital information, why cooperation during the e-Discovery process is essential to success, ethical issues associated with e-Discovery, and how to confront and control e-Discovery abuses.

e-Discovery for Everyone provides a welcome addition to the literature on e-discovery. Like a well-designed website, it is easy to navigate, informative, interesting, comprehensive without being overwhelming, and enjoyable.

What Other Experts Are Saying About Losey’s New Book

Facciola_shrugJohn M. Facciola, Chief Magistrate Judge for the United States District Court for the District of Columbia (retired); Adjunct Professor of Law, Georgetown Law School, had this to say about Losey’s new book.

Litigating lawyers must envy estate lawyers. When was the last time the rule against perpetuities changed? Since, these days, all discovery and litigation is electronic discovery and litigation, the poor litigator has to absorb technological and rules changes, new cases, and the very definition of their competence and ethical obligations. It is a good thing they have Ralph Losey and this collection of his blog posts.

Ralph is utterly fearless and, unlike too many of his colleagues, welcomes technological changes and insists that their often drastic implications for the courts, the lawyers, and their society be considered soberly and realistically. He is as comfortable with the insights of social psychology, philosophy and mathematical reasoning as he is with metadata. And, the man refuses to be dull. His posts are full of song lyrics, truly corny jokes, and clever drawings; the man insists that we enjoy his work and our own and that we not be intimidated by our own future. Over the years he has forced us to look beyond our narrow concerns and try to see where all this change is taking us. He is a welcome man and this is a most welcome book.

ronald-hedgesRonald J. Hedges, Senior Counsel for Dentons (retired U.S. Magistrate Judge) has also reviewed e-Discovery for Everyone.

Ralph Losey is an acknowledged “early starter” yet continuing thought leader in EDiscovery and all the complexities that go into that phrase. Anything he does is well worth the read!

ken_withersKenneth J. Withers, Deputy Executive Director, The Sedona Conference®, provided a review in his typical erudite and highly original fashion.

I read the whole book yesterday afternoon and I think it’s a great anthology. I’d recommend it to anyone designing a training program for lawyers (and non-lawyers) or any individual who wants a solid introduction to the field.

If there were an award in the legal profession for ‘most creative iconoclast,’ I’d be honored to present it to Ralph Losey for his short, entertaining, and provocative lessons in e-discovery. In 19 easy-to-read essays, Ralph adroitly weaves pop culture, science, technology, and astute case law analysis into the warp and weft of ethical responsibility and justice. All of us should wear the resulting cloth every day in our practice, if for no other reason than it itches, which is a good thing.

Jason R. BaronJason R. Baron, Drinker Biddle & Reath LLP, Information Governance and eDiscovery Group, who was previously the Director of Litigation at the U.S. National Archives and Records Administration, had this to say about e-Discovery for Everyone.

Ralph Losey has done it again: he is the Thomas Paine of e-discovery, with another excellent set of essays making the case that lawyers should follow “common sense” principles when dealing with the brave new world of electronically stored information.   These principles include, first and foremost, litigators working as a team with e-discovery lawyers and outside specialists to ensure that discovery obligations are met.  Second, they include lawyers recognizing that the newly amended Federal Rules of Civil Procedure emphasize that opposing counsel are expected to work cooperatively together to narrow areas of disagreement, and that lawyers should keep in mind that discovery should be proportional to the matters at stake in litigation. And third, lawyers should maintain competence on technical subjects such as how to search through large volumes of digital data.   This book is an easy (and fun to read) introduction to some of the most important topics in e-discovery.  There is no better “explainer-in-chief” of e-discovery writing today!

mark_williamsMark R. Williams, CEO & President of Kroll Ontrack, Inc., also provided a review.

Attorneys can no longer claim to be confused by e-discovery! This book is a tremendous resource that makes e-discovery accessible for any legal professional, no matter past experiences with technology and the law – this is a “must-have” for any professional in the e-discovery industry, or trying to learn the industry.

John Tredennick

John Tredennick, Founder, CEO of Cayalyst Repository Systems, and past Chair of an ABA Law Practice Management Section, had this to say.

Losey is a master at making e-discovery accessible and even fun. 


ralph_smilinge-Discovery for Everyone is Ralph’s fifth book on e-discovery. His first four books were:

Adventures in Electronic Discovery (West Thomson Reuters, 2011).

Electronic Discovery: New Ideas, Trends, Case Law, and Practices (West Thomson Reuters, 2010).

Introduction to E-Discovery: New Cases, Ideas, and Techniques (ABA 2009).

e-Discovery: Current Trends and Cases (ABA 2008).

All of Losey’s prior books are still in print and can be ordered too. Ralph donates all royalties from his books to charity.

Anyone interested in this new field of law could benefit from reading Ralph’s new book. You can buy e-Discovery for Everyone online directly from the ABA. (It will not be on Amazon for another nine-months.) You can also call ABA Customer Service at 800-285-2221 Monday-Friday between 9:00 AM and 6:00 PM ET. They have copies of the book and are ready to ship. ABA members get a nice discount! 

Ralph welcomes any questions or comments you may have. He can be reached at

Court Discusses The Obligation To Preserve Text Messages Under New Rule 37(e)

In a recent decision from the Western District of North Carolina, the Court discussed the importance of preserving text messages from accidental destruction due to a loss of a party’s cell phone.  In Shaffer v. Gaither, 2016 U.S. Dist. LEXIS 118225 (W.D.N.C. Sept. 1, 2016), the plaintiff brought sexual harassment claims against her former employer under Title VII of the Civil Rights Act.  The defendant employer moved to dismiss the action when it was discovered that relevant text messages that were on the plaintiff’s cell phone had been destroyed.  The plaintiff claimed that her cell phone had been accidentally destroyed when she dropped it in the bathroom in May 2014, well after both she and her counsel knew of the impending litigation.  She sent the broken phone and SIM card to her insurance company, and therefore no longer had access to the content of the relevant text messages.

The Court considered the amendments to Federal Rule of Civil Procedure 37(e), which states that the duty of a party to preserve electronically stored information (“ESI”) arises when litigation is “reasonably anticipated” and the loss of ESI is sanctionable when “reasonable steps to preserve” are not taken and such information cannot be restored or replaced through additional discovery.  The Court held that the plaintiff had not taken reasonable steps to preserve the relevant text messages, as the text messages only resided in the plaintiff’s cell phone, even after litigation was anticipated.  The Court stated that the plaintiff and her counsel should have taken steps to protect against destruction of the texts, such as printing the texts out, making an additional electronic copy of the texts, cloning the cell phone, or even placing the cell phone in the possession of her attorneys and getting a new personal phone for the plaintiff.

Despite the plaintiff’s failure to take reasonable steps under Rule 37(e), the Court declined to dismiss her case because the sanction of dismissal was not the sanction of first resort.  Rule 37(e)(1) and 37(e)(2) allow courts to take no greater action than necessary to cure the prejudice from the loss of the ESI, and there was no evidence of intentional spoliation.  The Court believed that the defendant may be able to cure the prejudice through testimony, as it was believed that several individuals read the relevant text messages before they were destroyed.  The Court nevertheless reserved the right to make a spoliation instruction at the trial if necessary to correct the prejudice from the destruction (that is, an instruction to the jury that they should infer the text messages contained prejudicial information for the plaintiff).

It is crucial to take reasonable steps to preserve ESI as soon as litigation is reasonable anticipated.  This decision makes it clear that relying on individuals to preserve relevant text messages in their personal cell phones is not sufficient under Rule 37(e) to satisfy this obligation as text messages may be lost through accidental destruction of the phone and its contents.  If the party is aware of relevant text messages, they should print out the text messages and preserve the copies or make an additional electronic copy of the text messages to ensure they are complying with their ESI preservation obligations.

Court Sanctions Both The Defendants’ CEO And Defendants’ Counsel For Discovery Misconduct

District Judge Katherine Polk Failla imposed significant sanctions in Arrowhead Capital Finance, LTD v. Seven Arts Entertainment, Inc., 2016 U.S. Dist. LEXIS 126545 (S.D.N.Y. Sept. 16, 2016), following Defendants’ repeated failure to cooperate in discovery and comply with the terms of her previously issued discovery orders. 

 The Backdrop.  Plaintiff sued Defendants in 2014 seeking to enforce an incontestable judgment that it had no practical means of enforcing because all of the assets held by the debtor had been sold to Defendants.  Defendants filed a motion to dismiss, arguing the Court lacked personal jurisdiction.  The Court denied the motion pending discovery.  In a letter dated September 21, 2015, Plaintiff claimed that Defendants and their attorney had engaged in various forms of misconduct during discovery.  Specifically, Plaintiff alleged that Defendants had puffed up their discovery with a nonresponsive document production, while simultaneously refusing to produce responsive documents.  Plaintiff also alleged that the discovery responses were incomplete and these issues were exacerbated by Defendants’ failure to produce key witnesses for deposition.  The Court held a conference to address Plaintiff’s concerns.  During the conference, Defendants’ counsel acknowledged that he had not reviewed the discovery responses and merely forwarded the materials he received from his client, Defendants’ CEO.

 The Court’s First Step.  Based on information received during a conference with the parties, the Court stated it had no confidence that Defendants were meeting their discovery obligations.  The Court ordered Defendants’ CEO to personally appear before the Court and testify concerning the alleged discovery misconduct following Plaintiff’s opportunity to depose multiple witnesses.  The Court also asked Plaintiff’s counsel to provide a list of the responsive documents Defendants had failed to produce and ordered Defendants to produce the documents identified by Plaintiff.  Nevertheless, Defendants continued to refuse to produce witnesses for deposition or produce the required documents.

 The Contempt Hearing.  Because Defendants’ CEO appeared to be directing Defendants’ counsel not to produce responsive documents or key witnesses, Plaintiff move for sanctions.  Defendants’ CEO testified that his offices were “paperless” and all records were stored on a server maintained by a third party that had destroyed the records in issue–after Defendants failed to pay their bills.  The CEO also cast blame on various staff people to whom he had purportedly delegated the task of compliance with the Court’s order.

 The Court Was Not Amused.  The Court concluded that Defendants were willfully making misrepresentations to the Court, cancelling depositions, and violating the Court’s orders for the purpose of withholding information from Plaintiff.  As such, the Court held that Defendants had forfeited their jurisdictional arguments through non-compliance with the Court’s discovery order and stated that the jury would receive a spoliation instruction, as appropriate, on any claims submitted to the jury.  Defendants’ CEO also was ordered to pay Plaintiff’s costs in association with bringing its motions in regard to discovery misconduct and was ordered to retain separate legal counsel to conduct a thorough review of Defendants’ files and determine if any additional responsive information remained to be produced.  This counsel also would represent Defendants in any future discovery hearings.   Defendants’ counsel, who was deemed complicit in the violations, also was ordered to pay a portion of Plaintiff’s costs. 

This decision reinforces that counsel may not blindly follow the instructions of their clients and have a duty to ensure that good faith efforts are taken to comply with a parties’ discovery obligations.


Federal Court Refuses To Compel Defendant To Produce Non-Responsive Documents That Hit On Agreed Upon Search Terms

A federal court in Texas recently refused to enforce the parties’ discovery agreement with respect to plaintiff’s request that the defendant produce all non-privileged documents responsive to search terms agreed to over email.  In BancPass, Inc. v. Highway Toll Admin., LLC, 2016 U.S. Dist. LEXIS 96978 (W.D. Tex. July 26, 2016), the Court addressed a dispute between two companies that provide mechanisms for motorists to pay highway tolls while driving rental cars.   In an effort to cooperate on electronic discovery in the case, BancPass and the Highway Toll Administration (“HTA”) negotiated certain search terms that the parties would use in order to locate and produce potentially responsive documents.  The agreed upon search terms included the following:

 • Smartphone /50 toll!

 • Smartphone /50 threat

 • Smartphone /10 app!

 • Phone! /10 app!

 • Double /10 bill

 • Geotoll

BancPass filed a motion to compel all non-privileged documents that hit upon these search terms.  Specifically, BancPass argued that the parties’ negotiations over these specific search terms, which occurred via written correspondence, constituted a binding and enforceable agreement between the parties.  BancPass claimed that the parties agreed that “all non-privileged documents responsive to the additional search terms will be produced,” which it understood to mean that every non-privileged document the search turned up would be produced, regardless of whether it had anything to do with the parties’ dispute.  Based on that understanding, BancPass ran the search terms against its data and produced all non-privileged documents that were hit by the search terms.  HTA, on the other hand, produced only those documents that were hit by the search terms and which were relevant to the case, and withheld the rest.  BancPass argued that an agreement by the parties to run search terms and produce all non-privileged results prevented HTA from later attempting to withhold documents based on relevance.  The Court disagreed.

 First, the Court reasoned that if it were to construe the parties’ correspondence on this topic to constitute a contract, it is likely that HTA’s actions would amount to a breach. The Court’s reading of the communications between the parties was that the parties agreed to produce all of the results of the searches except privileged documents.  However, the Court held the parties’ e-mail exchange was not a contract.  Rather, it was a means to simplify and limit the scope of production responsive to the parties discovery requests.  Then, having reviewed the attached affidavits detailing HTA’s search and review process, the court found there was no reason to believe that HTA withheld documents it was obligated to produce and was under no obligation to produce documents that hit upon the search terms but that were not relevant to the case.

 This case highlights that ESI is not necessarily responsive solely because it hits upon agreed upon search terms.  Should you find yourself in a situation where opposing counsel requests all documents returned from the agreed upon search terms whether or not the documents are relevant to the issues in the litigation, this case should be helpful to combat that claim.  However, as a better tactic, parties should avoid agreeing to produce non-relevant documents in the first place.  This case would have been simplified had the parties’ discovery agreement specifically stated that the parties would only produce non-privileged and responsive documents. 


Marginal Discovery Disallowed Because It Was Not Proportional To The Needs Of The Case

Under a ruling issued by a federal district court in Arizona (In re Bard IVC Filters Prods. Liab. Litig., 2016 BL 306366, D. Ariz., No. MDL 15-02641-PHX DGC, 9/16/16), the new Federal Rules for discovery allowed the defendant to avoid producing electronically-stored foreign communications in multidistrict litigation over allegedly faulty medical devices.

The decision is notable in part because it was issued by Judge David G. Campbell, who chaired the Rules Committee when the 2015 amendments were passed. Judge Campbell first reminded the litigants (and all other readers) that parties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.  As to the first part of this test, the Court noted that the new formulation of the Rule eliminates the former provision that inadmissible evidence was discoverable if it “appears reasonably calculated to lead to the discovery of admissible evidence.”  The court further noted that “[d]espite this clear change, many courts continue to use the phrase. Old habits die hard” and cited to seven decisions issued in the month prior that relied on the “reasonably calculated” language to define the scope of permissible discovery.

Judge Campbell’s gentle scolding of the profession is a good reminder for litigators to update their standard objections to discovery requests as well as brief points when moving for the production of discovery or defending against a motion to compel discovery.

Judge Campbell next addressed the second half of the test – proportionality – and held that the amended Rule 26(b)(1) “does not place on the party seeking discovery the burden addressing all proportionality considerations.” Instead, he noted, the Committee Notes to the amendments say the parties and the court have a “collective responsibility” to consider the proportionality of all discovery in resolving discovery disputes.

Some commenters have suggested that the revision and this Committee guidance should mean the principal burden falls on the judge and not the parties. How that will play out remains to be seen.

In this case – a product liability multidistrict litigation involving the malfunction of inferior vena cava filter implants – the plaintiffs requested communications between foreign entities that sell the filters abroad and foreign regulatory bodies.  Judge Campbell found those foreign communications were only marginally relevant, including because there were no plaintiffs from foreign countries, and because plaintiffs were seeking communications with foreign regulators for the narrow purpose of determining if any of those communications were inconsistent with defendants’ communications with the American regulators. The “mere conjecture” that foreign communications may be inconsistent with communications with the American regulators made the discovery only potentially relevant and not proportional to the needs of the case because the burden of located and producing the requested discovery outweighed its likely benefit, especially given the extensive discovery already taking place to capture communications with the American regulator.

ESI Lost After Duty To Preserve Had Been Triggered Results In Limited Sanction Under New Rule 37(e)

A federal court in Utah recently applied the newly amended Rule 37(e) and, in doing so, issued relatively limited sanctions following a finding of spoliation.   In First American Title Insurance Company, et al v. Northwest Title Insurance Agency, et al, No. 2:15-cv-00229, 2016 U.S. Dist. LEXIS 118377 (D. Utah, Aug. 31, 2016), the plaintiff, First American, sued two ex-employee defendants for taking and using the company’s confidential and trade secret information for use at their new business they formed to compete with the company, defendant Northwest Title.  First American sent preservation demand letters to the defendants, and there was evidence that certain documents and ESI were destroyed prior to receipt of the preservation demand.  In seeking sanctions, First American argued that the defendant’s duty to preserve arose as soon as they set up Northwest.  However, the court held that defendants knew or should have known litigation was “imminent” only upon receipt of the preservation demand letters and, therefore, the defendant’s duty to preserve under Rule 37(e) was not triggered until that date.

Although this ruling resolved the issue regarding the alleged spoliation by Northwest Title that occurred prior to the duty to preserve being triggered, the decision also addressed additional allegations of spoliation that occurred after the duty had been triggered. However, the court found that sanctions were not warranted under Rule 37(e) because First American did not demonstrate that the electronic files at issue were actually “lost” or that they could not be restored or replaced through additional discovery.

The court also addressed the fact that an ex-employee who took numerous hard-copy documents and a thumb drive containing electronic First American files to her new job at Northwest Title subsequently lost the thumb drive and could not recall with specificity all of the ESI files or documents she took with her.  She admitted that some of the materials were used in the course of business for Northwest.   The evidence showed that the thumb drive likely was lost after the defendants’ receipt of the preservation demand.   Looking to Rule 37(e), the court found that First American was prejudiced by not having access to the thumb drive because the lost ESI went to the heart of First American’s claims that defendants took and misused confidential information, and there was no mechanism to enable First American to recover or restore the files through further discovery.

In determining the appropriate sanction, the court reasoned that because there was no evidence that the defendants “acted with intent to deprive another party of the information’s use in the litigation” under Rule 37(e), the sanctions of evidence preclusion, adverse inference, or monetary sanctions were not available and the court could only “order measures no greater than necessary to cure the prejudice.”  Based on this framework, the court concluded that the parties would be permitted to present evidence and argument to the jury regarding spoliation of the ESI and documents, but the jury would not be instructed regarding any presumption or inference regarding those materials.

This case highlights the new requirement of Rule 37(e) that a party seeking sanctions for spoliation of ESI must show that the ESI at issue is truly “lost,” and cannot be restored or replaced through additional discovery, as ESI is often stored in multiple locations.   The case also illustrates Rule 37’s new guidance for courts in determining appropriate sanctions specific to discovery disputes involving ESI.