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Summaries, news and resources relating to eDiscovery in Delaware and beyond.
Showing 12 posts in Cost Shifting.
The first Delaware opinion that has been issued that addresses either sanctions or proportionality under the new Federal Rules is GN Netcom, Inc. v. Plantronics, Inc. Plaintiff GN Netcom, Inc. (“GN”) filed a motion for sanctions against defendant Plantronics, Inc. (“Plantronics”) after a long discovery dispute that centered around the “intentional and admitted deletion of emails” by one of Plantronics’s senior executives and his directives to other members of his team to delete emails. More ›
This is the first in a series of posts summarizing the 6 most important eDiscovery cases in Delaware in 2015.
In re: ISN Software Corporation Appraisal Litigation, C.A. No. 8388–VCG, Oral Argument on Petitioners Motion to Compel and Partial Rulings of the Court, April 27, 2015. More ›
2015 saw continued interest by the Delaware courts in various aspects of eDiscovery. The courts dealt with broad issues, such as spoliation and general discovery misconduct, while also focusing on narrower issues, such as document review and redactions.
This blog will be summarizing these 6 cases in more depth throughout the rest of 2016. The 6 cases that will be summarized are below: More ›
This is the fourth in a series of posts summarizing the 7 most important eDiscovery cases in Delaware in 2014.
In re ISN Software Corporation Appraisal Litigation, C.A. No. 8388–VCG, Oral Argument on Petitioners' Third and Fourth Motions to Compel and Partial Rulings by the Court, September 12, 2014. More ›
This summer one current and one former United States District Court Judge took to the interview circuit on the topic of eDiscovery. The most common theme was that lawyers have the obligation to understand both the law and technology. More ›
This is the second in a series of posts summarizing the 7 most important eDiscovery cases in Delaware in 2014.
The second case is 112359 Factor Fund, LLC and Five Nine Group, LLC v. Flux Carbon Starter Fund, LLC, Mary Carroll, Kevin Kreisler, and James L. Sonageri, C.A. No. 9568–VCL, Telephonic Oral Argument on Plaintiffs' Motion to Compel and Rulings of the Court, 06/20/2014.
In response to Plaintiffs' Motion to Compel, the Defendants claimed they did not have sufficient time or resources to review all 73,000 documents yielded by the search terms used. Vice Chancellor Laster was not swayed by these arguments. An Order had been entered earlier in the case requiring the parties to not only meet and confer regarding search terms, but to also "do more than the standard" and "confer regarding the use of an early data assessment tool…to focus on the custodians and time periods most likely to have responsive electronic documents”. Defendants’ reasons for missing the production deadline included delays in collecting the documents from their clients and insufficient manpower to properly review them. The Vice Chancellor found these explanations to be insufficient. The Court explained that in an expedited case, the parties need to think about approaches other than the “old school attorney-by-attorney review”. Had an early data assessment tool been appropriately used, as instructed, the number of search hits would not have come as a surprise and counsel could have thought ahead and planned appropriately to meet the discovery deadlines. The Court ordered that a copy of the transcript be given to Defendants clients, to help them understand that not complying with a discovery order will have serious consequences. More ›
The Court of Chancery continued to focus on eDiscovery throughout 2014. During the next few weeks we will be recapping 7 cases that covered various topics including preservation, designation of confidential material and the drafting of privilege logs. We will cover the cases in chronological order.
The first case is Sustainable Biofuels Solutions, LLC v. Tekgar, LLC and Michael Catto, C.A. No. 8741--VCP, Oral Argument on Plaintiff’s Motion to Compel and for Sanctions, Defendants’ Motion to Dismiss, and Rulings of the Court, 01/28/2014
In this dispute between a joint venture entity and one of its founding members, Plaintiff filed a Motion to Compel based on Defendants’ untimely production of emails, their blanket designation of 21,000 produced documents as Attorneys’ Eyes Only in violation of a Confidentiality Order, and lack of transparency throughout the eDiscovery process.
Before addressing the Motion to Compel, Vice Chancellor Parsons first reminded the parties of the Supreme Court case Christian v. Counseling Resources Associates, where the Supreme Court put litigants on notice that if they act without Court approval in modifying a scheduling order, they do so at their own risk. By choosing not to involve the Court, the party waives its right to dispute the opposing party’s late filings going forward. The Supreme Court advised that the best way to still “avoid motion practice and ill-will by agreeing to reasonable extension requests…[is to] promptly file a proposed amended scheduling order for the trial court’s signature.”
The court next found that the Defendants had failed to comply with their obligations under the confidentiality order by designating over 21,000 documents as Attorneys' Eyes Only. Under the order, designation required review by an attorney and a good faith basis for such designation. The court stated that "there is no way that an attorney could have looked at these documents and made a reasonable determination that there was a good faith basis for designating them as Confidential - Attorneys' Eyes Only..." The Defendants stated that they received the documents from their client at a late date and thus were rushed in their review. This necessitated the overdesignation of the documents.
Given that Vice Chancellor Parsons felt the Plaintiff had notified the Court “pretty promptly” of the discovery issues and that the Defendants had failed to comply with their obligations under the Confidentiality Order, the Court imposed sanctions of $10,000 in attorneys’ fees against the Defendants and gave them a strict deadline to complete any necessary dedesignations. The Defendants were further ordered to answer the Plaintiff’s questions regarding how they unilaterally refined the agreed-upon search terms and exactly what files were searched and to generally operate with a greater degree of transparency.
Three key takeaways can be taken from this case. First, if an attorney is unsure of who to proceed on eDiscovery issues, he or she should reach out to a colleague or vendor for guidance and assistance. The Vice Chancellor wrote that “It’s not unusual in cases of this type and in many, probably the majority, of the cases in the Court of Chancery that electronic discovery is proceeding by way of search terms and searches of custodians. That’s the way it’s usually done. If it’s a surprise to any attorney…then that attorney needs to associate himself or herself with people who know what they’re doing and are more familiar with it.”
The second takeaway is that the court should be promptly informed of any agreement regarding changes to a CMO.
Finally, parties need to factor in the time it takes to actually review documents in order to avoid situations such as confidentiality or privilege overdesignations. Parties should give themselves more than enough time to factor in the perhaps most important step between collection and production...attorney review of documents.
The entire transcript can be found here: Transcript of Sustainable Biofuels v. Tekgar
A recent podcast from the Legal Talk Network's ESI Report addresses cost control, an important issue for any client, eDiscovery attorney, or eDiscovery vendor. As the sheer volume of collections continues to increase and as the complexity and variety of the data collected continues to complicate review and production, we look to new tools to streamline the process. "Nearlining" is one such tool.
Nearlining enables reviewers to set aside unnecessary data for potential use at a later time. As a review progresses and a reviewer deems certain documents non-responsive, he may nearline those documents, which reduces a client's data footprint without deleting portions of the collection. This allows reviewers to easily access and focus on the most relevant content, but also lowers costs for clients by reducing their footprint on vendor servers, thus reducing hosting costs.
It is suggested that the non-responsiveness of documents is confirmed through a quality control process before nearlining the documents.
For a full discussion or nearlining and several other cost-savings techniques, see below:
As readers of this blog likely know, there's a mini-trend in eDiscovery to recover vendor costs in Federal courts as "taxable" under 28 U.S.C. §1920(4). That section allows courts to require losing parties to reimburse prevailing parties for "fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case." There recently have been several cases around the country where prevailing parties have successfully recovered costs this way. (See footnote 2 here for a short list of cases.)
In Race Tires America Inc. v. Hoosier Racing Tire Corp, the Western District of Pennsylvania awarded over $367,000 of "taxable costs" to the prevailing defendants for eDiscovery services like hard drive imaging, data processing, keyword searching, and file format conversion. However, the 3rd U.S. Circuit Court of Appeals vacated the award, defining copies as only scanning and file-format conversion, drawing a sharp distinction between "exemplification" and "making copies" in §1920(4).
In Delaware District Court recently, in Cordance Corp. v. Amazon.com, Inc., C.A. No. 06-491-MPT (D. Del. Apr. 11, 2012), Amazon prevailed and requested $447,694.69 reimbursement for electronic discovery costs under D. DEL. LR54.1(b)(11). According to Magistrate Judge Thynge
D. DEL. LR54.1(b)(11) provides “Other costs: Claims for costs other than those specifically mentioned in the preceding paragraphs of subpart (b) of this rule ordinarily will not be allowed, unless the party claiming such costs substantiates the claim by reference to a statute or binding decision.” Discovery or ediscovery expenses are not specifically itemized under LR 54.1(b)
Applying Race Tires, Judge Thynge approved just $1,729.28 as taxable, and requires Amazon to "produce documents that distinguish the costs for converting documents, which were recoverable, from costs for processing, which were not" in order to recover any other eDiscovery costs.
Clearly §1920(4) still has some value to prevailing parties in Delaware District Court (and elsewhere in the 3rd Circuit), just not as much as it once appeared.
When it's a quick peek, as was ordered in ACS State Healthcare, LLC v. Wipro, Inc. and Wipro, Ltd., No. 4385-VCP ( Del. Ch., July 23, 2009). This is believed to be the first order of its kind in Delaware and continues the Court of Chancery's recent trend of providing eDiscovery guidance to Delaware practitioners.
The title of this post may be a bit misleading though and may simply reflect my own ignorance of the true distinction between quick peek and clawback. (Or maybe I'm being pedantic.) Certainly, there are clawback provisions in this order, but the production of documents without review is what makes this a quick peek. The two are often presented as alternative means of protecting privilege waiver in eDiscovery, but it seems that clawback protects privilege while quick peek shifts costs. So quick peek is really clawback plus cost-shifting?
As I suppose we could have expected, 2009 has delivered the most important eDiscovery cases to date, and we’re only half way through the year (or we were when I started writing this series). The District Court started us off before the last of the New Year’s confetti had been swept up by issuing its decision in Micron Technology, Inc. v. Rambus, Inc., C.A. No. 00-792-SLR on January 9, 2009, declaring certain patents unenforceable as a sanction for spoliation. In a suit for patent infringement, Micron claimed Rambus employed a document retention policy that destroyed documents while they had a duty to preserve. The Court said that Rambus was an “aggressive competitor” so should have foreseen litigation as far back as December 1998. All relevant documents destroyed by Rambus after that time was spoliation. As a sanction, the Court decided the patents at issue were not enforceable against Micron.
Not to be out done, and what has really made 2009 interesting, the Court of Chancery has recently issued three opinions with significant eDiscovery implications. On May 18, the Court issued its decision in Triton Constr. Co. v. Eastern Shore Elec. Servs., Inc., 2009 WL 1387115, granting an adverse inference as a sanction for spoliation. In a suit for breach of fiduciary duty, Triton alleged that defendant Kirk had intentionally destroyed evidence on his office computer with a wiping program. Triton’s forensic expert found evidence that Kirk had used the program to annihilate files and emails. Kirk had also been required to produce his personal laptop and thumb drive, which he failed to produce claiming he no longer owned them. The Court didn’t buy it, and issued an adverse inference.
Just days later, on May 29, the Court issued two—yes, two—significant decisions: Omnicare, Inc. v. Mariner Health Care Mgmt. Co., 2009 WL 1515609; and Beard Research, Inc. v. Kates, 2009 WL 1515625. (Oh, what a glorious time it was for eDiscovery nerds everywhere!) In Omnicare, the Court ruled that just because data is on a backup tape doesn’t automatically make it ‘not reasonably accessible.’ Omnicare sued Mariner for breach of contract and moved to compel Mariner to restore backup tapes to retrieve old emails deleted pursuant to their data retention policy. Mariner asked the Court to force Omnicare to pay for the restoration or to allow it hold off on restoration and produce emails from its active files so the parties could assess whether the restoration could reasonably be anticipated to lead to relevant information. The Court looked to Zubulake to analyze the cost-shifting argument, and decided that cost-shifting was not warranted in this case, noting that just because “ESI is now contained on Backup Tapes instead of in active stores does not necessarily render it not reasonably accessible.” Nonetheless, the Court opted not to order the restoration, opting instead for the active file sampling Mariner proposed.
In Beard Research, the Court brought the hammer down on Kates for blatant, repeated, audacious spoliation. Beard sued Kates for tortuous interference and asked the Court to impose sanctions on Kates for spoliation. Kates repeatedly reformatted his laptop’s hard drive, then replaced the drive (but kept it), then wiped the new drive on the eve of the hearing in which he was explicitly told he would be required to turn the laptop over. The Court awarded attorneys’ fees and imposed an adverse inference, and Kates should thank his lucky stars the Court decided to go easy on him.
There we have it—the State of eDiscovery in Delaware. I’m off to the beach for a week.
In Part V of this series, we summarized the cases from late 2006 and all of 2007. Quick summary of those cases: the District Court concluded that imaged files should be the default form of production absent party agreement, the Bankruptcy Court issued summary judgment against a party found to have knowingly destroyed ESI despite reasonably anticipating litigation, the Superior Court declared spoliation requires intent not just negligence, and the Court of Chancery required discovery requests be supported by “a particularized showing of need.” On to 2008.
In a series of cases culminating in State v. Sisson, 2008 WL 162825 (Jan. 17, 2008), the Superior Court dealt with multiple issues of admissibility and validity of electronic evidence in a criminal case. Michael Arkfeld's eLaw Exchange provides the following concise summary:
At trial, Sisson filed a motion to suppress evidence collected at his home pursuant to warrant on four grounds: 1) the evidence was stale 2) the probable cause information was insufficient because the affidavit did not show that “emails sent by an internet ‘screen name’ linked to” Sisson were actually sent by him, nor did it demonstrate reliability of sources 3) ”police intentionally or recklessly omitted information” that Sisson may have been the victim of “spoofing” and 4) that the affidavit was recklessly or intentionally misleading in that it incorrectly suggested that the police had actual possession of “the illegal emails to which pornographic images allegedly were attached.” In a ruling on the probable cause argument, the court held that AOL, an internet service provider, was a reliable informant as it was equivalent to a “citizen eyewitness to a crime” and thus no “independent corroboration” of the information it provided was necessary. The court found that there were sufficient facts set forth in the affidavit to support a finding of probable cause “because the ‘screen name’ associated with the email and linked to Defendant was sufficient to allow a reasonable person to believe that ‘seizable property would be found at the address of the Internet subscriber with whom the name is registered’.”
Sisson subsequently challenged his conviction on several counts of Sexual Exploitation of a Child and Unlawfully dealing in Child Pornography to the Delaware Supreme Court and said conviction was affirmed on all grounds. On Motion for Post Conviction Relief, Sisson argued, in pertinent part, that he suffered ineffective assistance of counsel because his attorneys either did not argue or improperly argued on appeal: that a password was not required for email “spoofing”; “that the detectives acted with reckless disregard for the truth by not stating in the search warrant that they did not have the IP address of the computer that sent the email”; that a username alone was not enough to establish a link between Sisson’s home and the computer that transmitted the email; and that the informants supplying the information for the search warrant (AOL and NCMEC) were unreliable. Defendant’s motion was denied on all counts.
In a very short order in February 2008, the Court of Chancery requires a non-party to submit the credentials of its eDiscovery vendor/consultant. Solow v. Aspect Resources LLC, 2008 WL 441394. Competence of third party vendors and counsel is an issue we’re likely to see more of in the future. In a recent case out of Washington State, the court reduced attorney’s fees in connection with eDiscovery work for inexperience.
In the spring, in In re Kent County Adequate Pub. Facilities Ordinances Litig. (April 18, 2008), the Court of Chancery addresses the issue of attorney-client privilege waiver and applies a test that almost mirrors what will become new FRE 502 a few months later. In response to Petitioners’—landowners and developers—motion to compel in an underlying action, Kent County argued that some of the documents requested were privileged. Kent County asserted privilege over a set of documents it had voluntarily produced to support its motion to preclude the depositions of the individual respondents. The Court found that privilege had been waived for these documents. Another set of documents, however, was produced inadvertently, and Kent County sought to recover them as privileged. The Court, in agreeing to the return of the documents, applied the following test:
In order to determine whether the inadvertently disclosed documents have lost their privileged status, the Court must consider the following factors: (1) the reasonableness of the precautions taken to prevent inadvertent disclosure; (2) the time taken to rectify the error; (3) the scope of discovery and extent of disclosure; and (4) the overall fairness, judged against the care or negligence with which the privilege is guarded.
In applying this test, the Court cited the Delaware Superior Court’s decisions in Monsanto Co. v. Aetna Cas. & Sur. Co., 1994 WL 315238 (Del. Super.) (citing Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 104 F.R.D. 103 (S.D.N.Y.1985).
In summer 2008, in In re Intel Corp. Microprocessor Antitrust Litig., 2008 WL 2310288 (June 4, 2008), the District Court adopted a special master’s report finding waiver of work product protection. The plaintiffs moved to compel production of Intel’s attorneys’ custodian interview notes relating to litigation hold compliance. The parties had previously reached a privilege waiver agreement, but the special master found that the agreement did not extend to these notes. However, the special master found a privilege waiver for any custodian statements voluntarily disclosed by Intel. The special master opined that finding otherwise would have allowed Intel to "use its sword to assert facts while at the same time shield" the plaintiffs from Intel’s claim of human errors in its performance of its duty to preserve evidence. The special master concluded that protection of the non-core work product had been waived, so granted the plaintiffs motion for production.
Later that summer, the Court of Chancery, in Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 2008 WL 3522445 (Aug. 18, 2008), enforces a “clawback” agreement. Huntsman inadvertently produced an email drafted by one of its outside counsel and sent to another of its outside counsel and its investment banker in connection with a merger with Hexion. The Court found the email privileged and allowed for its clawback pursuant to the confidentiality order.
About a month later, the Court of Chancery, in a letter decision in Kinexus Representative LLC v. Advent Software, Inc., C.A. 1161-CC, reiterates that native or OCR production is not required “without a particularized showing of need.” Advent produced documents in non-searchable TIFF format. Kinexus moved to compel Advent to comply with an instruction to produce searchable ESI. The Court declined to find OCR required by court rules. The Court did find that Advent’s offer to produce “extracted text” was an acceptable compromise but ordered Kinexus to pay for the processing. It’s not clear what format the “extracted text” was provided in. If anyone if familiar with this case and knows how the extracted text was provided, please leave a comment. I’m sure I’m not the only one who is curious about that.
On September 19, 2008, President Bush signed FRE 502 into law. The newly adopted rule was identical to the one approved by the Judicial Conference of the United States in September 2007.
At last, we reach 2009! We’ll cover 2009 in the next and final installment of this series. In the meantime, if you know of significant Delaware eDiscovery cases from 2008 that you think I should have included, please post a comment to let everyone know.