Legal Hold Pro

We were honored once again to sponsor the Georgetown Law Center 8^th Annual Advanced eDiscovery Institute which took place November 17-18 in Pentagon City, VA. This conference is an annual highlight because of the outstanding quality of the panels, which include many of the country’s most influential jurists.  We were also pleased to have contributed to the discussions through a compilation of essays co-edited by Brad Harris and Ron Hedges on the topic of “Preservation and Proportionality.”

The conference had a wide-ranging agenda, so we’ve narrowed our focus to highlights pertinent to legal holds and data preservation issues, and selected three key takeaways from the conference.

1. Act Reasonably and Cooperate! Cooperate! Cooperate!

Arguably, the main event at the conference is the “eDiscovery Case Law Update” that was moderated by Ron Hedges and featured an all-star panel of judges. The recurring theme from the stage was  an admonishment to act reasonably and cooperate with the court on preservation issues.

As Hon. John M. Facciola reflected, “Thanks to the work of Judge Rosenthal, Judge Scheindlin and the other members of the Federal Rules Advisory Committee, I don’t think they appreciate just how much cooperation is now coming into the system…a steady, irreversible trend towards cooperation and it is the next phase of discovery.”

Continuing to focus on the positive, Hon. Shira A. Scheindlin followed up on Hon. Lee H. Rosenthal’s presentation about Gaalla v. Citizens Med.Ctr., 2011 WL 2115670 (S.D. Tex. May 27, 2011): “So often we focus on what wasn’t done than what was done. It’s very vindicating to me that there was a litigation hold put in place, and that is what gave [Judge Jack] cover.” Indeed, sending legal holds provides evidence of reasonableness, as cited in Siani v. State Univ., 2011 WL2580361 (E.D.N.Y. June 28, 2011), where in spite of spoliation, their good faith efforts helped litigants escape sanctions.

When compared to last year, where the conversation centered on the need for written legal holds, today the discussion has evolved to questions concerning trigger events and the opportunity for proportionality. As Hon. Andrew J. Peck affirmed, cooperation (a.k.a. “proactive strategic information giving”) is a key to getting what you want.

2. Judges Expressed Reservations about Updating Rules

The buzz at the conference was around the ongoing work by the Judicial Rules Subcommittee on Discovery to consider amendments to the Federal Rules of Civil Procedure as a means to address rising costs of data preservation. Following the Dallas Mini-Conference held in early September, the process is in high gear and involved many of the participants in the room at the Georgetown conference.

Although recognizing to the challenges faced by litigants, the jurists in attendance expressed a distinct lack of enthusiasm about updating the FRCP with bright lines concerning pre-litigation preservation. As Judge Peck argued during the opening panel: “’Just do the right thing’ approach of cooperation is going to work. It is a very difficult practical problem, but I’m not sure there is any rule-based approach that’s going to solve the problem.”

In a later panel that directly addressed the topic of Rules changes, Judge Rosenthal added her thoughts on the subject:

The “proportionality” buzzword that has become so widely used in the past year is a way of describing reasonableness. If the argument is that you have to write a rule that says “go forth and be reasonable.” I think that just proves a little too much.

…

Don’t misunderstand the advocacy or enthusiasm for a rule change or the belief that it would be helpful for a belief that that’s all you need. The good news for all of you is that there are lots of resources available, in addition to the rules. Even if the rules are changed in a pretty thorough way, or even a limited way, changing the rules is never enough.

While most participants weighed in with their own thoughts, the feeling from the jurists was that pre-litigation preservation is a gray area and one that has so many variables that it requires judgment on a case-by-case basis, rather than expecting arbitrary bright lines to provide comfort for litigants.  When one audience member suggested during the final Judicial Roundtable panel that Pippins v. KPMG opinion represented the end of proportionality, several judges were quick to point to the specifics of the case and the need for caution and due diligence when deciding what data is preserved or destroyed prior to discovery.

3. E-Discovery Pilot Programs Show Promise

Several ongoing pilot programs were referenced during various discussions which could provide valuable resources for litigants if they prove successful. The programs include:

• Southern District of New York’s Pilot Project Regarding Case Management Techniques for Complex Civil Cases
• Western District of Pennsylvania’s Electronic Discovery Special Masters
• Seventh Circuit Electronic Discovery Pilot Program

Judge Scheindlin described the program in her district as a proactive program aimed to streamline complex civil litigation.  The program includes an ESI protocol to guide the parties through the particulars of electronic discovery and to bring to the forefront any issues they can’t agree on.

Hon. Joy Flowers Conti presented an in-depth overview of the program she is overseeing in the Western District of Pennsylvania. The court is recruiting a group of pre-qualified Electronic Discovery Special Masters to serve as a ready resource to the courts should disputes arise pertaining to electronic discovery issues.

Judge Rosenthal provided a prescient overview of the importance of these efforts during the Future of Rules panel:

What’s the difference, the advantage they have over rules? They don’t have to go through a rules enabling act process that at a minimum takes three years, and often more to become adopted. That’s a long time. In our world in three years, a lot changes and it forces us to a level of generality because if you write it too specifically, the technology will become obsolete before the thing becomes effective. Pilot programs can change on a dime and can be more helpful.

The judges look at these programs as experiments that can help identify new techniques to promote cooperation and reduce the involvement of the court in resolving ongoing friction related to electronic discovery.

As in the past, the presentations at Georgetown reflected the continuing evolution of what constitutes “e-Discovery best practices” while remaining true to the overarching goal of “just, speedy and inexpensive” resolution of issues.  In the area of data preservation, the discussion is no longer if a legal hold needs to be issued, but rather on ways to reasonably limit the cost and burden of doing so through cooperation, reasoned thought and transparency.

By Brad Harris

In our recently published white paper, Preservation and Proportionality, Ron Hedges and I solicited input from industry thought leaders on the current debate over the rising costs of data preservation and the call for proportionality through cooperation, court order or rule changes.  A particularly relevant opinion was issued from the Southern District of New York on October 7, 2011, which directly posed the applicability of proportionality, and Pippins v. KPMG was prominent in several of the contributed essays for our paper.

We provided highlights of the case and included as reference the complete amicus brief filed by the U.S. Chamber of Commerce in response to U.S. Magistrate Judge James L. Cott’s findings. The debate over Pippins v KPMG continues, and we wanted to post two additional briefs as an addendum to our paper that shed additional light on the ongoing discussion.

The Defendants submitted their objections to the finding of the magistrate judge on October 28, arguing that a district court should modify or set aside the order.  In their brief, they articulate KPMG’s position with respect to their prior good faith efforts to preserve potentially relevant information (including HR personnel records and time records, in addition preserving “computer hard drives of departing employees who are putative class members in New York”).  They argue that the magistrate judge erred in holding “that every potential member of the putative class and FLSA potential opt-in plaintiff is a ‘key player’ whose hard drives must be preserved” (and therefore they should not have incurred a duty to preserve).  They further argue that denying the motion for a protective order was in err when the judge failed to determine “whether the cost of preserving the hard drives is proportional to their likely benefit” and unreasonably burdensome (arguing instead for a reasonable sample).

In response, the Plaintiff submitted a memorandum on November 30 in opposition to the Defendant’s objections, citing a lack of cooperation and arguing that the disputed hard drives are likely to contain useful information (having not had an opportunity to examine any hard drives to suggest otherwise).  They go on to argue that the Defendants had failed to sufficiently establish an undue burden nor demonstrate with any certainty that the drives should be destroyed without knowing their contents.

Both briefs make interesting reading, and are included here for your reference.  If you haven’t already done so, please download our Proportionality and Preservation Signature Paper.  We welcome your thoughts and feedback!

By Brad Harris

We just learned of another preservation case involving sanctions but what makes this one stand out is that the litigation started in 2011 – after Pension Committee, Rimkus, Victor Stanley II, and the other opinions showing the courts’ focus on preservation issues. This case out of the Western District of Tennessee, which is the first preservation sanction we’ve seen from this district, shows how the need for improved preservation practices is permeating the judicial landscape.

In NACCO Materials Handling Group, Inc. v. Lilly Co. (No. 11-2415 AV, 2011 WL 5986649, W.D. Tenn. Nov. 16, 2011), the plaintiff brought a motion to prevent further spoliation of evidence due to inadequate preservation efforts being demonstrated by the defendant.  The original lawsuit alleged unauthorized and improper access to the plaintiff’s secure dealer website.  After initial 30(b)(6) depositions and e-discovery, there was evidence of data spoliation, and the plaintiff sought sanctions for both the failure to adequately prepare the 30(b)(6) witness and failure to take reasonable steps to preserve potentially relevant information.

In determining if sanctions were warranted, the court looked at a number of factors:

In order to determine if sanctions against Lilly are appropriate, the court must first determine (1) when Lilly’s duty to preserve evidence arose; (2) the scope of Lilly’s duty to preserve evidence; (3) whether Lilly’s litigation hold and search and collection efforts were sufficient; and (4) if not, whether sanctions should be imposed on Lilly… [p. 6]

The court found that Lilly’s duty to preserve arose no later than when they were served with the lawsuit in December of 2011.  The court next looked at scope, concluding that “given the allegations concerning computer access, which Lilly did not deny, Lilly’s duty to preserve potentially relevant ESI was very broad” [p. 7].   The court then considered the defendant’s preservation actions, identifying a number of shortcomings:

Upon being served with the lawsuit on February 25, 2011, Lilly took no immediate action whatsoever to preserve any data, electronic or paper. In addition, upon receiving the preservation letter, approximately twelve days later, Lilly failed to issue a written company-wide litigation hold. Instead, Clark simply circulated the litigation hold letter to seven Lilly employees out of Lilly’s 160 employees without any additional instruction. The failure to issue a written litigation hold is “likely to result in the destruction of relevant evidence.” [p. 7]

The court went on to cite additional shortcomings, including not notifying all the “key players” who had access the secure dealer website, and that no actions were taken to prevent deletion of emails or backup data.  The court concluded:

In summary, after the duty to preserve was triggered, Lilly failed to timely issue an effective written litigation hold, to take appropriate steps to preserve any existing electronic records, to suspend or alter automatic delete features and routine overwriting features, and to timely and effectively collect ESI. Therefore, the court finds that Lilly breached its duty to preserve relevant evidence. [p.8]

The court then considered the level of culpability (in this case, finding negligence) and prejudice suffered (uncertain, but highly likely given the facts of the case).  The end result: the court imposed preservation actions, additional discovery and monetary sanctions.

It bears repeating. Lilly is required to bear these costs because its preservation and collection efforts were woefully inadequate. Parties must take their duty to preserve ESI seriously. In order to avoid sanctions, such as these, parties must cooperate and voluntarily preserve, search for, and collect ESI. [p.11]

We’re hearing such conclusions from the courts being repeated often, and they do indeed serve as fair warning that litigants must take their duty to preserve seriously and respond appropriately, especially now that these issues are under a white-hot spotlight.

Further Reading:

• Electronic Discovery Law Blog, “Sanctions Ordered for Failure to Adequately ‘Preserve, Search for, and Collect Potentially Relevant Information,’” K&L Gates, Dec. 8, 2011.