ESI Preservation in Employment Litigation: Counsel s Guide to New FRCP ediscovery Amendments

Transcription

1 ESI Preservation in Employment Litigation: Counsel s Guide to New FRCP ediscovery Amendments FEATURED FACULTY: Patricia E. Antezana, Counsel, Reed Smith LLP PAntezana@ReedSmith.com Steven C. Bennett, Partner, Park Jensen Bennett LLP sbennett@parkjensen.com

2 Patricia E. Antezana, Counsel, Reed Smith LLP Patricia focuses her practice on general litigation, including commercial matters, business torts and product liability defense, with a specialty in managing e- discovery issues. Patricia has been involved with all phases of litigation, including management of large-scale discovery, dispositive motions, trial preparation and alternative dispute resolution. She has coordinated electronic and hard copy record collection and managed large-scale review projects in numerous complex litigation matters. Additionally, Patricia has written and spoken extensively on the topic of e- discovery and recently founded a Pittsburgh chapter of the national organization Women in E-Discovery (WiE). Steven C. Bennett, Partner, Park Jensen Bennett LLP Steven C. Bennett's practice focuses on complex domestic and international commercial litigation and arbitration, including bankruptcy, construction, corporate governance, data security, energy, privacy, real estate and other matters. Mr. Bennett gained extensive trial experience during six years at the Office of the United States Attorney for the Southern District of New York, where he served as Chief of the Tax and Bankruptcy Unit, and nearly twenty years as a partner in a major international law firm.

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4 ESI Preservation in Employment Litigation: Counsel s Guide to New FRCP ediscovery Amendments Brought to you by Park Jensen Bennett LLP & Reed Smith LLP Presenters Steven C. Bennett, Partner, Park Jensen Bennett LLP, New York, New York sbennett@parkjensen.com Patricia E. Antezana, Counsel, Reed Smith LLP, Pittsburgh, Pennsylvania pantezana@reedsmith.com 1

5 Disclaimers The views expressed are solely those of the presenters and should not be attributed to the presenters firms or their clients. This presentation does not constitute a solicitation for an attorney-client relationship, and no confidential relationship exists without express written agreement. Do not send unsolicited confidential information. Outline of Presentation The Duty to Preserve The Scope of the Duty to Preserve Amendments to the Federal Rules of Civil Procedure Best Practices -4-2

6 Preservation In a recent survey of federal judges on e-discovery topics, preservation was identified as a key stage in the process: Identification and Preservation stages 68% of judges saw the most common e-discovery errors ESI Preservation Practices 45% of judges saw this area as where counsel needs the most improvement The Most Common Sanctionable Conduct Of discovery sanctions awarded: 55% are for Failure to Preserve (40% only issue + 15 % other issues, as well) 45% are for Failure to Produce (15% only issue + 30% other issues, as well) 27% are for Delay (7% only issue + 20% other issues, as well) 3

7 The Potential Universe of Preservation s (Inbox, Active Folders, Archived, Sent, PSTs) Electronic Documents (Word, Excel, PowerPoint) Hard Drives Shared Drives (including virtual areas like SharePoint or the cloud) Laptops Databases Hard Copy Documents Texts/IMs Voic s Flash/Thumb Drives, CDs, DVDs Social Media Preservation Challenges Identifying Appropriate Custodians and Non- Custodial Sources Issuing and Tracking Comprehensive Legal Holds Expanding Legal Holds and Preservation Efforts as the Matter Develops Identifying Data Sources Hard drives Shared drives Third-party software databases (industry-specific) Legacy systems Mobile devices 4

8 Preservation Model Rule 3.4: lawyer must not unlawfully obstruct access to evidence; must make reasonably diligent effort to comply with discovery requests Zubulake cases: lawyer duty to follow-up with client to ensure reasonable efforts Communicate early and often with client; do not delegate wholesale -9- What Triggers your Duty? Assertion of a claim. (Note, this is not always a formal Complaint.) With respect to pre-claim triggers, many federal courts use a reasonable anticipation of litigation, combined with a reasonable person standard to determine whether and when a litigant s duty to preserve information begins. Courts may look at prior behavior, so, again, consistency is important. Do not forget to consider: If you will want to assert any legal protections for documents, you must understand that you will be considered to have reasonably anticipated litigation back to that point, at least. What about letters? A letter from a prospective opponent can trigger a duty to preserve when the language in the letter is sufficiently explicit to cause a reasonable person to believe that litigation is probable. Letters containing phrases like wishes to litigate, and identifying a date on which the author would advance this matter accordingly are examples of language that courts have considered sufficient to trigger the duty. For a plaintiff, the trigger is generally thought to occur at the point when the prospective plaintiff determines that legal action is appropriate, or when an omniscient, neutral observer would believe that a prospective party is gathering evidence in support of articulable claims. For example, the filing of a competitor s application to market a competing pharmaceutical has been held to be a triggering event. 5

9 Litigation Hold Template Once the duty to preserve has been triggered, the party (or potential party) should issue a litigation hold (this includes to third parties, in some instances). In almost every circumstance, the hold should: be in written form; be issued by a senior executive or other high-level manager from within the corporate litigant; include a privileged and confidential designation; state that relevant information must not be destroyed; provide a broad explanation of the scope of what must be preserved (i.e., what is the case about and what are you looking for); contain language asking the recipient to identify potential additional recipients; account for information held by third parties; include a broad description of the type of information at issue (e.g., if relevant, list , home computers, PDAs, instant messaging, text messages, social networking sites, wikis, blogs, website, etc. in the definition of materials; identify relevant date range, if known; include on the distribution list: key players, IT, records management and HR (if the company has any kind of departing employee process); and provide the name and contact information for the person the recipient should call with questions. Updates & Release Counsel needs to evaluate whether and when additional information requires the modification of the current hold (e.g., more/less issues, more/less custodians, expansion/contraction of relevant timeframe). Even if the hold does not require modification, for ongoing litigation, reminder notices should be issued approximately every six months. The SEDONA BEST PRACTICES suggest that: When the circumstances that gave rise to the hold cease to exist, the organization should determine whether the hold can be lifted in whole or in part, in order to alleviate further costs of preservation. An organization s policy and procedures can explain not only who in the organization has authority for determining that the need for a legal hold no longer exists, but also what factors or information should be considered, and what procedures should be followed, to remove the legal hold. Considerations may include: o Whether there is a post-case obligation to maintain some records or other information pursuant to normal retention schedules or otherwise; o Whether the records or other information that can now be destroyed are subject to another legal hold, or may be needed for another special purpose (e.g., needed in whole or in part for other litigation); o Whether the underlying litigation that has been resolved gives rise to the reasonable anticipation of other similar litigation; o Whether records or information in third-party custody can be destroyed; and o Whether the records or other information can be disposed of as soon as the legal hold is lifted, or whether the organization should wait until the next scheduled disposition. 6

10 Zubulake Series of Cases Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003), et seq. (I-V) Discovery of electronic data permitted Duty to preserve evidence Cost-shifting possible (factors) Inaccessible data may be recovered (factors) Adverse inference (or other sanctions) may apply (factors) ProCaps S.A. v. Patheon, Inc., 2014 WL (S.D. Fla. Feb. 28, 2014), Further Order, 2014 WL (S.D. Fla. Mar. 18, 2014) Inadequate preservation where: key executives conducted own searches, without seeing document requests, and without search terms from counsel. Forensic recovery/analysis ordered (at cost of producing party) Fee award against outside counsel Further award where counsel refuse to cooperate in implementing forensic search Refusal to cooperate is a problematic, risky and usually unworkable approach to discovery

11 Hixson v. City of Las Vegas, 2013 WL (D. Nev. July 11, 2013) Plaintiff requested Rule 37(c) sanctions against the City of Las Vegas for its failure to produce part of a relevant chain City was not on notice that plaintiff contemplated litigation sufficient to trigger a duty to preserve ESI before the relevant was deleted The court stated that it is not reasonably foreseeable that every internal employment complaint may result in litigation if not resolved to the employee s satisfaction In re Ethicon, Inc. Pelvic Repair Sys. Prod. Liab. Litig., MDL 2327 Court awarded monetary sanctions against defendant due to alleged spoliation of evidence and failure to implement an adequate hold notice Court decided that defendant s system for legal holds was riddled with holes Court reasoned that duty to preserve was triggered by prior hold notices relating to products at issue in the MDL that had not been withdrawn, but had been refreshed 8

12 Amendments to the Federal Rules of Civil Procedure History Communication and Cooperation Proportionality Preservation and Sanctions Amendment Timeline Duke Litigation Review Conference May 2010 Advisory Committee Submits Draft Rules November 2012 Standing Committee Conditionally Approves (Sends back to Advisory Committee) January 2013 Advisory Committee Approves for Publication April 2013 Standing Committee Approves for Publication June 2013 Public Comment Period August 2013 February 2014 Back to Advisory Committee (Redraft of Rule 37(e)) April 10 11, 2014 Standing Committee Approves May 29 30, 2014 Judicial Conference September 2014 Supreme Court April 29, 2015 Congress By December 1,

13 Amendments Effective December 1, 2015 Rule 1 Scope & Purpose Rule 4 Summons Rule 16 Pretrial Conferences; Scheduling, Management Rule 26 Duty to Disclose; General Provisions Governing Discovery Rule 30 Depositions by Oral Examination Rule 31 Depositions by Written Questions Rule 33 Interrogatories to Parties Rule 34 Producing Documents, Electronically Stored Information, and Tangible Things Rule 37 Failure to Make Disclosures or to Cooperate in Discovery; Sanctions Rule 55 Default; Default Judgment Rule 84 - Forms Appendix of Forms Rule 1 Scope and Purpose (as amended) Rule 1. Scope and Purpose These rules govern the procedure in all civil actions and proceedings in the United States district courts, except as stated in Rule 81. They should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding. 10

14 Communication & Cooperation At the outset of a case, or sooner if feasible, counsel for the parties should discuss preservation. Such discussions should continue to occur periodically as the case and issues evolve. Memorialize in writing all agreements, and send to all affected parties. ESI Protocol can identify sources for which neither party will/can preserve data, and have justification (e.g., business doesn t use or record IM; text messages are overwritten and/or not used for business despite BYOD policy). In determining what ESI to preserve, parties should apply the proportionality standard (i.e., what is reasonable and not disproportionately broad, expensive, or burdensome?). The parties should discuss what ESI from sources that are not reasonably accessible will be preserved, but not searched, reviewed, or produced. As well as discussing ESI sources that are not reasonably accessible, the parties should consider identifying data from sources that (1) the parties believe could contain relevant information but (2) determine, under the proportionality factors, should not be preserved. Have detail prepared to explain the expense or other reason when the preservation or production would be burdensome. If there is a dispute concerning the scope of a party s preservation efforts, the parties or their counsel should meet and confer and fully discuss the reasonableness and proportionality of the preservation. If the parties are unable to resolve a preservation issue, then the issue should be raised promptly with the Court. Proportionality Rule 26 Concern that current proportionality features of Rule ignored Discovery permissible where: Relevant to any party s claim or defense, and Proportional to the needs of the case Factors Issues at stake Amount in controversy Party relative access to information Party resources Importance of discovery in resolving issues Whether burden of discovery outweighs benefit

15 Rule 26(b) As Amended (b) Discovery Scope and Limits. (1) Scope in General. Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party s claim or defense including the existence, description, nature, custody, condition, and location of any documents or other tangible things and the identity and location of persons who know of any discoverable matter. For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties relative access to relevant information, the parties resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. All discovery is subject to the limitations imposed by Rule 26(b)(2)(C). Rule 26(b)(1) Factors Formerly in 26(b)(2)(C)(iii) * * * * * (b) DISCOVERY SCOPE AND LIMITS. (2) Limitations on Frequency and Extent. * * * * * (C) When Required. On motion or on its own, the court must limit the frequency or extent of discovery otherwise allowed by these rules or by local rule if it determines that: * * * * * (iii) the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues. * * * * * 12

16 Benefits of Proportionality as Part of Scope of Discovery Force parties to discuss as part of discovery planning Express basis to resist fishing expeditions Important in asymmetrical disputes -25- (c) Protective Orders. Rule 26(c) As Amended (1) In General. A party or any person from whom discovery is sought may move for a protective order in the court where the action is. The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including one or more of the following: * * * * * (B) specifying terms, including time and place or the allocation of expenses, for the disclosure or discovery; * * * * * 13

17 Cost Allocation Rule 26(c) Protective order may include provision for allocation of expenses of discovery Note: does not mean cost-shifting shall become common practice Courts/parties should assume responding party ordinarily bears the cost of responding Further study expected -27- Rule 34 As Amended * * * * * (b) Procedure. (2) Responses and Objections. * * * * * (B) Responding to Each Item. For each item or category, the response must either state that inspection and related activities will be permitted as requested or state an objection to the request with specificity the grounds for objecting to the request, including the reasons. The responding party may state that it will produce copies of documents or of electronically stored information instead of permitting inspection. The production must then be completed no later than the time for inspection specified in the request or another reasonable time specified in the response. (C) Objections. An objection must state whether any responsive materials are being withheld on the basis of that objection. An objection to part of a request must specify the part and permit inspection of the rest. * * * * * 14

18 Production Requests/Objections Rules 34, 37 Grounds for objection must be stated with specificity Specify that copies will be provided (versus inspection) State in response whether documents are being withheld (versus general objections): may indicate what form of search conducted (see Notes): allows better informed discussion with adversary -29- Changes to Rule 37(e) Failure to Preserve ESI Current Rule 37(e): Failure to Provide Electronically Stored Information. Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system. 15

19 Rule 37(e) As Amended (e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court: (1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or (2) only upon finding that the party acted with the intent to deprive another party of the information s use in the litigation may: (A) presume that the lost information was unfavorable to the party; (B) instruct the jury that it may or must presume the information was unfavorable to the party; or (C) dismiss the action or enter a default judgment. * * * * * Amended Rule 37(e) Failure to Preserve ESI Court may order measures no greater than necessary to cure prejudice for the failure to preserve ESI if: ESI was lost because party failed to take reasonable steps to preserve it; ESI should have been preserved; AND Additional discovery cannot alleviate the loss of ESI. Court may give adverse instructions, order dismissal, or enter default judgment if it finds: ESI was lost with an intent to deprive party of information. 16

20 Significant Features Applies to failure to preserve, versus failure to produce (cure with order compelling) Replaces inherent authority as basis for sanction Court has discretion to assign burden re: finding of prejudice Reasonableness implies proportionality concern (see Notes) Where intent to deprive, no requirement to show level of prejudice (presume) Key Elements In The Notes Preservation obligation arises in common law, not Rules Sanction does not necessarily mean lawyer should be disciplined by bar Sanctions only in narrowly limited circumstances Safe harbor provision no longer necessary, because Rule re-shaped Focus on party s action addresses possible alternate sources (Act of God; cyber-attack)

21 Consequences Data preservation is expensive. Losing spoliation fight is expensive. Prejudice exists where party claiming spoliation cannot present evidence essential to its underlying claim Extent of prejudice and degree of culpability are key to determining appropriate sanction: o Default judgment o Striking claims or defenses o Adverse inference instruction o Monetary sanctions, fees and costs Courts should take pains neither to use an elephant gun to slay a mouse nor to wield a cardboard sword if a dragon looms. In re Pradaxa Prods. Liab. Litig., MDL 2385 Court held scope of litigation hold and phased preservation were not sufficient Court decided that incremental expansion of hold notice was inadequate when hold was expanded: 1-2 months after first case filed = added sales reps 5 months after first case filed = added sales reps 9 months after first case filed = added all sales reps 16 months after first case filed = added consultants Post 16 months after first case filed = added all consultants 18

22 In re Pradaxa Prods. Liab. Litig., MDL 2385 Court found litigation hold was inadequate because it failed to explicitly include text messages Defendants also failed to suspend automatic deletion on company-issued mobile devices and knew some reps were texting with personal cell phones despite policy against it In re Pradaxa Prods. Liab. Litig., MDL 2385 Court concluded actions were in bad faith Sanctions ordered in the amount of nearly $1 million ($500 per case) for: Failure to preserve documents from one scientist; Failure to preserve texts from sales reps; Late preservation of consultant documents; Late document productions; and Cumulative effect of alleged discovery abuses. 19

23 No Adverse Inference for Negligent Loss of ESI Vicente v. City of Prescott, 2014 WL (D. Ariz. Aug. 8, 2014) Negligently lost information not necessarily favorable or unfavorable to either party Adverse inference instruction may unfairly tip balance Requires bad faith showing Questioning Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99 (2d Cir. 2002) Quoting language from proposed FRCP 37(e) Judge is chair of Advisory Committee on Rules Practical Suggestions Communicate early and often regarding preservation Consider early Rule 34 requests Discuss preservation as part of Rule 26 conference Anticipate challenges to scope (complaint/answer may frame discovery) Build proportionality/priority into requests: What is needed What do we not have What is reasonable under circumstances

24 Additional Information The Sedona Conference Cooperation Guidance, For Litigators & In-House Counsel, March 2011, The Sedona Conference, The Sedona Conference Commentary on Proportionality in Electronic Discovery, August 2010, The Sedona Conference The Sedona Principle & Best Practices Recommendations & Principles for Addressing Electronic Document Production, June 2007, the Sedona Conference, Steven Bennett, Ethical Dimensions of the New Federal Rules on E-Discovery, American Lawyer Media, 2009 Patricia Antezana, Courts Struggle to Define Spoliation of Evidence, The National Law Journal, Questions your question to Press *1 of your telephone keypad to ask a live question 21