E-Discovery and ESI Recent Decisions and Best Practices

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1 E-Discovery and ESI Recent Decisions and Best Practices Ben Feldman Fox Rothschild

2 ESI Humor

3 ESI Humor Begs the Question

4 What is ESI? For the purpose of the Federal Rules of Civil Procedure, ESI is information created, manipulated, communicated, stored, and best utilized in digital form, requiring the use of computer hardware and software. The rule covers either as documents or as electronically stored information information stored in any medium, to encompass future developments in computer technology. (FRCP 34) Need to consider: s, documents, chats, social media posts, tweets, and potentially hardware (forensic imaging)

5 Duty to Preserve ESI Duty is derived from PA Rule of Professional Conduct 1.1 Rule A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. Duty of competence has been interpreted to include issuance of and compliance with litigation holds, or preservation notices

6 Duty to Preserve ESI must be retained pursuant to: (i) a law or regulation that requires its retention; (ii) a company policy or practice that requires retention; or (iii) a litigation hold Once litigation is anticipated (which is a fact inquiry), counsel must instruct the company to put a litigation hold in place that suspends routine document destruction and work with company to ensure all information that might be relevant is located and placed under the litigation hold Once a litigation hold is put into effect, it must continue through the final resolution of the relevant claims

7 Affirmative Duty to Monitor Compliance Courts are increasingly emphasizing the proactive responsibilities of litigants with regard to the preservation of evidence, including ESI It is not sufficient to notify employees of a litigation hold and expect that the [employee] will then retain and produce all relevant information. Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched [and in this case, preserved.] Swofford v. Eslinger, 671 F.Supp.2d 1274, 1281 (M.D. Fla. 2009)

8 Swofford - Affirmative Duty to Monitor Compliance Preservation letters sent to police department, however, defendants failed to preserve laptops, s and physical evidence Court sanctioned the police department and the department s general counsel who was not a named party to the action General counsel had forwarded plaintiff s preservation letters to only a few senior officials expecting they would cover the scope of evidence requested

9 Nonlawyer Review of ESI for Relevancy is Insufficient Jones v. Bremen High School Dist. 228, 2010 WL (N.D.Ill. 2010) Court criticized the defendant for directing only three employees to review their own s without assistance from counsel Court held, it is unreasonable to allow a party s interested employees to make the decision about the relevance of such documents, especially when those employees have the ability to permanently delete unfavorable from a party s system. Court stated that even with uninterested employees, most nonlawyers don t have expertise to determine what is relevant and are reluctant to reveal mistakes to employers

10 Duty to Preserve Documents in Control of a Third Party Goodman v. Praxair Services, Inc., 632 F.Supp.2d 494 (D.Md. 2009) plaintiff sought sanctions for defendant s failure to issue a hold notice to third party consultants (among other reasons) The court held that regardless of whether the company is in possession of relevant evidence, if it has sufficient legal authority or practical ability to ensure the preservation of the [evidence], it must do so Id. at 515 Court concluded that the defendant did not have legal control or practical access to the documents Important to consider application of this holding to other types of third party consultants, including legal counsel and expert witnesses

11 Evolution of Corporate ediscovery Duties Federal Rule of Civil Procedure 37(e) Safe Harbor 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. However, Advisory Committee Notes to the 2006 amendment adopting this safe harbor warns that good faith may require intervention in the routine operation where there is a preservation obligation

12 What Constitutes Sanctionable Behavior (important decisions in other jurisdictions) Pension Committee of Univ. of Montreal v. Banc of America Sec., 685 F.Supp.2d 456 (S.D.N.Y. 2010) court held that litigation hold notice was deficient because it lacked a mechanism for collecting the preserved records so they could be searched Court held that failure to issue a litigation hold notice constitutes gross negligence per se

13 What Constitutes Sanctionable Behavior (important decisions in other jurisdictions) In Chin v. Port Authority of New York and New Jersey, 685 F.3d 135 (2d. Cir. 2012), the Second Circuit abrogated the per se holding of Pension Committee In Chin, court held that the better approach is to consider [the failure to adopt good preservation practices] as one factor in determining whether sanctions are appropriate However, Pension Committee makes clear that corporate ediscovery duty is a two-step process: (i) issuing written litigation hold; and (ii) overseeing discovery collection and review. Must perform both steps to avoid potential sanctions.

14 What Constitutes Sanctionable Behavior (important decisions in other jurisdictions) Zubulake v. UBS Warburg series of opinions written by Judge Scheindlin (who also authored the Pension Committee case) which are landmark decisions regarding ediscovery Ms. Laura Zubulake (plaintiff) published Zubulake s e-discovery: The Untold Story of my Quest for Justice, (July 17, 2012) Amazon review: Having known Laura for six years, I knew she was smart. It was not until I read her book, that I came to realize just how smart. The philosopher in me particularly appreciated Chapter 8 introduced by Nietzsche's "[t]he irrationality of a thing is no argument against its existence, rather a condition of it." It is here where we learn about her walks through Central Park, one of which lead her to framing her challenge using Aristotle's law of non-contradiction.. This is a "must read" for business people, not just lawyers. Another Amazon review: If you were a fan of Erin Brockovich you will love Zubulake's e-discovery and hopefully, once you start reading it, you too, will have a hard time putting it down!

15 Zubulake Five Zubulake decisions offer guidance on how courts will treat the willful, negligent, or grossly negligent loss of ESI Court eventually concluded that the defendant acted deliberately in destroying relevant information and failing to preserve and recover key documents. As such, in final instructions the court included an adverse inference instruction: if you find that UBS could have produced this evidence, the evidence was within its control, and the evidence would have been material in deciding facts in dispute in this case, you are permitted, but not required to infer that the evidence would have been unfavorable to UBS.

16 Zubulake Cost-shifting analysis Used in Third Circuit, see e.g., Juster Acq. Co. v. North Hudson Sewerage Auth., 2013 WL (D.N.J. 2013) Seven factor test to determine if discovery costs should be shifted: 1. The extent to which the request is specifically tailored to discover relevant information 2. The availability of such information from other sources 3. The total cost of production, compared to the amount in controversy

17 Zubulake Cost-shifting analysis cont d 4. The total cost of production 5. The relative ability of each party to control costs and its incentive to do so 6. The importance of the issues at stake in the litigation 7. The relative benefits to the parties of obtaining the information

18 Spoliation Analysis is Two Steps 1. Whether spoliation occurred Spoliation occurs when: (1) the evidence was in the party s control; (2) the evidence is relevant to the claims or defenses in the case; (3) there has been actual suppression or withholding of evidence; and (4) the duty to preserve the evidence was reasonably foreseeable to the party. Omogbehin v. Cino, 485 Fed. Appx. 606 (3d Cir. 2012)

19 Two-Step Analysis 2. What is the appropriate sanction, if any? Poulis factors: (1) the party s personal responsibility; (2) the prejudice to the adversary; (3) a history of dilatoriness; (4) willfulness or bad faith; (5) the availability of alternative sanctions; and (6) the merit of the claim or defense. Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 867 (3d Cir. 1984) Third Circuit has held that the court should choose the least onerous sanction corresponding to the willfulness of the destructive act and the prejudice suffered by the victim. Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 79 (3d Cir. 1994)

20 Prejudice to Party To establish prejudice a party seeking spoliation sanctions must come forth with plausible, concrete suggestions as to what the [missing] evidence might have been. Medeva Pharma Suisse A.G. v. Roxane Laboratories, Inc., 2011 WL (D.N.J. 2011) Must also establish that the missing evidence would be relevant to her claims. Chirdo v. Minerals Techs., Inc., 2009 WL (E.D.Pa. 2009) Raises issue of proving a negative how can you prove relevance of evidence if it is intentionally hidden from you?

21 Available Sanctions District courts have the discretion to impose: (1) dismissal of a claim or judgment in favor of a prejudiced party; (2) suppression of evidence; (3) an adverse inference, referred to as the spoliation inference; (4) fines; and (5) attorneys fees and costs. Mosaid Techs. Inc. v. Samsung Elecs. Co., 348 F.Supp.2d 332, (D.N.J. 2004)

22 Bull v. United Parcel Service, Inc., 665 F.3d 68 (3d. Cir. 2012) For spoliation to occur, it must appear that there has been actual suppression or withholding of evidence Court in Bull, held that the District Court abused its discretion in determining that Bull intentionally withheld documents, concluding instead that the failure to produce the (original) documents was consistent with a presumption of inadvertence. Id. at 77.

23 After Bull Still undetermined what the requisite level of scienter for Bull bad faith is, i.e., whether the movant must show that the sanctioned party acted with the specific intent of hiding adverse information. Critical issue because Bull states unequivocally that destruction that occurs as a result of inadvertence, routine practice, or accident is not spoliation at all. Id. at 79. Does reckless disregard for consequences of an intentional and conscious destruction of evidence meet bad faith test? Remember, litigation must be foreseeable, which is a fact inquiry, for a duty to preserve to exist in the first place

24 After Bull cont d Since Bull, the Third Circuit has issued three unpublished opinions: Capogrosso v. 30 River Court, 482 Fed.Appx. 677 (3d Cir. 2012) held district court did not abuse discretion in finding spoliation where plaintiff, a licensed attorney, destroyed what she knew would be essential evidence U.S. v. Nelson, 481 Fed.Appx. 40 (3d Cir. 2012)- held no spoliation where there is no showing that the evidence was destroyed in order to prevent it from being used by the adverse party. Omogbehin v. Cino, 485 Fed.Appx. 606 (3d Cir. 2013) held that there was no evidence that the allegedly destroyed documents ever existed (raises issue of proving a negative)

25 After Bull cont d Vast majority of district court decisions applying Bull have not found spoliation where the party s conduct was no worse than negligent, or where the evidence was lost in the normal course of daily business or other similar activity

26 Bozic v. City of Washington, Pa., 912 F.Supp.2d 257 (W.D.Pa. 2012) Good analysis of Bull and the consequences of its holding Court holds that preserving evidence for length of administrative appeal period (EEOC determination) is insufficient, particularly when company knew plaintiff was litigious Holding suggests that duty to preserve may be triggered earlier for more argumentative or problematic employees

27 Delaware Court of Chancery Guidelines for Preservation of ESI 1. Develop and distribute written litigation hold notices to the custodians of potentially relevant documents as soon as the possibility of litigation emerges. 2. Oversee the preservation process and the process of identifying potentially relevant information. If a litigation hold notice has not been issued once litigation has commenced, counsel should instruct clients to take reasonable steps to act in good faith and with a sense of urgency to avoid loss of potentially relevant ESI. 3. In-house counsel and outside counsel should work together to identify, locate, and preserve potentially relevant ediscovery documents early in the case.

28 Delaware Guidelines Cont d 4. Place an emphasis on locating and preserving data from personal and portable storage devices, such as USB flash drives, business laptops, personal accounts, and home computers. 5. Take reasonable steps to verify information received regarding how documents have been created, modified, stored, or destroyed. Remember that the duty to preserve is triggered when litigation is anticipated. 6. Document steps taken to prevent the destruction of relevant information. 7. Be mindful of the importance of careful collection and review of documents and ESI.

29 Delaware Guidelines Cont d 8. Procedures used to collect and review documents should include interviews of custodians who may possess responsive documents to identify how such documents are kept. 9. Remember that unlike paper documents, ESI is susceptible to modification or deletion during collection and one should exercise care in developing collection procedures. 10. Play a key role in discovery process, including in collection, review and privilege determination process. 11. Engage in good faith discussions with opposing counsel regarding the scope and process for discovery.

30 A Few More Best Practices Be mindful of auto-deletion programs Store or image outdated hardware If storing ESI in the cloud, must take reasonable steps to protect data security, which means implementing mechanisms to back up data, install firewalls, limit unauthorized access, monitor all access, avoid inadvertent disclosure, and encrypt confidential data, as well as having a plan to address security breaches and having alternate ways to connect to the internet. Pennsylvania Formal Ethics Opinion,

31 Ben Feldman