E-Discovery Sanctions on the Rise

I commented on seeing this crisis coming over a year and a half ago, and I take no pleasure in seeing it borne out.  Via H&J, a recent report published in the Duke Law Journal states:

Sanction motions and sanction awards for e-discovery violations have been trending ever-upward for the last ten years and have now reached historic highs. At the same time, the frequency of sanctions against counsel for e-discovery violations, though small in number, is also increasing. Although serious e-discovery misconduct by parties and counsel should continue to be the subject of sanctions, appropriate consideration should be given to the complexity of e-discovery in ruling upon the increasingly frequent e-discovery sanction motion.

The e-discovery process is indeed complex.  But it is possible for a prudent attorney to avoid an ethical lapse with sufficient diligence and a thorough understanding of the technology involved in the process.  See, for instance, the Qualcom case:

One common but easily avoided e-discovery trap involves the failure to properly oversee the production of electronically stored information.  Courts are increasingly willing to sanction attorneys for failing to make “reasonable inquiry” into their clients’ production of electronically stored information during discovery.

[…]

The Qualcomm court determined that some of Qualcomm’s attorneys “assisted, either intentionally or by virtue of acting with reckless disregard for their discovery obligations” in Qualcomm’s discovery violations. While there was no direct evidence that Qualcomm’s attorneys helped to conceal damaging emails, the court found that the attorneys “contributed” to the discovery violation because they chose “to accept the unsubstantiated assurances of an important client that its search was sufficient” and ignored warning signs that Qualcomm’s document search and production were inadequate. The court imposed considerable sanctions against both Qualcomm and its attorneys because the attorneys did not make a “reasonable inquiry” into Qualcomm’s discovery search and production.  In addition to substantial monetary sanctions against Qualcomm, the court referred the sanctioned attorneys to the state bar for investigation and possible sanctions and ordered the attorneys to participate in a comprehensive discovery program to identify the failures in their case management and discovery protocol.

from Navigating E-Discovery: How to Avoid Common Pitfalls

Cost-Shifting in E-Discovery for Non-Parties

That’s a lot of hyphens in that title, huh?  But well worth it!

As we all know, discovery is expensive, and the massive volume of electronically stored information (ESI) can make it even more so.  Thus cost-shifting provisions of the rules of civil procedure can often make or break the viability of a case.  This can  pose an especial burden on non-parties:

“When non-parties are forced to pay the costs of discovery, the requesting party has no incentive to deter from engaging in fishing expeditions for marginally relevant material. Requesters forced to internalize the cost of discovery will be More inclined to make narrowly-tailored requests reflecting a reasonable balance between the likely relevance of evidence that will be discovered and the costs of compliance.” Linder a Calero-Portocarrero, 183 F.R.D. 314, 322-23 (D.D.C. 1998).

The federal case law in this area appears to unsettled in the area, but in order for a non-party to shift the costs to the requester requires that the discovery be unduly burdensome.  There are many factors considered by the court to determine is a discovery request rises to such a level:

Questions of undue burden invariably lead to questions of cost shifitng… the Northern District of California sets forth eight factors in determining whether to shift cost to the requesting party: (1) the scope of the request; (2) the invasiveness of the request; (3) the need to separate privileged material; (4) the non-party’s financial interest in the litigation; (5) whether the party seeking production of documents ultimately prevails; (6) the relative resources of the parry and the non-parry; (7) the reasonableness of the costs sought; and, (8) the public importance of the litigation. The Sedona Conference(R) Commentary on Non-Party Production & Rule 45 Subpoenas, 9 Sedona Conf. J. 197 at 200 (Fall, 2008).

Standing in marked contrast to the FRCP, the NY CPLR provides for automatic cost-shifiting with respect to nonparties.  According to CPLR Section 3122d, “the reasonable production expenses of a nonparty witness shall be defrayed by the party seeking discovery.”

E-Discovery of Inaccessible ESI and the “Good Cause” Standard

Complex civil litigation often hinges on discovery, and the discovery scheme of the Federal Rules of Civil Procedure has traditionally revolved around a cost benefit analysis, with the cost shifting to the requesting party if production is unduly burdensome. The advent of the new e-discovery rules continue this, as provided in FRCP 26(b)(2)(B): “A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost.”

This naturally raises the question, what exactly does “reasonably accessible” mean?

The “reasonably accessible” limit reflects worry about e-discovery’s “enormous costs … becoming the single most expensive facet of litigation.” The cost of e-discovery has two key components: (1) quantity – with businesses exchanging 2.5 trillion e-mails annually, 2 million at a typical company, and with computer files often remaining recoverable after deletion, the amount of attorney time needed to review discovery, and the potential for discovery disputes, has increased; and (2) inaccessibility – digital data “can be expensive or virtually impossible to recover” due to “outmoded storage media and software, and dispersion of information.” …[E]-discovery can cost tens or hundreds of thousands of dollars in even fairly typical cases[.]
Scott A. Moss, LITIGATION DISCOVERY CANNOT BE OPTIMAL BUT COULD BE BETTER: THE ECONOMICS OF IMPROVING DISCOVERY TIMING IN A DIGITAL AGE, 58 Duke L.J. 889, 894 (March, 2009).

Of course, nothing in law is that simple. What is that important piece of discovery isn’t reasonably accessible? FRCP 26(b)(2)(B) goes on to say that “the court may nonetheless order discovery from such sources if the requesting party shows good cause.” However, it would seem that the “good cause” standard is anything but standard:

The Federal Rules of Civil Procedure contain numerous good cause standards. It is a canon of statutory construction that a word used in multiple places in the same legal text should have the same meaning. Thus, the various good cause standards in the Rules should receive the same interpretation. But they do not. […] Even within the more limited universe of discovery rules, there is no single definition of good cause. A party seeking discovery of information that is not relevant to any party’s claims or defenses but is relevant to the subject matter of the action must show good cause pursuant to Rule 26(b)(1); a party seeking a protective order limiting discovery must demonstrate good cause pursuant to Rule 26(c); and a party seeking to conduct an adverse medical examination of another party must demonstrate good cause pursuant to Rule 35(a). Although these good cause standards all appear in the discovery rules, they have each been interpreted differently. As discussed above, the Rule 26(b)(1) good cause standard is weak and does not pose a significant hurdle to parties seeking discovery.
Henry S. Noyes, GOOD CAUSE IS BAD MEDICINE FOR THE NEW E-DISCOVERY RULES 21 Harv. J. Law & Tec 49 at 74-75, (Fall, 2007).

Electronically stored information is hardly a novelty by anyone standards, but in the federal law of discovery it is still a very new concept indeed. It would appear there are still a few kinks that need to be worked out.

E-Discovery and the Meta-Ethics of Meta-Data

Most people probably have never heard of “meta-data,” and I would venture to say that most practicing lawyers haven’t got a clue as to what it is either.  Essentially it is data about the document itself that isn’t overtly contained in the document itself, things like deletions, cut-and-paste, etc. that are stored outside the body of a digital document but still digitally attached to the readable content of the document.  This can have serious consequences in terms of electronic discovery at trial, where the production of digital documents can inadvertently include meta-data that is not within the purvue of required discovery.  This can lead to a host of ethical issues for both the sending and receiving attorney,

In Opinion 782, the New York State Bar Associationic Committee on Professional Ethics found that sending attorneys must use reasonable care to ensure that confidential client information is not disclosed through metadata contained in documents exchanged with adverse parties. New York State Bar Association additionally prohibits receiving attorneys from mining metadata, noting that receiving attorneys “may not ethically use available technology to surreptitiously examine” metadata.  Following New York’s lead, the Alabama, Arizona, and Florida State Bar Associations have also placed an ethical responsibility on both the sending attorney to remove all confidential client information from an electronic document’s metadata before sending, and also on the receiving attorney to refrain from reviewing metadata containing such information. Some commentators have opined that even in states that have not explicitly addressed the ethical issues presented by metadata, most state’s ethical rules would likely impose requirements similar to those in Alabama, Arizona, Florida, and New York.  Adam K. Israel, To Scrub or Not to Scrub: The Ethical Implications of Metadata and Electronic Data Creation, Exchange, and Discovery, 60 Ala. L. Rev. 469, at 488 (2009).

 Thus we see that metadata can be problematic to sending an receiving attorney both. So how does a prudent attorney go about protecting clients from inadvertent meta-data slipups?  Well one solution is convert more maleable data like Word documents into PDF format.  However this may not solve all the problems:

According to Donna Payne of the Payne Consulting Group, a legal consulting firm specializing in metadata removal, PDF files may contain information regarding: Authors, Create Data, Filename, PDF Version, Page Count, Encryption Status, Permanent ID, Changing ID, Producer, Creator, Custom Fields, Title, Subject, Keywords, Modification  Date, Bookmarks (Total number), Annotations (total number, type and total type amount), Page One Size, and Font Name, Type, and Embed Status. Thus, “the least revealing electronic paper, then, is also the least functional: printing the document to paper, then scan sic it into PDF.”  According to Payne, however, “there is at least one third-party utility to help eliminate the risk of PDF metadata.” ibid. at 474-475

So what’s the bottom line here?  Basically it is that e-discovery can be a mine-field for even a technically savvy attorney.  There is a need, I think, for a new scheme for dealing with this issue:

To some degree, these new rules, technology, and business developments ignore the root causes of the e-discovery crisis. The volume of information is not itself an insuperable problem. Rather, the problem largely stems from the fact that much of the information in modern businesses and other major institutions is not well organized or centrally collected. Instead, effective e-discovery requires that far-flung information in multiple formats be located in a standard, searchable format before the e-discovery process can really begin.

Fortunately, an emerging trend may address some of the root causes of e- discovery problems. Growing efforts aimed at improving records management (RM) involve systematic organization of information in standardized locations. These efforts permit the collection and search of well-organized records with greater ease and efficiency. Steven C. Bennett, RECORDS MANAGEMENT: THE NEXT FRONTIER IN E-DISCOVERY? 41 Tex. Tech L. Rev. 519, at 520