Under the terms offered by his legal team, Pappas made an immediate payment of $120,000. The plan called for another $50,000 to be wired on Monday and an additional $20,000 by the end of August, for a total of $200,000.

After that, Pappas and/or Creative Pipe would pay $20,000 a month toward the sanctions. Pappas must also close out money he has in offshore banks and bring it back to the U.S.

For a post describing prior events, please click here.

The ABA article was based on an Associated Press story. R. Foley, “Drug charges dropped because of too much evidence,” (Associated Press Aug. 15, 2012).  Mr. Foley quoted United States Attorney Stephanie Rose: “Continued storage of these materials is difficult and expensive. . . .”  The doctor reportedly fled to Panama.  Id.

Two terabytes is enough to store the text of 2 million novels or roughly 625,000 copies of “War and Peace.’

Id.

Mr. Pappas gained ESI fame in Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497 (D.Md. 2010)(“Victor Stanley I”), aff’d in part, modified in part,  MJG-06-2662 (D.Md. Nov. 1, 2010), subsequent opinion, 2011 WL 2552472 (D.Md. Jan. 24, 2011)(“Victor Stanley II”),  decision on merits, 2011 WL 4596043 (D.Md. Sep. 30, 2011), appeal pending. 

In short, “Pappas competed against Victor Stanley for site furnishing contracts using the pilfered designs under the trade name ‘Fuvista,’ which Pappas later admitted was short for ‘FU Victor Stanley.’”  B. Mook, “Infringer hauled back from Belize to face civil contempt charges,” The Daily Record (Aug. 13, 2012)

Victor Stanley I chronicled, in the Court’s words, defendant “Pappas’s dogged but unsuccessful attempts to prevent the discovery of ESI evidence against him. . . .”  The Hon. Paul W. Grimm described Victor Stanley I as “the case of the ‘gang that couldn’t spoliate straight.’” In the Court’s words: “Plaintiff [Victor Stanley, Inc.] is fortunate that Pappas’s zeal considerably exceeded his destructive skill and his judgment in selecting confederates to assist in his efforts to destroy ESI without detection.”  The Court concluded that plaintiff had proven “grave misconduct that was undertaken for the purpose of thwarting Plaintiff’s ability to prove its case and for the express purpose of hamstringing this Court’s ability to effect a just, speedy, and inexpensive resolution of a serious commercial tort.”

In Victor Stanley II, the Court summarized Victor Stanley I:

Suffice it to say that Defendants repeatedly failed to comply with multiple court orders compelling the preservation and production of ESI in response to Plaintiff’s discovery requests, and their overall behavior included spoliation of evidence and the failure of Mark Pappas, who controls Defendant Creative Pipe, Inc. and is himself a defendant, to tell the truth under oath during court hearings regarding the spoliation. The prolonged length and enormous breadth and scope of the spoliation and other violations reached a truly extraordinary level. As a result, the Court treated Defendants’ behavior as contempt and ordered Defendants to pay Plaintiff’s associated costs and attorney’s fees, among other sanctions. Specifically, the Court ordered that, “[p]ursuant to Fed.R.Civ.P. 37(b)(2)(C), Defendant shall pay monetary sanctions equivalent to Plaintiff’s attorney’s fees and costs, which will be awarded after further briefing by the parties, and which will include fees and costs associated with all discovery that would not have been untaken but for Defendants’ spoliation, as well as the briefings and hearings regarding Plaintiff’s Motion for Sanctions.”. . . . Additionally, in its Memorandum, Order and Recommendation, the Court stated that “spoliation sanctions shall include costs and legal fees allocable to spoliation. Specifically, as Plaintiff requested, the Court shall award attorney’s fees and costs, including costs related to uncovering Defendants’ discovery abuses; preparing, filing, and arguing all of Plaintiff’s ESI motions; and retaining Guidance Software and Andreas Spruill.”

Thus, in Victor Stanley II, the Court addressed the fees, costs, and expenses to be awarded and wrote “it is hereby ORDERED that relief in the form of payment by Defendants of $1,049,850.04 for attorney’s fees and costs is GRANTED. Defendants already remitted payment of $337,796.37, and shall remit payment of the balance, $712,053.67, to Plaintiff within thirty (30) days of this Order.”

The August 15, 2012, Daily Record reports that:

By December, Pappas had paid $478,409 toward the sanctions, but said he was unable to come up with the balance. He offered to make a $100,000 “good faith” payment and further installments of $20,000 a month, which the court agreed to.

During Wednesday’s deposition, he was questioned about why he had not made the $100,000 payment.

“It was a bad judgment error,” he said. “I should have made it.”

He said he was paid a salary of $190,000 in 2011, while his wife, who also worked for the company, was paid $100,000. He also collected rent from Creative Pipe on office space he owned.

According to Shepard’s, the first decision in that string of decisions, Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309 (S.D.N.Y. 2003), has been cited 760 times.  Ms. Zubulake’s book, however, provides a different perspective.  Written from the bird’s eye view of a lay-plaintiff, it reads like a “whodunit,” presenting an unfolding picture of the e-discovery process from the plaintiff’s chair.

The Zubulake Case: For those unfamiliar with the five published decisions, Ms. Zubulake was a highly-compensated Wall Street executive.  When denied a promotion, she filed an EEOC complaint asserting gender discrimination.  She was then terminated and claimed retaliation. 

In discovery, her former employer failed to produce electronic information which Ms. Zubulake knew and believed existed.  

Rulings on the resulting motions defined a number of key principles involving the triggering, scope, implementation, and monitoring of the duty to preserve electronic information (“ESI”), and sanctions for spoliation.  The decisions are also notable for, among other things, the process of sampling of data on backup tapes and the related cost-shifting analysis. 

The case was tried over two weeks, resulting in substantial compensatory and punitive damages.  It settled prior to appeal for an undisclosed amount.  

Smoking Guns:  Generally, in civil litigation “[e]ach side must trust that the other has not withheld or destroyed the proverbial smoking gun.”  Clear Value, Inc. v. Pearl River Polymers, Inc., 242 F.R.D. 362, 384 (E.D.Tex. 2007)(subsequent history omitted). It has also been suggested by James Layton, Esquire, that “[s]moking guns will not look like smoking guns in the files of someone who knows what he is doing.”  Ms. Zubulake chronicles how she located important withheld and destroyed evidence; made sense out of seemingly innocuous email; and, describes how it was then used at trial. 

When asked why he robbed banks, Willie Sutton reportedly replied: “Because that’s where the money is.” One phrase in Ms. Zubulake’s book illustrates the plaintiff’s electronic discovery strategy:  “Where there was e-smoke, I suspected there would be e-fire.”

In fact, the Court wrote that “Zubulake has produced a sort of ‘smoking gun’,” a message that suggested that the company “exit her asap.”  Her search led to production of additional smoking email, such as: “Thanks. It’s a pity we can’t act on LZ earlier. . . .” 

Thus, Ms. Zubulake wrote: “It took only one resurrected electronic smoking gun to alter the trajectory of my case.” 

Little Known Details: The book contains many interesting factoids. In one of the most important electronic discovery cases of the decade, for example, Ms. Zubulake reported that her “e-mail account was not requested during discovery.” 

And, while one of the significant aspects of the litigation was the adverse inference instruction to the jury, jurors reported in post-trial interviews that the instruction had little, if any, impact on them. 

After the verdict, “[s]omeone asked [the jurors] what role the adverse inference instruction played in the jury’s decision and whether the jury speculated as to what kind of e-mails might not have been recovered. One juror pointed to a binder containing the e-mails entered into evidence. . . .  [The juror] replied that essentially the adverse inference instruction played no role.” 

The lesson Ms. Zubulake draws is interesting.  She concludes that, if the facts were weak, there would have been little or no inference; however, because they were strong, none was needed.  “[T]hey stood on their own.”

Classic Struggle:  On one level, the book is a self-described David-and-Goliath struggle of a single plaintiff against a global corporation.  Ms. Zubulake describes how she budgeted for the lawsuit, imposed stoic restraints on her life-style, embracing a “Spartan existence,” and she describes the personal impact:  “In reality, I struggled to fund the litigation and pay my personal bills.” 

When the Court’s cost-sharing decision was announced, her 25% share came to $40,000, “a staggering sum for an unemployed person,” while UBS Warburg’s share was $120,000, a small fraction of its resources. 

The book graphically explains the impact of routine litigation time lines and processes in this context.  “Unemployed and with a limited budget, every day mattered to me.”

Ms. Zubulake describes her personal isolation as follows:  “Litigation became a very lonely process,” “consuming me,” “demanding total focus,” and “an overwhelmingly debilitating experience. . . . The process became emotional and sometimes malicious.”  She wrote: “Civil action was the quintessential oxymoron; there was nothing civil about it,” and depositions “were a mild but legal form of torture.”

Nevertheless, she concludes: “Perversely, I believed [UBS Warburg’s] size was its Achilles heel.” Given the verdict – $20 million in compensatory and $9 million in punitive damages – that analysis of one impact of asymmetry is noteworthy.    

Retaining Records Rewarded:  On another level, the story provides insight to anyone litigating an employment case. Notably, when Ms. Zubulake began to be concerned about her future at UBS Warburg, she started saving messages and “ultimately preserved hundreds of additional emails, a factor that later proved decisive. . . .”  To “ensure delivery” of some messages, she “blind copied” email to herself and later produced those copies in discovery.  And, she notes that, “[r]ecognizing at the time that I had been wrongly accused of exclusion, I saved copies of e-mails that I continually sent to the Desk updating the progress of the dinner arrangements. I did this because in the event that issue was raised later in the year, I wanted to be able to demonstrate that I did not prohibit anyone from participating.”

It was this survival mechanism that exposed the weakness in UBS Warburg’s  discovery protocol. Ms. Zubulake’s Document Request No. 28 “asked for all documents regarding any communication by, between, or among [UBS Warburg’s] employees mentioning or concerning me.” “Document” was defined to include electronic information. 

UBS Warburg initially produced 100 pages of email, insisting that its production was complete. Ms. Zubulake, however, “was taken aback by the paucity of [UBS Warburg’s initial document] production,” in part because she had printed and retained 450 pages before her termination.  In the Court’s words: “Clearly, numerous responsive e-mails had been created and deleted at UBS, and Zubulake wanted them.”

Lessons for Lawyers: For attorneys handling e-discovery, the book is illuminating:  “E-discovery requires thinking beyond convention.”  For example, Ms. Zubulake discusses the use of an interdisciplinary strategy by emphasizing the value of her unique knowledge of the niche industry involved, the international equity desk on a Wall Street trading floor. She explains: “No one knew key players, events, and practices like I did.”  The need for that interdisciplinary approach, and inclusion of “business people” in the process, is now well-established.  See  Wm. A. Gross Const. Assoc., Inc. v. American Mfrs. Mut. Ins. Co., 256 F.R.D. 134, 135(S.D.N.Y. 2009)(“This case is just the latest example of lawyers designing keyword searches in the dark, by the seat of the pants, without adequate (indeed, here, apparently without any) discussion with those who wrote the emails. Prior decisions from Magistrate Judges in the Baltimore-Washington Beltway have warned counsel of this problem, but the message has not gotten through to the Bar in this District. . . . [A]t a minimum [searchers] must carefully craft the appropriate keywords, with input from the ESI’s custodians as to the words and abbreviations they use. . . .”)(subsequent history omitted).

How Far E-Discovery Has Come:  While in some ways the Zubulake decisions ushered in an era of high-tech litigation, in other ways, the case was decidedly low-tech by contemporary standards.  For example, there were no sophisticated litigation review platforms on the plaintiff’s side and information produced by UBS Warburg was managed using “a [100-page, crude] multi-columned excel spreadsheet listing all documents. . . .” 

At that time, search methodology was still in its early stages.  Ms. Zubulake describes an admittedly naïve keyword search for “Laura,” “Zubulake,” and “LZ,” and concludes that, “[i]n retrospect, my keyword selections were inadequate.” She suggests that “[o]ne person’s professional woman was another’s ‘bitch’; one manager’s termination was another’s ‘exit.’”

While recognizing the advantages of computer-assisted searches, she argues for human input, at least in small cases:  “Relying solely on computer modeling (particularly in small cases) and disregarding the insights of a party or custodian might be cost efficient, but is arguably less effective.  Smoking guns are intended by the originator not to be found.”

Advocating for the Human Touch:  For example, one of the key emails used to demonstrate actual knowledge by the defendant was a reply message that stated only “received, thanks,” and a first name. Ms. Zubulake notes that “[t]his new, three-word e-mail appeared innocuous. However, it provided a missing link” by acknowledging receipt of a facsimile transmission of the EEOC complaint: “The Court later ruled that although the three-word e-mail seemed insignificant in isolation, it was actually quite important.”  It “strongly undercut[]” UBS Warburg’s claim that a key person did not know of the EEOC complaint. 

Would this message have been found by predictive coding?  Ms. Zubulake argues that some “e-mails did not exhibit glaring content or themes that could have been detected by automated search or topic review technology.. . . Individuals wanting to conceal improper conduct were unlikely to use blatantly incriminating language.”

This is, of course, why Jason R. Baron, Esquire, a leader in search methodology, has suggested that “[t]here is no ‘one size fits all’ way to effective search methodology. . . . What is required is a review of available options and analysis of the cost in proportion to what is at stake in the case, with thought given to any shortcomings of the software,” and quality assurance techniques to review false positives and negatives. J. Baron, et al., “Designing a ‘Reasonable’ E-Discovery Search: A Guide for the Perplexed,” in M. Berman, et al., eds., Managing E-Discovery and ESI (ABA 2011), 491-92. 

Nevertheless, Ms. Zubulake’s limited search was successful: “Was the search for electronic evidence worth the time, effort, and money? Yes.  Do I believe that the e-mails made a difference? Absolutely.” 

The “What Ifs”:  Despite the successful verdict, the book points to many “what ifs?”  Due to limited resources and nascent technology, many stones were left unturned.  Mobile and home devices were not searched. Nor was voicemail or social media reviewed.  Selected tapes were unavailable for restoration and “[t]here were [available] back-up tapes that were not  restored and never searched.” Predictive coding was not used. 

In short, the case left Ms. Zubulake to “wonder, what would I have learned if I had discovered all relevant, lost emails?” 

In spite of this doubt, Ms. Zubulake concludes that, “[a]lthough my methods seemingly date back to the Stone Ages, they sufficed.”  She notes that “[w]hat worked for me in 2003 might not be appropriate for the current environment.” In Jason Baron’s words: “What may pass for a reasonable search [today] may be viewed in a few years hence as insufficiently comprehensive or missing a key ingredient. . . .” J. Baron  at 496; see M. Berman, et al. “Has Indexing Technology Made Zubulake Less Relevant?,” (ABA Tech. for Litigators). 

A Detailed Account: At points, the book goes pretty deep into the weeds.  As such, it requires a great deal of attention. The factual presentation is complex, with great detail.  On the other hand, this was a lawsuit where the devil was in the details. 

Ms. Zubulake properly describes the importance of the five published Zubulake opinions.  As The Hon. John M. Facciola recently noted: “[W]hen it was finished, Judge Scheindlin, who presided, would forge a revolution in how courts consider and resolve” e-discovery issues.  J. Facciola, “A History of Electronic Discovery,” in M. Berman, et al., eds., Managing E-Discovery and ESI (ABA 2011), 17.

Nevertheless, six years later, The Hon. Shira A. Scheindlin, author of the Zubulake decisions, wrote: “Once again, I have been compelled to closely review the discovery efforts of parties in a litigation, and once again have found that those efforts were flawed. As famously noted, ‘[t]hose who cannot remember the past are condemned to repeat it.’” The Pension Committee of the Univ. of Montreal Pension Plan v. Banc of America Securities, LLC, 685 F.Supp.2d, 456, 462 (S.D.N.Y. 2010), quoting George Santayana, Reason in Common Sense, Vol. 1 of The Life of Reason (1905) (Prometheus Books 1998 at 82).  Despite the “abundantly clear” guidance of the Zubulake decisions, and while Ms. Zubulake correctly concludes that her case “transformed the legal industry and the discovery phase of litigation,” many issues persist.

In closing argument, Ms. Zubulake’s counsel stated: “She stayed within the law.  She lived by the rules.  The defendant did not. . . . The rules were not good enough for them.” 

While that argument was not limited to UBS Warburg’s e-discovery failures, it described them. In the words of Justice Cardozo, “[e]very new case is an experiment.”  B. Cardozo, The Nature of Judicial Process (Yale 1921), 23-24.  “Nothing is stable.  Nothing absolute.  All is fluid and changeable.” Id. at 28.  Ms. Zubulake’s lawsuit proved that.

 * * * *

Laura A. Zubulake, “Zubulake’s e-Discovery: The Untold Story of My Quest for Justice” (CreateSpace 2012)(©Laura A. Zubulake). 

This post is reproduced with permission from Digital Discovery & e-Evidence, 12 DDEE 311, 08/02/2012.  Copyright ^© by The Bureau of National Affairs, Inc. (800-3732-1033) http://www.bna.com.  There are minor modifications in this post and the original may be found by clicking Book Review: Zubulake’s e-Discovery.

C. Calderone, Review of Zubulake’s e-Discovery

Lee Isaacs, Book Review, Law Technology News

Monica Bay, “Plaintiff Zubulake Publishes Book on Eponymous Litigation,” Law Technoloy News (July 26, 2012).

* * * *

When it comes to electronically stored information (“ESI”), “[t]he fuss is about money.  Discovery is expensive, and electronic discovery is really expensive.”  A.L. Brown, “The Manageable Challenge of Electronic Discovery,” formerly posted at www.rkmc.com/.  Nevertheless, courts have split on which e-discovery costs may be awarded to a prevailing party under 28 U.S.C. §1920(4).  One recent article describes “[a]n enormous divergence of opinion” among the courts, “with outcomes that range from almost complete reimbursement to total denial.”  M. Austrian, “Taxation of Costs and Offer of Judgment,” For the Defense (DRI June 2012), 13 (suggesting use of an offer of judgment to pursue a request for costs); see generally, S. Bennett, “Are E-Discovery Costs Recoverable by a Prevailing Party?,” 20 Albany J.L.Sci.&Tech. 537 (2010).

I.       COSTS MAY BE AWARDED FOR MAKING COPIES OF MATERIALS

Section 1920(4) provides that a court may tax as costs “[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case. . . .”  [emphasis added]. Prior to 2008, §1920(4) authorized recovery of the costs of making “copies of papers.”  It was amended by the Judicial Administration and Technical Amendments Act of  2008 to replace that phrase with “the costs of making copies of any materials where the copies are. . . .”

Section 1920(4) must be read in conjunction with Fed.R.Civ.P. 54(d)(1) which generally provides for an award of costs to the prevailing party.  See Crawford Fitting Company v. International Woodworkers of America, AFL-CIO, CLC, 482 U.S. 437, 441 (1987).

In Taniguchi v. Kan Pacific Saipan, Ltd., __ U.S. __, 132 S.Ct. 1997, 2006 (2012), the Supreme Court wrote that “[t]axable costs are limited to relatively minor, incidental expenses, as is evident from §1920. . . .”  They are “limited by statute and modest in scope. . . .”  Id.  Kan Pacific was decided under §1920(6)(taxation of cost of interpreters).

II.    BROAD AWARDS OF COSTS UNDER §1920(4)

Some courts have held that §1920(4) has a broad sweep.  In In Re Aspartame Antitrust Litigation,817 F.Supp.2d 608 (E.D.Pa. 2011), the court wrote that taxation of e-discovery costs  “is a new area of law” with divergent approaches.  Because the court was persuaded that e-discovery saves overall costs in complex cases, it broadly taxed costs for creation of a litigation database, storage of data, imaging of hard drives, keyword searches, de-duplication, data extraction, hosting data, technical support, optical character recognition, creation of load files, and processing, including a privilege screen.  It refused, however, to tax the cost of a document review tool with visual clustering, the cost of concept-based review, as well as certain “tech usage fees,” and confidentiality and bates labeling.  Id. at 616, 618.

The court in In Re: Online DVD Rental Antitrust Litigation, 2012 WL 1414111 (N.D.Ca. Apr. 20, 2012), concluded that “broad construction of section 1920 with respect to electronic discovery production costs – under the facts of this case – is appropriate,”  although it stayed the award pending appeal.  Costs for TIFF conversion and “blowback” were taxed, while the court disallowed costs such as production of duplicative slides and re-stamping documents due to prior mistakes.

Similarly, in In re Ricoh Company, Ltd., Patent Litigation, 661 F.3d 1361, 1365 (Fed.Cir. 2011), the court determined that the costs of producing documents are not narrowly construed to cover only printing and bates-labeling.  It determined that making ESI available through a database constituted “electronic production.”  On the facts presented, however, it determined that the parties’ contractual, cost-sharing agreement overrode §1920(4). 

In short, at least some of the cost of converting electronic data into a readable format has been taxed under §1920(4).  Petroliam Nasional Berhad v. GoDaddy.com, Inc.,  2012 WL 1610979, *4 (N.D.Ca. May 8, 2012)(taxing cost of technicians); Tibble v. Edison International, et al., 2011 WL 3759927, *6-8 (C.D.Ca. Aug. 22, 2011)(third-party e-discovery technicians); Parrish v. Manatt, Phelps & Phillips, LLP, 2011 WL 1362112, *3 (N.D.Ca. Apr. 11, 2011) (costs for “warming up their electronic discovery engine” were taxed); Farrar & Farrar Dairy, Inc. v. Miller-St. Nazianz, Inc., 2012 WL 776945, *4-5 (E.D.N.C.  Mar. 8, 2012)(scanning cost held to be taxable; fact that documents became searchable was “simply an added benefit”).

III.  NARROW AWARD OF COSTS UNDER §1920(4)

Kan Pacific signals a different approach. In a post-Kan Pacific decision, one court rejected taxation of bates labeling, binding, hole punching, tabbing, and express shipping of documents.  Minemyer v. R-Boc Representatives, Inc., 2012 WL 2422982 (N.D.Ill. Jun. 26, 2012); cf. Ricoh, 661 F.3d at 1368 n. 3.  It held that any costs not enumerated in §1920(4) are not recoverable and also rejected taxation of electronic scanning because adequate supporting information was not provided in the bill of costs.

The narrow view of taxable costs is exemplified by Race Tires America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3^rd Cir. 2012), decided shortly before Kan Pacific.  After reviewing the legislative history of §1920, the Third Circuit permitted taxation of scanning, conversion of native files to TIFF images, and transferring VHS recordings to DVD format, but denied taxation of charges for data collection, preservation, and culling.  It criticized contrary decisions as “untethered from the statutory mooring.”  While the non-taxable steps were “necessary” for production, the court decided that necessity did not equate to “making copies” within the reach of §1920(4).  An unopposed petition for writ of certiorari is scheduled for conference on September 24, 2012.

In Cordance Corp. v. Amazon.com, Inc., 2012 WL 1194211 (D.Del. Apr. 11, 2012), the court held that costs of converting ESI to “an agreed-upon production format” are taxable, because they are the functional equivalent of making copies; however, it refused to tax the costs of processing, searching, culling, and de-duplicating the ESI.  Accord Rawal v. United Air Lines, Inc., 2012 WL 581146 (N.D.Ill. Feb. 22, 2012)(taxing costs for electronically scanning and processes limited to the equivalent of exemplification and copying; tasks to prepare documents for review fall under the rubric of attorneys’ fees, not costs); Jardin v. Datallegro, Inc., 2011 WL 4835742, *6-9 (S.D.Ca. Oct. 12, 2011)(services for general project management and assembling records for production not taxable; quality control for physical preparation and duplication are taxable;  case-by-case analysis);  Specht v. Google, Inc., 2011 WL 25565666, *3 (N.D.Ill. June 27, 2011)(cost to convert QuickBooks not recoverable); Mann v. Heckler & Koch Defense, Inc., 2011 WL 1599580 (E.D.Va. Apr. 28, 2011)(cost of creating database, de-duping, and metadata extraction not taxable);  Fells. v. Virginia Dep’t. of Transportation, 605 F.Supp.2d 740 (E.D.Va. 2009) (refusing to tax costs of processing, extracting metadata, and converting to searchable format);  seeMerigan v. Liberty Life Assurance Co., 839 F.Supp.2d 445, 448 (D.Mass. 2012)(denying costs for airfare, messengers, parking, and taxis).

IV.  CONCLUSION

The opinion in Kan Pacific, __ U.S. at __ n. 8,  implies that the expense of a forensic expert may not be a taxable cost under §1920.  Although decided under §1920(6), Kan Pacific brings the broad view of §1920(4) into question.  See J. Barkett, “Un-taxing E-Discovery Costs: Section 1920(4) after Race Tire Amer. Inc. and Taniguchi (ACEDS Jun. 29, 2012)(asserting that the Supreme Court has stopped taxation of e-discovery costs). 

If it grants the certiorari petition in Race Tire, the Supreme Court may define the scope of §1920(4) in connection with the multiple steps necessary to produce ESI.  ESI billing can be more complicated than the rule against perpetuities.  M. Berman, “Tips to Avoid Mistakes with ESI Vendors” (ABA Technology for the Litigator 2009).  Race Tires, Minemyer, and others demonstrate that invoices submitted for taxation must be detailed and accurate, and even then any award will likely be limited. 

Because of the limitations of §1920(4), litigants may consider using other procedures to recover e-discovery costs, such as a protective order under Rule 26(c), a cost-shifting order pursuant to Rule 26(b)(2)(B),  a limiting order under Rule 26(b)(2)(C), an offer of judgment under Rule 68, or sanctions under Rule 11(“appropriate sanction”) or 28 U.S.C. §1927 (“costs, expenses, and attorneys’ fees”), if substantively appropriate. See generally Marens v. Carrabba’s Italian Grill, Inc., 196 F.R.D. 35, 39(D.Md. 2000)(limiting search time); Mancia v. Mayflower Textile Servs. Co., 253 F.R.D. 354, 364 (D.Md. 2008)(discovery budget).

Subsequent developments:

The Supreme Court denied certiorari in Race Tires. 133 S.Ct. 233 (2012).

The Country Vintner of North Carolina, LLC v. E&J Gallo Winery, Inc., 2013 U.S.App.Lexis (4th Cir. Apr. 29, 2013) ( rejecting request to tax costs in the amount of $111,047.75; approving award of $218.59 in ESI costs).  The Fourth Circuit  was “mindful” that converting ESI “often encompasses the copying of metadata.” It note that, if “a case directly or indirectly required production of ESI-unique information such as metadata,” it assumed, without deciding, “that taxable costs would include any technical processes necessary to copy ESI in a format that includes such information.”  See n. 19.  The Court also expressly wrote that it was “not confronted with a case in which the parties clearly agreed to the production of ESI on a particular database or in native file format.” See n. 20.  Finally, the Court noted that block billing obscured many details. See n. 22.

Related References:

U.S.Dist.Ct.Md., Local  Rule 109.1 (requiring affidavit and memorandum of grounds and authorities with a bill of costs).

U.S.Dist.Ct.Md., Guidelines for Bill of Costs (Aug. 2011)(bill of costs form)(“Only those costs specifically mentioned in 28 U.S.C. § 1920 are taxable.”), http://www.mdd.uscourts.gov/publications/forms/BillofCostsGuidelines.pdf

Md. Rule 2-603 (costs).

Md. Cts. & Jud. Proc. Art. §7-301(c)(costs in civil case).  

A.  Howell, “Using Taxation of Costs to Collection Some Litigation Expenses and Maximize Client Recovery, “ 84 Am.Jur.Trials 367 (2002), §§43-44 (Maryland).

STANDARD COMMUNICATIONS, INC. v. THE UNITED STATES, .2012 U.S. Claims LEXIS 982 (Ct.Claims August 2, 2012).

See Kate Paslin, “Show Me the Money: Proposed Rule Changes Take on the Spiraling Costs of Discovery” (Aug. 21, 2012).

A. Hocevar, “Supreme Court Should Clarify “Taxation of Costs” Statute (ACEDS Sep. 15, 2012).

Messrs. Olson and O’Connor take on one of the most problematical issues presented by ESI – - cost control.  Setting the stage, the authors note the complexity of service provider pricing and write:  ”Very few people have the experience, let alone the patience, to sort through those sheets.”  Id. at 17.  I have similarly noted that “ESI pricing can be trickier than the Rule Against Perpetuities.”  M. Berman, “Tips to Avoid Mistakes with ESI Vendors” (ABA Tech. for the Litigator 2009).

Messrs. Olson and O’Connor provide a step-by-step road map to circumnavigate that maze.  The book selects representative software solutions, acknowledging that there are many equally-excellent programs that cannot be mentioned, and describes them in detail, including price, options, advantages, and disadvantages.  While not criticizing expensive solutions for high-dollar cases, the authors focus on the small case and the “tweener,” and point out that “you cannot expect a 747 jumbo jet to be used as an effective or cost-efficient means of transporting commuters during rush-hour traffic.” Id. at 18.

The book describes programs like SafeCopy2 ($161.25 for an individual license) and Harvester Portable ($1,495.00) as low-cost collection tools.  When a client or opponent provides a “mixed bag” of multiple types of ESI, the authors recommend Quick View Plus Standard Edition ($49.00) as a viewer.  They suggest the use of dtSearch Desktop ($199.00) as a “robust tool for processing, searching, and viewing a mixed collection of raw files and e-mail files,” concluding it is “ideal for use with small collections.” Id. at 41.  For in-house processing, the book suggests Digital WarRoom Pro ($895.00).  After describing somewhat pricier litigation review platforms, the authors describe several cloud-based options.  There is also a chapter on managing email with Adobe Acrobat portfolios.  The book closes with a discussion of trial presentation options.

While it is neither the first nor the only publication on this topic, see e.g., S. Nelson and J. Simek, “Electronic Discovery in Everyday Cases: Practical Guidance is an Antidote to Fear!,” (2007); D. Jaar, “E-discovery Tips for Everyday Cases” (ABA 2009); C. Jacoby, “E-Discovery in the $50,000 Case” (LLRX.com 2009),“Electronic Discovery for Small Cases” fills a void and is certainly, at a minimum, among the best.  It presents a “how to” or “do-it-yourself” guide to handling the smaller cases.  The authors note: “Although those cases might be small to an international corporate service provider,”  “they mean everything to the person involved in the lawsuit and the lawyers who represent them.” Id. at 18.

Messrs. Olson and O’Connor demonstrate how to avoid shooting a mouse with an elephant gun or fighting a dragon with a cardboard sword.  See M. Berman, C. Barton, P. Grimm, eds., “Managing E-Discovery and ESI: From Pre-Litigation Through Trial” (ABA 2011), 354, quoting Anderson v. Beatrice Foods Co., 900 F.2d 388, 395 (1^st Cir.), cert. denied, 498 U.S. 81 (1990).

The Rule 26(f) conference of parties has been described as the lynchpin of the e-discovery rules. See  Craig  Ball, Musings on Meet and Confer (2007). In fact, “[i]f there is a master blueprint to e-discovery under the Federal Rules, it lies in amended Rule 26(f) and the accompanying Advisory Committee Notes.” S. Gensler, “Some Thoughts on the Lawyer’s E-volving Duties in Discovery,” 36 N.Ky.L.Rev. 521, 522 (2009). “Perhaps no change in the Federal Rules is more dramatic than the one associated with the changes to the meet and confer requirement of Rule 26(f).” Moze Cowper and John Rosenthal, “Not Your Mother’s Rule 26(f) Conference Anymore,” 8 Sed. Conf. L. J. 261, 261 (2007). In fact, “[i]f there is a master blueprint to e-discovery under the Federal Rules, it lies in amended Rule 26(f) and the accompanying Advisory Committee Notes.”

This may be because “[t]he overriding theme of the recent amendments to the discovery rules has been open and forthright sharing of information by all parties to a case with the aim of expediting case progress, minimizing burden and expense, and removing contentiousness as much as practicable.”  Board of Regents of Univ. of Nebraska v. BASF Corp., 2007 WL 3342423, at *5 (D.Neb. 2007); Mancia v. Mayflower Textile Servs. Co., 253 F.R.D. 354, 361 n. 3 (D.Md. 2008) (citing BASF and other decisions).

As the Court in Hopson v. Mayor & City Coun. of Baltimore, 232 F.R.D. 228, 245 (D.M. 2005), wrote that “[i]t cannot be emphasized enough that the goal of the meeting to discuss discovery is to reach an agreement that then can be proposed to the court.”

The Technology Committee of the Maryland State Bar Association presented a mock Rule 26(f) Conference of the Parties at the June 2011 Annual Meeting. The Conference was based on a hypothetical student exercise that I use as a teaching exercise in my ESI seminars at the University of Maryland and University of Baltimore Schools of Law.

The mock conference is of particular interest because forensic experts participated. “Just as Georges Clemenceau said that war is too important to be left to the generals, attorneys frequently cannot ‘go it alone,’ and it is important to have a multidisciplinary approach to a conference of the parties.” M. Berman, C. Barton, and The Hon. P. Grimm, eds., “Managing E-Discovery and ESI: From Pre-Litigation Through Trial” (ABA Jul. 2011), 422.

The mock exercise was conducted in two parts. In the first part, after an introduction and setting the stage for those who are not familiar with ESI, two experienced attorneys, supported by their forensic experts and a legal assistant, met with their “client” to prepare for the conference. After a “critique” of that discussion, those attorneys presented their discovery plan to two opposing attorneys and their forensic expert in the Rule 26(f) conference.

The fact pattern involved an asymmetric, high-stakes commercial dispute between ABC, a “mom and pop” company with antiquated systems, but important ESI, which was suing XYZ, a high-tech manufacturing company, with sophisticated “24/7” systems. XYZ had shipped a critical medical device that turned out to be the wrong size, to the wrong location, proximately causing a patient’s death. The issues included a missing e-mail and a decade-long, electronic course of conduct.

The video of the mock conference begins with my introduction and can be found in its entirety through the Maryland State Bar Association web site. After following the link pasted above, it is necessary to click the link titled “Nuts & Bolts of E-Discovery,” register with host site for Gore Brothers Reporting, and type “edisco” in the “promo code” box in order to access the video. The video lasts approximately 2-½ hours.

Participants included the committee chair, W. Lawrence Wescott, II, Esq., and David Kinzer, Esq., Ober Kaler; Francis R. Laws, Esq., Thomas & Libowitz, P.A.; J. Mark Coulson, Esq., Miles & Stockbridge, P.C.; Howard Feldman, Esq., Whiteford Taylor Preston, LLP; Michael MacWilliams, Esq., Venable LLP; Marc Hirschfeld, Esq., Precision Legal Services; James Shoemaker, Miles & Stockbridge; and, Lynda Anderson, Lex On Demand.

POSTSCRIPT

Sharon Nelson’s review in “Ride the Lightning,” describes the book as an “excellent resource.”

In 1968, Dr. William A. Nolen wrote “The Making of a Surgeon” (Mid-List Press 1968, 1990):

How do you make a surgeon? Not by the preliminaries, the four years of college and four years of medical school that have to be gone through to earn an M.D. degree, but by the five, six or seven years that a man [or woman] spends after medical school learning the surgical trade.

Id. He suggested that “[t]he transformation is a slow process. . . . Not by big jumps, just small steps forward.”  Dr. Nolen wrote:

It’s sad that all through a book on surgery, mistakes and error should play such a prominent role.  Patients like to believe doctors are infallible. . . .  Unfortunately, that’s not the case. Not some, not most, but all doctors, at one time or another, make errors.  This is the nature of medicine. It’s isn’t an exact science. .  . . [W]e made errors. We operated when we shouldn’t have, didn’t operate when we should have; sometimes we performed the wrong operation; occasionally, we chose the right operation but did it poorly.  We made all these errors. But, to keep the proper perspective, not often.  We did our damnedest to avoid mistakes – we took every precaution we could to eliminate errors and struggled to keep them down to the absolute minimum.  And for every patient we hurt by one of our mistakes, we did, I hope, help hundreds.

Id. at 57, 65.  The author described “[t]he patient, or better, victim,” of his first major surgery, an appendectomy.  Id. at 18.  When handed the scalpel, all of his confidence disappeared and he could not determine where to make the incision.  Then, his effort to tie off the base of the appendix failed, contaminating the surgical area. Although the recovery was more complicated, the patient survived.  Dr. Nolen concludes: “If he had died, I think I would have given up surgery for good.”

What does that have to do with ESI and software glitches?  “Especially in the highly complex world of e-discovery, even with good faith efforts, it is very easy to fail to preserve or lose relevant information by inadvertence.”  P. Grimm, M. Berman, et al., “Discovery About Discovery: Does the Attorney-Client Privilege Protect All Attorney-Client Communications Relating to the Preservation of Potentially Relevant Information?,” 37 U.Balt.L.Rev. 413,  454 (2008).

Perfection Is Not, and Has Never Been, the Standard of Litigation

In The Pension Committee of the University of Montreal Pension Plan v. Banc of America
Securities, LLC, 685 F.Supp.2d 456, 461 (S.D.N.Y. 2010), the court wrote:

In an era where vast amounts of electronic information is available for review, discovery in certain cases has become increasingly complex and expensive. Courts cannot and do not expect that any party can meet a standard of perfection.

In a forthcoming book, The Hon. Paul W. Grimm wrote that the Advisory Committee Note to Fed.R.Evid. 502(b) suggests that the Rule “does not require perfection. . . merely that what was done in a particular case was reasonable.”   P. Grimm, “The 10 Most Important Things You Need to Remember About FRE 502,” in M. Berman, C. Barton, and P. Grimm, eds., “Managing E-Discovery and ESI: From Pre-Litigation Through Trial” (ABA forthcoming Aug. 2011), 416-17.

Thus, “[i]t would be utopia to expect perfection from everyone: police, lawyers, judges, and society in general. We can take note, however, that while we often strive for perfection it is seldom achieved.”  State v. Scott, 699 S.W.2d 760, 764 (Mo. App. 1985)(failure of police to dictate a complete inventory on property bag)(subsequent history omitted); accord Southern Capitol Enters., Inc. v. Conseco Servs., L.L.C., 2008 U.S. Dist. LEXIS 87618, at *7 (M.D. La. Oct. 24, 2008)(in an “ongoing electronic discovery dispute,” the court wrote that “[p]erfection in document production is not required. . . .”); Frazier v. Layne Christensen Co.,  2005 WL 372253, at *4 n. 3 (W.D. Wis. 2005) (in a proceeding for violation of protective order, the court wrote that “[t]his court doesn’t expect perfection from counsel or their staff when thousands of documents are being exchanged. . . .”);  Gilmore v. Oil and Gas Conservation Comm’n., 642 P.2d 773, 781 (1982)(“Appellant seems to expect perfection. Justice was accomplished here, as much as could be under the circumstances. This litigation should end.”)(administrative appeal); State v. Turner, 21 N.C.App. 608, 205 S.E.2d 628 (1974)(“Certainly, the bench and bar cannot expect perfection in the transcription of trial court proceedings, particularly jury instructions.”); Williams v. Russell, 419 F.2d 1092, 1094 (6^th Cir. 1969)(in denying habeas petition for alleged failure to request a severance and call a specific witness, the court wrote “[w]e just simply cannot hold lawyers to perfection to guarantee that they will be absolutely free from error. . . .”), cert. denied, 398 U.S. 942 (1970); Dolley v. Ragon, 68 Cal.App. 223, 226, 228 P. 665, 666 (1924)(contempt proceeding against attorney for misrepresenting facts in the record)(“Every one knows that in the course of litigations in which numerous details of extensive transactions have to be referred to, as they were referred to in this case, sometimes counsel, and sometimes the judges of the court, will commit errors, whereby a misstatement of fact may be made, or a fact may be omitted which ought to have been included in the statement. That occurs every day. No one reasonably expects perfection in such matters, and no one reasonably charges corrupt intention in the making of such errors.”); U.S. v. Foster Lumber Co., Inc., 429 U.S. 32, 52 (1976)(“No one expects perfection in income taxation.”)(Blackmun, J., dissenting).

In short, “[t]he goal of our system of justice is fairness, not perfection. We live in an imperfect world and it is unrealistic to expect perfection in the courtroom.”  Gould v. Charlton Co., Inc., 929 S.W.2d 734, 739 (Ky. 1996)(discussing jurors).  Thus, “[s]ometimes, despite everyone’s best efforts, mistakes are made during the course of a trial. We visit an endless array of trial errors with a paradigm that looks for fairness rather than perfection. We do not expect perfection.”  People v. Biggerstaff, 287 Ill.App.3d 813, 818, 679 N.E.2d 118, 121 (1997); accord Bush v. Gore, 531 U.S. 98, 143 (2000)(“we live in an imperfect world. . . .”)(Ginsburg, J., dissenting)(Presidential election).

Sanctions Are Reported To Be At An “All Time High”

It is in this context that a recent article states: “E-discovery sanctions are at an all-time high.” D. Willoughby, R. Jones, and G. Antine, “Sanctions for E-Discovery Violations: By The Numbers,” 60 Duke L.J. 789, 790 (2010).  “[T]here has been a significant increase in
both motions and awards since 2004.” Id. at 790-91.  While “[m]arquee e-discovery
disaster cases. . .  are towering reminders of the most severe sanctions. . . [o]f greater concern to the average practitioner is the increasing frequency of sanction decisions, an issue most recently illustrated by Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, in which all thirteen plaintiffs were sanctioned for e-discovery failings not rising to the level of intentional or willful conduct.” Id. at 791.  Mr. Willoughby and his colleagues conclude that “appropriate consideration should be given to the complexity of e-discovery in ruling upon the increasingly frequent e-discovery sanction motion.” Id. at 828.

Sanctions and the Brady Analog

Sanctions motions in civil cases have “developed a civil procedure analog to a Brady [v. Maryland, 373 U.S. 83 (1963)] attack on alleged prosecutorial misconduct.   In
short, under the sanctions rules, civil litigators could obtain a tactical advantage by alleging deficiencies in the performance of opposing counsel.  The opposing attorney, countering such allegations, was often tempted to respond in kind.  Civility suffered.”  M. Berman, “The Sedona Conference Cooperation Proclamation” ABA Technology for the Litigator, reprinted in M. Berman, C. Barton, P. Grimm, eds., “Managing E-Discovery and ESI: From Pre-Litigation Through Trial” (ABA forthcoming Aug. 2011); see P. Grimm, et al., “Discovery About Discovery: Does the Attorney-Client Privilege Protect All Attorney-Client Communications Relating to the Preservation of Potentially Relevant Information?,” 37 U.Balt.L.Rev. 413 (2008).

This is especially problematical because “[a]s a relatively recent concept, e-discovery’s reasonableness standards are still developing.” D. Bassett, “Reasonableness in E-Discovery,” 32 Campbell L.Rev. 435, 436 (2010).  In short, courts and litigators are still “writing the book.”  M. Berman, C. Barton, P. Grimm, eds., “Managing E-Discovery and ESI: From Pre-Litigation Through Trial” (ABA forthcoming Aug. 2011), 2.

The anticlimactic denouement in Qualcomm, Inc. v. Broadcom Corp., 2008 WL 66932 (S.D. Ca. Jan. 7, 2008), vacated and remanded in part, 2008 WL 63810 (S.D. Ca. Mar. 5, 2008), appeals dismissed, 327 Fed.Apx. 877, 2008 WL 6400775 (Fed. Cir. Aug. 18, 2008), on remand, 2010 WL 1336937 (S.D. Ca. Apr. 2, 2010), partially exonerating trial counsel after their careers were devastated by an earlier sanctions decision, illustrates the need for caution in analyzing ESI-related errors.

Software Glitches

Software glitches are a fact of contemporary life. C. Cavas, “F-35s resume flight ops after software glitch,” Navy Times (Jun. 24, 2011); ; J. Scully, “Software glitch delays launch,” Lompac Record (Jun. 9, 2011)(NASA rocket); C. Sorrel, “RIM Recalls PlayBooks Thanks to Software Glitch,” Gadget Lab (May 17, 2011); O. Wright, “Software glitch costs tax office millions in lost revenue,” (The Independent Feb. 1, 2011); Associated Press, “Nissan to fix software glitch in electric car,” (A.P. Apr. 18, 2011);  P. de Selding, “Software Glitch Blamed for Turning Satellite Into Space Zombie,” (Space.com Jan. 13, 2011).

Many cases illustrate software glitches. I.B.E.W. v. Limited Brands, Inc., 2011 WL 1238308, at *15 (S.D. Oh. 2011)(“CW4 and CW6 represented that the distribution center was experiencing software glitches throughout the class period. . . .”); Shah v. Washington County Assessor, 2011 WL 2651582, at *4 (Or. Tax Magistrate Div. 2011)(“Huffman admitted at trial that due to a ‘software glitch’ his analysis of Plaintiffs’ comparable properties gave them a downward adjustment for extra bathrooms when the analysis should have given an upward adjustment to those same properties.”);  Central Parking Systems of Tennessee, Inc. v. Nashville Downtown Platinum, LLC, 2011 WL 1344633, at *1 (Tenn.Ct.App. 2011)(“Due to a “software glitch[,]” however, the amount was double posted, and a check was sent to NDP for twice that amount: $53,761.78.”); In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices and Products Liability Litigation, 754 F.Supp.2d 1208, 1221 (C.D. Cal. 2010)(“Plaintiff identifies three design defects that cause or contribute to SUA events, including: . . . software glitches. . . .”);  Beverly Enterprises v. Mississippi Div. of Medicaid,  808 So.2d 939, 943 (Miss. 2002)(“It is unrefuted that a computer software glitch in a newly installed system caused Beverly to miscalculate the correct amount of funds necessary to properly reimburse them for services actually rendered to approximately 712 patients.”).

Sensient Colors, Datel Holdings, and Mt. Hawley

Three recent cases addressed software glitches in the ESI context.  In two, courts recognized the complexity, and failures were excused. In the other, a different result was reached.

Sensient Colors

Faced with determining the adequacy of counsel’s efforts to protect disclosed, privileged information, one court wrote: “Plaintiff’s production was made in the midst of a commendable effort to employ a sophisticated computer program to conduct its privilege review. Unfortunately, mistakes occurred. Plaintiff should not be unduly punished for occasional mistakes that occurred while it started to use new software to organize and sort its documents.”  U.S. v. Sensient Colors, Inc., 2009 WL 2905474, at *4 (D.N.J. Sep. 9, 2009).  According to the court, plaintiff “prepared a database of relevant fields of each of its documents,” conducted oral and written training for the reviewers, and employed pre-production, computer-assisted quality control.  Nevertheless, 214 documents were inadvertently produced out of a 45,000 document production.

The Sensient Colors court cited Heriot v. Byrne, 257 F.R.D. 645, 659 (N.D. Ill. 2009)(citations omitted), for the proposition that “where discovery is extensive, mistakes are inevitable. . . .” The court noted that “no disclosure would have occurred but for the [ESI] Vendor’s error. . . .” Id. at 661.   It concluded that “Plaintiffs relied, and should be able to rely, on their Vendor to faithfully carry out the instructions it had been given.”  Id. at 660.   The court deemed it unfair to penalize a litigant for a mistake it did not cause or anticipate. Id.

Thus, the Sensient Colors court reasoned: “It appears that plaintiff’s implementation of a new computer application was largely to blame for the errors that occurred. This is not unexpected. The use of sophisticated analytical software should be encouraged. Obviously, however, given plaintiff’s experience thus far, future errors will not be treated generously.”  Id. at n. 11.

Datel Holdings

In Datel Holdings Ltd. v. Microsoft Corporation, 2011 WL 866993 (N.D. Cal. Mar. 11, 2011), subsequent opinion on other issues, 2011 WL 2437265 (N.D. Cal. Jun 17, 2011), the defendant inadvertently produced privileged documents due to a software glitch, much like Sensient Colors.  In a nutshell, a litigation support program truncated the portion of an email chain that showed the entire chain was subject to an assertion of privilege. Therefore, reviewers missed it, failed to assert privilege, and six assertedly-privileged documents were erroneously included in the 119,000-document production.

As in Sensient Colors, defendant had a review protocol described by the court as “fairly robust.”  It included a first-pass review of potentially responsive documents, followed by a quality control team review of potentially privileged documents, followed by a privilege team review of the output.  Reviewers received written instructions and a tutorial from litigation counsel. Litigation counsel also conducted quality control checks.  Faced with a waiver argument, the Datel Holdings court wrote:

Specifically, Defendant explains that after potentially responsive documents were collected from custodians, they were loaded into a computerized document processing system known as “Clearwell.” Clearwell extracted metadata from each document and converted the documents into a format that allowed for text searching. Once the documents were processed through Clearwell, they were entered into an online platform, where they were reviewed by attorneys. For reasons still unknown to Defendant, Clearwell truncated some “Re-auth” documents during processing. [internal citations omitted].

The court wrote:

Here, although Defendant’s team of lawyers carefully reviewed documents to identify privileged communications, a computer glitch truncated the documents, removing the portion conveying the request from counsel to conduct a factual investigation. The technical glitch was a mistake, which occurred accidentally and unintentionally, and prevented Defendant’s team of lawyers from recognizing the privileged nature of the email chain. Mistaken production due to an unexpected software glitch that occurred despite the use of standard discovery software falls squarely on the inadvertent side of the divide between intentional disclosure under Rule 502(a) and unintentional disclosure under Rule 502(b). Under these circumstances, production of these six documents was inadvertent. [footnote omitted]. . . .  Here, Defendant used a computerized document processing system to organize its documents which, unbeknownst to Defendant, suffered a software failure.

The court concluded:

In relatively large productions of electronic information under a relatively short time table, perfection or anything close based on the clairvoyance of hindsight cannot be the standard; otherwise, the time and expense required to avoid mistakes to safeguard against waiver would be exorbitant, and complex cases could take years to ready for trial.

As in Sensient Colors, these actions were held to be reasonable and, therefore, sufficient.

“[F]airly robust” procedures were good enough in light of what the Datel Holdings court called a relatively large production “under a relatively short time table. . . .”  2011 WL 866993, at *4.

Mt. Hawley

In Mt. Hawley Insurance Co. v. Felman Production, Inc., 271 F.R.D. 125 (S.D.W.Va.  2010), objections overruled, 2010 WL 2944777 (S.D.W.Va. Jul. 23, 2010), the court was also faced with a software glitch “in the context of a massive production of e-discovery.” In brief summary, the plaintiff had produced an email between its Human Resources Manager and attorneys and, upon learning of the error, subsequently argued non-waiver of the privilege.  Additionally, 377 other documents were at issue.

Opinion of the Magistrate Judge

The May 14 email had been listed on plaintiff’s privilege log.  The court noted that plaintiff “and its counsel used various search protocols, software and vendors’ services to search for and produce documents.”  It recited that production took place in an accelerated, five-month period.  It wrote that defendants identified almost 980 attorney-client communications, of which plaintiff sought to claw back 377, although the initial decision turned primarily on the single email.

The plaintiff, defending its production as inadvertent, “points to its ‘carefully selected privilege search terms,’ document-by-document review of potentially privileged documents, and a second electronic search of remaining documents, as evidence of its reasonable steps. It notes that the May 14 email was listed on its privilege log. After learning of the production of apparently privileged materials, Felman investigated and determined that certain documents were not tagged for attorney review due to an undetermined software error.” [internal citations omitted].

The court framed the dispositive issue as whether plaintiff took reasonable steps to  prevent disclosure. Id. at 133.  It described a sophisticated series of steps taken by counsel to obtain and process ESI, including retaining an “ESI collection vendor,” collecting 1,638 GB, selecting search terms, testing the search terms, refining the search terms after testing, tagging documents for privilege review, and performing a document-by-document review of potentially privileged materials. The ESI had been loaded in multiple Concordance databases and, after learning of the inadvertent disclosure of the privileged email, investigation revealed the one of the databases “inexplicably built an incomplete index of potentially privileged materials.”  Id. at 136.  The court wrote: “The manufacturer of the Concordance software, Lexis-Nexis, has not been able to explain why the index was incomplete.” Id. It was then determined that 328 of the 377 documents had come from the mis-indexed database.

The court found that the production of the 377 documents was not “solely attributable to the problem with the fourth Concordance database file.” It faulted plaintiff for failing to perform critical quality control sampling and found a failure to perform simple key word searches to locate copies of the key email. It concluded that “the precautions taken to prevent inadvertent disclosure were not reasonable.”

Opinion of the District Judge

Felman filed objections to the Magistrate Judge’s decision.  In overruling the objections, the District Judge wrote that discovery in the case had “taken on a life of its own” and “been especially adversarial. . . .” 2010 WL 294477, at * 1.  The court noted that 30% of Felman’s production had contained irrelevant materials and it had “produced nearly a thousand communications subject to attorney-client privilege,” a fraction of which it sought to claw back. It wrote:

Although inadvertently, Felman produced a massive amount of irrelevant documents and thousands of privileged communications. In light of this fact, the Court need not consider the details of Felman’s preproduction document review process – or the unexplained technical glitch that led to the fourth volume of Felman’s e-discovery being not properly screened for potentially privileged materials – to find that Felman’s screening precautions were not reasonable.  The ridiculously high number of irrelevant materials and the large volume of privileged communications produced demonstrate a lack of reasonableness.

The Mt. Hawley court may have been concerned by the allegations of a “data dump” and the assertion that at least 14.3 GB of “junk documents” had been produced.  On the other hand, however, the pre-production steps, detailed at 271 F.R.D. at 135, are impressive precautions.

What Can We Learn From Dr. Nolen?

After his surgical mistake during the appendectomy, Dr. Nolen concluded: “If [the patient] had died, I think I would have given up surgery for good.” Careers were ruined in Qualcomm.  Z. Elinson, “Judge Lifts Sanctions Over Qualcommm Discovery Scandal” (Law.com Apr. 6, 2010).

Dr. Nolen’s book demonstrates that error is a part of complex human endeavors.  In 1968, Dr. Nolen wrote that, “[t]o stick with the appendicitis example, it’s estimated that surgeons are wrong about 15% of the time” in their diagnosis of a “simple” condition like appendicitis. Id. at 58.  And, of course, “[e]ven if he [or she] makes the proper diagnosis the surgeon isn’t home free. There are often two, three or more ways to treat a patient with a specific disease. . . .  Every step of the way, you have to choose between options.” Id.

The Sensient Colors court wrote that a litigant “should not be unduly punished for occasional mistakes that occurred while it started to use new software to organize and sort its documents.”  Sensient Colors, 2009 WL 2905474, at *4. Just as Dr. Nolen was not able to find the landmarks for the initial incision on his “victim” for his first surgery, the preservation, collection, processing, review, and production of ESI is far from a science in this, the fifth year after the “ESI rules.”

By necessity, ESI is a team effort. Similarly, Dr. Nolen wrote that:

Every operation is a team event.  A surgeon can no more operate on a patient by himself [or herself] then can a general fight a war alone.  An operation, like a battle, is a co-operative venture.

Id. at 217.  ESI attorneys rely on complex software and service providers as part of the team. They have no other choice. Wholesale manual review of terabytes of information is not possible. In Heriot, the court wrote that a litigant “relied, and should be able to rely, on their Vendor to faithfully carry out the instructions it had been given.”  257 F.R.D. at 660.

Proportionality, transparency, and cooperation are central concepts.  “The public has an interest in effective and efficient legal proceedings calculated to lead to fair and just results. The litigants have an interest in having their legal matters addressed fairly, promptly and economically.”  Gould v. Charlton Co., Inc.,  929 S.W.2d 734, 737-38 (Ky. 1996). Each case turns on its unique facts, however, as in Datel Holdings, “fairly robust” measures, even if imperfect, should generally suffice.

Resources

One issue in Mt. Hawley was that the recipient of the inadvertent production successfully argued that it had no duty to notify the producing party of its receipt of privileged information.  “Notice” should be a topic discussed in Rule 26(f) conferences. M. Berman, “The Rule 26(f) Conference of Parties,” in M. Berman, C. Barton, and P. Grimm, eds., “Managing E-Discovery and ESI: From Pre-Litigation Through Trial” (ABA forthcoming Aug. 2011), Chap. 19.

For a discussion of search methodology, see Chapters 21 and 22 of M. Berman, C. Barton, and P. Grimm, eds., “Managing E-Discovery and ESI: From Pre-Litigation Through Trial” (ABA forthcoming Aug. 2011).

Postscript

R. Losey, “Winning isn’t everything, it’s the only thing” (“Perfection is not attainable, but if we chase perfection we can gain excellence.”)

“[T]he perfect is the enemy of the good,” P. Grimm, L. Bergstrom, and M. Kraeutter, “Federal Rule of Evidence 502: Has It Lived Up To Its Potential?,” 17 Rich.J.L. & Tech. 13, 41, quoting Voltaire Quotes, Famous Quotes.

Thorncreek Apartments III, LLC v. Village of Park Forest, 2011 WL 3489828 (N.D. Ill. Aug. 9, 2011)(documents tagged for privilege during document review were inadvertently produced in online database.  Court held that procedures were not reasonable. Court cited statements of counsel that “all” documents were produced, inadequate description of precautions taken, failure to timely notice the production, and failure to timely prepare a privilege log.  “Perhaps the most telling in assessing the adquacy of the safeguards is the abject failure of the Village’s processes to protect allegedly privileged documents.  The Village did not succeed in identifying and withholding from production even a single privileged document.”).

B. Kerschberg, “Privilege Waived? Federal Court Says Don’t Blame Your Electronic Discovery Vendor,” Forbes (Aug. 19, 2011)(“Thorncreek may produce a sigh of relief among e-discovery vendors, at least based on these facts. There are myriad scenarios that are equally plausible and would probably result in a different outcome, but the courts will address them if and when they arise. In the meantime, counsel has been warned: electronic discovery is not the bailiwick of third-party vendors alone. Absent active involvement in—and indeed control of—the e-discovery process, serious repercussions may ensue.”).

The Sedona Conference Best Practicies Commentary on the Use of Search and Information Retrieval Methods in E-Discovery, 8 Sed.Conf.L.J. 189, 204, 211 (2007)(“The discovery standard is, after all, reasonableness, not perfection. . . . [T]here is no requirement that ‘perfect’ searches will occur. . . . A standard of absolute perfection is and always has been unrealisitic, but now, with quantitative data available, we know perfection is  not only unrealistic, but also quite simply unachievable. . . . ‘[P]erfection should not be allowed to be an enemy of the attainable and reasonable goal of reasonableness.”).

This post was reproduced by Litigation Support Technology and News.

There have, however, been a number of decisions that have been highly critical of government efforts in the ESI arena. E.g., Moore v. Napolitano, 723 F.Supp.2d 167 (D.D.C. 2010)(government made a “mockery” of process);  In Re Fannie Mae Sec. Litig., 552 F.3d 814 (D.C.Cir. 2009)(contempt); Un. Med. Suppl Co., Inc. v. U.S., 77 Fed.Cl. 257 (Fed.Cl. 2007)(sanctions).

Authorities are divided on the question of whether the government is to be treated like any other litigant. The United Medical court wrote that:

“Generally speaking, ‘when the United States comes into court. . . it is. . . as any other litigant…. It is the duty of the United States, no less than any other party before this court to ensure, through its agents, that documents relevant to a case are preserved.”

Id. Others have argued that, because litigation diverts scarce public resources, special considerations are in order.

Proportionality principles provide at least a partial solution to the perceived problem of conserving the public fisc. In an article by Milberg LP and Hausfeld LLP, “E-Discovery: The Fault Lies Not in Our Rules. . . .,” 4 Fed.Cts.L.Rev. 1 (2011), the authors argued that attorneys are failing to use Rules 1, 26(b)(2)(B), 26(b)(2)(C), 26(c), 26(f), and 26(g) as cost containment measures.

While there is no “silver bullet,” it appears that Rules-based solutions, transparency and cooperation provide viable tools to address at least many of the issues presented. The slide deck is available, Addressing Proportionality in Government E-discovery – IQPC, June 2011