Maine Evidence and Electronic Discovery

The Economy, the Courts and the Way Forward: Maine's Court System in 2014

Yesterday the Maine Trial Lawyers Association and the University of Maine School of Law co-sponsored a symposium on the Maine judicial system and where it is headed.  The symposium included an impressive array of panelists, including the Governor, Chief Justice of the Maine Supreme Judicial Court, state Attorney General, President of the Maine Senate, Speaker of the Maine House of Representatives, Commissioner of the Maine Department of Economic and Community Development, the House Republican Leader and, last but not least, the president of the Shipyard Brewing Company.

Unfortunately I was unable to attend.  But according to reports from the symposium in the press, Chief Justice Saufley reported that the judiciary is applying for a $2.5 million federal grant to construct a computer platform that will allow for e-filing and increased online access to information about criminal cases.  That initiative would further the court system's goal of increasing automation and technology, both to save costs in the long term and to increase public access to what transpires in the courts.  Recently the court system has taken another step toward those goals by implementing a pilot project that permits defendants to pay certain court fines online, arising out of convictions in the state district courts in Bangor, Biddeford and Springvale and in the Penobscot County Superior Court in Bangor.

Certainly any steps that can increase the efficiency of the state courts are welcome.  Those of us who practice in the federal courts have become somewhat spoiled by the ease with which one can access and download essentially any filing in any case anywhere in the country.  E-filing in the state system would be equally beneficial.

The press also has reported that Shipyard's president suggested bringing Judge Judy to Maine, to offer small businesses with disputes under $50,000 an opportunity for quick and dirty resolutions of their issues.  Although that prospect seems unlikely, expanding the Business and Consumer Court that was created a couple of years ago could accomplish some of the same ends.  Unfortunately, with the state of the judiciary's budget, the Business and Consumer docket has shrunk as the judges and staff have been pulled in multiple other directions.  With the appropriate resources, no doubt the Maine courts could achieve justice more swiftly, but without the theatrics of Judge Judy.

A Party May Be Forced to OCR its Documents Before Producing Them

In most big document cases, having documents either produced or converted into electronic, searchable format is essential to facilitate review, organization and understanding of the content of what has been produced.  Sifting through rooms full of paper documents, and then trying to organize them in a coherent way for future access and use throughout the case, often is not feasible.  A recent decision demonstrates that, even where one party claims it has no interest in having the documents available in a searchable format, the court may order it anyhow after a cost-benefit analysis.

In Proctor & Gamble Co. v. S.C. Johnson & Son, Inc., 2009 WL 440543 (E.D. Tex. Feb. 19, 2009) (click here), the parties agreed that all documents produced in the case would be produced electronically in TIFF format, but disagreed whether the producing party also should have to perform the Optical Character Recognition (“OCR”) process on the documents prior to production.  Defendant did not want to do so, arguing that the total cost of conversion would run around $200,000, and that it "does not itself seek to use the OCR process, and any extra expense would be incurred on its behalf solely for Plaintiff's convenience."  Id. at *1 n.1.  The plaintiff disputed the $200,000 estimate, noting that the cost of converting a document into OCR format typically is in the range of 3 cents per page, and of course would only apply to documents maintained only in hard copy format.

The court did not find the defendant's cost estimate to be well supported.  Moreover, the court observed that the defendants did not dispute that providing OCR formatting for the documents would "make documents easier to examine and evaluate, thus reducing costs for attorney time."  Id. at *1.  After conducting the cost-shifting analysis under the seven-factor criteria set forth in Zubulake, the court concluded that the factors did not support shifting the OCR costs to the plaintiff.  The court referenced the parties' case management plan, noting that "the parties' respective litigation budgets in this case are estimated to be several million dollars apiece, so the parties have adequate resources."  Id. at *2.  As the court concluded:

OCR, while perhaps not absolutely necessary to litigation, is a tool that greatly decreases the time and effort counsel must invest in searching and examining documents. Presumably, each party would perform the OCR process in a cost-effective manner to minimize their costs. Requiring the parties to incur this cost, when the OCR process is likely to streamline the discovery process and reduce the chance that either side will employ tactics designed to hide relevant information in a mountain of difficult-to-search documents is neither unreasonable nor burdensome. Therefore, after review of the Zubulake factors, the court concludes that cost shifting is not appropriate in this case.

Id.  At bottom, perhaps the court simply found the defendant's argument that it had no intention of OCRing the documents for its own use unpersuasive, in light of the scope of the litigation and the resources available to both sides.

American College of Trial Lawyers Issues Report Critical of Electronic Discovery Rules

On March 11, 2009, the American College of Trial Lawyers and the Institute for the Advancement of the American Legal System issued their final report on a joint project to examine the role of discovery in the American civil justice system and to make recommendations for reform.

According to the joint press release, the group's proposals are "designed to treat the nation’s ailing system of civil justice."  In particular, the group concluded that "Discovery costs far too much and has become and end in itself; discovery should be limited by proportionality, taking into account the nature and scope of the case, relevance, importance to the court’s adjudication, expense and burdens."

According to the report, "discovery can cost far too much and can become an end in itself. As one respondent noted: 'The discovery rules in particular are impractical in that they promote full discovery as a value above almost everything else.'  Electronic discovery, in particular, needs a serious overhaul. It was described by one respondent as a 'morass.' Another respondent stated: 'The new rules are a nightmare. The bigger the case the more the abuse and the bigger the nightmare.'"

In general, the group has proposed that discovery be tailored to specific cases, based on the issues and amount in controversy.  Discovery should be "proportional" and staged where appropriate.  The group has suggested, among other things, that there be financial limitations on the amount of money that either party can spend, or be forced to spend by its opponent, on discovery.

Regarding e-discovery in particular, the group advocates for substantially curtailing the scope and breadth of current discovery called for under the federal rules.  As the group observed, "Electronic information is fundamentally different from other types of discovery in the following respects: it is everywhere, it is often hard to gain access to and it is typically and routinely erased. Under judicial interpretations, once a complaint is served, or perhaps even earlier, the parties have an obligation to preserve all material that may prove relevant during a civil action, including electronic information. That is very difficult, if not impossible, to accomplish in an environment in which litigants maintain enormous stores of electronic records. Electronic record keeping has led to the retention of information on a scale not contemplated by the framers of the procedural rules, a circumstance complicated by legitimate business practices that involve the periodic erasure of many electronic records.

The group recommends that "Electronic discovery should be limited by proportionality, taking into account the nature and scope of the case, relevance, importance to the court’s adjudication, expense and burdens."  Although Federal Rule of Civil Procedure 26(b)(2) is intended to address some of those concerns, the group concluded that it is insufficient as applied by the courts.  The group further proposes:

The obligation to preserve electronically-stored information requires reasonable and good faith efforts to retain information that may be relevant to pending or threatened litigation; however, it is unreasonable to expect parties to take every conceivable step to preserve all potentially relevant electronically stored information.

Absent a showing of need and relevance, a party should not be required to restore deleted or residual electronically-stored information, including backup tapes.

Sanctions should be imposed for failure to make electronic discovery only upon a showing of intent to destroy evidence or recklessness.

The cost of preserving, collecting and reviewing electronically-stored material should generally be borne by the party producing it but courts should not hesitate to arrive at a different allocation of expenses in appropriate cases.

Many of the group's proposals make good sense, and in fact are guided by the spirit of the Sedona Principles and the federal rules.  Certainly some courts under the current rules have balanced the scope and costs of e-discovery against the issues and size of the litigation, but too often those considerations are not given the proper attention until too late in the process, or after substantial costs already have been incurred, sometimes with little relevant information gained in spite of the massive scope of data produced. 

I suspect that the group's recommendations will receive some resistance for the precise reason the group believes reform is necessary:  for some parties discovery is an end in itself, and is used for driving others to the settlement table simply to curtail the high costs of continuing to litigate.  Particularly in cases where there is only one institutional party, and so the e-discovery costs are borne almost entirely by one side, the incentive for the other side to agree to reasonable limitations on electronic discovery usually does not exist.  But these proposals offer a number of interesting ideas, and are sure to lead to "nationwide discussion" and "lively and informed debate," just as the drafters intended.

Corporate Waiver of Attorney-Client Privilege

Congress is again considering legislation to prohibit the practice that became common in recent years of federal prosecutors demanding, under Justice Department procedures, that corporations waive the attorney-client privilege as evidence of the corporation's cooperation in an investigation.

Senator Arlen Specter has reintroduced S.445, the Attorney-Client Privilege Protection Act of 2009, which would provide protection for the attorney-client privilege and the work-product doctrine as a matter of federal law across the spectrum of federal agencies.  Although the DOJ has pulled back some from the height of its waiver procedures in its most recent standards known as the Filip guidelines, Senator Specter's primary concern as stated in his introductory comments in the Congressional Record is that, "as evidenced by the numerous versions of the Justice Department's corporate prosecution guidelines over the past decade, the Filip reforms cannot be trusted to remain static. Moreover, unlike Federal law--which requires the assent of both houses and the President's signature or a super-majority in Congress--the Filip guidelines are subject to unilateral executive branch modification. Therefore, to avoid a recurrence of prosecutorial abuses and attorney-client privilege waiver demands, legislation is necessary."

The bill is intended to "protect the sanctity of the attorney-client relationship by statutorily prohibiting Federal prosecutors and investigators across the executive branch from requesting waiver of attorney-client privilege and attorney work product protections in corporate investigations. The bill would similarly prohibit the government from conditioning charging decisions or any adverse treatment on an organization's payment of employee legal fees, invocation of the attorney-client privilege, or agreement to a joint defense agreement."

The new attorney general, Eric Holder, has not endorsed the proposed legislation, instead adhering to the prior DOJ line in his written responses to Senator Specter's questions submitted in connection with his confirmation hearings that "the opportunity to institute appropriate prosecution policies should be extended before legislative action is considered."

Third Party Electronic Discovery: Another Lesson on Email Searches

Following up on my post of February 24, 2009, discussing e-discovery email search terms, a recent D.C. Circuit decision highlights the extreme costs (both literally and figuratively) that can be imposed even on third parties who are served with electronic discovery requests that target email.

In In re:  Fannie Mae Securities Litig., 552 F.3d 814 (D.C. Cir. 2009), various plaintiffs sued Fannie Mae and several of its executives in actions consolidated into multidistrict litigation in the district court in the District of Columbia, alleging that Fannie Mae manipulated its earnings in order to inflate executive compensation.  A federal agency, the Office of Federal Housing Enterprise Oversight ("OFHEO") conducted its own investigation into the allegations and issued a preliminary investigative report.  In connection with the multidistrict litigation, several of the defendant Fannie Mae executives served subpoenas on OFHEO, seeking, among other things, copies of emails.

OFHEO initially moved to quash the subpoenas, and the district court entered an order denying the motion and directing the agency to comply with the requests. The agency later took the position that the court's order applied only to paper discovery, not electronic discovery.  The court again clarified that its order did, indeed, apply to electronic discovery, but at OFHEO's request it extended the deadline for the agency to comply with its production of both paper and electronic records. 

Months later, OFHEO informed the court that it had produced all documents requested by the executives, including all of the subject emails.  The executives were skeptical of that assertion, so obtained leave to conduct a Rule 30(b)(6) deposition of the agency.  During that deposition, the executives learned that the agency had not searched any of its off-site backup tapes for responsive emails.

The defendants then moved to hold the agency in contempt for failing to comply with the court's prior discovery order.  The court convened a contempt hearing, and following the first day of the hearing, the defendants and OFHEO entered into a stipulated order that stayed the proceedings on the contempt motions and required the agency to search its backup tapes for any responsive emails, produce any responsive emails and log any privileged materials within roughly 90 days.  Critically, the stipulated order contained the following language:

OFHEO will work with the Individual Defendants to provide the necessary information (without individual document review) to develop appropriate search terms. By October 19, 2007, the Individual Defendants will specify the search terms to be used.

Slip op. at 5.  The defendants than submitted more than 400 search terms which resulted in about 660,000 emails identified from the agency's backup tapes.  OFHEO objected, arguing that the stipulation did not give the defendants unfettered discretion to pick the search terms, but the district court agreed and ordered the agency to comply roughly 60 days before the deadline contained the stipulation expired.

In response, the agency hired "50 contract attorneys solely for that purpose" of complying with the order, and spent "over $6 million, more than 9 percent of the agency’s entire annual budget" on the search and review process.  Id.  Nevertheless, the agency still failed to complete the production of responsive emails and privilege logs by the stipulated deadline. 

The defendants then moved to hold the agency in contempt.  The district court was "cognizant of the large number of attorneys, contract attorneys, and OFHEO personnel working to comply with the subpoenas and the resulting costs of this compliance," but was concerned that the agency had "treated its Court-ordered deadlines as movable goal posts and has repeatedly miscalculated the efforts required for compliance and sought thereafter to move them."  Id.at 6.  In particular, the district court was disturbed by the fact that the agency had "only recently hired the necessary number of contract attorneys" to do what it had agreed to do several months before, which the district court found to be "too little too late."  Id. 

On appeal, OFHEO argued that the stipulation should not be read to permit the defendants unilaterally to select the search terms, and even if so, the district court should have considered the burdens and costs involved with the agency's compliance.  The court of appeals agreed that the agency "undertook extensive efforts to comply with the stipulated order."  Id.at 5.  Nevertheless, the court found the language in the stipulation to clearly allow the defendants to select the search terms.  Regarding the agency's arguments about cost-shifting and burden, the court found that OFHEO had "abandoned them by entering into the stipulated order" in the midst of the very hearing scheduled by the district court to consider the agency's objections to the scope of the subpoenas. 

And although the agency "undeniably made extensive efforts to produce the documents and privilege logs in accordance with the timetable set forth in the stipulated order," the court of appeals found those efforts insufficient to afford any "basis for concluding that the district court abused its discretion by finding it in contempt for failing to comply with the stipulated order’s deadlines."  Id.at 14-15.  That was so even though the D.C. Circuit noted that, "Were we deciding this matter in the first instance, we might not have held OFHEO in contempt."  Id. at 15.

So what are some of the important lessons here? 

First, there is no doubt that electronic discovery can be sought from, and ordered to be produced by, third parties who are not directly involved in the underlying litigation.

Second, before you agree to anything regarding e-discovery - whether representing a party or third party - it is essential to know what is likely to be involved in your client's end to comply with the requests and what the potential scope and costs may be.

Third, if you want to have some control over the scope of e-discovery, and email searches in particular, don't simply delegate that responsibility to the requesting party and hope that they will exercise restraint.  They probably will not, at least unless there is push-back. 

Fourth, although courts generally will be more mindful of costs and burdens for e-discovery productions when the target is a non-party, courts nevertheless will hold parties and non-parties alike to their own agreements.

And fifth, don't irritate the district judge.  Absent extreme results, an appellate court reviewing a discovery order from below is likely to be deferential.  Even in a case like this, where the costs were staggering and the court of appeals indicated it likely would have reached a different result, the lower court's findings and sanctions were upheld.