2013 E-Discovery Year in Review: Part 1
A quiet year in the courts as the profession appears to accept that EDD is here to stay.
Editor's note: This is part one of two parts.
Last year was surprisingly quiet on the electronic data discovery front. No earth-shattering opinions, no imprisoned spoliators, and barely a whimper from reported decisions related to parties' chosen form of production. Perhaps the bench and bar are getting more sophisticated and technology savvy. Or perhaps the courts implicitly recognized the current state of flux, what with the proposed amendments to the Federal Rules of Civil Procedure that specifically address EDD. Or possibly, the industry is evolving from what was once considered cutting-edge and novel to what is emerging as best practices.
FRCP AMENDMENT PROGRESS
Last year saw a tremendous amount of progress by the Federal Rules Committee as they revised proposals for updated EDD-related provisions of the FRCP. Two significant proposed changes concern a revised definition of the scope of permissible discovery and a clarification of the standards for awarding sanctions due to spoliation of documents.
Under the proposed framework, discovery would be limited to matters that are "relevant to any party's claim or defense and proportional to the needs of the case," essentially moving the proportionality factors currently in Rule 26(b)(2)(C)(iii) to Rule 26(b)(1) which addresses the general scope of discovery. (Proposed changes in italics.)
Furthermore, the proposed amendments, while acknowledging a party's right to obtain non-privileged material related to claims or defenses, delete the reference to discovery of the "existence, description, nature, custody, condition, and location" of documents and "any matter relevant to the subject matter involved in the action. See FRCP 26(b)(1). There is no consensus as to the significance of these omissions.
The proposed amendments would also exclude from the scope of permissible discovery documents that are merely "reasonably calculated to lead to the discovery of admissible evidence" and discovery that might otherwise be allowed under local rules. These changes would address the growing concern throughout courts and among litigators that discovery has become unwieldy and overly expensive.
In addition, Rule 37's "safe harbor" provision would be eliminated altogether and replaced by a tiered approach. Under the proposed rule, if a party failed to preserve information when it anticipated litigation, the court could award "curative measures" (e.g., additional discovery or payment of expenses and fees) or impose harsher "sanctions," and "sanctions" are only available if the party's actions: "(i) caused substantial prejudice in the litigation and were willful or in bad faith; or (ii) irreparably deprived a party of any meaningful opportunity to present or defend against the claims in the litigation."
The proposed amended rule sets forth factors for courts to consider in assessing a party's conduct, including whether the failure to preserve was "willful or in bad faith." These changes are designed to address the current inconsistency across circuits as well as the perception that there is a local patchwork of standards across the country (and often within a single district).
Notably absent from the current proposed amendments (that are subject to public comments, via written submissions and three public hearings) are clarifications as to when the duty to preserve is triggered as well as a definition for the term "willful," which has been interpreted by courts to include everything from simple carelessness to intentional misconduct.
Under the current state of the law, identical conduct can result in a wide variance in sanctions depending upon the court and jurisdiction. For example, in In re Pfizer Inc. Securities Litigation, U.S. Magistrate Judge Henry Pitman declined to award sanctions for negligent conduct and echoed a reminder from the Second Circuit's 2012 Chin v. Port Authority, Nos. 10–1904, 10–2031 (2d Cir. 2012) decision that a "finding of gross negligence merely permits, rather than requires, a district court to give an adverse inference instruction" or to award other sanctions. No. 04-Civ.-9866 (S.D.N.Y. Jan. 8, 2013).
Pitman found that Pfizer's conduct in failing to preserve "E-Room" content was, at most, negligent, and plaintiffs' "bare assertion" that some documents were missing was insufficient to establish relevance.
Yet, in Sekisui American Corp. v. Hart, No. 12 Civ. 3479 (S.D.N.Y. Aug. 15, 2013), U.S. District Court Judge Shira Scheindlin issued a reminder that, at least in her court, grossly negligent conduct resulting in destruction of electronically stored information triggers a presumption of prejudice to the non-spoliating party. (Magistrate Judge Frank Maas had declined to issue sanctions, holding that the defendants had failed to show any prejudice resulting from the destruction of the ESI.)
Scheindlin awarded an adverse inference jury instruction where the plaintiff acted with gross negligence by, among other things, waiting 15 months to issue a litigation hold and another six months to notify its outside vendor to preserve relevant documents. She clarified, however, that the jury instruction was one in which the jury "may still determine that [defendants] were not prejudiced by [plaintiff's] willful destruction of ESI and decline to draw any adverse inference."
The federal appellate courts are equally at odds. In Hallmark Cards, Inc. v. Murley, No. 11-2855 (8th Cir. Jan. 15, 2013,), the Eighth Circuit reiterated its "requirement that a district court must find bad faith and prejudice prior to giving an adverse inference instruction" and inferred that the district court made the requisite findings in that instance. Similarly, in Grosdidier v. Board of Governors, No. 11-5291, (D.C. Cir. Mar. 8, 2013), although the District of Columbia circuit upheld a lower court's grant of summary judgment in an employment discrimination matter, it noted that the district court erroneously required evidence of bad faith to deny an adverse inference/spoliation instruction.
Noting that the Second and Fourth circuits do not require evidence of bad faith as a prerequisite to an adverse inference sanction, the D.C. Circuit reasoned that the negligent destruction of interview notes was sufficient for a permissive jury instruction—as opposed to a more severe instruction that plaintiff had requested which "was tantamount to a directed verdict"—that would have allowed the fact finder to draw reasonable inferences in favor of plaintiff based upon the non-accidental destruction of two of three sets of interview notes.
However, the court ultimately held this was "harmless error" because all of the reasonable inferences that could be drawn in plaintiff's favor from the lost notes still would not have allowed the fact finder to find that the destroyed notes would have established the pretext alleged, let alone discrimination, thus, dismissal of the case via summary judgment was appropriate.
On the other side of the coin, in Northington v. H&M International, No. 12-1233 (7th Cir. Mar. 21, 2013), the Seventh Circuit left untouched the lower court's sanction—which deemed specific facts admitted at trial and ordered an adverse jury instruction that barred the defendant from making certain arguments at trial—that was based upon "negligent but not willful conduct." (After the duty to preserve had been triggered, the defendant moved its email system to another vendor and during the transition deemed relevant accounts inactive and allowed them to be deleted.) However, the appeals court also upheld the lower court's grant of summary judgment, noting that, irrespective of the discovery sanctions, the plaintiff's Title VII retaliation claim still failed because she was not engaged in protected activity.
The saga continued in EEOC v. Original Honeybaked Ham Co. of Georgia, Inc. As noted in the 2012 Year in Review, in response to the defendant's discovery requests that sought, among other things, social media evidence and text messages to dispute the class members' claims and damages, U.S. Magistrate Judge Michael Hegarty ordered all class members in a sexual harassment action to turn over to a special master their relevant cell phones for forensic collection and review and to provide access to any relevant social media and email accounts, websites or cloud-storage accounts that they used to post communications or pictures. No. 11-cv-02560 (D. Colo. Nov. 7, 2012).
In 2013, after the EEOC first refused to produce the ESI and later reversed its position on various issues related to the production, Hegarty went further and awarded attorney fees and costs to the defendant as a result of the EEOC's failure to comply with basic discovery obligations, "dilatory" cooperation efforts, and "somewhat cavalier" execution of its responsibilities to the court. No. 11-cv-02560.
Update Jan. 8: This article has been updated regarding the omission of the words "including the existence, description, nature, custody, condition and location of any documents or tangible things" from proposed Rule 26. The proposed rule is silent as to the reason for removing this language. Hat tip to Charles Ragan.
Cecil Lynn is the director of e-discovery and technology at eBay Inc. Email: firstname.lastname@example.org. Lauren Schwartzreich is the e-discovery counsel at Littler Mendelson. Email: email@example.com. Statements made express the authors' views and do not necessarily reflect those of Littler or eBay.