Hand Over The Cash Or The Hard Drive Gets It!

In January 2013, GlaxoSmithKline (“GSK”) filed a complaint in New York state court alleging that its e-discovery vendor, Discovery Works Legal Inc., was “holding hostage over 20 terabytes of GSK’s most sensitive and confidential data, and threatened to withhold and destroy the data" unless GSK paid a ransom of more than $80,000. GSK is the second largest pharmaceutical company in the world by revenue, employing over 100,000 people in 117 countries. How could a mere  e-discovery vendor hold GSK’s data hostage?

Reportedly, Discovery Works is in control of roughly 3.75 billion pages of GSK documents in “unknown” locations. As Law360 reporter Andrew Strickler summarized the threat (and thereby inspired the title of this article)  “Hand over the cash or the hard drive gets it!”

In the case, GlaxoSmithKline LLC v. Discovery Works Legal Inc., et al., Case No. 650210/2013, Judge Shirley Werner Kornreich, who sits in New York County’s Commercial Part, sounded a note of caution, in a ruling on the case on September 25, 2013,  about the customary practice of corporations and law firms to outsource their electronic discovery to e-discovery vendors. She said that GSK’s experience with its vendor was a “cautionary tale.” She noted that GSK’s data is stored in far flung locations in a raw, uncoded form that is not indexed in any way, which makes it hard to retrieve without considerable IT work.

“It’s a frightening thought,” she said, that a multi-national company like GSK could find so much of its data in peril due to an e-discovery vendor’s failure and/or refusal to provide the data in usable form. Judge Kornreich urged GSK and others to rewrite their contracts to give themselves more protection with e-discovery vendors by requiring them to keep an index of all of the data the vendors are managing for the client.

However, having a good contract with the vendor is just the start. A company is legally obligated to be able to produce all relevant discovery, including ESI, in litigation. What happens when the vendor is unwilling or unable to provide the client with the data required for discovery? What if the discovery vendor shuts its doors? Will the company be hit with spoliation of evidence sanctions? How would Judge Shira Scheindlin respond if presented with a motion for spoliation sanctions? The short answer is that it probably depends on the circumstances.

But one thing is clear.  I would not want to be the lawyer who retained a problem-some vendor for my client. What due diligence should a law firm perform to ensure that the discovery vendor is a responsible choice for a client? Clearly, the lowest bid cannot be the determinant of what e-discovery vendor is selected, particularly after case,  Additionally, I would be unlikely to hire a small firm (no matter how brilliant and innovative the principals) because the firm’s stability and solvency over the long haul is a critical consideration. 

As Michael G. Van Arsdall at Crowell and Moring wrote recently: “There is a very low likelihood such a hostage situation would ever arise with the large number of reputable vendors that occupy the e-discovery space.” That said, Mr. Arsdall recommends some actions that companies can take to mitigate the risk, or, alternatively, provide the company or the law firm the opportunity to switch e-discovery vendors, if necessary. These actions include:

1. Insisting that the original collection media provided to the vendor (e.g., hard drives) be returned to the law firm or company for safekeeping;
2. Maintaining a copy of all production sets produced;
3. Negotiating reasonable archiving fees upfront, and require that at the end of the matter (or at reasonable intervals during the engagement) an archive set of the data is provided to the company or law firm for safekeeping; and
4. Requiring the vendor to certify that it has destroyed or returned all the company’s data at the conclusion of the matter or at the company’s or law firm’s instruction.

We are all increasingly tied at the hip to our e-discovery vendors in one form or another today. The e-discovery vendor is an important member of the litigation team. If, for any reason, the e-discovery vendor falters in its obligations, the entire team may suffer adverse consequences.

“Dog Ate My Emails” No Defense Against Spoliation Sanction

On a motion for spoliation sanctions, it makes no difference that a party destroyed emails without “malevolent” purpose. For a sanctions motion to be granted, it is necessary only to demonstrate that the evidence was destroyed deliberately.

In an article, August 19, 2013, titled “Sanctions Imposed for Non-Malevolent Destruction of Emails,” the New York Law Journal  reported on a decision handed down by the Hon. Shira Scheindlin in the Southern District of New York on August 15, 2013 in Sekisui Medical America v. Hart, 1:12-cv-03479, 2013 U.S. Dist. LEXIS 115533 (S.D.N.Y. 2013).

In that case, plaintiff, a Japanese medical equipment manufacturer, was sanctioned by Judge Scheindlin for deliberately destroying electronic records found relevant to a dispute over its acquisition of a business from the former owners, Richard Hart and Marie Louise Trudel-Hart. As federal court practitioners are well aware, Scheindlin decided the Zubulake case which, along with several other decisions, created the modern standard for preservation of electronic materials. Although her holding rests on established Second Circuit precedent, Judge Scheindlin’s analysis provides important guidance to practitioners.

It emerged during discovery that Sekisui had not placed a litigation hold on the relevant business unit’s electronically stored information (“ESI”) until fifteen months after a Notice of Claim was received. During that period, the business unit’s HR director ordered deleted the relevant emails because they were cluttering the company’s servers.

 Not one, but multiple missteps appear to have haunted Sekisui in the run-up to the ruling. For example, before directing the permanent deletion of the defendant’s ESI, the HR director apparently “identified and printed any emails that she deemed pertinent to the company,” which emails were produced in discovery. However, these “pertinent” emails were not backed up before being deleted; they were merely printed out in hard copy. Eventually, Sekisui was able to search alternative sources and produced 36,000 emails to and from defendant Hart. However, the court determined that it was impossible to say how many emails were permanently deleted and remained unrecoverable. Due to a cognitive disorder, defendant Hart could not testify or be deposed in the action.

By now, federal court practitioners know the importance of issuing a litigation hold as early as possible. However, it is not enough to have the client merely distributing the litigation hold to the staff. It is necessary to ensure that the correct individuals are sent the notice and that they completely understand their legal obligations with regard to ESI preservation. Following up with the client on preservation compliance after the litigation hold is sent is essential in avoiding potentially catastrophic result.

The court recognized that Sekisui had made a real effort to minimize the harm done by the destruction of emails. However, it was still not able to rebut the presumption of prejudice because of the unknowable amount of ESI that was permanently destroyed.  Judge Scheindlin advised the parties that she would give the following jury charge in the case: 

The Harts have shown that Sekisui destroyed relevant evidence. This is known as the "spoliation of evidence."

Spoliation is the destruction of evidence or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation. To demonstrate that spoliation occurred, several elements must be proven by a preponderance of the evidence:

First, that relevant evidence was destroyed after the duty to preserve arose

Second, that the evidence lost would have been favorable to the Harts.

As to the first element I instruct you, as a matter of law, that Sekisui failed to preserve relevant evidence after its duty to preserve arose. This failure resulted from an employee’s intentional directive given to ADI’s information technology vendor to destroy the email files of— at least— Richard Hart and Leigh Ayres. Moreover, this failure resulted from Sekisui’s gross negligence in performing its discovery obligations. I direct you that I have already found as a matter of law that this lost evidence is relevant to the issues in this case.

As to the second element, you may presume, if you so choose, that such lost evidence would have been favorable to the Harts. In deciding whether to adopt this presumption, you may take into account the egregiousness of the plaintiffs’ conduct in failing to preserve the evidence.
Sekisui offered evidence that, although evidence was lost and it may have been relevant, nevertheless such evidence would not have been favorable to the Harts.

If you decline to presume that the lost evidence would have been favorable to the Harts, then your consideration of the lost evidence is at an end, and you will not draw any inference arising from the lost evidence.

However, if you decide to presume that the lost evidence would have been favorable to the Harts, you must next decide whether Sekisui rebutted that presumption. If you determine that Sekisui rebutted the presumption that the lost evidence was favorable to the Harts, you will not draw any inference arising from the lost evidence against Sekisui. If, on the other hand, you determine that Sekisui has not rebutted the presumption that the lost evidence was favorable to the Harts, you may draw an inference against Sekisui and in favor of the Harts – namely that the lost evidence would have been favorable to the Harts.

Without question, spoliation of evidence will become a major trial theme for the defense in Sekisui. As is often the case when the jury is given a charge of this nature, jurors will assume the worst of the party responsible for the spoliation–a challenging scenario for any trial lawyer or jury consultant to deal with.

Predictive Coding: Will E-Discovery Swallow The Judicial System?

In an earlier article, we discussed the significance of Magistrate Judge Andrew J. Peck’s (SDNY) opinion in Da Silva Moore v. Publicis Groupe (2/24/12), a highly publicized decision that approved of the use of computer-assisted review in place of “eyes on” document review.

Eric Seggebruch, the Regional Manager for eDiscovery at Recommind, Inc., testified before Judge Peck as an expert witness during a  Da Silva Moore discovery hearing. Seggebruch has authored a helpful article titled “Electronic Discovery Utilizing Predictive Coding,” that provides both technical and practical insights concerning predictive coding and its likely future in the legal marketplace.  

At its heart, the ESI debate revolves around the discussion of the concept of proportionality. By way of example, Da Silva Moore is an employment discrimination case with a universe of some three million records subject to review for document production purposes. Proportionality asks the question whether the costs involved in identifying potentially relevant documents are justified by what is at issue in the underlying litigation.

Nearly one year after Judge Peck’s decision in Da Silva Moore, the attorneys in that case reportedly continue to submit extensive (and presumably costly) briefs on ESI discovery issues. It is for this reason that the title of this article asks whether e-discovery will swallow the judiciary. Leaving aside the staggering costs to parties in litigation, the judicial resources necessary to address these issues may not be up to the task considering the time and intensity with which these battles are fought.

In evaluating the efficacy of predictive coding, Seggebruch tells us that there are two critical terms of art – “recall” and “precision.” “Precision” asks how many documents one has to look at to find a relevant document. By way of example, if you review one hundred documents and find fifty relevant documents, you have achieved 50% precision. “Recall” may be the more important element of the two. If a search of one hundred documents brings back twenty-five relevant documents but twenty-five relevant documents are missed, then “recall” is only 50%. The rate of “recall” in any document production, whether predictive coding or “key word” searches are used, is critical to the integrity of the process.

With increased acceptance of predictive coding over time, it is likely that the “key word” paradigm, with which most lawyers and judges are familiar, will most likely change. According to Seggebruch, scientific studies have shown that “key word” document analyses are less efficacious than predictive coding. However, adversary counsel cannot complain about the level of “recall” obtained from the “key word” analysis performed if they had significant involvement in selecting the “key words” used in the search.

As an indication of how quickly the technology in this field is moving, in some cases, lawyers are now demanding ESI discovery “do overs.” These lawyers argue that when their adversary performed their initial ESI production early in the case, they were admittedly adhering to the then prevailing best technology. However, since that initial production, new ESI techniques, such as predictive coding, have become available to provide potentially  better results. To date, courts that have considered the “do over” petitions have either rejected them out of hand or required the requesting party to assume the costs.

Crafting A Strong E-Discovery Proposed Order

In an earlier article on January 5, 2012, we discussed how New York practitioners should stay abreast of important new rules and proposed rules governing e-discovery in both the state and federal courts in New York. At that time, the New York State Bar Association had just released a report titled, “Best Practices in E-Discovery in New York State and Federal Courts,” which contains practical “hands on” advice concerning the preservation, collection and production of ESI.

But what does a joint proposed joint e-discovery submission and proposed order look like and what topics should it cover and in what level of detail?  An excellent example of what a joint e-discovery judicial submission might look like may be found in the class action litigation styled United States of America v. Apple, Inc., (In Re Electronic Books Antitrust Litigation) which submission was filed in the SDNY on July 6, 2012. Although some initial Rule 26 disclosures may contain more or less information, I believe that the information provided here represents a good faith effort to comply with the rule and to address potentially thorny issues from the outset. By reaching consensus early on concerning the scope of e-discovery to be conducted, the parties spare themselves and their clients a great deal of expense and potential heartache down the road.

E-Discovery Examined In Depth

On July 16-17, 2012, Executive Counsel Institute conducted a cutting edge meeting in New York titled, “E-Discovery for the Corporate Market.” The theme of the two day meeting was “Controlling Your E-Discovery Destiny.” The Colloquium Moderators, Brown E. Marean III  from DLA Piper, David Kessler from Fulbright & Jaworski, and Paul Weiner from Littler Mendleson did an excellent job of keeping all of the participants actively engaged.

The panelists included: Steven C. Bennet, a partner at Jones Day; Richard Cohen, President of RenewData in Austin, Texas; Eric T. Crespolini, Vice President of eDiscovery Technologies; Andrea L. D’Ambra, Counsel at Drinker Biddle & Reath LLP; Eugene “Gene” Eames, Director of Search and Data Analytics at Pfizer;  Lynn Frances, Principal at E-Discovery Writer; Bill Gallivan, CEO of Digital WarRoom in Seattle; Daniel P. Kulakofsky, Managing Counsel and Director of Electronic Discovery at The Travelers Companies; Jason Lichter, Senior Counsel of eDiscovery and Information Governance at Seyfarth Shaw; Stephen J. Lief, Practice Support Counsel at Epstein Becker & Green and all-round high tech guru; Mary Mack, Enterprise Technology Counsel at ZyLAB; Maryrose E. Maness, Senior Vice President and Chief Employment and Corporate Infrastructure Counsel at Warner Music Group; Lynn Mestel, President of Hire Counsel in New York City; Tom O’Connor, Director Gulf Coast Legal Technology Center in New Orleans; Andrew J. Peck, United States magistrate judge in the U.S. District Court for the Southern District of New York; Farrah Pepper, Executive Counsel of Discovery at General Electric; Mary Pat Poteet, Senior Consultant at Project Leadership Associates in Chicago; John A. Schwab at Gordon Alfano Bosick & Raspanti; Debra C. Swartz, Chief Compliance Officer for AmerisourceBergen Corporation in Philadelphia; John Thacher, Director of Managed Review Services at TechLaw Solutions in New York City; Brian T. Wolfinger, Vice President of Technology at LDiscovery in Philadelphia; and  the eponymous Laura A. Zubulake, author and speaker on Information Governance.

I attended the meeting because, as a trial lawyer, I was troubled that I did not even know what I didn’t know about e-discovery. Having attended the meeting, I can report that I now know what I don’t know and there is a lot I now know I don’t know.  What I did learn, however, is that there remains a great deal of uncertainty throughout the e-discovery realm, and that technological advances are emerging almost constantly. I was somewhat comforted that even some of the technological gurus at the meeting, who are partners at major law firms, often have difficulty “selling” technologically advanced e-discovery solutions to their more conservative trial partners.

Judge Peck discussed whether manual document review and keyword searches will be replaced by computer-assisted coding, sometimes referred to as “predictive coding.” In an important recent opinion, discussed in an earlier blog post, Judge Peck provided a judicial imprimatur for the use of predictive coding in federal district court litigation but it has by no means been adopted broadly. Predictive coding may offer a new template for conducting e-discovery just as computerized research using Lexis transformed the manner in which lawyers perform legal research in the mid-1970’s.  Just as stodgy older lawyers then urged their  associates to stay away from that "computer box" and perform their legal research manually–with books–the time-tested traditional way, their counterparts today are leery of embracing emerging new e-discovery technology.

There was much discussion concerning data security, social media and The Cloud. There was frank discussion concerning ethical and contractual tensions that can arise between in-house counsel, outside counsel and e-discovery vendors. Discussions centered on factual and legal scenarios that had been encountered by attendees and panel members.  All of this made for a very worthwhile meeting.


New York’s First Department Adopts Even More Of Zubulake

On February 28, 2012, the Appellate Division, First Department, issued its decision in U.S. Bank N.A. v. GreenPoint Mortgage Funding, Inc., 2012 N.Y. App.Div. LEXIS 1487, which  adopted the standards established in the SDNY’s 2003 landmark decision in  Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (SDNY 2003).  In its decsion, he First Department held that the  party producing electronically stored information ("ESI") bears the the burden of paying for the production.  This unanimous decision represents a reversal of several New York trial court rulings holding that the party requesting disclosure had the obligation to pay for its production. 

As is often the case, interesting appellate decisions can be the product of discovery disputes that have a high chutzpah quotient.  Here, not only did GreenPoint seek to have plaintiff pay for its ESI production, it went a step further in demanding that plaintiff pay for the cost of GreenPoint’s attorneys’ pre-production time in performing a pre-production privilege review. Would this appeal have been filed if attorneys’ fees had not been in the mix?

Several weeks ago, I reported here about the First Department’s adoption (in Voom H.D. Holdings) of Zubulake’s standards for addressing the spoliation of ESI evidence.  In  U.S. Bank N.A. v. GreenPoint Mortgage Funding, Inc., the court has turned to Zubulake yet again, in the absence of any guidance in the CPLR concerning ESI disclosure cost allocation.  Although it is unclear whether the other New York appellate departments will similarly embrace Zubulake, the decision harmonizes state and federal discovery practice in Manhattan courts, if not upstate.

Therefore, it is all the more important for the practitioner to appreciate that Zubulake’s cost allocation mandate is by no means absolute.  Under Zubulake, the producing party must only bear "the initial cost of searching for, retrieving and producing discovery".  The decisions sets forth seven factors for courts to consider in evaluating whether to shift all or part of the cost of ESI production back to the requesting party.  For example, costs may be shifted back to the requesting party if: (1) the request is not tailored to discover relevant information; (2) the discovery can be obtained from other sources; (3) the cost of production as compared to the amount in controversy; (4) the cost of production, compared to the resources available to the parties; (5) the relative ability of each party to control costs and their incentive to do so; (6) the importance of the stakes in the litigation; and (7) the relative benefit to the parties of obtaining the information at tissue. 

We should expect that state court practitioners, seeking to avoid having their clients bear  the costs of ESI production alone,  will shortly be committing these seven factors to memory. 

Computers Replacing Lawyers In Reviewing Documents?

For those of us who work on document-intensive litigations, take note of Magistrate Judge Andrew J. Peck’s (SDNY.) opinion released on February 24, 2012 in Monique Da Silva Moore, et al. v. Publicis Groupe and MSL Group, Case 11 Civ. 1279 (ALC)(AJP). Judge Peck’s decision may be the first federal court opinion approving the use of computer-assisted review in place of  “eyes on” document review. Citing recent studies, Judge Peck states “while some lawyers still consider manual review to be the ‘gold standard,’  that is a myth, as statistics clearly show that computerized searches are at least as accurate, if not more so, than manual review….While this Court recognizes that computer-assisted review is not perfect, the Federal Rules of Civil Procedure do not require perfection.”

In a thoughtful guest blog on the Forbes.com site, (from which post the photo is reproduced here)Matthew Nelson discusses the significance  (or not) of both Judge Peck’s case and a second case in the Northen District of Illinois, the Hon. Nan R. Nolan presiding.  In that case, Kleen Products LLC v. Packaging Corporation of America et al, the plaintiffs are seeking a court order requiring defendants, among other things to use predictive coding technology in responding to their discovery requests. 

Computer assisted review, or, as it is sometimes called, predictive coding, employs the use of a sample set or “seed set” which is reviewed for responsiveness. The “seed set” can then be made available to opposing counsel to approve the responsive/non-responsive determinations made. Interestingly, at least in this case, the court noted that  “All of this review to create the seed set was done by senior attorneys (not paralegals, staff attorneys or junior associates).” The seed set is then fed into a program that creates a logic (based on the seed set determinations) and extrapolates to the universe (the negotiated set of data). Predictive coding, in essence, attempts to take the place of burdensome, expensive and time consuming document review.

As the opinion suggests, predictive coding will not work in all cases. According to Judge Peck, “What the Bar should take away from this Opinion is that computer-assisted review is an available tool and should be seriously considered for use in large-data-volume cases where it may save the producing party (or both parties) significant amounts of legal fees in document review.”  While the court discussed possible objections under the FRCP, FRE 702 and Daubert, the court did not sufficiently address what happens when one party wants to use predictive coding and the other party objects.  In the case,  to protect privileged documents that would conceivably be swept in by the computer logic, the parties entered into a clawback agreement which was entered as a court ordert. Unfortunately, in government investigations, parties do not always have the opportunity to have a court enter such an order. So, predictive coding should be used cautiously – perhaps still requiring some “eyes on” document review in handling governmental investigations. 

Predictive coding could provide substantial benefits to clients. On the other hand, law firms whose business models depend on leveraging large teams of associates and staff attorneys to conduct document review will increasingly have to explain to their clients why such costly efforts are necessary. Technology may allow medium sized firms to more effectively compete with large firms in cases with substantial discovery. In short, predictive coding makes good sense for the courts, the clients and the Bar. 



New York’s First Department Adopts Federal E-discovery Standard

On January 31, 2012 decision, the Appellate Division, First Department, adopted the federal Zubulake standard for spoliation of electronic evidence in Voom H.D. Holdings v. EchoStar Satellite, LLC, 600292/08.  Voom is the first New York state appellate decision to apply the standard for spoliation of electronic evidence set forth in Southern District Judge Shira Scheindlin’s decision in Zubulake v. UBS Warburg, LLC, 220 FRD 212.  Brendan Pierson wrote an article about the case in the New York Law Journal on February 1, 2012.

We have discussed the heightened sensitivity to E-discovery spoliation in state courts in this space previously.  See blog post titled, “New E-discovery ‘Best Practices’”, (January 5, 2012). 


The First Department’s adoption of Zubulake’s reasoning has far reaching consequences in commercial litigation in state court.  It potentially opens the floodgates to all of the post-Zubulake jurisprudence that has been percolating in federal courts over the past several years.  I predict that New York appellate courts will see a number of interlocutory discovery appeals on E-discovery in coming months.

New E-Discovery ‘Best Practices’

New York practitioners should stay abreast of important new rules and proposed rules governing E-discovery in both the state and federal courts in New York.  As reported by Mark A. Berman in an article in the New York Law Journal on January 3, 2012, NYSBA’s influential E-Discovery Committee has released a report entitled,"Best Practices in E-Discovery in New York State and Federal Courts", which contains practical "hands-on" advice concerning what Mr. Berman describes as  the challenging electronic discovery landscape relating to the preservation, collection and production of ESI. Until now, state court  practitioners perhaps have not felt the same pressure in a state court setting as in federal court  to "get it right" when it came to ESI.  This may begin to change. The working group of the NYS Unified Court System is expected to shortly release a bench book on ESI, which will be provided to state judges.  In Manhattan, Commercial Division Justice Jeffrey K. Oing, is utilizing a model electronic e-discovery order, which may soon become the norm in commercial litigation throughout the State.  Even more than previously, e-discovery concerns need to be raised with both the client and the adversary at the earliest possible stage of a claim.  The Berman article provides a good overview of the key guidelines in the report.