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. 

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.

Federal Court Awards $367k in E-discovery Costs to Prevailing Parties

 Duane Morris reported today concerning a decision in Race Tires America, Inc. v. Hoosier Racing Tire Corp., 2011 U.S. Dist. LEXIS 48847 (W.D. Pa. May 6, 2011). There, the U.S. District Court for the Western District of Pennsylvania held that the prevailing defendants at trial  may recover a whopping $367,000 in e-discovery costs because such costs are the modern-day equivalent of duplication costs.  Although the court took care to limit its ruling to the "unique" facts associated with this case, should litigants consider more narrowly tailoring their discovery requests and seeking early agreement on the scope of electronic productions?  Following an affirmance of an award of summary judgment to defendants by the Third Circuit, the defendants sought to recover their costs—the vast majority of which were related to e-discovery. The plaintiff objected, contending that the costs were not taxable pursuant to 28 U.S.C. § 1920(4), which permits recovery of "[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case." The issue before the district court was the applicability of § 1920(4) to electronically stored information, an issue which has not yet been addressed by the Third Circuit. In its ruling, the district court first focused on the words "exemplification" and "copying." While recognizing that these terms "originated in and were developed in the world of paper," it viewed the steps a vendor takes to produce electronic data as the "electronic equivalents of exemplification and copying."  Defendants were able to demonstrate that plaintiff  aggressively pursued e-discovery under the case management plan, and the court found that the requirements and expertise necessary to retrieve and prepare documents for production were an indispensable part of the discovery process.  Although the district court limited the holding to the facts presented by the case, it is likely that the expanded view of 1920(4) will be debated in other district courts around the United States in the months to come. Although many courts have attempted to allocate the costs of e-discovery fairly before a party undertakes this obligation, this cases suggests that courts may seek to revisit the allocation of e-discovery costs following entry of judgment.  According to the decision, it is up to the party seeking to recover these costs to demonstrate that the costs at issue were incurred for the sole purpose of complying with an adversary’s demands rather than, for example, improving the appearance of documents for trial presentation purposes. 

Why Discuss E-Discovery In A Toxic Tort Blog?

In In toxic tort cases where plaintiffs have questionable liability claims, serving burdensome e-discovery demands on defendants often threatens to change the focus of the case from the merits of the claim to a spoliation of evidence sideshow that focuses on the efforts of the defendant to preserve and produce electronically stored information ("ESI"). To avoid traps for the unwary (potentially both corporate defendants and the law firms that represent them), this blog will occasionally provide e-discovery guidance and reference information.  The Electronic Discovery Reference Model  or ERDM is one such authoritative reference. The ERDM is an industry group that establishes practical standards and guidelines for ESI, including its identification, collection, processing, review, analysis, storage and production. The ERDM also provides helpful information on the  triggering events, which may give rise to a duty to preserve or disclose email, documents or other data in conjunction with a pending or future legal proceeding. (According to ERDM,  It is the point at which the party or the law firm may become liable to meet certain standards, the violation of which can result in any number of  unfavorable outcomes depending upon the forum).  Ensuring that both you, as counsel, and your client, have a firm understanding of how these triggering events work is an important first step in approaching ESI issues in litigation.  EDRM’s trigger discussion expands upon some of the following concepts: (1) The duty to preserve and disclose data may be triggered by a judicial order, a discovery request, or mere knowledge of a pending or future proceeding likely to require data; (2) The scope of data to be preserved or disclosed is determined by the subject matter of the dispute and the law and procedural rules that a court or other authority will ultimately apply to resolve it. In general, data is potentially discoverable if it is relevant to the disputed transaction or may lead to relevant data; and (3) Failure to preserve or disclose discoverable data may result in serious penalties. To minimize this risk, diligent steps must be taken to identify all potentially discoverable data in the client’s possession or control.

ESI In New York State Court Practice

Are defendants in New York product liability and toxic tort litigation better off in federal court than in state court? Federal court discovery rules certainly are more liberal than state court discovery rules. There, plaintiff’s experts are subject to deposition and, if appropriate, Daubert challenges. In contrast, state court provides only minimal expert disclosure. However, state court rules concerning the production of electronically stored information (“ESI”) may be more favorable to corporate defendants litigating in state court. In state court, the general rule is that the requesting party pays for the defendant’s ESI retrieval. In federal court, the court will apply “proportionality” concepts, and balance the importance of the discovery with the burden on the producing party. Thus, the result of the burden shifting analysis is somewhat more complex and subject to more variables. As reported in this space on November 4, 2009, (“Cost Allocation of E-Discovery in NY Trial Courts”), the Joint Committee on Electronic Discovery, convened by the Association of the Bar of the City of New York, has recommended that the legislature amend the CPLR to address time-consuming ESI disclosure disputes. The new proposed CPLR rule is expected to address a litigant’s duty to preserve ESI in anticipation of litigation; the scope of that duty; and the scope of ESI production. 

An article in Kramer Levin’s Electronic Discovery Update (January 2010), “Cost Shifting in New York: Forum Makes All the Difference,” discusses the background of the general presumption in state court that the requesting party pays for the cost of discovery. Although the CPLR does not explicitly apply this presumption to ESI costs, New York state courts have followed this presumption when deciding how to allocate e-discovery costs. In Lipco Elec. Corp. v. ASG Consult. Corp., for example, the court found that “… cost shifting of electronic discovery is not an issue in New York, since the courts have held that, under the CPLR, the party seeking discovery should incur the costs.” Lipco Elec. Corp. v. ASG Consult. Corp., 4 Misc.3d 1019(A), 2004 WL 1949062 (Sup. Ct. Nassau Co. Aug 18, 2004). In contrast to state court practice, the standard under federal jurisprudence is less clear cut.  The Hon. Shira Scheindlin (SDNY) has articulated a multi-factored balancing test, which has been influential in guiding determinations of when the cost of producing “inaccessible” data should be shifted to the requesting party. Zubulake v. UBS Warburg LLC, 216 F.R.D. 280 (S.D.N.Y. 2003). The Kramer Levin Update observes that a recent New York trial court opinion declined to apply this federal approach, stating that it was “not empowered – by statute or case law – to overturn the well settled rule in New York state that the party seeking discovery bear the cost incurred in its production.” T.A. Ahern Contractors Corp. v. Dormitory Auth. of the State of N.Y., 2009 WL 806779 (Sup. Ct. N.Y. Co. Mar. 19, 2009). Citing the policy behind the rule, the court observed that the requester-pays standard gives a party “a strong incentive to formulate its discovery requests in a manner as minimally burdensome as possible.”  I predict that the differences between state and federal ESI practice will narrow in the near term, possibly with the promulgation of a CPLR rule, and that New York will ultimately adopt a more federal approach modeled on the influential Sedona Conference Working Group template.  However, for the present, a New York state court plaintiff runs the risk of incurring substantial costs in demanding burdensome ESI from a corporate defendant.  Be careful what you wish for!


Cost Allocation Of E-discovery In NY Trial Courts

The Manual For State Trial Courts Regarding Electronic Discovery Cost-Allocation, authored by the Joint E-Discovery Subcommittee of the Association of the Bar of the City of New York, is required reading for any New York state court litigator involved in e-discovery.  The Manual is intended to assist New York State judges and court personnel in managing issues relating to the cost of discovery of electronically stored information, or "ESI’.  As  state court decisions on e-discovery cost allocation are likely to reference the Manual, practitioners are well-advised to familiarize themselves with the Manual now.  The authors cite one study that found that between 58% and 90% of litigation budgets are devoured by document review.  The issue of who pays for  e-discovery–the requesting party or the responding party–often involves sums of money above and beyond the damages sought by the claimant.  As a result, litigation costs drive cases to settle that should not settle on the merits.  Although New York law mandates that the requesting party pay the costs of discovery, there is authority in New York law for requesting parties to seek protective orders aimed at shifting all or part of the ESI costs to the producing party.

Of interest to practitioners outside New York, the Manual provides an overview of ESI burden and expense, and cost-shifting rules, adopted in states across the country.  This discussion, as well as a review of federal case law, suggests that New York is not "going it alone" but is drawing on the principles developed at the Sedona Conference and in leading cases such as Zubulake, which provides a seven-factor balancing test for determining cost allocation.

Fighting E-Discovery And Not Losing Your (Client’s) Shirt

If you litigate in federal courts and have not yet reviewed the Sedona Conference Cooperation Proclamation, wake up!  The final exam is about to start and you have slept through your alarm!  Although not as revolutionary as Thomas Paine’s Common Sense, the Cooperation Proclamation is premised upon the heretical (to some) proposition that "Cooperation In Discovery is Consistent with Zealous Advocacy" and makes a sharp distinction between advocacy (good!) and adversarial conduct (self-defeating when it comes to e-discovery).  Significantly, a number of federal judges have "signed on" to the Cooperation Proclamation and their published discovery decisions provide the wise practitioner with a road map for navigating through the shark-infested waters of  e-discovery.  On March 19, 2009, SDNY Magistrate Judge Andrew J. Peck issued what he characterized as a "wake-up call to the Bar in this District about the need for careful thought, quality control, testing and cooperation with opposing counsel in designing search terms or "keywords" to be used to produce emails or other electronically stored information ("ESI")." William A. Gross Construction Associates, Inc. v. American Manufacturers Mutual Insurance Company, 07 Civ. 10639 (LAK) (AJP).  In his well-crafted decision, Magistrate Peck derides lawyers, who design "keyword searches in the dark, by the seat of the pants" without even bothering to consult with their clients beforehand.  The danger for practitioners in not "getting it right" the first time is running the risk that the Court may issue an e-discovery order that is more costly and burdensome to your client than might have otherwise been the case.  Some very good articles have been written by practitioners concerning how to anticipate meeting the concerns of a Cooperation Proclamation jurist during your initial client meetings in preparation for the Rule 26(f)(3) ESI meet and confer.  One such article is "The Collaborative Model of E-Discovery" written by J. Mark Coulson at Miles and Stockbridge PC in Baltimore in Product Liability Law 360 on March 11, 2009 (Law 360 requires a subscription)  Mr. Coulson provides  practical advice such as being aware before offering to search your client’s hard drive for documents that each gigabyte on a hard drive may contain 30,000 to 50,000 documents.  The "take-away" from most of the good  e-discovery articles is for the practitioner to be proactive and to address ESI issues with both the client and opposing counsel early in the meet and confer process.  Strong client advocacy in the ESI realm requires not hiding the ball about relevant witnesses, e-mail system and retention schedules.