January Edition of Notable Cases and Events in E-Discovery

E-Discovery Update

The December 2014 Case Notes discuss the following:

1. A Tennessee federal district court decision allowing plaintiff to use predictive coding to review two million documents notwithstanding defendant’s opposition, a case management order specifying use of search terms, and initial screening with such terms;
2. A Northern District of California order ruling that the production of a “grab-bag” of documents in an unorganized manner violated Fed. R. Civ. P. 34 and ordering that the documents should be produced again in accordance with Rule 34’s requirements;
3. A California state appellate court ruling upholding an award of attorneys’ fees against a non-party subpoena recipient for refusing to comply with the subpoena even though the issuer offered reasonable compensation for compiling the requested data; and
4. A Northern District of California decision that a party could not withhold documents simply because the opposing party could not produce corresponding documents.

1. In Bridgestone Americas, Inc. v. IBM Corp., 2014 WL 4923014 (M.D. Tenn. July 22, 2014), Magistrate Joe B. Brown allowed plaintiff to use predictive coding to review two million documents notwithstanding defendant’s opposition, plaintiff’s prior agreement to a case management order specifying use of search terms, and initial screening with such terms.

Plaintiff requested to review over two million documents using predictive coding. Defendant opposed, arguing that the request was contrary to the original case management order and that it was unfair to use predictive coding after an initial screening had been done with search terms. Id. at *1.

The Magistrate Judge stated that predictive coding is “a rapidly developing field” and noted the involvement of the Sedona Conference in developing best practices in this area and Magistrate Judge Andrew Peck’s article on the issue. He indicated that use of predictive coding was a “judgment call” and should be considered in the context of Rule 26’s “exhortation . . . that discovery be tailored by the court to be as efficient and cost-effective as possible.” Id. This case, he noted, involved millions of documents to be reviewed at a cost of millions of dollars and that “there is no single, simple, correct solution possible under these circumstances.” Id.

Given these circumstances, Magistrate Judge Brown granted plaintiff’s request to use predictive coding, acknowledging that he was “to some extent, allowing Plaintiff to switch horses in midstream.” Id. Accordingly, he stated that “openness and transparency in what Plaintiff is doing will be of critical importance” and noted that “Plaintiff has advised that they will provide the seed documents that they are initially using to set up predictive coding.” Id.

Having allowed plaintiff to use predictive coding, Magistrate Judge Brown stated that defendant could also switch to predictive coding to review the remainder of its documents as well, if it believed that doing so would be more efficient than completing its manual review. Id. at *2.

2. In Venture Corp. Ltd. v. Barrett, 2014 WL 5305575 (N.D. Cal. Oct. 16, 2014), Magistrate Judge Paul S. Grewal ruled that production of a “grab-bag” of documents in an unorganized manner violated Federal Rule of Civil Procedure 34 and that the party should make the production again in accordance with Rule 34’s requirements.

James Barrett and Venture Corp. Ltd. had a dispute over the ownership of three patents on air monitor and gas scrubber components. In response to Barrett’s discovery requests, the parties met to discuss the form of production but never reached an agreement. Thereafter, Venture produced 41,000 pages of documents in folders and files with no organization or labeling and no custodial index or table. Barrett filed a motion to compel Venture to identify which documents were responsive to which categories of requests and to indicate which documents belonged to which custodians. Id. at *1-*2.

Magistrate Judge Grewal ruled that Venture was obligated to produce the documents in an organized format. Noting the practice of the “document dump,” the Magistrate Judge stated that Federal Rule of Civil Procedure 34 “aims to prevent such a scenario with two specific and separate requirements.” First, “[a] party must produce documents as they are kept in the ordinary course of business or must organize and label them to correspond to the categories in the request” (quoting Fed.R.Civ.P. 34(b)(2)(E)(i)). Second, “[i]f a request does not specify a form for producing electronically stored information, a party must produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms” (quoting Fed.R.Civ.P. 34(b)(2)(E)(ii)). Barrett, 2014 WL 5305575, at *1.

The Magistrate Judge found that Venture failed to satisfy either requirement of Rule 34. The “form” requirement of Rule 34 governs “whether the production should be native, near-native, imaged as PDF (or more commonly, as TIFFs accompanied by load files containing searchable text and metadata) or in paper (printed out).” Id. at *3. It imposes an “obligation” on Venture to show that the production was in a form “ordinarily maintained or in a reasonably usable form or forms.” Id. Venture failed to fulfill this requirement by producing documents in what the Magistrate Judge described as a “grab-bag of PDF and native files.” Id.

The organization requirement of Rule 34 requires at a minimum disclosure of:

“information about each document which ideally would include, in some fashion, the identity of the custodian or person from whom the documents were obtained, an indication of whether they are retained in hard copy or digital format, assurance that the documents have been produced in the order in which they are maintained, and a general description of the filing system from which they were recovered.” Id. (quoting Pass & Seymour, Inc. v. Hubbell, Inc., 255 F.R.D. 331, 337 (N.D.N.Y. 2008)).

The Magistrate Judge determined that Venture failed to provide any of this information regarding the form of its production. Barrett, 2014 WL 5305575, at *3.

As Venture had failed to comply with its obligations under Rule 34, Magistrate Judge Grewal ordered that Venture should make the production anew. Recognizing the “disjunctive structure” of Rule 34(b)(2)(E)(i), he ordered Venture to do the following: “(1) either organize and label each document it has produced or it shall provide custodial and other organizational information along the lines outlined above and (2) produce load files for its production containing searchable text and metadata.” Id. (emphasis in original).

3. In Vasquez v. California School of Culinary Arts, 230 Cal. App. 4th 35 (2d Dist. 2014), the California Court of Appeal upheld a trial court’s decision to award attorneys’ fees against a third party for refusing to comply with a subpoena after the issuer offered to compensate the third party for compiling data in its possession in the manner specified in the subpoena.

Graduates of the California School of Culinary Arts brought suit against their former school for allegedly defrauding them by providing misrepresentations about graduation rates, employment prospects, and anticipated income. Plaintiffs subpoenaed the production of loan files from Sallie Mae. Sallie Mae at first provided a cost estimate of $60,000 for the production of paper files, and plaintiffs issued a second subpoena that requested electronically stored files consisting of 44 specific data fields for 786 students in a format that was electronically searchable and sortable. Id. at 38. In exchanges between counsel, Sallie Mae stated that it had no obligation to do research on the loans and indicated that the revised request would not significantly reduce the cost in light of the research involved. Plaintiffs’ counsel stated that it did not want research but instead wanted the data in Sallie Mae’s database in the manner set forth in the subpoena and requested the reasonable cost of doing so. Id.

Sallie Mae refused to provide a cost estimate for the production of the electronic documents and filed a motion to quash the subpoena. Sallie Mae argued that the business records subpoena was improper because, among other reasons, plaintiffs sought to impose an affirmative obligation on Sallie Mae to manipulate data and perform research for plaintiffs and also to require Sallie Mae to produce information unrelated to the lawsuit. Id. at 39.

The trial court denied Sallie Mae’s motion to quash and, in response to plaintiffs’ further motion for attorneys’ fees, ruled that Sallie Mae’s motion to quash was without substantial justification and granted plaintiffs $11,487 in attorneys’ fees. Id. at 40.

Sallie Mae appealed the award of attorneys’ fees, arguing that there was substantial justification for its position that it could not be compelled to perform research or to compile data through a programming effort to create a spreadsheet. Id. at 42.

The California Court of Appeal held that the trial court did not err in concluding that Sallie Mae lacked substantial legal and factual support for its motion to quash. Under California’s Electronic Discovery Act, a subpoenaed person may oppose production of electronically stored information if it “‘is from a source that is not reasonably accessible because of undue burden or expense.’” Id. (quoting California Electronic Discovery Act § 1985.8(d)). Though non-parties are “‘not required to create documents that do not exist,’” id. at 43 (quoting Gonzales v. Google, Inc., 234 F.R.D. 674, 683 (N.D. Cal. 2006)), Sallie Mae never claimed that it could not obtain the requested data. The Court of Appeals found that “[a]lthough plaintiffs repeatedly asked Sallie Mae for a cost estimate for extracting and producing the requested information and acknowledged their obligation to pay for the ‘reasonable costs’ of production, Sallie Mae refused to provide a cost estimate until after its motion to quash had been denied.” Vasquez, 230 Cal. App. 4th at 44. Finding that Sallie Mae maintained the data sought by plaintiffs and had been offered compensation to put that data in the format requested by plaintiffs, the Court of Appeal ruled that substantial evidence supported the trial court’s determination that Sallie Mae’s efforts to resist the subpoena were without merit and upheld the award of attorneys’ fees.

4. In Finjan, Inc. v. Blue Coat Systems, Inc., 2014 WL 5321095 (N.D. Cal. Oct. 17, 2014), Magistrate Judge Paul S. Grewal held that a party could not withhold documents simply because the opposing party could not produce corresponding documents.

In a patent infringement case, plaintiff Finjan served various requests for technical and damages documents on defendant Blue Coat. Blue Coat agreed to produce most of the documents, but it objected to producing documents that Finjan was incapable of producing—namely, emails of former employees stored on systems that were no longer active.

This discovery dispute, Magistrate Judge Grewal stated, boiled down to the basic question of whether Blue Coat’s discovery responses had been fair. The Magistrate Judge concluded that “Blue Coat’s discovery responses so far have largely been fair, but not entirely.” Id. at *2.

On the fairness of requiring one party to produce emails when the other party could not, the Magistrate Judge acknowledged that “Blue Coat may largely be in the right that it should not have to dig through legacy systems when Finjan is unable to do the same for its custodians.” Id. Having said that, however, Magistrate Judge Grewal observed that “one party’s discovery shortcomings are rarely enough to justify another’s.” Id. After addressing Blue Coat’s fairness point, he turned to the issue of the documents sought by Finjan and stated that those documents should be produced: “[H]ere, at least with respect to documents mentioning Finjan—the one specific category of documents Finjan could identify that it needed from archived email—Finjan’s request is reasonable.” Id. Accordingly, the Magistrate Judge ordered that Blue Coat produce the requested documents even though Finjan could not produce similar documents.

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The E-Discovery Task Force of Sidley Austin LLP

The legal framework in litigation for addressing the explosion in electronic communications has been in flux for a number of years. Sidley Austin LLP has established an “E-Discovery Task Force” to stay abreast of and advise clients on this shifting legal landscape. An inter-disciplinary group of more than 25 lawyers across all our domestic offices, the Task Force monitors and examines issues and developments in the law regarding electronic discovery. The Task Force works seamlessly with our firm’s Litigators who regularly defend and prosecute all types of litigation matters in trial and appellate courts, federal and state agencies, arbitrations, and mediations throughout the country. The co-chairs of the E-Discovery Task Force are: Alan C. Geolot (+1 202.736.8250, ageolot@sidley.com), Colleen M. Kenney (+1 312.853.4166, ckenney@sidley.com), and Jeffrey C. Sharer (+1 312.853.7028, jsharer@sidley.com).

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