Exploration of Sophisticated Cloud Computing Abilities Unnecessary When Responding to Discovery Demands

A new decision out of the District of New Jersey holds that a company need not utilize its cloud-based comprehensive document search tools absent evidence that its standard custodian-based approach to data collection was deficient.

In Koninklijke Philips v. Hunt Control Systems, a multi-billion dollar trademark dispute, defendant Hunt Control Systems, Inc. (“Hunt”) served plaintiff Koninklijke Philips N.V. (“Philips”) with discovery demands that included requests for production of electronically stored information (“ESI”).  To prepare its response, Philips requested information from eight specific employees.

Hunt was dissatisfied with Philips’ response, claiming it was able to locate numerous significant documents not produced by Philips, and hence Philips’ custodian based approach was ineffective. Hunt’s expert provided a declaration stating that “due to its cloud-based IT structure, Philips has available to it some of the most sophisticated and comprehensive state-of-the-art document search and location tools” and alleged that “Philips refuses to use these tools to satisfy its obligations.” Hunt sought a Rule 30(b)(6) deposition of Philips’ IT witness to “understand why and how these sophisticated tools are somehow inappropriate in spite of their clear design to accommodate eDiscovery.”

Philips sought a protective order, claiming it always used a custodian-based approach to collecting ESI. It submitted a declaration of its “ESI discovery professional” who was previously interviewed by Hunt, which stated that Philips outsources its ESI collection to Microsoft, and the contract with Microsoft does not permit or contemplate the type of ESI collection suggested by Hunt. Philips also claimed its document production was sufficient and that the purportedly missing documents were largely publicly available or irrelevant.

The Koninklijke court granted Philips’ protective order, finding reasonable Philips’ approach to conducting and gathering ESI materials. The court found that even if alternate ESI collection tools are available to Philips, Hunt failed to show Philips’ existing production was materially deficient. Further, even if Philips’ custodian-based approach to collecting ESI was somehow flawed or lacking, there is not enough evidence to show that conducting another search under a new method would “substantially alter the production already made.” Ultimately, the Koninklijke court concluded allowing the deposition had the potential to opening the door to more discovery with no end in sight.

The Koninklijke decision is good news for companies on the receiving end of ESI discovery requests. While a party can always argue that more can be done to gather ESI, the Koninklijke court confirmed the viability of a reasoned custodian-based approach. While the court did not consider what might have happened had the requesting party initially insisted on the responding party utilizing comprehensive cloud computing technology when compiling its initial responses, the analysis is likely the same — unless there is some evidence that the results of a custodian-based search will actually be deficient, there is no basis to interfere with responding parties’ efforts to collect and produce ESI, and parties remain best-suited to determining the best methods of collecting their own data.