E-Discovery Law Alert : New York & New Jersey Attorneys for Electronic Discovery and Corporate Information Management Law

In response, Plaintiffs sought a more meaningful sample and ultimately requested an order (1) requiring KPMG to preserve all hard drives of departed employees and (2) directing KPMG to provide Plaintiffs with five hard drives for inspection to “determine whether this issue is even worth fighting about.” As noted by Plaintiffs, “it would be difficult, if not impossible to generate search terms without the opportunity to first determine what the hard drives contain.” Nonetheless, in Judge McMahon’s view, KPMG was not advancing the ball because of its decision not to provide any hard drives for inspection. Ultimately, while the Motion to Certify was pending, Judge Cott ordered preservation of all existing hard drives of former employees until otherwise ordered by him or the parties had reached an agreement regarding methodology to obtain the appropriate sample.

In affirming this decision, Judge McMahon did not let anyone off the hook. She took particular umbrage that no one sought clarification of whether the stay precluded negotiation of the appropriate inspection and sampling procedure so that discovery could “proceed in a meaningful way” while the Motion to Certify was pending. In some terse dicta, she explained that “I cannot begin my discussion of this dispute without recognizing that a complete misinterpretation by everyone of the discovery stay I imposed seems to have contributed to the parties’ inability to agree on a sampling methodology.”

Although Judge McMahon acknowledged that other courts have been hesitant to apply a proportionality test to preservation duties, she made clear that Judge Cott was backed into a corner when he cast a very wide preservation net because the party seeking relief had thwarted his ability to conduct a proportionality analysis. The Court agreed that Judge Cott had no choice but to order preservation of the hard drives of all former employees who she had little trouble holding were “key players” under Zubulake v. UBS Warburg LLC IV, 220 F.R.D. 212, 217-18 (S.D.N.Y. 2003) (“Zubulake IV”), meaning that they were “likely to have relevant information.” As stated by Judge McMahon, if a party withholds information that might help streamline discovery in this type of case, that party should “reasonably anticipate” that each employee or audit associate who would be receiving an opt-in notice should be deemed a potential plaintiff in the matter.

Although this case may cause defendants in class actions to cower at the prospect of potential pre-certification preservation obligations, the Pippins decisions must be read in the context of the parties’, in particular defendants’, failure to cooperate in the early stages of the e-discovery process. Parties resisting wholesale or perceived overextensive preservation and production demands must take care when making proportionality arguments to preface those arguments with clear indicia of cooperation in the early stages of discovery. Objecting parties must, in short, provide the court with the tools necessary to clearly assess the extent of the purported burden, the costs involved and in some cases the lack of relevant information relating to the objected demands. While it is undoubtedly true that this level of cooperation may require disclosing more than a party may initially want, and entail risk in the sense that the sampling may result in evidence that weighs in favor of broader preservation or disclosure, Pippins clearly demonstrates the downside risk to taking the alterative approach.

Sandro G. Ocasio is an Associate on the Gibbons E-Discovery Task Force.

The Court began its analysis with Federal Rule of Civil Procedure 45, which governs requests for discovery, including ESI, from non-parties. Under Rule 45, a Court must weigh (1) the relevance of the discovery sought; (2) the need for the information; and (3) the potential hardship to the non-party. The Court noted requests to non-parties may also be limited if the information sought “is obtainable from another source that is more convenient, less burdensome, or less expensive, or if the burden of the proposed discovery outweighs its likely benefit." While acknowledging the breadth of the subpoena directed to Burrell, the Court determined that Wood reasonably sought “only those non-privileged documents identified by an electronic search for key words related to the claims and defenses asserted by the parties.” The Court further noted that Burrell was not a disinterested fact witness. Rather, he “is alleged to have been Plaintiff’s supervisor at the time the events at issue occurred and is alleged to have terminated Plaintiff.”
Perhaps the most important holding in Wood was the Court's acknowledgement that employees often transact business outside the workplace using personal electronic devices.

In this age of smart phones and telecommuting, it is increasingly common for work to be conducted outside of the office and through the use of personal electronic devices. Therefore, it is not unreasonable, despite Burrell’s assertions to the contrary, that some relevant information may be found on his personal computer’s hard drive.

Wood clearly supports a party’s effort to obtain ESI from a non-party’s personal electronic devices. (Contrast the New York State Supreme Court's decision in DeRiggi v. Krischen, which you can read about here, where the court refused to order a forensic examination of a plaintiff's personal computer hard drive.) Wood is also another example of a non-party being ordered to comply with a subpoena seeking ESI, even where the non-party may experience some cost or inconvenience in the process. Plaintiff's success in enforcing his subpoena likely resulted, at least in part, from his agreement to pay most of the costs of searching Burrell’s hard drive, as well as Plaintiff’s proactive approach in proposing search terms as part of the meet and confer efforts. Such efforts at cooperation are a clear sign of good faith that nearly always favorably impress a court in resolving an e-discovery dispute of any sort.

Stephen J. Finley, Jr. is an Associate on the Gibbons E-Discovery Task Force.

Judge Francis itemized the instances where Orbit One and Ronsen failed to adopt and implement model preservation procedures, but also observed that the data on Ronsen’s laptop, hard drive, backup disks and email account either had been archived, was uncompromised, was otherwise still retrievable and/or had actually been previously produced. As such, the court concluded that sanctions, particularly the severe sanction of an adverse inference, was not appropriate because there was insufficient evidence that any of Orbit One and Ronsen’s actions resulted in the loss of any “discovery-relevant” information -- information that is likely relevant even if only under the broad definition of the Federal Rules. The court noted that sanctions, particularly in the form of an adverse inference, are predicated on the loss of information that is “relevant” to a claim or defense and to “ameliorate any prejudice to the innocent party by filling the evidentiary gap created by the party that destroyed evidence.” Accordingly, the sanction of an adverse inference for inadequate preservation efforts must be tied to a showing of the loss of “discovery-relevant” materials and prejudice to the innocent party, not simply to the spoliating party’s gross negligence or bad faith. Magistrate Judge Francis took issue with Pension Committee for its omission of the discovery-relevance requirement and for the suggestion that sanctions are warranted by a mere showing that a party’s preservation efforts were inadequate. Under that standard, the court reasoned that litigation would become a “gotcha” game between the parties regarding lost information, however inconsequential, rather than a full and fair opportunity to address the merits of a dispute. Thus, Magistrate Judge Francis held that sanctions are only appropriate if the inadequate preservation efforts resulted in the destruction of “discovery-relevant” materials.

The law on sanctions, spoliation and preservation efforts favors a factored analysis approach to the imposition of sanctions, rather than a categorical approach that ignores culpability or the lack of any real damage to the innocent party. Thus, most courts have held that sanctions for the destruction of ESI data should be dictated by circumstances of individual cases and should only be imposed if discovery relevant material has been destroyed. Nonetheless, this contrast of opinions between two highly respected jurists and e-discovery specialists from the same jurisdiction highlights the controversial and constantly evolving nature of these principles, and cautions that the most prudent course is to always engage in broad, methodical and well-documented preservation practices.

The court was not persuaded by defendant's assurances. It was undisputed that examination of plaintiffs' hard drive could not definitively establish that plaintiffs had not visited the site since the absence of that evidence could just as likely be due to data having been overwritten in the 2 plus years since the website was allegedly visited. While this alone may have been sufficient for denial of defendant's discovery motion, the court went further and found that the defendant failed to establish that the information sought was material and necessary to the defense of the action. The court also pointed out that plaintiff used the computer to communicate with his attorney and thus discovery of the hard drive presented a risk to the confidentiality of attorney-client communications.

DeRiggi illustrates the balancing courts regularly perform between the policy for liberal discovery and countervailing privacy and confidentiality concerns. Where the risks are substantial and the returns questionable, courts are hesitant to order the discovery. At the very least, a party seeking intrusive discovery should be able to articulate the reasons why such discovery is material and necessary to their case.

Paul E. Asfendis is an Associate on the Gibbons E-Discovery Task Force.