E-discovery Pitfalls and Practice Tips

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01Nov2009

E-discovery Pitfalls and Practice Tips

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By Timothy B. Parlin, Carroll McNulty & Kull, Basking Ridge, NJ

RealtimeUnderstanding the e-discovery rules is critical in today’s litigation environment. The Mancia v. Mayflower Textile Servs. Co., 253 F.R.D. 354 (D. Md. 2008), and Treppel v. Biovail Corp., 249 F.R.D. 111 (S.D.N.Y. 2008), cases demonstrate the pitfalls that can occur. This article will analyze these cases and detail practice tips for propounding and responding to e-discovery demands.

The Mancia case required litigants to cooperate and communicate during the discovery process to minimize the costs and burdens of discovery. While Mancia does not specifically address e-discovery issues, it could have a wide-ranging effect on cases that involve massive amounts of electronically stored information (ESI).

In Mancia, employees filed an action against defendant under the Fair Labor Standards Act for knowingly failing to compensate them for overtime work and illegally deducting wages from their paychecks. Plaintiff served several discovery demands upon defendant, and moved to compel responses. At a subsequent hearing, Magistrate Judge Grimm raised concerns about the breadth of plaintiff’s discovery demands, which were disproportionate to the issues raised in the litigation, as well as defendant’s “reflexive” boilerplate objections. Noting that the dispute could have been resolved or minimized by cooperation and communication between counsel, the court’s opinion focused upon Fed.R.Civ.P. 26(g), which is becoming the favored discovery enforcement tool of the federal bench. Rule 26(g) requires that every discovery request, response and objection, be signed by an attorney. The attorney certifies that, to the best of his or her knowledge or information and belief formed after a reasonable inquiry, the request, response or objection is: (i) consistent with the rules of procedure and warranted by existing law; (ii) not imposed for an improper purpose, such as to harass or needlessly increase the cost of litigation; and (iii) neither unreasonable nor unduly burdensome or expensive, considering the needs of the case, prior discovery in the case, the amount in controversy and the importance of the issue at stake in the action. A key component of Rule 26(g) that is frequently overlooked by counsel is that it imposes mandatory sanctions for violations that are not substantially justified.

courtroomGrimm addressed the limits imposed upon discovery by specifically focusing upon the tenets of Rule 26(g). As the court explained, “the rule aspires to eliminate one of the most prevalent of all discovery abuses: ‘kneejerk discovery requests served without consideration of cost or burden to the responding party’ as well as ending ‘the equally abusive practice of objecting to discovery requests reflexively — but not reflectively — and without a factual basis.'”

RULE 26(g) PRACTICE TIPS

Mancia is welcome news for corporate defendants since it could result in more focused and less burdensome discovery if the court’s principles are followed by courts in New Jersey. Counsel need to keep in mind the following to avoid the types of discovery abuses Rule 26(g) is intended to curb:

  • the parties must meet and confer before propounding discovery so that their respective requests can be focused and tailored to the discovery necessary to resolve the matter;
  • the parties should discuss “phased discovery” so that the most relevant, least expensive discovery can be produced first, thereby eliminating the need to propound more burdensome and expensive discovery at a later date;
  • propounding counsel must consider the needs of the case and seek discovery that is proportional to issues raised in the litigation;
  • an objection to a discovery request cannot be made until counsel has considered whether, after reasonable inquiry, there is a factual basis for such an objection; and
  • to respond to an overbroad discovery request, counsel must be knowledgeable about the client’s IT department, its infrastructure, the data it manages and contains, its retention policies and potentially relevant ESI in order to have the necessary ammunition to avoid the mandatory sanctions of Rule 26(g).

TREPPEL

The Treppel case addressed the duty to preserve backup tapes. In Treppel, a former securities research analyst brought suit against Biovail, its chief executive, general counsel and others, alleging that they had defamed him in response to his downgrading Biovail’s company stock. The events took place in April 2002 and Treppel filed suit on April 29, 2003. Biovail’s general counsel stated that he verbally instructed Biovail’s executives to preserve all relevant information “sometime in May 2003.” Biovail’s IT department did not receive written instructions until December 2003, after plaintiffs counsel sent a letter to Biovail demanding that it preserve all information, including ESI, which may be relevant to Treppel’s claims and defenses. Although Biovail took some steps to preserve ESI after the filing of Treppel’s action, it did not preserve any backup tapes until December 2003.

courts of justiceIn July 2005, Biovail’s counsel rejected plaintiff’s proposal for a comprehensive approach to e-discovery. Instead, Biovail suggested that the parties agree which employee’s files would be searched and the search terms to be used. When the parties could not agree, plaintiff moved to compel Biovail to preserve all potentially discoverable ESI and answer a number of questions concerning its electronic data management practices and produce data responsive to certain requests. The court denied plaintiff’s preservation motion as premature but ordered defendant to: (i) conduct a diligent search for the requested documents; (ii) produce any responsive documents; and (iii) explain the protocol defendant used to locate those responsive documents. In response, Biovail proceeded to search its ESI using previously rejected search terms. In the face of this, plaintiff requested Biovail to expand its ESI search by adding 30 search terms and several individual custodians. Biovail objected on the grounds that plaintiff’s request was overbroad and untimely. After discovery closed in December 2007, plaintiff filed a motion to compel Biovail to search for the previously requested ESI, and sought sanctions, alleging that defendant did not adequately preserve evidence of all existing backup tapes that may provide relevant evidence from the time of the dispute, April 2002. (The backup tapes were critical to Treppel’s case since they were the only available sources for relevant documents regarding his claims.)

In addressing plaintiff’s motion to compel, the court noted that Biovail failed to institute a preservation program until seven months after it was aware of its obligation to begin preserving data. The court noted that since Biovail had a policy to retain its monthly backup tapes for one year before overwriting them, Biovail should have possessed backup tapes as of May 1, 2003, which dated back to May 2002, the month in which many of the underlying events at issue in the litigation allegedly ensued. However, the May 2002 backup tapes were subsequently overwritten.

The court recognized that there was no duty to preserve every backup tape in existence at the time Biovail’s preservation obligation began. However, while the law was clear that any backup tapes containing the documents of a key player must be preserved and accessible, it was a “grey area” in 2003 when Treppel’s litigation was commenced. Even though plaintiff sought sanctions for the missing backup tapes and requested an adverse inference instruction because Treppel could not adequately prove “relevance” regarding the missing documents, the court declined. The court ordered Biovail to restore certain backup tapes and to give the laptop of Biovail’s Chairman/CEO, which had not been searched, to plaintiff’s forensic expert to ascertain if any missing documents were stored on it. The court stated that any evidence recovered from the laptop could be reviewed by Biovail’s counsel to assert any applicable claims of privilege and then produce the retrieved documents, along with a privilege log, to plaintiffs counsel.

PRACTICE TIPS FOR PRESERVING ESI

Treppel affords counsel a road map as to what must be undertaken to preserve ESI, regardless of venue:

  • Counsel, either outside or in-house, must specify in writing what materials are to be saved and a full preservation program must be implemented, including backing up any servers;
  • Counsel must take affirmative steps to monitor a company’s compliance so that all sources of discoverable information are identified and searched;
  • If the company has a backup tape retention policy, it must be followed unless the preservation request from the litigation overrides it; and
  • As a general rule, a company need not preserve all backup tapes even when it reasonably anticipates litigation. However, it must retain all relevant documents, in existence at the time the duty to preserve attaches.

CONCLUSION

As Mancia and Treppel demonstrate, e-discovery issues and its pitfalls are becoming more prevalent in litigation. It is imperative that counsel not only understand their client’s IT infrastructure and how electronic data is stored but also how courts will deal with these issues in order to avoid the mandatory sanctions of Rule 26(g). Since the law in this area is constantly evolving, counsel must stay current regarding changes to the law in order to best advise their clients.

Timothy B. Parlin is a senior associate of Carroll McNulty & Kull in Basking Ridge, N.J.
This article was first published within the New Jersey Law Journal. Reprinted with permission from the May 18, 2009 edition of the New Jersey Law Journal.

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