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This case involves a contractual dispute worth $41 million between Juster and North Hudson Sewerage Authority (NHSA). Juster issued a request for production of documents that included 49 requests for documents and a list of 67 proposed search terms. Some of these terms included words such as “fee,” “debt,” “tax,” and “SEC.” NHSA argues that the court should grant a protective order because it already produced 8,000 pages of documents and felt these search terms were too vague. Additionally, NHSA stated that if the court did not grant its protective order, the cost for producing these documents and running the searches should be shifted to Juster. The court did not agree with NHSA’s claims. Not only was there a lack of evidence that the data requested here was inaccessible, the court also applied the seven-factor test set forth in Zubulake v. UBS Warburg. This case has been adopted by the Third Circuit in cases that involve fee shifting. The Zubulake factors include: The extent to which the request is specifically tailored to discover relevant information; The availability of such information from other sources; The total cost of production, compared to the amount in controversy; The total cost of production; The relative ability of each party to control costs and its incentive to do so; The importance of the issues at stake in the litigation; and The relative benefits to the parties of obtaining the information In applying the Zubulake factors to this case, the court held that fee shifting is not warranted. The requests for electronically stored information (ESI) were tailored, as the searches were restricted to a specific time period (2011-2012). Second, it is unknown if this information is available from other sources. The third, fourth, and fifth factors are concerned with the costs associated with the request for ESI. Here, the court found that given the amount of damages at stake, NHSA’s ability to absorb the costs of the ESI requests, and the projected costs are not substantial enough to justify fee shifting. The fact that the litigation had $41 million at issue and the cost of running the keyword searches was approximately between $6,000 and $16,000, the court felt fee shifting would be inappropriate. The final factors are not relevant to this litigation as this is a private contractual dispute between two parties and no public policy is implicated. Overall, these factors weigh heavily in favor of Juster. As a result, this case illustrates that courts are reluctant to sway from the idea that it is the responding party that bears the costs in complying with discovery requests. Only when there is an undue burden on the responding party, or inaccessibility of information, will the court consider fee shifting. Yet, given today’s society, most information is accessible. Additionally, when both parties have comparable discovery requests and both agree to pay their own costs in producing discovery, fee shifting is even less likely to occur. Jennifer Whritenour received her B.S. in Political Science and History in 2011 from the University of Scranton. In May 2014, she received her J.D. from Seton Hall University School of Law.
The defendant in personal injury litigation commonly requests discovery concerning a plaintiff’s Facebook account. The reason such requests are made is that pictures on Facebook may reveal the “injured” plaintiff dancing on top of a bar table, skiing, traveling, etc. These damaging photos may prove that the plaintiff’s injury is not as severe as he or she claims and could result in dismissal of the case. Therefore, it is not uncommon for a plaintiff to delete his or her Facebook account in order to conceal any damaging pictures. The deletion of a Facebook account, however, may result in sanctions such as an adverse inference jury instruction. In Gato v. United Airlines, Inc., the plaintiff was injured while working for the defendant. During the litigation, the plaintiff permanently deleted his Facebook account. The defendant motioned for an adverse inference jury instruction claiming that the deletion of the Facebook account destroyed relevant evidence, thereby prejudicing the defendant. In granting the sanction, the district of New Jersey adopted a very low standard as to what a litigant must show in order to obtain an adverse inference jury instruction. The court held that “so long as evidence is relevant, the offending party’s culpability is largely irrelevant, as it cannot be denied that the opposing party has been prejudiced.” This seemingly simple sentence has enormous implications for litigants in the district of New Jersey for two reasons. First, it means that as long as the destroyed evidence was relevant, a litigant need not prove that the adversary intentionally (or even negligently) destroyed evidence. The lack of state of mind requirement eliminates what is often the most difficult element to prove when seeking spoliation sanctions. Without the need to prove a litigant’s culpability in destroying the evidence, the court seems to impose a form of strict liability upon the destroying party. The only requirement imposed by the court is that the party seeking sanctions prove that the destroyed evidence was relevant. This is a significant deviation from the traditional method employed by courts which requires proof that a party was at least negligent in destroying the evidence. Second, the court indicates that as long as the evidence is relevant, it will presume that the destruction of the evidence was prejudicial to the opposing party. This eliminates the need for the party seeking sanctions to prove that it was prejudiced by the missing evidence. Instead, the party only needs to prove that the evidence was relevant. Notably, the court explained that the defendants in Gato were “prejudiced because they have lost access to evidence that is potentially relevant to Plaintiff’s damages and credibility.” In other words, the defendant in Gato did not have to even prove that the destroyed evidence was undoubtedly relevant—the defendant only had to prove that the evidence was potentially relevant. In sum, the District of New Jersey imposed an adverse inference jury instruction simply because the destroyed evidence was potentially relevant to the litigation. The court did not require the defendant to show that it was prejudiced by the destruction, nor did the court require any showing as to the Plaintiff’s state of mind in destroying the evidence. Moving forward, litigants must be extra careful in their efforts to preserve evidence relevant to litigation. E-DiscoParty, a Seton Hall University School of Law graduate (Class of 2014), served on the executive board of the Seton Hall Law Review and is a member of the Interscholastic Moot Court Board. Currently, E-DiscoParty clerks for a Justice on the Supreme Court of New Jersey.  An adverse inference jury instruction is a powerful sanction where the court advises the jury to presume that any destroyed or missing evidence contained detrimental information about the party that destroyed or lost the evidence.
In this case, Peerless Industries, Inc. sued defendants Crimson AV, LLC claiming patent infringement and design patent infringement arising out of defendant’s manufacture and sale of certain TV mounts. While not a defending party, Sycamore Manufacturing Co., Ltd. (“Sycamore”) is plaintiff's former supplier of these TV mounts and played a vital role in the alleged infringement. Sycamore is located in China, while Peerless and Crimson are both located in the United States. Plaintiffs filed two motions: (1) a motion to compel the deposition of the Sycamore’s president, Tony Jin, and (2) a renewed motion for sanctions, both of which were granted. It was also determined in a previous case that Jin exercised managerial control over both Sycamore and Crimson. Therefore, plaintiff satisfied that Mr. Jin is a managing agent of Crimson. The court stated, “Plaintiff must simply show ‘that there is at least a close question as to whether the witness is a managing agent.’ We already found this to be the case. Furthermore, Mr. Jin clearly satisfies the ‘paramount test,’ which is whether the individual identifies with the corporation's interests as opposed to an adversary's.” The court further ordered that without any showing of hardship, Jin’s deposition would have to take place in the United States and not in China. As for the plaintiff’s renewed motion for sanctions, this motion marked the third time the plaintiff filed a motion regarding the same set of documents. The plaintiff argued that at the deposition of Crimson’s managing director, “it became clear that defendant did not conduct a reasonable investigation regarding Sycamore’s document production or Sycamore’s document retention for purposes of this litigation.” The plaintiff then filed a renewed motion for sanctions. The defendant and Sycamore asserted that certain documents in Sycamore’s possession had been produced. The plaintiff noted, that defendants did not represent that all requested documents were produced or that they were searched for but no longer existed. The plaintiff argued that the defendant wanted to rely on the same declarations as opposed to issuing more specific responses. The court stated that since it had determined Jin was principal of both Crimson and Sycamore and that he exercised a considerable amount of control over both corporations, that he was able to obtain all relevant documents from Sycamore. However, the court found that defendant took a “back seat” approach and instead used a third-party vendor to collect the documents. Finding that neither Crimson nor Jin had apart in the process of obtaining the requested discovery, the court granted the plaintiff’s motion for sanctions. The court held that this “hands-off’ approach is insufficient. “Defendants cannot place the burden of compliance on an outside vendor and have no knowledge, or claim no control, over the process. Finally, the court held that defendants must show that they in fact searched for the requested documents and, if those documents no longer exist or cannot be located, they must specifically verify that it is they who cannot produce. Salim received his B.A. in Applied Communications, with a minor in Legal Studies, from Monmouth University. He received his J.D. from Seton Hall University School of Law in 2014. Salim’s past experiences include interning for a personal injury law firm prior to attending law school, as well as judicial internships in the Civil and Family Divisions. Currently, Salim is taking part in the Immigrants’ Rights/International Human Rights Clinic at Seton Hall Law.
Big things can often come in small packages, especially in the field of eDiscovery. In Christou v. Beatport, LLC, the defendants learned that something as small as a text message on a lost cell phone can lead to a bevy of headache-inducing preservation issues, even without proof that the lost texts actually contained relevant information. Originally, the two parties worked together to create Beatport, an online marketplace dedicated to promoting and selling electronic dance music. When that relationship eventually fell apart, the plaintiff, a prominent nightclub owner, brought suit against Beatport and his former employee who, as a “talent buyer,” was responsible for attracting DJs to perform at the plaintiff’s venues. The plaintiff claimed that since the falling-out, the former talent broker had been strong-arming DJs against performing at the plaintiff’s nightclubs by threatening to drop them from his now high-profile website. Soon after the case was filed, the plaintiff issued a litigation hold letter to the defendants seeking the preservation of electronically stored information. Despite the fact that this letter specifically referenced text messages, the defendants made no effort whatsoever to preserve the text messages on the former employee’s cell phone. Of course the phone was then lost, about a year and a half after the hold should have been instituted. The plaintiff sought spoliation sanctions in the form of an adverse jury instruction. The defendants attempted to shelter themselves from punishment behind testimony that the former talent broker did not use texts to contact clients and no proof was offered that there was relevant evidence anywhere in the phone. Thus, the defendants felt the plaintiff’s motion was entirely speculative. Given the disappearance of the phone, the court recognized that there was simply no way to know whether it contained any relevant evidence. There was also no evidence that the defense had done their due diligence by reviewing the text messages to determine whether any were responsive to the plaintiff’s discovery requests. The court explained that spoliation sanctions are appropriate when “(1) a party has a duty to preserve evidence because it knew, or should have known that litigation was imminent, and (2) the adverse party was prejudiced by the destruction of the evidence.” Here, there was no question that the defendants neglected their duties by failing to make any effort whatsoever to preserve the text messages. Because the loss of the phone was an accident, or at the most the result of negligence, an adverse jury instruction was unwarranted because it would be too harsh a punishment. Instead, the court permitted the plaintiffs to present evidence at trial about the litigation hold and the defendant’s failure to abide by it. Despite finding no foul play by the defendants, sanctions were necessary because “[a] commercial party represented by experienced and highly sophisticated counsel cannot disregard the duty to preserve potentially relevant documents when a case like this is filed.” The previous sentence best sums up the defendants’ actions. They completely shirked all responsibility by failing to turn over the requested text messages or securing the phone itself. Even though the phone was lost accidentally, spoliation sanctions were warranted because of the defendants’ complete disregard of their preservation duties. The time and money spent belaboring this eDiscovery dispute could have been completely avoided if the defendants simply preserved all of its electronically stored information, especially those documents specifically mentioned in a litigation hold. Instead, the defendants suffered what probably turned out to be significant financial consequences fighting the motion and were left to combat incredibly damaging evidence at trial. Jeffrey, a Seton Hall University School of Law graduate (Class of 2014), focused his studies primarily in the area of civil practice but has also completed significant coursework concerning the interplay between technology and the legal profession. He was a cum laude graduate of the University of Connecticut in 2011, where he received a B.S. in Business Administration with a concentration in Entrepreneurial Management.
In a recent ERISA class action case against Coventry Healthcare, th plaintiffs raise four ERISA violations: “Count I asserts a claim for failing to prudently and loyally mange the Plan and assets of the Plan; Count II asserts a claim for failing to monitor fiduciaries; Count III asserts a claim for failing to avoid conflicts of interest; and Count IV asserts a claim for co-fiduciary liability.” While Count II was thrown out on an earlier motion, the remaining Counts are still pending. In this dispute, the plaintiffs filed a motion to compel the defendants to comply with discovery requests. The defendants responded, stating that the plaintiffs’ request was overbroad because it requested documents from too large of a time period. In support of this argument, the defendants cited the related securities violation that involved “the same set of operative facts” where a similar motion was struck down by the court. However, the court noted that ERISA litigation has a different scope from securities cases, and the relevant period here is the period of time during which Coventry engaged in imprudent investment: “[U]nlike the Securities Litigation, in which the focus is primarily on misleading statements, the focus in this ERISA action is also on Defendant’s conduct, as fiduciaries, in offering Company Stock as an investment option when they allegedly knew it was overvalued.” Thus, the court granted the plaintiffs’ Motion to Compel, although they did allow the defendant an opportunity to create a “claw-back” provision to reduce the potential burden. Matthew G. Miller, a Seton Hall University School of Law 2014 graduate, focused his studies in the area of Intellectual Property. Matt holds his degree in Chemistry from the University of Chicago. While in law school, Matt worked as a legal intern at Gearhart Law, LLC.
The defendants in Conn. Gen. Life Ins. Co. v. Scheib objected to five of the plaintiff’s Requests for Production of Documents (“RFPs”) because they would be unduly burdensome to produce. Thus, the court allowed the defense counsel to come forth with evidence to prove that the production of those documents, which consisted of 219 gigabytes of 19 different e-mail accounts. The court determined that such production would be unduly burdensome. Counsel for the defendants did indeed file a Supplemental Briefing Regarding Cost of E-Mail Production indicating that it would cost over $121,000 to index, filter, and process the data. In this case the plaintiff’s complete claim totaled $119,515.49. In analyzing the defendants' proof against production, the court used Federal Rule of Civil Procedure 26(b)(1), which states that a court can limit discovery of relevant material if the discovery sought is unreasonably cumulative, obtainable from another source that is more convenient, less burdensome, or less expensive, or the burden or expense of the proposed discovery outweighs the likely benefit. The party objecting to the discovery request has the burden of proving why the requested discovery should not be permitted. But, if the party meets that burden, the burden then shifts to the original requesting party to show that the information is relevant and necessary for the case. The court also goes through the steps of analysis of determining whether a party meets the burden of proof. The first inquiry is to determine the benefits derived from the documents requested, specifically what relevant information will become available and the value of that information in resolving issues in the case. Then, those benefits should be compared against the cost of the production of the documents. Additionally, the court can deny the discovery request if the court finds there is a likelihood that the benefits of the requested discovery would be outweighed by the burden or expenses imposed by the proposed discovery. The court here also noted that cost shifting is a possibility when the documents are found to be burdensome to one party, but the other party feels they are necessary for the case. So a court could determine that parties either need to share the costs of a discovery request, or that a proposing party must take over costs for the request. The court found the defendants provided enough proof that the five RFPs were unduly burdensome to produce. The costs, tasks, and outside firms that would need to hired all combined convinced the court that it outweighed the benefit that the plaintiff would get out of the documents. Additionally, the court noted the lower stake of the litigation and the already provided documents that hit many of the relevant matters at hand in the case. The court also allowed the plaintiff to fund the retrieval of the information requested in those five RFPs if desired: “If Plaintiff believes that this information is important to its case, then Plaintiff can perform its own cost-benefit analysis and determine whether it wants to fund the discovery.” Overall, Scheib teaches us that once a party gets past the heavy burden of proving that production is burdensome, then all burden and costs could easily shift to that original requesting party.
In Brown v. Tellermate Holdings Ltd., Tellermate Holdings, the defendant company, terminated two employees for allegedly failing to meet sales targets over several years. The employees, feeling that they were wrongfully terminated due to their age, filed an employment discrimination action against the company as well as other entities and individuals associated with Tellermate. Throughout pre-trial proceedings, the case was plagued with numerous discovery mishaps. The plaintiffs requested from the defendant company data stored and maintained by Salesforce.com, which would, in theory, evidence plaintiffs’ sales records over the last few years in addition to allowing the plaintiffs to compare their sales figures with other (younger) employees. However, even though numerous discovery conferences were held, numerous discovery motions filed with the court, and several discovery orders issued by the court, the defendant corporation failed to produce the requested data and documents. Ultimately, the plaintiffs filed for judgment and sanctions under Federal Rule 37(b)(2); the court held a three-day evidentiary hearing on the matter. The presiding judge, United States Magistrate Judge Terence P. Kemp, identified three areas in which the defendant company or its counsel failed in its obligations to the plaintiffs and the court in relation to production of documents and data: Defendant’s counsel failed to understand how Tellermate’s data stored with Salesforce.com could be obtained and produced to plaintiffs, which resulted in counsel making false statements to the plaintiffs’ counsel and the court; By failing to understand how the defendant’s data was stored and maintained, defendant’s counsel took no steps to preserve the integrity of the information in Tellermate’s database located with Salesforce.com; Defendant’s counsel failed to learn of the existence of documents relating to a prior age discrimination charge until almost a year after plaintiffs requested the documents; Defendant’s counsel produced a “document dump” resulting from counsel’s use of an overly-broad keyword search that yielded around 50,000 irrelevant documents, which plaintiffs’ counsel could not review within the time period ordered by the court. The Salesforce.com Data Judge Kemp found that Tellermate’s failure to preserve and produce the data logged on Salesforce.com’s website irreparably deprived the plaintiffs of reliable information necessary in supporting their claims. Although defendant’s counsel initially stated that Tellermate “does not maintain salesforce.com information in hard copy format,” “cannot print out accurate historical records from salesforce.com,” and that “discovery of salesforce.com information should be directed at salesforce.com, not Tellermate,” the court found such statements to be on their face false. In fact, Tellermate did have access to the information sought by the plaintiffs as one, and sometimes two, of Tellermate's employees enjoyed the highest level of access to the Salesforce.com information. The court determined that the information eventually produced by the defendants could not be trusted as “even a forensic computer expert has no way to detect hat changes, deletions[,] or additions were made to the database on an historical basis.” Because of Tellermate’s failure to preserve the Salesforce.com data, Judge Kamp precluded Tellermate from providing evidence showing that the plaintiff-employees were terminated for their alleged underperformance. Counsel’s Obligations With Respect to ESI The court found that the defense’s counsel fell short of their well-established obligations to critically examine the documents and data Tellermate provided to them. Tellermate made false representations to its counsel about the data’s availability and therefore caused undue delay in document production as well as false and misleading arguments to be made to plaintiffs’ counsel and to the court. Subsequently, the plaintiffs were forced to file discovery motions before the court to address these discovery issues which produced the Salesforce.com data that was never properly preserved albeit its significance to the plaintiffs’ case. Judge Kemp ultimately determined that counsel for the defendant conducted an inadequate investigation of Tellermate’s electronic data while simultaneously failing to understand the most basic concepts of cloud computing and cloud storage, which led to counsel’s failing to preserve key electronic data. Control of Data Stored in the Cloud As mentioned above, Tellermate and its counsel repeatedly represented to the plaintiffs and to the court that it did not possess and could not produce any of the Salesforce.com data requested by plaintiffs. Additionally, the defendants asserted that in light of those facts, the defendants could not preserve the data stored on Salesforce.com’s databases at any point prior to litigation. Judge Kemp dismissed these claims. The court concluded that, without any factual basis whatsoever, no substantive argument could be made that Tellermate was prohibited from accessing the information stored on the Salesforce.com databases or that Salesforce.com was responsible for preserving Tellermate’s information and data as it was the entity that maintained possession and control of the data. In reality, Tellermate was the custodian of the data stored on the Salesforce.com databases. While information can be stored in locations outside the immediate control of the corporate entity by third party providers, it can still be under the legal control of the owner of the data and therefore must be produced by the owner under Federal Rule 34(a)(1)(A). Additionally, had Tellermate’s counsel critically examined the agreement between Tellermate and Salesforce.com, it would have realized that Tellermate was the owner of all data created by its employees and that Tellermate could, at any time, download the data stored on the Salesforce.com databases for preservation and production purposes. Limitations on Document Production to Avoid “Document Dumps” Tellermate produced to the plaintiffs 50,000 pages of irrelevant documents, classified by Judge Kemp as a “document dump.” Tellermate’s counsel refused to disclose which search terms it used in deciding which documents to produce to the plaintiffs, claiming that the search terms were privileged. In actuality, the court discovered, Tellermate’s counsel only used the full names and nicknames of employees as its search terms, which obviously yielded irrelevant documents. Without reviewing the returned documents, and because the court’s deadline for producing relevant documents was rapidly approaching, Tellermate’s counsel produced to the plaintiffs the documents as “Attorney’s Eyes Only.” The court recognized that a protective order was permitted only when counsel held a good faith belief that such information constituted a “trade secret or other confidential research, development, or proprietary business information, and that such material was entitled to a higher level of protection than otherwise provided in the protective order.” Tellermate could not demonstrate entitlement to this level of protection with respect to the search terms used in procuring documentation for discovery: The alleged burden imposed by a high volume production does not provide the producing party or its counsel free reign to choose a given designation and ignore the Court’s order pertaining to that designation. First, the court looked to whether competitive harm would result from the disclosure of the types of documents produced by Tellermate to a competitor; however, Tellermate’s memorandum on the issue did not contain any evidence about the harm which might result if the plaintiffs were permitted to review any particular document that was labeled “Attorney’s Eyes Only.” Second, Tellermate’s argument as to the harm it would experience was entirely conclusory and was not supported by evidence: Apart from the general concept that disclosure of some types of sensitive information to a competitor may result in harm, it contains no particularized argument which is specific to [the plaintiff], the way in which he was competing with Tellermate, and how the disclosure of any one of the 50,000 pages marked as attorneys-eyes-only would harm Tellermate’s interests. The court was astounded that Tellermate continually failed to meet the burden required to designate the documents as “Attorney’s Eyes Only” and, up until the hearing date, made no effort the redesignate a single page of the 50,000 produced in order to permit the plaintiffs from viewing the documents. Sanctions The court had absolutely no qualms with an award of attorneys’ fees for all motion practice connected to the preservation and production of the Salesforce.com data. “Had Tellermate and its counsel simply fulfilled their basic discovery obligations, neither of these matters would have come before the Court, or at least not in the posture they did.” The court took great concern to the extraordinary lengths the plaintiffs had to go to in order to obtain the documents maintained by the defendant and, even after several rounds of motions, were not able to obtain all of them. The “Attorney’s Eyes Only” designation on the 50,000 documents produced was also unfounded, the court held, and unduly precluded plaintiffs from necessary evidence that supported their case, which warranted fees under Federal Rule 37(a)(5)(A). Conclusion Tellermate provides a warning to all attorneys that the realm of technology in which their clients are constantly interact with is always changing. Therefore, so does the practice of electronic discovery. Counsel must always meet its duties with respect to ESI by engaging in discussions with its clients and opposing counsel about ESI; being aware, and perhaps even knowledgeable, of new and emerging technologies; and investigating and assessing with its clients the sources and status of potentially relevant ESI. By forgoing these practices, counsel opens itself and its clients to easily avoided and costly sanctions. Daniel is the Editor-in-Chief of eLessions Learned and a third-year law student at Duquesne University. To read more about him, click here.  Salesforce.com is a cloud-based customer relationship management system with more than 100,000 corporate customers around the world. Tellermate and its employees used Salesforce.com to track their sales and other interaction with customers. The court recognized that each sales person using the Salesforce.com management system could add, remove, or otherwise change data on their sales account.  See Zubulake v. UBS Warburg LLC, 382 F.Supp.2d 536 (S.D.N.Y. 2005) (counsel had an affirmative duty to monitor preservation an d ensure all sources of discovery information were identified).
An employer doesn’t need an attorney to tell him or her that destroying evidence relevant to litigation may make the court very unhappy. Often times, when a party acts in bad faith by intentionally destroying evidence, the court will impose a sanction such as an “adverse inference” jury instruction. This type of instruction orders the jury to infer that the missing evidence would have been detrimental to the guilty party. But what if a party did not intentionally destroy evidence in bad faith, but rather lost the evidence due to a negligent mistake? Should the same adverse inference instruction be used? In Pillay v. Millard Refrigerated Services, the court held that even if a party is merely negligent in destroying evidence, a jury may presume that the evidence would have been unfavorable to that party. This permissive adverse inference instruction differs from the circumstances where the court determines that the party acted in bad faith because the court gives the jury the option of making an adverse inference. Typically, when bad faith is present, the court will instruct the jury that it should presume the missing evidence is detrimental to the party who destroyed it. This instruction differs from the instruction in Pillay where the court gave the jury the option of making the adverse inference. The Pillay court imposed a permissive adverse inference jury instruction when an employer negligently deleted relevant information. The employer claimed that it terminated an employee because the employee’s production levels were down. The employee claimed that he was terminated for unlawful reasons and that the employer’s labor management system (“LMS”) would show that the employee’s production level exceeded expectations. The employer, however, no longer possessed the LMS data because of routine deletions of the data after one year. The data was deleted despite opposing counsel’s numerous requests to preserve all relevant documents and evidence. The employer argued sanctions were not warranted because the LMS data was not deleted intentionally or in bad faith. The court rejected this argument holding that even without a showing of bad faith, the court has the discretion to impose sanctions when a party’s negligence causes information to be lost. The court sanctioned the employer with the following permissive adverse jury instruction: Pillay contends that Millard at one time possessed data documenting [an employee’s] productivity and performance that was destroyed by Millard. Millard contends that the loss of data was accidental. You may assume that such evidence would have been unfavorable to Millard only if you find by a preponderance of the evidence that (1) Millard intentionally or recklessly caused the evidence to be destroyed; and (2) Millard caused the evidence to be destroyed in bad faith. Moving forward, this case means litigants must be extra careful in preserving evidence that may be relevant to litigation. One negligent misstep, even if done without any showing of bad faith, may be the cause of an adverse jury instruction that can potentially be the deciding factor in a lawsuit. E-DiscoParty, a Seton Hall University School of Law graduate (class of 2014), served on the executive board of the Seton Hall Law Review and is a member of the Interscholastic Moot Court Board. E-DiscoParty now clerks for a Justice on the Supreme Court of New Jersey.
The plaintiff, Country Vintner, had an agreement with a winery (Esmeralda, who was not named a party to the action) to be the exclusive wholesaler of Alamos, which is an Argentinean wine, in North Carolina. A few years later, the defendant, Gallo, started supplying the wine to a variety of other wholesalers, but not to Country Vintner. The plaintiff sued Gallo for violations of the North Carolina Wine Distribution Agreements Act and for violations of the N.C. Unfair and Deceptive Trade Practices Act. Inevitably, there were disagreements over discovery of Electronically Stored Information (ESI). The plaintiff wanted emails and other ESI that would establish that there had been some sort of collusion between Esmeralda and Gallo that ended up excluding Country from the distribution of Alamos. The parties agreed to narrow the discovery request to certain key words, date restrictions, employees, etc., in order to accommodate Gallo’s complaints of an undue burden and expense to produce the requested information. After much deliberation, and accompanying motions, the district court decided to adopt Country’s proposal, ordering several search-narrowing guidelines. Gallo then collected more than 62 gigabytes of data and gave the data to their lawyers to process and review. The lawyers processed the data into a) searchable data, b) removed system files and exact duplicates, c) and ran several variations of the 19 proposed search terms and phrases. The district court eventually granted Gallo a motion to dismiss the complaint regarding the Unfair and Deceptive Trade Practices Act, and also granted them summary judgment for the remaining Wine Act complaint. Then, perhaps getting a little ahead of itself, Gallo sought to recover $111,047.75 for their eDiscovery work. They broke down the costs as follows: $71,910.00 – for “flattening” and “indexing,” basically making the files searchable and removing duplicate content; $15,660.00 – for extracting the metadata, facilitating data review and other such things; $178.59 – for the conversion from native format to a .tif or .pdf format; $74.16 – for electronically Bates stamping the information; $40.00 – for copying the data onto a disc; $23,185.00 – for ensuring the “quality” of the data and ensure proper preparation of the documents for opposing counsel. The court granted a drastically reduced ESI-related recovery in the amount of $218.59. This covered the costs for copying or duplicating the files but not for their preparation or anything else. The court relied on a 2012 Third Circuit decision (Race Tires Am., Inc. v. Hoosier Racing Tire Corp.) and interpreted the applicable statute (28 U.S.C. § 1920(4), a.k.a. the “taxation of costs” statute) to exclude ESI processing costs. When Gallo appealed this decision, the Fourth Circuit affirmed the lower court’s decision. The court proceeded to go through the history of taxation of costs, which hadn’t existed prior to 1853, and has been slowly added to our law over the years. The latest version of section 1920 was amended in 2008, and allowed for fees for “printed or electronically recorded transcripts necessarily obtained for use in the case;” and “fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.” The court cited a Supreme Court decision that discussed the purpose of section 1920, and said that taxable costs should be a small fraction of the overall costs in litigation, and therefore should be interpreted narrowly to include only what is written in the law. Therefore, “making copies” was interpreted quite literally to include only the costs of actually making the copies, which in this case meant conversion to PDF and TIFF formats, and copying them onto a CD/DVD. Interestingly, the court also responded to the claim that the current e-technology requires more extensive preparation and therefore greater costs, by saying that preparation of discovery documents was always a big cost, yet were not authorized by Congress to be “taxable.” Gallo also tried to argue that when the statute provided for “exemplification” to be included in taxable costs, that it would include the costs in this case, since they had to load the information onto a review platform. The court said that exemplification does not apply here, since it means “an official transcript of a public record, authenticated as a true copy for use as evidence.” In our case, the charges didn’t include either any public records to be authenticated, or any exhibits. So the costs did not qualify as exemplification. What can be learned from this case is that although there are many things that go into the preparation of any type of discovery, including ESI, the costs of that preparation are not always carried by the requesting party. Undoubtedly, the charges that the defendant was trying to tax onto the plaintiff were legitimate. However, the history of the taxable charges laws has shown that the costs of production of discovery have been greatly limited to the copying stage, and not to the production. I would suggest, therefore, that before a party actually goes through the production and incurs its costs, perhaps they should include the costs into their discovery agreement. Akiva Shepard received his J.D. from Seton Hall University School of Law in 2014. Akiva has worked for a New York State Supreme Court Judge in Kings County and for a NJ real estate firm.
In W Holding Co., Inc. v. Chartis Ins. Co. of Puerto Rico, the receiver of Westernbank, FDIC-R brought action under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) against the banks’ directors and officers (D & O’s) for gross negligence, breach of fiduciary duties, fraudulent conveyances, and adverse domination. Prior to discovery, FDIC-R proposed an order establishing a protocol for discovery of Wesernbank’s ESI and to reduce the number of written interrogatories it would receive. The D & O’s offered a competing protocol. The court denied FDIC-R’s request to alter the number of interrogatories and issued a separate order to establish ESI protocol. When FDIC stepped in as a receiver for Westernbank, it possessed 6.8 terabytes of ESI and over 900,000 paper documents. FDIC spent $2.1 million to put the ESI into a system called DMS iConnect (“DMS”), an internal database where the relevant paper documents were scanned into digital images and processed to generate searchable text. FDIC waned to use a second contractor-maintained system called Relativity to give its litigation opponents searchable access to selected data, which will cost $450 per gigabyte to move. FDIC-R wanted D & O to share in the costs. FDIC–R advanced three rationales in support of its proposal: (1) ESI production costs are analogous to “copying costs” borne by the requestor; (2) the Westernbank ESI is “not reasonably accessible” under Rule 26(b)(2)(B); and (3) the seven-factor test applied in Zubulake III requires cost-shifting in this case. The court disagrees with all three FDIC-R’s arguments. As to the argument that production costs are analogous to copying costs, the Court felt that FDIC-R failed to explain how those costs are outside the realm of gathering and preparation expenses customarily borne by responding parties. As for accessibility, the Court disagreed with FDIC-R’s position that Federal Rule of Civil Procedure 26(b)(2)(B) required cost-shifting when large volumes of ESI were involved. To be inaccessible, the FDIC-R would have to argue the “cost or burden” of production is tied to “some technological feature that inhibits accessibility.” However, the FDIC-R failed to raise any technological issues. The court further noted that the relevant data had already been uploaded into a searchable and organized retrieval system. The court also rejected FDIC-R’s third argument that the seven-factor test in Zubulake III requires cost shifting. Zubake also requires that the date in question be inaccessible, which the Court already stated was not. Finally, as to the request to limit the number of interrogatories, the Court believed the requests were “too speculative to merit a ruling at this time.” The Court felt that until the parties take more affirmative discovery steps, there is no ground for the Court to alter the defaults under the Federal Rules of Civil Procedure. Salim received his B.A. in Applied Communications, with a minor in Legal Studies, from Monmouth University. In 2014 he received his J.D. from Seton Hall University School of Law in 2014. Salim’s past experiences include interning for a personal injury law firm prior to attending law school, as well as judicial internships in the Civil and Family Divisions.