Does a party obligated to produce ESI need to do more after coming up with electronic documents by using a reasonably constructed search strategy?

What Responsibility Does An ESI Producing Party Have in Reviewing the Documents for Responsiveness?

ESI is usually massive and its discovery burdensome. The proportionality consideration is thus often a deciding factor for courts to impose a particular document production protocol. The rules of ESI request and production do not offer a clear line as to the form of production and the obligation of a producing party in further culling for responsiveness by reviewing search hits produced by computers. That allows courts to order production procedures with considerable flexibility.

ESI production is governed by Rule 34 of FRCP, which states that a request of ESI production “may specify the form or forms in which electronically stored information is to be produced” (emphasis added). However, rule 34(b)(2)(E) specifies that:

(E) Producing the Documents or Electronically Stored Information. Unless otherwise stipulated or ordered by the court, these procedures apply to producing documents or electronically stored information:
(i) A party must produce documents as they are kept in the usual course of business or must organize and label them to correspond to the categories in the request;
(ii) If 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; and
(iii) A party need not produce the same electronically stored information in more than one form.

As to the responsiveness review, nowhere in Rule 34 is it expressly stipulated how the review should be carried out and how the electronic search should be conducted, particularly in the context of ESI.

The court in FDIC v. Bowden, by referencing other cases, developed some practical guide in applying the ESI production rules as to production forms and responsiveness review responsibility. In FDIC v. Bowden, the court, in the spirit of balancing discovery burdens and applying proportionality restriction, provided a reasonable ESI production procedure to follow in the particular context of the case. That context, involving a suit by FDIC who took over a failed bank for mismanagement against some prior executives of the bank, may not be as uncommon as it appears, particularly in the aftermath of the 2008 financial crisis resulting from broad adoption of ruthless practices by the financial industry. The position of the court is thus illuminating and offers much guidance to parties facing similar situations.

Specifically in FDIC v. Bowden, a bank insured by the FDIC failed and the FDIC formed a separate legal entity, the FDIC-R, to act as a receiver and took over the bank. The FDIC-R then brought a bank mismanagement case against sixteen former directors and officers. The parties disputed as to the ESI document production protocol. Like many other mismanagement cases, the defendant had been running the bank and thus had some reasonable understanding of majority the bank’s (or the plaintiff’s) ESI and knew reasonably well what needed to be searched. This point seems to have carried much weight for the court to determine a suitable document production protocol.

First, it is interesting to note that the court treated acceptable ESI production protocol by FDIC for defendants’ request for documents related to FDIC’s claims separately from defendants’ request for documents responsive to defendant’s defenses.

As to the production of ESI related to the claims, the court first noted that since this type of case generally involves the bank’s takeover by the FDIC and thus the ESI has usually been modified in the course of FDIC’s running of the bank. Thus, irrespective of whether the defendants specified any document production form, FDIC cannot really satisfy the “course of business” option of Rule 34(b)(2)(E)(i) by simply providing ESI as kept by FDIC because the “course of business” was held by the court to mean the business of the bank, not of the FDIC. Under Rule 34, the FDIC thus needed to produce categorized documents according to defendant’s request. But there is no obligation for the responding party to examine every scrap of paper in its potentially voluminous files in order to comply with its discovery obligations. Rather, the court approved a two-stage scheme. In the first stage, FDIC only needs to conduct a diligent search, which involves developing a reasonably comprehensive electronic search strategy, categorize the resulting files according to the request, and produce the documents. However, the obligation (if there is one) for FDIC to review the responsiveness of the documents resulting from these initial searches may be obviated through a cooperative search query formulation on an equal access document database in a second stage document production. Specifically for the second stage, parties would agree to a set of search terms to apply to the Bank’s database maintained by FDIC-R. FDIC-R would then export the results into some review tool, called “Relativity” in this case. FDIC-R would provide full accessibility of “Relativity” to defendants. That way, the defendants can be afforded the opportunity to review the documents identified through the second round searches and select for production only the documents that the defendants desire.

As for the defendant’s interest in corralling documents in support of their defense, the court held that FDIC-R must confer with defendants and run whatever reasonable searches they wish to run on the electronic records and make those hits available for review and refinement. This seems to be a natural way of dealing with request for document helping with defense since the defensive strategy is mostly with the defendants themselves.

From this case, it appears that as long as a responding party conducts a reasonable and diligent electronic search according to the document request and produces hits, it does not immediately have the obligation to further review these hits for responsiveness. However, the court may ask the responding party to make their ESI database available for a collaborative search between the parties. The responding party can always produce these hits in a format kept in ordinary course of business irrespective of whether the requesting party has specified any form of production. Of course, the responding party can also produce the document by categorizing the document according to the request if it chooses to do so or if the ESI has been altered and becomes too burdensome to reverse to the form kept in ordinary course of business.

Gang Chen is a Senior Segment Manager in the Intellectual Property Business Group of Alcatel-Lucent, and a fourth-year evening student at Seton Hall University School of Law focusing on Patent Law.

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