In Re NVMS, LLC, Case No. 308-01901 (Bkrtcy.M.D.Tenn. Mar 21, 2008)

The debtor in this case is a medical services company who contracted with Medical Billing Partnership (“MBP”) to handle all of its billing. After filing for bankruptcy, the debtor asked MBP to provide billing data so as to determine the status of claims, but MBP refused to provide the information due to the proprietary software. MBP did provide a hard copy as well as a CD-rom with the information in an unformatted text file. 

Yet, according to sworn statements, “there is no way to translate or convert the text on the CD-rom into a useful format without ‘manually going through each line of text and coding or delimiting it, which would require enormous time, effort, and money.’” Opinion at 1-2. The court, in weighing the competing concerns of trade secrets versus discoverable information decided that “data in its native format is discoverable” but ordered the electronic information to be used only for the debtor’s claims and returned after all claims have been resolved. Opinion at 3. 

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Hoover v. Florida Hydro, Inc., Case No. Civil 07-1100 (E.D.La. Oct. 1, 2008)

Defendant’s majority shareholder, Williams, created and obtained a patent for a hydroelectric generator but couldn’t find any funding to commercialize the invention. Plaintiff, Hoover, helped by developing a business plan, purportedly in exchange for a verbal offer of half of the Florida Hydro stock which was never memorialized or exchanged, and therefore resulted in this lawsuit.

The defendant requested production of electronic data storage for a roommate of Hoover and Hoover’s mother. Hoover argues that Florida Hydro is not entitled to inspect the identical electronic data that was already submitted in hard-copy format as a response to an earlier subpoena. The court “acknowledges but disagrees with Hoover’s suggestion that, if Florida Hydro wished to challenge the completeness of [his mother’s] earlier production, it should have filed a motion to compel. A party is free to utilize the discovery method it deems appropriate…”Opinion at 4. 

Since Hoover’s mother had previously revealed she had electronic information from Florida Hydro on her computer, the court allowed forensic computer inspection. The court, though, found no defect in the responses of Hoover’s roommate and thus quashed the subpoena for the production of his computer. 

Hoover then claimed that he has used his mother’s computer for communication with his lawyers and thus it was protected by attorney-client privilege. The court was “not persuaded that the electronic search could not be configured so as to exclude these communications…” and therefore allowed the search. Opinion at 5. 

The court did order Florida Hydro to “prepare and exchange a Search Protocol with Hoover prior to the production and inspection of [Hoover’s mother’s] computer”, apparently attempting to preempt other discovery issues in this case. Opinion at 5. 

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Koosharem Corp v. Spec Personnel, LLC, Case No. Civil 6:08-583-HFF-WMC (D.S.C. Sept. 29, 2008)

The plaintiff in this case runs a national human resource outsourcing company that provides staffing services to the transportation industry. The defendant, a former Vice President of Plaintiff, is now employed with a direct competitor and hired away several employees to join him. 

Discovery in this case involved email requests, but when the emails were produced in response, every email had been modified to reflect the date the email was compiled, not the dates they were sent. In addition, “irregularities” in the emails called into question the authenticity of the documents. These irregularities included an email from a person who was not listed as sender or recipient and emails missing attachments. The plaintiffs believed the documents had been modified after the defendants were put on notice of the litigation and thus a failure to execute a proper litigation hold. 

The court found forensic analysis of the home computers of the defendant-employees appropriate. The plaintiff believed there were confidential documents emailed from the plaintiff’s workplace to home computers immediately prior to the employees moving to the competitor-defendant. The employees also used their home computers for their first month of work with the defendant’s business. The court also ordered the computer forensic analyst to determine whether any programs have been installed that would “alter, destroy, erase, modify, or otherwise compromise any portion of each computer or its contents…” Opinion at 2. 

The suspicion surrounding the first email production caused much more time and expense for both sides in this case. This initial request should be taken seriously to avoid these issues. 

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Dorn-Kerri v. South West Cancer Care, Case No. 06-1754 (S.D. Cal. Aug. 18, 2008):

This was an employment discrimination case where the pro se plaintiff sought discovery of certain information regarding her employer’s medical billing practices. The plaintiff first sought hard-copies of the requested material, but was informed that such information is destroyed as the medical bills were paid by the patients and/or their insurers. Therefore, the trial court ordered that the plaintiff be permitted to conduct an on-site inspection of the employer’s computer systems, with the aid of a computer expert, to see if the information could be regenerated.

Prior to the on-site computer system inspection, the defendant searched its archived tangible files for the requested information, but found no such documents. The defendant also contacted the manufacturer of the medical billing software at issue to determine if the information could be reproduced, but was informed that the software was incapable of such actions. Apparently the evolving nature of the medical billing information input into the system, wherein updates were made as medical bills were paid, thereby altering the status of the accounts tracked therein, prevented the reports from being regenerated. 

During this on-site computer inspection, the plaintiff’s computer expert was permitted to instruct the defendant’s employee concerning how to regenerate the reports at issue. However, neither the plaintiff’s expert’s process, nor any attempt by the defendant, succeeded in reproducing the requested reports. Thereafter, the plaintiff sent additional discovery requests (outside the discovery period), to which the defendant refused to respond. Therefore, the plaintiff filed a motion to compel the requested information, as well as electronically stored versions of the requested medical billing reports.

In ruling on that motion to compel, the trial court noted that the plaintiff met her initial burden to establish that the requested information was relevant to the case. However, the requested information was destroyed in the ordinary course of business. (Remarkably, no mention is made concerning if and/or when the defendant employer should have taken steps to prevent this information from being destroyed in the ordinary course of business). The trial court denied the motion to compel, holding that the defendant had “performed its discovery obligations to the best of its ability.” Stating the obvious, the trial court noted that, “[i]f a document or thing does not exist, it cannot be in the possession, custody, or control of a party and therefore cannot be produced for inspection.” Slip Opinion at 8.

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Reino de Espana v The American Bureau of Shipping, Inc., Case No. Civil 3573 (S.D.N.Y. Aug. 18, 2008)

In 2004 an oil tanker sank off the coast of Spain. Spain, as Plaintiff in this action, while apparently unhappy about the situation, has consistently refused to disclose electronic documents for the relevant time frames. In 2004, the Defendants first requested all non-privileged electronic documents for a nine-day period during which Spain took control of the tanker. Several orders from 2006-2007 have compelled discovery. Sanctions were granted against Spain for failure to provide such information and Spain appealed such an order. 

After considering all the evidence in the original request for sanctions, the judge found that Spain’s dodging of the Federal Rules was sanctionable, Spain’s representations that further electronic documents did not exist were unconvincing, the Defendants’ discovery request was reasonable and limited, and Spain had failed to preserve electronic documents by neglecting to put in place a litigation hold. 

Judge Ellis noted that Spain’s “failure to act timely [to preserve documents] supports the allegation that the lack of electronic records is a function of the failure to adequately preserve evidence, and not an indication that such records simply did not exist.

Opinion at 3, quoting Nov. 2 Order at 14.

The court affirmed that Spain had adequate notice that preservation and spoliation would be at issue. Judge Ellis noted, “…it’s my view that when a party is asked to produce documents it is always an issue whether or not…they adequately preserved them.” Also, “[Spain’s] failure to conduct a timely and effective search for electronic discovery records undermines Spain’s position [that it has produced all discovery records from the casualty period] and indicates that evidence related to the [tanker] was likely lost.” Opinion at 5-6, quoting Evid. Hrg. Tr. 42 and Nov. 3 Order at 8. 

Neither judge found any humor in Spain’s failure to preserve evidence then when adequately warned to do so, thus the objections to the sanctions were overruled.

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Sherman v. Harrah’s New Orleans Casino, Case No. Civil 06-2379 (E.D.La. August 19, 2008)

In July 2007, Plaintiff filed a second motion to compel Harrah’s to satisfy its discovery obligations by providing him with “all information pertaining to his gambling activities, most of which was electronically stored.” Opinion at 2, citing Report & Recommendation, p. 3. The Magistrate ordered a Rule 30(b)(6) deposition of Harrah’s employees to determine how its computer-related documents were kept. On the eve of depositions, Harrah’s provided Plaintiff with “nearly three hundred pages of additional responsive documents.” Opinion at 2, citing Report & Recommendation, p. 3. Harrah’s representatives essentially testified in the depositions that the major database systems could have been accessed sooner to obtain the electronically-stored information.

The Magistrate found that Harrah’s had abused the discovery process and ordered Plaintiff to document how much time had been spent in conjunction with the second motion to compel. The Magistrate recommended that Plaintiff be awarded over $15,000 for costs, IT support services and attorney’s fees, on the grounds that, 

It was only after plaintiff filed and litigated two motions to compel and deposed five Harrah’s employees on three separate days that he obtained all documents and electronically stored data pertaining to him and that the reasons offered by defendant do not justify the extensive efforts plaintiff was required to take to obtain the requested information. 

Opinion at 4, citing Report & Recommendation p. 5. 

Ultimately the court granted summary judgment for Harrah’s and dismissed Plaintiff’s case, taxing costs against the Plaintiff, yet refusing to tax plaintiff for costs of depositions necessitated by Harrah’s misconduct.

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Mancia v. Mayflower Textile Servs. Co., Case No. 08-273 (D. Md. October 15, 2008)

Magistrate Judge Paul Grimm strikes again. Judge Grimm authored Victor Stanley, discussed here, and Hopson, discussed here, which are even now reshaping search and retrieval practice and protection from inadvertent disclosure of privileged material in e-discovery, as well as Lorraine v. Markel American Insurance, discussed here and in several other posts, in which he expounds on all manner of issues relating to authentication and admissibility of ESI. Now, in his latest opinion, he directly confronts discovery abuses arising out of overbroad and burdensome discovery requests, boiler plate objections, and the failure of counsel to engage in cooperation and communication regarding the scope and timing of discovery. The opinion is an important one, particularly in light of the Judge’s extraordinarily high profile in the discovery arena. 

Judge Grimm begins with an analysis of Rule 26(g), Fed. R. Civ. P., the rule that requires that a signature of counsel accompany every discovery request, response and objection. He characterizes the rule as one of the most important, “but apparently least understood or followed, of the discovery rules.” 

The signature “certifies that to the best of the person's knowledge, information, and belief formed after a reasonable inquiry,” the disclosure is complete and correct, and that the discovery request, response or objection is: (a) consistent with the rules of procedure and warranted by existing law (or by a nonfrivolous argument for extending, modifying, or reversing existing law, or for establishing new law); (b) is not interposed for any improper purpose (such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation); and (c) is 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 issues at stake in the action).

Slip Opinion at 7-8 (emphasis in original). He follows this with a reference to the Advisory Committee Notes, which “significantly flesh [the Rule] out”:

Rule 26(g) imposes an affirmative duty to engage in pretrial discovery in a responsible manner that is consistent with the spirit and purposes of Rules 26 through 37. In addition, Rule 26(g) is designed to curb discovery abuse by explicitly encouraging the imposition of sanctions. The subdivision provides a deterrent to both excessive discovery and evasion by imposing a certification requirement that obliges each attorney to stop and think about the legitimacy of a discovery request, a response thereto, or an objection....

Slip Opinion at 8 (emphasis in original). In sum, the Rule “simply requires that the attorney make a reasonable inquiry into the factual basis of his response, request, or objection.”

The Judge bases his demand for cooperative discovery on the affirmative duties underlying Rule 26(g):

First, the rule is intended to impose an “affirmative duty” on counsel to behave responsibly during discovery, and to ensure that it is conducted in a way that is consistent “with the spirit and purposes” of the discovery rules, which are contained in Rules 26 through 37. Id. It cannot seriously be disputed that compliance with the “spirit and purposes” of these discovery rules requires cooperation by counsel to identify and fulfill legitimate discovery needs, yet avoid seeking discovery the cost and burden of which is disproportionally large to what is at stake in the litigation. Counsel cannot “behave responsively” during discovery unless they do both, which requires cooperation rather than contrariety, communication rather than confrontation.

Slip Opinion at 9-10. He notes that the Rule comes fully armed with a requirement that violators be sanctioned. “[T]he rule is intended to curb discovery abuse by requiring the court to impose sanctions if it is violated, absent “substantial justification,” and those sanctions are intended to both penalize the noncompliant lawyer or unrepresented client, and to deter others from noncompliance.”

He then ties the Rule’s passage to the aspiration 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,” and “the equally abusive practice of objecting to discovery requests reflexively – but not reflectively – and without a factual basis.” The Judge goes so far as to explicitly characterize boilerplate objections as “prima facie evidence of a Rule 26(g) violation, because if the lawyer had paused, made a reasonable inquiry, and discovered facts that demonstrated the burdensomeness or excessive cost of the discovery request, he or she should have disclosed them in the objection, as both Rule 33 and 34 responses must state objections with particularity, on pain of waiver.”

The Judge painstakingly names the numerous surveys, commentaries, and Law Review articles that have criticized the cost of discovery in recent days, and then relates it back to the very same criticisms that were leveled when the Civil Justice Reform Act of 1990, 28 U.S.C. §§ 471 et seq., was passed. According to the Judge, little has changed, despite concerted efforts to do so.

The Judge goes on to reject the defendants’ boiler plate objections to discovery requests as nothing more than waivers:

Rule 33(b)(4) requires that “the grounds for objecting to an interrogatory must be stated with specificity” and cautions that “any ground not stated in a timely objection is waived, unless the court, for good cause, excuses the failure”; therefore, the boilerplate objection to Plaintiffs' interrogatory waived any legitimate objection Defendant Argo may have had. The same is true for the boilerplate objections to Plaintiffs' document production requests. The failure to particularize these objections as required leads to one of two conclusions: either the Defendants lacked a factual basis to make the objections that they did, which would violate Rule 26(g), or they complied with Rule 26(g), made a reasonable inquiry before answering and discovered facts that would support a legitimate objection, but they were waived for failure to specify them as required. Neither alternative helps the Defendants' position, and either would justify a ruling requiring that the Defendants provide the requested discovery regardless of cost or burden, because proper grounds for objecting have not been established.

Slip Opinion at 25-26 (citations omitted).

His dealing with the actual discovery requests, however, is a bit more complicated. He notes that Rule 26(b)(2)(C) requires a court, sua sponte, to limit discovery if it determines that any of the conditions set forth in that Rule are present. The record, does not provide him with enough information to make a determination of overbreadth or burden. Therefore, he ordered counsel to meet and confer on the following:

• First, I asked Plaintiffs and Defendants each to estimate the likely range of provable damages that foreseeably could be awarded if Plaintiffs prevail at trial. In doing so, I suggested that the Plaintiffs assume for purposes of this analysis that their pending motion to certify a FLSA collective action would be granted, because doing so would allow the parties to gauge the “worst case” outcome Defendants could face. I then ordered that counsel for Plaintiffs and Defendants compare these estimates and attempt to identify a foreseeable range of damages, from zero if Plaintiffs do not prevail, to the largest award they likely could prove if they succeed. I also asked Plaintiffs' counsel to estimate their attorneys' fees. While admittedly a rough estimate, this range is useful for determining what the “amount in controversy” is in the case, and what is “at stake” for purposes of Rule 26(b)(2)(C)'s proportionality analysis. The goal is to attempt to quantify a workable “discovery budget” that is proportional to what is at issue in the case.
   
• Second, I ordered Plaintiffs' counsel and Defendants' counsel to discuss the amount and type of discovery already provided, and then discuss the additional discovery still sought by Plaintiffs, in order to evaluate the Rule 26(b)(2)(C) factors, to determine whether Plaintiffs' legitimate additional discovery needs could be fulfilled from non-duplicative, more convenient, less burdensome, or less expensive sources than those currently sought by the Plaintiffs. I further instructed Defendants' counsel that during this portion of the discussion, the burden was on the Defendants to provide a particularized factual basis to support any claims of excessive burden or expense.
   
• I then advised counsel that in their discussion they should attempt to reach an agreement, in full or at least partially, about what additional discovery (and from what sources) should be provided by Defendants to Plaintiffs. In doing so, I suggested that they consider “phased discovery,” so that the most promising, but least burdensome or expensive sources of information could be produced initially, which would enable Plaintiffs to reevaluate their needs depending on the information already provided.
   
• Finally, I advised counsel that when they had completed their discussion, they were to provide me with a status report identifying any unresolved issues, and if there were any, I gave them a format to use to present them to me in a fashion that would enable me to rule on them expeditiously.

Slip Opinion at 27-29. As the court noted, this process requires counsel to cooperate and communicate and results in the resolution of most discovery disputes. What the Judge doesn’t say is that essentially he has provided a blueprint for many Rule 26(f) meet and confer conferences.

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Citizens for Responsibility and Ethics in Washington v. Executive Office of the President, Case No. Civil 07-1707 (D.D.C. July 29, 2008) and
National Security Archive v. Executive Office of the President, Case No. Civil 07-1577 (D.D.C. July 29, 2008)

In this case, two political watchdog groups (National Security Archive and Citizens for Responsibility and Ethics in Washington) claimed that several million emails had been improperly deleted from White House computers. Magistrate Facciola previously recommended to Judge Kennedy that the Executive Office of the President (“EOP”) be ordered to collect and preserve all e-mails sent or received between March 2003 and October 2005. The EOP argued that this order is unnecessary because “substantially all” e-mail sent or received between the relevant dates should be contained on existing back-up tapes. 

Magistrate Facciola called this argument “fundamentally flawed because it presumes that all e-mails sent or received between March 1, 2003, and May 22, 2003, remained on the EOP network on May 23, 2003, when the earliest existing back-up tape was created.” Slip opinion at 4. An employee would only need to move the email into a personal folder sometime before May 23, 2003 and that e-mail would not be present on any back-up tape. 

The court had previously raised the possibility of ordering the forensic imaging of data on workstations which would allow for the preservation of data on slack space but not require workstations to be quarantined. The EOP was ordered to figure out how much this would cost. Since there were 545 workstations at issue and the cost of imaging a 100 GB hard drive is between $400 and $1,000 each, the total cost could be over half a million dollars. 

The court decided against ordering forensic imaging in this case, but left open the possibility for the future. “The Court takes no position on whether forensic imaging would be appropriate at a later stage of the litigation, but at this time—with a dispositive motion pending—the limited potential benefit and high potential burden cannot justify its use as injunctive relief.” Slip opinion at 7. 

This should send up several warning signs for those responsible for preserving data. First, the courts are getting smarter on technical matters and thus merely claiming you have all the required email isn’t going to cut it. Second, back-ups taking place years late is a big problem. Third, forensic imaging, while expensive, was left open as a possible remedy should the case and the behavior causing the email deletion warrant that tactic.

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United States v. O’Keefe, Case No. Cr. 06-249 (D.D.C. August 19, 2008)

With the November elections fast approaching, it’s a perfect time to talk about governmental corruption. In this case, O’Keefe was an employee with the Department of State in Canada and allegedly received bribes from Agrawal, the owner of a small jewelry business, for expediting visa requests for employees. Discovery issues have plagued this case for months, and we have written about an earlier decision in the case here. 

Co-defendant Agrawal requested documentation from the State Department and Immigration Services concerning the applications of the employees as well as any post-(visa) issuance analysis, email or other documents. The United States offered a printout of the Consolidated Computer Database but refused to provide any of the post-issuance (post-indictment) communications. Agrawal felt this post-indictment analysis was the “best and most direct evidence regarding whether the visas were issued properly…” Slip opinion at 4, citing memorandum at 7. 

The court ordered the government to examine files in the post-indictment time frame to be able to state unequivocally whether it is in possession of any documents that would fall within this discovery request and produce them. If privilege was to be claimed, a privilege log must be produced that “so explicitly describe[s] the documents that in camera review is unnecessary.” Slip opinion at 5. 

The court appears to be losing patience for the time it has been asked to expend as umpire to these discovery requests and is getting terse. (“There has been extensive discovery in this case but Agrawal now seeks more.” Slip opinion at 2.) The lessons here may be not wasting the court’s time!

Read the O'Keefe I Opinion

Read the O'Keefe II Opinion