Shortly after the turn of the century, a series of decisions emanated from the U.S. District Court for the Southern District of New York on the topic of “e-discovery.” Many would argue that Judge Shira Scheindlin’s opinions in the renowned case of Zubulake v. UBS Warburg marked a turning point in modern litigation. Indeed, one might characterize the opinions as causing a seismic shift, ultimately similar in magnitude to adding the concept of discovery to the Federal Rules of Civil Procedure in 1937. 

Since Zubulake, a number of jurists around the country have been recognized as “thought-leaders” in this ever expanding sub-specialty of the law. Magistrate Judges Paul Grimm and David Waxse from Maryland and Kansas, and Judge Lee Rosenthal from the Southern District of Texas quickly come to mind. But the Southern District of New York has once again taken center stage, producing the most talked about new law of this decade. 

Pilot Project for Complex Cases

On October 31, 2011, the U.S. District Court for the Southern District of New York issued a Standing Order establishing new pretrial procedures designed “to improve the quality of judicial case management” in complex cases. The Standing Order was the culmination of a year-long effort by the district court’s Judicial Improvements Committee, chaired by Judge Scheindlin, and known as the Pilot Project Regarding Case Management Techniques for Complex Civil Cases.

The Standing Order comprehensively addresses all aspects of pre-trial procedure, but includes many provisions of particular interest to the e-discovery community. These include:

• Requiring parties to provide, at the initial pre-trial conference, a “concise overview of the essential issues in the case and the importance of discovery in resolving those issues so that the Court can make a proportionality assessment and limit the scope of discovery as it deems appropriate. The Court may also wish to consider the possibility of phased or staged discovery.” Standing Order at I.B.3.
• Requiring discovery disputes to be submitted to the Court by “a letter of not more than 3 single-spaced pages.” All disputes that are to be raised at the time “must be submitted in a single letter.” (Emphasis in original.) Standing Order at II.B.1.
• Expediting briefing of discovery disputes—with a “responding letter” to be filed within three business days and a “reply” two business days thereafter. Standing Order at II.B.2 and 3.
• In Camera sampling of assertions of privilege in the event of dispute. Standing Order at IIC.
• Identifying documents that presumptively need not be logged on a privilege log, including communications between a party and its trial counsel, work product after commencement of the action, and internal communications within a law firm or within a legal department.
• Streamlining the requisite description of email threads in privilege logs.

The expedited and limited briefing contemplated by the Standing Order may be problematic in the context of e-discovery disputes, which often involve very complex issues. However, the remaining provisions may provide some welcome relief to employers and their counsel. This is particularly true of the emphasis on proportionality and the concept of staged discovery—if only judges take to heart the message to them implicit in that emphasis. 

The primary source of all evils associated with e-discovery is volume. Given the ubiquity of electronically stored information (ESI), the notion of “complete” discovery, which underlies rules created for a paper world, no longer works. Yet to date, courts have been loathe to tell a litigant that it has “enough” discovery. Similarly, despite the difficulty of drawing lines between “stages” of discovery, targeting discovery to particular issues that may be determinative of a case, or lead to early resolution of a case, can be an effective tool in controlling costs.    

The Standing Order also attempts to force changes in litigant practices by mandating submission of a detailed Joint Electronic Discovery Report and Proposed Order (Report Form). Significantly, the Report Form requires that “counsel certify that they are sufficiently knowledgeable in matters relating to their clients’ technological systems to discuss competently issues relating to electronic discovery” (or have identified a substitute for this purpose). The Report Form also attempts to put “teeth” into the Federal Rules of Civil Procedure 26(f) conference. The parties must discuss, and report on, methodologies and protocols for search, review, and production of ESI. The Report Form makes clear that parties are expected to engage in full disclosure regarding keyword search lists, hit reports and response rates, and limitations used in searching, such as fields or file types and date restrictions. 

Mandated information sharing does not stop with the mechanics of finding and producing ESI. Rather, the Report Form implies that the parties are to identify custodians and systems from which production will be made, including whether searches will be conducted of back-up tapes, archives, and legacy systems. While not mandating disclosure, the Report Form also implicitly urges parties to disclose details of litigation holds, including recipients, dates, and contents. Notably, litigation holds have generally, but not universally, been held privileged in the absence of spoliation. The Southern District of New York may be breaking away from that mainstream. In any circumstance, litigation holds should be drafted in the belief that they may someday become evidence. The Pilot Project’s direction simply elevates the importance of that precaution.

Pippens v. KPMG

The Pilot Project makes clear that “preservation” is a topic that should be addressed in the early stages of litigation—a concept with which few would disagree. The question with which the e-discovery community wrestles is what factors should define the scope of preservation. 

Pippens v. KPMG dashes the hope that preservation obligations may soon be reined in. In this putative wage and hour class and collective action challenging the exempt status of associates working in KPMG’s audit practice, KPMG had requested the court to grant it relief from preserving thousands of putative class members’ hard drives. KPMG’s argument focused on the high cost of preservation versus the uncertain relevance of the potential information. In other words, it focused on proportionality. 

KPMG’s request for relief was denied. On the subject of proportionality, the court acknowledged that several recent cases had advocated for proportionality in defining the preservation obligation, citing Victor Stanlev, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 522-23 (D. Md. 201 0) (Magistrate Judge Grimm) and Rimkus Consulting Group, Inc. v. Cammarata, 688 F. Supp. 2d 598, 613 (S.D. Tex. 2010) (Judge Rosenthal). However, the court then quoted from the more cautionary Orbit One Commc'ns, Inc. v. Numerex Corp., 271 F.R.D. 429, 436 (S.D.N.Y. 2010) (“‘this [proportionality] standard may prove too amorphous to provide much comfort to a party deciding what files it may delete or backup tapes it may recycle’”; “‘[u]ntil a more precise definition is created by rule,’ prudence favors retaining all relevant materials”). Ultimately, the Pippens court determined that the risk of spoliation would be too great if it granted the relief sought by KPMG. The magistrate’s order was affirmed by the district court on appeal. Pippins v. KPMG, LLP, 11 CIV 0377 (S.D.N.Y. October 7, 2011) aff’d 2012 WL 370321 (S.D.N.Y. February 03, 2012).

In rejecting the application of proportionality to preservation, the Southern District of New York has bucked the prevailing tide, which seemed to be trending towards inclusion of the concept. Indeed, the well known Sedona Conference and other think tanks had floated the idea of incorporating the concept into the Federal Rules of Civil Procedure. Since Pippens, this suggestion appears to have fallen by the wayside.

Da Silva Moore v. Publicis Groupe

The two aspects of e-discovery that are most troublesome (and costly) are preservation and identification of relevant, responsive information. While Pippens may have put a stop to a potentially beneficial movement regarding the former, Da Silva Moore may serve to revolutionize the latter. 

Due to the vast volume of ESI, most courts have recognized that manually identifying relevant, responsive information is cost and time prohibitive. The use of search terms to partially automate the process has become accepted practice. But search terms do not have a good track record of efficiency or accuracy. Indeed, 80 to 90 percent of the data identified through search terms is usually found non-responsive. At the same time, numerous extremely relevant documents may be overlooked because of linguistic peculiarities. Use of advance search features available in some early case assessment tools alleviate these drawbacks in small measure, but processing and reviewing large quantities of ESI are still both a daunting and expensive task. 

Magistrate Judge Andrew Peck may have catapulted e-discovery practitioners (and vendors) into the next generation of identification techniques when he approved a proposal to use “computer-assisted review” as “an acceptable way to search for relevant ESI in appropriate cases.” In his landmark opinion, Magistrate Judge Peck provided a scathing analysis of the traditional search term/linear review discovery model that is used in most cases. He pointed to studies demonstrating that computer-assisted review (also known as “predictive coding”) is far more effective at finding relevant documents, thus avoiding the expensive and time-consuming review of “false positives.” This method of review also provided statistical analysis of the likelihood that relevant documents had been left behind—a feature not generally available in traditional approaches. After extolling the virtues of computer-assisted review, Magistrate Judge Peck went on to approve, over the plaintiff’s objection, a specific approach to computer-assisted review that was proposed by the defendant. In so doing, he removed the uncertainty that employers typically face in unilaterally designing search strategies.

The official sanction of computer-assisted review is a significant development for employers attempting to cope with large data sets. The method holds great hope for significantly reducing costs.  However, it is not a panacea. While computer-assisted review has the potential to significantly reduce back-end review costs, it actually requires more up-front investment. Vendor costs for initial processing are significantly higher than traditional processing. “Educating” the software on what is relevant requires the in-depth involvement of senior counsel who are well versed in the issues and facts of a particular case. Likewise, developing the protocol for computer-assisted review is a resource intensive process. Unlike the straightforward application of search terms, there is no single standardized protocol for computer-assisted review.

Successful use of computer-assisted review also may involve greater transparency and a higher level of cooperation than counsel is accustomed to. For instance, in Da Silva, the defendant agreed that it would permit the plaintiff’s counsel to review both responsive and non-responsive documents in the “seed sets” (used to educate the software) so long as the documents were not privileged.   

Whether computer-assisted review is the right approach for any particular case remains an open question. However, Da Silva legitimizes a new option and puts the Southern District of New York back on the cutting edge of e-discovery.

Chin v. Port Authority of New York & New Jersey      

The vast majority of this recent opinion from the Second Circuit Court of Appeals has nothing to do with e-discovery. However, the next to last three paragraphs may bring sighs of relief to corporate counsel and their defense attorneys across the nation.

The Zubulake opinions alerted the legal community to the need for diligent preservation efforts. Judge Scheindlin’s scathing opinion in Pension Comm. Of Univ. of Montreal Pension Plan v. Banc of Am. Secs., LLC, 685 F. Supp. 2d 456 (S.D.N.Y. 2010) struck terror into the hearts of many—in particular the court’s pronouncement that failure to issue a written litigation hold constituted gross negligence per se.

In Chin, an employment discrimination case challenging promotion processes, the Second Circuit decisively rejected that rule, effectively overruling at least this aspect of Pension Committee.

We reject the notion that a failure to institute a ”litigation hold” constitutes gross negligence per se. Rather, we agree that ”the better approach is to consider [the failure to adopt good preservation practices] as one factor” in the determination of whether discovery sanctions should issue.

2012 WL 2760776 *21 (citations omitted).

The Second Circuit went on to find that the district court’s refusal to give an adverse inference instruction was not an abuse of discretion because the destroyed evidence played a “limited role” in the challenged promotion process and the plaintiffs had “ample evidence regarding their relative qualifications” despite the missing evidence. Id. The court also emphasized that a “case-by-case approach to the failure to produce relevant evidence” was the right approach.

Whether the Second Circuit’s seemingly more tempered perspective on preservation and spoliation will make any real difference remains to be seen. The court certainly did not suggest that litigants had no obligation to preserve potentially relevant evidence. At the same time, the distinction between simple and gross negligence may be principally one of semantics—either can lead to sanctions, including adverse inferences in the Southern District of New York. Still, the court’s ruling may signal recognition that preservation and spoliation are not black and white, but rather, many shades of grey, so that trial courts must take a closer look at the totality of circumstances.

Note: This article was published in the July 2012 issue of the Class Action eAuthority.