[Editor’s Note: This article was first published September 20, 2023 and EDRM is grateful to Tom Paskowitz and Robert Keeling of our Trusted Partner, Sidley, for permission to republish. The opinions and positions are those of the author.]

This Sidley Update addresses the following recent developments and court decisions involving e-discovery issues:

1. an order from the U.S. District Court for the Northern District of Illinois declining to permit discovery into the Defendants’ collection of documents for discovery purposes, where the Plaintiff did not demonstrate a specific and material failure by Defendants to conduct a reasonable inquiry during the discovery process
2. a decision from a discovery special master in the U.S. District Court for the Northern District of Illinois ordering the Plaintiff to produce documents found during “elusion” testing on documents that did not hit on the parties’ search terms, where the Plaintiffs’ initial elusion testing was clearly inadequate
3. a ruling from the U.S. District Court for the Southern District of California denying a motion for sanctions against the Plaintiff for failing to preserve evidence on her smartphone, where the Defendants did not move to compel production of the evidence before moving for sanctions and had not carried their burden to demonstrate that the evidence could not be replaced or recovered from another source
4. an opinion from the New York Supreme Court denying a motion to compel text, social media, and LinkedIn messages where the parties had waived their right to request such information in a discovery stipulation

1. An order from the U.S. District Court for the Northern District of Illinois declining to permit discovery into the Defendants’ collection of documents for discovery purposes, where the Plaintiff did not demonstrate a specific and material failure by Defendants to conduct a reasonable inquiry during the discovery process.

In LKQ Corporation v. Kia Motors America, Inc., No. 21 C 3166, 2023 WL 4365899 (N.D. Ill. July 6, 2023), U.S. Magistrate Judge Sunil R. Harjani addressed the circumstances in which “discovery on discovery” is properly authorized in the federal courts.

Plaintiff initiated this litigation seeking a declaratory judgment of noninfringement and patent invalidity in response to a letter from Defendants alleging that 15 of Plaintiff’s automotive replacement parts infringed on Defendants’ patents. 2022 WL 1092119, at *2. In discovery, Magistrate Judge Harjani ordered the parties to file separate electronically stored information (ESI) disclosures describing their ESI search process up to that point in the case. 2023 WL 4365899 at *2. After Defendants filed their disclosure, Plaintiff served a deposition notice on Defendants specifying 13 topics, 11 of which were directed at Defendants’ document collection efforts. This set of requests, Magistrate Judge Harjani noted, “concerns discovery directed toward the information gathering and production process, what this and many other courts refer to as discovery on discovery.” Magistrate Judge Harjani informed Plaintiff that such a request must proceed by motion, resulting in Plaintiff’s motion to compel. Id. at *1.

In ruling on the motion, Magistrate Judge Harjani first noted that normally a motion to compel would proceed under the standard of Federal Rule of Civil Procedure 26(b), which provides that “parties are entitled to obtain discovery regarding ‘any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.’ ” Id. at *2 (quoting Fed. R. Civ. P. 26(b)(1)) (emphasis in original). But he explained that discovery on discovery does not seek information about a party’s “claim or defense” as Rule 26(b) lays out. And Rule 37, authorizing sanctions, deals with “the consequences of a failure to preserve and/or disclose and does not necessarily address a party’s initial concern that an opponent’s discovery production process was inadequate.” Id. at *4 (emphasis in original). As such, Magistrate Judge Harjani reasoned, another source of authority for a court’s ability to order discovery on discovery would need to be located because “the Federal Rules of Civil Procedure do not explicitly permit this type of discovery” and “[n]othing in the Federal Rules directly enables a party to serve interrogatories, document requests, or conduct depositions about a party’s procedures to comply with its discovery obligations.” Id. at *3 (emphasis in original). He further stated that although “courts have broad authority to manage discovery,” the Federal Rules of Civil Procedure govern what courts are permitted to do, and so “without an applicable rule, discovery on discovery should not be permitted.”

Magistrate Judge Harjani found the applicable rule in Rule 26(g), which “requires counsel and the client to make a reasonable inquiry in responding to discovery, and by signing the response to a document request has certified as much.” Id. at *3-4. He noted that under this rule “counsel must be diligent, make a careful inquiry, and act in good faith,” and courts and parties properly rely on the certifications to that effect. Id. at *4. A violation of Rule 26(g) requires a court to impose “an appropriate sanction.” Id. (citing Fed. R. Civ. P. 26(g)(3)). Magistrate Judge Harjani held that a court may, as a sanction for a Rule 26(g) violation, “order additional discovery to get to the bottom of whether additional responsive documents were not produced because of a failure to conduct a reasonable inquiry in the initial production process.” Id. at *5. He also clarified that “[c]ourt authorization should be sought via motion before a party is allowed to conduct discovery on discovery.” Id. at *7.

Magistrate Judge Harjani explained that Rule 26(g) does not provide a standard under which discovery on discovery might be authorized under the rule. Noting some disagreement on the precise standard among the courts, he explained that all such existing standards “necessitate[] that concrete evidence be presented to the court to support the requesting party’s request.” Id. at *6. Magistrate Judge Harjani then turned to the Sedona Principles for establishing the required showing in the ESI context, noting that the principles provide that “a party bears the burden of providing tangible evidence of a material failure in the discovery process.” That is, there must be a “specific discovery deficiency” and that deficiency must be “material.” In evaluating such a showing, he emphasized that discovery on discovery should be “the exception, not the norm” and that “mere speculation of discovery misconduct” would be insufficient to authorize discovery on discovery. Id. at *5.

Magistrate Judge Harjani next turned to the facts of the case and held that Plaintiff had not demonstrated a specific and material failure by Defendants to conduct a reasonable inquiry in the discovery process. He first rejected Plaintiff’s argument that Defendants’ failure to individually list each custodian or each search string performed was evidence of a failure of a reasonable inquiry, holding that specifying custodians by group within Defendant companies’ organization and “describing when searches were conducted, who conducted them, how they searched for documents, and what documents were collected” was sufficient under the text of the court’s order for an ESI disclosure, especially as Defendants were corporate organizations and the discovery had taken place some time ago. Id. at *8-9.

Magistrate Judge Harjani also rejected Plaintiff’s argument that the lack of a reasonable inquiry could be shown by the absence of any responsive documents in the possession, custody, or control of several of Defendants’ inventors for the automotive parts at issue. Id. at *9-11. He held that no inference of spoliation could be drawn because the documents Plaintiff sought far predated the litigation and so would not be subject to any legal obligation for document preservation, and the documents Plaintiff sought were produced by Defendants’ other custodians. Accordingly, there was no failure of a reasonable inquiry to authorize discovery on discovery. He also noted that Defendants’ Rule 11 certification that they had “completed a reasonable inquiry” into the presence of these documents was sufficient to dispel any doubts, noting “Kia is well aware of its duty of candor and the sanctions that it could face in the event that evidence is later presented that it misled the Court.” Id. at *11. Finally, Magistrate Judge Harjani held that Plaintiff had not demonstrated cause to order discovery of Defendants’ litigation hold notices, finding that there was no “tangible evidence of a material discovery violation” because nothing indicated the lack of a litigation hold by Defendants, and deposition evidence indicated that they had put such a hold in place. Id. at *12.

Last, Magistrate Judge Harjani denied both parties’ request for fees. He found that the rule generally authorizing the recovery of fees for responding to a motion to compel was Rule 37(a)(5)(B). But because a request for discovery on discovery is, on Magistrate Judge Harjani’s view, a motion under Rule 26(g) and not Rule 37, Rule 37 was “inapplicable to the present dispute.” Instead, the request for discovery on discovery was itself a request for sanctions under Rule 26(g). Still, Magistrate Judge Harjani stated, “the Court hopes that there are some lessons learned here for the parties and counsel in future litigation in this and other cases.”

2. A decision from a discovery special master in the U.S. District Court for the Northern District of Illinois ordering the Plaintiff to produce documents found during “elusion” testing on documents that did not hit on the parties’ search terms, where the Plaintiffs’ initial elusion testing was clearly inadequate.

In Deal Genius, LLC v. O2COOL, LLC, No. 21 C 2046, 2023 WL 4556759 (N.D. Ill. July 14, 2023), Special Master Philip J. Favro addressed the use of elusion testing in e-discovery disputes.

This was a patent infringement case for a neck-worn portable cooling fan device. The parties were “bitterly divided … over issues relating to the production of relevant emails,” including whether Plaintiff “made fulsome email productions.” Id. at *1. Because the parties were unable to resolve this issue before the close of fact discovery, Special Master Favro was appointed to oversee the e-discovery disputes. Upon his appointment, Special Master Favro worked with the parties to execute a stipulated order, which required that Plaintiff redo some of its production and conduct elusion testing.

Elusion testing “involves having the producing party review a random sample from the ‘null set,’ which comprises the documents that did not hit on any of the search terms, together with the documents the producing party deemed not responsive after reviewing the search term hits.” Id. at *6. This sample will typically be “calculated using a statistical confidence level of 95% with a margin of error of 2%” and will typically “contain between 1,000 and 2,400 documents.” Id. at *6 n.34. The producing party then reviews the documents in the sample and produces any additional relevant documents. Special Master Favro described elusion testing as “a standard quality assurance practice” designed to combat the inherent underinclusivity of search terms and that “can ultimately validate, or confirm the reasonableness and proportionality, of the producing party’s production and thus help satisfy the Rule 26(g) reasonable inquiry standard.” Id. at *5-6.

The parties’ dispute centered around the adequacy of the elusion testing Plaintiff conducted pursuant to Special Master Favro’s order. Plaintiff’s first round of elusion testing contained a sample of 2,397 documents, out of which Plaintiff identified two responsive documents. Id. at *2. After some time, Defendant requested Plaintiff run an additional search query on the null set of documents. Id. at *3. Plaintiff did so and found that the search yielded 28 documents, “all of which [Plaintiff] deemed relevant upon review.” Finally, Defendant requested a second additional search. Special Master Favro ordered Plaintiff to run this second search and report the number of hits before producing the documents. Id. at *4. The second search yielded 18 additional, unique documents, which Plaintiff argued it should not have to produce. Special Master Favro overruled Plaintiff’s objections to producing these 18 documents and found that the results of the first search raised “questions regarding the reliability of [Plaintiff]’s elusion testing results.” Id. at *9-10.

Special Master Favro noted that whether the documents from the second additional search should be produced was a question of relevance and proportionality under Rule 26(b)(1). Id. at *4. He found that both cut in favor of production: Plaintiff did not contest that the documents at issue were relevant and did not argue that producing 18 documents was unduly burdensome. Id. at *6-7. Plaintiff raised three other objections to production, each of which Special Master Favro overruled. First, Plaintiff argued that the 18 documents had no “causal connection” to the initial elusion testing inquiry (which yielded two documents). Special Master Favro found that his order did not require such a causal connection. Id. at *7. Second, Plaintiff argued that the stipulated order provided a seven-day window in which to raise any issues with elusion testing and that Defendant objected after the close of that window. Special Master Favro found that responding to the first modified search query “operate[d] as a waiver” of any right under the order and also noted a “general judicial preference to resolve disputes on the merits rather than on procedural issues” that cut against strict enforcement of the seven-day deadline. Id. at *8. Third, Plaintiff argued that the new search should have been run before the close of fact discovery. While Special Master Favro was sympathetic to this argument, he ultimately rejected it because Defendant had “long disputed the adequacy of the email searches that [Plaintiff] ran during fact discovery” and remaining concerns were “outweighed by the need to ensure that potentially key documents are produced” given “the well-chronicled problems Deal Genius has experienced conducting ESI searches.” Id. at *8-9.

Special Master Favro further explained that problems with Plaintiff’s elusion testing warranted the production of the documents at issue, holding that the results of the first additional search “demonstrably establish[ed] the need … for the Parties to consider running additional search terms to identify relevant information.” Id. at *10. He noted that Plaintiff’s first production — two documents from a sample of almost 2,400 — had a purported statistical “elusion rate” of .08% and that if that rate were applied to the total “null set” of about 660,000, about 530 remaining relevant documents would exist. Id. at *9. Special Master Favro indicated, however, that Plaintiff’s null set “include[d] an excessive number of documents” and that “the presence of so many irrelevant documents … skew[ed] the ability of the … sample to capture relevant documents.” This was demonstrated, he noted, by the fact that the initial sample yielding two relevant documents did not contain any of the 28 documents that the first additional search would later reveal. This, Special Master Favro stated, “raise[d] questions regarding the reliability of [Plaintiff]’s elusion testing results” because it meant “[t]he .08% elusion rate may … be ‘misleading.’ ” Thus he found that the production of the 18 documents from the second additional search, the documents at issue, was “warranted under the circumstances of this dispute” and subsequently ordered Plaintiff to produce those documents. Id. at *10.

3. A ruling from the U.S. District Court for the Southern District of California denying a motion for sanctions against the Plaintiff for failing to preserve evidence on her smartphone, where the Defendants did not move to compel production of the evidence before moving for sanctions and had not carried their burden to demonstrate that the evidence could not be replaced or recovered from another source.

In Tan v. Konnektive Rewards, No.: 20-cv-1082-LL-DDL, 2023 WL 2669869 (S.D. Cal. March 28, 2023), U.S. Magistrate Judge David D. Leshner addressed whether Plaintiff could be sanctioned for not preserving a text message on her smartphone that was relevant to the litigation.

Plaintiff brought putative class claims against Defendants for allegedly scamming her through text message into purchasing a monthly installment of skin care products. Id. at *1. After commencing the litigation, Plaintiff reportedly “traded in her smartphone” without preserving evidence stored in it, including the text message she allegedly received, a survey she allegedly saw after clicking a link in the text message, and the website she allegedly visited after clicking a link in the survey. Defendants claimed that the loss of Plaintiff’s smartphone deprived them of relevant evidence and requested an order precluding Plaintiff from offering testimony regarding what she saw but did not preserve. Plaintiff opposed the motion, arguing that Defendants had not demonstrated that the survey and website were in fact stored on her phone, nor that the information contained in the text message, survey, and website could not be restored through other discovery. Id. at *2.

Magistrate Judge Leshner started his analysis with the propositions that the law imposes on litigants a duty to preserve evidence which they know or reasonably should know is relevant to pending or reasonably anticipated litigation and that spoliation is a party’s sanctionable breach of this duty. He noted that Rule 37(e) of the Federal Rules of Civil Procedure governs the spoliation of ESI and empowers the court to sanction a spoliating party when ESI “that should have been preserved in the anticipation or conduct of litigation is lost because the party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery.” Id. (quoting Rule 37(e)).

Magistrate Judge Leshner explained that Rule 37(e) establishes three prerequisites to sanctions for spoliation of ESI: that (1) the ESI should have been preserved, (2) the ESI was lost through a failure to take reasonable steps to preserve it, and (3) the ESI cannot be restored or replaced through additional discovery. He noted that the party moving for sanctions bears the burden of proving that the ESI existed and was spoliated by a preponderance of the evidence.

Magistrate Judge Leshner first found that text message, survey, and website at issue were relevant and that Plaintiff had a duty to preserve them if they were stored on her phone. Id. at *3. He noted that Plaintiff’s complaint alleged that she received a “fake text message” and that by following the links in the text message, she was taken to a website and invited to sign up for a “free trial” that was actually an undisclosed subscription for skin care products. Plaintiff further alleged that she relied on, and was deceived by, the affirmative misrepresentations and material omissions in the text message, survey, and website.

Magistrate Judge Leshner next found that Plaintiff had custody and control over her phone, but he noted that the spoliation analysis concerns whether there was relevant information stored on the phone. Plaintiff did not dispute that the alleged text message was stored on her phone and therefore Plaintiff had a duty to preserve the text message “when her lawsuit became imminent.”

Magistrate Judge Leshner reached a different conclusion regarding the survey and website. Id. at *4. Defendants assumed that these were stored on Plaintiff’s phone, but “mere speculation that deleted ESI may exist is insufficient.” Magistrate Judge Leshner noted that Plaintiff’s complaint disclaimed knowledge about the website to which she was directed, which undermined any assumption that information about the offending website and survey were stored in a “cache” on Plaintiff’s phone. Thus, Magistrate Judge Leshner concluded that Defendants did not meet their burden to establish that the survey and website were stored on Plaintiff’s phone when she traded it, and therefore he could not find that Plaintiff was under a duty to preserve her phone to avoid the loss of the website and survey.

Focusing solely on the text message, Magistrate Judge Leshner found that Defendants met their burden of showing that Plaintiff failed to take reasonable steps to preserve it. Plaintiff conceded that the text message was stored on her phone when she upgraded it and failed to take reasonable steps to preserve the message, such as taking a screenshot, saving the message to the cloud, or backing up her phone.

Magistrate Judge Leshner next turned to the question of whether the text message could be replaced or recovered from another source, noting that he could sanction Plaintiff for spoliation under Rule 37(e) only if the parties were unable to restore or replace the lost ESI through feasible means.

On this question, Magistrate Judge Leshner found that Defendants had not met their burden to show that the text message was “irretrievably lost.” Id. at *5. He first noted that Defendants’ reliance on the “self-executing” sanctions under Rule 37(c)(1) was inappropriate because that rule involves ESI that was withheld, not spoliated. Magistrate Judge Leshner next explained that Defendants had “a significant amount of information about the marketing that was directed to Plaintiff,” including records indicating what materials were sent to Plaintiff and the transactions with Plaintiff, including the “upsell” and “checkout” websites from which she placed her initial order in January 2020. Id. at 18. Logically, if Plaintiff received these marketing messages, somebody sent them — and not just to Plaintiff.

Magistrate Judge Leshner found it “significant” that the parties were unable to state definitively whether the text message was available from any other source, noting that “ESI is not lost if it is available from another source.” He noted that Defendants did not provide any evidence that the text message was sought from any of their affiliates, other parties or nonparties, or within their own files but remains unavailable.

Magistrate Judge Leshner agreed with Plaintiff that “the plain terms of Rule 37(e) require a moving party to explore other avenues of discovery before sanctions are appropriate.” Id. at *6. He explained that Defendants chose not to bring a motion to compel production of the text message but instead “proceeded directly to a motion for sanctions under Rule 37(e), for which they bear the burden of showing by competent evidence that the ESI sought was actually lost,” which they had not done.

As a result, Magistrate Judge Leshner denied Defendants’ motion for sanctions because Defendants did not satisfy all the prerequisites of Rule 37(e).

4. An opinion from the New York Supreme Court denying a motion to compel text, social media, and LinkedIn messages where the parties had waived their right to request such information in a discovery stipulation.

In Latin Markets Brazil, LLC v. McArdle, Index No. 654374/2020, 79 Misc.3d 1224(A), 191 N.Y.S.3d 615 (Sup. Ct N.Y. Co. July 14, 2023), New York Supreme Court Justice Robert R. Reed addressed whether a waiver of the right to request certain types of materials in an ESI stipulation was binding on the parties.

In this action for violation of certain noncompete agreements and for tortious interference with business relationships against two individual Defendants, Plaintiff filed a motion to compel the individual Defendants to produce text, social media, and LinkedIn messages that Plaintiff alleged would show the formation of a competing company while they were still employed by Plaintiff and the theft of Plaintiff’s confidential business information. Id. at *1.

Plaintiff argued that the requested communications were relevant to the prosecution of its case and narrowly tailored to the needs of the case because the communications would likely reveal which of Plaintiff’s clients Defendants contacted and attempted to solicit as well as any other discussions of improperly removing and using Plaintiff’s confidential materials. Defendants opposed the motion, arguing that the terms of the ESI stipulation the parties entered into prohibited the disclosure. Id. at *2. In particular, Defendants argued that Plaintiff stipulated to not request text messages in the ESI stipulation and that the ESI stipulation should be enforced according to its terms.

Justice Reed began his analysis with a brief recitation of the relevant discovery rules, including Rule 3101(a) of the Civil Practice Law and Rules (CPLR) providing for the “full disclosure of all matter material and necessary in the prosecution or defense of an action.” He noted that this rule requires disclosure “of any facts which will assist preparation for trial by sharpening the issues and reducing delay and prolixity” and that “a party moving to compel discovery must establish that the discovery it seeks is material and necessary and meets the test of usefulness and reason.” Id. (quoting CPLR 3124).

But Justice Reed concluded that Defendants were correct that the ESI stipulation prohibited disclosure. He reasoned that Plaintiff was represented by counsel and consented to a voluntary waiver of discoverable materials when it stipulated that “the following sources of ESI information do not warrant collection, search, review or production: (a) Voicemail, text messages, personal phones or tablets and instant messages.” He further noted that Plaintiff had made no showing of fraud, duress, coercion, or mistake that would warrant overturning the stipulation. As a result, Justice Reed denied Plaintiff’s motion to compel.