Going Dutch on eDiscovery: Hosted Review Agreement Trumps Prevailing Party Cost-Shifting

In a patent dispute, the parties agreed to use a online review platform for the production of email and to share the costs.  The prevailing party in the lawsuit won on having their hosting costs of $234,702.43 shifted to the opposing party.  The losing party appealed and the Court of Appeals reversed the cost-shifting award. Synopsys, Inc. v. Ricoh Co. (In re Ricoh Co.), 2011 U.S. App. LEXIS 23495, 9-12 (Fed. Cir. Nov. 23, 2011).

The use of the online review database was born out of a production dispute.  The Producing Party initially proposed producing email messages as 1) a hard copy production of the e-mails; 2) converting them to TIFF format, or 3) loading them onto a local terminal at its offices and allowing the Requesting Party counsel to review them on site only. In re Ricoh Co., at *5.

The Requesting Party [very rightly] objected to the Producing Party’s form of production proposals and sought the email produced in native file format.  In re Ricoh Co., at *5.

The Requesting Party recommended a hosted review provider and to divide the hosting costs between the litigants.  In re Ricoh Co., at *5-6.

After the conclusion of the lawsuit, the Producing Party argued that because the hosted review platform was used for the email production, the full hosting costs were taxable.  In re Ricoh Co., at *6.

The Court agreed that the use of the online review platform was taxable under 28 U.S.C. 1920(4), because the “database was used as a means of document production in this case.” In re Ricoh Co., at *7.

However, there was a very BIG however: the joint contract with the hosted service provider that contained a cost-sharing provision.

The Court cited to a case from 1975, which held that it was “proper” to “exclude from costs awarded certain charges because ‘[t]he parties had agreed to share the expense for [that] service.’” In re Ricoh Co., at *10, citing Thomas v. Duralite Co., 524 F.2d 577, 590 (3d Cir. 1975).

The Court of Appeals zeroed in on the 14-page joint hosting contract that included a cost-sharing agreement between the parties.  In re Ricoh Co., at *11.  As the Court of Appeals stated:

The parties characterized this agreement as a cost-sharing agreement, but never indicated that the cost-sharing was only temporary. Communications between the parties after the agreement with Stratify was executed continued to reflect the cost-sharing agreement.

There is no indication in any of the extensive communications between the parties that they intended this cost-sharing agreement to be anything other than a final settlement of the cost of the Stratify database.

 If the cost-sharing agreement were designed to be only an interim agreement, it seems likely that there would have been some indication to that effect in either the communications between counsel or the agreement with Stratify. Under these circumstances, the parties’ agreement is best interpreted as agreeing to a final, not an interim, sharing of costs.

In re Ricoh Co., at *11-12.

The Court held the hosting agreement was controlling and reversed the award of $234,702.43 for hosting costs.

Bow Tie Thoughts

It is good that courts recognize hosting fees for an online review platform as recoverable costs.  This opinion puts parties and service providers on notice to watch out for the terms in a shared hosting agreement.  If there is a possibility a party may seek costs for a shared hosted review database, a clause should be put into the agreement about cost-shifting for a prevailing party.  This should be a Rule 26(f) meet and confer topic if a shared-hosting platform is being considered.

Online review databases have many benefits.  In large multi-party lawsuits, the volume of ESI to review is often too large for a law firm to maintain.  Having the data hosted by a third-party allows the law firm to focus on the subject matter of the case, opposed to investing in both the hardware, software and expertise to effectively set-up the discovery for review.

Large law firms are not the only ones using online review software.

Hosted solutions can also allow judges to have access to the discovery if the case so requires.  In El-Amin v. George Wash. Univ., 2008 U.S. Dist. LEXIS 85009 (D.D.C. Oct. 22, 2008), Judge Facciola ordered the parties to consider using a hosted review platform that could “easily used by counsel and by the Court.”  For more, see Court Orders For Hosted Review Solutions: When the Judge Wants to See the Discovery Too.

Highlighting the advantages of an online review platform, Access Data has been very gracious to host my high school mock trial team’s fictional case in Case Vantage.

The students are using Case Vantage to review the witness statements; identify facts supporting the causes of actions/defenses; recognize evidentiary issues; determine hearsay objections and the corresponding hearsay exceptions. Issue codes were created for the different charges against the fictional defendant based on the assigned jury instructions.

The students are also posting outlines of their pre-trial arguments, opening statements, closing arguments, and witness examinations for me to review online.

Whether an online review platform is being used in a complex case subject to a protective order or by high school students learning how to build a case, there are many advantages to using online hosted review.

Adventures in Statutory Construction of FRCP Rule 34(b)(2)(E)

In a multi-party complex case, the parties agreed to the production of electronically stored information as TIFFs or JPEGs with fields of information that did not reflect the metadata of the native files.  The original production fields included: beginning bates number, ending bates number, page count, CD volume name, producing party, and produced date.  The agreement was codified as a case management order. City of Colton v. Am. Promotional Events, Inc., 2011 U.S. Dist. LEXIS 126848, 47-48 (C.D. Cal. Oct. 13, 2011).

As the Court later commented on the production protocol, “the parties did not produce ESI in the manner in which it is kept in the usual course of business, which, at a minimum, would identify the provenance of the files and provide some context as to their meaning.” City of Colton, at *48.

One Defendant brought a motion to compel well into discovery, arguing the United States did not comply with Federal Rule of Civil Procedure Rule 34(b)(2)(E)(i). The Defendants claimed the United States was required to produce documents and ESI as they were kept in the usual course of business or organize and label the production to correspond to the Production Requests.  City of Colton, at *29-30.

The United States argued the case management order superseded the requirements of Rule 34(b).  City of Colton, at *30.  Furthermore, the United States argued that the production of electronically stored information was controlled by Federal Rule of Civil Procedure Rule 34(b)(2)(E)(ii), which requires ESI to be produced as it is ordinarily maintained or in a reasonably useable form.  City of Colton, at *30-31.

Federal Rule of Civil Procedure Rule 34(b)(E) states:

  (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;

USCS Fed Rules Civ Proc R 34

The Special Master assigned to the case first heard the dispute and concluded that the case management order did not exempt the parties from Federal Rule of Civil Procedure Rule 34’s requirements.

Moreover, the Special Master found Rule 34(b)(2)(E)(i) applies to electronically stored information as well as paper documents.  The United States was ordered to either re-produce its prior production in native file format with corresponding metadata or “categorize by Production Request the Bates numbers of all previously produced ESI.” City of Colton, at *31-32.

Magistrate Judge Suzanne Segal agreed with the Special Master’s analysis that found Rule 34(b)(2)(E)(i) applies to electronically stored information as well as paper documents.

As a preliminary matter, the Magistrate Judge did not find any intent by the Judge who issued the case management order to deprive the parties their rights under the Federal Rules of Civil Procedure to ensure a production was organized in a “satisfactory way.”  City of Colton, at *33-36.

The Court engaged in a highly detailed review of the Advisory Committee Notes to Federal Rule of Civil Procedure Rule 34(b)(2)(E).  The Court recounted that the Advisory Committee specifically recognized that the term “document” encompassed ESI as a general rule:

“[A] Rule 34 request for production of ‘documents’ should be understood to encompass, and the response should include, electronically stored information unless discovery in the action has clearly distinguished between electronically stored information and ‘documents.’” Fed. R. Civ. P. Rule 34 advisory committee’s note (2006 Amendment, subdivision (a)). The notes specifically admonish that “[r]eferences to ‘documents’ appear[ing] in discovery rules that are not amended . . . should be interpreted to include electronically stored information as circumstances warrant.” Id.

City of Colton, at *39.

Furthermore, the Court also stated that ESI productions may not be “randomly organized:

Rule 34(b) provides that a party must produce documents as they are kept in the usual course of business or must organize and label them to correspond with the categories in the discovery request. The production of electronically stored information should be subject to comparable requirements to protect against deliberate or inadvertent production in ways that raise unnecessary obstacles for the requesting party. Rule 34(b) is amended to ensure similar protection for electronically stored information.” Id. (2006 Amendment, subdivision (b)).

City of Colton, at *40.

Based on the above, plus other case precedent, the Court found that Federal Rule of Civil Procedure Rule 34(b)(2)(E)(i) applied to ESI productions that they “must” be produced as they are kept in the usual course of business or “must” be labeled to correspond to the discovery request.  City of Colton, at *44.  As the Court explained:

While the specific information a producing party must provide when organizing a production “in the usual course of business” may vary in its details according to the type of document or file produced, it is clear that parties are entitled under the Federal Rules to rationally organized productions so that they may readily identify documents, including ESI, that are responsive to their production requests.

City of Colton, at *47.

The Court went on to state the following:

Unless and until the parties agree to amend their production protocol to include metadata fields sufficient to satisfy the requirement under Rule 34(b)(2)(E)(i) that documents, including ESI, be produced as they are kept in the usual course of business, the Rules require the United States (and Defendants) to organize and label their productions to correspond to the categories in the request.

City of Colton, at *48-49.

The Court addressed a practical issue in the case: there had been over 500 discovery requests from the Defendants.   The Court noted that identifying the ESI responsive to each request could be both “challenging” and “time-consuming.”  City of Colton, at *49.

The Defendants explained a “compromise” between the parties, where the United States would produce its ESI in native file format as a “substitute” for producing the ESI as it was kept in the usual course of business and instead of labeling its production to correspond to the Production Requests. City of Colton, at *49.

The Court accepted the compromise, stating:

“…because a simultaneous production in native format will provide Defendants with the metadata necessary to identify the provenance of each document and put it into its proper context, the United States may, at its option, provide Defendants with a copy of ESI in native format in any future production in lieu of labeling the production, in addition to producing ESI in TIFF or JPEG format to the Encore common repository pursuant to the parties’ current production protocol.”

City of Colton, at *49-50.

The sole footnote in the opinion stated the following on a blended production with metadata:

The Court strongly encourages the parties to consider the alternative of a new agreement concerning which metadata fields with TIFF/JPEG formats would provide identifying information sufficient to organize an ESI production that is usable for the receiving party and to amend their production protocol accordingly. Such an agreement would allow the United States to avoid the expense of producing ESI in both native and TIFF/JPEG formats, should it exercise that option, and would similarly allow Defendants to avoid the expense of reviewing ESI in two different formats and cross-referencing the productions. Furthermore, TIFF or JPEG productions with embedded metadata would enable Defendants to perform the various field searches they claim are necessary to make sense of the production and would be immediately available for use as exhibits without further processing. This would likely be more useful to Defendants than a report identifying the Production Requests to which documents are responsive with no contextualizing metadata.

City of Colton, at *50-51, fn 1.

Bow Tie Thoughts

I have been a Civil Procedure geek since my first day of law school. Magistrate Judge Suzanne Segal did an exceptional job reviewing past cases, the committee notes and applying practical knowledge on the issue of whether ESI is included in Federal Rule of Civil Procedure Rule 34(b)(2)(E)(i).

Many attorneys and judges have waded into the issue of whether Federal Rule of Civil Procedure Rule 34(b)(2)(E)(i) also applies to electronically stored information.  The plain language of the Rule says “documents.”  Moreover, Federal Rule of Civil Procedure Rule 34(b)(2)(E)(ii) specifically states “electronically stored information,” highlighting the difference between the two types of discoverable information.  Reading the two sections separately is something many lawyers have been doing since 2006.

On a fundamental level, a party producing any discovery, digital or paper, should not make a disorganized production.  As Judge Suzanne Segal stated, “…it is clear that parties are entitled under the Federal Rules to rationally organized productions so that they may readily identify documents, including ESI, that are responsive to their production requests.”  City of Colton, at *47.

For anyone who has done hours of document review, having the producing party label the production to correspond to the categories in the requests for production makes review (a little) less burdensome.

One way to accomplish labeling productions can be achieved in most of the review products on the market with issue coding.  While conducting review for ESI or documents responsive to a specific request, create issue tags at that time for the production requests.  For example, “Request for Production 7,” would be RFP007.  The three digit number system would allow for easier sorting in a data by discovery request.

When ESI is determined to be responsive to a request, code it accordingly with its request code.  At the time of production, add that field of information with the other extracted text/metadata fields to be produced.  Logging this information can increase organization for both the requesting and producing parties to a lawsuit.

The above is one way to help organize a production.  There are many other ways to use review tools and processing engines to generate information to label a production to comply with Rule 34(b)(2)(E)(i). Whatever is determined should be agreed upon before document review to increase efficiency.

Discovery wounds are sometimes self-inflicted.  Converting native files to static images and not producing the standard bibliographic extracted text and metadata can unintentionally drive up discovery review.  As a practical matter, everything that once was searchable has had that feature removed.  Additionally, fields of extracted text that could have populated a review database are now empty, waiting for a reviewing attorney to re-enter (at an hourly rate) what should have been produced as a matter of right.

The Court had a very good point in the one footnote about having two different production protocols in one case.  Virtually all of the review products on the market can handle blended productions of both ESI and static images such as TIFFs. Moreover, most processing software can produce discovery as native files and TIFFs if there is a need for a blended production.  However, this is far easier to do at the beginning of discovery, opposed trying to link a prior production in TIFF format to one with native files. While the technology can handle the different formats, the blended cross-productions having different fields of information can complicate review.

PFIC 2011 Recap

The Fourth Paraben Forensic Innovation Conference was November 5-9 in Park City, Utah.  This is by far one of my favorite conferences of the year, because of the excellent content of the presentations and the extreme creativity of the Paraben Team. Plus, any conference that provides homemade sugar-free cookies as a speaker “thank you” is in a class act.

Advanced e-Discovery with Quin Gregor from OrcaTec

The event began on November 5 with multiple boot camps for forensic investigators.  November 6 included an advanced e-Discovery track taught by Quin Gregor of OrcaTec LLC.  Quin taught for 4 hours, addressing technology to make identifying relevant ESI more effective and other advances in e-Discovery.

Hockey for Charity

Sunday night PFIC hosted a casino night to raise funds for Hackers for Charity.  Each year PFIC has raised money to help build a classroom in Africa.

I was very happy to donate some raffle prizes from the Apple Company Store and honored PFIC gave my donation “First Prize” status.

Jeff Baxter, formerly of Steely Dan and The Doobie Brothers, was the keynote speaker on November 7.  In addition to being an amazing guitar player, Jeff is also an expert in missile defense and cyber-terrorism.  Don’t be fooled by the ponytail, his top secret clearance is rather impressive.

Jeff Baxter's Keynote

Baxter’s keynote was extremely enthralling on national defense, creativity and the intersection of problem solving between musicians and physicists.

I presented two new seminars on search terms and advanced e-Discovery.  Both of my sessions were well attended with timely questions on search and solving e-Discovery challenges.

I enjoy PFIC because of the amazing attendees.  Questions are thoughtful and geared toward problem solving.  Moreover, the time of the show allows for healthy networking and getting to know other attendees.

Amber Schroader, CEO of Paraben, is already planning PFIC 2012.  Amber announced a new hands-on boot camp next year, which will include attendees being given an e-Discovery fact pattern, conducting an investigation with the products they select and presenting their findings in a mock hearing.

While still in the very early planning stages, I will suggest having a civil and criminal track, inviting attorneys to participate in the process and invite local judges to assist with the mock hearings.  The educational opportunity for every professional from collection expert to judge to get hands-on practice with an electronic discovery cases would certainly be a great learning experience.

Once again, I congratulate the Paraben team for hosting another wonderful conference.

Disclosure: I was asked to help plan an e-Discovery track for next year’s PFIC. 

Failing to Show Undue Burden in Cost Shifting for Native File Production

In Sundown Energy, L.P. v. Haller, the Defendant (Requesting Party) brought a motion to compel the Producing Party to produce electronically stored information in native file format.  The Defendant had specified “native format” as the form of production in their request for production.  Sundown Energy, L.P. v. Haller, 2011 U.S. Dist. LEXIS 124145, at *9-10 (E.D. La. Oct. 26, 2011).

The Court granted the motion to compel.  The Producing Party requested the Defendants bear the production costs.  Sundown Energy, L.P. at *9.

The Court cited the following from Zubulake:

[W]hether production of documents is unduly burdensome or expensive turns primarily on whether it is kept in an accessible or inaccessible format (a distinction that corresponds closely to the expense of production)…Whether electronic data is accessible or inaccessible turns largely on the media on which it is stored.

Sundown Energy, L.P. at *9-10, citing Zubulake v. UBS Warburg, L.L.C., 217 F.R.D. 309, 318 (S.D.N.Y. 2003).

The Court quickly held the Producing Party failed to show the ESI was inaccessible, because their sole undue burden argument was the production would be “costly.”  Sundown Energy, L.P. at *10.  The Court stated there was no evidence of how the ESI was stored or how it was not reasonably accessible.  As such, the request for cost shifting was denied.  Id.

Bow Tie Thoughts

I have met attorneys who categorically state that e-Discovery is “expensive” and thus unduly burdensome.  This belief is often not substantiated with details of how a client’s data is maintained, types of files at issue, strategies for collection, how the data would be processed into a reasonably useable form, expected time for reviewing electronically stored information and costs for each step in production.  These are just a few of the possible elements to show undue burden and by no means a complete list.

Demonstrating ESI is not reasonably accessible requires at a minimum affidavits explaining the undue burden and the cost to translate not reasonably accessible ESI into a reasonably useable form.  A Court needs specific facts to make an undue burden determination, beyond a lawyer simply saying e-Discovery is “expensive.”

Broken Hearted Early Discovery

In a case involving alienation of affection, the Plaintiff sought early discovery on third party electronic communication service providers.  Dockery v. Horvath, 2011 U.S. Dist. LEXIS 124997, 2-3 (S.D. Miss. Oct. 27, 2011). The case was in procedural limbo, because the Defendants were in New York state, had not filed an answer and the Plaintiff had not secured a default judgment.  Dockery, at *2.

The motion for early discovery sought, “permission to serve subpoenas on any known third party through which Defendant…and Plaintiff’s now ex-wife have communicated, prior to the Rule 26(f) attorney conference requirement, in an effort to obtain critical evidence and prevent it from being lost.” Dockery, at *2-3. The motion referred to electronic communications from the third-party service providers, such as cell phones, text messages and email, on the understanding the ESI was “time sensitive.” Id.

The Court noted the Plaintiff’s legal support for their position was “unclear.”  Id.

Good cause is required for early discovery on third parties prior to a Rule 26(f) conference.  Dockery, at *4.

The Court quickly held the Plaintiff did not establish good cause, because there was no particularized showing or evidentiary support that the ESI would be lost.  As the Court stated, “The assertions in his motion are supported only by understanding and belief, and are vague and conclusory at best.”  Dockery, at *4-5.

Bow Tie Thoughts

There are two challenges to seeking early discovery of ESI from third party communication providers: The first is showing good cause to justify the early discovery and the second is the Stored Communications Act.

Even if a party is able to demonstrate good cause, such as there is a specific time in which email messages are maintained on a provider server, the service provider cannot produce the content of those messages without violating the Stored Communication Act.  (From more SCA cases, see Dueling Definitions of “Interception” in Wiretap Violations, Being a Fugitive is Not Consent for Production under the Stored Communications Act, and Quashing Subpoenas with the Stored Communication Act).

Furthermore, the wholesale production of all communications from a specific individual would arguably be overly broad and include either irrelevant or privileged information.  The requesting part would want the ESI request narrowly tailored to what was relevant to the case to ease the cost and time of document review.