Category Archives: Discovery

Failure to Use Basic Security Protections when Transferring Electronic Files Results in Waiver of Privilege

The Attorney/Client Privilege and Work Product Protection for a video file transferred via Box.com was lost when a client failed to use basic security precautions.  A February 2017 ruling by a Western District of Virginia magistrate judge in Harleysville Insurance Company v. Holding Funeral Home, Inc. (Case No. 1:15-cv-00057) should reinforce a requirement that lawyers use basic security protections (at a minimum) for all potentially privileged or protected communications.

  1. All Too Common Facts

There are no winners in this case. Both sides of the Harleysville Insurance matter were scolded by the magistrate judge.  In this case, an insurance investigator transferred a video file to its company’s counsel using Box.com, a popular file transfer and sharing service. To notify counsel of the transfer, the investigator sent an email that included the hyperlink to the video file.  Months later, the transmission email was produced in discovery.  Defendants’ counsel spotted and then tested the hyperlink, and immediately found the video file.

It appears from the recitation of the facts that the investigator knew how to use the basic transfer capabilities of Box.com but was never trained or instructed to use even the basic security tools. For example, Box.com allows for the creation of secure folders and the controlled access to any folder.

To make matters worse, the video file resided on the Box.com site accessible by the hyperlink for at least six months.

  1. Attorney/Client Privilege and Work Product Protection Waiver

After the access to the Box.com site and the video file were exposed, Harleysville argued that the defense counsel’s access to the file was an improper, unauthorized access to privileged information, and this should require the disqualification of defense counsel. The argument in response was that Harleysville had waived any claim of privilege or confidentiality by placing the information on Box.com without using any of the available security tools.

Attorney/Client Privilege.  The court analyzed the Attorney/Client Privilege waiver separately from the Work Product Protection issue.  Its first finding was that Harleysville waived any claim of Attorney/Client Privilege with regard to the information posted on Box.com.  The court concluded that “the information uploaded to this site was available for viewing by anyone, anywhere who was connected to the Internet and happened upon the site by use of the hyperlink or otherwise.”  The decision continues, “In essence, Harleysville has conceded that its actions were the cyber world equivalent of leaving its claim file on a bench in the public square and telling its counsel where they could find it.”

Attorney/Client Privilege issues in the case were governed by state law. Virginia law provides protection for privileged communications. See Walton v. Mid-Atlantic Spine Specialists, 694 S.E.2d 545. 549 (Va. 2010).  But this privilege is an exception to the general duty to disclose and should be strictly construed.   Continuing, the proponent of the privilege has the burden to establish that the Attorney/Client Privilege applies and that the privilege has not been waived.

The Walton case adopts a multifactor analysis for determining whether the holder of a privilege took reasonable steps to prevent disclosure and also took reasonable steps to rectify the error. The first listed factor is “the reasonableness of precautions to prevent inadvertent disclosures.”  Harleysville’s failure to take any reasonable security precautions doomed its argument from the start.

Work Product Protection.  Work Product Protection in this matter was governed by federal law.  The Harleysville Court built its analysis on the Fourth Circuit’s recognition “that the inadvertent disclosure of attorney work product, even opinion work product, can result in a waiver of its protected status.”  This guidance is tempered by additional appellate authority that holds that a waiver should occur only when an attorney’s or client’s actions are “consistent with a conscious disregard of the advantage that is otherwise protected by the work product rule.”

FRE 502(b) would protect an “inadvertent” disclosure.  But the magistrate judge reasoned the disclosure here could not be inadvertent because the investigator clearly intended to transfer the video file to Box.com.  The Court also looked to Rule 502(b)(2), which provides that the disclosure is not a waiver if the holder of the protection “took reasonable to prevent disclosure.”  Again, Harleysville was in a bad place because it failed to take any steps.

The magistrate judge was obviously troubled not only by the transfer of the video file to Box.com without any security precautions, but also by the client leaving the unprotected file on the Internet site for at least six months.  The conclusion followed that this carelessness waived the Work Product Protection.

  1. Sanctions Imposed against Defense Counsel

In the introduction to this Blog post, we noted that both sides were scolded by the Court.  The investigator’s email that included the hyperlink also included a Confidentiality Notice.  This Notice coupled with the obvious significance of the video file was sufficient for the Court to conclude that the defense counsel should not have downloaded and studied the file. The Court wrote, “by using the hyperlink contained in the email also containing the Confidentiality Notice to access the Box Site, defense counsel should have realized that the Box Site might contain privileged or protected information.”

Harleysville argued that the appropriate sanction should be the disqualification of defense counsel. The magistrate judge agreed that there was an ethical stumble, but concluded that the disqualification was an unnecessarily severe sanction. She did, however, order that defense counsel should bear the parties’ costs in obtaining the Court’s ruling on the matter.

  1. Summary and Conclusions

The immediate instruction from the Harleysville magistrate judge’s ruling is that if a party chooses to use a new technology, it will be held responsible for ensuring that its employees and agents understand how the technology works, and, more importantly, whether the technology allows unwanted access by others to its confidential information.   The Box.com facts present a straightforward set of facts—the basic security features of Box.com would, if utilized, have blocked access to the video file.

The case sets the stage for a broader set of responsibilities associated with newer and more sophisticated security technologies.  For example, now that encryption technologies are readily available, should a disclosure that would have been blocked by the use of even simple encryption be deemed a waiver of privileges?   In Harleysville, the Box.com tools were present but not utilized.  In the encryption example, the tools can be acquired and then used, but as of today are probably not widely installed.  But this could change overnight when courts understand that Microsoft has added encryption options to Outlook.   The Harleysville reasoning likely will make it a requirement, not just a recommendation, that lawyers employ encryption for potentially privileged or protected communications.

H/T to Sharon Nelson and the VSB 2017 TechShow for flagging the significance of the Harleysville Ins. Co. v. Holding Funeral Home, Inc. ruling.

Proportionality Redux: The Sedona Conference Revisits its Commentary on Proportionality in Electronic Discovery

When Working Group 1 of The Sedona Conference (Sedona) publishes one of its eDiscovery White Papers, the consequence is often that Sedona steers the development of the law rather than merely reports on developments.  This observation is intended as a compliment, not a criticism. Sedona’s publications have guided the development of eDiscovery law since publication in 2003 of The Sedona Principles; Best Practices, Recommendations & Principles for Addressing Electronic Document Production, and have earned recognition as the gold standard for both the practical and scholarly discussion of eDiscovery issues.

In November 2016, Sedona released its Public Comment Version  of its Commentary on Proportionality in Electronic Discovery (“2016 Commentary”).  This version follows Sedona’s 2010 and 2013 Commentaries on Proportionality and its Fall 2015 publication in The Sedona Conference Journal of Judge Craig B. Shaffer’s scholarly article, “The ‘Burdens’ of Applying Proportionality” (also available for download from Sedona’s website).

This Blog post is not a critique or even a summary of the 2016 Commentary, but serves as a signpost directing litigators to Sedona’s website and the White Paper with the suggestion that the work be a resource for every federal litigator.

The December 2015 Rules Amendments: Key Rules Completely Revamped

The 2016 Commentary reminds us that “Rules 26 (b)(1) and 37(e) were completely revamped in December 2015.”  The amendments are the product of at least five years of  committee work and the most extensive public debate over any rules amendment going back to and probably including the Federal Rules of Civil Procedure introduction in 1938.

For federal court litigators on the front lines, these amendments should carry enormous, almost religious significance.  Chief Justice John Roberts emphasized in his 2015 Year-End Report on the Federal Judiciary that these developments were indeed a “Big Deal.”   See Kurz, J, “The Chief Justice and the Big Deal in the December 2015 Amendments to the Federal Civil Rules,” EDVA Update Blog (February 8, 2016).

The Chief Justice wrote that amended Rule 26(b)(1) “crystallizes the concept of reasonable limits on discovery through increased reliance on the common-sense concept of proportionality.”   Before the amendment, the boundary for the scope of discovery was relevancy.  While for at least three decades federal courts had wrestled with various proportionality considerations embedded in the discovery section of the Federal Rules, the consensus is that proportionality had gained little or no traction for the day-to-day practice of law.  Each time we checked, proportionality slipped deeper into the forgotten fine print of rule subsections and subparts.  With the December 2015 amendment, the discovery scope boundaries are revised to matters “relevant to any party’s claim or defense and proportional to the needs of the case . . .” (emphasis added).  The amended rule then identifies six consideration points.  Proportionality thus moved from the proverbial rule sub-basement (Rule 26(b)(2)(iii)) to the front foyer.

The rule-makers opted in Rule 26(b)(1) not only to elevate proportionality as a discovery touchstone along with relevancy, but seemingly weighted them equally.  This amendment was then paired with the total revision of Rule 37(e), the rule that provides directions for data preservation and spoliation sanctions.   For our coverage of the Rule 37(e) amendment, see Kurz and Mauler, “Proposed Rule 37(e) Cleared by the U.S. Judicial Conference,” EDVA Update Blog (September 29, 2014).  Under these combined rules, a proponent of discovery should now be prepared to defend both the relevancy and the proportionality of requested discovery. Additionally, when conducting a post hoc analysis of preservation decisions, the reasonableness of the preservation should depend in part on proportionality considerations.

Sedona’s 2016 Commentary on Proportionality in Electronic Discovery

The intervening development between the earlier Commentaries and Judge Shaffer’s work and now the 2016 Commentary is the arrival of the December 2015 amendments to Rule 26(b)(1) and Rule 37(e).

The 2016 Commentary revises only slightly the previously published Sedona Principles of Proportionality.  These principles first appeared in the 2010 Commentary. The discussion under each principle is now considerably more robust than in the prior versions. Of course, this is the expected result now that we have the amended rules, the Committee Notes, and nearly a year of case law applying the amended rules.

Some commentators have observed that many practitioners, and even some federal courts, have continued seemingly oblivious to the December 2015 amendments.  This was expected—as we all know, court procedural rules can be mind-numbing, and it will reasonably  take several years for amendments, even highly consequential amendments, to achieve broad effect.  The Chief Justice’s “Big Deal” reminder in his 2015 Report was probably more an effort to accelerate what was otherwise anticipated to be slow change, and not a response to minimally-observed changes on the front lines of litigation.

Sedona’s 2016 Commentary does not admonish either the bar or the bench regarding recognition of the rules amendments.  Rather, the Commentary summarizes the rules amendments, and then works through the six Principles of Proportionality using for the first time a detailed set of 24 Comments.  With each Comment, the Commentary suggests how the new rules can and should work in practice.  For example, under Principle 1 (which addresses proportionality in preservation) in Comments 1.a and 1.b, the language is “proportionality principles may be considered in evaluating the reasonableness of prelitigation preservation efforts,” and “a post hoc analysis of a party’s preservation decisions should [be made] in light of the proportionality factors set forth in Rule 26, and the reasonableness of the preservation parties’ efforts.”  Consistent with Sedona’s practices, the Comments are supported by comprehensive footnotes.

As a second example, the same bridge from Principle to Comments and practical advice can be seen in the discussion of Principle 4 (proportionality decisions should be based on information other than speculation). Comment 4.b directs that “Discovery must be limited if producing the requested information is disproportionate to its likely benefits . . . .”  In Comment 4.c the instruction is that “courts may order sampling of the requested information to determine whether it is sufficiently important to warrant discovery.”

Making Use of Sedona’s 2016 Commentary

Sedona’s White Papers should be a part of every federal litigator’s eDiscovery toolkit.  The White Papers are the preferred starting point to understand the current state of eDiscovery law, to track recent developments, and to appreciate pending or future rules amendments.  Overall, Sedona presents balanced assessments of eDiscovery issues, and provides the best available practical guidance as well as scholarly research and analysis.

We appreciate the practical value of the 2016 Commentary.  This reflects the make-up of the team of lawyers and judges who drafted the Comments. The team members, all respected eDiscovery veterans, include front-line litigators and two federal court magistrate judges.  In many instances, they provide granular, step-by-step recommendations for implementing the Principles.  For this reasons, the Commentary may prove to be especially valuable in resolving many of the eDiscovery challenges that routinely arise in federal court litigation.

The 2016 Commentary, while currently at the Public Comment Version stage, is no exception to the continuing quality of Sedona’s White Papers.  The writers and editors have produced the best available resource on proportionality in eDiscovery, including bringing to date the developments associated with the December 2015 amendments to Rule 26(b)(1) and Rule 37(e).

The Chief Justice and the “Big Deal” in the December 2015 Amendments to the Federal Civil Rules

Why is the Chief Justice of the Supreme Court of the United States proclaiming that the 2015 Amendments to the Federal Rules are a “Big Deal?” He is clearly telling us that the amendments should usher in significant improvements in the civil litigation process. The 2015 Amendments by themselves probably would fall well short of Chief Justice Robert’s assessment, but when the amendments are read together with his 2015 Year-End Report on the Federal Judiciary, the combination certainly looks like a “Big Deal.”

2015 Year-End Report on the Federal Judiciary

Using his 2015 Report to convey his messageChief Justice Roberts writes, “The amendments may not look like a big deal at first glance, but they are.” Since the Chief Justice sits at the top of the legal pyramid, his commentary and admonitions should steer expectations (with other federal judges, at the very least). The 16-page Report, which begins with discussion of the 1838 Codes for Principals and Seconds in dueling, is both easy and necessary reading for every federal litigator even if it delivers a somewhat uncomfortable message to the bench and bar.

The Chief Justice reminds us that the 2015 Amendments are the “product of five years of intense study, debate, and drafting to address the most serious impediments to just, speedy, and efficient resolution of civil disputes.” This is more than a congratulatory pat on the back for the rule makers. The Committee members and many participants appreciated that the federal courts were in need of an overhaul, and they were determined to deliver meaningful improvements.   The process spanned five years because the task was both huge and critically important, and that process required careful steps and broad participation.

Amendments to Rule 1 and Rule 26(b)(1)

While the 2015 Amendments are a package of rule changes, this Blog posting considers just the 8-word expansion of Rule 1 and the revised and relocated proportionality language now in Rule 26(b)(1). This limited coverage, however, confirms the Chief Justice’s message that the 2015 Amendments can be, in fact, the “Big Deal.” But it’s not tweaks to the rules alone that will initiate meaningful improvements in the litigation process. The Chief Justice saying the rules mandate cooperation among the parties and the court, and his instruction to the federal judiciary to become actively involved in setting the scope of discovery, propels the implementation of the intended improvements.
At the beginning of the Report, the Chief Justice discusses Rule 1:

Rule 1 directs that the Federal Rules “should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.” The underscored words make express the obligation of judges and lawyers to work cooperatively in controlling the expense and time demands of litigation—an obligation given effect in the amendments that follow. [Emphasis in original Report]

So that we do not glide by the newly added eight words without absorbing their meaning, the Chief Justice instructs “[t]he underscored words make express the obligation of judges and lawyers to work cooperatively in controlling the expense and time demands of litigation—an obligation given effect in the amendments that follows.” If cooperation was a distant objective before, it’s now embedded in the Federal Rules.

Our attention next turns to the proportionality amendments in Rule 26(b)(1). Chief Justice Roberts there explains, “Rule 26(b)(1) crystallizes the concept of reasonable limits on discovery through increased reliance on the common-sense concept of proportionality.” He quotes the amended rule:

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.

Appreciate how the amended rule differs from before. The scope of discovery had been “any matter relevant to the subject matter involved in the action.” The new scope boundaries are substantially reduced to matters “relevant to any party’s claim or defense and proportional to the needs of the case . . .” Also, the proportionality language is relocated from the proverbial basement (previously Rule 26(b(2)(c)(iii)) to the front foyer (Rule 26(b)(1)) so that proportionality can no longer be treated as an afterthought, or perhaps given no thought at all.

The “Big Deal”

Justice Roberts goes beyond reciting the reworded and somewhat expanded rules. To bring genuine improvement to the civil litigation process, he explains, “The key here is careful and realistic assessment of actual need.” If the Report stopped here, then the 2015 Amendments might bring about just a shuffling of papers with new but meaningless reports. Opposing counsel probably can only rarely reach agreement on “actual need” no matter how sternly a court demands that they meet and confer, even if they must meet multiple times.

The Chief Justice continues, “[t]hat assessment may, as a practical matter, require the active involvement of a neutral arbiter—the federal judge—to guide decisions respecting the scope of discovery.” This is it. Rule 1 dictates that “the court and the parties” be involved, and, according to the Chief Justice, it is the “obligation of judges and lawyers to work cooperatively . . .” And the Chief Justice calls for the “active involvement” of federal judges in setting the “scope of discovery.” While it is a big deal for the Chief Justice to admonish attorneys that they must “work cooperatively” with their opposition, and it is an even bigger deal for the Chief Justice to instruct the federal judiciary that it’s time for them to come down from the bench, roll up their sleeves, and become actively involved in core discovery issues at the early stages of a matter.

In an interesting development, the Washington Post concurred with the Chief Justice. It’s not often that legal rule amendments are fodder for newspaper editorials; when the news media weighs in on legal procedure, it’s usually because the developments are a Big Deal (or some horribly botched process). While the Post editorial page may not be persuasive legal precedent, there is common sense relayed in the editorial:

Some in the legal world warn that these changes are unnecessary and potentially counterproductive, limiting access to valuable information. But there is no good argument against insisting that lawyers’ requests be proportionate. Judges will have to make sure the spirit of these reforms is respected.

Chief Justice Roberts might disagree with one point in the editorial. His message to the bench and bar is that the changes are more than the mere “spirit of these reforms”.  Instead, the duties and obligations are, in fact, now embedded in the Federal Rules.

In sum, those who downplayed the 2015 Amendments to the Federal Rules as technical adjustments that would have only minimal impact on day-to-day practice should think again.  Chief Justice Roberts, drawing on the amendments and employing his position as the Chief Justice of the Supreme Court of the United States, announced that there is an “obligation of judges and lawyers to work cooperatively” and that federal judges should be actively involved in setting the scope of discovery.  Moreover, these duties and obligations are now embedded in the Federal Rules. This is, truly, a Big Deal.

Yelp! The Virginia Supreme Court Restricts Third-Party Discovery, Pushing Litigants to Federal Court

After a recent decision of the Virginia Supreme Court, litigators facing the choice of whether to file in state or federal court must now consider the availability of third-party discovery.  The Virginia high court has significantly reduced the effective ability for a state court to enforce a subpoena on a party with a Virginia registered agent but headquartered outside of the Commonwealth.  Thus, practitioners who foresee the need for extensive third-party discovery on out-of-state parties will likely need to go to federal court.

In past EDVa Updates, we have discussed amendments to FRCP Rule 45 (FRCP Rule 45 Amendment Take Effect on December 1, 2013), and have contrasted federal court third-party discovery with Virginia state court procedures (3rd Party Discovery Under FRCP Rule 45. v. Virginia Rule 4:9A: A Trap for the Unwary Means that Valid Objections Could be Waived).   In its April 2015 decision in YELP, Inc. v. Hadeed Carpet Cleaning, Inc., 770 S.E.2d 44 (Va. 2015), the Supreme Court of Virginia restricted a significant Rule 4:9A discovery avenue.  The Court held that Virginia state courts do not have subpoena power over third-parties that do not reside in Virginia, even if they have Virginia registered agents.

On third-party discovery, it seems that the Virginia state courts are moving away from streamlined discovery, while federal courts, with the 2013 Fed. R. Civ. P. 45 amendments, are improving the discovery process.  For certain types of cases, the YELP decision’s limitations on Virginia state courts’ subpoena authority tilts the court-selection decision towards the federal courts.

The Hadeed Claims and the Court’s Holding

In the case, Alexandria-based Hadeed Carpet asserted defamation claims against three John Doe defendants.  The claims focused on anonymous negative reviews posted on YELP.  To identify the defendants, Hadeed served a Rule 4:9A subpoena on YELP’s Virginia registered agent.  (For a discussion of similarities and differences between Virginia Supreme Court Rule 4:9A and Fed. R. Civ. P. 45 practice, see here.)  Virginia has a specific statutory procedure at Va. Code § 8.01-407.1 for seeking otherwise anonymous internet information.  Hadeed complied with the statute, yet YELP balked, refusing to turn over any information.  The trial court issued an order enforcing the subpoenas, and still YELP refused.  Civil contempt followed.  On appeal, the Virginia Court of Appeals affirmed the trial court’s ruling.  YELP, Inc. v. Hadeed Carpet Cleaning, Inc., 62 Va. App. 678, 752 S.E.2d 554 (2014).

The Supreme Court of Virginia reversed.  First, the Court held there is no statutory authority for such subpoenas (“the General Assembly has not expressly authorized the exercise of subpoena power over non-parties who do not reside in Virginia”).  The Court then nixed any notion that the Virginia Rules permit the discovery (“our Rules do not recognize the existence of subpoena power over nonresident non-parties”).  In sum, the Court held that the trial court had no authority to enforce the third-party subpoena to YELP.  (In a concurring opinion, Justices Mims and Millette concluded that Virginia’s statutes do authorize the exercise of subpoena power over non-resident, non-parties, but they arrived at the same result because they see this extension of subpoena power as a 14th Amendment Due Process violation.)

Virginia State Court Practice v. EDVa Practice

The case is significant in day-to-day practice because it limits an avenue to discover data maintained by companies such as Google, Facebook, Twitter, and Pinterest (who together filed as amici curiae in the YELP case).  These companies are out-of-state operations who have Virginia registered agents.  If they can be reached with Rule 4:9A subpoenas as non-parties in Virginia state court litigation, then there exists a fairly inexpensive discovery avenue for certain types of information.  But if this route is cut off, as the Yelp case holds, then a litigant will instead have to navigate the Uniform Interstate Depositions and Discovery Act (“UIDDA”).

The UIDDA provisions were enacted in Virginia in 2009, and they require that a litigant obtain out-of-state discovery subpoenas from the courts of the other states.  For example, in Virginia state court litigation, a subpoena to a third-party Maryland entity would first have to be issued by the Virginia court, and then based on the Virginia subpoena the Maryland court would issue its own subpoena.  Any contest over the subpoenas would likely unfold in the Maryland courts.  The UIDDA is an improvement over the scattered procedures from before, but it still can be a maze to navigate.

Contrast the YELP development for Virginia state courts with the 2013 amendments to Fed. R. Civ. P. 45.  Under Rule 45, an attorney may issue a third-party subpoena from the Eastern District of Virginia.  While enforcement of that subpoena likely begins in a foreign court, the Rule now includes procedures that potentially will send enforcement back to the issuing court.  Thus, a Rule 45 subpoena to a Florida company issued in EDVa litigation likely might be enforced by an EDVa magistrate judge.

The differences in these third-party discovery procedures matter when the court-selection decision is made.  If a case will require significant third-party discovery from national players (who  may have Virginia registered agents but are not Virginia residents), then the YELP decision scores in favor of federal court selection and against choosing Virginia state courts.

Possibility of Legislative Repair

The Court’s 5-2 majority opinion leaves open the door to legislative repair.  If the General Assembly returns with a statutory amendment making clear that Virginia intends that its courts have subpoena power over nonresident non-parties, then for parties such as Plaintiff Hadeed Carptet in the YELP case, the state court avenue would become available.  The Mims/Millette position, however, in their concurring opinion would bar such a statutory amendment if the position prevails.  Under their analysis where they refer to the “state court’s coercive judicial power,” a Virginia court’s subpoena power is limited by the Due Process Clause of the Fourteenth Amendment, and extending subpoena power over nonresident third-parties would be a Due Process violation.  For the foreseeable future, therefore, federal courts will provide Virginia litigators more useful third-party discovery of out-of-state parties.

Fourth Circuit Reverses Spoliation Sanctions: Case Remanded to District Court for Additional Findings

In a March 31, 2015 unpublished decision, the Fourth Circuit reversed and remanded the damages portion of an oral contract case decided by the Alexandria district court.  The opinion highlights the difference between a duty  to preserve all documents once there is a reasonable anticipation of litigation as opposed to a duty “to preserve documents that the party knew or should have known were, or could be, relevant to the parties’ dispute.”

The Case Facts: A Failure to Preserve and the Resulting Adverse Inference Instruction

The case, Blue Sky Travel et al. v. Al Tayyer Group, No. 13-2500 (4th Cir. Mar. 31, 2015), involved an oral contract for a US-based travel company to purchase airline tickets for a Saudi entity working for the Ministry of Higher Education of Saudi Arabia.  The front-end of the case focused on the oral contract and the statute of frauds.  The district court decided that the statute of frauds did not apply, and the Fourth Circuit affirmed this part of the decision.  However, the Fourth Circuit reversed on a spoliation instruction that influenced the damages part of the case.  The damages argument centered on an adverse inference instruction that followed the magistrate judge’s determination that defendant ATG spoliated evidence.  Specifically, it appeared that ATG either destroyed or failed to preserve invoices of its dealings with other vendors who also sold airline tickets to ATG. The district court awarded $10 million in damages to Blue Sky Travel for lost profits.

In the discovery phase of the case, the magistrate judge ordered ATG to produce a series of ATG’s 3rd party invoices. ATG failed to do this even after three orders.  It eventually surfaced that the invoices no longer existed.  The magistrate judge’s recommendation to the district court was for an adverse inference instruction as a sanction for the spoliation.  The sanction was appropriate, the magistrate judge concluded, “to address effectively the prejudice caused by defendant’s failure” to preserve.  The district court affirmed the sanction order for the reason given by the magistrate judge, namely the prejudice from the spoliation of evidence.

The magistrate judge had held that once litigation began, ATG had a duty to stop its document destruction policies “and to preserve all documents because you don’t know what may or may not be relevant” (emphasis added in appellate opinion).  The Fourth Circuit held that this is too broad a duty; a party is not required to preserve all its documents but rather only documents that the party knew or should have known were, or could be, relevant to the parties’ dispute.”   The Fourth Circuit determined that the spoliation finding and sanction were an abuse of discretion because the action was based on an erroneous principle of law.

At trial, by agreement between the parties, the lost profits component of damages was decided by the district judge, not by the jury.  The district court treated the adverse inference instruction as “an evidentiary presumption applicable to the damages hearing.”

The Fourth Circuit’s Holding, Reversal in Part, and Instructions on Remand

The Fourth Circuit’s reversal is grounded on the difference between a duty to preserve all documents once there is a reasonable anticipation of litigation as opposed to a duty “to preserve documents that the party knew or should have known were, or could be, relevant to the parties’ dispute.“   The Opinion recites the current Fourth Circuit law:

A party may be sanctioned for spoliation if the party (1) had a duty to preserve material evidence, and (2) willfully engaged in conduct resulting in the loss or destruction of that evidence, (3) at a time when the party knew, or should have known, that the evidence was or could be relevant in litigation.

Opinion at 21 (citing Turner v. United States, 736 F.3d 274, 282 (4th Cir. 2013)).

The Turner case dealt with the United States Coast Guard’s role in a tragic boating accident.  The plaintiff sought copies of audio tapes of Coast Guard communications during a search and rescue operation.  The Coast Guard did not preserved the tapes.  A claim of negligent spoliation followed.  The Fourth Circuit held that spoliation does not result from negligent conduct, and it restricted the preservation duty to evidence “relevant to some issue in the anticipated case.” The court in that case wrote:

[S]poliation does not result merely from the “negligent loss or destruction of evidence.” Rather, the alleged destroyer must have known that the evidence was relevant to some issue in the anticipated case, and thereafter willfully engaged in conduct resulting in the evidence’s loss or destruction.

Turner v. United States, 736 F.3d 274, 282 (4th Cir. 2013) (internal citation omitted).

Based on the appellate record in Blue Sky Travel, the Fourth Circuit was unable to determine whether ATG had a duty to preserve the 3rd party invoices.  Judge Keenan observed that:

In the present case, neither the magistrate judge nor the district court made the crucial finding whether ATG destroyed or failed to preserve the evidence at issue, despite having known or should have known that the evidence could be relevant in the case.

Opinion at 21 (citing Silvestriv. General Motors Corp., 271 F.3d 583, 591 (4th Cir. 2001); Turner, 736 F.3d at 282).

On remand, the Fourth Circuit directed the district court to answer two unresolved questions:

  • First, the district court should ascertain the date by which ATG knew or should have known that invoices relating to other vendors could be relevant in the case.
  • Second, the district court should establish when ATG destroyed the invoices from the other vendors.

 A Different Analysis under Proposed Fed. R. Civ. P. 37(e)

Blue Sky Travel confirms the current Fourth Circuit position on the duty to preserve. Beyond this, the case has little or no precedential value on spoliation issues and related sanctions.  First, it is only an unpublished decision, which the Fourth Circuit reminds us is not binding precedent.  But apart from this designation, the case facts may soon be governed by proposed FRCP Rule 37(e), which would likely dictate at least a different track at the trial level. Following that track, the magistrate would have more guidance on the necessary findings and the available remedies or sanctions.

Proposed Rule 37(e) (to be effective December 1, 2015) requires a party take “reasonable steps” to preserve ESI.  This seemingly limits the duty to preserve to relevant ESI and documents.  Moreover, the preservation duty should be viewed as proportional to the issues in the case and the dollars at stake.  Again, this dictates against an overly broad preservation duty (i.e., against a knee-jerk “all documents” approach) and directs the inquiry back to what is relevant.  As to the sanction, the key finding in the case was of “prejudice” to the plaintiff because of ATG’s spoliation, leading to an adverse inference instruction.  Under the proposed Rule 37(e), an adverse inference instruction may not be based on a finding of only prejudice, but requires a finding of an “intent to deprive” the opposing party of the use of the missing documents.  (Proposed Rule 37(e) applies to ESI only, so it would not cover physical copies of the invoices.  But if the invoice copies were scanned into electronic form, then the Rule would apply.)

The Fourth Circuit split 2-1 on the statute of frauds issue, but it was seemingly unanimous on the spoliation question.  The Appellant has petitioned for rehearing en banc, so practitioners should stay tuned for any further developments in this case

The Form 52 Report: An Often Overlooked Opportunity to Avoid or Resolve Discovery Issues

The Form 52 Report is an often overlooked opportunity to avoid or resolve discovery issues in the early stages of a federal lawsuit.  The Report and the subsequent Rule 16(b) Scheduling Order have added importance in the Eastern District of Virginia where discovery closes only 16-18 weeks after commencement.

Most attorneys (even seasoned litigators) when questioned about the Form 52 Report, ask “What report?”   The Form 52 Report is the parties’ report to the Court in advance of the Rule 16(b) Scheduling Conference.  It documents their Rule 26(f) meeting and agreements and is eventually entered as an order by the Court.  The report is so fundamental that a copy is included in the Appendix of Forms immediately after Federal Rules of Civil Procedure.  The Report states the parties’ discovery-related agreements – and disagreements – for inclusion in the Rule 16(b) Order.

This Blog Post identifies the timing in the litigation of the Form 52 Report and shows that it very well may be the best opportunity to bring multiple discovery issues before the magistrate judge for early consideration.  This Blog Post lists seven issues that are candidates for coverage in the Report.  A recent example of a Form 52 Report is available here.

Form 52 Report in the Discovery Timeline

The Form 52 Report enters the picture shortly after the Court’s initial order opening discovery and setting the date for the Rule 16(b) Scheduling Conference.  EDVA Local Rule 16(B) provides that “as promptly as possible after a complaint . . . has been filed,” the Court shall schedule [the Rule 16(b) conference].    In our court, this order arrives usually about eight weeks after filing the lawsuit.   Under Rule 26(f), the parties must confer regarding a list of discovery and case management issues identified in the Rule at least 21 days in advance of the Rule 16(b) Conference.  The initial Order typically directs that the Form 52 Report be filed at least a week before the Rule 16(b) Conference.  The graphic below shows this extraordinarily tight timetable.

Timeline Form 52 Report

 

The Rule 16(b) Scheduling Order shapes discovery and potentially resolves multiple issues that might otherwise arise during discovery and prior to the Pretrial Conference.  The Form 52 Report is the best opportunity to influence the contents of the Rule 16(b) Scheduling Order because magistrates often incorporate the report contents in their Scheduling Orders.   And even if the parties are not in full agreement on all points, the Form 52 Report can state both sides of an issue, and quite likely the magistrate will decide the issue when he or she issues the Scheduling Order.

Matters to Consider for Inclusion in the Form 52 Report               

Here’s a list of seven issues outside of the standard fare that are candidates for inclusion in the Form 52 Report:

  1. ESI and Document Preservation.  Preservation is the “sleeper” issue in eDiscovery.  Consider including specific ESI preservation requirements in the Report.  The pending Rules Amendment scheduled for December 1, 2015 will highlight ESI preservation and identify it as a subject to be covered in the Rule 16(b) Scheduling Order.  Get on this bandwagon early.
  2.  ESI Production Timetables.   A common experience is when the discovery due date yields only a bland statement that a party will produce responsive documents.  In EDVa where discovery must be completed within 16-18 weeks, a delay in the physical production throws a wrench into the discovery planning.  Consider including a production timetable in the Form 52 Report.   On approach is to prepare the first Rule 34 Requests for ESI and Document Production in advance of the Rule 26(f) Conference and make this an agenda item.  Having the requests in front of the parties encourages a substantive discussion not only on the specifics of the discovery but also on the timetable
  3. Privilege Log and FRE 502(d) Order.   Production of Privilege Logs often significantly trail the ESI and document production, and the preparation of these logs can be expensive and time-consuming.   Put the issue on the table at the time of the Rule 26(f) Conference and include agreements or positions in the Form 52 Report.Couple the Privilege Log issues with discussion of a FRE 502(d) order.  The 2006 eDiscovery Amendments to the Federal Rules set up the processes for protection against inadvertent production of privileged materials, but to secure the protections, you will need an order to put them in place.  Including this in the Form 52 Report that is entered by the court accomplishes that task.
  4. eDiscovery Production Formats.  If you can take production formats off the table as an issue, then discovery will go more smoothly.  The Rules allow the requesting party to specify the formats, and then it is the responding party’s duty to either object or propose alternate formats.   But rather than going through a protracted process to arrive at the formats, bring this issue forward at the start.
  5. Protective Orders, Including Potential Cost Shifting.  If the case requires a Protective Order in advance of discovery, aim to negotiate the order early.  If feasible, mention the need for Protective Orders in the Form 52 Report, and provide any consent order to the magistrate along with the Form 52 Report.   Pending Rule amendments include mention of discovery cost shifting as an appropriate issue for a Protective Order.   Recent case law directs that cost shifting will not be addressed in any significant way in a post-trial cost petition.   There, the time to introduce the issue is as early as possible, which would be the Form 52 Report.
  6.  Stipulation that ECF Service is the Equivalent of Personal Service.    The 1-Week Discovery Sprint is one way in which the EDVa Court keeps the docket moving at warp speed.   See R. Larson, The 1-Week EDVa Discovery Spring: From Filing to Ruling in 7½ Frantic Days (EDVa Update Blog , June 4, 2014).   But the sprint process only works if there is personal service on the opposing party or counsel before 5 p.m. on the first Friday before the proposed hearing.  This can be difficult if the opposing counsel is not nearby—good luck in getting the messenger from Alexandria to the far side of Tysons Corner before 5 p.m. on a Friday afternoon in July.Consider including in the Form 52 Report a stipulation that for purposes of discovery motions, ECF filing and service is the equivalent of personal service under Rule 5(b)(2)(A).  You can go one step further and stipulate to the waiver of the additional 3 days that accompanies ECF service under Rule 6(d).  Either or both of these steps should keep open the 1-Week Sprint option on motions to compel discovery.
  7. Special Discovery Issues.  If you have discovery requirements or issues that may be unique to the case, get them before the Court in the Form 52 Report.  For example, if you expect to take more than one Rule 30(b)(6) deposition of a party, perhaps confirm that the first deposition will not bar the second.   Or, if you foresee that your case requires more than five depositions, put the issue before the magistrate judge early

Summary

Discovery arrives quickly in the EDVa Courts, and at least in the Alexandria Division, it all takes place within a 16-18 week window.   Since much of the discovery process will be governed by the Rule 16(b) Scheduling Order, counsel should consider using the Form 52 Report as the mechanism to get significant issues before the magistrate judge and perhaps included in the Scheduling Order.   And even if the Scheduling Order does not cover all the desired issues, you may want to at least raise the issues in the Form 52 Report so that when you later find yourself before the magistrate, you can show where the issues were previously raised—along with your positions.

Summary Exhibits Under Fed. R. Evid 1006 Must Be Carefully Prepared to be Admitted into Evidence

In a recent decision, Judge James C. Cacheris provided trial practitioners a valuable roadmap to the use of summary exhibits under Fed. R. Evid 1006.  Practitioners often are well-advised to use charts and graphics to communicate complicated factual and legal arguments to a judge or jury. But the careful practitioner must successfully navigate a series of potential pitfalls to ensure that their carefully designed graphical exhibits are admitted into evidence and make their way to jury room.

In United States v. Ging-Hwang Tsoa, 1:13cr137, 2013 WL 6145664 (E.D. Va. Nov. 20, 2013), the defendant was charged with participating in a complicated mortgage fraud conspiracy involving thousands of documents.  Prior to trial, the Government moved in limine to admit into evidence several charts that summarized many pages of documentary business records under Fed. R. Evid. 1006.  In his opinion, Judge Cacheris outlined the analysis used to admit a summary exhibit, and in doing so, provided a working example of the Fourth Circuit’s recent analysis of the differences between R. 1006 summary exhibits and non-admissible demonstratives.

Quoting the Fourth Circuit, Judge Cacheris noted that the “purpose of this Rule is to reduce the volume of written documents that are introduced into evidence by allowing in evidence accurate derivatives from the voluminous documents.”  He then went on to provide the minimum elements necessary to warrant admission under Rule 1006: “(1) the summarized material must be ‘voluminous’ and not conveniently subject to examination in court; (2) the summary or chart must be an accurate compilation of the voluminous records; (3) the records summarized must be otherwise admissible into evidence; and (4) the underlying documents must be made available to the opposing party for examination and copying.”

 The Government, however, did not totally win its in limine motion, and in doing so, provided a cautionary example to trial practitioners  Judge Cacheris refused to admit the summary exhibit into evidence at that point because the Government failed to provide a Certification of Authenticity of the business records under Fed. R. Evid. 902(11).  Subpart 11 was added to Rule 902 in 2000 and allows business records to be admitted into evidence under Fed. R. Evid. 803(6) upon a certification of a custodian or other qualified person.  This certification eliminates the need to have a custodian appear at trial simply to authenticate business records.  Under Rule 902(11), however, the moving party must give the adverse party prior written notice before the trial or hearing of the intent to offer the Certification and must also make both the business records and the Certification available to the other side.  Rule 902(11) does not define what prior “reasonable” notice means, so practitioners are best advised to provide the notice as early as possible and well before the eve of trial.

In doing this, Judge Cacheris implicitly connected two other Rules of Evidence – Rules 902(11) and 803(6) – to the summary exhibit rule 1006.  A practitioner wanting to present summary exhibits under Rule 1006 must also satisfy the requirements of the Rules of Evidence that apply to the underlying documents that are being summarized.

In this case, the Government’s oversight is likely not fatal.  Judge Cacheris’s opinion essentially says that once the Rule 902(11) Certification is provided, and if provided with “reasonable” advance notice to the other side, the Government’s summary exhibit will be admitted into evidence.  And because this was a motion in limine, the Government has time before trial to prepare and submit the Certification.  But if this had not been an in limine motion, and it had instead been in the midst of trial, the Government would likely have been unable to admit its summary exhibit into evidence.

Please note:  This blog/Web site is made available by the firm of Redmon, Peyton & Braswell, LLP (“RPB”) solely for educational purposes to provide general information about general legal principles and not to provide specific legal advice applicable to any particular circumstance. By using this blog/Web site, you understand that there is no attorney client relationship intended or formed between you and RPB. The blog/Web site should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

FRCP Rule 45 Amendments Take Effect on December 1, 2013

On December 1, 2013, amended Rule 45 will become part of the Federal Rules of Civil Procedure. This will introduce fairly significant changes in the procedures for obtaining third-party discovery.  The biggest changes concern third-party subpoenas, both for depositions and for production of documents.

In the Rocket Docket, we often face the situation where discovery closes before a court elsewhere rules on a motion to enforce a third-party subpoena.  This can happen even when third-party subpoenas are served at the beginning of discovery.   Magistrate judges are understanding, and will likely extend discovery for the purposes of obtaining the third-party discovery, but the practical limits are still there due to the typical 9-month window between the filing of the Complaint and the trial in the Eastern District.  The Rule 45 amendments somewhat improve the situation because they permit transfer of subpoena-enforcement to the initial court by consent (barring consent, provide an opening to argue for transfer).  The Committee Note allows that “transfer may be warranted in order to avoid disrupting the issuing court’s management of the underlying litigation …” But the prospect of being caught in two different courts working on two very different timelines remains.

The Major Changes to Rule 45

There are four major changes in the soon-to-be effective Rule 45 amendments:

  1. The court where the underlying matter is pending will now be considered the court “issuing” the subpoena for deposition testimony or document production.  This is in contrast to current practice where the court sitting in the district where the person is found is considered the “issuing” court.
  2. Amended Rule 45(b)(2) provides for nationwide service of the subpoena (the same process is followed in criminal cases).  . The caveat here is that a subpoena is returnable (i.e., where the deponent or the documents are to be produced) only within the state where the recipient or documents are found (depending on the state’s rules), or within 100 miles of where the recipient lives or works.  This applies to trial subpoenas as well.  The inclusion of trial subpoenas under this provision clarifies a situation that arose in the Vioxx Litigation.  (Note that a party representative or a corporate officer might be compelled to appear at a deposition where the litigation is pending, but a trial subpoena for that same person is limited by the in-state/100-mile rule).
  3. You must serve notice to the other parties to the litigation before service of the subpoenas.  Notice must include a copy of the subpoena itself.
  4. As explained above, the amendment adding Rule 45(f) permits transfer of compliance proceedings—both protective orders and motions to compel– back to the court where the underlying matter is pending.   Objections should be made in the court where the subpoena recipient resides, and absent consent, a motion to compel must be initiated in that court as well, but then transfer is a possibility.

The rule-makers achieve their goal in simplifying third-party discovery, but from our vantage point in the Eastern District, an easier standard for transfer of enforcement proceedings to the issuing court would be preferred.  Even under the “exceptional circumstances” standard, distant courts may be inclined to send third-party discovery issues to the issuing court.

Let’s use a hypothetical to help understand how a Rule 45 Subpoena might be treated after the changes take effect:

Our Hypothetical Case: Partner Holdings, LLC v. Delta Investments, Inc. 

 Partner Holdings is embattled in a hotly contested dispute with Delta Investments in the U.S. District Court for the Western District of Texas over a bungled telecommunications deal.  Partner serves Rule 45 discovery in December 2013 on Tango 3P Communications, a Virginia LLC located in Fairfax County, Virginia.  Partner notifies Delta, and then issues the Rule 45 subpoena from the Western District of Texas, the subpoena is served on the Virginia registered agent for Tango 3P.

Assume you represent Tango 3P Communications.  As a practitioner, how do you properly quash the third-party subpoena under the amended Rule 45?

Partner’s request seeks confidential trade secrets and commercial information as well as privileged information in the form of documents within 21 days. Additionally, Partner requests documents from Tango 3P other telecommunication contracts with Delta which are unrelated to Partner’s current litigation with Delta.  Partner directs Tango 3P to deliver its responses to Partner’s law firm’s Washington, D.C. office.

Note that the requirement of notice before service does not mean that Partner would have to produce to Delta the documents produced by Tango 3P.  This still requires a Rule 34 Request for Production.

What grounds are there to quash the subpoena? Since Partner is only seeking documents from Tango 3P, the grounds available to quash the subpoena are:

  1. A failure to allow for a reasonable time to comply;
  2. The subpoena seeks privileged information, or
  3. The request is an undue burden on the recipient.

Under amended Rule 45, the proper court for a motion to quash the subpoena is the jurisdiction where the recipient is located, in this case, the Eastern District of Virginia.

This is the first filing for Tango 3P and requires Tango 3P to open a “Miscellaneous” matter with the Clerk and pay the filing fee (the current filing fee in the EDVa is $46). Tango 3P then must file the following:

  • A notice of the motion;
  • A memorandum of law;
  • Supporting affidavits;
  • A proposed order; and
  • Proof of service on the issuing party.

Timing is key. The motion should be filed prior to the return date of the subpoena or within 14 days of service, whichever is earlier.  Missing the 14-day limit is grounds for denial of the motion.

Before setting the motion for a hearing date, you must consider the local rules of the issuing court and whether those rules require the parties to meet and confer.  In Tango 3P’s case, both the Western District of Texas and the Eastern District of Virginia require parties to meet and confer in good faith before even filing the motion (and must state in their memorandum that a meet and confer actually happened).  A failure to meet and confer is grounds for the magistrate judge to deny the motion to quash.  This should come as no surprise to practitioners in the EDVa, where meaningful meet and confers are demanded by the magistrate judges, and parties are admonished (and sometimes penalized) for failing to abide by the rules.

In the hypothetical, the motion to quash is heard by the magistrate judge five days before the return date of the subpoena. The judge decides against transferring the motion to the Western District of Texas, partly because Tango 3P objects to the transfer and partly because the circumstances presented in the motion are not exceptional.

The judge agrees with your argument that Partner’s requests seek privileged and confidential communications, but disagrees with your position that the time to comply with the demand is unduly burdensome or that the additional requests made concerning Tango’s contracts with Delta is overly broad. The judge grants in part and denies in part your Motion to Quash and directs Tango 3P to comply within 30 days of the judge’s ruling.

If there are compliance issues, the EDVa court may enforce its order.  The amended Rule also permits transfer of compliance issues, and in fact encourages the involved judges to consult with each other.

Conclusion

The amendments to Rule 45, especially as they concern third-parties, simplify the subpoena process and afford more protection to third-parties attempting to quash subpoenas for production of documents or testimony. The amendments also provide more protection to non-issuing parties in discovery matters by demanding notice prior to service of the subpoena.

Take care in preparing Rule 45 subpoenas, providing the required notice, be wary of the 14-day objection provision, and be on the lookout for the possibility of having to enforce or defend a subpoena in a foreign jurisdiction

Committee Report on Rule 45

Please note:  This blog/Web site is made available by the firm of Redmon, Peyton & Braswell, LLP (“RPB”) solely for educational purposes to provide general information about general legal principles and not to provide specific legal advice applicable to any particular circumstance. By using this blog/Web site, you understand that there is no attorney client relationship intended or formed between you and RPB. The blog/Web site should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

4th Circuit Narrows 28 USC § 1920(4) Taxation of Common eDiscovery Costs

The Fourth Circuit confirms that while certain costs of ESI copying for discovery are taxable under Rule 54(d)(1), the taxable costs in a plain vanilla ESI production do not include the underlying ESI processing costs. The impact of this will often be substantial—the prevailing party in the case sought $101,858 in ESI-related costs—the court awarded $218.59. The caveat is that in a more complex production that includes metadata or specified formats, the costs to produce the metadata may be taxable.

In Country Vintner of North Carolina, LLC v. E. & J. Gallo Winery, Inc., 718 F.3d 249 (4th Cir. 2013), the court concluded that 28 USC § 1920(4), applied to a basic eDiscovery production, “limits taxable costs to . . . converting electronic files to non-editable formats, and burning the files onto discs.”  Opinion at 21.  The case involved conversion of PST files to TIFF images, with the production of the TIFF images on CDs.   Apparently no load file was part of the production.  The Opinion recognized in a footnote that “we assume, without deciding, that taxable costs would include any technical processes necessary to copy ESI in a format that includes such information.”   Opinion, n.19 at 21.  This covers the load files.  A second footnote carves out the situation where the parties have agreed to a specific production format (“the production of ESI on a particular database or in a native file format”).  Id. n. 20 at 21.

In a ruling by Judge Brinkema a month before the Country Vintner decision, essentially the same issues were addressed with essentially the same results.   In Nobel Biocare USA, LLC v. Tecnhique D’Usinage Sinlab, Inc. 2013 WL 819911 (E.D.Va. 2013), a more factually robust case, the court concluded

. . . all of the cited authorities agree that although the costs of collecting, storing, and extracting electronically stored information may not be taxable, the costs of converting that information into the agreed-upon format and electronically Bates stamping it are analogous to copying costs, and therefore are taxable.

Citing the Parties’ Joint Discovery Plan that provided for “searchable TIFF or PDF format,” Judge Brinkema allowed $30,000 for the production of more than 400,000 TIFF images.

The 4th Circuit’s analysis begins with the Supreme Court’s recent observation that taxable costs under 28 USC § 1920 are “modest in scope” and “limited to relatively minor, incidental expenses.”  Taniguchi v. Kan Pacific Saipan, Ltd., 132 S.Ct. 1977 (2012).  The analysis then cites approvingly Race Tires America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3rd Cir. 2011).  In that case, the appellate court reversed the trial judge’s ruling that allowed taxation of $365,000 of eDiscovery costs, and approved only $30,000 for “scanning and file format conversion” as it was “the functional equivalent of making copies” under the statute.   The approved file format conversion costs included conversion to TIFF and conversion of video from VHS to DVDs.

The current standard in the Eastern District for taxable eDiscovery costs under 28 USC § 1920(4) seemingly distill to these points:

  • When the production is basic (e.g., PST files to PDF to TIFF), the taxable costs are the conversion costs (here PDF to TIFF) plus the costs to transfer to the production media.
  • The underlying ESI collection and processing costs are not taxable.
  • Ancillary production costs, such as electronic Bates-stamping, are taxable.
  • If the production requires metadata (for example, a common Summation or Concordance load file), then the taxable costs likely include the costs to put the data in the production format.
  • If in an agreement between the parties or specifications in the discovery Instructions further production (but not processing) requirements are imposed, those costs are likely taxable.

The big-ticket eDiscovery components—the document collection, processing, and attorney review—are not taxable.  Only eDiscovery costs analogous to costs of physical copying fall within the scope of 28 USC § 1920(4).

The Country Vintner of North Carolina, LLC v. E. & J. Gallo Winery, Inc. Opinion

Please note:  This blog/Web site is made available by the firm of Redmon, Peyton & Braswell, LLP (“RPB”) solely for educational purposes to provide general information about general legal principles and not to provide specific legal advice applicable to any particular circumstance. By using this blog/Web site, you understand that there is no attorney client relationship intended or formed between you and RPB. The blog/Web site should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.