This Sidley Update addresses the following recent developments and court decisions involving e-discovery issues:
- A decision from the U.S. District Court for the Southern District of Ohio finding that a “an experienced businessman” was negligent in failing to discover and disable an auto-delete function on his phone that resulted in the loss of relevant text messages and granting spoliation sanctions
- A decision from the U.S. District Court for the Northern District of Illinois granting a motion to compel one Defendant to use additional specific search terms based on the Plaintiffs’ discovery of relevant documents that the Defendant had not produced
- A ruling from the U.S. District Court for the Northern District of Mississippi ordering that the Defendant was required to sequester documents that were subject to a claim of privilege by the Plaintiff under Federal Rule of Civil Procedure 26(b)(5)(B) and the Defendant could not view or use any of the putatively privileged information pending resolution of the privilege claim
- An opinion from the U.S. District Court for the District of Kansas finding that a clawback mechanism in the parties’ protocol for electronically stored information (ESI) would not be limited to instances of inadvertent production and the parties would not be required to use a search-term review protocol before using technology-assisted review (TAR)
In Safelite Group, Inc. v. Nathaniel Lockridge, et al., No. 21-cv-04558, 2024 WL 4343038 (S.D. Ohio Sept. 30, 2024), Chief U.S. District Judge Sarah D. Morrison assessed whether to grant spoliation sanctions based on an individual’s failure to remove an auto-delete function that resulted in the loss of relevant text messages.
Plaintiff, an auto-glass and repair and replacement company, brought this action against a competitor and certain of its former employees alleging misappropriation of trade secrets and interference with its employment contracts and business relationships. Id. at 1.
Defendant Nathaniel Lockridge resigned from Plaintiff’s employ in August 2021 and immediately began working for a competitor. Documents produced during discovery reflected that Lockridge spoke to and texted with other of Plaintiff’s employees for the purpose of recruiting them to work for the same competitor. On August 27, 2021, Plaintiff sent Lockridge a detailed cease-and-desist letter reminding him of his nonsolicitation obligations, demanding assurances that he was complying with those obligations, and threatening legal action absent such assurances. Id. at 1-2.
Plaintiff filed this action on September 13, 2021, and Lockridge was served with the complaint shortly thereafter. Id. at 3. Lockridge met with counsel on October 7, 2021, and was advised of his obligation to retain and not destroy, delete, or throw away any documents, records, or communications that dealt with the allegations in the lawsuit. He received a written litigation hold in November 2021.
During discovery, Plaintiff asked Lockridge to produce certain communications, including text messages. However, Lockridge admitted that he made no effort to preserve his text messages until February 3, 2022, when he claims to have discovered that his cell phone was set to delete any text messages older than 30 days. As a result, Lockridge did not preserve any text messages sent or received before January 4, 2022. Plaintiff filed a motion for an order finding that Lockridge spoliated evidence, imposing an adverse-inference sanction, and awarding costs and expenses.
Chief Judge Morrison began her analysis by explaining that a party to civil litigation has “a duty to preserve information, including [ESI], when he knows (or should know) that the information may be relevant to future litigation.” Quoting from Rule 37(e), she further explained that a party seeking sanctions for spoliation of ESI must show that (1) ESI that “should have been preserved in the anticipation or conduct of litigation” was lost; (2) the party responsible for preserving the information “failed to take reasonable steps to preserve” it; and (3) the information “cannot be restored or replaced through additional discovery.”
Chief Judge Morrison next explained that once these elements are satisfied, differing sanctions can be granted depending on the “cause and effect of the spoliation.” First, under Rule 37(e)(1), a court can impose sanctions that are “no greater than necessary to cure the prejudice” if the loss of information prejudices the movant, regardless of the nonproducing party’s intent. Alternatively, under Rule 37(e)(2), a court can impose more severe sanctions if (and only if) the court finds that the nonproducing party intended to deprive the movant of the information’s use in the litigation.
Chief Judge Morrison found that Plaintiff satisfied each of the elements of a spoliation claim against Lockridge.
First, she found that Lockridge was on notice of his duty to preserve after receiving Plaintiff’s August 27 cease-and-desist letter. Id. at 4. She noted that courts use an objective standard to determine the point at which a party is put on notice, and the “question thus becomes, when the non-producing party should have known that the evidence may be relevant to future litigation — not when he subjectively learned of the litigation.” She concluded that the August 27 letter was “detailed and specific” and directly threatened legal action.
Chief Judge Morrison rejected Lockridge’s argument that no duty could be imposed on him by Plaintiff’s August 27 cease-and-desist letter because he was a “lay person.” She noted that this argument was inconsistent with the applicable objective standard and counter to the relevant authorities’ finding that a party’s inexperience in litigation is a factor in evaluating whether he took reasonable steps to preserve evidence — not whether he had a duty to preserve.
Chief Judge Morrison also found that the lost text messages were likely relevant to the litigation. Id. at 4-5. She cited a number of circumstantial facts in support of this finding. For example, she cited to evidence that Lockridge texted and spoke on the phone to a number of individuals that were listed in an email he sent to his new employer and that Lockridge exchanged an unusually high volume of texts with one of those individuals in September 2021. In light of this circumstantial evidence, Chief Judge Morrison rejected Lockridge’s argument that he was texting the relevant individuals “as friends — about family and shared interests.”
Second, Chief Judge Morrison found that Lockridge failed to take reasonable steps to preserve the text messages. She explained that Rule 37(e) “does not call for perfection,” and courts consider a “party’s familiarity with litigation, level of control over the lost evidence, resources, and any evidence of the routine, good faith operation of an information retention system.” Chief Judge Morrison concluded that Lockridge made no effort to preserve his text messages, which were under his exclusive control, despite having the “wherewithal and the resources to discuss his obligations” with counsel.
Chief Judge Morrison declined to credit Lockridge’s assertion that “he did not know his phone automatically deleted text messages after 30 days,” finding that “Lockridge is an experienced businessman” and “[i]t is not plausible that a modern, professional smartphone user like Lockridge could carry on for four years without realizing that his text messages disappeared after 30 days.”
Chief Judge Morrison also faulted Lockridge’s counsel, who were obligated not only to implement a litigation hold but to monitor Lockridge’s efforts to retain and produce the relevant documents. While Lockridge’s counsel orally advised him of the “obligation to retain and not destroy, delete, or throw away any documents, records, or communications that dealt with the allegations in the lawsuit,” Chief Judge Morrison stated that “an oral litigation hold is insufficient to reasonably protect against the spoliation of evidence.”
Third, Chief Judge Morrison found that Lockridge’s text messages could not be restored or replaced through additional discovery. Id. at 5-6. Plaintiff demonstrated that it was unable to obtain the text messages by other means, including from the other parties to those text messages. She also concluded that there was no substitute for the messages, because “[w]ithout the lost text messages, Plaintiff is deprived of the opportunity to know the precise nature and frequency of those private communications, which occurred during a critical time period.”
Having concluded that Plaintiff demonstrated spoliation, Chief Judge Morrison turned to the appropriate sanction. She found that Plaintiff merited sanctions under Rule 37(e)(1) because Plaintiff showed that Lockridge was negligent in failing to preserve the text messages and Plaintiff was prejudiced by Lockridge’s failure. Chief Judge Morrison explained that “[p]rejudice can be properly understood as a party’s ability to obtain the proofs necessary for its case ... which is another way of saying the loss of ESI could negatively impact a party’s ability to make its case, or prejudice that party because of the loss of information.” Referring to the Advisory Committee’s notes to the 2015 amendment to Rule 37(e), she further explained that “[t]he rule does not place a burden of proving or disproving prejudice on one party or the other” but “leaves judges with discretion to determine how best to assess prejudice in particular cases.”
Chief Judge Morrison stated that Plaintiff had demonstrated prejudice by proffering evidence that Lockridge exchanged extensive text messages with relevant individuals during a critical time period, and was communicating with his new employer about those individuals during that same critical period. She noted that prejudice could be found based on the fact that Plaintiff was “required to piece together information from other sources to try to recover relevant documents.” Id. at 6.
With respect to the specific sanction, Chief Judge Morrison stated sanctions under Rule 37(e)(1) were appropriate based on Lockridge’s negligent failure to preserve the text messages. She explained that “[t]he severity of the sanction is determined on a case-by-case basis, depending in part on [the] non-producing party’s level of culpability,” but must be “no greater than necessary to cure the prejudice.” After “consider[ing] the record as a whole in assessing the extent to which [Plaintiff] has been prejudiced by the lost text messages,” Chief Judge Morrison concluded that Plaintiff should be permitted to introduce evidence at trial of the August 27 letter and of Lockridge’s failure to preserve his text messages. In addition, both Plaintiff and Lockridge would be permitted to present evidence and argue with respect to the appropriate inference that the jury should draw.
Accordingly, Chief Judge Morrison granted Plaintiff’s motion for spoliation sanctions and ordered that the parties would be permitted to present admissible evidence of Lockridge’s duty to preserve his text messages, and negligent failure to do so, and argument on whatever inference the jury should take from that evidence. She further awarded Plaintiff attorneys’ fees and costs under Rule 37(a)(5)(A).
In In Re Outpatient Medical Center Employee Antitrust Litigation, No. 21-cv-305, 2024 WL 4188728 (N.D. Ill. Sept. 13, 2024), U.S. Magistrate Judge Young B. Kim addressed the proportionality standard of Rule 26 as applied to a request to compel the use of additional search terms.
Plaintiffs in this antitrust litigation brought claims under Section 1 of the Sherman Act, alleging that Defendants, ambulatory surgery centers and outpatient medical centers, conspired to reduce and limit compensation and mobility of their employees. Id. at *1.
Earlier in discovery, Plaintiffs had filed a motion to compel Defendants Surgical Care Affiliates, LLC, and SCAI Holdings, LLC (SCA), to produce documents related to wage-fixing and the exchange of employment-related business information with other Defendants. The court had granted that motion and compelled SCA to produce the requested documents because Plaintiffs’ complaint included allegations that Defendants conspired to fix wages. Based on this order, SCA performed a series of searches relating to wage-information-sharing practices, including using the search term “Wage w/5 (increase* OR budget)” which SCA represented generated 2,706 hits.
But Plaintiffs claimed that SCA failed to produce responsive documents that should have been captured in that search, including two email threads that another Defendant, United Surgical Partners International (USPI), had produced discussing the sharing of wage increase information with SCA. Magistrate Judge Kim surveyed these email threads, in which an SCA employee discussed the exchange of wage increase budgets with an employee of USPI. Id. at *2. Magistrate Judge Kim found these email exchanges to be “significant and incriminating, at least on the surface.”
Based on those emails, Plaintiffs moved to compel SCA to perform supplemental searches for ESI to search for documents relating to exchanges of wage information using three new search terms across two new and three previously designated custodians. In particular, Plaintiffs proposed broadening the terms SCA had used to include (1) “Wage* /20 (increas* OR budget*)”; (2) “(Wage* or info* or data) /20 (shar* OR swap* OR exchang*)”; and (3) “Wage* AND (USPI OR ‘United Surgical Partners International’).
In response to the motion, SCA argued that it produced 890,233 documents and conducted reasonable search for documents concerning wage-fixing. SCA suggested that its failure to produce the USPI email threads raised by Plaintiffs may have been because they predated SCA’s preservation obligations. SCA also argued that Plaintiffs’ supplemental requests were “unreasonably cumulative, duplicative, and burdensome.” SCA pointed out that the USPI email threads identified by Plaintiffs did not contain any of the three new proposed terms.
SCA further argued that the proposed search terms were not proportional to the needs of the case. Id. at *4. In particular, SCA noted that the three new search terms returned 648 hits, 22,458 hits, and zero hits respectively across the three previously designated custodians and estimated it “would take 462 hours of attorney time to review those documents, at a significant cost to SCA.” Based on these figures, SCA argued that Plaintiffs’ request failed the proportionality requirement in Rule 26(b)(1) because “[a]ny potential benefit of running these new search terms is minimal and far outweighed by the expense and burden of performing these reviews.”
Magistrate Judge Kim began his analysis by explaining that Rule 26(b) governs the scope of discovery and provides that the “[p]arties 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,” with relevance “to be construed broadly.” Id. at *3. He further explained that an assessment of proportionality required consideration of 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.” Id. (quoting Fed. R. Civ. P. 26(b)(1)).
Magistrate Judge Kim noted that SCA did not dispute the relevance of the USPI email threads, so “[t]he key inquiry thus turns on whether SCA, as the opposing party, has satisfied its burden of showing that the supplemental searches Plaintiffs seek are improper.”
Magistrate Judge Kim agreed with Plaintiffs that the three new proposed search terms were “narrowly tailored” to discover “exchanges of wage information between SCA and USPI” and related documents. Magistrate Judge Kim found that Plaintiffs’ newly proposed search terms sought relevant information and satisfied the proportionality requirement because the documents Plaintiffs sought related to evidence of wage-fixing, which he found to be relevant and important to the resolution of Plaintiffs’ claims. Magistrate Judge Kim also found that “the importance of the issues at stake in the action, the amount in controversy, [and] the importance of the discovery in resolving the issues” all weighed in favor of compelling the supplemental searches.
While Magistrate Judge Kim credited SCA’s concerns that the new proposed search terms placed an undue burden on SCA, he found that SCA has not satisfied its burden of showing that Plaintiffs’ requested searches are improper. He noted that the parties had proceeded with discovery under an existing ESI protocol and that “tweaking search terms now will increase SCA’s discovery expenses.” But Magistrate Judge Kim held that the supplemental discovery was appropriate given the significance of the USPI email threads to the claims in this case. He stated that SCA could “minimize its burden of reviewing newly identified documents by relying on [TAR] and Federal Rule of Evidence 502(d).”
In GXO Logistics Supply Chain, Inc. v. Young Living Essential Oils, LC, No. 23-CV-61-SA-RP, 2024 WL 3930501 (N.D. Miss. Aug. 23, 2024), U.S. Magistrate Judge Roy Percy addressed the sequestration procedures required by Rule 26(b)(5)(B) once a party has received notice of a claim of privilege as to information previously produced.
In this action resulting from the breakdown of the parties’ business relationship, Plaintiff produced 16 documents during discovery that it later claimed contained privileged information. Id. at *1. Pursuant to Rule 26(b)(5)(B), Plaintiff notified Defendant of the claim of privilege as to those documents, and Defendant sequestered the documents pending resolution of Plaintiff’s privilege claim.
But the parties disagreed over whether Defendant, having sequestered the documents, could review the documents in order to assess and oppose Plaintiff’s claim of privilege. Plaintiff argued that Defendant should not be permitted to view the sequestered documents pending resolution of the privilege claim, but Defendant argued that it should be permitted to view and use the putatively confidential information in opposing the privilege claim. Plaintiff filed a motion to prohibit Defendant from viewing the subject documents pending resolution of the privilege claim.
Magistrate Judge Percy began his analysis by explaining that Rule 26(b)(5)(B) provides, in relevant part, that after receiving notice of a claim of privilege as to information previously produced, the receiving party “must promptly return, sequester, or destroy the specified information and any copies it has; must not use or disclose the information until the claim is resolved; ... and may promptly present the information to the court under seal for a determination of the claim.”
Magistrate Judge Percy referred to the reasoning of a prior decision, In re Google RTB Consumer Privacy Litigation, No. 21-cv-02155-YGR (VKD), 2022 WL 1316586 (N.D. Cal. May 3, 2022), which explained that the goal of Federal Rule of Evidence 502(d) was to promote more efficient and cost-effective discovery in cases involving substantial quantities of ESI. He reasoned that to accomplish this goal, the rule permits parties to avoid the need for exhaustive preproduction privilege reviews by providing a mechanism for parties to claw back privileged materials after the fact without waiving privilege. But he noted that allowing “receiving parties to examine and brief the contents of documents subject to a claw back notice would defeat the purpose of the rule, as parties would likely choose to undertake an exhaustive pre-production review to identify and withhold privileged information rather than risk a waiver for briefing purposes only.”
Magistrate Judge Percy explained that “in the typical circumstances contemplated by Rule 502(d), where a party produces a large volume of documents without exhaustive privilege review and later discovers that the production includes privileged material, nothing in Rule 26(b)(5)(B) requires a court to permit the receiving party to examine and brief the contents of the putatively privileged material in challenging the claim of privilege. Id at *2 (quoting In re Google). He also pointed out that Rule 26(b)(5)(B) permits parties to “present” the privileged material to the court under seal.
Magistrate Judge Percy noted that there was no indication that the information Plaintiff sought to claw back had already been used or disclosed in a substantive way in the litigation, such as in a brief filed with the court or in deposition testimony about the information. Id. at *3. He therefore distinguished this case from one where a document had already been used or disclosed in a substantive way in the litigation before the producing party attempted to claw it back, in which it would be impracticable or unreasonable to require parties to avoid discussing the contents of a putatively privileged document in briefing and argument challenging the claim of privilege.
Magistrate Judge Percy found that it was not impracticable or unreasonable to prohibit Defendant, when challenging Plaintiff’s claim of privilege, from discussing the specific contents of the putatively privileged information. Accordingly, Magistrate Judge Percy granted Plaintiff’s motion. He ordered that pending resolution of the dispute over Plaintiff’s clawback request, Defendant could not view the sequestered documents or use any putatively privileged information it may have learned when viewing the subject documents prior to receiving the clawback request.
In Edgar v. Teva A Pharmaceutical Industries, Ltd., No. 22-cv-2501-DDC-TJJ, 2024 WL 3677614 (D. Kansas Aug. 5, 2024), U.S. Magistrate Judge Teresa J. James resolved two disputes between the parties in connection with their proposed ESI protocol.
Magistrate Judge James first addressed the parties’ dispute regarding whether the clawback procedure for the disclosure of privileged information should be limited to “inadvertent or mistaken production” (as proposed by Plaintiffs) or whether it could be invoked for all materials produced “whether inadvertent or otherwise” (as proposed by Defendants).
Plaintiffs argued that Rule 502(b) is expressly titled “Inadvertent Disclosure” and provides a safe harbor only for inadvertent production if reasonable steps were taken to prevent the error and then rectify it. Plaintiffs contended that removing the concept of inadvertence would undermine the waiver consequences of an intentional disclosure and that Defendants could try to use such a provision to allow assertion of privilege over emails that were intentionally produced in another litigation.
Defendants meanwhile argued that their proposed clawback provision for all materials “whether inadvertent or otherwise” was consistent with Rule 502(d) and would avoid fights over whether the production or disclosure of privileged information was in fact “inadvertent.” Defendants also argued that the protective order in the case and the Federal Rules provided the parties with “ample protections” to challenge an assertion of privilege if they believed such a challenge was warranted.
Magistrate Judge James agreed with Defendants’ proposal permitting the clawback of privileged materials on any basis, “whether inadvertent or otherwise,” because that would “avoid disputes over whether the parties’ disclosure was inadvertent.” She also found that Plaintiffs’ concern regarding the potential for clawback of privileged documents that were intentionally disclosed in other cases could be addressed through motion practice challenging the assertion of privilege for the specific documents at issue.
Magistrate Judge James next addressed the parties’ dispute regarding the use of TAR during document review. Plaintiffs proposed a TAR provision that would require a party to “disclose the need for implementation of TAR” after the party made a good faith attempt to produce documents using the parties’ search term protocol. Id. at *2. Plaintiffs’ proposed provision also required the parties to “meet and confer to enter into a cooperative and transparent TAR protocol.”
Defendants proposed a simpler TAR provision: “The parties shall meet and confer to enter into a mutually agreeable TAR protocol.” Defendants objected to Plaintiffs’ proposal that would allow TAR only after a good-faith attempt to use a search term protocol, because this would undermine the “cost and time saving features” of TAR. Defendants also opposed use of the word “transparent” for a TAR protocol because it was ambiguous and objected to disclosing the need for implementation of TAR on the basis that it might waive attorney-client privilege or work product.
Magistrate Judge James noted that “[b]oth sides make valid arguments” but ultimately sided with Plaintiffs’ proposed TAR provision. In particular, she noted that the case law cited by Plaintiffs supported “the importance of transparency and cooperation among counsel when a party intends to use TAR.” She explained that “TAR requires an unprecedented degree of transparency and cooperation among counsel in the review and production of ESI responsive to discovery requests” and that courts approving the use of TAR typically “required the producing party to provide the requesting party with full disclosure about the TAR technology used, the process, and the methodology, including the documents used to train the computer.” Magistrate Judge James found that Plaintiffs’ proposed TAR provision “better aligns with these principles of transparency and cooperation as it requires the party intending to use TAR to disclose the need for implementation of TAR, as well as requiring a meet and confer to enter into a cooperative and transparent TAR protocol.”
But Magistrate Judge James disagreed with Plaintiffs’ proposal that a party intending to use TAR is required first to make a “good faith attempt to produce from the search term protocol” because this requirement could significantly reduce the cost-saving benefits of TAR. Instead, she ordered that a “reasonableness” standard should apply to the TAR provision requiring a “good faith attempt to produce from the search term protocol.”
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