- A Wake-Up Call To Counsel Over ESI Discovery
- April 7, 2015 | Authors: Eric P. Mandel; Charles R. Ragan
- Law Firm: Zelle Hofmann Voelbel & Mason LLP - Minneapolis Office
The recent case of Brown v. Tellermate Holdings Ltd. is noteworthy for its imposition of near-terminal evidentiary sanctions, and order directing counsel and defendant to jointly pay plaintiffs’ cost of bringing motions to compel. But its important lesson is that counsel must stay abreast of continuing changes in information technologies, and critically assess client information about electronically stored information if they are to meet their duties to courts and clients.
Defendant Tellermate employed plaintiffs Robert and Christine Brown in sales positions until August 2011, when they were terminated allegedly for failing to meet increasing sales targets over a period of several years. Several months later, plaintiffs brought an employment discrimination action alleging age discrimination against Tellermate, another business entity and several individuals.
In the words of Magistrate Judge Terence P. Kemp, “Discovery did not go smoothly. Numerous discovery conferences were held, numerous discovery motions were filed and several discovery orders were issued.” Eventually, the Browns moved for judgment and other sanctions under Rule 37(b)(2) and the court held an evidentiary hearing over the course of three days.
The Magistrate Judge’s Opinion
The Judge Kemp's opinion focused on three areas of discovery failure: (1) counsel’s failure to understand how information located on Tellermate’s salesforce.com account could be obtained and produced, which resulted in repeated false statements to opposing counsel and the court; (2) counsel’s failure to identify for almost a year certain requested documents regarding a prior age discrimination case; and (3) what the court described as a “document dump,” which resulted from defense counsel’s use of overbroad search terms that yielded approximately 50,000 largely irrelevant documents, which counsel could not review within the court-ordered time frame, and so counsel designated them as for "attorneys’ eyes only."
In its discussion, the court touched on a number of themes heard frequently in eDiscovery conferences: the importance of the Rule 26(g)(3) certification in making discovery requests and responses; the desirability of approaching discovery cooperatively with opposing counsel; limiting discovery to what is relevant to claims and defenses and proportionality.
The court found that the failure to preserve and produce salesforce.com information irreparably deprived plaintiffs of reliable information relevant to their claims: “[T]he most comprehensive evidence of [the Browns] performance,” wrote the court, “appears to be the salesforce.com information. But that information cannot [now] be trusted, and even a forensic computer expert has no way to detect what changes, deletions or additions were made to the database on an historical basis.” To remedy the situation, the court precluded Tellermate from using any evidence which would tend to show that the Browns were terminated for performance-related reasons.
Counsel Must Critically Examine Client Information About ESI
The “overriding reason” for the significant problems that arose, the court wrote, was that
counsel fell far short of their obligations to examine critically the information Tellermate gave them about the existence and availability of documents requested by the Browns. As a result, they did not produce documents in a timely fashion, made unfounded arguments about their ability and obligation to do so, caused the Browns to file discovery motions to address these issues and, eventually, produced a key set of documents which were never subject to proper preservation.
In so ruling, the court did not blaze a new path in the law. As early as 2004, U.S. District Judge Shira A. Scheindlin in Zubulake v. UBS Warburg LLC ruled that counsel had an affirmative duty to monitor preservation and ensure that all sources of discoverable information were identified. (See also In re Taylor, 655 F.3d 274 (3d Cir. 2011) (lawyer could not simply settle for information client provided, but, using independent professional judgment, must make reasonable inquiry to determine what facts are likely to be relevant); Phoenix Four Inc. v. Strategic Resources Corp., 2006 WL 1409413 at *5 (S.D.N.Y. 2006) (monetary sanctions imposed for late production where defendant “never undertook the more methodical survey” of sources of information required by Zubulake but “simply accepted the defendants’ representation”); Comment to ABA Model Rule of Prof. Conduct 1.1, added in 2012.)
But the Tellermate Court found that experienced defense counsel conducted an inadequate investigation, failed to uncover and understand even the most basic information about a cloud-based database and consequently failed to take steps to preserve the integrity of that information. Those failures led to defense counsel making statements to opposing counsel and in court that were false and misleading, and which had the effect of hampering plaintiffs’ ability to pursue discovery timely and in a cost-efficient manner.
Discovery From Salesforce.com: Possession, Custody and Control of Cloud-Based ESI
Salesforce.com is a popular cloud-based customer relationship management database system with more than 100,000 customers globally. Tellermate’s employees, including plaintiffs, used salesforce.com to keep track of all contacts with customers. The system was “dynamic” in that users add to or change data within the system as they interact with clients.
During discovery, defense counsel repeatedly took the position — without any factual basis — that defendant did not have and could not produce the requested salesforce.com information, and that defendant could not take steps to preserve the information in the database (e.g., by obtaining an export of the data early in the litigation). As Judge Kemp pointed out in his opinion, no cogent argument could be made from the agreement between salesforce.com and Tellermate that: (1) the defendant was prohibited from accessing the information and producing it in discovery or (2) that salesforce.com was backing up the information periodically such that preservation steps by Tellermate were unnecessary.
Tellermate teaches two important lessons with respect to discovery of ESI stored in cloud-based applications. First, counsel must understand that, while information may be stored outside the enterprise and under the immediate “custody and possession” of a third party (in this case salesforce.com) it likely is still legally deemed within the “control” of the originator or owner of the data (in this case Tellermate), and, therefore, must be produced under Rule 34(a)(1)(A) of the Federal Rules of Civil Procedure.
Second, in order to understand the rights and obligations between the originator and the cloud-service provider, counsel should examine the service level agreement between the client and the cloud provider. In this case, had counsel done so, it would have quickly learned that Tellermate owned and controlled the data created by its employees but stored on salesforce.com, and that, while salesforce.com was prohibited from sharing the data with third parties and was not backing up data for preservation purposes, Tellermate was able to download its own information at any time for preservation or potential production.
Clarity on Scope of Requests, Prior Relevant Litigation Documents and Privilege Logs
The record concerning the documents from the prior age discrimination case was more complicated: Counsel objected to a document request, but stated responsive, nonprivileged documents would be produced. A few were produced, but no privilege log was provided. At a hearing in April 2013, defendant acknowledged there were additional documents being withheld on Rule 408 settlement privilege grounds.
Judge Kemp ruled that defendants had waived privilege by not providing a log as required by Rule 26(b)(5). On motion to the district court, defendants asserted only two documents were withheld on the basis of the Rule 408 settlement privilege. The district court agreed with the magistrate and overruled the objections. Defendants then produced more than two documents and a privilege log listing 30 or more additional documents, this time claimed to be subject to the attorney-client privilege. Judge Kemp again rejected the privilege claim as too little too late, and ordered additional documents produced.
The opinion notes that Tellermate offered no explanation for its failure to provide all these documents to its counsel as part of its initial response. That failure caused defense counsel to make false representations to opposing counsel and the court about the additional documents.
There are two key takeaways from this part of the opinion. First, as the court stated, “It is not sufficient to send the discovery request to a client and passively accept whatever documents and information the client chooses to produce in response.” Second, the decision underscores the need to raise claims of privilege and prepare and produce an adequate privilege log timely, if the court is to recognize the privilege claims. This view is consistent with what numerous judges have been telling audiences at eDiscovery conferences around the country.
Understanding Search Term Limitations and Volumes of Currently Available ESI
Finally, the “document dump” of 50,000 largely irrelevant and unresponsive pages of documents followed what is emerging as an all too familiar pattern. That pattern stems in large part from the failure of some litigators to embrace the directive of Mancia v. Mayflower Textile Services Co. and subsequent courts — namely, to approach discovery cooperatively, with discussions about sources of information, topics for discovery and search terms and methodologies.
In Tellermate, defense counsel objected to disclosing the search terms it used on the ground they were arguably privileged. In fact, the full names and nicknames of identified sales personnel were the only search terms used, and they understandably returned numerous irrelevant and nonresponsive “hit” documents. Because a deadline for production was fast approaching, defense counsel produced all the “hit” documents as “For Attorneys Eyes Only,” without reviewing them and without making or having any requisite showing of cause.
There are two important takeaways from this chapter in the case. First, search terms by now are notoriously perfidious. They often produce results that are both over-inclusive and under-inclusive. As Judge Peck has written:
Because of the volume of ESI, lawyers frequently have turned to keyword searches to cull email (or other ESI) down to a more manageable volume for further manual review. Keywords have a place in production of ESI. ... In too many cases, however, the way lawyers choose keywords is the equivalent of the child’s game of “Go Fish.” The requesting party guesses which keywords might produce evidence to support its case without having much, if any, knowledge of the responding party’s “cards” (i.e., the terminology used by the responding party’s custodians). Indeed, the responding party’s counsel often does not know what is in its own client’s “cards.”
Da Silva Moore v. Publicis Groupe & MSL Group, 287 F.R.D. 182, 190-191 (S.D.N.Y. 2012).
Second, because the volume and variety of potentially relevant ESI is increasing exponentially (in most organizations, doubling every 18-24 months), even what may seem at first blush to be a reasonably tailored search query may return a surprisingly large volume of “hit” documents, making for a potentially expensive postsearch, preproduction review.
It is therefore imperative that counsel understand the size of the target ESI population and the potential volumes of search returns and engage in sampling to test the accuracy of the search methodology before committing to use the search methodology or to a firm production timetable. Finally, the production timetable should also include a factor for sampling and/or running quality control checks for responsiveness and privilege.
Judge Kemp has provided a clear wake-up call that even seasoned and well-regarded counsel can get tripped up by given ever-changing and expanding information technologies. To participate in discovery practice successfully today, and meet one’s duties to discuss ESI knowledgeably with courts and adversaries, counsel must be alert to new and evolving technologies, investigate and critically assess sources of potentially relevant ESI and not assume that new technologies operate as older ones did, while associating with knowledgeable experts as necessary.