e-discovery 2.0

The American College of Trial Lawyers Task Force on Discovery (”Task Force”) recently came out with their final report based on their survey of the Fellows of the American College of Trial Lawyers (”ACTL”).  The project was conceived as an “outgrowth of increasing concerns that problems in the civil justice system, especially those relating to discovery, have resulted in unacceptable delays and prohibitive expense.”  After releasing an interim report, the Task Force issued its final say on the topic, which honed in on three major themes borne out by the Survey:

1. Although the civil justice system is not broken, it is in serious need of repair. In many jurisdictions, today’s system takes too long and costs too much. Some deserving cases are not brought because the cost of pursuing them fails a rational cost-benefit test while some other cases of questionable merit and smaller cases are settled rather than tried because it costs too much to litigate them.

2. The existing rules structure does not always lead to early identification of the contested issues to be litigated, which often leads to a lack of focus in discovery. As a result, discovery can cost far too much and can become an end in itself. As one respondent noted: “The discovery rules in particular are impractical in that they promote full discovery as a value above almost everything else.” Electronic discovery, in particular, needs a serious overhaul.

3. Judges should have a more active role at the beginning of a case in designing the scope of discovery and the direction and timing of the case all the way to trial. Where abuses occur, judges are perceived not to enforce the rules effectively. According to one Fellow, “Judges need to actively manage each case from the outset to contain costs; nothing else will work.”

In short, the Survey revealed widely-held opinions that there are serious problems in the civil justice system and that the discovery process, though not broken, is “badly in need of attention.”  While not cited specifically, a recent case highlights many of the Survey’s observations.  In Fannie Mae Sec. Litig., 552 F.3d 814 (D.C. Cir. 2009) the Office of Federal Housing Enterprise Oversight (OFHEO) responded to a third party subpoena and in the process incurred $6M in electronic discovery expenses.  While this case had a number of procedural nuances that fortunately make its holding fairly limited to the facts, this electonic discovery fiasco certainly is a poster child for a discovery process that is bursting at the seams.

The $6M problem started for the OFHEO when the individual defendants became skeptical of a limited production and obtained a Rule 30(b)(6) deposition, which confirmed that OFHEO had failed to search all of its off-site disaster-recovery backup tapes.  This inquiry led the OFHEO to enter into a stipulated order to avoid further contempt hearings.  As part of the stipulated order, the individual defendants submitted over 400 search terms, which covered over 600,000 documents.  Overwhelmed with the burden of conducting such a search and the need to hire 50 contract attorneys, the OFHEO objected that the list of search terms was “tantamount to a request for the dictionary,” since it resulted in a “retrieval of approximately 80 percent of the office’s emails.”  Unfortunately, the court ultimately held that the OFHEO needed to comply with the terms of the stipulated order even though the cost was a staggering “9 percent of the agency’s entire annual budget.” To add insult to injury, and despite their efforts, the OFHEO was found in contempt and sanctioned for not meeting the agreed upon discovery deadlines.

This $6M example brings us back to the Survey and the findings of the Task Force.  They proposed a set of Principles (modeling and citing the Sedona Working Group) that would “shape solutions to the problems they have identified.”  Several relating to e-discovery stand out…

• Promptly after litigation is commenced, the parties should discuss the preservation of electronic documents and attempt to reach agreement about preservation. The parties should discuss the manner in which electronic documents are stored and preserved. If the parties cannot agree, the court should make an order governing electronic discovery as soon as possible. That order should specify which electronic information should be preserved and should address the scope of allowable proportional electronic discovery and the allocation of its cost among the parties.
• Electronic discovery should be limited by proportionality, taking into account the nature and scope of the case, relevance, importance to the court’s adjudication, expense and burdens.
• The obligation to preserve electronically-stored information requires reasonable and good faith efforts to retain information that may be relevant to pending or threatened litigation; however, it is unreasonable to expect parties to take every conceivable step to preserve all potentially relevant electronically stored information.
• Absent a showing of need and relevance, a party should not be required to restore deleted or residual electronically-stored information, including backup tapes.
• Sanctions should be imposed for failure to make electronic discovery only upon a showing of intent to destroy evidence or recklessness.
• The cost of preserving, collecting and reviewing electronically-stored material should generally be borne by the party producing it but courts should not hesitate to arrive at a different allocation of expenses in appropriate cases.
• In order to contain the expense of electronic discovery and to carry out the Principle of Proportionality, judges should have access to, and attorneys practicing civil litigation should be encouraged to attend, technical workshops where they can obtain a full understanding of the complexity of the electronic storage and retrieval of documents.

As Oscar Goldman said about Steve Austin, the legendary $6M man:  “Gentlemen, we can rebuild him. We have the technology…” The electronic discovery “quagmire” appears to need the same type of radical makeover.  Data is proliferating at a rate far greater than the e-discovery competency of litigators and judges alike.  Tools are out there that can help tackle the proliferation problem, but the need for, and ultimate use of, such tools must be appreciated by counsel on both sides of the “v.”  Until notions of proportionality and cooperation start becoming common parlance for both litigators and judges we will unfortunately continue to see more $6M examples like Fannie Mae.

Without getting in Dutch with the key Sedona Conference principle that “what happens at Sedona, stays at Sedona” I thought I’d nevertheless write a post that focuses on the core topic at this year’s annual meeting, namely the case for cooperation in e-discovery.

According to the “Cooperation Proclamation” e-discovery is facing an unprecedented crisis:

“The costs associated with adversarial conduct in pre-trial discovery have become a serious burden to the American judicial system. This burden rises significantly in discovery of electronically stored information (”ESI”). In addition to rising monetary costs, courts have seen escalating motion practice, overreaching, obstruction, and extensive, but unproductive discovery disputes – in some cases precluding adjudication on the merits altogether – when parties treat the discovery process in an adversarial manner. Neither law nor logic compels these outcomes. With this Proclamation, The Sedona Conference launches a national drive to promote open and forthright information sharing, dialogue (internal and external), training, and the development of practical tools to facilitate cooperative, collaborative, transparent discovery.”

These sentiments about the “broken” nature of the discovery process echo in many ways the draft findings from the Interim Report & 2008 Litigation Survey from the Fellows of the American College of Trial Lawyers which stated:

“The joint study grew out of a concern that discovery is increasingly expensive and that the expense and burden of discovery are having substantial adverse effects on the civil justice system. There is a serious concern that the costs and burdens of discovery are driving litigation away from the court system and forcing settlements based on the costs, as opposed to the merits, of cases.”

In both instances, the core notion is that “we’ve met the enemy and the enemy is us” because it’s the participants in the process have collectively perverted the discovery process to the point it’s at today.

Sedona’s focus on this front has received at least some traction from the bench, as echoed in Mancia v. Mayflower Textile Servs. Co., 2008 WL 4595175 (D. Md. Oct. 15, 2008).  Mancia, written by leading e-discovery jurist Judge Grimm, was a fairly pedestrian employment litigation case where the parties had come to loggerheads over the e-discovery process.  Judge Grimm held that “[c]ourts repeatedly have noted the need for attorneys to work cooperatively to conduct discovery, and sanctioned lawyers and parties for failing to do so” citing both the Sedona Cooperation Proclamation and the Survey.

Judge Grimm also observed that the these recent lamentations about the costs of civil litigation aren’t terribly dissimilar to those voiced eighteen years ago when the Civil Justice Reform Act of 1990, 28 U.S.C. §§ 471 et seq., was passed:

“Perhaps the greatest driving force in litigation today is discovery. Discovery abuse is a principal cause of high litigation transaction costs. Indeed, in far too many cases, economics-and not the merits-govern discovery decisions. Litigants of moderate means are often deterred through discovery from vindicating claims or defenses, and the litigation process all too often becomes a war of attrition for all parties.”

Given the fundamentally adversarial nature of litigation, the Sedona initiative is either dramatically ambitious or simply tilting at windmills.  While generally a skeptic by nature, I think that the bench’s early participation and downstream behavior modification is the linchpin to reforming the litigating masses.  Given the long term “sales” cycle involved here, I doubt if we’ll know whether this effort will gain real traction for at least several years.