e-Discovery Team

This is the conclusion to the Guest Blog by Anonymous that started last week. I support the proposals made by Anonymous. Do you? If so, please share this Open Letter to the Judiciary with state and federal judges that you may know. Here is the link to Part I of the Open Letter, which should, of course, be read first.

PART II:

Examples

A. In re Ullico, 237 F.R.D. 314 (D.D.C. 2006)

In Ullico, the counter-claim defendant filed a motion to enforce the protective order entered in the case, arguing that of the 60,000 or so documents (equating to over 200,000 pages) that Ullico produced in discovery (in hard copy form), ninety-nine percent were designated as confidential, including documents that clearly were public, such as copies of newspaper articles, blank pages and Ullico’s annual report. The court found that Ullico had “grossly abused” the use of the confidentiality designation and had acted in bad faith in marking the documents, and that the movant was “unfairly burdened” by these designations because they would create logistical restraints on counter defendants ability to file, in the future, copies of these documents with the court. As to a remedy, the court required Ullico to remove the confidential designation from all documents produced and to re-review and re-label those that properly were deemed confidential – and to do so within 20 days of the order. Ullico also was required to pay counter defendant’s expenses and fees for bringing the motion.

B. Pettrey v. Enterprise Title Agency, et al., 470 F.Supp.2d 790 (N.D. Ohio 2006)

In this case, defendants produced 152 boxes of hard-copy documents totaling about 400,000 pages, with each one marked as confidential. The protective order issued in the case, the language of which the parties negotiated, allowed for documents to be designated “confidential” if they contained the producing party’s trade and business secrets or other confidential financial, personal, commercial or proprietary information, which if disclosed would put the producing party at a competitive disadvantage. Id. at 792. The protective order also required the producing party to file a motion with the court in a set amount of days in the event of a challenge to confidential designations which the parties could not resolve in “meet and confer” discussions. Defendants did not timely file such a motion although a motion ultimately was filed. The court was very critical of the defendants’ broad confidentiality designations and found that because defendants did not file a timely motion that all documents, therefore, automatically were to be deemed non-confidential. Notably, the court was unsympathetic to defendants’ argument that “reviewing documents prior to production was ‘an enormously expensive and time-consuming burden,” (id. at 796), finding that defendants had agreed in the protective order, which they had co-authored, to engage in good faith efforts in designating documents confidential and that they were bound by those terms.  Id.

C. Paradigm Alliance v. Celeritas Technologies, LLC, 248 F.R.D. 598 (D. Kan. 2008)

This decision focused on the use of a special “attorneys eyes only” (“AEO”) confidentiality designation that was permitted by the applicable protective order. Defendant produced 40,000 pages of documents and initially gave 70% of those pages an AEO designation. After discussions between the parties, the amount of AEO designations first was reduced to 23,000 pages and then apparently further refined to some 14,000 pages. Plaintiff ultimately challenged the volume of these designations and the fact that many documents were designated as AEO even though they could not possibly be considered confidential – e.g., blank pieces of paper and directions to defendant’s offices. Plaintiff also contested defendant’s failure to provide replacement copies of documents that were de-designated, providing instead only a 98 page list of “de-designated” bates numbers. The court found that defendant had been cavalier in designating documents as AEO and that “the duty of good faith in the protective order is a duty to review the documents in good faith before designating them as AEO.” Id. at 605 (emphasis in the original). As a remedy, the court ordered defendant to read all 40,000 pages of the documents produced and to prepare a log providing a justification for any document designated “AEO.”  The court also required the production of replacement images for any document that was de-designated from AEO to confidential or not subject to any protection.  In addition, the court specifically found inappropriate defendant’s practice of designating an entire email string as “AEO” because only one portion of the email string contained such confidential information.  “Under the circumstances, designation of the entire email string as AEO was improper. Similarly, [defendant] designated publicly available information as AEO merely because it was attached to an email.  An otherwise public document is not AEO material merely because it is attached to an email [that is considered AEO].”  Id. at 604, n.22.

D. Trusz v. UBS Reality, No. 3:09 CV 268, 2010 WL 3583064, (D. Conn. Sept. 7, 2010)[19]

In response to discovery request, defendant produced 1.8 million documents (four million pages) and designated all documents as “Confidential.” Plaintiff argued that such a sweeping designation of all documents – including public SEC filings, photographs and mass emails – demonstrated bad faith and requested that the court order defendant to withdraw all confidential designations and to re-review and re-produce all documents, and to utilize a confidential designation only if truly appropriate. The court looked to the Ullico decision for guidance, but acknowledged that “[t]he sheer volume of documents here, which is twenty-fold the number of pages produced in Ullico, makes timely review of every page by a human being nearly impossible.”  Id. at *9. Rather than fashion an immediate remedy, the court, which had earlier quoted from the Sedona Conference’s publications on attorney cooperation in discovery, ordered the parties to confer to determine the most efficient manner, including consideration of cost and time, to re-review the four million pages of documents to remove the confidential designations. Id. at *9. Notably, however, the court’s decision clearly anticipates that a re-review would occur.

E. Mt. Hawley Insurance Co. v. Felman Productions, No. 3:09-cv-00481, 2010 WL 1254682 (S.D.W. Va. Mar. 25, 2010)[20]

In this discovery dispute, defendant filed a motion challenging plaintiff’s designation of every document produced in discovery, totaling about one million pages, as “confidential.” Defendant also noted the large amount of “junk documents” produced – i.e., approximately 30% of the produced documents – with such “junk” including a photo of a kitten, a photo of a naked man, vacation arrangements, and advertisements. The court examined the language of the court’s form protective order, noting that it was “written carefully and restrictively . . . to limit those documents which are withheld from public view” and also noted the “good cause” standard incorporated in Local Rule 26.4.   Id. at *1. The court, citing various cases, focused on the common law presumption of access to copy and inspect all judicial records and documents and found that plaintiff’s marking of all documents as “confidential” “violate[ed] this Court’s Local Rule 26.4 and ma[de] a mockery of the Court’s form protective order.”  Id. at *2. The court also stated that because confidential documents require additional “handling” once produced – e.g., distribution of the protective order to those who see the document, maintenance of a list of those who see the documents, and the requirement of returning the documents at the end of the case – the costs of litigation rises and the burdens are increased on the receiving party.  Id.

The court then ordered that the parties submit briefs on the appropriate remedy and sanction to be imposed. Ultimately, plaintiff was ordered to pay $25,000 as a sanction.[21] Moreover, plaintiff undertook a “massive re-review of its e-discovery production, having acknowledged its production of irrelevant ESI, over-designation of confidential ESI and production of privileged documents.”[22]

 F. Minter v. Wells Fargo Bank, N.A., et al., Nos. WMN-07-3442 and WMN-08-1642, 2010 WL 5418910 (D. Md. Dec. 23, 2010)

Here, two separate groups of defendants produced 52,127 documents, with one defendant labeling almost all documents as confidential and the other acknowledging that all documents (totaling 167,000 pages) were designated as confidential in order to “‘move the process along speedily’” and on the belief “’that any question relating to confidentiality designations could be addressed later between counsel.’” Id. at *4 (quoting counsel’s declaration).  The court soundly rejected this approach, finding that defendants violated the protective order (and Rule 26c)) by failing to exercise good faith in designating documents as confidential and ordering a $10,000 sanction.  However, the court did not grant plaintiff’s request that all defendants’ documents be de-designated and treated as non-confidential.

In so ruling, the court noted that while neither the district court nor the Fourth Circuit has identified with specificity the level of care required to meet the “good faith” requirement incorporated into protective orders, “[a]nything less than a document-by-document or very narrowly drawn category-by-category review assessment [would] fail to satisfy the initial good faith requirement.”  Id. at *2.

As to a remedy, the court first stated that there is a “robust presumption” in favor of publication of documents used in judicial proceedings, but then acknowledged that based on the Supreme Court’s Seattle Times decision and the Fourth Circuit’s Rushford opinion, the right of public access does not extend to pretrial discovery materials. Id. at *2 and *5-6. Accordingly, the court stated that while it had “considered imposing on defendants the obligation to review all discovery materials with senior counsel describing the review and certifying to the Court that a document-by-document good faith review had been made,” it determined that such a result was not warranted because “given the strong likelihood that many of these discovery materials shall never be used in the actual litigation of the dispute, this seemed like an expensive and unnecessary burden on defendants . . . .”  Id. at *7.[23] Nonetheless, the court did order the $10,000 sanction, representing costs and plaintiffs’ attorneys’ fees.

Interestingly, the court was sympathetic to perceived costs to plaintiffs that it saw arising from over-designation and discounted the costs to defendants from having to engage in a detailed review of all documents. The court pointed to:  the need to restrict dissemination of the documents designated as confidential and to obtain written acknowledgments from those who are given access;[24] deposition transcripts being divided between confidential and non-confidential portions; and that the opposing party must decide whether to acquiesce in the designation or challenge it.  Id. at *7.

Analysis

Taken together, these seven cases,  all decided between 2006 and 2010, demonstrate that while the volume of documents produced in discovery has generally become increasingly larger and larger, and productions have moved from paper to electronic productions, the courts remain hostile to the notion that the extraordinary costs associated with ESI discovery justify a new approach for how to address confidentiality during discovery – that is during the “private” part of litigation in which the public has no recognized right of access and there is a virtual certainty that the vast majority of the thousands or millions of pages of documents produced will never be made part of the public portion of the case through court filings or introduction into evidence. Rather, despite all that has been written and said in recent years about the extreme costs of discovery because of ESI and the need for proportionality to be returned to the discovery process to avoid excessive and unnecessary costs,[25] courts regularly are continuing to call for full eyes-on review of documents – on a page-by-page or line-by-line basis[26] – to determine confidentiality – and are either oblivious to or completely dismissive of the expense involved. As the Minter court stated:  “[O]f course, careful, document-by-document review or category-by-category review is much more labor intensive and requires senior counsel review and approval. However, the parties agreed to this scheme, consistent with the practice of this court.”  Minter, 2010 WL 5418910, at *7.[27]

This judicial approach completely undermines everything that the courts and Congress thought that had been achieved by amending Rule of Evidence 502 concerning privilege designations and production. There, the amendments ultimately were adopted because of a recognition that to “insist upon ‘record-by-record pre-production privilege review, on pain of subject matter waiver, impose[s] upon parties costs of production that bear no proportionality to what is at stake in the litigation.’” Fed. R. Evid. 502 explanatory note, quoting Hopson, 232 F.R.D. at 244. “Simply put, one of the ‘two major purposes’ of Rule 502 was to bring down the cost of pre-production review of ESI by enabling lawyers and parties to use computer-based analytical methods to search for and identify privileged and protected information, as well as other analytical methods, such as sampling that avoid the enormous expense associated with personal review of each digital document.”[28]

The very same concerns should equally apply to the review necessary to protect confidential information, which if not protected during the private discovery phase of litigation, can be disseminated far and wide to whomever the receiving party chooses, through whatever means or medium, including having particularly “juicy” tidbits of sensitive business or personal information posted on a variety of social media sites from whence it could even go “viral.” Indeed, for some of the reasons discussed above, there should be heightened concerns about requiring a document-by-document review to discern confidential portions. Specifically, privilege documents tend to make up a small subset of the larger universe of documents collected and produced and there are more easily applied electronic methods to search for such communications – such as searching for attorney names, law firm domain names, etc.[29] Thus, the volume of documents to locate and examine in the privilege context is reduced or significantly “reduceable.” The same is not true for documents that can touch on a host or multiple hosts of business subject matters – meaning that essentially all documents will have to be examined before portions of them can be designate as confidential.[30] Thus, the adoption of the amendments to Rule 502 notwithstanding, producing parties are back to square one – meaning spending hundreds of thousands of dollars, if not over a million, to review documents to protect during discovery their business (and perhaps personal) information from wide distribution to a public that is not entitled to it in the first place.

What an extraordinary waste of time and money.  What end is being served?  None.

The Solution

The “fix” is easy and requires the courts to do nothing more than interpret the plain language of Rule 26(c) . . . well, plainly. The rule allows for a protective order to be entered to protect a party from “undue burden and expense.” What could be more of an undue burden and expense than requiring a pre-production, document-by-document review of many, many thousands or millions of pages of document to locate portions of documents for confidentiality treatment when only a very tiny portion of those documents will ever become a true judicial record and only then subject to public right of access concerns? An umbrella protective order applicable during the discovery phase of the case eradicates this financial burden, thereby allowing discovery to move forward more quickly and inexpensively. Thus, the purpose of the Rules as identified in Rule 1 would be served.

To satisfy the “good cause” portion of the Rule, either courts can recognize the costs and burdens on their own, citing any of the numerous opinions or articles that speak about the high cost of discovery, or require that the party advocating for the umbrella protective order make a preliminary showing that the subject matter of the discovery requests is such that the production of business sensitive information is required (e.g., information relating to pricing, sales plans, profitability, marketing initiatives, personnel, financial performance, etc.) and that the volume is expected to be significant.[31] Once such a showing is made, an umbrella protective order allowing for all documents during the discovery phase to be designated as confidential could (and should) be issued. Nor would such a procedure represent a radical departure from recognized and accepted practices. As long ago as 1986 – during the infancy of the electronic age and well before the advent of massive and wide-spread electronic business communications – the Third Circuit, in reliance on the then-existing Manual for Complex Litigation, stated:

[B]ecause in any large-scale litigation the movant will likely have far more documents that it wants to designate as confidential than the respondent will object to being so designated, the umbrella order approach is less time-consuming and burdensome to the parties and the court than the document-by-document method. In a very large case, the document-by-document approach may be so costly that it may make large-scale litigation too expensive for all but the most affluent parties.

Cipollone v. Liggett Group, Inc. et al., 785 F.2d 1108, 1122, n.18 (emphasis added).[32]

That viewpoint is much more applicable today where the production of millions of pages of documents, in a short discovery period, is becoming more and more common.[33]

One court has come close to recognizing that cost factors can justify an umbrella protective order approach during the discovery phase of a case – but ultimately did not go quite that far. In Containment Technologies Group, Inc. v. American Society of Health System Pharmacists, No. 1:07-cv-997, 2008 WL 4545310, (S.D. Ind. Oct. 10, 2008), the magistrate judge considered a request for a protective order and, if one were granted, whether the entire document could be designated confidential or only the portions that specifically were deemed confidential. In determining that the entire document may be designated and not only portions, the court stated:

There is a difference between a protective order issued for purposes of discovery only and one issued for purposes of sealing documents with the Court. “Secrecy is fine at the discovery stage, before the material enters the judicial record. . . .” Thus, the same scrutiny is not required for protective orders made only for discovery as for those that permit sealed filings. . . . As a practical matter, the Court is well aware of the practice of many counsel to overdesignate discovery responses as “confidential.” Presumably, it is easier on the producing party (and more efficient and thus less expensive) to overdesignate in this fashion rather than engage in a painstaking process of document-by-document (or even paragraph-by-paragraph) review of discovery materials to be produced. Massive electronic discovery production has significantly added to this challenge. From the Court’s perspective, it makes little difference whether a document is marked “confidential” during discovery, provided that a document so designated is not permitted to be filed under seal without some separate justification for doing so.”

[Because confidential documents require care as to dissemination during discovery], the question becomes whether it is preferable to require heightened attention . . . at the production stage or at the time the document may later be filed with the court.

In the Court’s view, the better approach is to focus more precisely on the time the document is filed with the Court. This is so for several reasons. First, even at the production stage, protective orders typically charge counsel with a duty to exercise good faith . . . . Second, requiring counsel to scour each document in a massive electronic discovery production to parcel out which portions of which documents should properly be designated as confidential undoubtedly adds additional burdens and expense to the litigation. Indeed, the recent creation of [Rule 502] . . . represents a specific response to the costs involved in extensive document review necessitated by electronic discovery.

Id. at *3-4 (internal citations omitted) (emphasis added).

As is apparent, the magistrate judge did not abandon the view that “good faith” would serve to limit over-designations – a position that was made clearer in a subsequent decision of his in another case. See Meharg v. Astrazenca Pharmaceuticals, L.P., No. 1:08-cv-184, 2009 WL 2960761, at*2 (S.D. Ind. Sept. 14, 2009) (vast majority of documents produced as “confidential”; Containment Technologies does not mean that a party can engage in no scrutiny during discovery stage; under Rule 26, parties must act in good faith when designating documents as confidential.)

Although the Containment Technologies court remained true to the traditional “good faith” perspective concerning confidentiality designations, the court’s commentary nonetheless shows a deep appreciation of the competing concerns surrounding electronic discovery and confidentiality protections during the discovery phase. Specifically, the court noted that the volume of documents coupled with the effort to scrutinize each document significantly increases litigation expenses and does so during a phase of the litigation that properly may be conducted in private, with closer scrutiny required only at the time documents may enter the judicial record.

This is the correct analysis and the time has come – please, Your Honors – to take the leap and follow Containment Technologies to its logical conclusion – that is, to conclude that concerns for harm arising from “undue expense” justify, under Rule 26(c), the issuance of an umbrella protective order during discovery that eliminates the need of the parties to review and examine each document for confidential information before production. In other words, “undue expense” and “good cause” should not be divorced from each other, but should be joined together so as to eliminate a key contributing factor to the escalating costs of litigation. What could be more “undue” than to require a party to spend upwards of a million dollars to examine in detail hundreds of thousands of documents in a hunt for what is or is not, or may or may not be “confidential,” when all but a comparative handful of those documents will remain forgotten and unused in opposing counsel’s database for the duration of the litigation and treated as electronic flotsam?[34]

Does this requested relief answer every question or solve all problems associated with discovery matters and confidentiality? No. However, the parties and the courts working together certainly should be able to arrive at solutions that will obviate the need to continue with the present system that assumes, presumes and imposes intolerable burdens of time and money. For example, as one judicial commentator to Part I of this letter already inquired (thank you for taking the time to read this letter, Your Honor) – if an umbrella protective order is permitted, what is to stop a party from overly using AEO designations to prohibit the other party from seeing documents during the discovery phase, thereby limiting that party’s ability to assist in the analysis of documents produced? As discussed above, the Paradigm Alliance case involved such a situation. However, as with privileged documents, it should be possible for a party to conduct much more limited and focused searches to identify documents on highly sensitive topics (e.g., non-public product formulas; very recent financial data, soon to be released pricing plans). Such pin-point searches would reduce the volume required to be reviewed to determine if the documents were worthy of AEO treatment. Moreover, the courts, in granting a protective order that allows for AEO designations, can make very clear that AEO designations should be used sparingly and only to protect information of the highest level of confidentiality. See, e.g., Taiyo Intern’l, Inc. v. Phyto Tech Corp., Civ. No. 10-3378, 2011 WL 3156042, at *5 and n.2 (D. Minn. July 26, 2011) (allowing for AEO designation of defendant’s formula/process, but sternly warning counsel to be scrupulously cautious in marking documents AEO and that over-designating will result in sanctions).

Another question received asks how to address confidentiality designations once one party wishes to attach the other party’s documents to a motion filed with the court – that is, at the point that a presumption of public access does attach. This situation arose in the second part of the Minter decision discussed above where the court was called upon to rule on the confidentiality of certain exhibits to the motion for class certification. One solution is to have the parties communicate in advance of any such filings by, for example, stating in the protective order that in a short time after each deposition is completed (e.g., 14 days), the producing party must submit to the other side clarification as to whether each exhibit to the deposition continues to be deemed confidential and, if so, the specific reasons therefor. Likewise, a party intending to use various documents in an upcoming motion could write the opposing party and ask whether specific documents continue to be regarded as “confidential” – although some would argue that this would give the opposing party advanced notice of the other side’s likely arguments and strategies. The Sedona Conference commentators suggest that the protective order allow the filing party to “lodge” the documents with the court in conjunction with a motion to seal – however, the onus of filing the motion to seal would fall on the party which had produced the documents. If no such motion is filed, the documents are not treated as confidential; if a motion is filed, the court will then consider the validity of the claims of confidentiality. See Best Practices Addressing Protective Orders, Confidentiality & Public Access in Civil Cases, 8 SEDONA CONF. J. 141 at 149.

I am certain that there are many more questions that can be posed – and I am equally certain that counsel working with each other and with the courts can craft reasonable and sustainable solutions to such additional questions and problems that might arise. However, it is clear that without the relief that I am requesting on behalf of myself and all e-discovery counsel – and most importantly, on behalf of our clients who are the ones paying for the costs of discovery – all the judicial calls and practitioners’ pleas to insert proportionality and cooperation back into the discovery equation will be for naught. Businesses and corporations will remain caught in a system that either requires them to expend a literal fortune, on top of the fortune already being spent to preserve, locate, collect, process and host vast amount of electronic documents, to try to protect their business proprietary information – or to forgo the expense and take the risk that by producing documents without a confidentiality review, opposing counsel or the opposing party will not use that information to inflict competitive harm or cause professional embarrassment. A daunting choice to say the least . . . and an unnecessary one. The courts have the power and authority under Rule 26(c), as well as the supporting jurisprudence, to issue broad umbrella protective orders that will allow all documents to be treated as confidential during the discovery phase of the case, thereby eliminating the Hobbesian choice faced by today’s litigants, without jeopardizing the public’s rights to an open judicial system or the courts’ abilities to manage the information actually submitted for consideration at a later stage in the proceedings.

*                                  *                                  *

Your Honors, now is the time to act so that the financial burdens of ESI discovery can be reeled in and some balance returned.  If not, the system is doomed to topple, with only the richest of the rich able to afford to litigate while others are forced to capitulate because they cannot afford to pursue a case or defend against one. Such is not the way of justice . . . .

Respectfully submitted,

Anonymous

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[34] Again, it must be recalled that these documents may well contain highly sensitive business information which were required under the broad discovery rules to be produced but simply were determined not to be useful to the opposing party in pursuing its case. Moreover, without the protection of a confidentiality designation and a requirement to return or destroy all produced documents after the litigation is concluded, opposing counsel could simply continue to hold this sensitive information and elect to release it publicly at some later date, or hunt and peck through it in hopes of finding other grounds to sue on other causes of action – collateral estoppel be damned.

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