Spoliated Schmalz: New Sanctions Case in Chicago That Passes-Over a Mandatory Adverse Inference

March 30, 2018

I am writing today, on Jewish Passover, regarding an opinion that AI found for me, namely a standing search of all of Pacer using Lex Machina. My AI assistant found a sanctions order for spoliation in an employment law case in Chicago. Schmalz v. Village Of North Riverside, et al, No. 1:2013cv08012 – (N.D. Ill., March 23, 2018). The opinion is a Report and Recommendation by U.S. Magistrate Judge Mary Rowland, a rising star in the e-discovery world. Her writing and analysis of Rule 37(e) is excellent. I can assure you that, despite its name, it is not at all schmaltzy. The sanctions granted were good for the moving party, but could have been better, kind of like chicken soup without the matzo balls. Trust me, thanks to my wife, Molly Friedman, I am an expert on that culinary subject.

The lukewarm sanctions in Schmalz were entered against defendants for the inadvertent loss of fifty text messages when key custodian cell phones were not saved after suit was filed. There was no real dispute as to the spoliation, which Judge Rowland called gross negligence. The arguments were about the remedy, the sanctions, if any, to be entered for this spoliation.

The Plaintiff, Schmalz, asked for dispositive sanctions under Rule 37(e)(2), either striking the defense or an adverse inference instruction. Judge Rowland passed-over these harsh sanctions as over-kill. She found that was unnecessary to counteract the prejudice caused to the plaintiff by loss of the text messages. She reached this opinion based on her finding that intentional, or bad faith, destruction of evidence was not shown. Instead, the evidence proved that defendants failure to preserve a few cell phones within their control was gross-negligence, not bad faith. In other words, just doofuses, not bad guys. Judge Rowland did, however, enter sanctions, permitting the plaintiff to present evidence at trial concerning the negligent text message loss. The Order also allows plaintiff to argue to the jury that they should presume that the contents of these texts would be contrary to defense witnesses testimony. Judge Rowland also granted Plaintiff Schmalz a fee award.

At page six of the Schmalz opinion, Judge Rowland explains the background and how the spoliation was discovered by surprising deposition testimony of a key witness:

In his February 2016 deposition, Defendant Niemann revealed that he had “at least 50” text message communications before and after the election with Defendant Hermanek about the police department, who he would promote to the Commander position, why he did not want a lieutenant’s position, and about Plaintiff specifically.

Plaintiff issued a discovery request for the text messages identified in Defendant Neimann’s deposition. (Dkt. 168 at 6). Defendants answered that there were no texts to be produced because “neither defendant Hermanek nor defendant Niemann still possess their cell phones from that time period.” …

Defendants’ duty to preserve the text messages arose as early as August 2013 when they received a litigation hold letter. See (Dkt. 207-1). Further, Defendants admit that they failed to take any steps to preserve the text messages. See (Dkt. 179-2, at 2–3). Likewise, Defendants admit that the text messages have been lost and cannot be replaced by additional discovery as they have exhausted all efforts to retrieve the messages. See (Dkt. 179-2, at 2–3). Given that these predicate elements are met, the Court next determines whether Plaintiff is prejudiced from loss of the text messages. See Fed. R. Civ. P. 37(e)(1).

Judge Rowland then goes on to explain her analysis at pages eight and nine of her opinion.

These text messages are certainly relevant as they involve private communications between the primary defendants and decision-makers in the case during a critical time period, and the alleged subject matter of the text messages involve issues highly pertinent to the underlying claim, including promotions in the police department and the Plaintiff specifically.

Defendants’ argument that Plaintiff is not prejudiced because “there are other means to obtain the contents of the conversations from the defendants, including prior oral discovery and potential trial testimony,” (Def.’s Resp., Dkt. 196 at 5), is unavailing. “A party has the right to prosecute its case in the way it deems fit based on all available relevant evidence.” Larson v. Bank One Corp., No. 00 C 2100, 2005 WL 4652509, at *14 (N.D. Ill. Aug. 18, 2005); see also Hickman v. Taylor, 329 U.S. 495, 507, 67 S. Ct. 385, 392, 91 L. Ed. 451 (1947) (“Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation.”). The content of text messages cannot be replaced simply by eliciting testimony from the Defendants, and by having Plaintiff accept that testimony rather than relying on the actual messages to use as they deem fit. Without the lost text messages, Plaintiff is deprived of the opportunity to know “the precise nature and frequency” of those pri-vate communications, which occurred during a critical time period. See Ronnie Van Zant, Inc. v. Pyle, 270 F. Supp. 3d 656, 670 (S.D.N.Y. 2017) (finding prejudice when text messages were lost and “the precise nature and frequency of those communications cannot be verified”). Accordingly, the Court finds that Plaintiff has suffered prejudice as a result of the spoliation of highly relevant text messages. …

Upon a finding of prejudice, a court may order “measures no greater than necessary to cure the prejudice.” Fed. R. Civ. P. 37(e)(1). Under Subdivision (e)(1), the court has much discretion to fashion an appropriate sanction, and “[t]he range of such measures is quite broad if they are necessary for this purpose.” Fed. R. Civ. P. 37(e), 2015 Amendment Advisory Committee Notes.

Judge Rowland then wraps up her analysis at page fifteen of the Schmalz opinion.

Because the Court finds that Defendants acted with gross negligence, which is insufficient to support a finding of intent as required under Rule 37(e)(2), the Court concludes that a lesser sanction under Rule 37(e)(1) is appropriate. … To address the prejudice resulting from Defendant’s spoliation of evidence, the Court recommends that the parties shall be allowed to present evidence to the jury regarding the destruction of the text messages and the likely relevance of the lost information; and that the jury shall be instructed that it may consider this information when making its decision. However, the jury shall not be given specific instructions on any presumption or inference based on the destruction of the text messages.

Conclusion

Do not be a caveman lawyer and forget the cell phones of key custodians. They may need to be preserved, depending on the facts. In Schmalz the cell phones contained key evidence. An interview of the witness at the beginning of the case should have revealed this important fact. The interview should have triggered appropriate preservation. That did not happen here. Judge Rowland found that defendant’s failure was a cave-man lawyer like mistake, grossly negligent and out of touch with 21st Century discovery. For that reason, what appears to have been an easily defendable case has become a nightmare. See Order of Judge Darrah in Schmalz dated October 28, 2016 ($60,000 settlement). The plaintiff can now put on a side-show at trial on cell phone negligence and missing messages. Although better to the defense than a mandatory adverse inference instruction, which is almost certainly a deathblow, this kind of testimony will distract from the otherwise questionable merits of the case.

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Posted by Ralph Losey

Document Review and Proportionality – Part Two

March 28, 2018

This is a continuation of a blog that I started last week. Suggest you read Part One before this.

Simplified Six Step Review Plan for Small and Medium Sized Cases or Otherwise Where Predictive Coding is Not Used

Here is the workflow for the simplified six-step plan. The first three steps repeat until you have a viable plan where the costs estimate is proportional under Rule 26(b)(1).

Step One: Multimodal Search

The document review begins with Multimodal Search of the ESI. Multimodal means that all modes of search are used to try to find relevant documents. Multimodal search uses a variety of techniques in an evolving, iterated process. It is never limited to a single search technique, such as keyword. All methods are used as deemed appropriate based upon the data to be reviewed and the software tools available. The basic types of search are shown in the search pyramid.

search_pyramid_revisedIn Step One we use a multimodal approach, but we typically begin with keyword and concept searches. Also, in most projects we will run similarity searches of all kinds to make the review more complete and broaden the reach of the keyword and concept searches. Sometimes we may even use a linear search, expert manual review at the base of the search pyramid. For instance, it might be helpful to see all communications that a key witness had on a certain day. The two-word stand-alone call me email when seen in context can sometimes be invaluable to proving your case.

I do not want to go into too much detail of the types of searches we do in this first step because each vendor’s document review software has different types of searches built it. Still, the basic types of search shown in the pyramid can be found in most software, although AI, active machine learning on top, is still only found in the best.

History of Multimodal Search

Professor Marcia Bates

Multimodal search, wherein a variety of techniques are used in an evolving, iterated process, is new to the legal profession, but not to Information Science. That is the field of scientific study which is, among many other things, concerned with computer search of large volumes of data. Although the e-Discovery Team’s promotion of multimodal search techniques to find evidence only goes back about ten years, Multimodal is a well-established search technique in Information Science. The pioneer professor who first popularized this search method was Marcia J. Bates, and her article, The Design of Browsing and Berrypicking Techniques for the Online Search Interface, 13 Online Info. Rev. 407, 409–11, 414, 418, 421–22 (1989). Professor Bates of UCLA did not use the term multimodal, that is my own small innovation, instead she coined the word “berrypicking” to describe the use of all types of search to find relevant texts. I prefer the term “multimodal” to “berrypicking,” but they are basically the same techniques.

In 2011 Marcia Bates explained in Quora her classic 1989 article and work on berrypicking:

An important thing we learned early on is that successful searching requires what I called “berrypicking.” . . .

Berrypicking involves 1) searching many different places/sources, 2) using different search techniques in different places, and 3) changing your search goal as you go along and learn things along the way. . . .

This may seem fairly obvious when stated this way, but, in fact, many searchers erroneously think they will find everything they want in just one place, and second, many information systems have been designed to permit only one kind of searching, and inhibit the searcher from using the more effective berrypicking technique.

Marcia J. Bates, Online Search and Berrypicking, Quora (Dec. 21, 2011). Professor Bates also introduced the related concept of an evolving search. In 1989 this was a radical idea in information science because it departed from the established orthodox assumption that an information need (relevance) remains the same, unchanged, throughout a search, no matter what the user might learn from the documents in the preliminary retrieved set. The Design of Browsing and Berrypicking Techniques for the Online Search Interface. Professor Bates dismissed this assumption and wrote in her 1989 article:

In real-life searches in manual sources, end users may begin with just one feature of a broader topic, or just one relevant reference, and move through a variety of sources.  Each new piece of information they encounter gives them new ideas and directions to follow and, consequently, a new conception of the query.  At each stage they are not just modifying the search terms used in order to get a better match for a single query.  Rather the query itself (as well as the search terms used) is continually shifting, in part or whole.   This type of search is here called an evolving search.

Furthermore, at each stage, with each different conception of the query, the user may identify useful information and references. In other words, the query is satisfied not by a single final retrieved set, but by a series of selections of individual references and bits of information at each stage of the ever-modifying search. A bit-at-a-time retrieval of this sort is here called berrypicking. This term is used by analogy to picking huckleberries or blueberries in the forest. The berries are scattered on the bushes; they do not come in bunches. One must pick them one at a time. One could do berrypicking of information without  the search need itself changing (evolving), but in this article the attention is given to searches that combine both of these features.

I independently noticed evolving search as a routine phenomena in legal search and only recently found Professor Bates’ prior descriptions. I have written about this often in the field of legal search (although never previously crediting Professor Bates) under the names “concept drift” or “evolving relevance.” See Eg. Concept Drift and Consistency: Two Keys To Document Review Quality – Part Two (e-Discovery Team, 1/24/16). Also see Voorhees, Variations in Relevance Judgments and the Measurement of Retrieval Effectiveness, 36 Info. Processing & Mgmt  697 (2000) at page 714.

SIDE NOTE: The somewhat related term query drift in information science refers to a different phenomena in machine learning. In query drift  the concept of document relevance unintentionally changes from the use of indiscriminate pseudorelevance feedback. Cormack, Buttcher & Clarke, Information Retrieval Implementation and Evaluation of Search Engines (MIT Press 2010) at pg. 277. This can lead to severe negative relevance feedback loops where the AI is trained incorrectly. Not good. If that happens a lot of other bad things can and usually do happen. It must be avoided.

Yes. That means that skilled humans must still play a key role in all aspects of the delivery and production of goods and services, lawyers too.

UCLA Berkeley Professor Bates first wrote about concept shift when using early computer assisted search in the late 1980s. She found that users might execute a query, skim some of the resulting documents, and then learn things which slightly changes their information need. They then refine their query, not only in order to better express their information need, but also because the information need itself has now changed. This was a new concept at the time because under the Classical Model Of Information Retrieval an information need is single and unchanging. Professor Bates illustrated the old Classical Model with the following diagram.

The Classical Model was misguided. All search projects, including the legal search for evidence, are an evolving process where the understanding of the information need progresses, improves, as the information is reviewed. See diagram below for the multimodal berrypicking type approach. Note the importance of human thinking to this approach.

See Cognitive models of information retrieval (Wikipedia). As this Wikipedia article explains:

Bates argues that searches are evolving and occur bit by bit. That is to say, a person constantly changes his or her search terms in response to the results returned from the information retrieval system. Thus, a simple linear model does not capture the nature of information retrieval because the very act of searching causes feedback which causes the user to modify his or her cognitive model of the information being searched for.

Multimodal search assumes that the information need evolves over the course of a document review. It is never just run one search and then review all of the documents found in the search. That linear approach was used in version 1.0 of predictive coding, and is still used by most lawyers today. The dominant model in law today is linear, wherein a negotiated list of keyword is used to run one search. I called this failed method “Go Fish” and a few judges, like Judge Peck, picked up on that name. Losey, R., Adventures in Electronic Discovery (West 2011); Child’s Game of ‘Go Fish’ is a Poor Model for e-Discovery Search; Moore v. Publicis Groupe & MSL Group, 287 F.R.D. 182, 190-91, 2012 WL 607412, at *10 (S.D.N.Y. Feb. 24, 2012) (J. Peck).

The popular, but ineffective Go Fish approach is like the Classical Information Retrieval Model in that only a single list of keywords is used as the query. The keywords are not refined over time as the documents are reviewed. This is a mono-modal process. It is contradicted by our evolving multimodal process, Step One in our Six-Step plan. In the first step we run many, many searches and review some of the results of each search, some of the documents, and then change the searches accordingly.

Step Two: Tests, Sample

Each search run is sampled by quick reviews and its effectiveness evaluated, tested. For instance, did a search of what you expected would be an unusual word turn up far more hits than anticipated? Did the keyword show up in all kinds of documents that had nothing to do with the case? For example, a couple of minutes of review might show that what you thought would be a carefully and rarely used word, Privileged, was in fact part of the standard signature line of one custodian. All his emails had the keyword Privileged on them. The keyword in these circumstances may be a surprise failure, at least as to that one custodian. These kind of unexpected language usages and surprise failures are commonplace, especially with neophyte lawyers.

Sampling here does not mean random sampling, but rather judgmental sampling, just picking a few representative hit documents and reviewing them. Were a fair number of berries found in that new search bush, or not? In our example, assume that your sample review of the documents with “Privileged” showed that the word was only part of one person’s standard signature on every one of their emails. When a new search is run wherein this custodian is excluded, the search results may now test favorably. You may devise other searches that exclude or limit the keyword “Privileged” whenever it is found in a signature.

There are many computer search tools used in a multimodal search method, but the most important tool of all is not algorithmic, but human. The most important search tool is the human ability to think the whole time you are looking for tasty berries. (The all important “T” in Professor Bates’ diagram above.) This means the ability to improvise, to spontaneously respond and react to unexpected circumstances. This mean ad hoc searches that change with time and experience. It is not a linear, set it and forget it, keyword cull-in and read all documents approach. This was true in the early days of automated search with Professor Bates berrypicking work in the late 1980s, and is still true today. Indeed, since the complexity of ESI has expanded a million times since then, our thinking, improvisation and teamwork are now more important than ever.

The goal in Step Two is to identify effective searches. Typically, that means where most of the results are relevant, greater than 50%. Ideally we would like to see roughly 80% relevancy. Alternatively, search hits that are very few in number, and thus inexpensive to review them all, may be accepted. For instance, you may try a search that only has ten documents, which you could review in just a minute. You may just find one relevant, but it could be important. The acceptable range of number of documents to review in Bottom Line Driven Review will always take cost into consideration. That is where Step-Three comes in, Estimation. What will it costs to review the documents found?

Step Three: Estimates

It is not enough to come up with effective searches, which is the goal of Steps One and Two, the costs involved to review all of the documents returned with these searches must also be considered. It may still cost way too much to review the documents when considering the proportionality factors under 26(b)(1) as discussed in Part One of this article. The plan of review must always take the cost of review into consideration.

In Part One we described an estimation method that I like to use to calculate the cost of an ESI review. When the projected cost, the estimate, is proportional in your judgment (and, where appropriate, in the judge’s judgment), then you conclude your iterative process of refining searches. You can then move onto the next Step-Four of preparing your discovery plan and making disclosures of that plan.

Step Four: Plan, Disclosures

Once you have created effective searches that produce an affordable number of documents to review for production, you articulate the Plan and make some disclosures about your plan. The extent of transparency in this step can vary considerably, depending on the circumstances and people involved. Long talkers like me can go on about legal search for many hours, far past the boredom tolerance level of most non-specialists. You might be fascinated by the various searches I ran to come up with the say 12,472 documents for final review, but most opposing counsel do not care beyond making sure that certain pet keywords they may like were used and tested. You should be prepared to reveal that kind of work-product for purposes of dispute avoidance and to build good will. Typically they want you to review more documents, no matter what you say. They usually save their arguments for the bottom line, the costs. They usually argue for greater expense based on the first five criteria of Rule 26(b)(1):

  1. the importance of the issues at stake in this action;
  2. the amount in controversy;
  3. the parties’ relative access to relevant information;
  4. the parties’ resources;
  5. the importance of the discovery in resolving the issues; and
  6. whether the burden or expense of the proposed discovery outweighs its likely benefit.

Still, although early agreement on scope of review is often impossible, as the requesting party always wants you to spend more, you can usually move past this initial disagreement by agreeing to phased discovery. The requesting party can reserve its objections to your plan, but still agree it is adequate for phase one. Usually we find that after that phase one production is completed the requesting party’s demands for more are either eliminated or considerably tempered. It may well now to possible to reach a reasonable final agreement.

Step Five: Final Review

Here is where you start to carry out your discovery plan. In this stage you finish looking at the documents and coding them for Responsiveness (relevant), Irrelevant (not responsive), Privileged (relevant but privileged, and so logged and withheld) and Confidential (all levels, from just notations and legends, to redactions, to withhold and log. A fifth temporary document code is used for communication purposes throughout a project: Undetermined. Issue tagging is usually a waste of time and should be avoided. Instead, you should rely on search to find documents to support various points. There are typically only a dozen or so documents of importance at trial anyway, no matter what the original corpus size.

 

I highly recommend use of professional document review attorneys to assist you in this step. The so-called “contract lawyers” specialize in electronic document review and do so at a very low cost, typically in the neighborhood of $50 per hour.  The best of them, who may often command slightly higher rates, are speed readers with high comprehension. They also know what to look for in different kinds of cases. Some have impressive backgrounds. Of course, good management of these resources is required. They should have their own management and team leaders. Outside attorneys signing Rule 26(g) will also need to supervise them carefully, especially as to relevance intricacies. The day will come when a court will find it unreasonable not to employ these attorneys in a document review. The savings is dramatic and this in turn increases the persuasiveness of your cost burden argument.

Step Six: Production

The last step is transfer of the appropriate information to the requesting party and designated members of your team. Production is typically followed by later delivery of a Log of all documents withheld, even though responsive or relevant. The withheld logged documents are typically: Attorney-Client Communications protected from disclosure under the client’s privilege; or, Attorney Work-Product documents protected from disclosure under the attorney’s privilege. Two different privileges. The attorney’s work-product privilege is frequently waived in some part, although often very small. The client’s communications with its attorneys is, however, an inviolate privilege that is never waived.

Typically you should produce in stages and not wait until project completion. The only exception might be where the requesting party would rather wait and receive one big production instead of a series of small productions. That is very rare. So plan on multiple productions. We suggest the first production be small and serve as a test of the receiving party’s abilities and otherwise get the bugs out of the system.

Conclusion

In this essay I have shown the method I use in document reviews to control costs by use of estimation and multimodal search. I call this a Bottom Line Driven approach. The six step process is designed to help uncover the costs of review as part of the review itself. This kind of experienced based estimate is an ideal way to meet the evidentiary burdens of a proportionality objection under revised Rules 26(b)(1) and 32(b)(2). It provides the hard facts needed to be specific as to what you will review and what you will not and the likely costs involved.

The six-step approach described here uses the costs incurred at the front end of the project to predict the total expense. The costs are controlled by use of best practices, such as contract review lawyers, but primarily by limiting the number of documents reviewed. Although it is somewhat easier to follow this approach using predictive coding and document ranking, it can still be done without that search feature. You can try this approach using any review software. It works well in small or medium sized projects with fairly simple issues. For large complex projects we still recommend using the eight-step predictive coding approach as taught in the TarCourse.com.

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Posted by Ralph Losey

Waymo v. Uber, Hide-the-Ball Ethics and the Special Master Report of December 15, 2017

December 17, 2017

The biggest civil trial of the year was delayed by U.S. District Court Judge William Alsup due to e-discovery issues that arose at the last minute. This happened in a trade-secret case by Google’s self-driving car division, WAYMO, against Uber. Waymo LLC v. Uber Techs., Inc. (Waymo I), No. 17-cv-00939-WHA (JSC), (N.D. Cal. November 28, 2017). The trial was scheduled to begin in San Francisco on December 4, 2017 (it had already been delayed once by another discovery dispute). The trial was delayed at Waymo’s request to give it time to investigate a previously undisclosed, inflammatory letter by an attorney for Richard Jacobs. Judge Alsup had just been told of the letter by the United States attorney’s office in Northern California. Judge Alsup immediately shared the letter with Waymo’s attorneys and Uber’s attorneys.

At the November 28, 2017, hearing Judge Alsup reportedly accused Uber’s lawyers of withholding this evidence, forcing him to delay the trial until Waymo’s lawyers could gather more information about the contents of the letter. NYT (11/28/17). The NY Times reported Judge Alsup as stating:

I can no longer trust the words of the lawyers for Uber in this case … You should have come clean with this long ago … If even half of what is in that letter is true, it would be an injustice for Waymo to go to trial.

NYT (11/28/17).

Judge Alsup was also reported to have said to Uber’s lawyers in the open court hearing of November 28, 2017:

You’re just making the impression that this is a total coverup … Any company that would set up such a surreptitious system is just as suspicious as can be.

CNN Tech (11/28/17).

Judge Alsup was upset by both the cover-up of the Jacobs letter and by the contents of the letter. The letter essentially alleged a wide-spread criminal conspiracy to hide and destroy evidence in all litigation, not just the Waymo case, by various means, including use of: (1) specialized communication tools that encrypt and self-destruct ephemeral communications, such as instant messages; (2) personal electronic devices and accounts not traceable to the company; and, (3) fake attorney-client privilege claims. Judge Alsup reportedly opened the hearing on the request for continuance by admonishing attorneys that counsel in future cases can be “found in malpractice” if they do not turn over evidence from such specialized tools. Fortune (12/2/17). That is a fair warning to us all. For instance, do any of your key custodians use specialized self-destruct communications tools like Wickr or Telegram?

Qualcomm Case All Over Again?

The alleged hide-the-email conduct here looks like it might be a high-tech version of the infamous Qualcomm case in San Diego. Qualcomm Inc. v. Broadcom Corp., No. 05-CV-1958-B(BLM) Doc. 593 (S.D. Cal. Aug. 6, 2007); Qualcomm, Inc. v. Broadcom Corp., 2008 WL 66932 (S.D. Cal. Jan. 7, 2008) (Plaintiff Qualcomm intentionally withheld from production several thousand important emails, a fact not revealed until cross-examination at trial of one honest witness).

The same rules of professional conduct are, or may be, involved in both Qualcomm and Waymo (citing to ABA model rules).

RULE 3.3 CANDOR TOWARD THE TRIBUNAL
(a) A lawyer shall not knowingly:
(1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer; . . .
(b) A lawyer who represents a client in an adjudicative proceeding and who knows that a person intends to engage, is engaging or has engaged in criminal or fraudulent conduct related to the proceeding shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal.

RULE 3.4 FAIRNESS TO OPPOSING PARTY AND COUNSEL
A lawyer shall not:
(a) unlawfully obstruct another party’s access to evidence or otherwise unlawfully alter, destroy, or conceal a document or other material that the lawyer knows or reasonably should know is relevant to a pending or a reasonably foreseeable proceeding; nor counsel or assist another person to do any such act.

Although, as we will see, it looks so far as if Uber and its in-house attorneys are the ones who knew about the withheld documents and destruction scheme, and not Uber’s actual counsel of record. It all gets a little fuzzy to me with all of the many law firms involved, but so far the actual counsel of record for Uber claim to have been as surprised by the letter as Waymo’s attorneys, even though the letter was directed to Uber’s in-house legal counsel.

Sarbanes-Oxley Violations?

In addition to possible ethics violations in Waymo v. Uber, a contention was made by the attorneys for Uber consultant, Richard Jacobs, that Uber was hiding evidence in violation of the Sarbanes-Oxley Act of 2002, Pub. L. 107-204, § 802, 116 Stat. 745, 800 (2002), which states in relevant part:

whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.

18 U.S.C. § 1519. The Sarbanes-Oxley applies to private companies and has a broad reach not limited to litigation that has been filed, much less formal discovery requests. Section 1519 “covers conduct intended to impede any federal investigation or proceeding including one not even on the verge of commencement.“ Yates v. United States, – U.S. –, 135 S.Ct. 1074, 1087 (2015).

The Astonishing “Richard Jacobs Letter” by Clayton Halunen

The alleged ethical and legal violations in Waymo LLC v. Uber Techs., Inc. are based upon Uber’s failure to produce a “smoking gun” type of letter (email) and the contents of that letter. Although the letter is referred to as the Jacobs letter, it was actually written by Clayton D. Halunen of Halunen Law (shown right), an attorney for Richard Jacobs, a former Uber employee and current Uber consultant. Although this 37-page letter dated May 5, 2017 was not written by Richard Jacobs, it purports to represent how Jacobs would testify to support employment claims he was making against Uber. It was provided to Uber’s in-house employment counsel, Angella Padilla, in lieu of an interview of Jacobs that she was seeking.

A redacted copy of the letter dated May 5, 2017, has been released to the public and is very interesting for many reasons. I did not add the yellow highlighting seen in this letter and am unsure who did.

In fairness to Uber I point out that the letter states on its face in all caps that it is a RULE 408 CONFIDENTIAL COMMUNICATION FOR SETTLEMENT PURPOSES ONLY VIA EMAIL AND U.S. MAIL, a fact that does not appear to have been argued as a grounds for Uber not producing the letter to Waymo in Waymo v. Uber. That may be because Rule 408, FRCP, states that although such settlement communications are not admissible to “prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction” they are admissible “for another purpose, such as proving a witness’s bias or prejudice, negating a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution.” Also, Rule 408 pertains to admissibility, not discoverability, and Rule 26(b)(1) still says that “Information within this scope of discovery need not be admissible in evidence to be discoverable.”

The letter claims that Richard Jacobs has a background in military intelligence, essentially a spy, although those portions of the letter were heavily redacted. I tend to believe this for several reasons, including the fact that I could not find a photograph of Jacobs anywhere. That is very rare. The letter goes on to describe the “unlawful activities within Uber’ s ThreatOps division.” Jacobs Letter at pg. 3. The illegal activities included fraud, theft, hacking, espionage and “knowing violations” of Sarbanes-Oxley by:

Uber’ s efforts to evade current and future discovery requests, court orders, and government investigations in violation of state and federal law as well as ethical rules governing the legal profession. Clark devised training and provided advice intended to impede, obstruct, or influence the investigation of several ongoing lawsuits against Uber and in relation to or contemplation of further matters within the jurisdiction of the United States.  …

Jacobs then became aware that Uber, primarily through Clark and Henley, had implemented a sophisticated strategy to destroy, conceal, cover up, and falsify records or documents with the intent to impede or obstruct government investigations as well as discovery obligations in pending and future litigation. Besides violating 18 U.S.C. § 15 19, this conduct constitutes an ethical violation.

Pages 5, 6 of Jacobs Letter. The practices included the alleged mandatory use of a program called WickrMe, that “programs messages to self-destruct in a matter of seconds to no longer than six days. Consequently, Uber employees cannot be compelled to produce records of their chat conversations because no record is retained.” Letter pg. 6.

Remember, Judge Alsup reportedly began the trial continuance hearing of November 28, 2017, by admonishing attorneys that in future cases they could be “found in malpractice” if they do not turn over evidence from such specialized communications tools. Fortune (12/2/17). There are a number of other secure messaging apps in adddition to Wickr that have encryption and self destruct features. A few I have found are:

There are also services on the web that will send self-destructing messages for you, such as PrivNote. This is a rapidly changing area so do your own due diligence.

Uber CEO Dara Khosrowshahi reacted to the November 29, 2017 hearing and Judge Alsup’s comments by tweeting on November 29, 2017 that Uber employees did, but no longer, use Wickr and another program like it, Telegram.

True that Wickr, Telegram were used often at Uber when I came in. As of Sept 27th I directed my teams NOT to use such Apps when discussing Uber-related business.

This seems like a good move to me on the part of Uber’s new CEO, a smart move. It is also an ethical move in a sometimes ethically challenged Silicon Valley culture. The culture is way too filled with selfish Ayn Rand devotees for my taste. I hope this leads to large scale housekeeping by Khosrowshahi. Matt Kallman, a spokesman for Uber, said after the public release of the letter:

While we haven’t substantiated all the claims in this letter — and, importantly, any related to Waymo — our new leadership has made clear that going forward we will compete honestly and fairly, on the strength of our ideas and technology.

NYT (12/15/17). You know the old saying about Fool me once …

Back to the Jacobs letter, it also alleges at pgs. 6-9 the improper use of fake attorney-client privilege to hide evidence:

Further, Clark and Henley directly instructed Jacobs to conceal documents in violation of Sarbanes-Oxley by attempting to “shroud” them with attorney-client privilege or work product protections. Clark taught the ThreatOps team that if they marked communications as “draft,” asked for a legal opinion at the beginning of an email, and simply wrote “attorney-client privilege” on documents, they would be immune from discovery.

The letter also alleges the intentional use of personal computers and accounts to conduct Uber business that they wanted to hide from disclosure. Letter pgs. 7-8.

The letter at pages 9-26 then details facts purporting to show illegal intelligence gathering activities by Uber on a global scale, violating multiple state and federal laws, including:

  • Economic Espionage Act
  • Uniform Trade Secret Act
  • California Uniform Trade Secrets Act
  • Racketeer Influenced and Corrupt Organizations Act (RICO)
  • Wire Fraud law at 18 U.S.C § 1343, and California Penal Code § 528.5
  • Wiretap Act at 18 U .S.C. § 25 10 et seq.
  • Computer Fraud and Abuse Act (CFAA)
  • Foreign Corrupt Practices Act (FCPA)

Special Master John L. Cooper

Judge Alsup referred the discovery issues raised by Uber’s non-disclosure of the “Jacobs Letter” to the Special Master handling many of the discovery disputes in this case, John L. Cooper of Farella Braun + Martel LLP. The Special Master Report with Cooper’s recommendations concerning the issues raised by the late disclosure of the letter is dated December 15, 2017. Cooper’s report is a public record that can be found here. This is  his excellent introduction of the dispute found at pages 1-2 of his report.

The trial of this trade secrets case was continued for a second time after the belated discovery of inflammatory communications by a former Uber employee came to light outside the normal discovery process. On April 14, 2017, Richard Jacobs sent a resignation e-mail to Uber’s then-CEO and then-general counsel, among others, accusing Uber of having a dedicated division with a “mission” to “steal trade secrets in a series of code-named campaigns” and engaging in other allegedly wrongful or inappropriate conduct. A few weeks later, on May 5, 2017, Mr. Jacobs’ lawyer, Clayton Halunen, sent a letter to Angela Padilla, Uber’s Vice President and Deputy General Counsel for Litigation and Employment. That 37-page letter expanded in some  detail on Mr. Jacobs’ e-mailed accusations regarding clandestine and concerted efforts to steal competitors’ trade secrets, including those belonging to Waymo. It also addressed allegations touching on Anthony Levandowski’s alleged downloading of Waymo trade secrets. The Jacobs Letter laid out what his lawyer described as a set of hardware and software programs, and usage protocols that would help Uber to allegedly carry out its thefts and other corporate espionage in secret and with minimized risk of evidence remaining on Uber servers or devices. By mid-August Mr. Jacobs and Uber settled their disputes and executed a written settlement agreement on August 14-15,2017.

Despite extensive discovery and multiple Court orders to produce an extensive amount of information related to the accusations in the Jacobs Materials, Waymo did not learn of their existence until after November 22, when the Court notified the parties that a federal prosecutor wrote a letter to this Court disclosing the gist of the Jacobs allegations.

The Special Master’s report then goes on to analyze whether Uber was obligated to produce the Jacobs Materials in response to any of the Court’s prior orders or Waymo’s discovery requests. In short, Master Cooper concluded that they were not directly covered by any of the prior court orders, but the Jacobs Letter was responsive to certain discovery requests propounded by Waymo, and Uber was obligated to produce it in response to those requests.

Special Master Cooper goes on to describe at page 7 of his report the Jacobs letter by Halunen. To state the obvious, this is clearly a “hot” document with implications that go well beyond this particular case.

That 37-page letter set forth multiple allegations relating to alleged efforts by Uber individuals and divisions. Among other things, the letter alleges that Uber planned to use certain hardware devices and software to conceal the creation and destruction of corporate records that, as a result, “would never be subject to legal discovery.” See ECF No. 2307-2 at 7. These activities, Mr. Jacobs’ lawyer asserted, “implicate ongoing discovery disputes, such as those in Uber’s litigation with Waymo.” Id. at 9. He continued:

Specifically, Jacobs recalls that Jake Nocon, Nick Gicinto, and Ed Russo went to Pittsburgh, Pennsylvania to educate Uber’s Autonomous Vehicle Group on using the above practices with the specific intent of preventing Uber’s unlawful schemes from seeing the light of day.

Jacobs’ observations cast doubt on Uber’s representation in court proceedings that no documents evidencing wrongdoing can be found on Uber’s systems and that other communications are actually shielded by the attorney-client privilege. Aarian Marshall, Judge in Waymo Dispute Lets Uber’s Self-driving Program Live—for Now, wired.com (May 3, 2017 at 8:47p.m.) (“Lawyers for Waymo also said Uber had blocked the release of 3,500 documents related to the acquisition of Otto on the grounds that they contain privileged information …. Waymo also can’t quite pin down whether Uber employees saw the stolen documents or if those documents moved anywhere beyond the computer Levandowski allegedly used to steal them. (Uber lawyers say extensive searches of their company’s system for anything connected to the secrets comes up nil.)”), available at (citation omitted).

Id. at 9-10.

Uber Attorney Angela Padilla

Angella Padilla was Uber’s Vice President and Deputy General Counsel for Litigation and Employment. She testified on these issues. Here is Special Master Cooper’s summary at pages 8-9 of his report:

Ms. Padilla testified in this Court that she read the letter “in brief’ and turned it over to other Uber attorneys, including Ms. Yoo, to begin an internal investigation. Nov. 29, 2017 Hr’g Tr. at 15:17-24. The letter also made its way to two separate committees of Uber’s Board of Directors, including the committee that was or is overseeing special litigation, including this case and the Jacobs matter. Id. at 20:10-13; 26:23-25. On June 27, Uber disclosed the allegations in the Jacobs Letter to the U.S. Attorney for the Northern District of California. Id. at 27:20-14. It disclosed the Jacobs Letter itself on or around September 12 to the same U.S. Attorney’s Office, to another U.S. Attorney, in the Southern District of New York, and to the U.S. Department of Justice in Washington. Id. at 28:4-10. Ms. Padilla testified that Uber made these disclosures to multiple prosecutors “to take the air out of [Jacobs’] extortionist balloon.” Id. at 28:18-19. Nearly one month before that distribution of the letter to federal prosecutors, on August 14, Uber settled with Mr. Jacobs—the terms of which included $4.5 million in compensation to Jacobs and $3 million to his lawyers. See id. at 62:6-63-12.

I have to pause here for a minute because the settlement amount takes my breath away. Not only the payment of $4.5 Million to Richard Jacobs who had a salary of $130,000 per year, but also the additional payment of $3.0 million dollars to his lawyers. That’s an incredible sum for writing a couple of letters, although I am sure they would claim to have put much more into their representation than meets the eye.

Other Attorneys for Uber Involved

Back to Special Master Cooper’s summary of the testimony of Uber attorney Padilla and other facts in the record about attorney knowledge of the “smoking gun” Jacobs letter (footnotes omitted):

Uber distributed the Jacobs E-Mail to two of Uber’s counsel of record at Morrison Foerster (“MoFo”) in this case. See Dec. 4, 2017 Hr’g Tr. at 46:1-47:5. Other MoFo attorneys directly involved in this case and related discovery issues e-mailed with other MoFo attorneys in late April about “Uber’s ediscovery systems regarding potential investigation into Jacobs resignation letter.” See Waymo Ex. 21.

None of the Uber outside counsel working on this case got a copy of the Jacobs Letter. Neither did the two Uber in-house lawyers who were or are handling this case; Ms. Padilla testified that she did not send it to them. Nov. 29, 2017 Hr’g Tr. at 47:8-16. By late June, some attorneys from Boies Schiller and Flexner, also counsel in this matter for Uber, had discussions with other outside counsel and Ms. Padilla about issues arising from the internal investigation triggered by the Jacobs Materials. See Waymo Ex. 20, Entries 22-22(h).

So now you know the names of the attorneys involved, and not involved, according to Special Master Cooper at page 9 of his report. Apparently none of the actual counsel of record knew about it. I would have to assume, and I think the court will too, that this was intentional. It was so clever as to be obvious, or, as the British would say too clever by half.

U.S. Attorney Notifies Judge Alsup of the Jacobs Letter

To complete the procedural background, here is what happened next leading to the referral to the Special Master. Note that a U.S. Attorney taking action like this to notify a District Court Judge of a piece of evidence is extraordinary, especially to do so just before a trial. Judge Alsup said that he had never had such a thing happen in his courtroom. The U.S. Attorney for the Northern District of California is Brian Stretch. Obviously he was concerned about the fairness of Uber’s actions. In my opinion this was a good call by Stretch.

On November 22, 2017, the U.S. Attorney for the Northern District of California notified this Court of the Jacobs allegations and specifically referenced the account Jacobs put in his letter about the efforts to keep the Ottomotto acquisition secret. See ECF No. 2383. The Court on the same day issued an order disclosing receipt of the letter from the U.S. Attorney and asked the parties to inform the Court about the extent of any prior disclosure of the Jacobs allegations. See ECF Nos. 2260-2261. After continuing the trial date in light of the parties’ responses to that query, the Court on December 4, 2017, ordered the Special Master “to determine whether and to what extent, including the history of this action and both sides’ past conduct, defendants were required to earlier produce the Jacobs letter, resignation email, or settlement agreement, or required to provide any information in those documents in response to interrogatories, Court orders, or other agreements among counsel.” ECF No. 2334, 2341.

Special Master report at pgs. 9-10.

Special Master Cooper’s Recommended Ruling

Master Cooper found that the Richard Jacobs letter was responsive to two of Waymos’ requests to produce: RFP 29 and RFP 73. He rejected Uber’s argument that they were not responsive to any request, an argument that must have been difficult to make concerning a document this hot. They tried to make the argument seem more reasonable by saying that even if the letter was “generally relevant,” it was not responsive. Then they cite to cases standing for the proposition that you have no duty to produce relevant documents that you are not going to rely on, namely documents adverse to your position, unless they are specifically requested. Here is a quote of the conclusion of that argument from page 16 of Uber’s Response to Waymo’s Submission to Special Master Cooper Re the Jacobs Documents.

Congress has specified in Rule 26(a)(ii) what documents must be unilaterally produced, and they are only those that a party “may use to support its claims or defenses.” Thus, a party cannot use a document against an adversary at trial that the party failed to disclose. However, Rule 26 very pointedly does not require the production of any documents other than those that a party plans to use “to support” its claims. Obviously, Uber is not seeking to use any of the documents at issue to support its claims. If Waymo believes that this rule should be changed, that is an issue they need to address with Congress, not with the Court.

Master Cooper did not address that argument because he found the documents were in fact both relevant and directly responsive to two of Waymo’s requests for production.

Uber’s attorney also made what I consider a novel argument that even if the Jacobs letter was found to be responsive, they still did have to produce it because, get this – it did not include any of the keywords that they agreed to use to search for documents in those categories. Incredible. What difference does that make, if they knew about the document anyway? Their client, Uber, specifically including in-house counsel, Ms. Padilla, clearly knew about it. The letter was to her. Are they suggesting that Uber did not know about the letter because some of their outside counsel did not know about it? Special Master Cooper must have had the same reaction as he disposed of this argument in short order at page 17 of his report:

Uber argues, that in some scenarios, reliance on search terms is enough to satisfy a party’s obligation to find responsive documents. See, e.g., T.D.P. v. City of Oakland, No, 16-cv-04132-LB, 2017 WL 3026925, at *5 (N.D. Cal. July 17, 2017) (finding certain search terms adequate for needs of case). But I find there are two main reasons why an exclusive focus on the use of search terms is inappropriate for determining whether the Jacobs Letter should have been produced in response to RFP 29 and RFP 73.

First, the parties never reached an agreement to limit their obligation to searching for documents to only those documents that hit on agreed-upon search terms. See Waymo Ex. 5 (Uber counsel telling Waymo during search-term negotiations that “Waymo has an obligation to conduct a reasonable search for responsive documents separate and apart from any search term negotiations”). (Emphasis added)

Second, Uber needed no such help in finding the Jacobs Materials. They were not stowed away in a large volume of data on some server. They were not stashed in some low-level employee’s files. Parties agree to use search terms and to look into the records of the most likely relevant custodians to help manage the often unwieldy process of searching through massive amounts of data. These methods are particularly called for when a party, instead of merely having to look for a needle in a haystack, faces the prospect of having to look for lots of needles in lots of haystacks. This needle was in Uber’s hands the whole time.

I would add that this needle was stuck deep into their hands, such that they were bleeding profusely. Maybe the outside attorneys did not see it, but Uber sure did and they had a duty to advise their attorneys. Uber’s attorneys would have been better off saving their powder for attacking the accuracy of the contents of the Jacobs letter and talking about the fast pace of discovery. They did that, but only as a short concluding argument, almost an afterthought. See page 16-19 of Uber’s Response to Waymo’s Submission to Special Master Cooper Re the Jacobs Documents.

Here is another theoretical argument that Uber’s lawyers threw up and Cooper’s practical response at pages 17-18 of his report:

Uber argues that it cannot be that the mere possession and knowledge of a relevant document must trigger a duty to scrutinize it and see if it matches any discovery requests. It asked at the December 12, 2017, hearing before the Special Master: Should every client be forced to instruct every one of its employees to turn over every e-mail and document to satisfy its discovery obligations to produce relevant and responsive documents? Must every head of litigation for every company regularly confronted with discovery obligations search their files for responsive documents, notwithstanding any prior agreement with the requesting party to search for responsive documents by the use of search terms?

It is not easy, in the abstract, to determine where the line regarding the scope of discovery search should be drawn. But this is not a case involving mere possession of some document. The facts in this case suggest that Ms. Padilla knew of the Jacobs Letter at the time Uber had to respond to discovery requests calling for its production—it certainly was “reasonably accessible.” Mr. Jacobs’ correspondence alleged systemic, institutionalized, and criminal efforts by Uber to conceal evidence and steal trade secrets, and not just as a general matter but also specifically involving the evidence and trade secrets at issue in this case—maybe the largest and most significant lawsuit Uber has ever faced. Ms. Padilla, Uber’s vice president and deputy general counsel for litigation and employment received the Jacobs Materials around the same time that discovery in this case was picking up and around the same time that the Court partially granted Waymo’s requested provisional relief. Shortly after that, Uber told federal prosecutors about the Jacobs allegations and then later sent them a copy of the letter. It sent the materials to outside counsel, including lawyers at MoFo that Uber hired to investigate the allegations. Two separate Uber board committees got involved, including the committee overseeing this case. Uber paid Mr. Jacobs $4.5 million, and his lawyer $3 million, to settle his claims.

The Federal Rules obligate a party to produce known, relevant and reasonably accessible material that on its face is likely to be responsive to discovery requests. RFP 29 and RFP 73 were served on Uber on May 9, just a few days after Ms. Padilla received the Jacobs Letter on May 5. Uber was therefore obligated to conduct a reasonable inquiry into those requests (and all others it received) to see if it had documents responsive to those requests and produce non-privileged responsive documents.

Special Master John Cooper concluded by finding that the “Jacobs letter was responsive to Waymo’s Request for Production No. 29 and Request for Production No. 73, and Uber should have produced it to Waymo in response to those requests.” It was beyond the scope of his assignment as Special Master to determine the appropriate remedy. Uber will now probably challenge this report and Judge William Alsup will rule.

Like everyone else, I expect Judge Alsup will agree with Cooper’s report. The real question is what remedy will he provide to Waymo and what sanctions, if any, will Judge Alsuop impose.

Conclusion

At the hearing on the request for a trial delay on November 28, 2017, Judge William Alsup reportedly told Uber’s in-house attorney, Angella Padilla:

Maybe you’re in trouble … This document should have been produced … You wanted this case to go to trial so that they didn’t have the document, then it turns out the U.S. attorney did an unusual thing. Maybe the guy [Jacobs] is a disgruntled employee but that’s not your decision to make, that’s the jury’s.

The Recorder (November 29, 2017).

In response to Angella Padilla saying that Jacobs was just a “extortionist” and the allegations in his letter were untrue. Judge Alsup reportedly responded by saying:

Here’s the way it looks … You said it was a fantastic BS letter with no merit and yet you paid $4.5 million. To someone like me and people out there, mortals, that’s a lot of money, that’s a lot of money. And people don’t pay that kind of money for BS and you certainly don’t hire them as consultant if you think everything they’ve got to contribute is BS. On the surface it looks like you covered this up.

The Recorder (November 29, 2017).

Judge William Alsup is one of the finest judges on the federal bench today. He is a man of unquestioned integrity and intellectual acumen. He is a Harvard Law graduate, class of 1971, and former Law clerk for Justice William O. Douglas, Supreme Court of the United States, 1971-1972.  How Judge Alsup reacts to the facts in Waymo LLC v. Uber Techs., Inc. now that he has the report of Special Master Cooper will likely have a profound impact on e-discovery and legal ethics for years to come.

No matter what actions Judge Alsup takes next, the actions of Uber and its attorneys in this case will be discussed for many years to come. Did the attorneys’ non-disclosure violate Rule of Professional Conduct 3.3, Candor Toward the Tribunal? Did they violate Rule 3.4, Fairness to Opposing Party and Counsel? Also, what about Rule 26(g) Federal Rules of Civil Procedure? Other rules of ethics and procedure? Did Uber’s actions violate the Sarbanes-Oxley Act? Other laws? Was it fraud?

Finally, and these are critical questions, did Uber breach their duty to preserve evidence when they knew that litigation was reasonably likely? Did their attorneys do so if they knew of these practices? What sanctions are appropriate for destruction of evidence under Rule 37(e) and the Court’s inherent authority? Should an adverse inference be imposed? A default judgment?

The preservation related issues are big questions that I suspect Judge Alsup will now address. These issues and his rulings, and that of other judges who will likely face the same issues soon in other cases, will impact many corporations, not just Uber. The use of software such as Wickr and Telegram is apparently already wide-spread. In what circumstances and for what types of communications may the use of such technologies place a company (or individual) at risk for severe sanctions in later litigation? Personally, I oppose intentionally ephemeral devices, where all information self-destructs, but, at the same time, I strongly support the right of encryption and privacy. It is a question of balance between openness and truth on the one hand, and privacy and security on the other. How attorneys and judges respond to these competing challenges will impact the quality of justice and life in America for many years to come.

 

2 Comments | Evidence, Lawyers Duties, Review, Spoliation/Sanctions, Technology | Tagged: , , , , , , , , , , , , , | Permalink
Posted by Ralph Losey

Proportionality Φ and Making It Easy To Play “e-Discovery: Small, Medium or Large?” in Your Own Group or Class

November 26, 2017

Every judge who has ever struggled with discovery issues wishes that the lawyers involved had a better understanding of proportionality, that they had spent more time really thinking about how it applies to the requisites of their case. So too does every lawyer who, like me, specializes in electronic discovery. As Chief Justice Roberts explained in his 2015 Year-End Report on the Federal Judiciary on the new rules on proportionality:

The amended rule states, as a fundamental principle, that lawyers must size and shape their discovery requests to the requisites of a case. Specifically, the pretrial process must provide parties with efficient access to what is needed to prove a claim or defense, but eliminate unnecessary or wasteful discovery. The key here is careful and realistic assessment of actual need.

Proportionality and reasonableness arise from conscious efforts to realistically assess actual need. What is the right balance in a particular situation? What are the actual benefits and burdens involved? How can you size and shape your discovery requests to the requisites of a case?

There is more to proportionality than knowing the rules and case law, although they are a good place to start. Proportionality is a deep subject and deserves more than black letter law treatment. 2015 e-Discovery Rule Amendments: Dawning of the “Goldilocks Era” (e-discoveryteam.com, 11/11/15) (wherein I discuss proportionality, the Golden Ratio or perfect proportionality, aka Φ, which is shown in this graphic and much more, including the spooky “coincidence” at a CLE with Judge Facciola and the audience vote). Also see: Giulio Tononi, Phi Φ, a Voyage from the Brain to the Soul (Pantheon Books, 2012) (book I’m rereading now on consciousness and integrated information theory, another take on Phi Φ).

We want everyone in the field to think about proportionality. To be conscious of it, not just have information about it. What does proportionality really mean? How does it apply to the e-discovery tasks that you carry out every day? How much is enough? Too much? Too burdensome? Too little? Not enough? Why?

What is a reasonable effort? How do you know? Is there perfect proportionality? One that expresses itself in varying ways according to the facts and circumstances? Does Law follow Art? Is Law an Art? Or is it a Science? Is there Beauty in Law? In Reason? There is more to proportionality than meets the eye. Or is there?

Getting people to think about proportionality is one of the reasons I created the Hive Mind game that I announced in my blog last week: “e-Discovery: Small, Medium of Large?”

This week’s blog continues that intention of getting lawyers to think about proportionality and the requisites of their case. It concludes with a word document designed to make it easier to play along with your own group, class or CLE event. What discovery activities required in a Big Case are not necessary in a Small Case, or even a Medium Sized case? That is what requires thought and is the basis of the game.

Rules of Federal Procedure

Proportionality is key to all discovery, to knowing the appropriate size and shape of discovery requests in order to fit the requisites of a case. Reading the rules that embody the doctrine of proportionality is a good start, but just a start.  The primary rule to understand is how proportionality effects the scope of relevance as set forth in Rule 26(b)(1), FRCP:

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.

But you also need to understand how it impacts a lawyer’s overall duty to supervise a discovery request and response as set forth in Rule 26(g). See Rule 26(g)(1)(B)(iii), FRCP:

neither unreasonable nor unduly burdensome or expensive, considering the needs of the case, prior discovery in the case, the amount in controversy, and the importance of the issues at stake in the action.

Many other rules have concepts of proportionality either expressly or implicitly built in, including Rule 26(b)(2)(B) (not reasonably accessible); Rule 26(b)(2)(C)(i) (cumulative); Rule 1 (just, speedy and inexpensive), Rule 34, Rule 37(e), Rule 45.

Case Law

Reading the key cases is also a help, indispensable really, but reading what the judges say is not enough either. Still you need to keep up with the fast growing case law on proportionality. See for instance the fine collection by K&L Gates at: https://www.ediscoverylaw.com/?s=proportionality and the must-read, The Sedona Conference Commentary on Proportionality_May 2017. Here a few of my favorites cases:

  • In re Bard IVC Filters Prods. Liab. Litig., D. Ariz., No. MDL 15-02641-PHX DGC, 2016 U.S. Dist. LEXIS 126448 (D. Ariz. Sept. 16, 2016). In this must-read opinion District Judge David G. Campbell, who was the chair of the Rules Committee when the 2015 amendments were passed, takes both lawyers and judges to task for not following the new rules on proportionality. He then lays it all out in a definitive manner.
  • In re Takata Airbag Prods. Liab. Litig., No. 15-02599-CIV-Moreno, MDL No. 5-2599 (S.D. Fla. Mar. 1, 2016). Judge Moreno quotes Chief Justice Roberts’ comments in the 2015 Year-End Report that the newly amended Fed.R.Civ.Pro. 26 “crystalizes the concept of reasonable limits in discovery through increased reliance on the common-sense concept of proportionality.” 2015 Year-End Report on the Federal Judiciary.
  • Hyles v. New York City, No. 10 Civ. 3119 (AT)(AJP), 2016 WL 4077114 (S.D.N.Y. Aug. 1, 2016) (Judge Peck: “While Hyles may well be correct that production using keywords may not be as complete as it would be if TAR were used, the standard is not perfection, or using the “best” tool, but whether the search results are reasonable and proportional. Cf. Fed. R. Civ. P. 26(g)(1)(B)”)
  • Johnson v Serenity Transportation, Case No. 15-cv-02004-JSC (N.D. Cal. October 28, 2016) (“… a defendant does not have discretion to decide to withhold relevant, responsive documents absent some showing that producing the document is not proportional to the needs of the case.”)
  • Apple Inc. v. Samsung Elecs. Co., No. 12-CV-0630-LHK (PSG), 2013 WL 4426512, 2013 U.S. Dist. LEXIS 116493 (N.D. Cal. Aug. 14, 2013) (“But there is an additional, more persuasive reason to limit Apple’s production — the court is required to limit discovery if “the burden or expense of the proposed discovery outweighs its likely benefit.” This is the essence of proportionality — an all-to-often ignored discovery principle. Because the parties have already submitted their expert damages reports, the financial documents would be of limited value to Samsung at this point. Although counsel was not able to shed light on exactly what was done, Samsung’s experts were clearly somehow able to apportion the worldwide, product line inclusive data to estimate U.S. and product-specific damages. It seems, well, senseless to require Apple to go to great lengths to produce data that Samsung is able to do without. This the court will not do.“)
  • PTSI, Inc. v. Haley, 2013 WL 2285109 (Pa. Super. Ct. May 24, 2013) (“… it is unreasonable to expect parties to take every conceivable step to preserve all potentially relevant data.”)
  •  Kleen Products, LLC, et al. v. Packaging Corp. of Amer., et al., Case: 1:10-cv-05711, Document #412 (ND, Ill., Sept. 28, 2012).

Also see: The Top Twenty-Two Most Interesting e-Discovery Opinions of 2016 (e-discoveryteam.com, 1/2/17) (the following top ranked cases concerned proportionality: 20, 18, 17, 15, 14, 11, 6, 4, 3, 2, 1); and, Good, Better, Best: a Tale of Three Proportionality Cases – Part Two (e-discoveryteam.com 4/8/12) (includes collection of earlier case law).

Sedona Commentary

The Sedona Conference Commentary on Proportionality_May 2017 is more than a collection of case law. It includes commentary hashed out between competing camps over many years. The latest 2017 version includes Six Principles that are worthy of study. They can certainly help you in your own analysis of proportionality. The cited case law in the Commentary is structured around these six principles.

THE SEDONA CONFERENCE PRINCIPLES OF PROPORTIONALITY

Principle 1: The burdens and costs of preserving relevant electronically stored information should be weighed against the potential value and uniqueness of the information when determining the appropriate scope of preservation.

Principle 2: Discovery should focus on the needs of the case and generally be obtained from the most convenient, least burdensome, and least expensive sources.

Principle 3: Undue burden, expense, or delay resulting from a party’s action or inaction should be weighed against that party.

Principle 4: The application of proportionality should be based on information rather than speculation.

Principle 5: Nonmonetary factors should be considered in the proportionality analysis.

Principle 6: Technologies to reduce cost and burden should be considered in the proportionality analysis.

Conclusion

Proportionality is one of those deep subjects where you should think for yourself, but also be open and listen to others. It is possible to do both, although not easy. It is one of those human tricks that will make us hard to replace by smart machines. The game I have created will help you with that. Try out the Small, Medium or Large? proportionality game by filling out the online polls I created.

But, you can do more. You can lead discussions at your law firm, company, class or CLE on the subject. You can become an e-discovery proportionality Game-Master. You can find out the consensus opinion of any group. You can observe and create statistics of how the initial opinions change when the other game players hear each others opinions. That kind of group interaction can create the so-called hive-effect. People often change their mind until a consensus emerges.

What is the small, medium or large proportionality consensus of your group? Even if you just determine majority opinion, and do not go through an interactive exercise, you are learning something of interest. Plus, and here is the key thing, you are giving game players a chance to exercise their analytical skills.

To help you to play this game on your own, and lead groups to play it, I created a Word Document that you are welcome to use.

Game-Master-Hive-Mind_e-Discovery_Proportionality_GAME

 

 

1 Comment | informaton, knowledge, Lawyers Duties, New Rules, Review, Search, Spoliation/Sanctions, Technology, wisdom | Tagged: , , , , , , , , | Permalink
Posted by Ralph Losey

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