Tom Mueller is co-head of the firm's Electronic Discovery Task Force. He has spent over 20 years litigating antitrust and securities cases, both for plaintiffs and for defendants, in state and federal courts. Most of his clients have been large, multinational companies, adding significant complexities to the cases he handles. As a native German, he specializes in representing German, Swiss, and Austrian-based clients. He is also a member of The Sedona Conference Working Group 6 on International Electronic Information Management, Discovery, and Disclosure.
On the cover of our March issue, Paul Saunders, Chair of the American College of Trial Lawyers (College) Task Force on Discovery and Civil Justice, mentions a few of the important Principles (Principles) set forth in the Final Report of the Joint Project of the College and the Institute for the Advancement of the American Legal System. In the following interview the interviewee discusses how application of the Principles would address concerns arising from cases with which the interviewee is familiar.
Editor: Are there cases where extensive e-discovery was threatened, but which are settled in order to avoid e-discovery costs?
Mueller: There are a lot of cases out there, particularly in the securities and the antitrust field, where the allegations themselves may have relatively little merit and little basis in fact, but the cost of defending those cases is enormous because of the e-discovery burden. This creates tremendous pressure on the defendant to settle those cases at an early stage in the litigation regardless of whether or not there is merit to the claims. It takes a principled client to say "there is nothing to these allegations and I am going to invest the enormous amount of money it will take to defend against them because I just don't believe in settling unmeritorious claims."
My clients have usually taken the more principled route and said we are not going to pay on meritless claims because if we pay we will have a reputation that we are an easy mark, which will only lead to additional law suits down the road. My clients have generally been willing to fight such claims, even though it costs a phenomenal amount of money to engage in e-discovery in the securities and antitrust cases that I typically handle.
Editor: Do you feel that situation would be improved if the rules required fact-based pleading? Have the Iqbal and Twombly cases changed the situation?
Mueller: In my judgment changes in the rules are still required. There was a recent decision in the Second Circuit, Starr et al v. Sony BMG et al ., that seems to have limited the effects of Iqbal and Twombly and suggests that those decisions did not fundamentally change the notice pleading requirements. Thus, the effect that Twombly and Iqbal will have on the pleading standard is still a little bit up in the air. The various circuits are in the process of applying those decisions and there is a lot of uncertainty.
Editor: Have you had cases where there was extensive discovery and much of it was irrelevant?
Mueller: The amount of discovery that is taken is disproportionate to the discovery that is actually necessary and is actually used in the case. You have matters where people are producing millions upon millions of pages of documents or tera-bytes of information with very little of that information ever being used. The problem is that the amount of e-discovery that takes place to get to that kernel of relevant information is excessive.
Editor: To what extent would a rule requiring fact-based pleading be helpful?
Mueller: Fact-based pleading would result in a number of cases not being brought because people might not be able to meet that standard. Yet, you would still end up with a large number of cases that might be able to survive the heightened pleading standard. So, you will still have the issue of a lot of wasteful e-discovery, even in those cases that have merit.
Editor: Have you seen situations where there is suspicion that death resulted from a drug or an accident resulted from a product defect and notice pleading permitted a plaintiff to commence a case and to use e-discovery as an investigative tool?
Mueller: That is frequently the case in product liability suits where there is a news report about a suspected problem with a product. You also have it in antitrust cases where, for example, the EU raids a group of companies in Europe and plaintiffs' counsel here in the U.S. see newspaper reports of those raids. So press reports of problems, whether they be price-fixing problems or product problems, definitely lead to quick filings of the complaints where notice pleading is permitted even though plaintiffs' counsel have no hard facts to plead. There is almost a hair trigger response to such news stories because lawyers feel the need to be the first to file so that they enhance their chance to become lead counsel.
Editor: One of the points made in Iqbal was that unnecessary discovery could distract government officials from their work. What kind of disruption does e-discovery cause, including distracting senior managers of a company and its directors from their focus on running a successful business?
Mueller: You have a tremendous amount of loss of management time because they have to concentrate on collecting their documents, which involves talking to the lawyers, talking to the consultants, giving up their lap tops in order for them to be searched for information. That still doesn't account for (and I don't know how you would ever measure) the cost associated with people simply being mentally distracted by the fact that they've got these claims pending. I know that if I were sued personally, it would weigh on my mind, and I'm sure that it weighs on the minds of the CEO and other key executives.
Editor: One of the College's Principles calls on judges to apply a standard of proportionality so that you don't spend $200,000 on e-discovery in a $100,000 case.
Mueller: It is hard to apply the proportionality principle because it is very difficult to assess the cost of discovery up front. Discovery requests that may look reasonable on their face and look to be narrowly tailored and perfectly appropriate for the issues in a particular case may nevertheless cost the company a tremendous amount of money to comply with. And there are times when you don't realize the amount of the cost until you actually start trying to comply with the request and realize the problems that the request creates. It would certainly be very helpful to include the principle of proportionality in the rules, but it would still end up being difficult to apply simply because often it is not readily apparent what the cost of e-discovery will be.
Editor: The College's Principles limit sanctions to situations where there is a showing of intent to destroy evidence or recklessness. How significant do you feel that is?
Mueller: I think it would be a great improvement. Obtaining all of the requested information from a large multinational and making sure that nothing gets destroyed is not as easy as it sounds. You are dealing with a large number of people who need to receive a litigation hold and to implement it. These people usually get inundated with several hundred emails a day, so they may miss the hold notice. Are they traveling when they receive the notice and then forget to implement it when they get back to the office? Have they lost their computer or had it crash at an inopportune time? There are many different reasons why a hold may not be implemented for a particular data source.
Implementing the hold in a large multinational is very difficult. The reality is that most multinationals have several heads of IT in different divisions and regions. So, you have different information systems running different applications on different servers throughout the company all over the world. Some affiliates may use outside vendors, others may handle everything internally. You are not talking to one key person. You are talking to maybe a half-dozen or a dozen different IT people, and they in turn have to tell their people to implement the hold. It's a much more complicated process than most people imagine.
There is a high risk of there being some sort of mistake or inadvertent failure to put a hold into place. I would not be surprised if there are many legal holds that get put into place that are not 100 percent effective.
The chances of an inadvertent mistake are very high, as are the potential costs of such a mistake. There are many instances where an opposing party will exploit an innocent mistake and seize upon it as a chance to change the playing field either because the threat of sanctions may cause the producing party to settle or the possibility exists that a court may impose adverse inferences or find some other way of shifting the burden of proof.
Therefore, the kind of standard the College suggests makes a lot of sense. Sanctions should not be applied unless there is a deliberate attempt to destroy evidence or a reckless failure to preserve it.
Editor: Based on the concerns you expressed, do you feel it would be useful for our corporate counsel readers and their law firms to supply anecdotal evidence and hard data in connection with the May Duke Conference being sponsored by the Federal Rules Committee?
Mueller: Yes. As I have pointed out, the College's Principles are only partial answers to a much bigger problem. But, they are a giant step in the right direction. The desire of the Federal Rules Committee to review the issues presents corporate counsel and their law firms with what well may be a once in a lifetime opportunity to have their concerns fully addressed.
The Conference offers the opportunity to bring the impact of e-discovery to the attention of the Rules Committee. It is most important that corporate counsel and their law firms provide the Conference with anecdotal evidence and data that will enable the Rules Committee to gauge the magnitude of the problems and to fully consider how the various proposals that have been made to reform the Rules will address those problems. Anything we can do to make our legal system more efficient and more cost effective helps not only the reputation of the legal system but helps litigating parties all across the board.