Why Your Data Can Reduce E-Discovery Abuses

Monday, April 5, 2010 - 01:00
Anthony J. Marchetta

Mr. Marchetta practices exclusively in the area of civil trial law. He was a lead trial counsel for W.R. Grace and GAF Corporation in their asbestos litigation and served as national coordinating counsel for a number of major corporations. He has tried numerous cases in state and federal courts around the country, as well as handled all appellate work connected with such trials.

Mr. Scordo practices in the area of commercial litigation in state and federal courts. His experience includes the handling of complex litigation.

This interview focuses on the approach set forth in the Final Report of the Joint Project of the American College of Trial Lawyers (ACTL) and the Institute for the Advancement of the American Legal System (IAALS) and in the Pilot Project Rules of the IAALS.

Editor: Describe cases in which extensive e-discovery was threatened, but which were settled in order to avoid discovery costs.

Marchetta: I've never been involved in a case that was settled only to avoid discovery costs, but I have been involved in cases where the discovery costs were considered as part of the overall settlement because the discovery costs were very expensive. It was part of the decision-making process and it entered into the arithmetic as to whether or not to settle the case, but it wasn't the only driver. It was just one of a number of considerations.

Scordo: I have not been involved in a case where that was the deciding factor, but it's certainly something that you keep in mind even before you start talking settlement, or even before you start talking with your adversary about how much e-discovery you have. E-discovery considerations certainly can give the other side a point of leverage if they realize that the burden will be much greater on your client than on their client.

Editor: Describe cases in which extensive discovery took place and whether or not the information developed affected the outcome.

Marchetta: Much depends on the nature of the case and how targeted the e-discovery effort is. Discovery abuses arise when a party deliberately uses e-discovery to enhance the settlement value of its case. In one case involving a very large database, a tremendous amount of work was involved to find the information we needed to challenge allegations concerning the amount of time plaintiffs worked on their jobs. It did prove relevant and key, however, because it enabled us to establish how much time the plaintiffs were actually working.

Scordo: I've had some pretty good experiences with e-discovery where there were a limited number of custodians and information was discovered that significantly tipped the case one way or the other. In two cases involving contract disputes, where the legal issue revolved around identifying the person who drafted a particular clause in the contract, e-discovery was useful in uncovering that information. The e-discovery was highly targeted. There was a limited list of players, a limited date range, and just one clause at issue. If you have something that narrow, e-discovery can be very useful. On the other hand, I have never been involved in a case where a very wide sweep was done and pulled in a mass of files from many custodians where e-discovery found a smoking gun from a person that nobody thought would have relevant information. This is the reason why people feel that unfocused e-discovery is wasteful and expensive.

Editor: Are you aware of cases where notice pleading permitted the plaintiff to engage in an investigation to see whether there were facts that could be used to support the complaint?

Marchetta: Where I've seen that the most is in class action litigation. At that time, plaintiffs in class actions would use the filing of the complaint and the ability to obtain discovery as a way to basically create or establish their claim because they had no other way of knowing whether or not they had a claim until they got into the corporate records of the defendant. The ACTL and IAALS approach resolves the issue by requiring each side to disclose their detailed facts at the pleading stage and by providing for limited pre-complaint discovery.

Editor: How much impact has Iqbal had?

Scordo: It hasn't had the impact that some people thought it would. It didn't raise the pleading standard that high. You can't have conclusory allegations and you have to put more of your facts in, but it certainly hasn't risen to the level where you're getting detailed facts at the outset, which is at the heart of the ACTL and IAALS approach.

Marchetta: I agree. The Iqbal standard doesn't create a great change in the pleading and discovery process as we know it right now. What is really key is the pretrial conference with the judge taking control of the case as is provided in the ACTL and IAALS approach, staying with the case and shepherding the discovery throughout so that proportionality and how discovery is conducted play a role in the management of the case from the very beginning. This is the best way of avoiding abuse of the discovery process and keeping discovery focused on the key issues in the case. No pleading standard in the world is going to provide that kind of control over the process.

Editor: Do you feel the courts have the resources to do that?

Marchetta: One of the key things is to have the same person managing the case. When you have the same judge on a case from beginning to end, she takes care of all discovery issues, deals with all problems in the case as they arise, and handles matters by telephone and email. That kind of attention by a single judge moves cases along and controls the discovery process. There is probably not enough manpower right now to do this, but I think that's the only way to ultimately get us back to where you can have cases go through to trial and have a process that encourages trials as opposed to forced settlements against a backdrop of unaffordable e-discovery costs.

Editor: What about state courts in which you practice?

Marchetta: In New Jersey if you have a case in the Track IV case management program, you have something more like the federal system with the case being overseen by a single judge throughout. If you don't have a Track IV case and you're just put in the general pool and motions are decided by whatever judge is going to hear them, then you've got a real uphill battle.

Editor: What kind of a burden does e-discovery put on corporate personnel?

Scordo: It's a very, very large burden. Most big companies now have dedicated staff to respond to e-discovery requests. It goes all the way up to the general counsel and all the way down to an IT person. It's a kind of built-in overhead that big companies need to maintain in order to react quickly when these requests come in. In addition to those involved in the e-discovery response team, the total cost also includes the burden on those employees who are involved in the particular dispute. Litigation holds need to be responded to instantaneously, and employees who must respond inevitably have questions and concerns about what they should save and what they should not save. A lot of work is thrust on people who are just not used to dealing with litigation and preserving files.

Marchetta: Companies are in the business of making money, and their success is attributable to having employees engaged in jobs that lead to the creation of wealth for the corporation and the shareholders. When people are diverted from that process, there is a cost over and above the cost of people doing the work required to respond to discovery. The loss in productivity is not captured in the numbers. It's hidden from the lawyers and the court.

Editor: Proportionality is emphasized in the ACTL and IAALS approach. Is it simply keeping the cost of e-discovery in line with the dollar value of the case?

Marchetta: No, it's got to go beyond the numbers because it really has to be applied to the issues in the case. I don't think any court is going to say that because the alleged damages are small, a plaintiff's attorney isn't allowed access to the information she needs to prove her case. What proportionality really means in those situations is that you have to focus on the precise legal issue and only allow discovery relevant to that issue. You may have to do it, if need be, on a staged basis so that you go to the most critical information first and expand out from there.

Scordo: I agree with that. There are very few judges in the country that are going to arbitrarily limit discovery because there is not a lot of money at issue in the case.

Editor: Under the ACTL and IAALS approach, sanctions may be imposed for destruction or failure to preserve electronically stored information only upon showing of intent to destroy evidence or recklessness. What is your reaction?

Scordo: If you have taken some reasonable steps to preserve data and you happen to miss something, I am aware of only a very small number of cases where the courts have awarded even minor sanctions. However, the threat exists for greater sanctions, and it is good to have specific guidelines to work under. I think that if you look at most sanction cases the vast majority of them involve either intentional or reckless conduct.

Marchetta: I agree with everything that John said. I might add that lawyers are increasingly using spoliation both as a sword and as a shield. Where they have to defend a claim without the information that they need, they can get adverse inferences. It is therefore necessary that guidelines be provided that will limit the abusive use of spoliation claims where there is no indication that the lost document might have been relevant.

Editor: Is it important for companies to supply LCJ with data for its white paper relating to the cost of e-discovery to bring home to the members of the Federal Rules Advisory Committee that doing something about the cost of e-discovery should be addressed in the federal rules?

Scordo: Yes. I really think that it is very important for in-house counsel and their law firms to quantify the direct and indirect costs of e-discovery because I still don't think that the courts recognize the immense burden that the current system imposes on corporations.

Marchetta: I think that the way that corporate counsel can help is to have people who are tasked with the obligation of developing direct and indirect cost numbers, including an estimate of the immense indirect costs resulting from the lost productivity of employees at all levels who get caught up in the e-discovery process.

Please email the interviewees at amarchetta@daypitney.com or jscordo@daypitney.com with questions about this interview.