Editor: Describe cases in which extensive e-discovery was threatened but which were settled in order to avoid discovery costs.
Naar: E-discovery is a fact of life in all litigation today and has been for some time now. One trend is to notify an adversary at the time litigation is filed, or even earlier, of the need to establish a litigation hold - if one has not already been put in place because of the anticipation of litigation - regarding certain documents and other materials maintained or stored in both hard copy and in electronic format. Litigators no longer wait until initial discovery requests are served, and rule changes now require counsel to meet and confer immediately upon the commencement of litigation to discuss issues involving electronically stored information ("ESI"). As a result, the cost benefit analysis engaged in by parties and their counsel as to whether to litigate or settle occurs earlier in litigation or even before litigation is filed. The costs and anticipated costs of e-discovery has thus had an impact on the settlement calculus. While the cost of discovery has always been a significant factor in the determination of whether or when a case should be settled, the costs related to extensive e-discovery have further pushed the scales toward settlement even when the producing party can make a convincing argument that all or some of those costs should be shifted to the party seeking the discovery. At the same time, parties seeking extensive e-discovery argue, based upon discovery of the adversary's computer systems and back-up protocols, that the discovery sought should be easier and cheaper to produce because it doesn't have to involve the production of a room full of boxes of hard copy documents, but can be burned to computer disks at the push of a button. These issues have brought about new twists to traditional issues such as the inadvertent production of privileged materials and the entry of protective orders. As a result, lawyers are spending more and more time speaking to their clients, their adversaries, and the courts to resolve the multitude of issues that now arise because most documents and materials are generated and stored electronically. It is unclear whether recent calls by reputable groups such as the American College of Trial Lawyers for fact-based pleading, limited discovery, and mandated proportionality will have an impact on the run-away train of e-discovery. One thing remains clear: an even greater percentage of cases are likely to settle because of e-discovery issues.
Editor: Describe cases in which extensive discovery took place and whether or not the information developed affected the outcome.
Naar: Cases in which the "smoking gun" is discovered in an e-mail or other electronically stored document and immediately affects the outcome are generally the exception rather than the rule in litigation. More typical problems arise when the issue is whether the ESI is accessible (and the cost to access it), fee shifting, or when potentially relevant material has been deleted and destroyed - either prior to or after a litigation hold was or should have been put into place. These issues may compel settlement or affect the outcome of cases and may be the new "smoking guns" of litigation. I did have one case recently where I represented a defendant and sought the production of certain relevant emails that were sent by or to the plaintiff that I became aware of from other discovery. The plaintiff could not produce the emails (which were otherwise unavailable) and asserted that they were filed inadvertently in folders unrelated to the project in dispute, and which folders were subsequently deleted and destroyed. The court agreed to permit an evidentiary hearing regarding the deletion of the e-mails to determine whether it would give an adverse inference instruction. Ultimately, the case settled before a hearing was conducted, but it was clear that it affected the plaintiff's view of the case and its willingness to settle. Clearly, discovery often affects the outcome of a case. More often than not, that means that the discovery sought/permitted/produced is a factor leading to a settlement of the case rather than the outcome at trial. Parties are often loathe to produce extensive discovery to an adversary, even if that discovery will remain confidential and used only in the litigation.
Editor:To what extent were cases commenced as an investigative tool to see whether or not facts could be developed that would justify bringing the case?
Naar: It is not unusual for a plaintiff to file litigation based upon a theory or a claim that cannot be established until such time as the plaintiff has obtained significant discovery to support that theory or claim. It is unlikely that courts will respond to such cases in a uniform way despite the Supreme Court's pronouncements in Twombly and Iqbal regarding Rule 8 pleading requirements. Although such cases are often ripe for motions to dismiss, many courts are unwilling to dismiss a case if a cause of action can be alleged and is plausible or the complaint can be amended to cure any defect in pleading. Most courts will allow the plaintiff to obtain discovery, especially when the plaintiff can establish that it doesn't have access to relevant information and documents that are in the hands of the defendant or some third party. Of course, if the defendant can convince the court that the plaintiff is engaged in a "fishing expedition," the court will likely entertain a motion for summary judgment after a certain amount of discovery.
Editor: The Supreme Court in Iqbal mentioned that unnecessary discovery could distract government officials from their work. To what extent does e-discovery have a similar effect on corporate employees? What other direct and indirect costs are triggered by e-discovery?
Naar: E-discovery has a similar effect on corporate employees, and not just IT professionals. While those responsible for maintaining computers and networks may be most affected by the search for ESI for initial disclosures or production, all employees must pay close attention to document retention policies and litigation holds. That is a fact of litigation life and it is unlikely that courts will be sympathetic to the fact that time or energy must be spent responding to legitimate discovery requests. Iqbal presented a unique situation because the claims were against the Attorney General of the United States and the Director of the FBI who asserted a qualified immunity defense to claims that they had designated Iqbal as a "person of high interest" to the September 11 investigation based on his race, religion and national origin in contravention of the Unites States Constitution. The Court specifically noted that the thrust of the qualified immunity doctrine was to free officials from the concerns of litigation, including the avoidance of disruptive discovery. Corporate parties will have the best opportunity to challenge discovery when the time, cost and effort will substantially outweigh the likely significance of the discovery sought and if the ESI is inaccessible. Our federal courts in New Jersey engage in an analysis as to whether the costs of discovery outweigh its anticipated significance and whether fee shifting is appropriate.
There are a variety of direct and indirect costs triggered by e-discovery requests. These costs include the time and expense associated with (a) creating and maintaining use, retention and back-up policies for email and other ESI including voice mail, text messaging, and the use of personal email accounts, personal computers, and social media sites, and blogging; (b) creating and maintaining litigation hold policies; (c) convincing management and rank and file employees to get on board with these policies; (d) responding to requests for ESI and devising search parameters; and (e) determining if there is a need to hire outside vendors and consultants. These costs are triggered not just by e-discovery requests but by the fact that we live in a digital world.
Editor: How would fact-based pleading solve the problems addressed above? Describe any cases you have had where fact-based pleading was involved and the effect on e-discovery. Have there been any improvements as a result of Iqbal ?
Naar: The Supreme Court's rulings in Twombly and Iqbal were designed to eliminate civil claims that were nothing more than threadbare recitals of the elements of a cause of action supported by nothing other than mere conclusory statements. One of the factors that the Court took into consideration was the expense of discovery and the Court was less than sanguine about the ability of trial courts to control abusive discovery. Fact-based pleading may reduce the need for expansive e-discovery because courts may be more willing to limit and tailor discovery to the specific facts alleged in the complaint (or in the answer and fact-based affirmative defenses). On the other hand, courts are loathe to dismiss cases based upon the inadequacy of a pleading. Plaintiffs are given every opportunity to amend their pleadings to cure defects. Although the heightened pleading standard might weed out some cases and result in more tailored discovery, it is not clear to what extent fact-based pleading will cure or limit the problems and issues associated with e-discovery requests and production. I have yet to see any dramatic change in practices after Iqbal .
Editor: Describe cases where a proportionality requirement should have been applied to the amount of e-discovery and contrast them with any cases you have had in which the judge was guided by the principle of proportionality.
Naar: The Magistrate Judges in our federal district court in New Jersey have been very good at using proportionality with respect to the scope of e-discovery - taking into consideration the parties, the type of case, and the amount in controversy - in connection with Rule 16 conferences, initial scheduling orders and the ongoing supervision of cases. Ongoing case management by judges assigned to specific cases is the most effective way to use proportionality in the conduct of discovery and in checking discovery abuses.
Editor: Why do you feel that it would be useful to adopt the Principle that "sanctions should be imposed for failure to make electronic discovery only upon a showing of intent to destroy evidence or recklessness?"
Naar: I believe that it would be useful to adopt such a Principle. It may be hard to believe, but we are still in the early stages of e-discovery practice and law, even though e-discovery has been with us for a generation. The extent of e-discovery issues is often dependent upon the skill and expertise of tech-savvy lawyers and judges. If neither lawyer in a case is tech savvy, those lawyers will continue to produce documents in hard copy format, even if those documents are stored electronically and were printed from a computer. If neither lawyer objects or raises an issue with respect to the production in electronic format, the old way of doing business will prevail, notwithstanding changes in the rules of court. On the other hand, when one lawyer is tech savvy, he may try to take advantage of the other lawyer's failure to understand the different issues that can arise in the context of ESI - where those documents may exist, how they can be modified or deleted, and whether they are accessible or inaccessible. There are still lawyers and parties who have little understanding of the need to put in place a litigation hold or how that should be done, although the level of sophistication is increasing daily. For all of these reasons and more, sanctions should not be imposed unless there has been a showing of intent to destroy evidence or recklessness.
Editor: How important is it for both the law firm and corporate counsel to provide hard data on litigation costs?
Naar: It is very important for all parties to provide data on litigation costs associated with e-discovery. Parties, counsel and courts need to be educated on the direct and indirect costs associated with e-discovery so that the courts can develop a body of law that permits the appropriate level of discovery that is directed to fact-based claims and defenses in proportion to what is at stake in litigation. The data should not be limited to costs but should also include information that will convince parties and counsel that unlimited e-discovery is often too expensive and is not required to achieve justice.