The U.S. District Court for the District of New Jersey affirmed
a magistrate judge's order relieving a plaintiff of its
agreement to produce documents identified as part of a forensic
examination of its computer network, servers, and related storage
devices—a search that yielded nearly 65 million hits from
the unallocated space, e.g., deleted files and temporary data. I-Med Pharma, Inc. v. Biomatrix, Inc.
Commenting that the plaintiff "should have known better,"
the court concluded that, under the proportionality rule of 26(b)(2)(C), the expense of reviewing those
documents was not warranted by the unsubstantiated possibility that
the documents would provide undisclosed evidence to the
defendants.
The plaintiff, biotechnology firm I-Med Pharma, Inc., alleged
breaches of exclusive distribution contracts by the defendants,
Biomatrix, Inc., Genzyme Corporation, and Genzyme Biosurgery. The
defendants are other biotechnology companies that manufacture
medicines and medical devices. During discovery, the defendants
argued that I-Med had not preserved critical documents and pressed
for a forensic inspection of I-Med's computer system to recover
inaccessible deleted data. By stipulated order, the parties agreed that
I-Med would produce, subject to a privilege review, the results of
a forensic examination of I-Med's computer system without
limiting that search to specific custodians, time periods, metadata
fields, or user-generated files.
The 58 search terms—which included "profit*,"
"loss," and "FDA"—were run on both
allocated (active) and unallocated space. The expert's search
in the unallocated space alone registered nearly 65 million hits.
"Experienced and competent counsel should have known that a
list of over fifty search terms, applied across a corporate
party's entire computer network and without date limitations or
limitations by custodian, would be likely to lead to an unwieldy
volume of responsive documents," maintains John D. Rue, New
York City, cochair of the ABA Section of Litigation's
Electronic Discovery Subcommittee for the Pretrial Practice and
Discovery Committee.
Balking at reviewing the estimated 95 million pages of documents
from the unallocated space on which those nearly 65 million hits
occurred, I-Med sought relief from the magistrate judge's
stipulated order. Magistrate Judge Michael A. Shipp excused I-Med from the discovery stipulation,
focusing on the considerable costs associated with a review, the
defendants' failure to support their accusations of spoliation,
and the likelihood that the documents at issue would be
inadmissible at trial because a substantial portion of the data was
unintelligible.
Magistrate Judge's Order "Doubtlessly
Proper"
The defendants objected, under Rule 72(a), to Magistrate Judge Shipp's
finding of good cause to modify the original discovery order,
arguing that he improperly applied the "undue burden"
standard applicable to discovery disputes under Rule 26(b)(2)(C)
instead of the "exceptional circumstances" and
"manifest injustice" standards that govern relief from
stipulations. Judge Dickinson R. Debevoise affirmed the magistrate
judge's order, finding it "doubtlessly proper,"
ruling that the magistrate judge had applied the correct legal
standard, and reaffirming the magistrate judge's role in
ensuring reasonable discovery.
Judge Debevoise additionally ruled that the magistrate judge's
order met the heightened standard advocated by the defendants.
"Discovery stipulations should be binding, but not so much so
that one side can play 'gotcha' with the other to the tune
of millions of dollars in wasted discovery expenses. Ultimately, FRCP 1 has to control," says Rue.
The Court's Order Offers Lessons to All
Litigators
The district court's characterization of the plaintiff's
"carelessness" and "inattention" regarding the
stipulated e-discovery search terms has implications beyond the
I-Med case. The parties' search terms were "extremely
broad, but this case represents a larger lesson: Be sure you fully
understand an agreement before you enter it," observes Ian H.
Fisher, Chicago, cochair of the Section of Litigation's
Pretrial Practice and Discovery Committee.
"Some early due diligence, including sampling and, possibly,
working with a technical expert, would have allowed the
plaintiff's attorneys to avoid the mistake," further
explains Fisher. "In today's modern e-discovery practice,
preparedness by using a forensic specialist is necessary to
properly and zealously represent your client," adds Joan K.
Archer, Kansas City, MO, cochair of the Section's Pretrial
Practice and Discovery Committee.
Cooperation Is Key to Avoid Costly and Unnecessary
E-Discovery
"The key here is cooperation. The dispute may have been the
result of the defendants' lawyers having caught the
plaintiff's lawyers in a mistake, and then pressing for every
advantage, without sufficientconsideration of the benefit to the
litigation of full performance of the literal terms of the
stipulation. This situation could have been avoided by adopting
meaningful stipulations at the 26(f) conference governing all discovery, e.g.,
incorporating by reference the provisions of the Seventh Circuit's pilot e-discovery
protocol, which, for example, creates a presumption that
deleted files are not relevant," explains Rue. Rue believes
that "while this is an understandable overemphasis on zealous
advocacy at the expense of cooperation, the court here resolved the
issue correctly in light of the proportionality provisions of Rule
26(b)(2)(C)."
Some believe the decision is an example of overzealous advocacy.
"The mere fact that plaintiff may haveentered into an
ill-advised stipulation to broad search terms is an insufficient
basis to require the Hobson's choice between the waste of
resources necessary to do a privilege review, or the risk of
waiver. This is especially true where, as here, there appears to
have been no showing that the documents are relevant, and an
affirmative finding that they are unlikely to be admissible.
Between the lines, the court may suspect the defendants of merely
demanding that plaintiff fulfill the letter of the stipulation as a
means of inflicting discovery pain, perhaps in order to exert
settlement pressure," observes Rue. "Underneath the undue
burden relief valve is the belief that justice can be obtained on
substantive issues and not the parties' maneuverings,"
says Archer.
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