Electronic Discovery Bulletin April 2017

The following is a compendium of articles and case law that may be of interest to our AG offices that are dealing with electronic discovery issues. Neither the National Association of Attorneys General nor the National Attorneys General Training & Research Institute expresses a view neither as to the accuracy of the articles nor as to the position expounded by the authors of the hyperlinked articles.

Does a Parent Company Have Duty to Ensure Subsidiary Preserves Documents?

If the subsidiary is sued, must the parent company ensure it preserves documents? As eDiscovery provider Percipient notes, it depends. If the parent company has sufficient control over the subsidiary, it may have a duty to make sure the subsidiary issues litigation holds and preserves relevant ESI. Here are some case examples:

  • In Pegasus Aviation, Inc. v. Varig Logistica S.A., 118 A.D. 3d 428 (N.Y. App. Div. 2014). Pegasus sued Varig and its parent company and sole shareholder. Varig failed to issue a litigation hold, and eventually Pegasus successfully sought sanctions against both companies. The court concluded the parent as a sole shareholder had a duty to ensure the subsidiary preserved ESI.
  • In Platinum Equity Advisors, LLC v. SDI, Inc., 2016 NY Slip Op 31079, the court declined to penalize the parent company for its subsidiary’s loss of ESI. It found the parent had no duty to ensure the preservation of ESI because it had no practical control over the subsidiary.

To determine whether an obligation exists, courts often look at the corporate structures of parent companies, the affiliate’s relationship to the transactions at issue in the litigation, how closely the companies work together and whether the affiliate is involved in the litigation or will benefit from the outcome.

eDiscovery Don’ts: Don’t Agree to Search Terms Without First Testing Them

Electronic discovery experts Doug Austin points out that waiting until the meet and confer to consider search terms can have disastrous results. An example he cites is the case of an attorney handling a case on mining activities who decided to use a wildcard of “min” to retrieve variations such as “mine,” “mines” and “mining.” That search retrieved more than 300,000 files because there are 269 words in the English language that begin with “min.” The attorney ultimately had to try to renegotiate a more appropriate revised search.

Sedona Issues Guidance on Selecting eDiscovery Providers

The Sedona Conference Working Group 1 Technology Resource Panel (TRP) published Guidance for the Selection of Electronic Discovery Providers which provides a step-by-step analysis of the vendor selection process and the considerations to be taken into account when making a selection. The TRP is comprised of users of eDiscovery services with input from eDiscovery providers who agreed to support the effort. Appendices include a sample nondisclosure agreement, a sample information request, pricing models and a sample decision matrix. The publication can be downloaded from https://thesedonaconference.org/publications.

Free Webinar on Avoiding eDiscovery Pitfalls

CloudNine, an eDiscovery software provider, is offering a free webcast, Pitfalls and Potholes to Avoid in eDiscovery Projects, on April 27, 2017 at 1 pm ET (12 pm CT, 11 am MT, 10 am PT). Topics will include how to proactively address inadvertent privilege productions, how to avoid common searching mistakes and how to avoid getting stuck with a bad production from opposing counsel. CloudNine presenters are Doug Austin, VP of Ops and Professional Services, and Karen DeSouza, Director of Review Services. Registration for the webinar is at https://www.ediscovery.co/webcasts/pitfalls-potholes-to-avoid-in-ediscovery-projects/.

“Intent to Deprive:” A High Standard for Sanctions

The 2015 Amendments to FRCP 37(e) requires a party seeking sanctions to show there was an “intent to deprive” them of the lost or destroyed ESI. A recent case shared by eDiscovery attorney Joshua Gilliland illustrates the challenges in meeting that standard. In Belanus v. Dutton, no. CV 12-00065-H-DLC (D. Mont. Mar. 23, 2017), a prisoner rights case, the prisoner moved for an adverse inference instruction alleging the prison failed to preserve his recorded statement after an incident. The motion was denied because he could not show any intent to deprive him of the lost statement. Another recent case provides an example of how a party met the higher sanctions burden. In First Financial Security, Inc. v. Freedom Equity Group, LLC, no. 15-cv-1893 (N.D. Cal. 2016), the court found there was an “intent to deprive” when the movant produced the opposing side’s testimony that “[t]his is going to be a lawsuit. So you’ve got to be careful.” The court found “an explicit agreement to avoid communicating electronically suggests a shared intent to keep incriminating facts out of evidence.” The motion for an adverse inference instruction and attorney’s fees was granted.

Sedona Issues Third Edition of Its Principles

The Sedona Conference released the public comment version of its classic The Sedona Principles, Third Edition: Best Practices, Recommendations & Principles for Addressing Electronic Document Production. This edition reflects the 2015 FRCP amendments and includes a substantial revision of its Principle 12 on forms of production. It may be accessed from https://thesedonaconference.org/publications. Comments can be emailed to comments@sedonaconference.org before June 10, 2017.

Judge Waxse Talks About Proportionality

The Association of Certified eDiscovery Specialists (ACEDS) is offering a free discussion with U.S. Magistrate Judge David Waxse of the U.S. District Court for the District of Kansas on how proportionality is being addressed after the 2015 FRCP amendments. The webinar is set for May 4, 2017 at 1 pm ET (12 pm CT, 11 am MT, 10 am PT) with registration at http://www.aceds.org/events/event_list.asp?show=&group=&star.

Case Law: No Need to Produce Duplicative Emails in FOIA Case

In Competitive Enterprise Institute v. Office of Science and Technology Policy, no. 14-765 (D.D.C. Mar. 13, 2017), the Competitive Enterprise Institute (“the Institute”) brought an action against the White House Office of Science and Technology Policy (“OSTP”), alleging that OSTP violated the Freedom of Information Act (FOIA) by failing to produce emails from the OSTP Director’s private email account. That account had been issued to the Director by his former employer, Woods Hole Research Center (“Woods Hole”), a private, non-government facility. The Director occasionally used the Woods Hole account for emails related to his work at OSTP, and when he received emails at that account, he forwarded them to his OSTP account or copied OSTP on the correspondence, as required by OSTP policy and federal law. OSTP interpreted the FOIA requests as seeking emails that were copied or forwarded to the OSTP account, as it had no control over the Woods Hole account. The Institute was dissatisfied and sought all OSTP-related emails from the Woods Hole account.

OSTP filed a motion for summary judgment, arguing it did not need to produce the emails from the Woods Hole account because they were duplicative of emails already provided from the OSTP account. The court found that the Director complied with the forwarding and copying policy and noted that the Institute was unable to show any specific instance of failure to comply with it. The court granted summary judgment for OSTP, ruling that FOIA does not require production of duplicate records and that the search conducted by OSTP was reasonable.

Case Law: Metadata Reveals Documents Not Authentic

In Ensing v. Ensing, no. 12591 (Del. Ch. Mar. 6, 2017), Sara and Hans Ensing had jointly owned an Italian vineyard with a winery and hotel which was operated through two Delaware limited liability companies. Since the couple divorced, Hans took actions to remove Sara as manager of one of the companies and sought to divest her of her interests in the vineyard. Sara filed a declaratory action to determine the rightful ownership and management of the companies. During discovery, Hans produced Pledge and Trust Agreements purportedly executed by both parties in 2012, but Sara denied signing the agreement and challenged its authenticity. She sought production of computers, drives and other ESI storage devices, and the court ordered them delivered to a third party vendor. At trial, Sara offered evidence that the company stamp appearing above her name on the Pledge Agreement wasn’t created until 2015, although the document was created in 2012. Further, her computer forensic expert testified that the metadata on the PDF version of the Pledge Agreement showed it was created on May 27, 2016 using a Mac OS released in 2015.

The Trust Agreement’s metadata also showed it was created in 2016 and emailed to Sara 30 minutes later. The court concluded that the metadata revealed fake documents had been submitted as authentic and determined judgment for Sara was warranted in addition to attorney’s fees and costs.


Hedda Litwin is the Editor of E-Discovery Bulletin and may be reached at 202-326-6022. The E-Discovery Bulletin is a publication of the National Association of Attorneys General. Any use and/or copies of this newsletter in whole or part must include the customary bibliographic citation. NAAG retains copyright and all other intellectual property rights in the material presented in this publication. For content submissions or to contact the editor directly, please e-mail hlitwin@naag.org.

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