Employment Discovery Evolves as Rules and Technology Change

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By Lisa Nagele-Piazza

Jan. 27 — Electronic information has changed the way employers and employees communicate, and e-discovery rules have significant implications for employment litigation, legal professionals told Bloomberg BNA.

Although the potential cost of e-discovery can be high, management and employee advocates alike agree that e-discovery can be an effective tool to fill in gaps or to strengthen a case.

E-discovery can sometimes be a chore, but it cuts both ways, Ivo Becica, a management attorney in the labor relations and employment law department of Obermayer Rebmann Maxwell & Hippel LLP in Philadelphia, told Bloomberg BNA Jan. 20. An employer can show through e-mails and other electronic documents that an employee was put on notice, was trained on policies, or received the handbook, Becica said.

“E-discovery can be a real help to employees,” Donna M. Ballman, an employee-side attorney in Fort Lauderdale, Fla. said in a Jan. 19 e-mail.

“I find it's especially helpful in defending against noncompete agreements,” said Ballman, who is the author of the book, “Stand Up For Yourself Without Getting Fired.”

“When I ask the employer to produce that top secret database they spent millions on and it turns out to be a Chamber of Commerce directory, that can be the end of the employer's case,” Ballman said.

Discovery in employment cases is asymmetrical, meaning that the burden of searching for and producing electronically stored information (ESI) is largely on the employer, Mark Risk, who represents clients in employment law and litigation in New York, told Bloomberg BNA Jan. 20.

This removes some of the incentive for parties to reach agreements on the scope of production that exist in commercial cases, Risk said.

Amendments to the Federal Rules of Civil Procedure effective Dec. 1, 2015, specifically address proportionality and sanctions for failing to preserve ESI.

“The amendments to Rule 37 on sanctions for the mishandling of ESI may turn out to be comforting for corporate parties by limiting the possibility for an adverse jury instruction where ESI is lost or destroyed,” Risk said.

Expansive ESI Makes Proportionality Key

“As individuals and corporations increasingly do business electronically—using computers to create and store documents, make deals, and exchange e-mails—the universe of discoverable material has expanded exponentially,” Judge Shira Scheindlin of the U.S. District Court for the Southern District of New York wrote in a 2003 pretrial discovery ruling that preceded the 2006 and 2015 amendments to the rules (Zubulake v. UBS Warburg LLC, 91 FEP Cases 1574, 217 F.R.D. 309 (S.D.N.Y. 2003)).

“E-discovery can be a real burden on employees,” Ballman said. “While employers can afford a computer expert to do a huge forensic audit, employees usually can't. If the employer produces documents in an e-format, many employees don't have the technical know-how to even open the documents, much less analyze them.”

E-discovery also is burdensome for employers because they generally possess most of the relevant ESI, attorneys said.

The amended Rule 26 specifically addresses proportionality in the definition of discovery scope: “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case … .”

Judges always had the power to weigh the potential benefits of discovery against the burden or expense, Risk said. The amendments create the potential to limit discovery in employment cases and appear to encourage judges to make rulings about discovery that keep in mind the size of the case, he said.

“Of course, employees' lawyers will remind the court that the magnitude of a case in which civil rights are being vindicated should not be measured in dollar value alone,” said Risk, who brings and defends employment cases in federal courts. “We will be watching the case law under the amended Rule 26 to see how it is applied.”

New Rule 37 Creates Framework for ESI Sanctions

Scheindlin's landmark ruling in the Zubulake case came in 2004 when she imposed sanctions on the employer for failing to preserve documents and also addressed counsel's continued responsibility to monitor client compliance (Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, 94 FEP Cases 1 (S.D.N.Y. 2004); (140 DLR A-9, 7/22/04).

Scheindlin called the underlying matter “a relatively routine” employment discrimination case, in which Laura Zubulake alleged she was fired after filing a sex discrimination charge with the Equal Employment Opportunity Commission. But the e-discovery issues transformed the matter into a ground-breaking case.

Zubulake claimed that critical electronic evidence for her lawsuit had been deleted by the company and only was available on archived media. The company argued that restoring the requested document collection would be expensive and that review of those documents would be time-consuming.

After the company was ordered to produce all responsive e-mails, Zubulake presented evidence that some e-mails were destroyed, lost or withheld for several years. Although some of those e-mails were recovered from back-up tapes, at least one was not.

Moreover, some of the recovered e-mails contained information that was damaging to the company.

Scheindlin found that the company willfully deleted potentially relevant e-mails while it was under a duty to preserve those documents.

She imposed sanctions, including an order that the company must pay Zubulake's costs for the motion and a negative jury instruction that would allow the jury to conclude the destroyed e-mails contained information adverse to the company.

The amendments to Rule 37 state that the court

“only upon finding that the party acted with the intent to deprive another party of the information's use in the litigation may … presume that the lost information was unfavorable to the party … instruct the jury that it may or must presume the information was unfavorable to the party; or … dismiss the action or enter a default judgment.”

“I think the message to lawyers is that you want to be able to show the court that you have taken the obligation to preserve relevant ESI seriously from the beginning of the lawsuit,” Risk said.

Employers and Employees Alike Must Preserve ESI

The Zubulake court also held that it isn't sufficient for attorneys to simply instruct their clients to preserve e-mail archives once litigation is reasonably anticipated.

“Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched,” the court said.

An attorney must issue a “litigation hold” to the client as soon as litigation is reasonably anticipated, and the memorandum should be periodically re-issued to remind existing employees and to inform new employees.

Becica advises employers to retain e-mails and other information for at least two years, which is the statute of limitations for most employment claims. The litigation hold notice will take over and preserve the documents from there, he said. He noted that some willful violations have a three-year statute of limitations.

The duty to preserve applies every bit as much to the employee as the employer, Risk said. “An employee can make her Facebook page private, but she can't delete or destroy it.”

Ballman said employees should preserve any text messages and e-mails that may help the case. Employees should print them or copy them onto another disk or device, she said. “It's too easy to lose or crash a phone or laptop.”

Risk said he sees text messages as a focal point of future disputes.

Courts Permit Use of Technology-Assisted Review

There has been some debate as to whether document review is more appropriately done by humans—such as paralegals, junior attorneys or partners—or if technology-assisted review (TAR) is an appropriate or even more efficient tool.

Some studies have shown that the error rate for TAR is lower than that of manual document review, Risk said.

If you have an attorney who has been looking at documents for 12 hours, that person is going to get tired, Magistrate Judge Andrew J. Peck of the U.S. District Court for the Southern District of New York told Bloomberg BNA Jan. 21. And clients can no longer afford to have an attorney or paralegal eyeing every document, he said.

Key word searches were the next thing lawyers were using, but e-mails have misspellings and abbreviations, Peck said. A product may be called “project x” before it is branded, and that won't be found in a key search.

The terms predictive coding, computer-assisted review and TAR have generally been used to describe the same thing, but TAR recently has become the favored term, Peck said.

TAR is a process used to prioritize or code a document collection using a computerized system that takes human judgments from experts based on a smaller document set and extrapolates those judgments to a larger document collection, according to the Grossman-Cormack Glossary of Technology-Assisted Review.

Peck's ruling in Da Silva Moore v. Publicis Groupe, 287 F.R.D. 182, 18 WH Cases2d 1479 (S.D.N.Y. 2012), appears to be the first judicial opinion approving TAR.

In Da Silva Moore, Peck said “computer-assisted review is an available tool and should be seriously considered for use in large-data-volume cases where it may save the producing party (or both parties) significant amounts of legal fees in document review”(42 DLR A-7, 3/2/12).

Peck again addressed this issue in a March 2015 decision (Rio Tinto PLC v. Vale S.A., 306 F.R.D. 125, 2015 BL 54331 (S.D.N.Y. 2015)).

In Rio Tinto, Peck said in the years following his Da Silva Moore decision “the case law has developed to the point that it is now black letter law that where the producing party wants to utilize TAR for document review, courts will permit it.”

But courts are split on how transparent parties need to be about the “seed set,” or the initial training set, provided to the learning algorithm.

Some courts have required transparency and cooperation, while others have not. Although Peck didn't rule on the issue in Rio Tinto, he said it is important that TAR not be held to a higher standard than key word searches or manual review.

“Doing so discourages parties from using TAR for fear of spending more in motion practice than the savings from using TAR for review,” he wrote.

We are waiting to see if the Dec. 1 rule changes will lead to more or less discovery disputes, Peck told Bloomberg BNA. It is certainly a change from 30 years ago, he said, adding that there is much more involved in case management.

To contact the reporter on this story: Lisa Nagele-Piazza in Washington at lnagele@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com