Delta Fin. Corp. v. Morrison, 2006 WL 2403437 (N.Y. Sup. Ct. Aug. 17, 2006)
This case involved breach of contract and fraud claims stemming from an exchange of assets between some of the parties, which took place in August 2001. The opinion resolves the parties’ dispute relating to three categories of electronic documents sought by one of the defendants (“LLC”) from the plaintiff (“DFC”): 1) non-email electronic documents which LLC claimed were not captured by DFC’s search process; 2) emails which LLC claimed were not captured by DFC’s ninety-day back-up tapes; and 3) emails from January 1, 1999 through July 12, 2000.
Apparently, DFC’s backup tapes covering emails and non-email documents dating back to January 2000 were at some point restored and transferred to hard drive. As a result, LLC argued that DFC’s electronic data was “accessible” and that the usual rules of discovery should apply. LLC contended that with the restoration already accomplished, the search process could take place by the application of DFC’s search terms to sift through the restored data for non-duplicative and relevant documents. LLC stated that it would initially pay the cost of this process, and offered to begin each search with a sampling, to the extent possible, to ascertain whether a full search would be a worthwhile endeavor.
LLC further contended that it was entitled to have the additional searches run because DFC’s prior production of electronic documents yielded responsive, highly probative documents and that LLC’s search request sought to capture fundamentally similar documents to the documents already produced by DFC. LLC also argued that it was neither obligated to identify specific documents missing from prior productions nor need to demonstrate that a gold mine lies within the universe of yet-to-be searched documents to have the searches run.
In response, DFC argued that no further discovery of electronic data should be required as DFC’s backup tapes were maintained for disaster recovery purposes, not storage of electronic information for routine retrieval. DFC cited the Sedona Principles for Electronic Document Production, Principle 8 (July 2005 Version) for the proposition that backup tapes maintained for disaster recovery purposes should not be searched as part of discovery unless the requesting party can demonstrate “a need and relevance that outweigh the cost, burden, and disruption of retrieving and processing the data from such sources.”
Moreover, DFC stated that recent case law reflected that, because of the difficulty of producing useful information from back-up tapes and duplicative nature of information on back-up tapes, the responding party does not have an automatic duty to produce information on all its backup tapes. DFC contended that it had produced thousands of responsive emails, and that LLC had failed to make any showing that any relevant emails were missing from the DFC production.
The court noted that, although it was not controlled by the Federal Rules of Civil Procedure, it found the federal rules and the case law interpreting them “instructive and quite useful.” It went on to examine each category of electronic data at issue:
1) Non-email electronic documents
LLC claimed that DFC performed a substandard search for non-email electronic documents, and therefore, there were documents which were not captured by DFC search process. LLC cited DFC’s purported shortcomings with regard to: (1) its purported failure to issue a proper litigation hold; and (2) DFC’s purported failure, in response to LLC’s document request, to coordinate and organize a comprehensive search, supervised by outside counsel, of non-email electronic documents:
[S]pecifically, LLC argues that DFC’s outside counsel, as of June 24, 2005, had not issued or overseen the dissemination of a written “litigation hold” for potential relevant documents. LLC also claims that two witnesses from DFC, Dawn Ceccarini and Eric Schencman, DFC’s Director of IT since April, 2005, testified that they were unaware of any written or oral litigation hold that they were directed to observe with regard to this present litigation or disputes that reasonably would have been anticipated to lead to litigation.
In addition, LLC alleges that DFC’s collection of relevant documents that existed on the servers as of the commencement of the litigation was deficient. LLC argues that DFC collected non-email documents in late 2003 by asking individuals likely to have responsive documents in hard copy or electronic form to review their records. LLC claims that outside counsel apparently played no role in this process as the collection was coordinated by Ms. Ceccarini and overseen by Marc Miller, a named defendant in this action. LLC further states that search terms were not used and DFC has not even suggested there was a quality control process or a set of guidelines in place that would assure the completeness or the consistency of the process. LLC concludes by stating that in light of DFC’s lack of retention policy and manifestially [sic] unreliable collection process, additional searches for non-e-mail documents is necessary.
DFC argued that it searched all relevant servers for responsive documents so there was no need to go to the extraordinary step of searching backup tapes for other kinds of documents. DFC argued that because LLC failed to make any showing that any documents were, in fact, missing from the production already produced, LLC should not be permitted to conduct additional searches. Further, DFC stated that its policy with regard to company records, i.e., electronic non-email documents, was that the records are “never routinely deleted.” Rather, DFC’s policy was to maintain documents, other than emails, on shared servers, which were searched for relevant documents in response to LLC’s document demands.
The court agreed with the logic expressed in Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003) (“Zubulake I”) and McPeek v. Ashcroft, 202 F.R.D. 31 (D.D.C. 2001), and directed DFC to:
search and produce responsive documents from a small sample of the restored data of non e-mail documents. LLC will be permitted to choose a total of four months of restored data for the search process. Counsel for LLC shall notify Counsel for DFC which particular months of restored data it wants searched for relevant and responsive documents. After DFC has searched the hard drives for the months chosen by LLC for responsive documents, applied a de-duplication process and reviewed any relevant documents for privilege, DFC shall produce relevant, non-privileged documents.
The court stated that, because it was “not entirely convinced that relevant and responsive documents will be found,” LLC would be initially responsible for 100 percent of the costs and expenses of the search process, de-duplication process, as well as attorneys’ fees and costs for the privilege review process. It directed counsel for DFC to “prepare an affidavit detailing the results of its search, which among other things, shall include the number of responsive documents found and the costs and expenses associated with the processes including but not limited to attorneys fees for privilege review.” The affidavit would be used to assist the court in determining whether a full search would be necessary and whether further cost-shifting was warranted.
2) Monthly Email Backup Tapes
LLC argued that DFC’s search was inadequate for the additional reason that it searched 90-day backup tapes for the period of July 12, 2000 through June 30, 2002, instead of monthly backup tapes created during the same time period. LLC argued that this approach did not capture any emails that were saved on monthly backup tapes not searched by DFC but then “double-deleted” before the creation of the 90-day backup tapes subject to DFC’s search. LLC noted that two tapes not searched by DFC (created in or about May 1, 2001 and July 2, 2001) covered periods in time when the analysis and representations leading up to the 2001 Exchange were made, and argued that it was important for searches be conducted for double-deleted documents. Moreover, LLC asserted that because the backup tapes at issue were already restored, all that would be required would be for a technical consultant at LLC’s expense in the first instance, to run DFC’s search terms through the restored data, and then run a de-duplication process to remove documents already produced by DFC.
In response, DFC argued as follows:
DFC argues that for any non-duplicative documents to be on interim tapes i.e., monthly backup tapes, relevant documents would have to have been affirmatively deleted from the parties’ “In Box” between when the ninety day tapes were run. Because backup tapes also backup individuals’ “Trash” folders, the relevant documents would have to have been further affirmatively deleted from the “Trash” folders. DFC further claims that even if an e-mail was affirmatively deleted from both places, i.e., “In-Box” and “Trash,” it is still not going to exist on an interim monthly backup tape unless it existed before the interim backup tape was run but then was affirmatively deleted in both places before the next ninety day backup tape was run. DFC contends that LLC has made no showing that any of these three seemingly unlikely events occurred, much less than all of them occurring in a rare combination that would leave a relevant e-mail on a backup tape that has not already been searched.
Given the time frame of the two months that LLC specifically requested the restored data to be searched, May 1, 2001 and July 2, 2001 and its proximity to the 2001 Exchange, the court directed a sample search of those two months only, applying DFC’s search terms to the restored data.
3) Emails From January 1, 1999 Through July 12, 2000
LLC requests that DFC search email dating from January 1, 1999 through July 12, 2000, since its initial document request sought responsive documents from January 1, 1999. LLC claimed that DFC searched for non-email documents and hard copies dating back from January 1, 1999, but only searched for responsive emails beginning on or about July 12, 2000, a date that LLC states has no particular bearing on this action.
The court concluded that, because DFC had produced responsive documentation as far back as January 1, 1999, it was possible that responsive emails may be found on the backup tapes from that timeframe.
Thus, it directed a sampling of three monthly backup tapes from the period of January 1, 1999 through December 31, 1999 to be chosen by LLC. After the three backup tapes were restored, a search would be conducted for responsive documents based upon the application of DFC’s search terms, a de-duplication process run and a review for privilege performed. In addition, the court ordered LLC to choose two months of restored data from January 1, 2000 through July 12, 2000 to be searched, de-duplicated, and reviewed for privilege.
The court summarized its decision as follows:
(1) [W]ith regard to the LLC’s request for additional searches of DFC’s non-email documents, LLC will be permitted to choose a total of four months of restored data which DFC is directed to search, apply its search terms, and produce responsive, non-privileged documents. DFC shall prepare an affidavit detailing the results of its searches, as well as the time and money spent on the process.
(2) With regard to the search of DFC’s monthly backup tapes, DFC shall search the restored data for May 1, 2001 and July 1, 2001 and produce all responsive, non-privileged documents. DFC shall prepare an affidavit detailing the results of its search, as well as the time and money spent on the process. All other requests for additional searches of the monthly backup tapes whether restored or otherwise are denied at this time.
(3) With regard to LLC’s request to search for responsive e-mails from January 1, 1999 through July 12, 2000, DFC shall restore, search for, and produce responsive, non-privileged documents for a total of three monthly backup tapes from 1999 selected by LLC. In addition, LLC shall choose two months of restored data from January 1, 2000 through July 12, 2000 that shall be searched by DFC and relevant, non-privileged documents produced. DFC shall then prepare an affidavit detailing the results, as well as the time and money spent on the process.
(4) It is further Ordered that LLC shall initially bear one hundred percent of the costs of the restoration, search, de-duplication, and review processes for all its requests. After the Court’s review of the affidavits submitted by DFC, the Court will determine if more expansive searches are necessary and if further cost-shifting is warranted.