New developments arise frequently in e-discovery case law. In this article, we discuss a few particularly important recent decisions.

Litigation holds

The common law requires litigants to preserve relevant evidence (including ESI) as soon as litigation is “reasonably anticipated.” Preservation typically begins when a company issues a litigation hold. Because courts can sanction parties who fail to implement or monitor litigation holds, disputes frequently arise in this area. For example, in the Apple Inc. v. Samsung Electronics Co., Ltd. case, both parties received sanctions in the form of adverse inference jury instructions for their failure to preserve relevant documents.

A major reason why there is so much satellite litigation on this topic is that many courts have found that “after a discovery duty is well established, the failure to adhere to contemporary standards can be considered gross negligence,” as opposed to ordinary negligence. Although some have bucked this general trend, the 2nd Circuit’s opinion in Chin v. Port Authority of New York & New Jersey appears to have settled this debate in New York, at least for now.

There, one plaintiff argued that the district court erred in denying his motion for sanctions for failure to preserve certain records. In holding that the district court did not abuse its discretion, the 2nd Circuit rejected the idea “that a failure to institute a ‘litigation hold’ constitutes gross negligence per se.” Thus, in one sentence, the court reversed the aforementioned trend, and determined that the better approach is to consider the failure to adopt good preservation practices as a factor in deciding whether sanctions should issue.

Cost-shifting

A recent Eastern District of Pennsylvania decision addressed cost-shifting prior to class certification. Plaintiffs alleged that the defendant engaged in deceptive practices and breached the plaintiffs’ gym membership contracts when plaintiffs decided to terminate their memberships. Recognizing the possibility that the case may be certified as a class action, the court observed that discovery would be asymmetrical—the brunt of the costs of discovery would be borne by the defendants, as opposed to plaintiffs, who likely would have very few documents. The court concluded that “where (1) class certification is pending, and (2) the plaintiffs have asked for very extensive discovery, compliance with which will be very expensive, that absent compelling equitable circumstances to the contrary, the plaintiffs should pay for the discovery they seek.” The court added that if plaintiffs (and their counsel) have confidence that the court will certify the class, plaintiffs should not object to investing in the costs of discovery.

Recovering e-discovery costs

The 3rd Circuit’s recent decision in Race Tires America v. Hoosier Racing Tire Corp. resolved the issue of recovery of costs related to e-discovery under 28 U.S.C. § 1920(4). The question before the court was whether the statute permits the recovery of costs for expenses incurred by parties who retain e-discovery vendors. Several lower courts had addressed the issue inconsistently and the 3rd Circuit resolved the conflict.

In Race Tires, an antitrust litigation, the parties conducted extensive discovery. The district court granted the defendants’ motion for summary judgment, and defendants each filed a bill of costs seeking a total of $472,000, the majority of which related to e-discovery expenses. The prevailing party wished to recover costs generated by certain activities of an e-discovery vendor because under 28 U.S.C. § 1920(4) a prevailing party may recover costs “for exemplification and the costs for making copies of any materials where the copies are necessarily obtained for use in the case.” The court concluded that “of the numerous services the vendors performed, only the scanning of hard copy documents, the conversion of native files to TIFF and the transfer of VHS tapes to DVD involved ‘copying,’ and that the costs attributable to only those activities are recoverable” under § 1920(4). Accordingly, the court remanded the case to the district court to reassess the costs.