Williams Mullen: Are You Sure You Want Those Documents? Then You Might Have To Pay For Reviewing Them

W.D. Va. Explicitly Holds that Courts May Consider the Cost of Reviewing Electronically-Stored Information for Privilege in Assessing Burden of Production and May Shift Cost to Requesting Party Based on Burden; Encourages Cooperation in Developing Privilege Review Protocols

By Bennett B. Borden, Monica McCarroll and Neil Magnuson

In two nearly identical opinions, the U.S. District Court for the Western District of Virginia considered a question faced by many modern litigants in the age of eDiscovery, namely, whether "otherwise accessible, responsive documents should not be produced because of the high cost of reviewing those documents for privileged or responsive information, or, in the alternative, whether the cost of such review should be shifted to the requesting party." Adair v. EQT Production Company, 2012 U.S. Dist. LEXIS 75132, at 11 (W.D. Va. May 31, 2012) (Adair) [enhanced version available to lexis.com subscribers]; Adkins v. EQT Production Company, 2012 U.S. Dist. LEXIS 75133, at 9 (W.D. Va. May 31, 2012) (Adkins) [enhanced version].

Both Adair and Adkins involved class action claims against defendant EQT Production Company relating to the ownership of "certain gas estate interests in coalbed methane." Adair at 3; Adkins at 1-2. In each case, written discovery requests had been served upon EQT, who then moved for entry of a protective order to avoid production of responsive emails and other electronically stored information ("ESI"), or to otherwise shift costs associated with production to the plaintiff class members.

EQT argued that the costs associated with processing, storing, hosting, and - in particular - reviewing roughly 6 million documents for responsiveness and privilege should be considered as part of the Court's proportionality balancing under Fed. R. Civ. P. 26.

As Magistrate Judge Pamela Meade Sargent noted in the Adair and Adkins opinions, Rule 26 is often invoked in cases where "inaccessibility is the cause of the undue burden or cost to the producing party." Adair at 10; Adkins at 9. In the cases before the Court, however, there was no dispute that the ESI was "readily accessible." Nonetheless, Magistrate Judge Sargent observed that Rule 26(b)(2)(C) "gives the court the ability to 'limit the frequency or extent of discovery' - regardless of accessibility - whenever 'the burden or expense of the proposed discovery outweighs its likely benefit.'" Adair at 12; Adkins at 11. Therefore, the Court concluded, the cost of review of ESI for privileged or responsive information may be considered in assessing whether discovery imposes an undue burden or cost on a responding party. The Court went on to suggest that, should the cost of review be found to present an undue burden, this cost could be shifted in whole or part to the requesting party.

This holding is significant, as Federal Court opinions to date have not clarified whether the burden of producing ESI encompasses the burden of reviewing that ESI. The proportionality principle in Rule 26 has recently taken the forefront in eDiscovery case law, and is providing increasingly significant protection to companies in providing the basis for relieving some of the burden of identifying, reviewing and producing relevant ESI. The key take away is to provide the court with sufficient information regarding the burden of identifying and producing relevant ESI, taking into account the review of that ESI, as well as the benefit of the information within that ESI. Because Rule 26 requires a balancing of both sides of the benefit versus burden argument, it is critical to provide the court with information on both sides of the scales.

Using Federal Rule of Evidence 502(d) Orders and the "Bucketing Approach" to Privilege Review to Reduce the Burden of Review

These holdings also provide a good example of how to use Federal Rule of Evidence 502(d) orders and the "Bucketing Approach" to privileged documents to reduce the burden of review. FRE 502(b) protects parties from the waiver of privilege, when a document is inadvertently produced, if the producing party's steps to prevent such disclosure are reasonable. Its protections are limited to the court's determination of the reasonableness of the steps taken to prevent disclosure, which is a fact-specific inquiry made in hindsight. FRE 502(d), on the other hand, provides a significantly greater degree of protection. Under FRE 502(d), any agreement among the parties governing the disclosure of privileged or protected information that is entered as an order of the court protects such disclosure from effecting a waiver of the privilege or protection in the matter before the court, or in any subsequent state or federal proceeding. The distinction between 502(b) and 502(d) is important for two reasons.

First, the 502(d) order can remove the "reasonableness" determination that is required by FRE 502(b). In other words, an FRE 502(d) order can prevent the waiver of any privilege regardless of whether the documents were produced reasonably or because of abject errors in the production process. This affords significant protection because courts have frequently held that many common production errors are not "reasonable" under FRE 502(b).

Second, properly worded FRE 502(d) orders can allow a party to purposefully disclose privileged information without fear that the production will result in a waiver of privilege in subsequent proceedings. This is especially useful in proceedings with regulators, such as the SEC or DOJ, when a company discloses privileged information in an effort to cooperate. If a proper FRE 502(d) order is issued, the company may disclose the privileged information, and if that information is sought in subsequent litigation (e.g., a shareholder derivative action), the company's privilege is protected. A well-crafted FRE 502(d) order is a powerful protection for companies and should be considered in every federal case.

In Adair and Adkins, a 502(d) order was entered by the Court, so the Court used it, as well as the parties' agreement to use a privilege "bucketing approach," as factors in evaluating the burden of EQT's privilege review. The bucketing approach is a relatively new technique aimed at reducing the burden of privilege review. First widely espoused by Chief Magistrate Judge John Facciola (D.D.C.) and Jonathan Redgrave, Esq., the bucketing approach is increasingly being adopted by litigants confronted with significant volumes of data. The bucketing approach allows parties to group together similar kinds of potentially privileged documents, describe them to opposing parties, and remove them from review, without having to log each item separately on a privilege log, which can be a costly process. In Adair and Adkins, the parties agreed to a "bucket approach" agreement such that EQT was permitted to "withhold any emails to and from in-house and outside legal counsel to reduce the risk of producing attorney-client privileged information." Adair at 14; Adkins at 12. In other words, these documents could be removed from review entirely.

Magistrate Judge Sargent held that, because the parties had a 502(d) order that would protect EQT from the risk of waiver based on the disclosure of privileged documents, and that the bucketing approach removed from review the documents most likely to be privileged, EQT's claims regarding the burden of such review were overstated. In light of this, the Court ordered the parties to cooperatively develop an ESI protocol that would target the relevant information, and provide it with sufficient information to properly balance the burden versus the benefit of that information, keeping in mind that the ultimate cost of review would be considered in the balance, and could be shifted to the requesting party.

Key Take-Aways

  • 1. Prove up the Proportional Value of Each Source of ESI
    The proportionality principle in FRCP 26 is a powerful mechanism for limiting the burden of eDiscovery. To effectively use it, present sufficient facts about both the burden of producing the information within each source of ESI and the benefit of the information contained within it. 
  • 2. Negotiate and Obtain a Proper 502(d) Order
    FRE 502(d) provides significant protection for a company but is often underutilized. Such an order should be considered in every federal case.
  • Consider the Bucketing Approach to Privilege
    Privilege logs are costly to produce, and often are uninformative and noncompliant with legal standards. However, agreeing on "buckets" of documents that can be removed from privilege review and logging can greatly reduce the cost and burden of any such review. 

If you have any questions about these cases, or the principles contained in this Alert, please contact a member of our eDiscovery and Information Governance Team. 

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