New eDiscovery Case Law Developments in 2020: Native Excel Production without Relevance Redactions, FRCP 37(e) Order Rejecting Inherent Authority, and Denial of Proposed Blanket Production 502(d) Order

With so many lawyers focused on COVID-19, it would be easy to overlook the significant case law developments on electronic discovery that have transpired so far in 2020. Courts have issued any number of instructive orders on eDiscovery issues ranging from metadata production and technology-assisted review to cost shifting and sanctions. Three particularly compelling topics addressed by recent cases include: (1) native productions of Excel spreadsheets without relevance redactions; (2) an ESI sanctions order that rejects judicial reliance on inherent authority in favor of Federal Rule of Civil Procedure (FRCP) 37(e); and (3) the impropriety of Federal Rule of Evidence (FRE) 502(d) non-waiver orders that result in the compelled production of privileged information.

It has been standard practice over many years for responding parties to produce relevant spreadsheets such as Excel in native format. Such a practice is essential for requesting parties who wish to analyze and understand the contents of a spreadsheet. And yet, responding parties may still resist turning over spreadsheets in native format given the presence of sensitive nonresponsive information unless they can redact such information. The Corker v. Costco Wholesale case is instructive on this issue.[1]

In Corker, a defendant declined to produce a relevant Excel spreadsheet in native format, arguing it would expose irrelevant and “commercially-sensitive information” to litigation adversaries who were industry competitors. Defendant had first produced “summary documents” in lieu of the native spreadsheet file. When plaintiffs balked at that production, defendant then turned over a 2,269-page PDF version of the spreadsheet “with significant redactions obscuring [irrelevant] sales information.”

The Corker court rejected the PDF production and ordered defendant to produce the relevant spreadsheet in native format. While the court agreed that defendant could redact certain “commercially-sensitive information,” the redacted content could nonetheless be viewed by adversarial counsel pursuant to the protective order’s “attorneys-eyes only” provision. The court explained that case authority generally proscribed an absolute “relevance redaction” of such content and that defendant had not demonstrated why it was entitled to excise such information on relevance grounds.

The Corker holding fails to fully appreciate that commercially-sensitive information may still be misappropriated despite an “attorneys-eyes only” restriction. As David Kessler and Andrea D’Ambra of Norton Rose Fulbright recently explained, relevance redactions are often the only way to truly safeguard such information. Relevance redactions may also protect personal data from unauthorized disclosures and better prevent security breaches.

The 2015 advisory committee note to FRCP 37(e) clarified that courts should use FRCP 37(e) to determine whether ESI preservation failures warrant sanctions and confirmed that reliance on inherent authority for addressing this issue is not permitted. Despite this unequivocal proscription, certain litigants and courts have continued to turn to inherent authority to analyze ESI preservation failures. The Alsadi v. Intel Corporation decision rejects this trend and emphasizes that FRCP 37(e) is the appropriate vehicle to establish whether sanctions should issue for ESI preservation failures.[2]

In Alsadi, plaintiffs sought a negative inference sanction against defendant Intel Corporation for its alleged failure to preserve relevant information generated and recorded by an electronic measurement device. In their briefing, plaintiffs argued that such information was not electronically stored information (ESI) within the ambit of FRCP 37(e) and that the court should, therefore, rely on its inherent authority (not FRCP 37(e)) to issue the negative inference.

U.S. District Judge David Campbell, who oversaw the effort to amend FRCP 37(e) when he chaired the Advisory Committee on the Federal Rules of Civil Procedure from 2011 to 2015, rejected both aspects of plaintiffs’ argument. As an initial matter, Judge Campbell explained that the data in question was ESI within the scope of both FRCP 34 and FRCP 37(e), both of which had been developed to broadly include any type of stored electronic data. Judge Campbell next articulated that FRCP 37(e) provides the exclusive framework for addressing whether ESI preservation failures justified sanctions. Reliance on inherent authority would both violate this premise and run contrary to the Advisory Committee’s stated goal of providing “uniformity to an area of the law that had been badly splintered by various courts’ reliance on inherent authority.” Analyzing the issues through FRCP 37(e), the court denied the requested negative inference. Plaintiffs could only speculate that Intel lost the ESI at issue “for whatever reason,” which was clearly insufficient to satisfy FRCP 37(e)’s “intent to deprive” requirement.

It is fairly apparent that plaintiffs in Alsadi sought the negative inference under the court’s inherent authority because they could not meet the “intent to deprive” showing. Related attempts to circumvent FRCP 37(e)’s sanctions framework in favor of inherent authority—and the hope of meeting a lesser standard for the issuance of severe sanctions—should likewise be rejected.

The Sedona Conference articulated several years ago in its Commentary on the Protection of Privileged ESI that non-waiver orders issued under FRE 502(d) should not be used to force a responding party to make blanket productions that may include attorney-client privileged communications. Winfield v. City of New York confirmed this principle when it refused to adopt a quick-peek arrangement that would have required the defendant (over its objection) to make a blanket production of information that included privileged documents. In so doing, Winfield rejected cases such as Fairholme Funds v. United States, which held that such orders are permissible to expedite stalled litigation proceedings.

Despite there being no basis to obligate a responding party to produce privileged information under 502(d), litigants are still relying on inapposite authority such as Fairholme Funds to persuade courts to impose 502(d) orders that coerce blanket productions of privileged information from responding parties. U.S. Equal Employment Opportunity Commission v. The George Washington University is the latest court to reject this misguided position.[3]

In the EEOC matter, the court examined whether certain document requests that plaintiff served which sought broad categories of email communications were disproportionate to the needs of the case. In an effort to show that its requests were not unduly burdensome (and thus not disproportionate), plaintiff asserted that defendant’s linear privilege review procedure was too costly and that a more efficient approach could yield significant cost savings. Plaintiff proposed that the court enter a 502(d) order, which would force defendant to make a blanket production of certain custodial emails without a privilege review.

Following both Winfield and the Commentary on the Protection of Privileged ESI, the court rejected this approach. The court explained that 502(d) was never intended to coerce a responding party into producing privileged information with the mere possibility of clawing back those documents upon their discovery by the requesting party. To implement such an order, observed the court, would “be an abuse of discretion.”

As the EEOC case demonstrates, courts and litigants should be on the lookout for contrived 502(d) orders that do nothing to safeguard privilege and instead result in forced disclosures of privileged information. Contrary to the assertions advanced by their adherents, such orders do nothing to advance the well-reasoned objectives of 502(d) or even FRCP 1. Instead, they may very well result in the opposite through protracted motion practice: increased litigation costs, greater inefficiencies in discovery, and unjust outcomes, particularly for the party claiming privilege.