Source: https://www.lrrc.com/non-party-responses-to-preservation-demands
Timestamp: 2019-04-24 21:57:17+00:00

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Individuals and organizations have long struggled to efficiently and defensibly preserve ESI before and during litigation. Indeed, many attorneys issue overbroad preservation demand letters to opposing parties, often directing recipients to preserve every byte of data in their possession that conceivably relates to a broad series of topics. The 2015 amendments to the FRCP sought to limit the potential for parties to over-preserve by clarifying that the scope of discovery itself is limited by proportionality factors and through the sanctions and curative measures framework set by FRCP 37(e). However, even well-meaning attorneys may cast a broad net in their preservation demands rather than let an opposing party overlook or destroy a potential source of relevant evidence.
As attorneys have become more comfortable issuing preservation demands, they have increasingly served these demands on non-parties, even before litigation has commenced.
In some circumstances, the non-party recipient may have an independent duty to preserve ESI because it anticipates suing or being sued at a later time in connection with the same dispute. But in many cases, the non-party recipient is a true, disinterested third party. For example, an organization such as a bank, a payroll company, an internet service provider, a phone company, or a law firm might possess information relevant to pending or anticipated litigation without having any reasonable expectation that the organization itself will sue or be sued.
Become familiar with the general framework for subpoena practice under FRCP 45.
Consider potential ESI-related objections it can assert when served with a subpoena while litigation is pending.
Assess its potential courses of action if no litigation is pending and the non-party has no forum or proceeding in which to raise ESI-related objections.
FRCP 45, together with a developing body of case law, provides guidance on a non-party’s obligation to preserve ESI when served with a subpoena. The rule provides the general framework for a non-party’s response to a subpoena, including ESI-related issues.
14 days after the subpoena is served.
(FRCP 45(d)(2)(B); see below ESI-Related Objections to a Subpoena.) A non-party’s failure to timely object to a subpoena ordinarily constitutes a waiver of any objections (Am. Federation of Musicians v. Skodam Films, LLC, 313 F.R.D. 39, 43 (N.D. Tex. 2015); Bailey Indus., Inc. v. CLJP, Inc. 270 F.R.D. 662, 668 (N.D. Fla. 2010)).
If the non-party makes an objection, the subpoena is null and void until the issuing party files a motion to compel (FRCP 45(d)(2)(B)(i)-(ii)).
When defending against a motion to compel, the non-party must support its objections. If it objects that the ESI is inaccessible, for example, it must show that the information is not reasonably accessible because of undue burden or cost (FRCP 45(e)(1)(D); see below Inaccessible Data). Even if that showing is made, the issuing party can overcome objections if it establishes “good cause” (FRCP 45(e)(1)(D)). Separate burden shifting tests are applied for objections based on undue burden and those based on disclosure of trade secrets (FRCP 45(d)(3)(A), (B); see below Undue Burden or Expense).
Impose “an appropriate sanction — which may include lost earnings and reasonable attorney’s fees” on the offending party or attorney (FRCP 45(d)(1); see W. Convenience Stores, 2014 WL 1257762, at *21, *23).
Deny the motion and order the non-party to comply, if the court does not find an undue burden.
The efforts needed to comply with the subpoena will subject the non-party to undue burden or expense.
The subpoena calls for the production of inaccessible data.
The form of production specified in the subpoena is itself objectionable as unduly burdensome.
The non-party can or must avail itself of any statute-based objections to disclosure.
A non-party that receives a preservation demand before litigation is pending should also consider whether compliance with the demand would be objectionable for any of these reasons (see below Preservation Obligations Before Receiving a Subpoena).
Suspend routine backup of its data or turn off auto-delete functions.
Collect information from multiple custodians or departments.
Preserve data that is frequently overwritten and would otherwise not be saved, such as point-of-sale data or last modified dates of documents.
Forensically examine computers or otherwise collect data from devices in a manner that typically requires the engagement of outside vendors.
To object to a subpoena as unduly burdensome or expensive under FRCP 45, the non-party must demonstrate its grounds for those objections with specific evidence. A number of courts have overruled non-party objections and refused requests for fees and costs where the objecting non-party failed to provide sufficient evidence of its burden or expense (see, for example, W. Convenience Stores, 2014 WL 1257762, at *2, *10, *23 (denying a non-party’s request to recover $122,202.50 in attorneys’ fees and $26,546 of costs incurred in responding to several subpoenas, but modifying the subpoena to require the non-party to produce only “responsive information existing on active computer systems”)).
A non-party may object that data sought by a subpoena is “not reasonably accessible,” provided the non-party specifically identifies the types of ESI that it deems inaccessible due to undue burden or cost (FRCP 45(e)(1)(D)).
Deleted, slack, fragmented, or unallocated data on hard drives.
Random access memory (RAM) or other ephemeral data.
Online access data, such as temporary internet files, history, cache, or cookies.
Data in metadata fields that are frequently updated automatically, such as last opened dates.
Backup data that is substantially duplicative of data that is more accessible elsewhere.
Other forms of ESI whose preservation requires extraordinary affirmative measures that are not used in the ordinary course of business.
However, as mentioned above, even if a court finds that a subpoena seeks inaccessible data, a non-party may be required to comply with the subpoena if the issuing party demonstrates good cause (FRCP 45(e)(1)(D)). If the issuing party makes a sufficient showing, a court may require the non-party to use forensic methods or other outside vendor services to preserve and collect data. In these circumstances, a court may be more inclined to permit a non-party to recoup costs related to these activities.
Comply with the format request.
Object to the requested format within 14 days after being served with the subpoena (FRCP 45(d)(2)(B)).
The format in which the non-party ordinarily maintains the ESI.
Native files. The non-party may object if the subpoena demands production of all documents in native format, but the responsive data requires the non-party to redact privileged or confidential information.
Documents in image format with accompanying load files. The non-party may object if it does not have the sophisticated in-house tools and personnel to produce load files and would instead need to hire an outside vendor.
producing the entire database to make the native files useful would require the production of large volumes of irrelevant or non-responsive information.
producing the software is unduly burdensome.
A non-party need not produce ESI in more than one format (FRCP 45(e)(1)(C)). For this reason, a requesting party should also be mindful of its preferred form of ESI from the outset to avoid losing the opportunity to receive the information in the form it needs.
Certain laws may eliminate or modify a non-party’s obligation to respond to a valid subpoena. For example, the Stored Communications Act (SCA) prohibits “providers of communication services” from disclosing the content of communications, and it does not include an exception for civil subpoenas (18 U.S.C. §§ 2701 to 2712; see, for example, Mintz v. Mark Bartelstein & Assocs., Inc., 885 F. Supp. 2d 987, 993-94 (C.D. Cal. 2012) (holding that the SCA prevented a non-party service provider from disclosing the content of text messages in response to a subpoena)).
Although a subpoenaed non-party must preserve evidence that it reasonably expects is responsive to the subpoena, a non-party’s duty to preserve ESI in the face of a boilerplate preservation demand when no litigation is pending is less clear.
For example, a non-party may receive a letter notifying it of a potential dispute and demanding that the non-party preserve all information in its possession relating to the dispute, or to any individuals or organizations involved in the dispute, such as customers or employees. The letter might even purport to require the non-party to preserve all sources of relevant information, including those on company and personal computers of its employees, data on external media, such as flash drives, and information stored on mobile phones, and to take forensic images of all data sources.
Evaluate whether it has a duty to preserve the information described in the preservation demand.
Confer with the party who sent the preservation demand.
Draft a formal response to the preservation demand.
After receiving a preservation demand, a non-party must first evaluate whether it is likely to become a party to any subsequent related litigation. If the non-party reasonably anticipates suing or being sued in connection with the potential dispute, it has an independent obligation to preserve potentially relevant data and should take immediate steps to do so. On the other hand, if the recipient merely holds information and is a true, disinterested third party, its obligation to respond to the preservation demand is unclear.
Courts have taken varying approaches to the concept of a non-party duty to preserve in different scenarios. Some courts have found that a non-party has no preservation duty until it receives a subpoena. By contrast, others have held that a non-party may have a duty to preserve simply because it had notice of the dispute, even before a formal subpoena or demand letter was issued.
However, because many of these decisions address tangible evidence and not ESI, their application to ESI preservation is debatable. Indeed, the 2015 amendments to the FRCP excluded the destruction of physical evidence from its new sanctions regime (2015 Advisory Committee’s Note to FRCP 37(e) (noting that the new rule applies only to ESI); see In re Bridge Constr. Servs. of Fla., Inc., 185 F. Supp. 3d 459, 472-73 (S.D.N.Y. 2016)).
Relying on a court’s inherent ability “to sanction the conduct of a non-party who participates in abusive litigation practices, or whose actions or omissions cause the parties to incur additional expenses,” the court ultimately ordered the defendant and non-party Collecto to share the costs of having an expert reconstruct archived data for the allegedly spoliated call logs (Lofton, 308 F.R.D. at 285, 287-88; see also Palmer v. Allen, 2016 WL 5402961, at *2 (E.D. Mich. Sept. 28, 2016) (declining to impose spoliation sanctions on a party that was previously dismissed from the case)).
Notably, the drafters of the 2015 amendments to FRCP 37(e) intended to significantly curtail the inherent authority to impose sanctions relied on by the court in Lofton. However, the amendments do not address whether courts retain the inherent authority to impose sanctions where the elements for FRCP 37(e) sanctions have not been met.
Additionally, when assessing whether it has a duty to preserve ESI, a non-party must carefully consider its obligations under applicable state law. A handful of states recognize spoliation as an independent tort that may give rise to separate litigation (see, for example, J.S. Sweet Co. v. Sika Chem. Corp., 400 F.3d 1028, 1033-34 (7th Cir. 2005) (noting that Indiana law recognizes a non-party’s duty to preserve evidence where a “special relationship” exists)).example, J.S. Sweet Co. v. Sika Chem. Corp., 400 F.3d 1028, 1033-34 (7th Cir. 2005) (noting that Indiana law recognizes a non-party’s duty to preserve evidence where a “special relationship” exists)).
A non-party that receives a preservation demand should confer with the issuing party or its counsel. As a practical matter, the non-party may be able to resolve and substantially narrow the scope of ESI that is subject to the preservation demand.
Production formats. For example, the non-party should try to determine whether the requested format requires it to preserve the potentially responsive ESI in a particular manner and, if so, whether the requesting party is willing to pay for any additional costs inherent in that preservation method.
ESI sources. For example, if the relevant information in the non-party’s possession is limited to certain phone records or financial records, the non-party should try to determine if it can eliminate email and other custodian-centric ESI from the preservation scope.
Proactively negotiating with the issuing party at this stage offers a tactical advantage as well. If the party that issued the preservation demand later serves a subpoena on the same non-party and the non-party wants to object to the subpoena as unduly burdensome, it must provide details on the burden under FRCP 45. A court may be more favorably inclined toward an undue burden argument if the non-party can demonstrate that it first attempted to narrow the scope or otherwise minimize the burden of a subpoena before it was served, and ultimately refused to produce the requested information only after negotiations failed. By engaging in a dialogue with the issuing party, even if the issuing party refuses to alter its request, the non-party can strengthen its position when it comes to recovering attorneys’ fees and costs incurred in responding to a subsequently issued subpoena.
A non-party typically should respond to the preservation demand letter in writing. In this response, the non-party should identify and describe the same objections it anticipates making in response to a subpoena (such as objections due to undue burden or expense, inaccessible data, or problematic production formats). The non-party should also describe its efforts to confer with the issuing party.
Although a responsive letter lacks the same effect as a formal objection to a subpoena or motion to quash, it may assist the non-party in defending against a later argument that it should have undertaken potentially expensive preservation steps.
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