Source: https://e-discoveryteam.com/2014/10/05/is-the-irss-inability-to-find-emails-the-result-of-unethical-behavior-new-opinion-by-u-s-tax-court-provides-some-clues-part-2/
Timestamp: 2019-04-18 20:53:12+00:00

Document:
This is Part Two of the essay where I go into the specifics of the holding in Dynamo. Please read Part One first: Is the IRS’s Inability to Find Emails the Result of Unethical Behavior? New Opinion by U.S. Tax Court Provides Some Clues – Part One. There I pointed out that the IRS attitude towards email discovery, particularly predictive coding, shows that they belong to the unethical category I call The Clueless. Yes, the IRS is clueless, but not in an affable Pink Panther Inspector Clouseau way, but in an arrogant, super-know-it-all way of egomaniac types. It is wonderfully personified in Ms. Lerner’s face during her Congressional non-testimony. Like Congress did to Lerner, the Tax Court in Dynamo properly cut down the IRS attorneys and rejected all of their IRS’ anti-predictive coding non-sense arguments.
Dynamo Holdings, Ltd. vs. Commissioner, 143 T.C. No. 9 (Sept. 17, 2014) is a very well written opinion by United Stated Tax Court by Judge Ronald L. Buch. I highly recommend that you study and cite this opinion. It is so good that I have decided to devote the rest of this blog to quotation of the portions of it that pertain to predictive coding.
I cannot refrain from provided some comments too, of course, otherwise what would be the point of doing more than provide a link? But for the sake of clarity, and purity, although I will intermix my [side bar comments] along with the quotes, I will do so with blue font, and italics, so you will not mistake the court’s words with my own. Yes, I know, that is not how you do things in law review articles, that this is way too creative. So what? It will be a lot more interesting for you to read it that way, and quicker too. So damn with the old rules of legal writing, here goes.
FN 2 – We understand respondent’s use of the term “clawback agreement” to mean that the disclosure of any privileged information on the tapes would not be a waiver of any privilege that would otherwise apply to that information.
Petitioners ask the Court to let them use predictive coding to efficiently and economically help identify the nonprivileged information that is responsive to respondent’s discovery request. More specifically, petitioners want to implement the following procedure to respond to the request: [I have omitted the first four reasons as not terribly interesting.] … 5. Through the implementation of predictive coding, review the remaining data using search criteria that the parties agree upon to ascertain, on the one hand, information that is relevant to the matter, and on the other hand, potentially relevant information that should be withheld as privileged or confidential information.
[T]he Court is not normally in the business of dictating to parties the process that they should use when responding to discovery. [This is a very important point. See Sedona Principle Six. The defendants did not really need the plaintiff’s approval to use predictive coding. Judge Buch is suggesting that this whole permission motion is an unnecessary waste of time, but he will indulge them anyway and address it. I for one am glad that he did.] If our focus were on paper discovery, we would not (for example) be dictating to a party the manner in which it should review documents for responsiveness or privilege, such as whether that review should be done by a paralegal, a junior attorney, or a senior attorney. Yet that is, in essence, what the parties are asking the Court to consider–whether document review should be done by humans or with the assistance of computers. [These are all very good points.] Respondent fears an incomplete response to his discovery. [Parties in litigation always fear that. The U.S. employs a “trust based” system of discovery that relies on the honesty of the parties, and especially relies on the honesty and cooperativeness of the attorneys who conduct the discovery. There are alternatives, like having judges control discovery. Most of the world has such judge controlled discovery, but lawyers in the U.S. do not want that, and it is doubtful that taxpayers would want to fund an alternative court based approach.] If respondent believes that the ultimate discovery response is incomplete and can support that belief, he can file another motion to compel at that time. Nonetheless, because we have not previously addressed the issue of computer-assisted review tools, we will address it here.
Each party called a witness to testify at the evidentiary hearing as an expert. Petitioners’ witness was James R. Scarazzo. Respondent’s witness was Michael L. Wudke. [I added these links. Scarazzo is with the well known vendor, FTI, in Washington D.C., and Wudke is with another vendor in N.Y., Transperfect Legal Solutions. He used to be with Deloitte.] The Court recognized the witnesses as experts on the subject matter at hand. We may accept or reject the findings and conclusions of the experts, according to our own judgment.
The substance of the article was eventually adopted in an opinion that states: “This judicial opinion now recognizes that computer-assisted review is an acceptable way to search for relevant ESI in appropriate cases.” Moore v. Publicis Groupe, 287 F.R.D. 182, 183 (S.D.N.Y. 2012), adopted sub nom. Moore v. Publicis Groupe SA, No. 11 Civ. 1279 (ALC)(AJP), 2012 WL 1446534 (S.D.N.Y. Apr. 26, 2012).
FN 10 – Predictive coding is so commonplace in the home and at work in that most (if not all) individuals with an email program use predictive coding to filter out spam email. See Moore v. Publicis Groupe, 287 F.R.D. 182, n.2 (S.D.N.Y. 2012), adopted sub nom. Moore v. Publicis Groupe SA, No. 11 Civ. 1279 (ALC)(AJP), 2012 WL 1446534 (S.D.N.Y. Apr. 26, 2012).
See Progressive Cas. Ins. Co. v. Delaney, No. 2:11-cv-00678-LRH-PAL, 2014 WL 3563467, at *8 (D. Nev. July 18, 2014) (stating with citations of articles that predictive coding has proved to be an accurate way to comply with a discovery request for ESI and that studies show it is more accurate than human review or keyword searches); F.D.I.C. v. Bowden, No. CV413-245, 2014 WL 2548137, at *13 (S.D. Ga. June 6, 2014) (directing that the parties consider the use of predictive coding). See generally Nicholas Barry, “Man Versus Machine Review: The Showdown between Hordes of Discovery Lawyers and a Computer-Utilizing Predictive-Coding Technology”, 15 Vand. J. Ent. & Tech. L. 343 (2013); Lisa C. Wood, “Predictive Coding Has Arrived”, 28 ABA Antitrust J. 93 (2013). The use of predictive coding also is not unprecedented in Federal litigation. See, e.g., Hinterberger v. Catholic Health Sys., Inc., No. 08-CV-3805(F), 2013 WL 2250603 (W.D.N.Y. May 21, 2013); In Re Actos, No. 6:11-md-2299, 2012 WL 7861249 (W.D. La. July 27, 2012); Moore, 287 F.R.D. 182. Where, as here, petitioners reasonably request to use predictive coding to conserve time and expense, and represent to the Court that they will retain electronic discovery experts to meet with respondent’s counsel or his experts to conduct a search acceptable to respondent, we see no reason petitioners should not be allowed to use predictive coding to respond to respondent’s discovery request. Cf. Progressive Cas. Ins. Co., 2014 WL 3563467, at *10-*12 (declining to allow the use of predictive coding where the record lacked the necessary transparency and cooperation among counsel in the review and production of ESI responsive to the discovery request).
Mr. Scarazzo’s expert testimony supports our opinion. He testified that11 discovery of ESI essentially involves a two-step process.
[K]ey word searching is, as the name implies, is a list of terms or terminologies that are used that are run against documents in a method of determining or identifying those documents to be reviewed. What predictive coding does is it takes the type of documents, the layout, maybe the whispets of the documents, the format of the documents, and it uses a computer model to predict which documents out of the whole set might contain relevant information to be reviewed.
So one of the things that it does is, by using technology, it eliminates or minimizes some of the human error that might be associated with it. [Note proper use of the word “some,” it eliminates some of the human error. It cannot be eliminated entirely.] Sometimes there’s inefficiencies with key word searching in that it may include or exclude documents, whereas training the model to go back and predict this, we can look at it and use statistics and other sampling information to pull back the information and feel more confident that the information that’s being reviewed is the universe of potentially responsive data.
In addition, Mr. Scarazzo opined credibly and without contradiction that petitioners’ approach to responding to respondent’s discovery request is the most reasonable way for petitioners to comply with that request. Petitioners asked Mr. Scarazzo to analyze and to compare the parties’ dueling approaches in the setting of the data to be restored from Dynamo’s backup tapes and to opine on which of the approaches is the most reasonable way for petitioners to comply with respondent’s request. Mr. Scarazzo assumed as to petitioners’ approach that the restored data would be searched using specific criteria, that the resulting information would be reviewed for privilege, and that petitioners would produce the nonprivileged information to respondent. He assumed as to respondent’s approach that the restored data would be searched for privileged information without using specific search criteria, that the resulting privileged information would be removed, and that petitioners would then produce the remaining data to respondent. As to both approaches, he examined certain details of Dynamo’s backup tapes, interviewed the person most knowledgeable on Dynamo’s backup process and the contents of its backup tapes (Dynamo’s director of information technology), and performed certain cost calculations.
Our Rules, including our discovery Rules, are to “be construed to secure the just, speedy, and inexpensive determination of every case.” Rule 1(d). Petitioners may use predictive coding in responding to respondent’s discovery request. If, after reviewing the results, respondent believes that the response to the discovery request is incomplete, he may file a motion to compel at that time. See Rule 104(b), (d).
This entry was posted on Sunday, October 5th, 2014 at 3:12 pm and is filed under Evidence, Lawyers Duties, Review, Search.	You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
Good stuff Ralph. There is so much to learn from this opinion and your analysis on so many levels that I think it is one of your best blogs. I am particularly interested in threads of consistency in process and substance in the courts’ efforts to enforce economical, efficient, and proportional eDiscovery while relying on legal and policy precedent. It is good to see when a judge gets it, is it not?

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