Court Tells Company To Hire Outside Vendor To Retrieve ESI

Posted by Gregg Mayer on Wednesday, February 27th, 2008   

In a lawsuit involving the movie trilogy The Lord Of The Rings, a court ordered New Line Production, Inc., the distributor of the movies, to hire an outside vendor to search for electronically stored information (“ESI”) needed for the litigation.

The judge in the case seemed more than frustrated that New Line apparently failed to retrieve and disclose all of the ESI needed for the litigation. Rather than allow New Line another chance to redo the search on its own, the judge ordered a separate, outside vendor to come in and do the work – at New Line’s expense. The judge wrote:

New Line’s failure to perform any structured search for emails and other electronic documents from the company’s servers and from individual employees’ desktop or laptop computers requires a different solution. Nor does the Court have any confidence that once again ordering New Line to conduct a good faith search for electronic documents will be any more effective than it has in the past. The Court has determined that, under the circumstances here presented, New Line should be required to retain an outside vendor experienced in electronic document retrieval to collect responsive documents.

As noted previously on this blog , it is important for companies to not just archive ESI, including email, but also to be able to implement solutions that permit cost-effective retrieval. Generally, companies have to pay to produce their own ESI during litigation. The more efficiently a company can retrieve ESI, the less it should cost.

As brief background on the lawsuit, director Peter Jackson’s Wingnut Films is suing New Line for not calculating the movie revenue properly, as reported in The Sidney Morning Herald and The New York Times.

As part of the contentious litigation, Wingnut complained New Line was not disclosing all of the information it should, including ESI. The court agreed. On New Line’s efforts to retrieve ESI, the court summarized the problems:

The testimony of New Line’s custodians demonstrates that New Line’s efforts to locate and collect electronic documents has been less than diligent. Ken Horowitz, who was the designated custodian with respect to documents relating to participant audits of Lord of the Rings and other films, testified at his first deposition that he was not aware of any search for electronic documents on New Line’s servers, on any individual’s desktop or laptop computer, or otherwise…At the second day of his deposition, Mr. Horowitz confirmed that no electronic search had been conducted….

…New Line’s other custodian, Dain Landon, testified that he had undertaken a search of New Line’s servers for documents relating specifically to merchandising agreements. Mr. Landon’s “search” consisted of little more than clicking through various folders on the only two server drives he personally could access…Mr. Landon acknowledged that he did not conduct or arrange for a server-wide search for documents containing the phrase “Lord of the Rings” or any other keywords; indeed, he did not even search for documents with “Lord of the Rings” in the title…

…New Line likewise failed to conduct any search of the company’s email servers for email correspondence containing the phrase “Lord of the Rings” or any other keywords. While some individual employees were asked to collect their emails, others were not; and even those employees who did collect emails were given little or no guidance on where to search (e.g., inbox, sent items, deleted items, archived folders) or how to conduct their search (e.g., keyword searching). Indeed, of the eleven individuals Mr. Landon spoke to in preparation for the second day of his deposition, only three told him that they had even looked for emails, and Mr. Landon had no information regarding how those searches were performed….

With that dismal effort, the court explained what New Line should have done:

At the very least, New Line should have charged its in-house information technology professionals with responsibility to ensure that all of the company’s servers and individual computers were searched, and that they were searched in a manner that was reasonably calculated to capture all responsive documents (e.g., keyword searches of electronic documents and emails). To the extent this could not be accomplished in-house, New Line should have retained an outside vendor…Instead, New Line practically disregarded its obligation to produce electronic documents at all.

Since New Line wholly failed to comply with the court’s order to produce ESI, the court explained that an outside vendor was necessary:

The vendor shall be granted access to New Line’s servers, including without limitation its email server(s), for the purpose of conducting keyword searches for responsive documents and emails. The vendor shall also be granted access to the hard drives from the desktop and laptop computers of specified employees who are connected with this dispute for the purpose of conducting keyword searches. All documents and emails collected by the outside vendor may be reviewed by New Line for privilege and confidentiality designations; however, no documents identified by the vendor may be withheld on relevance grounds.

….The vendor shall prepare a log of all collected documents so that Wingnut can confirm that all such documents are either produced or logged. In the event that the parties are unable to agree upon the identity of the outside vendor, the search protocol, or the individual employees whose desktop and laptop computers will be provided for inspection, those disputes should be promptly submitted to the Court for resolution. New Line shall bear all costs and expenses of the outside vendor.

In short, New Line not only has to redo it ESI disclosures, it also has to pay to let an outside vendor do it. What should have been an efficient retrieval of electronic documents has turned into an e-nightmare.

Courts take the proper disclosure of ESI seriously. With the rapid explosion of email and other ESI, parties must ensure they comply with the Federal Rules of Civil Procedure or face stiff sanctions during litigation. Here, New Line failed to meet its obligations and must pay the consequences.

Leave a Reply

You must be logged in to post a comment.