Recent Cases: PSEG

PSEG illustrates the dangers of using obsolete electronic discovery systems; you may think they will save you money because they often are charged out at lower initial prices, but can end up costing far more in the long run.

PSEG Power New York, Inc. v. Alberici Constructors, Inc.
No. 1:05-CV-657, 2007 WL 2687670 (N.D.N.Y. Sept. 7, 2007)

Facts and issues

PSEG involves a high-stakes construction dispute where, in the words of the court “for nearly six months, the parties and the Court have been grappling with an electronic discovery monstrosity,” over plaintiff PSEG’s production of some 3,000 converted emails where the link to their “married” attached documents became “divorced.”

The parties engaged in several months of discussions and technical exploration to resolve the situation, including PSEG providing a searchable spreadsheet listing emails and attachments and an attempt at a limited “re-marrying” of identified emails and attachments. After these attempts failed, the parties submitted cost estimates for a complete re-processing and re-production of the emails; PSEG’s estimate was $206,000 while defendant Alberici claimed it could be done for $37,500. PSEG refused, however, to allow defendant’s lower-cost vendor to perform the work because of confidentiality concerns, even though the court proposed a protective order to resolve the issue. In the end, the court was forced to resolve the issue.

The court began by rejecting PSEG’s claim that the 2006 amendments to the FRCP did not apply to this pre-amendment case, with an interesting, and somewhat contrarian view of the importance of the amendments:

The trouble with PSEG's position is that former rules of discovery engagement are not remarkably different than the amended rules. (*5)

The court then went on to note that even under old FRCP 34, PSEG would have had a duty to produce the emails properly connected to their attachments under the “usual course of business standard.”

Turning to the responsibility for costs, the court first examined whether the data was, as claimed by PSEG, “not reasonably accessible” under amended Rule 26(b)(2). Without expressly ruling on accessibility, the court then quickly went through the seven factor test from the Committee Notes to find that factors strongly favored PSEG remaining responsible for its own discovery costs.

The court ended its analysis by strongly suggesting that PSEG make use of Alberici’s vendor or at least one cheaper than the $206,000 estimate it had obtained. The court also stayed the merits of the case, pending resolution of the email mishandling and further factual discovery, thus styming PSEG in its efforts to reach timely resolution of the substantive case.

What it means for you

The court placed the blame for this “fiasco” and “quagmire” squarely on the shoulders of PSEG’s electronic discovery vendor:

The separation of the emails from the attachments happened at the interface between the different software used by PSEG and the vendor when reducing the documents in a form that could be reviewed by counsel. It appears that the "vendor's software was not compatible with the HTML format in which PSEG had provided its documents and that this incompatibility had resulted in the parent child link between the emails and attachments being broken." (*2, citations omitted)

At the time of the first production, these emails and their attachments were inadvertently divorced because of the incompatibility of PSEG's internal computer software and its vendor's software as they attempted to put all of these downloaded documents into a reviewable and searchable format. (*5)

… this discovery quagmire created by PSEG's vendor falls woefully short of comporting with the spirit of Rule 34.

But for PSEG's vendor creating this email attachment fiasco, we would not be having this discussion. (*12)

Yet, in the end, the responsibility for fixing the problem, and most importantly, paying for it, fell solely upon PSEG. So what’s the lesson? Regardless of whether a party ultimately will produce documents in an imaged or native file form, it is imperative that it use a review system that can process both file types and thereby not break critical email attachment relationships. Otherwise, parties risk having to pay their vendor twice: first, to process data; and then, like PSEG, to re-do costly electronic discovery work, with likely substantial attorneys’ fees incurred in defending a losing position to boot.