Recent Cases: Ryan v. Gifford

Ryan v. Gifford illuminates current trends with regard to native file format production and the preservation of metadata in electronic discovery.

Ryan v. Gifford
Civ. No. 2213-CC, 2007 WL 4259557 (Del. Ch., Nov. 30, 2007)

One of the continuing controversies in e-Discovery, beginning even before the effective date of the new “e-Discovery amendments” to the Federal Rules of Civil Procedure (FRCP) concerns production format. Must parties produce electronically stored information (ESI) in their “native file” form (that is, in the form that the files are ordinarily kept on their source computers and storage media, such as a Microsoft Word file in Word format), or can they convert native files into searchable formats, like PDF or TIFF, and, in so doing, separate or eliminate altogether “metadata” (such as timestamp, last modified date, author, recipient) and “embedded data” (such as tracked changes, hidden columns and comments)?. To be sure, amended Rule 34 does not mandate production of “native files.” But, the rule, as well as the advisory committee notes that accompany it, contain language that make clear that a requesting party’s ability to understand and search ESI should not be “degraded” as a result of the production process. So, how are companies supposed to sort this out?.

The Rule of Production

Amended Rule 34 sets forth a procedural construct for requesting electronically stored information (ESI). A requestor should specify the format in which it would like ESI produced. The producing party can then either:

1. produce in that format;
2. object to the requested format and propose an alternative format, or
3. identify a production format, if the requestor did not specify a format

If the producing party objects to the requestor’s proposed format (per 2 above), the court will decide the issue unless the parties reach agreement.

Courts’ Interpretation of the New Rule

The first reported decisions on native file productions actually pre-dated and anticipated the new rules’ adoption and generally supported native file production as a “better” approach. (see, e.g., Hagenbuch v. 3B6 Sistemi Elettronici Industriali, No. 04 C 3109, 2006 WL 665005 (N.D. Ill. Mar. 8, 2006)). Discovery respondents argued, however, that native file production imposed an additional and unnecessary burden, such as the supposed vulnerability of native files to human tampering (whether intentional or not) and increased costs of having to review hidden metadata, such as tracked changes, hidden comments and columns and the like. Several recent cases have thus required a showing of “particular need” to overcome those claimed risks and burdens, which can be traced back to guidance from Paragraph 6 of the District of Delaware Default Standards for Discovery of Electronic Documents. (see, e.g., Wyeth v. Impax Laboratories, No. 06-222, 2006 WL 3091331 (D. Del. Oct. 26, 2006; Kentucky Speedway v. NASCAR, No. 05-138, 2006 U.S. Dist. LEXIS 92028 (E.D. Ken. Dec. 18, 2006)(following the District of Delaware standards). Even the case that started the native file production “trend,” Williams v. Sprint/United Management, 230 F.R.D. 640 (D. Kan. 2005), required native production of only a specific file type (Microsoft Excel spreadsheets) and only after the plaintiffs had made a showing of particularized need (in a Fair Labor Standards Act case where the company’s human resources spreadsheet formulae were critical evidence). Yet, in most of the other “particularized need” cases, the courts rejected native file requests because the parties, perhaps caught unprepared, failed to make the requisite showing of need.

Ryan v. Gifford -- A New Native Argument?

A recent case in the Delaware Court of Chancery, Ryan v. Gifford, Civ. No. 2213-CC, 2007 WL 4259557 (Del. Ch., Nov. 30, 2007), stands in stark contrast to this apparent trend against native production and provides good guidance on how parties may successfully show particularized need. In this case arising out of the stock options backdating accusations against Maxim Integrated Products, plaintiffs sought documents held by nominal defendant Maxim in native file format, along with original metadata. In an unpublished letter order, the court granted plaintiffs’ requests, finding:

First, metadata may be especially relevant in a case such as this where the integrity of dates entered facially on documents authorizing the award of stock options is at the heart of the dispute. This relevance is further illustrated by the fact that Maxim’s special committee, as well as Deloitte & Touche, undoubtedly reviewed metadata as part of their investigation into the backdating problems at Maxim. This latter fact also undermines the asserted burdensomeness of producing documents in native file format…plaintiffs have clearly shown a particularized need for the native format of electronic documents with original metadata.

Most options backdating cases have turned on allegations that stock option grants at a number of companies, including Maxim were improperly, and in some cases, secretly back dated to provide artificial stock option value to the grantees – and the Ryan plaintiffs made use of this key issue to show particularized need. So, at first blush, it would be easy to dismiss the ruling in Ryan as a “one-off” decision or of limited importance, particularly as many stock option proceedings have run their course. But, it is the court’s rationale in Ryan that may have greater implications in other matters – that is, producing parties should not be allowed to argue against the value of metadata if, as is usually the case, they themselves rely upon it to conduct their own review and document production. As lawyers like to say…res ipse loquitor – the thing speaks for itself!