Should Parties Tender Back-Up Tapes Without a Privilege Review?
In the consolidated case Dynamo v. Commissioner of Internal Review and Beekman v. Commissioner of Internal Review, Docket Nos. 2685-11, 8393-12 (US Tax Ct. Sept. 17, 2014), the Commissioner (Respondent) requested production of the electronically stored information (ESI) on two specific backup storage tapes – or the tapes themselves – to review the ESI’s metadata, verify the dates when certain documents were created, and to ascertain all information relevant to the proceeding.
Petitioners acknowledged the two tapes contained relevant electronic data, but they also deemed the request a “fishing expedition” to look for additional issues in the case. Petitioners asserted that the tapes contained “personal identification information, health insurance information, HIPAA protected information and other confidential information” that they had a duty to protect. They alleged the full production sought by the Respondent would result in the disclosure of privileged information.
Petitioners calculated that traditional review of the back-up tapes would take many months and estimated the cost of review to be $450,000. Petitioners offered to tender the ESI if they were authorized to use computer-assisted issue coding, also called predictive coding, to cull the production and lessen the costs.
Responded objected to the use of predictive coding and claimed that if they just turned the tapes over, Petitioners would not have to review the data at their own expense. Respondent offered a clawback provision, whereby Petitioners could claim any privileged information on the tapes would not be subject to the discovery.
What Procedures Did Petitioners Offer to First Review the Tapes?
As Petitioners did not wish to turn over the back-up tapes without first review as Respondent suggested, they offered to use predictive coding as a cost-effective means of review. The procedure offered would include:
- Restoring the electronic data from the back-up tapes
- Qualifying some of the restored data, such as removing NIST files, system files, etc. (The footnote indicated this would remove some duplicative data)
- Index and load the data for review
- Apply criterial to the data to further remove duplicative data and non-relevant information
- Using agreed-upon search terms to find relevant documents
- Review the relevant documents for privilege and produce the non-privileged data and a privilege log
Should Petitioners just turn over the back-up tapes with a clawback order to save money? Should the court allow predictive coding despite Respondent’s objection? What do you think? Leave us a message or a comment on Facebook! Our discussion of this case and the court’s review will continue in our next post.