Post Process

Everything to do with E-discovery & ESI

Case Blurb: Collins & Aikman Corp.; Form of Document Production for Gov’t Entities Conducting Investigations

Posted by rjbiii on February 3, 2009

Under Rule 34 of the Federal Rules of Civil Procedure, a party has two options for the production of documents in response to a discovery request. The litigant may either produce documents “as they are kept in the usual course of business or must organize and label them to correspond to the categories in the request.” The Advisory Committee Note states that the purpose of this new rule language — added in 1980 — was to eliminate the practice of “‘deliberately [mixing] critical documents with others in the hope of obscuring significance.'” Allowing the production of documents as they “are actually kept in the usual course of business” was intended to minimize the burden of production while maintaining the “internal logic reflecting business use.”

Rule 34 does not elaborate on the term “usual course of business.” A party choosing to produce documents as maintained in the ordinary course of business “bears the burden of demonstrating that the documents made available were in fact produced consistent with that mandate.” In most cases, documents produced pursuant to Rule 34 will be organized by subject matter or category. The provision prohibits “simply dumping large quantities of unrequested materials onto the discovering party along with the items actually sought.”

The SEC [(producing party)] contends that even if the compilations are not protected as work product, it has the option of producing the complete, unfiltered, and unorganized investigatory file, as this is how the documents are maintained in the usual course of its business. As noted above, Rule 34 mandates that documents must be produced organized by the subjects of the request or organized as they are kept in the usual course of business by the producing party. The key to this dichotomy is the assumption that in either case the documents will be organized — that records kept in the usual course of business would not be maintained in a haphazard fashion. Thus regardless of the form chosen, the production will be useful to the requesting party, and neither choice will inject unnecessary time and cost into litigation.

In order to determine what constitutes an appropriate production of records as they are kept in the “usual course of business,” it is first necessary to define that term. To begin with, not every litigant is a business or functions in the manner of a business. Black’s Law Dictionary defines a business as “[a] commercial enterprise carried on for profit; a particular occupation or employment habitually engaged in for livelihood or gain.” Only as a secondary definition, business constitutes “[b]y extension, transactions or matters of a noncommercial nature.”
[…]
By rough analogy to Rule 803(6), the option of producing documents “as they are kept in the usual course of business” under Rule 34 requires the producing party to meet either of two tests. First, this option is available to commercial enterprises or entities that function in the manner of commercial enterprises. Second, this option may also apply to records resulting from “regularly conducted activity.” Where a producing party’s activities are not “routine and repetitive” such as to require a well-organized record-keeping system — in other words when the records do not result from an “ordinary course of business” — the party must produce documents according to the sole remaining option under Rule 34: “organize[d] and label[ed] . . . to correspond to the categories in the request.”

The logic of Rule 34 supports this limitation. When records do not result from “routine and repetitive” activity, there is no incentive to organize them in a predictable system. The purpose of the Rule is to facilitate production of records in a useful manner and to minimize discovery costs; thus it is reasonable to require litigants who do not create and/or maintain records in a “routine and repetitive” manner to organize the records in a usable 55 fashion prior to producing them.

However conducting an investigation — which is by its very nature not routine or repetitive — cannot fall within the scope of the “usual course of business.” While the SEC routinely collects and maintains regulatory submissions such 10-K reports, in its investigative capacity the agency conducts tailored probes of a company or an industry, requiring the gathering of records from diverse sources. Many if not most of the 1.7 million documents in the SEC production here were likely collected in the agency’s investigatory role. Thus it is no surprise that the complete collection is maintained as it was collected — in large disorderly databases. The documents can only be provided in a useful manner if the agency organizes or labels them to correspond to each demand. Based on the SEC’s submission, it appears that this has already been done through the lead litigation attorney’s creation of the 175-plus file folders at issue.

Therefore, the SEC must respond to [Requesting Party’s] request for production by providing him with the documents that respond to those requests. [Requesting Party] has not requested the SEC file folders as such, but many of them correlate with the factual allegations in the Complaint, the subjects of the requests. Thus, to the extent that one or more of the 175 folders assembled by the SEC’s attorneys constitute the complete set of documents relevant to a particular request…

SEC v. Collins & Aikman Corp., 2009 U.S. Dist. LEXIS 3367 (S.D.N.Y. Jan. 13, 2009)(internal citations removed).

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