I-Med Pharma, Inc. v. Biomatrix, Inc. No. 03-3677 (DRD), 2011 6140658 (D.N.J. Dec 9, 2011), highlights the dangers of carelessness and inattention in e-discovery.  In that case, the court affirmed the order of the Magistrate Judge which excused plaintiff from the obligation of reviewing and producing millions of pages of documents recovered from unallocated space files in light of the extreme burden and cost of such an undertaking.  The underlying dispute arose from the alleged breach of two medical distribution contracts between Plaintiff I–Med Pharma, Inc. (“I–Med”) and Defendant Biomatrix, Inc.  The Plaintiff alleged that Defendant, in conjunction with its related entities, entered into contracts under which I–Med would be the exclusive Canadian distributor of several medical products produced by Biomatrix. Plaintiff claimed that after a merger with Genzyme, Defendant failed to live up to its obligations to produce the licensed products for distribution.

The dispute before the Magistrate concerned data retrieved from a forensic investigation of Plaintiff’s computer system. Based upon a stipulation between the parties, Defendants hired an expert to conduct a keyword search of I–Med’s computer network, servers, and related storage devices.  The search was not limited to targeted document custodians or relevant time periods. It was not even limited to active files.  The expert was instructed to run the search terms across all data on the computer system, including so-called “unallocated space”—areas of computer memory in which there is no write-protection and in which deleted and partially deleted files and other temporary data may often be found.

The broad search terms hit millions of times across the large data set. In the unallocated space alone, the terms generated 64,382,929 hits. These hits represent an estimated 95 million pages of data.  Plaintiff balked at the prospect of conducting a privilege review of this material and petitioned Magistrate Judge for relief from the stipulation.

The Magistrate Judge conducted a telephone hearing in which the parties explained their positions on the matter. After permitting both sides a full opportunity to be heard, the Magistrate Judge issued an order permitting Plaintiff to withhold the data found in the “unallocated space” of its computer systems. Among other things, the order was based on findings that the burden of the review would outweigh any potential benefit and that the likelihood of finding relevant, admissible evidence was “minimal.”  However, given the costs Defendants had incurred in extracting and searching this data, the order permitted Defendants to seek reimbursement of those costs from Plaintiff.

The Defendant appealed this decision.  On appeal, the court upheld the order of the Magistrate Judge.   It first discussed the the issue of modifying an agreement of the parties.  The court stated that “[w]hile courts should not casually discard agreements between the parties, nor should they abrogate their duty to balance both burden and the likelihood of uncovering relevant evidence merely because a party made an improvident agreement.”

Thereafter, the court affirmed the Magistrate Judge’s opinion.  It found the benefit of the review was not likely to justify the burden and expense that would be required to complete the review.  Moreover, when the court weighed the expenditure of resources that would be required by the plaintiff to accomplish the review versus the expenditure of resources that would be required by the defendants in obtaining the data, it determined the costs “pale[d] in comparison to the millions of dollars” that would be spent by the plaintiff to adequately review the material.

For these reasons, the court concluded that “[w]hile Plaintiff should have known better than to agree to the search terms used here, the interests of justice and basic fairness are little served by forcing Plaintiff to undertake an enormously expensive privilege review of material that is unlikely to contain non-duplicative evidence.”