E-Discovery and the Cloud

Over the years courts have ruled that ESI held by a third party on behalf of a litigant or its counsel remains within the litigant’s “control,” and is thus subject to production.

Although few courts have commented specifically on discovery obligations within the context of cloud computing, the July 2014 decision in Brown v. Tellermate Holdings Ltd. confirms that courts are also likely to deem a cloud customer to be in control of data if the customer retains the right or ability to obtain the ESI. Accordingly, in-house attorneys or their outside counsel must be prepared to adequately respond to such requests.

Privileged data may become problematic. If discovery inadvertently retrieves privileged data, it may lead to a waiver of privilege.

A litigant also faces the liability of potentially waiving a third party’s privilege. If the litigant’s data is mingled with third-party cloud users’ data in a public cloud, production of that data may constitute waiver of a third party’s privilege. Inadvertently gaining access to a third party’s trade secret information stored in the cloud could destroy the legal protection of that trade secret.

Proposed changes to Federal Rules 16, 26 and 37 may clarify some of a party’s obligations with respect to e-discovery, or at least force litigants to plan for e-discovery issues, including cloud-stored data, at an early stage of the case. The proposed rules provide for consideration of, and sanctions related to, the preservation of ESI.