Can an E-Discovery Vendor Serve Two Masters?

Certain things were obviously made for sharing: YouTube videos, bicycles built for two, and popcorn at movies, for example. But in law, it’s rare to see adversaries share anything for fear of creating or appearing to create a conflict of interest. However, in a recent case, an e-discovery vendor argued that it should be allowed to perform work for parties on both sides—and won.

In Gordon v. Kaleida Health (W.D.N.Y. May 21, 2013), the defendants complained that their e-discovery vendor’s services for their adversary created an impermissible conflict of interest. The vendor signed a service agreement with the defendants in 2010 and the next year was used to scan 50 to 80 boxes of documents. The vendor’s subcontractor also performed “objective” coding, where reviewers manually entered basic information about documents, such as the author and date, in a database for the defendants. Just two months later, the plaintiffs engaged a separate group under the same vendor’s umbrella in the same case for e-discovery services including data hosting, providing an e-discovery platform, and predictive coding.

U.S. Magistrate Judge Leslie G. Foschio overruled the defendants’ motion, finding that disqualification was unwarranted for three reasons. First, there was no conflict of interest because the vendor performed tasks the court termed “clerical” rather than work that required expert knowledge or skills. Furthermore, given the nature of the work, the defendant did not have a reasonable belief that it had a “confidential relationship” with the vendor, even though its counsel had signed a service agreement with the vendor that required it to keep “all matters” relating to the law firm and its client confidential. Finally, the defendants could not show that the services involved confidential information that was ever disclosed to the plaintiffs. Kaleida has appealed this decision.

Did the magistrate judge get it right? When parties’ interests align, they are permitted to share an e-discovery vendor. In fact, technology allows adversaries to share certain services from the same vendor in the same case, which can lead to significant cost savings for both parties.  However, even where there is not an actual conflict (as the judge ruled in this case) e-discovery companies should take three steps to protect themselves and their clients. First, they should fully disclose the extent of their engagement and obtain both parties’ consent. Second, they should construct rigorous ethical walls to ensure no conflict of interest arises. Finally, they should perform meticulous conflicts checks before any engagement begins. Otherwise, discovery disputes may create an expensive sideshow that thwarts the potential economic advantages of sharing an e-discovery vendor.

Chris O’Brien is chief operating officer at Conduent. He can be reached at cobrien@conduent.com..