Historical ESI Highlights – Part XII – Texas v. Frisco and the “Free for All Zone” – A Preemptive Strikeout

The duty to preserve potentially responsive information generally arises before litigation begins.[1]

However, the Federal Rules of Civil Procedure don’t apply at that time. The Honorable Paul W. Grimm, M. Berman, et. al., “Proportionality in the Post-Hoc Analysis of Pre-Litigation Preservation Decisions,” 37 U. Balt. L. Rev. 381, 397 (2008).

When it comes to the common law “duty to preserve,” Texas v. City of Frisco, 2008 WL 828055 (E.D. Tex. Mar. 27, 2008), held that the pre-litigation time frame is a “free for all zone.”  There is no umpire to call the balls and strikes regarding the scope of the duty.  Post-City of Frisco, prospective litigants are left to determine the scope on their own.[2]

That may be a difficult task.  As noted by The Hon. Shira A. Scheindlin, the “broad contours” of the duty to preserve are “relatively clear,” however, the obligation “cannot be defined with precision.”[3]

In City of Frisco, Texas was faced with a broad and expensive preservation demand from the City of Frisco regarding a large-scale construction project. The State of Texas filed for a declaratory judgment defining its pre-litigation duty to preserve.  Judge Ron Hedges called this tactic a “preemptive strike.”[4]

 It was also a strike out.  The court dismissed Texas’s action and refused the request for a declaration of rights:

In Texas v. City of Frisco, the court refused to entertain an action seeking declaration of preservation responsibilities based solely on receipt of a pre-suit preservation demand letter.

Thomas Y. Allman, “Conducting E-Discovery After the Amendments: The Second Wave,” 10 Sedona Conf. J. 215, 219 (2009).

The impact of City of Frisco is clear.  As a result, “it is next to impossible to obtain an advisory opinion from a court to guide [pre-litigation] preservation activities.”  Kenneth J. Withers, “Risk Aversion, Risk Management, and the ‘Overpreservation’ Problem in Electronic Discovery,” 64 S.C. L. Rev. 537, 543 (2013)(emphasis added).

The City of Frisco court wrote:

In its Original Complaint and Request for Declaratory Relief and Protective Order, Plaintiff, the State of Texas, states that it is seeking a declaratory judgment and the Court’s protection from a general litigation hold request, initiated by a letter sent by the City of Frisco requesting the Texas Department of Transportation to generally preserve all electronic data associated with the State Highway 121 toll project from Dallas County North Tollway to U.S. 75. The letter from the City refers to potential litigation regarding the environmental evaluation of the toll project…. [T]he State has asked the Court to enter a declaratory judgment ruling that the City’s letter “violates the Federal Rules of Civil Procedure and is contrary to rules governing a NEPA/APA claim in federal court.”

2008 WL 828055, at *1 (emphasis in original).  At that time, suit had not been filed by the City. Id.

The City of Frisco moved to dismiss the State’s complaint, asserting that it sought “an advisory opinion concerning what action it must take to properly preserve those documents subject to the litigation hold.” The court agreed.  Id. at *1. The City inconsistently argued that its letter asserting “potential” litigation “does not rise to the level of a ‘specific threat of suit.” 2007 WL 4835765.  Of course, if litigation was not reasonably anticipated, Texas had no common law duty to preserve the requested information.  It appears that the City’s argument “proved too much.”[5]

Instead, Texas replied that it “has ample evidence to support its claim of undue burden with respect to expenditure of its time, money and human resources in complying with the pre-litigation preservation request.”  2007 WL 4835764.  It argued that the court should hypothetically assume that the City had filed suit.  Texas wrote:

Specifically, the pre-litigation preservation letter requests the preservation of documents related to the proposed tolling of State Highway 121 (“SH 121”) and warns of “potential litigation against the Texas Department of Transportation and/or Federal Highway Administration.” … The State, in its original petition, has demonstrated a real controversy because of the burden of the federal evidentiary rules and the lack of relief for a pre-suit litigation preservation letter. The State established the immediacy and reality of the concerns prompting its lawsuit. The State is wasting time, money and resources preserving information for a lawsuit that is planned but not yet filed, but the Federal Rules of Evidence [sic] do not provide a course of protection over a general, broad preservation hold. The situation is not abstract or hypothetical; it is one causing measurable damage. The letter required immediate action by the State; it didn’t merely insinuate that a lawsuit would be filed if the City didn’t like the outcome of the environmental documentation process. The issues can presently be litigated and are not merely an academic exercise….  The State has received a specific threat of suit, as well as a specific request under the new Rules to retain information that has resulted in immediate harm…. The injuries in terms of time, money and resource expenditure are occurring now and will continue ad infinitum until the City either agrees to narrow the scope of its request or retracts its request.

Texas sought a declaratory judgment.  In pertinent part, the Declaratory Judgment Act, 28 U.S.C. §2201(a), states: “In a case of actual controversy within its jurisdiction … any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.”

The court found that Texas’s declaratory judgment claim was not justiciable or ripe:

Notably, it is not the City’s potential claims regarding the tollway project that forms the basis of the State’s declaratory judgment action. Rather, the State seeks a declaratory judgment as to how rules of discovery and procedure might be applied by the Court to its preservation of documents in that potential suit. According to the State, it is “seeking a declaration of its rights under the new federal discovery rules, Federal Rules of Civil Procedure (“Rules”) 26(f) and 34 and “a declaratory judgment as to the interpretation and application of Rules 26(f) and 34, pertaining to the preservation of electronic documents.” Rule 26(f) deals with planning for discovery during a lawsuit, including conferences between the parties regarding the preservation of discoverable information and the disclosure and discovery of electronically stored information. See FED. R. CIV. P. 26. Rule 34 addresses the production of documents including the production of electronically stored data and the procedures to object to a document request during a suit. See FED. R. CIV. P. 34. As a result of the City’s litigation hold letter, the State asks this Court to determine “[w]hether it is a violation of Rules 26(f) and 34 to require an entity to broadly preserve and retain any and all electronic documents based on a required [sic] made before suit is filed.”

2008 WL 828055, at *3 (emphasis added; citations omitted).

The City of Frisco court then decided that “the facts here are not sufficiently immediate to establish an actual controversy between the City and the State.  Neither the letter nor any of the facts alleged by Plaintiff rise to the level of controversy sufficient to confer jurisdiction. The letter only states that potential exists for litigation regarding the tollroad project. It does not articulate a substantial controversy of immediacy and reality.”   2008 WL 828055, at *3 (internal citations and quotations omitted). The issue not having been presented, the City of Frisco court did not address whether the common law duty to preserve had been triggered in the absence of reasonable anticipation of litigation.[6]

In closing, the court wrote: “The Court encourages both parties to handle the preservation of documents in response to their respective litigation holds in such good faith. The Court declines, however, to intervene now and issue an advisory opinion as to what actions by the State would constitute good faith as to the City’s request.”

In short, Frisco established a pre-litigation “free for all zone.”  Frisco is unpublished and has not been cited by any other court.

Cooperation is, of course, necessary and  cooperation is often ordered by courts.  Plaintiff’s Complaint and motion papers contain some interesting allegations not discussed in the opinion.  2007 WL 4835762.  In ¶6, Texas alleged:

[S]ince [the City’s preservation] request, the City and its attorney has failed to respond to requests from TxDOT to meet and confer, as required under Rule 26(f) of the Federal Rules of Civil Procedure, on the specific subject matter or specific claims that it might assert in litigation and to attempt to reach an agreement on the extent and scope of the requested litigation hold. The State has attempted to comply with this general litigation hold, but it is extremely burdensome and expensive without specific guidance as to the documents and information that it would encompass. [emphasis added].

Texas described several specific efforts it made to confer with opposing counsel in person or via email.  However, it alleged that plaintiff “did not feel that a meeting is necessary at this time because TxDOT has taken steps to preserve electronic data and because litigation has not yet commenced.” Id., ¶15.  After that rebuff, Texas tried again and plaintiff did not respond.  Then, Texas sued, alleging that its “only recourse against this expensive and undue burden is now through this declaratory judgment action in this Court.”  Id., ¶15.[7]

Texas also alleged that the toll project had several phases and the City’s request was not limited by Control-Section-Job numbers.  Id., ¶11.  It wrote that it had “taken extraordinary actions to ensure protection of all possibly relevant information, including the sequestration and storage of tapes containing electronically stored information.”  Id., ¶12.

The City requested all electronic data associated with the SH 121 toll project, as described by [the City’s attorney’s] letter, including all electronic documents, emails, history files, system preferences, logs of email history and usage, and any graphical image files; all communications between TxDOT and the company Cintra; all communications with the City of Frisco; all communications related to the SH 121 toll project, as described by [the City’s attorney’s] letter, between TxDOT and the Regional Transportation Council, the Texas Transportation Commission, the Office of Governor Rick Perry or any member or staff member of the Texas Legislature.

Id., ¶6.  Texas alleged: “As of the date of filing of this Motion, TxDOT has already spent hundreds of hours working to ensure that the documents listed in the litigation hold notice have been preserved.” Id., ¶13.  It described steps it took to implement the litigation hold.  Id., ¶¶13-14.

In its response to the motion to dismiss, Texas argued: “The City also asserts that the State’s claims are not ripe for adjudication. If ever an issue was fit for decision it is this issue – whether it is a violation of Rules 26(f) and 34 to require an entity to broadly preserve and retain any and all electronic documents based on a request made before suit is filed.” 2007 WL 4835764 (emphasis in original).  See Requests for “Any and All” Documents Are Obsolete.  Texas responded to the ripeness challenge:

The City argues this matter is not ripe because no lawsuit has been filed and that the letter prompting this lawsuit “does not even rise to the level of ‘saber rattling.’”…. The State has received a specific threat of suit, as well as a specific request under the new Rules to retain information that has resulted in immediate harm…. [H]ere we are well beyond rattling, the saber has been unsheathed and swung inasmuch as the State has been forced to incur immediate expense and burden resulting in immediate harm….  The State is being encumbered by the federal discovery rules governing the preservation of electronically stored information in anticipation of threatened litigation. The litigation threat is not merely hypothetical as the City insists. Indeed if the threat is truly hypothetical, the pre-litigation preservation would not have been requested.

2007 WL 4835764 (emphasis added).

Nevertheless, the decision in City of Frisco closed the declaratory judgment door:

As vividly demonstrated by Texas v. City of Frisco, there is no option to seek early court guidance when disputes arise.

Thomas Y. Allman, “Preservation Uncertainty Revisited: Addressing Spoliation by Rulemaking,” 56 The Advoc. (Texas) 25, 27 (2011); accord Theodore C. Hirt, “The Quest for ‘Proportionality’ in Electronic Discovery-Moving from Theory to Reality in Civil Litigation,” 5 Fed. Cts. L. Rev. 171, 200 n. 74 (2011)(“Because there is no litigation pending, the parties cannot secure an adjudication of their disagreements over preservation.”).[8]

This leaves potential litigants in a “free for all zone”:

Given the difficulty in determining the scope of the duty to preserve, and when it has triggered, as well as the potential adverse repercussions of getting these decisions wrong, a litigant may have considered filing a declaratory judgment action with the court to get clarity on these issues. However, in State v. City of Frisco, the court stated that this option was unavailable for litigants.

See Duty To Preserve, Elect. Disc. L. & Pract., § 3.01 (Wolters Kluwer, C.C.H.), 2015 WL 5622236 (2021).  The bottom line is that Frisco leaves potential litigants with no judicial umpire, stuck in the free for all zone with scant guidance.

Did City of Frisco reach the right result?

The City’s argument that its letter asserting “potential” litigation “does not rise to the level of a ‘specific threat of suit,’” 2007 WL 4835765, lacked merit.  If the City’s preservation demand did not create reasonable anticipation of litigation, Texas had no common law preservation duty.

The declaratory judgment analysis is tougher.

• On the one hand, if every dispute over the scope of the duty to preserve could be presented in a declaratory judgment action, the courts would be swamped. City of Frisco makes sense.[9]
• On the other hand, under §2201(a), if there is “an actual controversy” within the court’s jurisdiction, a declaration may be requested “whether or not further relief is or could be sought.”[10]

My guess is that overworked courts are likely to follow City of Frisco.  My proposed “solution” is Some Tactical Options for Businesses Faced With Pre-Litigation Preservation Demands.

History is important.

________

[1] “By definition, for example, a plaintiff anticipates litigation before it is commenced. That is often also the case for potential defendants.” M. Berman and A. Shelton in “Electronically Stored Information in Maryland Courts” (Md. State Bar Ass’n. 2020), Ch. 9, 162.

[2] M. Berman and A. Shelton in “Electronically Stored Information in Maryland Courts (Md. State Bar Ass’n. 2020), Ch. 9, 162 (no umpire). “[A]t that pre-litigation stage, there is no court and no judge from whom to seek guidance as to the scope of the duty.” Id. at 162.

[3] See The Hon. Paul W. Grimm, M. Berman, et al., “Proportionality in the Post-Hoc Analysis of Pre-Litigation Preservation Decisions,” 37 U. Balt. L. Rev. 381, 392-93 (2008)(quoting Judge Scheindlin).

[4] R. Hedges, “Electronic Discovery: Trends And Developments Under The Federal Rules Of Civil Procedure And Beyond© (Powerpoint),” 2020 WL 6591756 (2020).

[5] Plaintiff wrote: “The Complaint admits that no litigation exists between the parties. However, the Plaintiff hypothesizes that a suit will be filed in federal court which allegedly will involve the federal Administrative Procedures Act and the National Environmental Policy Act. This pleading is merely conjectural and is not a factual recitation. No demands have been made by Frisco relating to either of these statutes and Frisco has not stated to the State that it will file suit in federal court.”  2007 WL 4835763.

[6] Alternatively, the court determined that the complaint did not evidence any concrete or developed disagreement regarding preservation. 2008 WL 828055, at *3.

[7] Texas submitted an affidavit stating, “attached hereto are 31 pages, marked as Exhibits A through K, records of Correspondence, including emails and letters, between TxDOT and [name removed], attorney for the City of Frisco, and between TxDOT employees and consultants pertaining to the requested SH 121 toll project Litigation Hold.”

[8] In n. 47, Mr. Allman cited Rules Comm. Memo, 51 at n. 61 (“Do we need anything more than a Committee Note to recognize that it is difficult to seek guidance from a court before there is a pending action?”).  Mr. Allman has also written that:

“The [Advisory Committee ] Note [to Rule 37] does not explain how pre-litigation guidance may be secured. Cf. May 2014 RULES REPORT, supra note 9, at 59 (‘[u]ntil litigation commences, reference to the court may not be possible’).

Thomas Y. Allman, “The 2015 Civil Rules Package As Transmitted to Congress,” 16 Sedona Conf. J. 1, 54 (2015).  He notes that: “The Conference Committee Report endorsed the possibility of enacting ‘more explicit provisions’ for dealing with preservation issues in Rule 26(c), ‘possibly including preservation before an action is filed.’”  Thomas Y. Allman, “Preservation Rulemaking After the 2010 Litigation Conference,” 11 Sedona Conf. J. 217, 220 (2010)

[9] For example: “The courts also have held that it is not one of the purposes of the declaratory judgments act to enable a prospective negligence action defendant to obtain a declaration of nonliability.”  Wright & Miller, 10B Fed. Prac. & Proc. Civ. § 2765 (4th ed.).

[10] City of Frisco’s justiciability and ripeness holding defeated jurisdiction.