The First Court of Appeals of Texas Limits Scope of Special Master Authority in eDiscovery

In a very troubling opinion, the First Court of Appeals of Texas has held that providing a special master with unrestricted access to all documents on a hard drive and discretion to employ or modify search terms is impermissible when discovery is ordered in a special appearance context.

In In re Howard K. Stern, No. 01-09-00438-CV, (Tex. App.—Houston [1st Dist.] August 25, 2010) celebrity Anna Nicole Smith’s mother, Virgie Arthur, alleged in an underlying lawsuit that she had been defamed by the relator, Howard K. Stern, and others who conspired with him to defame her. Arthur alleged that Stern’s actions damaged her ability to gain custody and visitation of her granddaughter. Stern, Smith’s former attorney and companion, filed a special appearance in which he denied all bases for personal jurisdiction in Texas. Arthur alleged that a Texas resident acted as Stern’s agent and because of this, personal jurisdiction attached to Stern. Stern objected to discovery beyond communications relevant to the establishment of personal jurisdiction and agreed to provide Arthur with e-mails from October 12th, 2006 to March 14th, 2008. Stern’s counsel stated that due to the type of email provider used by Stern, no emails would exist on his personal computer or hard drive, but offered to file a subpoena with Stern’s email provider, Yahoo! Business, in order to obtain the relevant emails maintained on the company’s server. Arthur then supplemented an earlier motion to compel by requesting that Stern be ordered to submit his “computers, external hard drives, jump drives, and other such electronic media” to a forensic examiner appointed by the trial court. Prior to resolution of Stern’s special appearance, the trial court ordered him to produce his computer hard drive to a special master for forensic examination. Stern then filed a petition for a writ of mandamus challenging the scope of the discovery ordered both in general and as ordered prior to the hearing on his special appearance.

The trial court’s May 11, 2009 order appointed a special master and forensic expert, providing in part:

(3) To facilitate production of such documents . . . the Court previously appointed . . . a Special Master . . . to conduct an independent forensic examination of relevant computer hard drives, external hard drives, jump drives, and other such repositories of electronic communications. . . . That appointment now is extended to include examination of Howard K. Stern’s electronic media.

(4) To facilitate the work of the Special Master, this Court ORDERS Defendant Howard K. Stern to contact the Special Master . . . within 10 days of the signing of this order to make arrangements for capture and examination of Howard K. Stern’s electronic media.

(5) At the option and expense of Defendant Howard K. Stern, [the] Special Master . . . may travel to California, where the electronic media is currently located, to examine and copy the electronic media. If Stern chooses this option, he will pay in advance for [the Special Master]’s time, portal-to-portal, 24-hours per day, at the rate of $250 per hour. Defendant Howard K. Stern will also pay for First Class or Business Class airfare and a good hotel. . . .

(6) Also at the option and expense of Defendant Howard K. Stern, [the] Special Master . . . shall produce a copy of Defendant Howard K. Stern’s electronic media and present that copy to the computer forensic expert of Defendant Howard K. Stern’s choosing. If Defendant Howard K. Stern chooses this option, [the special master] will hold the original of Defendant Howard K. Stern’s electronic media without viewing its contents for a period of 10 days after delivery of the copy to Defendant Stern’s expert to allow that expert an opportunity to view the contents first. At the expiration of that 10-day period, [the] Special Master . . . will begin forensic examination of the electronic media and shall:

a. have discretion to employ or to modify search terms;

b. capture all remaining electronic communications, including but not limited to emails to or from the persons, entities and email addresses listed in parts 1 and 3 of Plaintiff’s Requests for Production, and submit them to Defendant Howard K. Stern for privilege review prior to production.

(7) Within 14 days after receipt of the captured documents from the Special Master . . . Defendant Howard K. Stern shall produce a privilege log to [the] Special Master . . . and to [Arthur] listing all documents submitted by [the] Special Master . . . to Defendant Howard K. Stern, which Defendant Howard K. Stern has not produced to [Arthur] and the reasons for withholding the documents from production. [The] Special Master . . . shall then produce all documents within the scope of paragraph one above that are not listed on the privilege log to [Arthur]. . . .

(8) [Arthur] shall have an opportunity to challenge any designation listed on the log and, in the event that a designation is challenged, [the] Special Master . . . shall submit the log, along with the disputed document(s), to the Court for in camera inspection.

. . . .

(10) No waiver of privilege or confidentiality occurs if any otherwise privileged or confidential information is observed by [the] Special Master . . . during the imaging and review process.

(11) [The] Special Master . . . is expressly prohibited from using or disclosing any information obtained through the imaging and examination of Defendant Howard K. Stern’s electronic media other than providing to Defendant Howard K. Stern documents captured during his examination, except as specified in this order.

The Court of Appeals held that the trial court abused its discretion by ordering discovery without a showing that the discovery was relevant to the jurisdictional facts because the plain language of Texas Rule of Civil Procedure 120(a)(3) authorizes discovery prior to a ruling on a special appearance only with respect to those facts essential to justify an opposition to the special appearance. According to the court, the rule does not provide for the postponement of a special appearance hearing in order to allow a party to obtain discovery that is irrelevant to establishing jurisdictional facts.

The court also held that the trial court’s discovery order violated Texas Rules of Civil Procedure 192.3, 192.4, 193, and 196.4 because the order was not narrowly tailored to avoid the inclusion of information irrelevant to the establishment of jurisdiction, and was overbroad. The Court of Appeals stated the lower court’s order required what amounted to unrestricted production from Stern’s hard drive and authorized “an impermissible “fishing expedition.” See K Mart Corp., 937 S.W.2d at 431; Hall, 909 S.W.2d at 492; Texaco, Inc., 898 S.W.2d at 815.”

According to the Court of Appeals, the trial court failed to follow the procedures required by Texas Rule of Civil Procedure 171 before appointing the Special Master. The court further stated:

We have previously held, in an opinion on another petition for mandamus arising out of the same underlying case, that the failure to follow the requirements of Rule 171 in appointing a special master is an abuse of discretion. See In re Harris, No. 01-09-00771-CV, 2010 WL 2650638, at *16–18 (Tex. App.—Houston [1st Dist.] July 1, 2010, orig. proceeding). These requirements were not followed in this case, as they were not in In re Harris. See id.

The court appears to have ignored the permissive language in Rule 171, however:

The order of references to the master may specify or limit his powers, and may direct him to report only upon particular issues, or to do or perform particular acts, or to receive and report evidence only and may fix the time and place for beginning and closing the hearings, and for the filing of the master’s report. [emphasis added.]

The Court of Appeals stated that Arthur failed to show that relevant data retrieval from Stern’s hard drive was feasible as required by In re Weekley Homes. (295 S.W.3d at 318.) The court also ruled that the trial court erred by providing the Special Master and forensic examiner with full authority to sort through Stern’s hard drive despite that Rule 171 states: “the master has and shall exercise the power . . . to do all acts and take all measures necessary or proper for the efficient performance of his duties under the order. He may require the production before him of evidence upon all matters embraced in the reference, including the production of books, papers, vouchers, documents and other writings applicable thereto.”

According to the court, the lower court’s discovery order directly conflicted with the directive of In re Weekley Homes. The court stated:

[The Special Master] was instructed to image the hard drive for relevant documents, then to provide a list of these documents to Stern from which to construct a privilege log. This general procedure has been adopted by Texas courts. See In re Honza, 242 S.W.3d 578, 582 (Tex. App.—Waco 2008, orig. proceeding). However, [the Special Master] was given not only unrestricted access to all documents on Stern’s hard drive but “discretion to employ or modify search terms.” Because the order does not supply search terms, [the Special Master] was given virtually free reign to plumb Stern’s hard drive. Cf. In re Honza, 242 S.W.3d at 583 (search explicitly limited to two documents). Granting a special master carte blanche authorization to sort through Stern’s computer hard drive clearly violated the longstanding prohibition against impermissible “fishing expeditions.” See Tex. R. Civ. P. 192.4; In re Weekley Homes, 295 S.W.3d at 317–18; Sanderson, 937 S.W.2d at 431.

Despite the plain language of Rule 171, the Court of Appeals held the “trial court clearly abused its discretion in appointing . . . [a] special master and forensic examiner with power to search Stern’s computer hard drive for documents and in ordering Stern to turn his hard drive over to him.”

Stern’s petition for a writ of mandamus was conditionally granted, the trial court’s discovery order was vacated and Arthur’s motion for rehearing was denied. Additionally, the July 12, 2010 opinion of the First Court of Appeals of Texas was withdrawn and the August 25, 2010 opinion was issued in its place.

In July, guest blogger Peter S. Vogel also discussed this issue in his eDiscovery Update.

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