At That Time: The Dynamo Case on Predictive Coding

Hal Marcus
September 25, 2014

On September 16, I posted about the impact of timing on predictive coding in light of recent caselaw. Timing indeed being everything, an intriguing new opinion on this point was handed down the very next day. In Dynamo Holdings v. Comm’r, the IRS Commissioner sought to compel production of the contents of backup tapes containing at least several million documents. It objected to the producing parties’ request to use predictive coding to review them, calling it an “unproven technology.” In his opinion, Judge Ronald Buch rejects the IRS’ motion, detailing the substantial judicial and industry acceptance of predictive coding. He emphasizes the discretion that producing parties have in conducting document review, bluntly questioning why the use of predictive coding should even be before the court:

[T]he Court is not normally in the business of dictating to parties the process that they should use when responding to discovery. If our focus were on paper discovery, we would not (for example) be dictating to a party the manner in which it should review documents for responsiveness or privilege, such as whether that review should be done by a paralegal, a junior attorney, or a senior attorney. Yet that is, in essence, what the parties are asking the Court to consider–whether document review should be done by humans or with the assistance of computers.

Judge Buch immediately follows this forthright statement about discretion with an equally forceful statement about timing, declaring that the IRS’s opportunity to raise challenges will occur after production:

Respondent fears an incomplete response to his discovery. If respondent believes that the ultimate discovery response is incomplete and can support that belief, he can file another motion to compel at that time.

Later, in a seemingly pro forma effort to distinguish the recent Progressive opinion, Judge Buch arguably steps into curious territory touching on the oft-cited values of transparency and cooperation:

Where, as here, petitioners…represent to the Court that they will retain electronic discovery experts to meet with respondent’s counsel or his experts to conduct a search acceptable to respondent, we see no reason petitioners should not be allowed to use predictive coding to respond to respondent’s discovery request.

There has apparently been no cooperation to date, as the IRS objected to the use of predictive coding altogether. Nor has a “search” (apparently referring to a predictive coding workflow) been found that is “acceptable to respondent.” More to the point, the judge’s earlier language strongly emphasizes that review methodology is up to the producing parties. So are the parties simply being told to work it out? Possibly, but lest there be any doubt about the court’s intent, the appropriate recourse for the IRS Commissioner is firmly restated at the closing:

If, after reviewing the results, respondent believes that the response to the discovery request is incomplete, he may file a motion to compel at that time.

Dynamo provides yet another jolt of support for the discretion of producing parties — consistent with Sedona Principle Six and other case authority — to leverage predictive coding as they see fit, so long as they are prepared to defend their productions later in light of the guiding principles of reasonableness and proportionality. So, after Dynamo, when should you fight for predictive coding? The best answer may still be: When you can win. Where upfront cooperation is unlikely, consider leveraging predictive coding for a prioritized review, i.e., a workflow where likely relevant documents are prioritized for review, but there is no predetermined number of documents that will be reviewed. This strategy fits well within the discretion described in Dynamo and provides a range of benefits, even if you ultimately decide to put eyes on every document. Implementing a prioritized review strategy lets you see what the data tells you, so you can make an informed choice to stop reviewing if and when you deem appropriate and defensible. With a full report of your review metrics, iteration trends, and validation test results in hand, you’ll be well equipped for any battle that may ensue at that time. Three important words: “At that time.”