E-Discovery Bytes : E-Discovery Lawyer & Attorney : Quarles & Brady Law Firm : Electronic Discovery, Data Preservation, Conversion, Computer Forensics

Two Model Rules from the E-discovery-Kings under the sky:
Five or eight custodians for Tech-Lords in their courts of stone;
The vast production of metadata, perhaps doomed to die;
Five or ten search terms for the Dark Lord's e-mail on his dark throne
In the Land of Litigants where the patent Trolls lie.
But is there One Ring to rule them all? One Ring to find them?
One Ring to search them all and then produce and bind them,
In the Land of Litigants where patent cases lie?

"It's a dangerous business, Frodo, going out of your door . . .You step into the Road, and if you don't keep your feet, there is no knowing where you might be swept off to.”
              -- J.R.R. Tolkien, Lord of the Rings: The Fellowship of the Ring

Somewhere along the road of litigation and technology, e-discovery's All-Seeing Eye grew bigger than its stomach. Overall, only .0074% of documents requested and produced in litigation (less than 1 in 10,000) wind up on trial exhibit lists.  Still less are actually used. For e-mail, hotly demanded due to the hopes of finding a smoking gun in informal and hastily-sent communications, the proportion is even lower. This trend is especially concerning in intellectual property litigation -- patent cases in particular.

To combat this trend, two sets of courts -- let's call them the Fellowship of the E-Discovery Kings -- recently set on journeys to narrow the range of the All-Seeing Eye in patent litigation, issuing similar and helpful Model Orders for e-discovery to curtail mass and unnecessary production.  But whether there is really One Ring to Rule Them All when it comes to search methodologies -- one workable solution -- may not be as clear as the E-Discovery Kings propose.

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Most of you know the story: either the plaintiff wants everything under the sun from the defendant as part of discovery but has no documents of its own to produce, or two big companies hit each other with unreasonable discovery requests to make the other side settle an otherwise meritorious case.

To address both opportunities for abuse, two new cases put out the message, “If you make unreasonable demands, you are going to have to pay for it.”

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There’s good news in the world of electronic discovery. This February in New York, Magistrate Judge Andrew Peck and counsel for the parties in Da Silva Moore v. Publicis Groupe gave us a magnificent e-discovery lesson and pushed open the door for the utilization of advanced search technologies -- namely predictive coding, an increasingly used methodology of computer-assisted review.

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It's every litigator's fear - inadvertent disclosure of privileged documents leading to a court finding of waiver of privilege.  A recent Illinois case shows just how easy it is to waive the privilege if you do not stay on top of the technological aspects of your production, even after conducting a complete review and indentifying privileged documents.

In Thorncreek Apartments III, LLC v. Village of Park Forest, 2011 WL 3489828 (N.D. Ill. Aug. 9, 2011), the court was faced with a defense counsel who "thought" that merely marking documents as privileged in an electronic database would keep them safe from production. Unfortunately for counsel, every document that had been identified as privileged was produced to opposing counsel. To make matters worse, defense counsel did not learn of the accidental disclosure for nearly nine months of discovery. He then waited an additional four months to produce a privilege log to opposing counsel. Not surprisingly, the court held that while some of documents were privileged when originally created, defense counsel had waived privilege by his actions, or more precisely his inaction.

Here are some key points from the case all litigators should take to heart when engaging in document production:
 

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As interest in e-Discovery continues to grow, there's no question what's the driving force that grabs the headlines. Sanctions, of course.   It is the water cooler of the ESI world.  Sanctions capture clients' interest, and motivates unwitting attorneys to pay attention to the growing field that is e-discovery. And while it may be known that significant sanctions have recently been imposed for e-discovery violations, what is missing is perspective. How often are sanctions requested? When will they be imposed? How severe will the punishment be? What did the client and/or attorney do wrong?

A recent study by three King & Spalding attorneys that was published in the Duke Law Journal, attempts to provide some of this perspective. A full copy of the article can be found here. They identified 401 e-discovery cases where sanctions were sought dating back to the early 1980's and through January 1, 2010. Of those cases, sanctions were awarded in 230 cases.

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"You ain't never had a friend like me." Lyric by Howard Ashman from Disney’s Aladdin,© 1992

     Wanna be friends with a judge? Well, he might end up “friending” you on Facebook as part of an in-camera review of your page, if something you post may be relevant to a lawsuit.

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Never assume that the other side will be paying for your e-discovery costs.  A New York state court recently rejected a party's crafty strategy of (a) telling its opposition in writing that it expected them to pay for the costs of production; and (b) taking the opposition's failure to respond as acquiescence to a $67,000 bill.

Plaintiffs filed suit  for breach of contract in a construction case, Silverman v. LeMadre Development, LLC et al., No. 08-603231 (N.Y. Sup. Ct. 2008). Plaintiffs requested  that the defendants produce electronically-stored information (ESI) as part of the discovery process. In response, defendants sent a letter in July 2010 reminding plaintiffs' of a so-called obligation to pay for costs incurred in producing ESI.  Defendants' letter asked the plaintiffs to respond within two business days "so that [the defendants] can proceed as promptly as possible with [plaintiffs'] demand."

Plaintiffs did not reply to the letter.  Nonetheless, defendants went ahead and produced more than 7,000 pages of ESI at the cost of $67,000. Two months later, they filed a motion to compel the plaintiffs to pay for the costs on the grounds that the plaintiffs' silence constituted an agreement to do so.

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Baseball is almost the only orderly thing in a very unorderly world. If you get three strikes, even the best lawyer in the world can't get you off.       -- Bill Veeck                                   

While the law cannot come to the aid of a strikeout on the diamond, it apparently can rule on the muscles behind the bats. Baseball currently stands as not only the national pastime, but the center of a steroid abuse scandal that still reverberates through the hallowed walls of the nation's baseball stadiums and the musty courtrooms of the Ninth Circuit in California. The two venues converged when the Ninth Circuit's Court of Appeals retreated from an August 2009 e-discovery ruling against government prosecutors, in an offshoot of the Bay Area Laboratory Co-Operative (BALCO) steroid abuse scandal.

In the BALCO case, government agents had search warrants for the confidential medical records of 10 baseball players. As reported in an article in Crime in the Suites, that original ruling spelled out tight controls on what methods government agents could use to review and retain electronic information seized during the BALCO criminal investigation.  In the course of executing the warrants, medical records of hundreds of other players were obtained and used to obtain more search warrants. The government argued that those records came into "plain view" and thus were usable.

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This article was published by Wendy Akbar and Bill Hamilton.

Remember the days before the computer, the typewriter, the printing press, and even carbon paper? The days when, to copy a book, one needed to sit down and re-write it by hand? Every letter of every word of every sentence-dappled paragraph, had to be painstakingly copied one by one. With all the technology available today, no publisher would ever consider copying a book by hand rather than re-printing a copy saved on the computer. To do so would be a waste of time -- a return to the Dark Ages.

When it comes to e-discovery, unfortunately, the Dark Ages still occasionally guest stars in modern-day electronically stored information (ESI) retrieval and production. The dangers of being such an e-discovery ostrich were most recently highlighted in Multiven, Inc. v. Cisco Systems, 2010 WL 2813618 (N.D. Cal. July 9, 2010). Plaintiff Multiven, along with the two counterclaim defendants, originally elected to undertake a manual review of the full set of voluminous ESI it possessed prior to production. Sound conscientious? Not exactly. It means they turned the clock back about 15 years (in e-discovery time, akin to 150 years) and:

(1) Refused to use an outside vendor to help organize ESI information;
(2) Refused to utilize any search terms to narrow the "giant mass" of data to be reviewed;
(3) Instead used approximately five attorneys for six months to a year, to manually review every unfiltered page of "that giant mass" for responsive documents.

Why? They wanted to save on cost, particularly the expense of hiring an outside vendor to help whittle down potentially responsive information. Perhaps they adopted a manual review for other strategic reasons. (Never mind, of course, the hourly billing rate of five attorneys doing eight hours of document review five days a week for over six months, which more likely than not was more expensive than hiring a vendor to narrow the "giant mass" to a more reasonable review load for the attorneys).   The end result, however, was not exactly what was intended . . .
 

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 Live in such a way that you would not be ashamed to sell your parrot to the town gossip.

                                                                              -- Will Rogers

When reviewing and establishing a document retention policy for your business, it pays to pay attention to what constitutes gossip - or, as we call it, hearsay - in the electronic world.  Because sometimes, even e-hearsay can make it into the courtroom.

In a blog posted in WSJ Digits, Ethan Smith reported that thirteen record labels sued the on-line peer-to-peer music sharing program LimeWire for copyright infringement and related infractions. In May 2010, the Court faced Defendant's motion to suppress electronic evidence, such as exhibits of LimeWire's email chains, online exchanges and internet forum postings, on the grounds that it was inadmissable as hearsay.

The Court denied Defendant's motion . . .

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Federal district court judge Shira Scheindlin -- who penned five seminal opinions in the case of Zubulake v. UBS Warburg -- has weighed in again on a litigant's duty to preserve electronically stored information (“ESI”) relevant to pending or reasonably foreseeable litigation. She even titled her opinion, "Zubulake Revisited: Six Years Later."

In Pension Committee of University of Montreal Pension Plan v. Banc of American Securities, LLC 05-CIV-9016, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010), Judge Scheindlin sanctioned thirteen plaintiff investors for their failure to preserve ESI.  Along the way, she sketched a general framework for determining how much to blame a litigant for its failure to preserve ESI and what sanctions to impose when a litigant's conduct is blameworthy.

But the opinion will be more than just a warning. If Zubulake's reception is any guide, the analytical framework laid out in Pension Committee will greatly influence judicial thinking about the discovery of ESI.  Practitioners would be wise to be familiar with its contents. 
 

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We did it last year for two thousand and eight:
A review of the year’s e-discovery “greats.”
Here’s a more recent summary wholly in rhyme
To get you all up-to-date on two thousand and nine.

As a whole, common themes have begun to emerge,
Due to problems that have spurred many judges to urge
More cooperation and much earlier e-discovery plans,
And clarity on native-metadata versus PDF scans.
Numerous sanctions resulted, the courts raising their swords
Of adverse inference, default judgment and monetary awards.

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Arizona is suddenly on the cutting edge of e-discovery law, with a new decision from the state's supreme court. 

In what freedom-of-information advocates hailed as a groundbreaking victory, the Arizona high court held Thursday that when a public entity maintains a public record in electronic format, any attached metadata also constitutes a public record subject to disclosure.

Writing for the unanimous Court, Justice Scott Bales stated that "[i]t would be illogical, and contrary to the policy of openness underlying the public records laws, to conclude that public entities can withhold information embedded in an electronic document, such as the date of creation, while they would be required to produce the same information if it were written manually on a paper public record."

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"Because it is there" may be a perfectly adequate response to the question of why you want to scale a mountain (although it invites the follow-ups of "are you crazy?" and "does your spouse know you spent four thousand dollars on climbing gear?"). It does not, however, cut it when a judge asks why you want a mountain of metadata. 

The court in Dahl v. Bain Capital Partners, LLC, 2009 U.S. Dist. LEXIS 52551 (D. Mass. June 22, 2009) reminds us of this fact.  In that case, a requesting party sought every last scrap of metadata associated with the electronically stored information produced by the other side. The producing party refused, instead offering to hand over just 12 fields of metadata. Ignoring the inevitable follow-up question, "Does your client know you spent four thousand dollars on a discovery dispute over metadata?", the requesting party took the issue before the court. 

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It would be so nice if something made sense for a change!

- Alice, “Alice’s Adventures in Wonderland” by Lewis Carroll
 

What happens when, out of nowhere, the “other side” in a litigation matter wants electronic information during discovery not from you, but from a third-party who has worked directly with your company? Yikes! What about all that confidential information you provided them, never imagining that anyone else would have access to such electronic information? Alternatively, what if those third parties have purged their files and no longer have the requested information? Is there a duty to maintain electronic documentation which is out of your immediate control? 

The issue was addressed by United States Magistrate Judge Paul W. Grimm in his decision Goodman v. Praxair Servs., Inc., 2009 WL 1955805 (D. Md. July 7, 2009), where the Plaintiff asked that consultants to Praxair Services turn over their electronic documents in discovery.  The Plaintiff alleged that the Defendants violated their duty to preserve evidence when they failed to implement a litigation hold on the third party, resulting in a significant loss of data, including the contents of hard drives and emails relevant to the dispute at issue.

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It is rare to find one of those shared tenets that defy all cultural, geographic, and chronological boundaries -- some fundamental underpinning of life found everywhere from the days of the caveman to the modern age. One we can all agree on, however, is that a professional's worth is and always has been commensurate with his or her experience. The senior dragon slayer of King Arthur's round table received a shinier suit of armor than the new guy. The master caveman's time and worth rose above the apprentice's. And in present day law firm culture, the value of the Associate is often dwarfed by that of the Senior Partner in the cozy corner office.

Electronic discovery, however, has turned this fundamental dynamic on its head. In most areas of the law, change is effected in small increments, opinion by opinion and statute by statute. Sage senior lawyers add to their existing knowledge by keeping up on recent developments -- no fundamental change in thinking is required. Electronic discovery, however, has forced a radical, qualitative change in almost every aspect of how discovery is conducted. Heck, an entire Federal Rule of Civil Procedure was rewritten to account for it. And the dreaded "it" -- that virtual elephant in the room -- is everywhere. As Judge Shira Scheindlin of the Southern District of New York observed in an interview, "We used to say there's e-discovery as if it was a subset of all discovery. But now there's no other discovery."

This ever-expanding nature of e-discovery is carving out a unique dynamic in the three-ring circus that is the Law Firm and the in-house legal department. In short, the problem is that the two parts of the equation needed to master e-discovery (expertise in discovery law and procedure, and expertise in electronic media) are currently located in two separate circus rings: the Ringmaster's and the Clown's.
 

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Lawyers regularly receive emails from clients that contain earlier email threads that are forwarded in the course of seeking legal advice. Sometimes these earlier threads appear as attachments. Other times, they are embedded beneath the content of the most recent thread. Regardless of the form of the threads, parties involved in litigation will often seek to withhold the entire chain from the opposing party. The problem lies in determining how to properly log an email chain to preserve the privilege that attaches to the earlier email threads when they are forwarded along with a privileged email.

In a recently published opinion from the Eastern District of Pennsylvania, the court found that each individual thread must be logged. Rhoads Industries, Inc. v. Building Materials Corp. of America, 254 F.R.D. 238, 241 (E.D. Penn. 2008). If an underlying email is not logged, any privilege that otherwise might have attached to it is waived.  

If it doesn’t make immediate sense to you why someone might not want to log each individual thread, consider that the underlying emails probably have to be produced in their original, non-forwarded format. By comparing the log with the emails that have been produced, the opposing party can determine what emails the client forwarded to the lawyer.  Because the opposing party has access to these emails in their original format, the opposing party might be able to determine what the lawyer and client knew and when they knew it, including key facts in any dispute. 

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In yet another example of why records managers should be coordinating with legal on storage of documents, the U.S. Federal Court of Claims has held that documents archived in a manner other than the regular course of business do not comply with Rule 34 of the FRCP. 

In Ak-Chin Indian Community v. United States, 85 Fed. Cl. 397 (2009), documents stored in a different filing system than they were kept prior to transfer to storage were held not to have been kept in the ordinary course of business.  In that case, the plaintiffs were suing the government and wanted to get their hands on responsive documents kept in a bunch of boxes at the American Indian Records Repository (AIRR).  The boxes were indexed using an off-the-shelf commercial software package that "captures information about the source, files, and documents in [each] box [which information is subsequently] entered into the . . . database."  Id. at 398.  People digging around the database for, say, documents responsive to discovery requests, could run queries to search for them.  Id.  So, when served with discovery requests, the government turned to its handy database, ran a few queries to find the boxes that likely contained responsive documents, and sent the database query results along to the plaintiffs.  Id. at 399.  The plaintiffs filed a motion to compel, arguing that this didn't constitute a production of responsive documents organized and labeled by category of request as required by Rule 34 of the Rules of the U.S. Court of Federal Claims.  Id. 

Under Rule 34, "[a] party must produce documents as they are kept in the ordinary course of business or must organize and label them to correspond to the categories in the request."  Id. (quoting RCFC 34(b)(2)(E)(i)).  The Ak-Chin court held that the documents at the AIRR were not maintained in the ordinary course of business under Rule 34, because prior to transfer to the facility, they were reorganized from the filing system of the local agency offices to conform with the AIRR filing system (not wholly surprising, considering that AIRR was a records repository and records are not always in tip-top shape, organizationally-speaking, when they are first unearthed from the mess that makes up most people's filing cabinets). Id.  The court explained that "documents in storage are no longer in the usual course of business, they are kept in the usual course of storage," such that the only option under Rule 34 was to label and categorize the documents.  Id. at 400.  For documents transported to storage to still be kept in the ordinary course of business, the court said, the documents must be stored in the same way they were kept.  Id. The court was also concerned that the filing system at AIRR did not permit a meaningful review if the plaintiff was dissatisfied with the production.  Id. at 401.  Because only the boxes were indexed, not the specific documents in the boxes, the government was out of luck.  Id.

Take home message? Know just how your documents are arranged in storage in relation to how they're kept before they're retired to archives, boxes, and closets or you may incur additional costs to produce them.

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For a full understanding of the Great TIFF v. Native Debate and the dangers of choosing the wrong side, try this. Picture a bunny.

Why not? Spring is near, and Easter is only a month away. So, picture a bunny. You can cuddle it, watch its little nose twitch, listen to its heartbeat, even observe its behavior and follow it home. If you are one of those lucky creatures who speak bunny -- like computer programmers speak source code -- you can politely inquire where it's been, what it's seen and who it has spoken with.

Electronically-stored information (ESI) such as e-mails and spreadsheets, is like that living bunny. It exists in pure native form, possessing an exotic birthday suit from which can be gathered the hidden details known as metadata -- who authored the data, who sent and received it, the underlying formulas behind the numbers in an Excel spreadsheet, where files or e-mails were stored, who read or possessed them, when they were created, accessed, modified and saved. Such ESI produced by a party is fully searchable. Like the bunny, it can talk to your opponent, and tell them things.

But herein lies the nasty little secret: attorneys and their clients do not want the bunny to talk to their opponents. In fact, they would love to produce ESI in such a way that their opponents cannot communicate with the bunny. But in most cases, their opponents' requests for production specifically ask them to turn over the bunny. So what can they do?

Picture that bunny, dead. Whacked. A poor dead bunny, handed over to the other side. No pulse. No heartbeat. You can't follow a dead bunny home. You can't talk to it, and it certainly can't talk back. That dead bunny is a TIFF, or "Tagged Image File Format," like a PDF. When the bunny is snuffed and the electronic data "TIFFed" -- i.e., printed out in hard copy and then re-scanned -- it becomes dead and frozen, rather than dynamic and searchable. What you see is what you get. The hidden information, the ability to search millions of pages of text for smoking gun language, and to peek at its living history, is lost. And your opponent has no way to recreate it. There is no way for him to resuscitate that bunny. Sure, he can take a DNA test of the dead bunny: convert the tiny elements of TIFF images -- the individual letters, like the Ts, As, Gs and Cs of a double helix -- into searchable text format through optical character recognition ("OCR"). But OCR does not solve the main problem: identification of the lifeblood, the living metadata of the bunny's life history (the who, what, where, when and why) that does not appear in the TIFFs.

Still, what's wrong with this? Why not always produce ESI in TIFF rather than native metadata form? Why not always produce a dead bunny? Isn't this a perfect solution? Unfortunately, no -- as one law firm, two lawyers, and their very unhappy client just learned in Bray & Gillespie Mgmt. LLC v. Lexington Ins. Co., No. 6:07-cv-222-Orl-35 KRS (M.D. Fla. Mar. 4, 2009). In short, Lexington wanted a live bunny and requested all ESI in native format without any alteration or deletion of metadata. Its opponent Bray & Gillespie (B&G) produced a very dead bunny, and was called out by the court for doing so. And that was before B&G's counsel began lying about who killed the bunny and when.

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As a general matter, employees of corporations are aware that e-mails sent in the course of business may be read by IT support technicians for the company.  But did you know that personal e-mails sent on the job could come back to bite you in a grand jury investigation?  Henry Nicholas wasn’t – at least not until recently.  Nicholas, the billionaire co-founder and ex-CEO of Broadcom, is painfully aware that not even the marital privilege can protect incriminating e-mails sent from a work e-mail account. 

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What happens when Nineteenth Century dolls meet Twenty-First Century litigation? Sometimes - sanctions! Kvitka v. The Puffin Co, LLC, 2009 U.S. Dist. LEXIS 11214 (M.D. Pa. Feb. 13, 2009) reminds us that the failure to preserve relevant ESI can mean disaster in any litigation. Although few of us would fail to recognize the red flags posed by Ms. Kvitka's behavior in this case, it bears repeating that even the inadvertent failure to preserve ESI can fatally compromise an otherwise-valid claim or defense, even in a doll-sized case.

Nancy Kvitka had advertised her antique bisque-headed dolls in the magazine Antique Doll Collectors, published by Puffin Company, LLC, since the magazine's first issue in 1998.  In August 2005, the magazine notified Ms. Kvitka that it would no longer publish her advertisements because of a large number of complaints about her business practices, including her disparagement of other advertisers and misleading advertisements.

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Not having knowledgeable e-discovery counsel can be costly -- a lesson the Office of Federal Housing Enterprise Oversight (OFHEO) found out the hard way.  Failure to devise a comprehensive plan for responding to a third party subpoena seeking ESI ended up costing the agency over $6 million to comply with a court order, more than 9% of the agency's entire annual budget. In a rare Court of Appeals decision, In re Fannie Mae Securities Litigation, 552 F.3d 814 (D.C. Cir. January 6, 2009), the D.C. Court of Appeals affirmed the district court's order holding the OFHEO in contempt for failing to comply with a discovery deadline to which it agreed.  But it's a bit more complicated than that.

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E-discovery requests often focus on “tangible” data that exists on physical storage devices, such as e-mail messages, documents, pictures, music, video, sound clips, or application program files. But what about data that is not so tangible, such as elusively cached or transient files that exist only in integrated circuitries such as Random Access Memory (RAM)?  Is that data discoverable? And is there a duty to preserve? Courts appear to say YES, as long as a litigating party has requested it.

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Flooding the internet, they consistently accrue:
Blawgs offering e-discovery 'Year in Review's;
But these go on about facts and case histories too,
Before getting to the point of what you can and can't do.

Why not cut to the chase? Why not give it up straight?
Stripped below are the basics of two thousand and eight.
We'll start off with the general dos and the don'ts;
The haven'ts, the shouldn'ts, the emphatically won'ts.

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One of history’s most quotable women, Dorothy Parker, said, “If you don’t have anything nice to say, come sit by me.” She also said, “I don't care what is written about me, so long as it isn't true.”   

Unfortunately, few of us share Dorothy Parker’s sentiments, and with the advent of websites, blogs and other electronic storehouses of information, it has become increasingly easy to find ourselves anonymously defamed or knowingly or unknowingly defaming others. Lawsuits regarding defamation on the Internet are becoming increasingly common, and electronic discovery is critical to the prosecution and defense of such cyberspace abuse.

In one such case, Allcare Dental Management LLC v. Zrinyi, Greene, and John or Jane Does I-V, Unknown Persons, 2008 WL 4649131 (D. Idaho Oct. 20, 2008), a dental practice filed suit for defamatory statements made about their practice on a website called “Complaintsboard.com,” and also sought the identification of the anonymous posters of the statements. As part of the discovery process, they subpoenaed the provider, Cable One, seeking the identity of the Doe Defendants’ names and contact information. Since this information is protected under the Cable Communication Policy Act, disclosure of the requested information had to be requested pursuant to a court order.

In this case, the Court granted the Plaintiff’s Motion to serve their Rule 45 subpoena duces tecum on Cable One for the identity of anonymous persons who posted the alleged defamatory statements to the website, but for no other visitors to the site. The Court also required Cable One to preserve all electronically stored data responsive to the Rule 45 subpoena. Further, the Court required that a copy of its Order and the subpoena be served on all affected subscribers and/or account users, and those parties were given 14 days to file a motion to quash the subpoena. Imagine the chagrin of being served with that Order and subpoena and learning that your assumed “anonymity” is just an illusion!

The moral of this story is simple and two-fold: If you don’t have anything nice to say, don’t say it in cyberspace; and there’s no such thing as an “anonymous” posting. Or, to quote John Perry Barlow: “Relying on the government to protect your privacy is like asking a peeping tom to install your window blinds.” The illusion of online privacy is just that - an illusion.

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Although we're in the middle of winter, and the Midwest had -40 degree wind chills last week, this is the time for you to think about spring cleaning. I don't mean scrubbing floors or washing windows. Now is the time to develop a record retention policy and a litigation hold policy and then begin appropriately "cleaning house."  Micron Technology, Inc. v. Rambus, Inc., 2009 WL 54887 (D. Del. Jan. 9, 2009) shows us why it is so very important to have a litigation hold policy in place before starting that spring cleaning.

Rambus was a microchip technology company that became concerned about possible patent infringements by microchip manufacturers. It sought counsel regarding possible litigation, and counsel developed a litigation strategy. During this time, Rambus also designed and implemented a record retention policy, then held a series of "Shred Days" where many expired records were destroyed.

Micron sought a declaratory judgment from the court that its designs did not infringe on Rambus' patent.  The court held a separate trial on whether Rambus' wholesale destruction of documents pursuant to its document retention policy constituted spoliation of evidence and the appropriate sanction to be imposed on Rambus if in fact spoliation had occurred.  

In analyzing the spoliation issue, the court found that Rambus had a duty to preserve its documents once litigation became reasonably foreseeable.  According to the court,

Rambus knew or should have known, that a general implementation of the policy was inappropriate because the documents destroyed would become material at some point in the future.  Therefore, a duty to preserve potentially relevant information arose in December 1998 and any documents purged from that time forward are deemed to have been intentionally destroyed, i.e. destroyed in bad faith. 

Because Rambus' bad faith was so clear and convincing and because Rambus destroyed innumerable documents relating to all aspects of Rambus' business, the court determined that the very integrity of the litigation process had been impugned.  The court found that neither adverse jury instructions nor the preclusion of evidence nor the imposition of fees and costs on Rambus could cure the damage done by the massive document destruction.  Instead, the court delivered the ultimate sanction of all, it declared Rambus' patents involved in the lawsuit unenforceable. 

The moral of the story?  Companies must exercise extreme caution in implementing document retention policies and must strongly consider whether a "litigation hold" needs to be placed on some documents, even in cases where litigation has not been officially commenced yet.  Consequently, when you get that itch to do some spring cleaning, plan ahead so that you can protect your intellectual property and your business.

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Two e-discovery articles this week highlight a theme to remember:  no one escapes document retention and e-discovery obligations.

You think you can't lose.  The facts are on your side.  The law is on your side.  You have a slam-dunk motion for summary judgment.  Or three slam-dunk motions.  You can coast through until you prevail on the merits, right?  WRONG  Leonard Deutchman in the Pennsylvania Law Weekly looks at two of the more-famous e-discovery cases from 2008 - Qualcomm, Inc. v. Broadcom Corp. and Keithley v. The Homestore.com, Inc. - both of which demonstrate that even when you prevail on the merits, only a fool disregards her document retention and e-discovery obligations. 

In Qualcomm, the appellate court reversed an adverse judgment on the merits in the underlying patent infringement case, but  upheld the lower court's findings and rulings as to spoliation and other e-discovery violations, including sanctions imposed on counsel.  In Keithley, although the court ruled for the defendants on the merits, it adopted the magistrate judge's sanctions recommendations for spoliation of evidence and late production of discovery.  The only bright spot for defendants on the e-discovery front was that the court denied the plaintiffs' motions for adverse inference instructions, solely on the grounds that defendants' victory on the merits mooted that issue. 

Even the leader of the free world isn't exempt from document retention and e-discovery obligations.  As this Associated Press article on findlaw.com reports, on January 15, Magistrate Judge John Facciola "tore into" the Bush White House, finding that the administration had failed to meet its obligations to preserve ESI, including millions of missing e-mails.  And Judge Facciola isn't the only one hitting the White House hard over its document retention obligations; just the day before, U.S. District Judge Henry Kennedy issued an order requiring the White House to search for emails created between March 2003 and October 2005.

Lessons learned?  No matter who you are - from the most powerful person in the world to the owner of a small company - and no matter how good your case, you ignore your document preservation and e-discovery obligations at your own peril.

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I’m sad to report that despite the political hype, FRE 502 is not likely to provide you with any substantial cost savings related to your electronically stored information ("ESI") and document productions. This is because FRE 502 does not eliminate the need for one of the largest discovery costs - namely, the dreaded page-by-page document review (not to mention the ensuing carpal tunnel of the finger). 

FRE 502 merely codifies the current law of the majority of federal courts on the inadvertent production of privileged material – i.e., there can be no waiver of privilege on inadvertently disclosed documents if you took reasonable steps to prevent and rectify the disclosure.  But what reasonable steps? Although omitted from the law itself, the FRE Advisory Committee informs us that: 

A party that uses advanced analytical software applications and linguistic tools in screening for privilege and work product may be found to have taken reasonable steps to prevent inadvertent disclosure.

And that may actually be helpful, but for the fact that the federal courts have long recognized that such screening comes with limitations and risks because the proper selection and implementation of such technology involves both legal and scientific knowledge.  Is it really a reasonable step to use methods judicially deemed "not foolproof?"

Moreover, cases interpreting the new FRE 502 reiterate and do not eliminate the need for attorneys to conduct a page-by-page privilege review:

Rhoads Industries, Inc. v. Building Materials Corp., No. 07-4756 (E.D. Penn. Nov. 14, 2008): upheld privilege only on inadvertently disclosed documents that were manually reviewed and logged by an attorney.  

Relion, Inc. v. Hydra Fuel Cell Corp., 2008 WL 5122828 (D. Or. Dec. 4, 2008): held that privilege was waived because, even though the issue of inadvertent production was raised by opposing counsel, the holder failed to conduct a page by page review.

Bottom line: keep flexing that finger – at least for now!

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'Twas two weeks before Christmas and a few things were stirring in Seneca County, Ohio. The Big Guy in the red suit wasn't the only one deciding who has been naughty or nice. On December 9, the Ohio Supreme Court ruled in a 7-0 decision (State ex rel. Toledo Blade Co. v. Seneca County Board of Commissioners, 2008 WL 5157133, Dec. 10, 2008) that the Seneca County Board of Commissioners had been naughty and compelled them to make reasonable efforts to recover and provide the Toledo Blade newspaper with emails that had been deleted in violation of the County's records retention policy and disposition schedule.

The fact that these emails had been deleted did not relieve the County from its obligation to produce this information because deleted computer files are still discoverable. Many times this information is recovered by a forensic analysis of the computer, which can be a very costly process. The County’s failure to maintain the requested emails in accordance with the applicable schedule for records retention and disposition was one of the factors cited by the Court in determining to impose the expense of the forensic recovery of the deleted emails on the County.

Much like Santa's list, records retention policies should be rechecked to ensure compliance.

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A corporation's website is often one of a corporation's most visible assets and as a result, websites are often given high priority by corporate marketing and public relations departments.  Websites should be paid the same attention when a corporation institutes a litigation hold.  Unfortunately, when a litigation hold has been instituted, forgetting about your website can be a dangerous oversight. 

In the recent case, Arteria Property Pty Ltd. v. Universal Funding V.T.O., Inc., (2008 WL 4513696, October 1, 2008), the District Court for the District of New Jersey held that websites should be treated the same as other electronic files and sanctioned the defendant corporation for failing to maintain the content on its website once litigation was reasonably anticipated. In Arteria, the plaintiff requested in discovery electronic snapshots or paper copies of the defendant corporation’s website. The defendant corporation failed to produce this information.  There was no dispute that the website was in existence at a time when it was at least reasonable that the corporation would be sued. As a result, the court found that the failure to produce the website constituted spoliation of evidence and imposed sanctions on the defendant corporation. 

The moral of this story?  Your litigation hold policy should have a mechanism in place to insure that your corporation's website, as an electronic document, is preserved in the same manner as other electronic data subject to a litigation hold.  

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Into the "no duh" category of cases falls a recent Texas appeals court decision upholding the conviction of Manuel Flores for cocaine trafficking.  Flores v. State, No. 14-06-00813-CR (Tex. App., Oct. 23, 2008).  Flores contested his conviction on the grounds that he had been subjected to the "John Reid technique" of interrogation, which he claimed could lead to false confessions.  As support, he asked the trial court to take judicial notice of the Wikipedia article on the technique.  The court properly declined to do so.

Apparently borrowing a page from the Cheech and Chong primer on drug trafficking, Flores was busted when he went to pick up a package of 38 baskets made of straw into which 11 kilos of cocaine had been "intricately woven."  (Pop culture mavens will recall the scene in Cheech and Chong's 1978 film "Up in Smoke" where the two successfully drive a van constructed entirely of marijuana across the border).  Interestingly, as of this writing, Wikipedia doesn't contain an entry for the "John Reid technique," but does contain an entertaining entry for "Up in Smoke."

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It would appear that Detroit public officials have a real problem with text messages.  In addition to the current indictment against mayor Kwame Kilpatrick involving his alleged cover-up of text messages linking him romantically with his former chief of staff, text messages play a central role in another current case with Kilpatrick ties, and were the subject of a recent court decision that outlined how they would be disclosed.

The problems began with allegations of a 2002 party at the Kilpatrick's mansion involving exotic dancers.  When one of the dancers who claimed that she was at the party was shot to death in 2003, her family filed a $150 million lawsuit against the city.  The family claimed that the shooting was an attempt to cover up the dancer's role in the party, and further claimed that a Detroit police officer was the shooter.  The family issued two subpoenas to SkyTel, which supplied the city's text messaging devices.  The subpoenas sought text messages to and from all city officials and employees on the night of the shooting and text messages from a list of 34 city officials for certain periods between 2002 and 2007.  The court allowed discovery of the text messages from the night of the shooting, but narrowed the second request.

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In a recent case (Ferron v. Search Cactus, L.L.C., 2008 WL 1902499), the the District Court for the Southern District of Ohio ruled that information stored on a computer that contained content protected by the attorney-client privilege presented insufficient reason for a party to prevent the computer from being mirrored for electronic discovery purposes.

The plaintiff in the case case was an attorney who utilized his home and office computers for storing and working with information related to the representation of clients and the maintenance of lawsuits, but who also used his home computer to store his personal banking and credit card information. He objected to the defendants' discovery request so that the defendants could analyze the electronic evidence in question.

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Things are getting really ugly in what has turned into a grudge match discovery dispute between Qualcomm and the company's outside lawyers.

I wrote recently about the impressive sanctions handed down by a magistrate judge against Qualcomm and its outside counsel after they failed to turn over hundreds of thousands of documents in patent litigation.  Qualcomm's lawyers sought to defend themselves at the sanctions hearing by pointing the finger at Qualcomm's failures in the discovery process.  However, the magistrate judge ruled that they were prevented from doing so by the attorney client privilege.

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Be wary of your electronic communications regarding settlement -- they may bind you to an agreement.  That's the basis of the ruling in Basis Technology Corp. vs. Amazon.com Inc., 2006-P-1048.  The Jan. 7 decision serves as a reminder to lawyers that e-mail settlements carry the same weight as deals on paper.

Citing the trial judge's decision to terminate the trial instead of suspending it for exploratory negotiations, Associate Justice Mitchell J. Sikora Jr. rejected Amazon's argument of characterizing the e-mail exchange as a "framework" causing the "suspen[sion]" of the trial and forming a "starting point" toward a "final settlement."

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A California federal court judge sanctioned wireless chip developer Qualcomm Inc. and six of its outside lawyers on January 7, 2008 for what the judge labeled a "monumental discovery violation" in connection with Qualcomm's failure to turn over electronically-stored information.  One of Qualcomm's central arguments in patent litigation against Broadcom Corp. rested on Qualcomm's position that prior to September 2003 it had not been involved in working on a committee tasked with creating a video coding standard. 

The fly in the ointment was 46,000 emails (totaling over 300,000 pages) showing that Qualcomm had, in fact, been involved with the committee as early as August, 2002.  What to do? 

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 A recent New York appellate court decision offers some guidance on the interplay among an employer's right to monitor email traffic, an employee's expectation of privacy in their email and the attorney-client privilege.  In a decision by the Supreme Court for New York County, the Plaintiff, Dr. Scott, was fired by Beth Israel Medical Center and sued for $14 million in severance payments.  Dr. Scott got a bit ahead of himself, though, and sent several emails about the impending suit to his lawyers while still employed by the hospital, using his work email account and a hospital computer.  When the hospital informed his attorneys that it had the emails, Dr. Scott moved for a protective order preventing their use in litigation.

The question, then, was what took precedence, the attorney-client and work product privileges, or the hospital's email policy, which provided that the hospital's email system was not for personal use and that the hospital reserved the right to access emails at any time.

The court found that "A 'no personal use' policy combined with a policy allowing for employer monitoring and the employee's knowledge of these two policies diminishes any expectation of privacy," and the combined effect "is to have the employer looking over your shoulder every time you send an e-mail."  Thus, the court held that the emails were not protected, and were properly discoverable in litigation.  The full decision appears here: Scott v. Beth Israel Medical Center.

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Kroll Ontrack, an electronic discovery and computer forensic service provider, has put together an interesting analysis of the electronic discovery case law that has been decided since the new federal rules were enacted a year ago.

According to Kroll, of the approximately 105 e-discovery opinions reported since December 1, 2006, the major issues involved in these cases break down as follows:

• 25% of cases addressed discovery requests and motions to compel
• 24% of cases addressed spoliation/sanction
• 23% of cases addressed issues involving the form of production
• 9% of cases addressed preservation/litigation holds 
• 7% of cases addressed attorney-client privilege and waiver 
• 6% of cases addressed production fees 
• 6% of cases addressed admissibility of electronic evidence

The moral of the story?  75% of the cases analyzed by Kroll Ontrack dealt with discovery requests, motions to compel, the destruction of electronic data, sanctions, and the format in which electronic data must be produced.  E-discovery is not going away any time soon and corporations must have a game plan and a document retention policy in place that permits them to respond efficiently and cost effectively to document requests and motions to compel that request electronic data.  Without a game plan, corporations could, quite unintentionally, find themselves in the quarter of the cases that discuss sanctions and the spoliation of evidence.

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In a recent and previously sealed federal fraud and tax evasion case (U.S.A. v. Amazon.com, W.D.WI, Case No. 07-GJ-04, filed 6/26/07), the district court ruled that customers who bought used books via Amazon.com have a cognizable First Amendment right to maintain the privacy of their reading choices.

The case stemmed from the U.S. Justice Department's discovery attempt (via a grand jury subpoena) to obtain Amazon customer records in order to advance its criminal case against a used bookseller suspected of committing criminal fraud and tax evasion. The Justice Department in this case does not suspect Amazon nor its customers of any wrongdoing. It simply wants to use the customer information to build a case against the defendant.

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Assume the worst of your employees, lest a judge or jury assume the worst of you. 

That's the upshot of a recent e-discovery case out of the US Bankruptcy Court for the District of Hawaii. The debtor, Hawaiian Airlines, had shared proprietary information with prospective post-petition investors under a strict confidentiality agreement. Hawaiian later claimed that Defendant Mesa Airlines, once a prospective investor, had breached the confidentiality agreement and misused proprietary information for Mesa's own competitive advantage. After Hawaiian filed its complaint, an attorney for Mesa promptly sent an email to Mesa's three top officers imposing a "litigation hold," which explicitly included electronic documents. One of the recipient executives, Vice President and CFO Peter Murnane, responded by sending out emails from his company account (um, wow) to outside individuals searching for a data-wiping program. Apparently his search bore fruit, and Murnane installed software containing a data-wiping feature on his two company laptops.  He also changed the system clocks on those two laptops in an attempt to make it appear that he had deleted the data well before Hawaiian filed its complaint.

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Yes-- at least on the server side.
In a recent federal drug trafficking case (.pdf), the USDC for the Eastern District of Calif. was able to convince a Canadian court to issue an order granting the U.S. Drug Enforcement Administration access to clear text copies of encrypted emails sent through a Canadian email service called Hushmail ...

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