Author of the Zubulake Opinions Decides New E-Discovery Case, Chiding Those With A "Pure Heart and Empty Head"

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. 
 

Judge Scheindlin begins Pension Committee with some rough definitions, tailored to the discovery context, of three familiar classes of misconduct: negligence, gross negligence, and willfulness. She writes that negligence can result from "a pure heart and an empty head" -- for example, if a litigant acting in good faith fails to collect the records of employees who are peripherally connected to the litigation. A heart somewhat less pure (or perhaps a head more empty) can result in grossly negligent or even willful misconduct. A litigant is at least grossly negligent it fails to collect records from key players in pending or reasonably foreseeable litigation or if it destroys relevant email or certain backup tapes. 

Pension Committee then discusses the sanctions that a court may apply when a litigant wrongfully destroys, alters, or loses ESI -- and thus "spoliates" that evidence. These sanctions include requiring additional discovery, awarding a monetary remedy to the innocent party, imposing a fine on the litigant, issuing special instructions to the jury, excluding certain evidence at trial, or terminating the case with a default judgment or dismissal. A court should always elect the least punitive sanction that can remedy the harm to the innocent party and wield enough force to work as a deterrent. Terminating a case as a discovery sanction is appropriate "in only the most egregious cases, such as where a party has engaged in perjury, tampering with evidence, or intentionally destroying evidence by burning shredding, or wiping out computer hard drives." 

Pension Committee also addresses the difficult question who should bear the burden of establishing that missing or destroyed ESI was relevant to the litigation and that the innocent party has been harmed by its loss. Judge Scheindlin's answer is that the burden may shift depending on how badly the litigant responsible for losing or destroying information has behaved. A willful or grossly negligent litigant is responsible for showing that no harm fell upon the innocent party. But the innocent party must shoulder the burden of proof if the offending litigant behaved only negligently. 

In deciding the case, Judge Scheindlin rejected the defendants' claim that the plaintiffs had engaged in willful misconduct -- and turned down the defendants' request for dismissal as a sanction -- but still found that each plaintiff had been negligent or grossly negligent. All the plaintiffs had failed to timely issue a written litigation hold directing employees to preserve all relevant records and creating a mechanism for collecting the preserved records for discovery. Each grossly negligent plaintiff also had made one or more of the following mistakes: deleting or failing to preserve and collect electronic documents, failing to request documents from key players in the litigation, delegating search efforts without any management supervision, destroying backup data that might have contained the only copies of some key players' documents, and describing their discovery efforts in misleading or inaccurate ways in court submissions. 

Judge Scheindlin used a jury instruction to sanction the plaintiffs who were grossly negligent. She informed the jury that these plaintiffs had been grossly negligent in performing their discovery obligations and had lost evidence as a result. She instructed the jury that it could choose to adopt a rebuttable presumption that the lost evidence was relevant and would have favored the defendants. She also permitted the jury to consider the egregiousness of the plaintiffs' conduct when deciding whether to adopt this presumption.       

Judge Scheindlin imposed monetary sanctions on all the plaintiffs, ordering them to pay the defendants' reasonable attorney's fees and costs attributable to the discovery dispute. She also ordered two of the plaintiffs to provide further discovery if possible, noting that the goal of discovery is "to obtain evidence, not to issue sanctions."   

Pension Committee serves as a cautionary tale: Shoddy discovery efforts can result in serious consequences even when intentions are good. A complicated discovery dispute is not cheap to litigate, and the Pension Committee plaintiffs ended up paying the other side's legal fees in addition to their own. Those found grossly negligent also must now persuade a jury not to presume that any lost evidence was favorable to the defendants, even as they try to focus the jury's attention on the merits of their case. 

Digital Voicemail in E-Discovery -- or Dealing with Cerberus, the Three-Headed Dog from Hell

You have one new voice message. First message: Monday, 4:45pm --

I must have just missed you, Vice President Joe.
It's Mike van Dyke, your CEO.
Remember that complicated widget invention --
Our best-seller you copied from the Widget Convention?
The one in your job interview that you mentioned,
And stole from your last boss for withholding your pension?

Well, they've sued us for patent infringement and such,
And theft of trade secrets -- it's really too much.
So I need you to shred all the documentation:
The tech drawings you stole; design specifications.
And that memo you wrote, before everything,
Saying that they had a patent, worth copying.

And yes, it goes without saying, too, Joe --
Please immediately delete this voicemail also.

End of new messages.

A lawyer who finds a copy of this voicemail buried in the other side's electronic document production will immediately splurge on champagne and party hats. And who can blame him? But here's the question: would this message be captured in the net of responsive material, or would it slip through the cracks? The answer may depend less on the skill of document retrieval experts, and more on how your company (or client's) voicemail system works.

It's old news that voicemail systems have graduated from analog to digital. Now, while the self-contained answering machine is still around, the digital era has also ushered in various types of integrated systems. The most complex, like the famed mythological dog Cerberus guarding the gates of Hell to prevent the dead who cross the river Styx from escaping, have three heads: the company telephone system, e-mail system, and computer system. And while a message on a self-contained machine can be difficult for a company -- let's call it Hades, Inc. -- to track and easy for an individual employee to get rid of, life with Cerberus is akin to life in the underworld: there is no escape, and nowhere to hide.
 

There are four major types of digital voicemail systems, as discussed in a New York Law Journal article:

  1. The Stand-alone: Voicemail is stored only on a stand-alone voicemail server completely separate from the e-mail and computer servers.
     
  2. The Stand-alone with E-mail Notification: This is a stand-alone model with an e-mail alert that notifies users that they have received a voicemail. However, the alert says nothing substantive about the message, and the user cannot access, save or forward the message via computer or e-mail.
     
  3. The Stand-alone with E-mail Link: Here, the e-mail contains not just a notification but a "link" that allows the user to access the message by computer. While the message remains housed in the voicemail server, it is possible to copy it to the e-mail system as an audio (.WAV) file, and save or forward them as attachments.
     
  4. The Unified System -- "Cerberus": With Cerberus standing guard, users receive an e-mail containing the audio file, and can retrieve it on a computer or Blackberry-type device. The message is stored on the e-mail server (not the voicemail server), and is thus exposed to the search protocols undertaken on the company's computer and e-mail systems. A user can also easily save the message or forward it to others, creating multiple copies in different locations and making it more likely that the message will be found. Such messages are also fully subject to Hades Inc's e-mail protocols with regard to back-ups and auto-deletion, which usually call for a greater retention period than a voicemail server.

As the systems move further and further Cerberus-ward down the river Styx, a number of things happen: (1) the amount of control a company has over the deletion and dissemination of voicemails declines; (2) the number of e-crumbs left by the voicemail increases, magnifying the risk of messages such as Vice President Joe's being found and produced to the opposition; and (3) the costs of voicemail-related e-discovery increases.

On the stand-alone end of the spectrum, Hades, Inc. will retain the most control over voicemails, and the risk of eventual production is the lowest. There is only one copy, and it resides on a stand-alone server. It cannot be replicated, forwarded, saved onto a computer or disseminated in any other way. Because of that, the single copy is at the mercy of the user's decision to delete it, or Hades, Inc's auto-deletion policy that spirits messages to the underworld permanently once a specific amount of time has passed. Once deleted, that message is gone, lost in Hades without a trace.

Even if there is no auto-deletion and Vice President Joe accidentally forgets (oops!) to erase the message, the message and others like it may still very well not be found during discovery. The voicemail server is not be connected to Hades, Inc.'s computer or e-mail servers, which are searched much more extensively during litigation (courts are reluctant to order expansive searches of voicemail alone). So the only reason such messages would be found and produced is if voicemails are included in document requests and if the recipient, such as our Vice President Joe, were singled out as one of the key custodians whose collection of data and documents are being searched for responsive materials.

In the case of a stand-alone system with a simple e-mail notification, Hades, Inc. is still in the lower-risk end of the production spectrum. The difference is that a trace of the voicemail remains, deleted or not. The e-mail notification will likely be retained as part of the litigation hold, and may even be produced if it engenders a "hit" during the search protocol. The odds of this are not high, as search terms related to the case will usually not appear in a simple notification e-mail, which does not contain any information about the message's sender or content. However, even if the message is deleted, a search and production of Hades, Inc. e-mails to the opposition may still reveal that Vice President Joe received a voicemail on Monday at 4:45pm on such-and-such a date, which opposing counsel will recognize was right after the complaint was served. Naturally, they will demand production of the voicemail. And if that voicemail has been deleted, there will be hell to pay, faster than Charon can row that ferry across the river Styx. The other side will likely make trouble, such as asking for sanctions, for a more detailed search of Hades, Inc. voicemails, or for an inference at trial that the e-mail must have contained something incriminating.

The third type of system is where it begins to become much more likely that Vice President Joe's voicemail and others like it will be found and produced, or at the least that its existence and subsequent deletion will be noticed. In this case the voicemail is still stored on the voicemail server, but the e-mail notification contains a link to the message. In some cases, the link can be converted into a file that can then be saved on the Hades, Inc. computer or forwarded through e-mail accounts -- say, vpjoe@hades.underworld.com. With all this data floating around with information on the sender and content of the message, production in one form or another becomes much more likely. Even if the original message has been deleted, it has left a trail of e-crumbs -- there are that many more e-mails and copies and files floating around that either contain the message itself, or that make it evident that a message used to be there.

Which leads us to Cerberus, our three-headed monster. Yes, dogs are a man's best friend, and Cerberus may well be the user's best friend, allowing the greatest degree of access to voicemail -- through computer, Blackberry or otherwise -- and the greatest degree of malleability in terms of saving, copying and forwarding the message. With Cerberus, however, the control Hades, Inc. has over these messages is extremely low. The voicemails leave an awful lot of e-crumbs, posing the greatest risk of production in litigation. The message itself will reside in the user's e-mail inbox, may be saved to person folders or hard drives, and can be copied and sent to others ad nauseam. The e-mails will also contain more easily-searchable information than links or e-mail notifications, such as the name of the sender, the originating phone number and the contents of the message. And courts are more likely to treat voicemails in these types of systems like e-mails -- subject to greater obligations insofar as identification, preservation and production. All of these facts will not only increase the cost of e-discovery substantially, but transform the odds of Vice President Joe and his voicemail going down in flames.

What does all this mean? For a company on the defensive side such as Hades, Inc., it is important to understand just what type of voicemail system is being used. While Cerberus is certainly the most technologically-savvy and user-convenient, he is also the messiest eater, leaving far more e-crumbs in his wake than, say, stand-alone voicemail servers. Companies who use Cerberus to guard the gates of voicemail should therefore educate their employees to treat messages more carefully on both the sender and recipient sides. Keep voicemails short and general, think before speaking as to whether the message being left could cause trouble in a litigation, and do not wax poetic (literally or figuratively) about litigation or other controversial matters like our foolish Hades, Inc. CEO Mike van Dyke. Another possibility is shortening the company voicemail retention period to the extent legally permissible, so that the backlog of saved voicemails is not as daunting and not as much of a field day for the other side.

On the offensive side, parties to a litigation should ensure that litigation hold notices, and instructions for document requests, specifically request responsive and relevant voicemail messages. They should also keep an eye out for e-mails produced in discovery that reveal the existence of relevant voicemails that were not produced.  Additionally, parties believing that voicemail will play a key role in the case should request early on in discovery, information as to what type of voicemail system their opponent maintains. That way, they can be more aware of how best to ensure that Vice President Joe's voicemail will escape the watchful eye of Cerberus, cross the river Styx, and get produced.
 

Making Sense of Third-Party Discovery

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.

The Court found there was no duty to preserve third party evidence.  Although Fed. R. Civ. P. 34(a) does provide that documents are considered to be under a party's control when that party has “the right, authority, or practical ability to obtain the documents from a non-party to the action,”  the Court determined that Praxair did not have “the sufficient legal authority or the practical ability” to ensure the preservation of documents prepared by its third-party consultants or "any legal control" over those documents.  Accordingly, the Court held that Praxair had no duty to preserve any of the documents prepared by the third-party consultants.  Absent any duty to preserve evidence under a party’s control, there could be no finding that spoliation of evidence had occurred. 

This is a holding that makes perfectly good sense.  Alice would be delighted.

Litigation Holds Can Be "Tire"some, But Hang In There!

"It ain't over 'till it's over."  Yogi Berra was talking about baseball, but the quote applies just as well to lawsuits.  It is no secret that litigation can be a very protracted process, and, when a party is subject to a litigation hold, it seems that much longer. 

One question that lawyers get with some frequency is "how long do we have to maintain this hold?"  The answer is that it depends.  One touchstone, though, is that the hold should remain in effect until all deadlines for appeal or further review have expired.

In a recent Louisiana case, Pipes v. UPS, UPS was hit with a motion for sanctions due to alleged spoliation of evidence.  One of its drivers was involved in an accident.  After the accident, UPS fired the driver and he filed a grievance protesting his termination.  He argued that the accident was not his fault, but rather was caused by a faulty tire on his delivery van.  His grievance was denied at all stages, and his firing was upheld.  Following the end of the grievance process, van maintenance records were destroyed, and the allegedly faulty tire was released to a vendor.

However, the fired driver then sued both UPS (for firing him) and his union (for inadequate representation) in federal court.  When he discovered that the maintenance records and tire were gone, he brought a motion for sanctions.  UPS's managers testified that they thought they could put the matter behind them when the grievance was decided, and so had gotten rid of the evidence.  The court ultimately declined to sanction UPS because the driver's claim lacked merit, and the tire and maintenance records were ultimately only slightly relevant to his claims.

As demonstrated by this case, it is imperative that litigation holds remain in place until appeal or review opportunities have passed.  This is a tricky issue where, as here, the avenue for appeal may be novel (one of UPS's managers testified that he had never seen a grievance decision appealed).  It is important that the person managing the hold make sure that all key players are on the same page about when the hold may be released, and that attorneys keep their clients informed about the possible avenues and timelines for appeal.

Best of the Blogs: Law.com Blogger Debunks Data Recovery Myth

Blogger, trial lawyer, and self-described computer forensics/EDD special master Craig Ball has boldly traveled the “back roads of listservs and blogs”, and lived to blog another day.  We are lucky that he survived; in a highly entertaining and informative read, Ball eviscerates the “flea bitten claim” that forensic examiners can recover overwritten data; apparently, threats to recover such data are mere puffery.

Ball’s blog, “Busting the Multipass Erasure Myth,” was posted March 26 on Law.com. In it, he traces the origin of the “myth” that data cannot be overwritten to a paper published in 1996 by Peter Gutmann. Ball reports that Gutmann developed a 35-pass overwriting process to eliminate data -- the “Gutmann Method erasure.” Not one to mince words, Ball pronounces that method “all a lot of hogwash.”  There is no need to take 35 passes, says Ball, or anything close to it.  Indeed, Ball goes so far as to say that only one overwrite is needed:  “No tool and no technique extant today can recover overwritten data on 21st century hard drives. Nada. Zip. Zilch.” 

So, contrary to popular belief, data really can be erased.  But Ball's readers should make no mistake:  Overwriting data is different than simply pressing "delete."

A Doll's House of Cards: Wanton Laptop Destruction Leads to Sanctions

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.

 

Upset, Ms. Kvitka sent a letter back, intimating that forged or altered emails had led to the dispute. When Ms. Kvitka threatened litigation, Defendants notified Ms. Kvitka that Puffin had a file containing several emails written by Ms. Kvitka disparaging its other clients. Defendants' counsel also sent a letter to counsel for Ms. Kvitka reminding them that Ms. Kvitka's computer - and, in particular, the hard drive and the email messages contained there - needed to be preserved as potential evidence in the threatened litigation. "As you know," the letter warned, "emails can be deleted, but they cannot be erased."

 

Ms. Kvitka filed suit in Pennsylvania state court in January of 2006. She later claimed that, shortly after filing the state court litigation, she began having problems with the laptop she presumably used to send the offending emails. The laptop was "doing wonky things, ridiculous things," she said, and "it was difficult to receive emails, it was difficult to send emails..."  Nonetheless, after she ordered a new laptop, she successfully received email confirmation of that order on the old laptop, and forwarded that email confirmation to her computer technician on that old laptop. Hmmm.

 

Once her computer technician set up the new laptop, Ms. Kvitka THREW THE OLD LAPTOP IN THE TRASH.   (I guess she couldn't pull a Torvald and burn it?)  Mere days later, the court inquired about the status of the original emails Ms. Kvitka supposedly sent from the old laptop. Ms. Kvitka failed to inform the court of the destruction of the old laptop, and instead abruptly terminated the state court litigation and refiled her claims in federal court.

 

Ms. Kvitka successfully concealed the fate of her old laptop until January 2008, when Defendants moved for an order of inspection of her new laptop. She then claimed that, although she had not deliberately transferred any data between laptops, "some" emails had mysteriously made their way from the old laptop to the new laptop, while others had just as mysteriously disappeared forever.

  

Although such magical things may happen in dolly-land, they don't happen in the real world of ESI, and the court wasn't buying it either. Finding that Ms. Kvitka had acted in bad faith and "with the greatest degree of fault" in destroying her old laptop, the court imposed sanctions for the intentional spoliation of evidence, including dismissal of Ms. Kvitka's claims and an adverse inference instruction on Defendants' cross-claims.

 

Naturally - and much like your dear blogger - the court couldn't resist quoting Ibsen. Noting with dismay Ms. Kvitka's many implausible attempts to conceal her malfeasance, the court counseled her that "[m]any a man can save himself, if he admits he's done wrong and takes his punishment." (I was hoping for "it would be the greatest miracle of all if you avoided sanctions here, lady.")

Use Caution When Doing Your Spring Cleaning!

 

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.

No One Escapes E-Discovery Obligations

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.

2008 E-Discovery Year In Review

It's that time of the year again .... chilly temperatures, frenzied shopping, offices full of high-calorie treats, and, my personal favorite, year-end "year in review" and "top" lists.  Kroll Ontrack contributes an interesting early entry to the annual roll with its descriptively-titled, "Year In Review: Courts Unsympathetic to Electronic Discovery Ignorance or Misconduct"

Kroll's sobering survey of the approximately 138 reported opinions on electronic discovery issue leaves something rather more ominous than visions of sugarplums dancing in one's head, revealing that over half of those opinions addressed sanctions, data production, or preservation and spoliation issues, with a whopping 25% involving some type of court-ordered sanctions for e-discovery issues.  Kroll also offers its "top five" 2008 cases demonstrating both the breadth of material available through e-discovery and courts' growing intolerance for e-discovery mishaps:

  • In Flagg v. City of Detroit, 2008 WL 3895470 (E.D. Mich. Aug. 22, 2008), U.S. District Judge Gerald Rosen rejected the city defendants' argument that the court's previous order - compelling the production of text messages sent between City employees on city-issued text messaging devices - violated the Stored Communications Act ("SCA").  Although the SCA does not authorize a service provider to disclose electronic communications in response to a subpoena or court order, Judge Rosen found that the law does not override a defendant's obligation under Federal Rule of Civil Procedure 34 to produce relevant, nonprivileged electronic communications in their possession, custody or control.  Rosen reasoned that defendants were both able and obligated to give their consent to SkyTel, the service provider that stored the text messages, to retrieve those messages, which the city must then produce. 
  • U.S Magistrate Judge Paul Grimm contributes once again to the body of e-discovery casleaw with Victor Stanley, Inc. v. Creative Pipe, Inc., 2008 WL 2221841 (D. Md. May 29, 2008), and sheds some light on the "reasonable precautions" parties must take to prevent inadvertent disclosure.  Judge Grimm found that defendants had waived the attorney-client and work product privileges as to 165 electronic documents inadvertently produced in discovery by failing to take several measures that could have prevented the waiver, including a clawback agreement the disclosing party voluntarily abandoned and compliance with The Sedona Conference® best practices.
  • The effectiveness of electronic search terms and methods may be a growing area for expert testimony in both civil and criminal cases, per United States v. O'Keefe, 2008 WL 449729 (D.D.C. Feb. 18, 2008).  Applying the civil e-discovery rules to a criminal prosecution, Magistrate Judge John M. Facciola ordered the parties to collaborate to reach an agreement on production after the co-defendant filed a motion to compel claiming the government failed to meet its discovery obligations.  Judge Facciola further suggested that any judicial review of search methods may demand the services of an expert witness, observing that lawyers and judges who attempt to determine whether search terms are effective venture "where angels fear to tread."
  • Another Judge Facciola decision makes Kroll's top-five list:  Peskoff v. Faber, 2008 WL 2649506 (D.D.C. July 7, 2008).  Peskoff involved an ongoing discovery dispute involving Faber's failure to produce certain emails without explaining why they were not produced or what efforts he had undertaken to locate them.  Finding that Faber's search had been inadequate, the court orderd the parties to seek bids from forensic computer technicians to determine whether the cost of searching for, restoring, and converting the emails from Faber's computers was justified.  Since the court found that defendant's inadequate search efforts, failure to preserve ESI, and overall unwillingness to take "discovery obligations seriously" had caused the need for forensic examination, the court refused to shift costs.
  • Last, but certainly not least, my personal favorite e-discovery cautionary tale of 2008 goes to Keithley v. Homestore.com, Inc., 2008 WL 3833384 (N.D.Cal. Aug. 12, 2008).  A "lackidasical attitude" towards e-discovery doesn't pay, as the defendant in patent infringement litigation learned when the court awarded plaintiffs their attorney fees, expert witness fees and costs that could total over $1 million for re-doing tasks made necessary by defendants’ misconduct and ordered a mandatory adverse inference jury instruction against defendants.  Why?  A litany of e-discovery misconduct that the court described as "among the most egregious this court has ever seen," including:  
    • a defendant employee who "suddenly remembered" after well over a year of discovery demands, court orders and sanctions hearings that he had stored a crashed hard drive that contained some of the source code sought at his home;
    • computerized reports that defendants claimed "did not exist" suddenly surfacing in a hard drive under a directory labeled "reports";
    • defendants' failure to remind technical personnel of the need to preserve crucial source code information, resulting in the loss of backup information when the backup tapes for a failed computer continued to be overwritten;
    • defendants failure to ask the person responsible for transferring files to a new source code control system about the availability of source code until after a sanctions hearing.

Fodder for some 2009 e-discovery resolutions, indeed!

Don't Forget the Website!

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.  

2007 E-Discovery Cases - Year in Review

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.