Electronic Discovery Law

Court Compels Production of Foreign Data and Re-Production of "Already-Produced" Electronic Discovery in a Reasonably Usable Form

K&L Gates — Wed, 03 Feb 2010 08:23:58 -0800

Accessdata Corp. v. ALSTE Tech. GMBH, 2010 WL 3184777 (D. Utah Jan. 21, 2010)

In this breach of contract case, the court granted plaintiff’s motion to compel and ordered defendant (a German company) to produce responsive third-party, personal data, despite objections that such production would violate German law. The court also granted plaintiff’s motion to compel the re-production of previously produced electronic discovery where defendant’s initial production did not conform to the requirements of Fed. R. Civ. P. 34.

Plaintiff, an American company, sought to compel defendant’s production of documents, including information related to customer complaints and defendant’s technical support of non-customers. Defendant objected to the interrogatories and requests for production on the grounds that they were overly broad, unduly burdensome, and seeking irrelevant information and because “disclosure of information relating to third parties’ identities would violate German law.”

Addressing the production of third-party, personal data and defendant’s claim that such production “would be a huge breach of fundamental privacy laws in Germany,” the court found that defendant “failed to demonstrate the verity of this assertion” by failing to cite a particular provision of German law that would prohibit such disclosure. Moreover, the court cited to a section of the German Data Protection Act (GDPA) that seemed to allow for such a transfer of third party information upon meeting certain conditions, including receipt of consent of the third party. Further, the court reasoned that even if the GDPA prohibited such disclosure, the United States Supreme Court has held that “[i]t is well settled that such [blocking] statutes do not deprive an American court of the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate that statute.” Turning to defendant’s assertion that plaintiff should be required to comply with the rules set forth in the Hague Convention for Taking Evidence Abroad with respect to private customer information, the court acknowledged that “[p]arties might properly be required to resort to Hague Convention procedures ‘in suits involving foreign states, either as parties or as sovereigns with a coordinate interesting the litigation’ or if ‘the additional cost of transportation of documents…to or from foreign locations…increase[s] the danger that discovery [is] sought for [an] improper purpose,” but reasoned that “neither circumstance is present [here] where the costs of transmitting information and electronic documents ought to be relatively minimal.”

After addressing several other discovery requests, the court then turned to plaintiff’s request for the re-production of certain electronic discovery in native format. Plaintiff claimed that defendant failed to produce electronic discovery “in a form or forms in which they are ordinarily maintained or in a reasonably usable format” as is required by Fed. R. Civ. P. 34. Defendant argued that its production of scanned documents converted to PDF format was sufficient. The court disagreed, noting its confidence that “most (if not all) of the documents already produced would have been ordinarily maintained in an electronic format.” The court further noted the rule’s Advisory Committee Notes, which state that “[i]f the responding party ordinarily maintained the information it is producing in a way that makes it searchable by electronic means, the information should not be produced in a form that removes or significantly degrades this feature.” Accordingly, the court ordered defendant to re-produce the already-produced electronic discovery “in its native format or, at least, in an electronically-generated PDF format.”

A copy of the full opinion is available here.

Personal Emails Retained by Public School's Email System Not Subject to Michigan's Freedom of Information Act

K&L Gates — Fri, 29 Jan 2010 16:04:36 -0800

Howell Educ. Assoc. MEA/NEA v. Howell Board of Educ., 2010 WL 290515 (Mich. Jan. 26, 2010)

In this “reverse” Freedom of Information Act (FOIA) case, the trial court held that personal emails generated by and stored on a public school’s email system were public records subject to FOIA. Upon plaintiffs’ appeal, the appellate court reversed the trial court and held that such emails were not public records and thus not subject to FOIA. Moreover, the appellate court concluded that violation of an acceptable use policy barring personal use of an email system – “at least one that does not expressly provide that emails are subject to FOIA” – does not render personal emails subject to FOIA.

Intervenor/Counter-plaintiff Chetly Zarko submitted a series of FOIA requests seeking production of emails sent to and from three specific teachers beginning in January 2007 and emails between those teachers and an employee of the Michigan Education Association. The teachers were all members of and officials for Howell Education Association MEA/NEA (“HEA”). HEA objected to the release of “union communications” between the teachers arguing the emails were not “public records” as defined under FOIA. To settle the issue, plaintiffs sought declaratory judgment that the emails were not subject to FOIA, among other issues. The trial court held the emails were subject to FOIA. Plaintiffs appealed.

Michigan FOIA requires the disclosure of public records upon proper request. A “public record” is defined as “a writing prepared, owned, used, in the possession of, or retained by a public body in the performance of an official function, from the time it is created.” [Emphasis added.] Defendants argued that the retention of electronic data was “an official function where it is required for the operation of an educational institution” and cited Michigan precedent in which the court held that the magnetic tape which was the school’s record of student names, addresses, etc. was retained in performance of an official function because the university could not have functioned without such a list of its students.

Rejecting the comparison, the court noted that defendants in the present case could “function without the personal emails” and that “given their very definition they have nothing to do with the operation of schools.” The court further rejected defendants’ argument that retention was sufficient to subject the emails to FOIA where the school district did not assert that the back-up system was purposely designed to retain and store personal emails or that such emails had an official function:

It appears that the system is intended to retain and store emails relating to official function, but that it is simply easier technologically to capture all the emails on the system rather than have some mechanism to distinguish them. We do not think that because the technological net used to capture public record emails also automatically captures other emails we must conclude that the other emails are public records. To rule as defendants request would essentially render all personal emails sent by governmental employees while at work subject to public release upon request. We conclude that this was not the intent of the Legislature when it passed FOIA.

The court went on to cite a federal case in which the court determined that the electronic calendar for the chairman of the SEC was not an “agency record” despite containing both business and personal information and being stored on the agency’s computer system. In that case, SEC employees were permitted limited personal use of their office equipment. The court in the present case found the personal emails at issue analogous to the chairman’s electronic calendar.

Recognizing the lack of permission for personal use in the present case as evidenced by defendants’ Acceptable Use Policy, the court nonetheless rejected defendants’ argument that the policy put users on notice that their personal emails were subject to FOIA:

Although the use policy certainly gives notice to the users that school officials may look at their email, and that the documents could be released pursuant to a subpoena, it in no way indicates that users' emails may be viewed by any member of the public who simply asks for them.

The court further rejected the argument that violation of the policy rendered the otherwise personal emails public records.

The court next decided that the emails at issue, i.e., emails involving “internal union communications” were personal emails and thus not subject to disclosure.

A copy of the full opinion is available here.

Court Finds Data "Not Reasonably Accessible," Denies Motion to Compel

K&L Gates — Thu, 28 Jan 2010 09:05:19 -0800

Rodriguez-Torres v. Gov. Dev. Bank of Puerto Rico, 2010 WL 174156 (D.P.R. Jan. 20, 2010)

In this employment discrimination case, the court found the electronically stored information (“ESI”) requested by the plaintiffs “not reasonably accessible because of the undue burden and cost” and that plaintiffs had failed to show good cause to compel production of the ESI and denied plaintiffs’ motion to compel.

Plaintiffs filed a motion to compel defendants’ production of “all email communications and calendar entries describing, relating or referring to plaintiff Vicky Rodriquez, both inbound and outbound from defendant GDB’s messaging system servers” for the years 2007, 2008, and 2009. Moreover, plaintiffs sought to compel such production “in native format with its original metadata…” Defendants objected and indicated that plaintiffs’ request was likely to produce “hundreds if not thousands of documents which will include irrelevant, confidential, and potentially privileged information.”

Prior to ruling, the court ordered additional briefing on the issue. The parties' submissions included a report from a consulting service indicating an approximate cost of $35,000 to retrieve the requested ESI. Defendants also indicated the need to perform a privilege and confidentiality review of the ESI prior to production. Accordingly, the court found the requested ESI “not reasonably accessible” reasoning that the proposed cost was “too high of a cost for the production of the requested ESI in this type of action.” Moreover, the court indicated its concern over the increased cost that would result from the need to review the documents prior to production stating, “the volume of such information along with the form in which the information is stored makes privilege determinations more difficult and, correspondingly, more expensive and time consuming.”

The court continued its analysis, however, noting that “under FRCP 26(b)(2)(B), the party requesting the information that is not reasonably accessible can still acquire the information if the requesting party shows good cause.” Attempting to show good cause, the plaintiffs indicated they expected to find “communications showing discriminatory animus such as derogatory and demeaning references, exclusion from meetings, communications and work activities, and general disregard for plaintiff Rodriguez’s abilities.” Their “only basis” for this belief was “three articles which suggest that e-mail encourages senders to write unguarded, unwise, and often inappropriate comments.”

The court found no good cause to compel the production and stated “the court determines that Plaintiffs’ request is merely a fishing expedition to find out if there is any evidence that supports their claim. Discovery is not meant to serve as a fishing expedition. As such the court concludes this is not good cause.”

A full copy of the opinion is available here.

"Zubulake Revisited: Six Years Later": Judge Shira Scheindlin Issues her Latest e-Discovery Opinion

K&L Gates — Wed, 27 Jan 2010 10:38:14 -0800

Pension Comm. of Univ. of Montreal Pension Plan v. Bank of Am. Secs., LLC, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010) (Amended Order)

Issued earlier this month, Judge Shira Scheindlin’s opinion in Pension Comm. of Univer. of Montreal Pension Plan v. Bank of Am. Secs., LLC, addresses the issues of parties’ preservation obligations and spoliation in great detail, including detailed and informative discussions of the varying levels of culpability in failing to uphold discovery obligations, the required burdens of proof, and the appropriate remedies upon a finding of spoliation.

The opinion was summed up by Judge Scheindlin in the introduction to her opinion:

By now, it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve records-paper or electronic-and to search in the right places for those records, will inevitably result in the spoliation of evidence.

The court specifically identified several actions (or failures to act) which would result in a finding of gross negligence in upholding discovery obligations:

Thus, after the final relevant Zubulake opinion in July, 2004, the following failures support a finding of gross negligence, when the duty to preserve has attached: to issue a written litigation hold; to identify all of the key players and to ensure that their electronic and paper records are preserved; to cease the deletion of email or to preserve the records of former employees that are in a party's possession, custody, or control; and to preserve backup tapes when they are the sole source of relevant information or when they relate to key players, if the relevant information maintained by those players is not obtainable from readily accessible sources.

Following its lengthy discussion of the facts and findings, the court concluded that:

While litigants are not required to execute document productions with absolute precision, at a minimum they must act diligently and search thoroughly at the time they reasonably anticipate litigation.

For a full copy of the opinion, click here.

District Court Rejects Total Dismissal of Claims, Orders Partial Dismissal and $75,000 in Monetary Sanctions for Egregious Discovery Violations

K&L Gates — Tue, 26 Jan 2010 14:19:09 -0800

Bray & Gillespie Mgmt., LLC v. Lexington Ins. Co., 2009 WL 5218035 (M.D. Fla. Aug. 3, 2009); Bray & Gillespie Mgmt., LLC v. Lexington Ins. Co., 2010 WL 55595 (M.D. Fla. Jan. 5, 2010)

Following her finding that “[Bray & Gillespie], through counsel, acted willfully and in bad faith in violation of the Federal Rules of Civil Procedure and this court’s orders” by failing to make reasonable efforts to search for and produce documents in response to court orders and by making repeated misrepresentations to the court, among other things, the Magistrate Judge recommended that the plaintiff’s claims be stricken and that the case be dismissed with prejudice. (For additional details of plaintiff’s discovery abuses, click here to be taken to a summary of a prior opinion in this case.) On review of that recommendation, the District Court Judge found total dismissal of all the plaintiff’s claims “an excessive remedy” and instead ordered the dismissal of all claims for damages arising from the alleged interruption of business at the Treasure Island Property and for the plaintiff to pay $75,000 to the defendant for expenses incurred in pursuit of its motion for sanctions.

In its opinion, the District Court acknowledged the egregious nature of plaintiff’s and plaintiff’s counsel’s many discovery failings. Despite these many violations, however, the court found the sanction of total dismissal of all claims “excessive” and chose instead to dismiss only the claims related to the Treasure Island Property, the property for which the late discovered evidence was relevant. Declining to adopt the Magistrate’s recommendation, the District Court found the defendant’s contention that the plaintiff’s failure to produce the Treasure Island evidence prevented the defendant from interviewing persons who could describe the condition of the Resort “unpersuasive” where the defendant admitted that certain relevant individuals had been “available to Defendant since the inception of litigation” and had not been interviewed. Also, the defendant’s appraisers had access to the relevant property throughout the relevant time period and took photos of the property to support the defendant’s case. The court also noted that the plaintiff’s conduct “has only related to the production of folios for the Treasure Island Property” and that “[t]o speculate without any evidentiary support that Plaintiff’s conduct in this area undermines the integrity of all discovery provided in the case is not appropriate.”

Contemplating a range of alternative sanctions from disallowing the plaintiff’s use of the folio evidence to the recommended dismissal of all claims (and denying the plaintiff’s motion for an extension of time for additional productions), the court determined the dismissal of the plaintiff’s claims related only to the Treasure Island Property was appropriate. Additionally, the court ordered the plaintiff to pay defendant $75,000 “for expenses reasonably incurred …in pursuit of [the] underlying motion. The court noted that “the amount may not suffice to cover all reasonable expenses incurred by Defendant” but that in combination with the dismissal sanction, the sanctions were “sufficient for the conduct at issue.”

A full copy of the August 3rd Report and Recommendation is available here.
A full copy of the January 5th Order is available here.

Upcoming Events - February

K&L Gates — Fri, 22 Jan 2010 10:42:04 -0800

Information Week Virtual Event: Modernizing IT Governance, Risk and Compliance to Accelerate Flexibility and Visibility: “E-Discovery Drill Down: First hand insight on driving more efficiency, cost-value and priorities in electronic e-discovery initiatives.”

February 10, 2010
5:00-5:45 PM ET

K&L Gates Partner Thomas J. Smith will participate in a panel discussion focusing on document retention and management and “establishing compliant-driven policies that prevent overloading or underloading information that may need to be retrieved in the future.”

Click here to learn more and to register.

ABA Section of Litigation Corporate Counsel CLE Seminar: “Holding the Line on Reasonableness in E-Discovery”

February 13, 2010
Westin Mission Hills Resort
Rancho Mirage, CA
9:25-10:25 AM PT

K&L Gates Partner Martha J. Dawson will participate in a panel discussion: “Holding the Line on Reasonableness in e-Discovery.” This session will examine the standard of reasonableness in conducting electronic discovery, including the increasing trend toward a standard of perfection and strategies and tactics to correct it.

Click here to learn more and to register.

The Knowledge Congress: Legal Ethics and E-Discovery (Live Webcast)

February 17, 2010
12-2 PM ET

K&L Gates partner David R. Cohen will present on a number of topics, including compliance with preservation and production obligations, the duties of in-house vs. outside counsel, privilege issues and Fed. R. Evid. 502, and how to avoid common e-discovery pitfalls.

Click here to learn more and to register.

Court Finds Claims of Burden and Expense "Exaggerated," Declines to Find Emails "Not Reasonably Accessible"

K&L Gates — Wed, 13 Jan 2010 09:22:06 -0800

Starbucks Corp. v. ADT Security Servs., Inc., 2009 WL 4730798 (W.D. Wash. Apr. 30, 2009)

In this recently released opinion written early last year, the defendant, ADT Security Services, Inc. (“ADT”), sought to avoid its obligation to produce archived emails by arguing the emails were not “reasonably accessible because of undue burden or cost,” as that term is used in Fed. R. Civ. P. 26(b)(2)(B). In support of this position, ADT’s Manager of Information Technology, John Mitchell, provided various estimates regarding the potential cost of time and money to restore the requested email. In response, the plaintiff, Starbucks Corporation (“Starbucks”), provided its own estimates of the potential cost which were significantly lower than those proffered by ADT. Finding Mitchell had “at every turn, provided exaggerated reasons and exaggerated expenses as to why ADT allegedly cannot and should not be ordered to comply with its discovery obligations,” the court declined to find the information at issue “not reasonably accessible.” Moreover, the court indicated that even had the information been deemed not reasonably accessible, the court would have found that good cause existed to order the production. Accordingly, Starbuck’s motion to compel was granted.

Starbucks sought to compel the production of archived emails from the years 2003 through 2006 regarding “five specifically identified current and former employees.” ADT objected, arguing that the emails were not reasonably accessible because of the “cumbersome” nature of the system on which they were stored and the resulting burden of retrieval. Specifically, ADT represented that the emails were stored in a format that could only be read by proprietary equipment, that restoring the emails could take up to four years (if all 5 custodians had 25,000 relevant emails to restore), and that such retrieval would result in significant disruptions to ADT’s business. Regarding the cost of the production, including processing, etc., Mitchell initially estimated a cost of $88,000. Just six months later, Mitchell amended the estimate to a potential cost of $834,285. Notably, despite the allegedly significant problems with the Plasmon System (the system on which the archived emails were stored), ADT continued to utilize it in the operation of its business and had not migrated the archived emails to its newer, more easily accessed system.

As discovery continued, two alternatives for production arose. First, the court became aware that ADT could produce “email stubs,” containing limited information such as the “To,” “From,” and “Subject Matter” data and about 80 characters of email. These stubs could be retrieved “relatively quickly” (subject to a clawback provision) and Starbucks could then specify which emails it wanted to see. Second, the court learned that “more than half” of the DVDs in the Plasmon system were not, in fact, in the Plasmon-format, and thus could be read by a vendor. However, ADT argued that the disks still “could not be read by all equipment,” that the processing would still take an extended period of time, that additional equipment would need to be purchased, and that approximately 2 terabytes of storage would need to be stored. Anticipating the need for outside assistance, ADT provided an estimate of “several hundred thousand dollars” for a vendor "just to make copies and thousands more to purchase a hardware system to house the data", but failed to include the vendor’s proposal with its submission to the court.

In response, Starbucks provided its own estimates (procured from two outside vendors) which indicated the likely cost to be between $17,000 and $26,000. These estimates were attached to the declarations provided to the court.

Accordingly, the court determined that “Mr. Mitchell has, at every turn, provided exaggerated reasons and exaggerated expenses as to why ADT allegedly cannot and should not be ordered to comply with its discovery obligations. He simply is not credible.” Moreover, the court stated that “it is difficult to conclude that the ESI sought in this case is ‘not reasonably accessible’ in light of the fact that the Plasmon System continues to be used by ADT personnel…The fact that a company as sophisticated as ADT…chooses to continue to utilize the Plasmon System instead of migrating its data to its now-functional archival system should not work to plaintiff’s disadvantage.”

The court went on to state that, even had it found the email “not reasonably accessible,” it would have found that “good cause” existed to compel production, considering the factors set forth in Fed. R. Civ. P. 26(b)(2)(C). In so finding, the court rejected ADT’s “alternatives to production” including interrogatories and depositions. The court also dismissed ADT’s assertion that certain of the emails may already have been in Starbuck’s possession.

Balancing the cost of production versus the likely benefit, the court found it significant that “the ESI critical to this case was created during the time period which means that it is housed on the Plasmon System.” The court went on to note the significant stakes for both parties (e.g. Starbucks was seeking at least one million dollars) and that “both parties in this case have the substantial resources necessary to conduct this litigation.” Finally, the court noted that Starbucks had attempted to mitigate the burden to ADT by limiting the number of custodians and providing terms to filter for those persons.

Thereafter, the court ordered ADT to “implement an immediate plan to make copies of the archived UDF-formatted disks and to save them to an appropriate searchable storage medium.” Regarding the disks in the proprietary format, the court found the complete restoration of those disks “inappropriate at this time,” and instead ordered the production of all relevant emails’ stubs and for Starbucks to designate emails for restoration and production. Finally, the court ordered the parties to confer to agree upon fees and costs due to Starbucks or, in the event agreement could not be reached, for Starbucks to file an appropriate motion requesting such fees.

A copy of the full opinion is available here.

Appellate Court Affirms Order Allowing Plaintiff's Expert to Image Defendants' Hard Drives to Support Claims of Spoliation and Fraud

K&L Gates — Thu, 07 Jan 2010 11:41:01 -0800

Cornwell v. N. Ohio Surgical Ctr., 2009 WL 5174172 (Ohio. Ct. App. Dec. 31, 2009)

In this wrongful death litigation, the trial court granted plaintiff’s motion to allow his forensic expert to create a mirror image of defendants’ hard drives. Plaintiff asserted that examination of the drives would reveal evidence of defendants’ willful alteration or deletion of relevant evidence. The court granted the motion despite defendants’ objections that such access would violate statutory and common law prohibitions against the disclosure of confidential medical information and that such access was not authorized under Fed. R. Civ. P. 34. Defendants appealed. On appeal, the order of the trial court was affirmed.

Plaintiff’s wife, Mary Cornwell, suffered cardiac arrest during arthroscopic knee surgery and died six days later. In plaintiff’s suit for wrongful death, a question arose as to the surgeon’s knowledge of Mrs. Cornwell’s history of hypertension and the medication(s) she was taking. The surgeon claimed no such knowledge. However, several pieces of documentary evidence (including two “office notes” and a letter) called the veracity of that claim into question. Following the depositions of the surgeon’s resident and an employee of the clinic, plaintiff came to believe that defendants had purposefully altered the content of certain electronically created evidence related to the surgeon’s knowledge of Mrs. Cornwell’s medical history. Based upon the deposition testimony and evidence that “despite [plaintiff’s] request” defendants “permitted an information technologist access to the desktop computer upon which the office note was transcribed” and that the computer was thereafter “rendered nonfunctional,” plaintiff amended his complaint to include claims of spoliation and fraud.

Plaintiff then sought to create a mirror image of the hard drives upon which the relevant documentary evidence was created. Defendants objected claiming that “their hard drives contained privileged health information of ‘hundreds of other patients’” and argued, essentially, that such access would violate both statutory and common law prohibitions against the dissemination of confidential patient information. The motion was granted and the court issued a detailed order defining the protocol to be followed when creating and analyzing the mirror image of the drives.

Defendants appealed the order. On appeal, defendants argued that allowing the expert’s access to their computer systems would violate statutory prohibitions against the disclosure of privileged health information and that the search terms would “undoubtedly ‘pull up’ privileged information” thereby subjecting defendants to tort liability for the disclosure of patient information. Like the trial court, the appellate court rejected these arguments. Supporting its conclusion, the appellate court cited the testimony of plaintiff’s expert that he would not open or otherwise view confidential patient information in the course of his forensic process.

The appellate court then turned to defendants’ arguments that plaintiff’s direct access to their computer system was not authorized by Fed. R. Civ. P. 34 and that “they, not [plaintiff] are the only parties who can supply [plaintiff] with the data from [the relevant drives].” Citing the advisory committee notes, defendants argued that “it is only when data cannot be made useable by the responding party that the discovering party ‘may be required’ to use his own devices to translate the requested data into usable form.” Defendants bolstered their argument by citing to In re Ford Motor Co., 345 F.3d 1315 (11th Cir. 2003), a case in which the plaintiff’s request for direct access to Ford’s databases in order to search for additional claims analogous to her own was denied on appeal in the absence of “some condition such as improper conduct on the part of the responding party” and because “the district court failed to state any abuse of the discovery process by Ford, failed to set forth any protocols for [plaintiff’s] search of Ford’s databases, and did not even designate any restricting search terms.”

The appellate court found Ford distinguishable where the plaintiff in the present case learned of the potential evidentiary issues “during discovery [sic] process itself” and where “unlike the circumstance in Ford, it was impossible for [defendants] to produce those documents.” Further, the court noted, “the circumstances under which the letter and the office note disappeared and the computer virus/inoperability was allegedly discovered raises an inference of improper conduct.”

In dismissing defendants’ argument regarding proper access pursuant to rule 34, the court also noted the “direct relationship between the [plaintiff’s] claims of spoliation and fraud” and explained “it is clear that [plaintiff] can only recover on either or both [claims] if he is allowed to determine whether appellants’ [hard drives] were willfully altered (spoliation) and/or [defendants] falsely represented that they had no knowledge of Mrs. Cornwell’s pulmonary hypertension at the time of her arthroscopy (fraud).” The court also reasoned that unlike in Ford, the trial court in this case “set forth a specific protocol, definite search terms, and the means necessary to protect privileged information.”

The trial court’s judgment was affirmed.

A copy of the full opinion is available here.

Upcoming Events - January

K&L Gates — Wed, 06 Jan 2010 15:04:12 -0800

Center for Competitive Management – E-Discovery Best Practices and Compliance Guidelines (Audio Conference)

January 14, 2010
2-3:15 PM ET

K&L Gates partners David Cohen and Todd Nunn will co-present this discussion of how to stay on top of the rapidly changing world of electronic records, discovery, and evidence including discussion of specific topics such as recent rulings and risks associated with e-discovery, best practices for managing electronic stored information, opportunities and challenges for 2010, and methods for cutting costs and lowering data loss risks.

For more information or to register, click here.

Thompson Publishing – Taming the E-Discovery Beast: Proactive Measures to Slash Costs and Reduce Risks (Webcast)

January 20, 2010
2 PM ET

K&L Gates partners David Cohen and Julie Anne Halter will co-present this discussion focusing on proactive steps that organizations can take before litigation to reduce e-discovery exposure and proven cost control and cost reduction strategies to employ during litigation.

For more information or to register, click here.

"International Man of Mystery" Sanctioned for Contempt of Court and Intentional Spoliation

K&L Gates — Wed, 23 Dec 2009 12:52:19 -0800

TR Investors, LLC v. Genger, 2009 WL 4696062 (Del. Ch. Dec. 9, 2009) (Unpublished)

In this case, defendant Arie Genger was held in contempt and found to have intentionally spoliated relevant documents in violation of a court order following his instruction to his personal IT consultant to wipe the unallocated space of his company’s computer system which his consultant then carried out. Declining to impose terminating sanctions, the court instead ordered that Genger produce 10 documents previously subject to a claim of privilege, that the burden of persuasion as to Genger’s affirmative defenses and counter-claims be raised one level, that Genger was precluded from prevailing on any material factual issue by reason of his testimony alone, and that Genger pay for plaintiffs’ reasonable attorneys’ fees and expenses in the amount of $750,000.

As of June 2008, defendant Genger was the Chief Executive Officer of TRI, a company that he founded. Plaintiff, The Trump Group, owned a sizeable portion of the company’s stock and had representatives on the board of directors. Eventually, for reasons unimportant to the discovery issues at hand, TRI sought to take over the company and to remove Genger from his position. Litigation ensued. While attempting to settle their disputes, the parties submitted to the court a stipulated status quo order which included a provision that prohibited tampering with or destroying company records.

It turned out that Genger was not a run of the mill CEO. Instead, aside from his usual business interests, Genger had high level contacts within the Israeli government for whom he performed “sensitive tasks” related to Israel’s national security. (As the court noted, “[a]lthough Mike Myers may have made millions by bringing to the big screen his take on what it is like to be an "international man of mystery," Arie Genger, as it turns out, is such a man.”) Highly sensitive documents related to his Israeli contacts were stored on his work computer and server, along with other personal documents. Concerned that his personal information would be viewed by members of The Trump Group, Genger undertook to segregate his personal documents from those relevant to the litigation. In doing so, Genger was substantially assisted by attorneys for TRI who in turn employed an outside technology firm to identify and encrypt personal confidential documents and to preserve documents related to the business of TRI.

When imaging TRI’s computer system, however, the outside technology firm failed to capture the unallocated space. Nor did they review TRI’s email server, because it was maintained off-site, and they were not made aware of it. Thereafter, Genger’s personal IT consultant, Oren Ohana, informed Genger that non-encrypted versions of his personal files may be present in the unallocated space on TRI’s system, despite the technology consultants’ efforts to protect their confidentiality. Ohana then ran wiping software to “take care of” the problem. Because the consultants failed to capture the unallocated space, the deleted data had not been preserved by their efforts. Neither Genger nor Ohana informed anyone of their actions, even when obvious opportunities to do so arose. When “caught,” Genger claimed his actions were merely intended to erase copies of any unencrypted versions of his personal documents. For a myriad of reasons, including the suspicious timing of the deletion, the technical savvy of Ohana, and the parties’ failure to disclose their actions, the court did not accept this justification.

To establish civil contempt, the court noted, the petitioner must “demonstrate that the [contemnors] violated an order of this Court of which they had notice and by which they were bound.” Rejecting Genger’s claims that he was merely disposing of copies of documents and his defense that there was no evidence that “any particular documents were lost”, the court identified several documents that were “likely” to have been erased by Genger’s actions and found him in contempt of court.

Turning to the issue of spoliation, the court identified the need for a showing of intentional or reckless spoliation of documents subject to a duty to preserve to justify the imposition of dismissal claims of an adverse inference. Specifically as to an adverse inference, the court went on to note, there must also be a showing that the “allegedly destroyed evidence existed and supported the aggrieved party’s position.”

The court found that Genger spoliated evidence. In so holding, the court first found that Genger was under a clear duty to preserve as evidenced by both the ongoing litigation and the clear language of the Status Quo Order. The court next found that the spoliation was intentional or, “at the very least reckless,” stating, “If Genger believes that running wiping software without advice of counsel or court permission in this context does not constitute recklessness, he has an unusual dictionary. The law uses a more traditional lexicon.” Finally, the court found that The Trump Group had met its burden of showing that relevant documents were destroyed as evidenced by the existence of relevant documents that were not found on Genger’s or TRI’s computer systems (and thus, reasoned the court, were likely deleted by the wiping of the unallocated space.)

Having found Genger in contempt and having determined that he participated in the spoliation of relevant documents, the court turned the question of sanctions. The court laid out the appropriate considerations: “(1) the culpability of the spoliating party; (2) the degree of prejudice suffered by the aggrieved party; and (3) the availability of lesser sanctions that could both avoid unfairness to the aggrieved party and serve as an adequate penalty to deter such future conduct.”

With these considerations in mind, the court first found that “Genger was improperly motivated and intended to limit the Trump Group’s ability to gather evidence” but also that “part of his motivation was to protect the confidentiality interests of his personal information.” Next, the court found that the Trump Group did not suffer a high degree of prejudice” because the misconduct only affected unallocated space and in light of the Trump Group’s own bad conduct which, although insufficient to warrant denying TRI relief, was “relevant in deciding to deny default judgment.” Finally, the court found the extreme remedy of default judgment inappropriate where lesser sanctions were sufficient.

Accordingly, as noted above, the court ordered that Genger produce 10 documents previously subject to a claim of privilege, that the burden of persuasion as to Genger’s affirmative defenses and counter-claims be raised one level, that Genger was precluded from prevailing on any material factual issue by reason of his testimony alone, and that Genger pay for plaintiff’s reasonable attorneys’ fees and expenses in the amount of $750,000 – an amount suggested by the judge as reasonable.

A copy of the full opinion is available here.

Western District of Oklahoma Adopts Best Practices for Electronic Discovery in Criminal Cases

K&L Gates — Thu, 17 Dec 2009 13:15:08 -0800

If you needed more proof that electronic discovery is not just for civil cases, the Western District of Oklahoma has adopted “Best Practices for Electronic Discovery of Documentary Materials in Criminal Cases.” Adopted on August 20th, these Best Practices recognize the lack of guidance in Federal Rule of Criminal Procedure 16 or in U.S.C. § 3500 regarding the production of discovery materials in electronic from and are intended to “summarize proposed electronic discovery practices.”

Included in the Best Practices are requirements that counsel for the parties shall, by a time proscribed, address issues including the volume of discovery, the litigation capabilities of counsel, and timeframes for production, among other things. Additional requirements include the production of electronically stored information in .PDF format, the production of an index identifying the “source and/or nature of the materials” produced, and mandatory good-faith discussions of possible cost-sharing measures when handling voluminous discovery.

A full copy of the Best Practices are available here.

Court to rule on privacy of texting

K&L Gates — Tue, 15 Dec 2009 11:22:39 -0800

By Robert Barnes
Washington Post Staff Writer
Tuesday, December 15, 2009

The Supreme Court will decide whether employees have a reasonable expectation of privacy for the text messages they send on devices owned by their employers.

The case the court accepted Monday involves public employees, but a broadly written decision could hold a blueprint for private-workplace rules in a world in which communication via computers, e-mail and text messages plays a very large role.

To read the full article, click here.

Court Rules Mistaken Transmission of Privileged Email Due to Use of "Autofill" Function in Email Did Not Result in Waiver

K&L Gates — Fri, 11 Dec 2009 12:09:38 -0800

Multiquip, Inc. v. Water Mgmt. Systs., LLC, 2009 WL 4261214 (D. Idaho Nov. 23, 2009)

When responding to an email communication from his attorney, defendant mistakenly sent his message to a third party. As a result, the email was eventually provided to opposing counsel in the litigation. Plaintiff’s counsel refused to return the email upon defense counsel’s request and filed a motion for a protective order to which the email was attached. Defendants then filed a motion to exclude plaintiff’s use of the email. Defendant David Muhs explained that the mistaken transmission occurred when the autofill feature on his email program supplied the wrong address in place of that of the intended recipient. Conducting its analysis pursuant to Fed. R. Evid. 502, the court determined that privilege had not been waived.

While responding to an email from one of his attorneys, defendant Muhs sought to include his other attorneys in the communication. When typing the name of one such attorney, however, the autofill function in his email system supplied the address of a third party unrelated to the relevant litigation. Mr. Muhs failed to notice the error prior to sending his message. Upon receipt of the email, the third party forwarded the message, which was forwarded again, and was eventually sent to opposing counsel in Mr. Muhs’ ongoing litigation. Plaintiff’s counsel immediately notified defense counsel of his receipt of the privileged email, but refused to return it, arguing that FRCP 26(b)(5)(B) only applied to documents disclosed in discovery. Plaintiff then sought a protective order and attached the email as an exhibit. Defendants moved to exclude the email from evidence.

After establishing the application of the attorney-client privilege to the email, the court turned to the question of whether the email was protected from waiver, despite its disclosure, by FRE 502.

Relying on Mr. Muhs’ unequivocal declaration, the court quickly decided that the email was inadvertently disclosed - the first element for analysis under FRE 502. A footnote in this portion of the court’s opinion also indicates its rejection of the notion that FRE 502 is inapplicable outside of the context of discovery: “Either the privilege applies or it does not; likewise, the privilege is either waived or it is not. Whether this takes place within a discovery context is immaterial toward maintaining the privilege under FRE 502(b).”

Turning next to the question of whether reasonable steps were taken to prevent the disclosure, the court recognized the contrast of the present situation to inadvertent production within the context of discovery, where the review protocols of the producing party are examined to determine the reasonableness of the steps taken to prevent disclosure. The court then undertook an analysis of the reasonableness of Mr. Muhs’ reliance on the autofill function, a function he attested he had successfully utilized several hundred times when communicating with counsel. The court stated:

Mr. Muhs' care in addressing his email was hasty and imperfect. Nevertheless, "he relied on a system that had worked in a particular way in the past to continue working the same way in the future." Under these circumstances, it cannot be said that Mr. Muhs' isolated act was unreasonable. Therefore, the Court finds that Mr. Muhs took reasonable steps to prevent the disclosure.

[Citations omitted.]

Finally, the court turned to whether reasonable steps were taken to rectify the error upon learning of the inadvertent disclosure. In this case, on the same day defense counsel became aware of the disclosure, he contacted plaintiff’s counsel to assert the attorney-client privilege and request the email’s return. The next day, Mr. Muhs’ local counsel also contacted plaintiff’s counsel to reiterate the claim and again request the email’s return. Accordingly, the court determined that the final element of FRE 502 was also satisfied.

Notably, the court indicated in footnote that shortly after learning of the “misdirected” email, defense counsel advised Mr. Muhs to take a number of steps to prevent future mis-sent emails, including: “(1) erasing [the relevant third party’s] address from Mr. Muhs' email program's address book, (2) checking to see if the autofill program worked as expected, (3) sending email to just one attorney who would then forward it as necessary, and (4) creating a "group" to send certain emails rather than relying on the autofill process.”

Having determined all elements of FRE 502 were satisfied, the court granted Defendants’ Motion to Exclude Evidence and ordered plaintiff to destroy all versions of the email in its possession and for the copy in the court’s file to be placed under seal.

A copy of the full opinion is available here.

Ex Parte Contact with Independent Forensic Examiner Results in Forfeiture of Opportunity for Forensic Examination and Denial of Motion for Sanctions with Prejudice

K&L Gates — Fri, 11 Dec 2009 11:57:51 -0800

G.K. Las Vegas Ltd. P’ship v. Simon Prop. Group, 2009 WL 4283086 (D. Nev. Nov. 30, 2009)

Following a determination that defendants participated in improper ex parte communications with an independent, court-appointed forensic expert and thus destroyed its impartiality, the district court held that defendants had forfeited their right to a forensic examination of plaintiffs’ relevant computer systems and modified its prior order to deny defendants’ motion for spoliation sanctions with prejudice.

In this case stemming from a partnership formed for the development and management of a Las Vegas Strip shopping complex, defendants suspected plaintiffs of the spoliation of relevant electronically stored evidence (“ESI”) and filed a motion for sanctions accordingly. At a hearing on the motion, the court indicated its unwillingness to grant the motion in light of the possibility that the ESI could be located on other hard drives in plaintiffs’ possession and authorized the forensic examination of plaintiffs’ relevant computers by an independent expert. If the parties agreed, they were instructed to contact the court to “work out an order.” The court also indicated that defendants would bear the cost of such an examination, but that the costs could be shifted upon the proper showing of spoliation. Accordingly, defendants’ spoliation motion was denied without prejudice.

Thereafter, the parties agreed that FTI Consulting (“FTI”) would perform the forensic examination. Accordingly, defendants made contact with FTI to determine its willingness to participate. Defendants also provided FTI with various documents for review, but did not notify plaintiffs of the exchange.

After defendants’ initial communications with FTI as described above, the court entered an order governing the forensic examination. The scope of the order was quite specific and charged the examiner with two tasks. First, FTI was to determine whether the relevant computers/servers contained the ESI at issue, to restore the ESI if found, and to perform an agreed upon search to identify potentially relevant emails to be provided to plaintiffs for review. Second, FTI was to determine whether any such ESI had been deleted and if so, to determine the details of that deletion.

When FTI indicated its intention to execute an agreement to proceed with both sides, defendants’ counsel quickly objected stating, “Let’s have [defendant] as the engaging party since it the only one paying the bills.” The agreement was thereafter executed between FTI and defendants only. Subsequently, defendants’ counsel made arrangements for three FTI consultants to fly to defendants’ offices for a meeting with counsel. Plaintiffs were not informed of or invited to this meeting. Additionally, in the course of the process leading up to the examination, defense counsel requested that FTI inquire of plaintiffs about the possibility that certain data from an allegedly water damaged laptop had been copied to another computer. It was this inquiry that subsequently raised plaintiffs’ suspicion of improper ex parte contact.

Following plaintiffs’ resistance to additional participation in the examination process, defendants sought to compel plaintiffs to respond to certain interrogatories and to compel participation in all future communications with FTI to prevent additional allegations of bias, among other things. Plaintiffs in turn sought to vacate the forensic examination order, disqualify FTI, and modify the court’s initial denial of defendants’ spoliation motion to be entered with prejudice.

Tasked with analyzing the competing motions, the magistrate judge first noted the court’s power to appoint an independent expert witness pursuant to Evid. R. 706 (as opposed to an expert advisor to the court) and thereafter established that this had been the district court’s intention, despite the absence of explicit language in the order for forensic examination.

Rule 706 provides that the expert witness will be informed of his or her duties by the court. In the present case, the magistrate noted, the order did not contain an explicit prohibition against ex parte contact. Nonetheless, as the magistrate stated, defendants were “obviously aware” of the district court’s repeated statements that the forensic experts would need to be independent.

Accordingly, the magistrate determined that while defense counsel’s initial contact with FTI to determine its willingness to serve was reasonable, the choice to provide FTI with certain documents absent approval from plaintiffs was not. Moreover, the magistrate objected to defendants’ decision to execute the contractual agreement with FTI without plaintiffs, despite the fact that defendants were to bear the initial cost of the examination.

“Most disturbing,” per the magistrate’s recommendation, was defense counsels’ decision to invite FTI for an ex parte meeting without notifying plaintiff. The magistrate rejected arguments that the meeting was necessary to determine FTI’s qualifications because FTI had already been approved by the court and because plaintiffs had an equal interest in the qualifications of the expert, but were not invited to participate in the meeting.

Finally, the magistrate found defendants’ decision to involve FTI in its efforts to obtain information related to whether specific data on a laptop subject to water damage had been copied to an alternative source improper. Specifically, such activity on the part of FTI was outside the scope of the court’s examination order and therefore was not authorized.

The magistrate determined that “defendants’ counsel have compromised FTI’s appearance of independence and have thereby diminished the assurance that the forensic examination will be performed in an impartial manner.” Thus, the magistrate recommended that the court find defendants had forfeited the opportunity to obtain an independent forensic examination and that their motion to enforce the examination order be denied. The magistrate left to the district court judge the decision as to plaintiffs’ motion to modify the court’s prior order to deny defendants’ motion for spoliation sanctions with prejudice.

Upon the parties’ objections to the magistrate’s recommendation, the district court took up review of the issues presented. The district court’s order, in large part, addressed (and rejected) defendants’ argument that FTI was not an independent court-appointed expert, but rather a “party-retained independent expert” such that defendants’ ex parte contact would have been permissible. As to the ex parte contact, the court indicated its agreement with the magistrate judge that “FTI’s role as an independent expert ha[d] been compromised.”

Accordingly, the district court judge adopted the recommendations of the magistrate judge and vacated the order for forensic examination of plaintiffs’ computers. Also addressing the question of the modification of its prior order, the district court found that such modification was warranted, and modified the prior order to deny defendants’ motion for spoliation sanctions, with prejudice, noting that “defendants have not met their burden to demonstrate spoliation.”

A copy of the full opinion is available here.

Supreme Court of Washington Holds Trial Court Did Not Abuse Discretion in Imposing $8,000,000 Default Judgment Pursuant to CR 37 for Defendant's Willful Discovery Violations

K&L Gates — Fri, 11 Dec 2009 11:47:12 -0800

Magaña v. Hyundai Motor Am., 220 P.3d 191 (Wash. 2009)

Plaintiff sustained injuries in an automobile accident that he alleged were caused in part by a defective seat design which allowed the seat to collapse. The case went to trial and plaintiff was awarded $8,000,000. The verdict was reversed on appeal for reasons related to plaintiff’s expert’s testimony and a new trial on the issue of liability was ordered.

In preparation for retrial, plaintiff requested that defendant Hyundai update its prior discovery responses. Previously, following its unilateral decision to limit the time frame of its responses, Hyundai represented it had no similar claims of seat back failure for production and that the 1995-1999 Hyundai Accents were the only models with the same or substantially similar seat design. In its updated response, though, Hyundai indicated it would produce information related to alleged seat back failures in 1995-1999 Accents and in 1992-1995 Elantras. Hyundai also stated that 1995-1999 Accents use the same or similar right front seat as the 1996 Accent and that the 1992-1995 Elantras “had a recliner on the right front seat that was substantially similar to the front recliner on the 1996 Hyundai Accent.” For the first time, claims of alleged seat back failure from 2000 and 2002 were produced.

Plaintiff sought to compel production of all documents related to seat back failures. Upon the trial court’s order granting the motion, Hyundai produced additional documents, including (for the first time) records from its consumer “hotline” database and nine reports of seat back failures involving 1995-1999 Accents.

Thereafter, plaintiff moved for default judgment arguing that “it would be impossible to prepare a case with the other similar incidents just produced” and that certain evidence had been lost due to delay. In its defense, defendant claimed that it had been relieved of its obligation to produce other similar incidents of seatback failure per a 2001 agreement between the parties and that the prejudice to plaintiff was speculative.

Following an evidentiary hearing in which the primary focus was whether plaintiff was prejudiced, the trial court granted default judgment. “The court found (1) there was no agreement between the parties to limit discovery, (2) Hyundai falsely responded to Magaña's request for production and interrogatories, (3) Magaña was substantially prejudiced in preparing for trial, and (4) evidence was spoiled and forever lost. The trial court considered lesser sanctions but found that the only suitable remedy under the circumstances was a default judgment.” Defendant appealed.

On appeal, the order of the trial court was reversed upon the court’s finding that plaintiff had not been prejudiced and that lesser sanctions would have sufficed. Plaintiff appealed to the Supreme Court of Washington.

Reviewing the trial court’s sanctions for abuse of discretion, the Supreme Court noted that if a trial court imposes one of the “harsher remedies” under CR 37(b), the record must clearly show: (1) one party willfully or deliberately violated the discovery rules and orders, (2) the opposing party was substantially prejudiced in its ability to prepare for trial, and (3) the trial court explicitly considered whether a lesser sanction would have sufficed.

Turning then to the issue of willfulness, the court noted that both the trial court and the Court of Appeals held that Hyundai’s failure to disclose was willful and that is responses to discovery were “false, misleading, and evasive.” The court also noted that Hyundai “then failed to supplement its incorrect responses” in preparation for the new trial. Addressing the adequacy of Hyundai’s search, the court stated:

A corporation must search all of its departments, not just its legal department, when a party requests information about other claims during discovery. Here Hyundai searched only its legal department. Hyundai's counsel told the trial court that in response to request for production 20, Hyundai's search "was limited to the records of the Hyundai legal department" and that "no effort was made to search beyond the legal department, as this would have taken an extensive computer search." CP at 5319. As the trial court correctly found, "[t]here is no legal basis for limiting a search for documents in response to a discovery request to those documents available in the corporate legal department.

The court also stated:

The trial court also found "Hyundai had the obligation not only to diligently and in good faith respond to discovery efforts, but to maintain a document retrieval system that would enable the corporation to respond to plaintiff's requests. Hyundai is a sophisticated multinational corporation, experienced in litigation." Id. Hyundai willfully and deliberately failed to comply with Magaña's discovery requests since Magaña's initial requests in 2000 and continued to do so.

Concluding its discussion of willfulness, the court noted the record fully supported the trial court’s other conclusions and that there was no abuse of discretion as to the willfulness element of the three part test.

Turning to the issue of prejudice, the court found that plaintiff’s “ability to prepare for trial was substantially prejudiced because of Hyundai’s egregious actions during discovery.” Specifically, the high court dismissed the rationale of the appellate court that plaintiff could have completed his necessary inquiry into other accidents if given more time and rejected the assertion that plaintiff was partially to blame for his troubles by requesting additional discovery and then complaining about a lack of time to investigate. The Supreme Court also determined that the appellate court used the wrong standard in determining the existence of prejudice. Specifically, the court found that the proper inquiry was whether plaintiff could have properly prepared for trial rather than whether the plaintiff could have obtained a fair trial – the erroneous standard applied by the lower court. Accordingly, the Supreme Court held that plaintiff’s ability to prepare for trial was substantially prejudiced, as determined by the trial court.

Finally, addressing whether the trial court explicitly considered lesser sanctions, the Supreme Court found that “the trial court adequately and explicitly” considered lesser sanctions on the record but determined the only adequate remedy was default judgment. In addressing the sufficiency of a monetary fine, for example, the trial court found that “it would be difficult to know what amount would be suitable since ‘Hyundai is a multi-billion dollar corporation” and that money would not address the prejudice that existed. The Supreme Court also noted the trial court’s explicit acknowledgment that default judgment would reinstate the substantial verdict, but reasoned that while the amount to be awarded was large, it was not because of plaintiff’s wrongdoing but rather “Hyundai’s atrocious behavior in failing to respond to discovery requests throughout the lawsuit.”

In accordance with the reinstatement of default judgment, the Supreme Court also reinstated plaintiff’s award of attorney’s fees and expenses and awarded plaintiff’s fees and costs for responding to the second appeal.

A copy of the full opinion is available here.

Trial Court Violated Attorney-Client Privilege by Ordering In Camera Review

K&L Gates — Thu, 03 Dec 2009 09:54:54 -0800

Costco Wholesale Corp. v. Superior Court, S163335 (Cal. Nov. 30, 2009)

In 2000, Costco hired outside counsel to provide legal advice regarding the applicability of certain wage and overtime laws to its warehouse managers. In furtherance of providing such advice, counsel spoke with two managers Costco had made available to her. Thereafter, she provided Costco with a 22-page opinion letter addressing the question at issue. Several years later, plaintiffs in a class action against Costco sought to compel production of the relevant opinion letter arguing that the letter contained unprivileged information and that Costco had placed the contents in issue thereby waiving the privilege.

To resolve the question, the court ordered the letter be reviewed by a discovery referee who subsequently recommended production of the letter with heavy redactions. The referee reasoned that the factual information therein was not privileged and that while interviewing the two managers, the attorney had acted not as an attorney but as a fact finder. The trial court adopted the recommendation and ordered the letter produced. On appeal (and without ruling on the merits of the trial court’s order or its decision to refer the letter to a discovery referee for review), the court affirmed the order reasoning that Costco had failed to establish that the production would cause irreparable harm. The issue was appealed to the Supreme Court of California.

The supreme court held that the attorney-client privilege attached to the opinion letter “in its entirety, irrespective of the letter’s content” and that Evidence Code section 915 prohibited the disclosure of information claimed to be privileged “in order to rule on a the claim of privilege.” The court also held that “contrary to the Court of Appeal’s holding, a party seeking relief from a discovery order that wrongfully invades the attorney-client relationship need not also establish that its case will be harmed by disclosure of the evidence.”

Specifically regarding the protection of the entirety of the letter, the court relied on a prior decision in which it explained that “[T]he privilege covers the transmission of documents which are available to the public, and not merely information in the sole possession of the attorney or client. In this regard it is the actual fact of the transmission which merits the protection, since discovery of the transmission of specific public documents might very well reveal the transmitter’s intended strategy.” The court later stated, “because the privilege protects the transmission of information, if the communication is privileged, it does not become unprivileged simply because it contains material that could be discovered by some other means.” In its analysis the court rejected plaintiffs’ attempts to conflate the issue of whether the information contained within the letter was privileged (as opposed to merely factual) with the issue of whether the letter itself was a protected communication with counsel. The court also noted plaintiffs’ failure to dispute the fact that Costco retained counsel to provide legal advice.

Having settled the question of the attorney-client privilege (and having declined to address the applicability of the work product doctrine), the court turned to its second reason for overturning the order: the prohibition against requiring disclosure of information claimed to be privileged in order to rule on privilege. Pursuant to Evidence Code section 915, “the presiding officer may not require disclosure of information claimed to be privileged… in order to rule on the claim of privilege.” Accordingly, the court found that the trial court’s requirement that the letter be disclosed to the referee for review was in error. In so holding, the court engaged in a lengthy discussion of the nuances of this prohibition, including a discussion of the court’s ability to review information related to the communication in lieu of the communication itself in order to make a determination of privilege and a litigant’s option to request an in camera review of its own documents by the court in order to aid the court’s determination of privilege, among other things.

Finally, the court turned to the ruling of the appellate court and its determination that absent a showing of irreparable harm from the production, the trial court would not be reversed. Per the court, such reasoning implied that the harm in an order compelling the disclosure of privileged information was the risk of a party obtaining information to which it is not entitled. Rather, the court reasoned, the “fundamental purpose of the attorney-client privilege is the preservation of the confidential relationship between attorney and client, and the primary harm in the discovery of privileged material is the disruption of that relationship, not the risk that the parties seeking discovery may obtain information to which they are not entitled.” [Citations omitted.] Accordingly, the court concluded that “Costco is entitled to relief because the trial court’s order threatened the confidential relationship between Costco and its attorney.” The judgment of the appellate court was therefore reversed, and the case was remanded to the trial court for further proceedings.

A copy of the full opinion is available here.

Finding Back-up Tapes "Not Reasonably Accessible" Court Declines to Compel Restoration of All but One Tape; No Sanctions for Deletion of Email Absent Evidence of Duty to Preserve or Showing of Bad Faith

K&L Gates — Thu, 03 Dec 2009 09:29:31 -0800

Calixto v. Watson Bowman Acme Corp., 2009 WL 3823390 (S.D. Fla. Nov. 16, 2009)

In this breach of contract litigation, plaintiff filed a motion to compel defendant Watson Bowman Acme Corporation (“WABO”) to “remedy its spoliation of documents” by restoring and searching back-up tapes that potentially contained copies of emails that were deleted. Plaintiff also sought sanctions for the alleged spoliation. The court denied plaintiff’s motion to compel the restoration of all back-up tapes, following its determination that the burden and cost of such restoration rendered the documents not reasonably accessible and upon finding that plaintiff failed to establish good cause for such a search. However, as to a one tape determined to potentially contain the relevant deleted emails, the court granted plaintiff’s motion and ordered the tape be restored and searched. Regarding sanctions, the court denied plaintiff’s motion absent a clear indication of a duty to preserve at the time of the deletion and absent any evidence of bad faith.

In the course of discovery, plaintiff learned of the existence of back-up tapes in WABO’s possession which were dated from December 2004 through July 2007. Plaintiff also learned that a member of WABO’s IT department, Molly Young, had deleted the emails of an important custodian following his departure from the company in August 2004.

Plaintiff filed a motion to compel. Per the court, the questions to be resolved in analyzing plaintiff’s motion were: 1) whether WABO’s alleged destruction of the emails justified an order requiring WABO to reconfigure and search any or all of its back-up tapes and 2) whether spoliation sanctions were warranted.

To assist in its determination, the court ordered WABO to submit an affidavit explaining how it conducted its document search, what documents had been deleted from the system and why, and what if any options existed for recovery of those documents. Accordingly, WABO submitted the affidavit of Molly Young who asserted that the emails were deleted by her in furtherance of her routine practice of deleting the emails of departed employees – a routine she later testified that she had engaged in since approximately 1997 or 1998 and that she undertook on “her own initiative.” She further asserted that she was unaware of the pending litigation at the time of her deletion. Regarding the likelihood that the back-up tapes contained non-duplicative, relevant information, Young testified at an evidentiary hearing as to WABO’s extensive collection and preservation efforts (upon learning of the litigation) and, as noted by the court, implied that there were likely no new responsive documents on the back-up tapes at issue.

Turning to its analysis, the court laid out the parameters of Fed. R. Civ. P. 26(b)(2)(B) which obviates a party’s obligation to produce data from sources deemed “not reasonably accessible” because of undue burden or cost. Accordingly, the court determined that the back-up tapes were “not reasonably accessible” upon WABO’s showing that the cost of restoration and keyword searching alone would be approximately $40,000.

Turning then to the second tier of analysis pursuant to the relevant rule, the court addressed the question of whether, despite a showing that the tapes were not reasonably accessible, plaintiff had nonetheless demonstrated good cause for ordering the tapes’ restoration. Outlining the nature of the inquiry, the court stated:

The Court is well aware of the electronic discovery analysis set forth by the Zubulake v. UBS Warburg, LLC, opinions and subsequent cases, as well as of the ideals embodied in the Sedona Principles, and fully appreciates the considerations raised by these pioneering writings. Nevertheless, in this matter, the Court need not travel down the Zubulake road because the question before the Court is an elementary one that must be answered in all discovery matters, regardless of whether the medium of the discovery sought happens to be electronic in nature: whether we can reasonably anticipate that the information to be gleaned from the discovery sought will be relevant and non-duplicative. After all, electronic discovery is, at bottom, just discovery, and, as Rule 26(b)(2)(B) makes clear, the usual limitations to which all discovery is subject apply with equal force to electronic discovery.

The court determined plaintiff had not established good cause, noting plaintiff’s lack of objection to the adequacy of WABO’s search efforts. Nonetheless, the court ordered the restoration and search of one particular back-up tape which was determined to have the potential to contain the emails that were routinely deleted and other discoverable records.

Turning to the question of sanctions for the deletion of a relevant custodian’s emails, the court first discussed its inherent power to sanction litigants, particularly with an adverse inference instruction, but noted the necessity of a finding of bad faith. Following a discussion of several cases in which and adverse inference was considered, the court concluded:

Taken together, these cases demonstrate that bad faith can be found based on direct evidence or on circumstantial evidence where certain factors converge. More specifically, where no direct evidence of bad intent exists, in this Circuit, bad faith may be found on circumstantial evidence where all of the following hallmarks are present: (1) evidence once existed that could fairly be supposed to have been material to the proof or defense of a claim at issue in the case; (2) the spoliating party engaged in an affirmative act causing the evidence to be lost; (3) the spoliating party did so while it knew or should have known of its duty to preserve the evidence; and (4) the affirmative act causing the loss cannot be credibly explained as not involving bad faith by the reason proffered by the spoliator.

Addressing each factor in turn, the court first found that the documents “may fairly be supposed to have contained information material to the matters at issue in this case.” The court also found the spoliation was intentional, pursuant to Young’s admission that she purposefully deleted the emails in furtherance of her routine practice. However, the court found that neither of two letters presented by the plaintiff triggered WABO’s duty to preserve prior to its deletion of the emails in question. Moreover, “even if it had” the court found Young’s assertions that her deletion was undertaken in furtherance of a routine practice and without knowledge of pending litigation were credible. Accordingly, there was no requisite evidence of bad faith. Plaintiff’s motion for spoliation sanctions was denied.

The court’s opinion also discussed plaintiff’s motion for letters of request pursuant to the Hague Convention on the Taking of Evidence for subpoenas duces tecum to proceed with discovery as to several foreign corporations.

A copy of the full opinion is available here.

Communications with Attorney Using Company Computer and Email Account Not Protected by Attorney-Client Privilege

K&L Gates — Tue, 01 Dec 2009 12:56:19 -0800

Alamar Ranch, LLC v. City of Boise, 2009 WL 3669741 (D. Idaho Nov. 2, 2009)

In this case arising from a land use and permitting dispute, the court ruled that emails sent by a non-party to her attorney using her work computer and work-assigned email address were not protected by the attorney-client privilege. In so holding, the court relied in large part upon the existence of company policy which put the employee on notice that her emails were subject to monitoring and were not confidential. Emails sent by the attorney to the employee’s work account were likewise unprotected where the attorney was on notice of the employee’s use of company email and should have recognized the risk that such emails were unprotected. As for emails sent to the attorney by other clients and copied to the employee, the court reasoned that such emails retained their privileged status where the senders (non-employees of the relevant company) were not on notice of the potential exposure of their emails to outside scrutiny.

Non-party Jeri Kirkpatrick opposed the issuance of a conditional use permit for the construction of a facility for troubled youth and belonged to a group of likeminded citizens called Opponents of Alamar [“Opponents”]. The Opponents were represented by attorney Dennis Charney. In the course of discovery in the relevant litigation, counsel for Alamar Ranch LLC, Dara Labrum, sought discovery of Charney’s non-privileged files and thereafter obtained copies of several emails which Charney subsequently claimed were protected as privileged. Charney filed a motion seeking the emails’ return.

Quickly dismissing any work product protection because Charney represented only non-parties to the action, the court turned to the question of whether the emails were protected by attorney-client privilege. Specifically, the court presented the question: “Does the use of work e-mail waive any privilege?” To answer the question, the court turned first to the four factor test established by other jurisdictions:

(1) Is there a company policy banning personal use of e-mails?; (2) Does the company monitor the use of its e-mail?; (3) Does the company have access to all e-mails?; and (4) Did the company notify the employee about these policies? See In re Asia Global Crossing, LTD., 322 B.R. 247, 257 (S.D.N.Y.2005).

The court rejected Kirkpatrick’s “bare assertion” that she did not “subjectively intend to waive the privilege” of the emails as “insufficient” in the face of her employer’s policies regarding electronic communications. Specifically, her employer’s policies stated that employee emails would: “(1) become company property, (2) be monitored, stored, accessed and disclosed by [the employer], and (3) should not be assumed to be confidential.” Additionally, the court reasoned: “It is unreasonable for any employee in this technological age--and particularly an employee receiving the notice Kirkpatrick received--to believe that her e-mails, sent directly from her company's e-mail address over its computers, would not be stored by the company and made available for retrieval.”

Accordingly, the court found that Kirkpatrick had waived the privilege as to those messages sent from work.

Addressing emails sent from Charney to Kirkpatrick’s work address, the court found that they were also unprotected:

[T]here is no question that her address--"JeriK@IHFA.org"--clearly put Charney on notice that he was using her work e-mail address. Employer monitoring of work-based e-mails is so ubiquitous that Charney should have been aware that the IHFA would be monitoring, accessing, and retrieving e-mails sent to that address. Given that, the Court finds that Charney's e-mails sent to Kirkpatrick's work e-mail are likewise unprotected by any privilege.

For emails sent to Charney by other Opponents and copied to Kirkpatrick’s company address, the court found that the privilege was intact where “there [was] no evidence that [other Opponents] were aware- or should have been aware – that by copying Kirkpatrick…they were exposing their emails to [her employer’s] scrutiny.” The court declined to extend the constructive knowledge that Charney had because “laypersons are simply not on ‘high alert’ for such things as attorneys must be.”

Upcoming Events - December

K&L Gates — Wed, 18 Nov 2009 15:37:50 -0800

Pennsylvania Bar Institute – E-Discovery

December 3, 2009
PBI Professional Development Conference Center
Heinz 57 Center
339 Sixth Ave., 7th Floor
Pittsburgh, PA

K&L Gates partner David Cohen will present “The Year in Review,” a closer look at some of the most important and interesting opinions of 2009. Cases to be discussed cover a myriad of topics including preservation of ESI, the discoverability of metadata, format of production, and much much more.

To learn more and to register, click here.

IQPC 8th Annual Electronic Discovery Event

December 7-9, 2009
Altman Building
New York, NY

K&L Gates partner, David Cohen, will be co-presenting a pre-conference workshop, “e-Discovery Mythbusters: Proven Strategies to Increase Value and Lower Costs Early in the Litigation Cycle.” Attendees to this presentation will learn valuable lessons on how to prepare for litigation while avoiding common pitfalls and minimizing risk and will also learn about recent developments and trends in the industry.

For more information and to register for the conference, click here. Save 20% off standard pricing by using the referral code: IUS_SPKRPASS_#1!

Thomson Reuters 13th Annual Electronic Discovery and Records Retention Conference: Information Governance: Old Wine in a New Bottle or New Wine in an Old One?

December 9-10, 2009

The Stanford Court, a Renaissance Hotel
905 California St.
San Francisco, CA 94108-2201

K&L Gates partner Julie Anne Halter will participate in a panel discussion, “Vetting a Vendor: Should We? Can We Afford Not To?” - a discussion of what role a vendor plays in e-discovery and what they can do for you. The discussion is scheduled for December 10th at 11:30 AM.

Click here to register or learn more.

Federal Judicial Center Releases Preliminary Results of "Case-Based Civil Rules Survey"

K&L Gates — Mon, 16 Nov 2009 09:06:11 -0800

The Federal Judicial Center has released the preliminary results of its Case-Based Civil Rules Survey. The survey, as described in the Executive Summary “presents preliminary findings form a survey of attorneys in recently closed civil cases…The report covers discovery activities and case management in the closed cases; electronic discovery activity in the closed cases; attorney evaluations of discovery in the closed cases; the costs of litigation and discovery; and attorney attitudes towards specific reform proposals, and, more generally, the Federal Rules of Civil Procedure.”

Included in the section addressing electronic discovery were results indicating that issues related to the discovery of electronically stored information (“ESI”) were discussed in more than 30 percent of planning conferences, that the most common issues discussed were the “parties’ routine practices regarding retention of ESI and the format of production,” and that “approximately 50 percent of parties eventually producing ESI instituted a litigation ‘freeze.’”

A copy of the full report is available here.