Electronic Discovery Law

Plan Ahead: Proposed Amendments to Rule 26 Would Extend Work-Product Protection

K&L Gates — Thu, 04 Mar 2010 10:08:16 -0800

One of the great things about the current rule-making process is the ability to see change on the horizon and adapt accordingly. This year, absent any unforeseen objection or delay, Rule 26 will be amended to extend the scope of the work-product doctrine to encompass draft expert reports and most communications between experts and counsel. Currently, the proposed amendment (and all proposed rule amendments, for that matter) is being considered by the Supreme Court. Pursuant to statute, the Court must transmit prescribed amendments to Congress by May 1st. Thereafter, absent legislation to reject, modify, or defer the rules, the prescribed amendments will take effect as a matter of law on December 1st.

The proposed amendment to Rule 26 would “apply work-product protection to the discovery of draft reports by testifying expert witnesses, and, with three important exceptions, communications between those witnesses and retaining counsel.” The exceptions would allow for discovery of communications between the lawyer and expert regarding: “(1) compensation for the expert’s study or testimony; (2) facts or data provided by the lawyer that the expert considered in forming opinion; and (3) assumptions provided to the expert by the lawyer that the expert relied upon in forming an opinion.”

Among the reasons cited in support of the proposal was evidence of lawyers and experts taking “elaborate steps to avoid creating any discoverable record”, including, for example, the retention of two experts: “one for consultation, to do the work and develop the opinion, and one to provide the testimony…” The Judicial Conference also cited evidence showing that lawyers often devote significant time at deposition attempting to uncover evidence showing that the expert’s opinion was shaped by the retaining lawyer, rather than on the substantive strength or weakness of that opinion. On a more positive note, the Judicial Conference also provided information that the State of New Jersey was successful in implementing a rule like the one proposed and that “practitioners reported a remarkable degree of consensus in enthusiasm for and approval of the amended rule.”

Briefly addressing concerns that the proposed amendment could “prevent a party from learning and showing that the opinions of an expert witness were unduly influenced by the lawyer retaining expert’s services”, the Judicial Conference concluded that “the best means of scrutinizing the merits of an expert’s opinion is by cross-examining the expert on the substantive strength and weaknesses of the opinions and by presenting evidence bearing on those issues.”

The full Report of the Judicial Conference discussing all proposed amendments is available here.

Court Provides Detailed Analysis of Law of Spoliation, Orders Adverse Inference Instruction, Monetary Sanctions for Intentional Spoliation of ESI

K&L Gates — Tue, 02 Mar 2010 10:11:35 -0800

Rimkus Consulting Group, Inc. v. Cammarata, 2010 WL 645253 (S.D. Tex. Feb. 19, 2010)

For intentional spoliation, the court declined to order terminating sanctions but ordered an adverse inference instruction and for defendants to pay plaintiff’s attorneys fees and costs.

In this litigation arising from accusations of misappropriation of trade secrets, violation of non-compete agreements, and related claims, plaintiff accused defendants of spoliating relevant evidence, including electronically stored information (“ESI”). The court found that defendants had indeed participated in intentional spoliation of evidence, including failing to preserve relevant ESI, manually deleting ESI, and destroying or giving away laptops containing relevant ESI, among other things. The court nonetheless declined to grant plaintiff’s request for terminating sanctions because plaintiff was unable to show a sufficiently high degree of resulting prejudice. Specifically, the court found that because defendants had produced a large volume of evidence despite their spoliation of other ESI, because plaintiff had obtained some of the deleted evidence from other sources, and because evidence revealed that some of the deleted records would have been favorable to defendants, the resulting prejudice was “far from irreparable” – the necessary showing to justify terminating sanctions: “The sanction of dismissal or default judgment is appropriate only if the spoliation or destruction of evidence resulted in “irreparable prejudice” and no lesser sanction would suffice.” [Citation omitted.]

Accordingly, the court ordered an adverse inference instruction to be given to the jury. The instruction would allow the jury to determine whether the destruction was intended to prevent the use of the destroyed evidence at trial and, if so, would allow the jury to further determine whether to infer that the content of the deleted evidence would have been unfavorable to the defendants. The court also ordered monetary sanctions and ordered defendants to pay plaintiff’s reasonable costs and attorney’ fees “required to identify and respond to the spoliation.”

Although relatively straightforward in its facts (at least those surrounding defendants’ spoliation), the court’s lengthy analysis of “the framework for analyzing spoliation allegations” (the title of section II of the court’s opinion) provides an insightful discussion of spoliation much like that found in the recent opinion from the Honorable Judge Shira Scheindlin in Pension Comm. of Univ. of Montreal Pension Plan v. Bank of Am. Secs., LLC, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010) and, in fact, specifically remarks upon the analysis of that opinion throughout. Unlike Judge Scheindlin’s opinion in Pension, though, the facts of this case involve intentional spoliation. Accordingly, this case provides a unique perspective that makes it well worth the time to read it.

A copy of the full opinion is available here.

[Note: this opinion also addresses a motion for summary judgment and includes analysis of claim and issue preclusion.]

Court Sanctions Plaintiff for Accessing Password-Protected Documents and Other Violations, Reduces Sanction based on Behavior of Plaintiff's Counsel and Defendant

K&L Gates — Fri, 19 Feb 2010 14:53:01 -0800

Lawson v. Sun Microsystems, Inc., 2009 WL 5842136 (S.D. Ind. Oct. 16, 2009); Lawson v. Sun Microsystems, Inc., 2010 WL 503054 (S.D. Ind. Feb. 8, 2010)

Where plaintiff accessed privileged, password-protected documents in defendant’s production, “carelessly” produced poor and incomplete copies of relevant taped conversations, and intentionally lied regarding taped conversations in deposition, the magistrate judge declined to recommend dismissal but recommended monetary sanctions instead. The amount of sanctions recommended was reduced by 25% upon the magistrate judge’s finding that plaintiff’s counsel mitigated plaintiff’s violations by ignoring plaintiff’s emails regarding the password-protected documents. The magistrate judge also found plaintiff’s “improprieties” mitigated “by the part [the defendant] and its counsel played in creating this perfect storm of a disaster” and reduced the sanction an additional 25%. While the magistrate judge recommended plaintiff’s counsel be ordered to pay monetary sanctions equal to a 25% reduction in plaintiff’s maximum sanction, the district court declined to adopt that recommendation. The recommendation was otherwise adopted.

In the course of discovery, defendant produced to plaintiff a hard drive containing large volumes of electronically stored information, some of which was privileged and password-protected. Prior to this production, the parties entered into a protective order and an agreement that plaintiff would provide defendant with fourteen days notice before using any information on the hard drive and that defendant would have seven days to object. It was apparently upon these agreements that defendant relied when producing privileged materials as well as a prior arrangement in which plaintiff had been allowed to return his company issued computer with privileged material encrypted to maintain its protection. Plaintiff's counsel denied the existance of any agreement regarding password-protected documents.

In the transmittal letter accompanying the hard drive, defendant indicated the password-protected documents were privileged. Later, there was disagreement as to whether this letter was provided to plaintiff by his attorneys.

Plaintiff accessed the password-protected documents. Thereafter, he sent an email to counsel disclosing his access with the subject line “Password protected files – Unlocked!” Although disputed amongst the parties, the magistrate judge determined that plaintiff’s attorneys did not open the email and remained unaware of plaintiff’s access. It was also determined that counsel did not see a later email in which the “unlocked documents” were mentioned. Counsel later withdrew.

Upon learning of plaintiff’s activities, defendant moved for sanctions. In addition to the password-protected documents, the magistrate judge was asked to consider defendant’s allegations that plaintiff intentionally produced an incomplete and low quality copy of a recorded conversation, failed to reveal the existence of other relevant tape recordings, and lied about those recordings in deposition.

Sifting through the contradictory assertions from all interested parties (plaintiff, former counsel, and defendant), the court found the following:

plaintiff’s attorneys did not read the email from plaintiff indicating he had accessed password-protected materials;
plaintiff did not speak with his attorneys prior to accessing the password-protected documents;
plaintiff intentionally accessed and viewed password-protected documents meant to remain confidential and privileged;
plaintiff’s attorneys had no knowledge of plaintiff’s activities;
plaintiff acted carelessly in responding to discovery when he produced an incomplete and poorly reproduced copy of a relevant taped conversation;
plaintiff’s failure to disclose the existence of other taped conversation was “careless and sloppy” but not intentional;
plaintiff intentionally lied about taped conversations at deposition.

The magistrate judge held that Rule 37 and “the inherent power of the court” provided authority for sanctions and that sanctions were appropriate. Plaintiff’s inappropriate behavior was “mitigated” however, by his own behavior, as well as that of his attorneys and the defendant. Specifically, for example, the magistrate judge credited plaintiff with his decision to volunteer certain information at deposition and his apparent lack of effort to hide his access to the privileged documents (as evidenced by his email to counsel). The magistrate judge also found plaintiff’s behavior mitigated by that of his attorneys because counsels’ failure to read or respond to plaintiff’s email “contributed to the situation” and because “[Plaintiff] cannot be blamed for the lack of attention paid to him by his attorneys.” Finally, the magistrate judge found that defendant’s behavior mitigated that of the plaintiff where defendant and defense counsel contributed to the “perfect storm of a disaster” by failing to remove the privilege documents from production in the first place, among other things.

Accordingly, having determined the maximum appropriate sanction to be $54,500, the magistrate judge recommended plaintiff’s sanction be discounted by 25% to account for the contributory behavior of his counsel and recommended counsel be ordered to pay an amount equal to the reduction. Similarly, the magistrate judge further reduced plaintiff’s sanction by another 25% to account for defendant and defendant's counsel's contributions to the problem.

Upon the district court’s consideration of these recommendations, counsels’ objections to the recommended sanction were sustained and the order of sanctions modified to reflect that counsel should not be sanctioned.

A copy of the magistrate judge’s Report and Recommendation is available here.

A copy of the district court’s opinion is available here.

Court Finds Non-Party's Claims of Privilege Waived, Rejects Assertions of Undue Burden, Grants Defendant's Motions to Compel

K&L Gates — Fri, 12 Feb 2010 07:57:37 -0800

Seger v. Ernest-Spencer, Inc., 2010 WL 378113 (D. Neb. Jan. 26, 2010)

In this personal injury case, the court found a non-party had waived its claims of privilege as to already-produced documents and granted defendant’s motion to compel their production upon finding that disclosure was “knowing and intentional” as evidenced by the non-party’s failure to establish reasonable precautions to prevent disclosure and its failure to timely assert a claim of privilege, among other things. Rejecting claims of undue burden, the court also granted defendant’s motion to compel the non-party’s production of emails after reducing defendant’s proposed search terms to eliminate those deemed irrelevant or overly broad.

Upon receipt of a subpoena for documents, non-party Valmont Industries, Inc (“Valmont”) retained counsel to review documents and identify those that were privileged. Relying on counsel’s determinations, Valmont then produced responsive discovery to the defendant. Six months later, Valmont produced its privilege log. Upon receipt of that log, defendant notified Valmont that certain documents identified as privileged had already been produced. Valmont responded by declaring the documents privileged and seeking the return of at least one particularly sensitive document. Valmont received no response to its attempts to negotiate (via correspondence) the return of the documents but did not seek judicial intervention. Defendant eventually sought to compel production of the disputed documents.

The court took the “middle of the road approach” to its determination of waiver and identified the appropriate five-step analysis:

These considerations are (1) the reasonableness of the precautions taken to prevent inadvertent disclosure in view of the extent of document production, (2) the number of inadvertent disclosures, (3) the extent of the disclosures, (4) the promptness of measures taken to rectify the disclosure, and (5) whether the overriding interest of justice would be served by relieving the party of its error.

Taking each consideration in turn, the court found that Valmont’s claims of privilege had been waived and granted defendant’s motion to compel:

Reliance on a law firm to advise a client about privilege is an insufficient basis to find inadvertent disclosure. Many documents in this case were disclosed in error according to Valmont. This factor, despite the large volume of documents, weighs in favor of waiver. Valmont argues prompt measures were taken to remedy the inadvertence once current counsel became aware of the disclosures. However, no initial claim of privilege for any document was made prior to June, 2009, the disclosed documents had been circulated by the defendants for approximately six months prior to any claim of privilege, and Valmont never sought court assistance to protect the documents. Valmont shows no overriding interest of justice would be served by relieving it of the errors. In fact, Valmont sought to enforce the privilege with regard to only two documents in negotiations with the defendants. Accordingly, the court finds the evidence shows Valmont's disclosure of documents for which privilege was later claimed was knowing and intentional. Therefore, Burns & McDonnell's motion to compel is granted.

The court next addressed defendant’s motion to compel production of emails in response to its subpoena. Valmont claimed the requests were overly broad and that responding would be unduly burdensome. As to the first disputed request, the court rejected Valmont’s assertions upon its determination that the burden was “overstated.” For example, the initial estimate of six to nine hours “per user” included “several hours for manual activities because [the Director of Information Technology Architecture for Valmont] does not trust the margin of error in the software (estimating two to three hours as opposed to one to several minutes) and organizing the CD after copying the information (estimating one to two hours as opposed to minutes)”. The estimate also included “processing time by the computer for which the technician need not be involved.” As to the second disputed request in which defendant sought production of all emails containing any one of 24 specified terms, the court held that defendant “failed to meet its burden of showing the searches are relevant and not overly broad” and reduced the number of search terms to 11. The motion to compel was otherwise granted.

Regarding costs and defendant’s prior offer to pay for the retention of an independent consultant to cull the requested data as a means of decreasing the burden to Valmont, the court left the details to the parties but noted its willingness to resolve any issues upon appropriate motion.

A full copy of the opinion is available here.

Defendant "Fails to Show that it is Settled Law that the Party Requesting Discovery Must Bear the Cost of Production," Court Denies Motion for A Protective Order

K&L Gates — Thu, 11 Feb 2010 14:15:28 -0800

MBIA Ins. Corp. v. Countrywide Home Loans, Inc., 2010 WL 519753 (N.Y. Sup. Ct. Jan. 14, 2010)

Upon defendant’s motion for a protective order to require plaintiff to bear the cost of defendant’s production of electronically stored information (“ESI”), the court declined to follow the purportedly “well settled rule” in New York that the party seeking discovery should bear the cost and denied defendant’s motion. (See T.A. Ahern Contractors Corp. v. Dormitory Auth. of State of N.Y., 875 N.Y.S.2d 862 (N.Y. Sup. Ct. 2009) declining to overturn the “well settled” rule in New York that the party seeking discovery bears the cost.)

In the course of discovery, plaintiff requested that defendant produce relevant ESI. The parties disagreed as to who should bear the cost of such production; each felt the other should be responsible.

To settle the dispute, the court undertook an analysis of several New York cases in which allocation of cost had been addressed and which had resulted in competing findings regarding who should properly bear discovery costs. In one recent case, Clarendon Natl. Ins. Co. v. Atlantic Risk Mgt., Inc., 59 A.D.3d 284 (N.Y. App. Div. 2009), the court indicated that “it saw ‘no reason to deviate from the general rule that, during the course of the action, each party should bear the expenses it incurs in responding to discovery requests.’” In another case, Waltzer v. Tradescape & Co., LLC, 31 A.D.3d 302 (N.Y. App. Div. 2006), despite affirming the rule that under the CPLR, the party seeking discovery should bear the cost, the court declined to place the cost of production with the requesting party “and instead, distinguished its facts on the basis that (1) it did not deal with deleted electronically stored material and (2) the information sought was readily available.” In that case, the court also stated that the “cost of an examination by the [producing party] to see if [material] should not be produced due to privilege or relevancy grounds should be borne by [the producing party].” Declining plaintiff’s request to view Clarendon as an “anomaly”, the court in the present case stated:

Far from being an anomaly, it is consistent with Waltzer in that application of the relevant rule in both resulted in cost allocation determinations only when the electronically-stored information to be produced was not readily available. While producing readily-available electronically- stored information (Clarendon --all of an insurance company's claims files; Waltzer--data stored on 2 compact discs) will not warrant cost-allocation, the retrieval of archived or deleted electronic information has been held to require such additional effort as to warrant cost allocation (Samide, 5 AD3d at 466; Delta Fin. Corp., 13 Misc.3d at 614; Etzion, 7 Misc.3d at 944- 45). Furthermore, under CPLR 3103(a), the lodestar in granting a protective order granting allocation of discovery costs is the prevention of "unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the courts." Hewing to this principle and the applicable case law, it is eminently reasonable to refrain from allocating discovery costs at this juncture.

Finding “[Defendant] fail[ed] to show that it is settled law that the party requesting discovery must bear the cost of its production or that cost allocation here is warranted”, defendant’s motion for a protective order was denied.

A full copy of the opinion is available here.

Ontario's New Rules of Civil Procedure Address Electronic Discovery

K&L Gates — Wed, 10 Feb 2010 13:57:58 -0800

As of January 1, 2010, Ontario’s new Rules of Civil Procedure became effective, including significant changes to the rules of discovery. Among the changes/additions is Rule 29.1.03(4) Principles re Electronic Discovery, which states that “In preparing the discovery plan,” as is required by Rule 29.1.03 (1), “the parties shall consult and have regard to the document titled ‘The Sedona Canada Principles Addressing Electronic Discovery’ developed and available from The Sedona Conference.” In its explanation of the provisions of the newly effective Rules of Civil Procedure, the Ministry of the Attorney General specifically identified several of the Sedona Principles to be considered:

• Discovery steps should be proportionate. Parties should consider the nature of litigation; relevance of electronic evidence; importance to adjudication; and the cost and delay that may be imposed to deal with electronic documents.
• Parties should meet and confer as soon as possible regarding identification, preservation, collection and production of electronic documents.
• Parties should be prepared to disclose all relevant electronic documents.
• Parties should agree as early as possible on the format in which electronic information will be produced.

As evidenced in the Sedona Principles highlighted by the Ministry of the Attorney General, the newly effective rules also establish the importance of proportionality in discovery and therefore identify several mandatory considerations for the court when “making a determination as to whether a party or other person must answer a question or produce a document.” Pursuant to Rule 29.2.03, those considerations are whether:

(a) the time required for the party or other person to answer the question or produce the document would be unreasonable;
(b) the expense associated with answering the question or producing the document would be unjustified;
(c) requiring the party or other person to answer the question or produce the document would cause him or her undue prejudice;
(d) requiring the party or other person to answer the question or produce the document would unduly interfere with the orderly progress of the action; and
(e) the information or the document is readily available to the party requesting it from another source. O. Reg. 438/08, s.25.

The rule also requires consideration of “the overall volume of documents”: “[I]n determining whether to order a party or other person to produce one or more documents, the court shall consider whether such an order would result in an excessive volume of documents required to be produced by the party or other person. O. Reg. 438/08, s. 25.”

The newly effective rules contain many other important revisions, including changes to the scope of discovery, the duration of oral exams, and the expert evidence rules, among others.

To read the Ministry of the Attorney General’s discussion of all changes to the Ontario Rules of Civil Procedure, click here.

To be taken directly to the Ontario Rules of Civil Procedure, click here.

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. Ct. App. 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

Cornwall 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 Cornwall, 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. Cornwall’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. Cornwall’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. Cornwall’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.