Discovery Spotlight 2011

12/29/11: Truck Stop – Sanctions City!  Nacco Materials Holding Group, Inc. v. Lilly Co., 2011 WL 5986649 (W.D. Tenn.), is based on Defendant's unauthorized and improper use of Plaintiff's apparently-not-so-secure secure website.  Plaintiff makes and sells trucks, and maintains a website that provides its authorized dealers with access to proprietary information about these trucks.  Plaintiff sued Defendant to prevent further alleged spoliation of evidence; to recover the fees and costs of taking a 30(b)(6) deposition of Defendant's president to determine what relevant ESI existed; and for the costs of a forensic exam and the imaging of Defendant's computers.  (Nacco at 1.)
The complaint in this case was served on Defendant on 02/25/11.  (Id. at 2.)  Defendant's president received a strong and comprehensive litigation hold letter from his counsel on 03/09/11, which was promptly forwarded to 7 key employees, then to 2 more, and to all employees about four months after that.  (Id. at 2-3.)  However, Defendant did nothing else to preserve electronic evidence of access to Plaintiff's site during this time.  (Id. at 4.)
The Magistrate Judge's first finding was that Defendant failed to produce a 30(b)(6) witness adequately prepared to testify, and sanctioned Defendant by ordering it to bear costs for another deposition.  (Id. at 5.)  Although the court noted Defendant could re-produce its president if he was properly prepared this time, both dicta and common sense suggest Defendant might consider sending the head of IT instead.  (Id. at 6.)
Turning to the spoliation charge, the court found Defendant's preservation obligation was triggered by receiving the complaint; that its three-step notification of employees - backed up by no immediate actions - fell short of meeting said obligations; and that by waiting three months even to run word searches on servers (not to mention leaving employees to search on their own), it failed to take timely steps to collect evidence (Id. at 7-9.)  Applying the legal standards to the facts - and leaning heavily upon theoeuvre of E-Discovery Master of the Universe Judge Scheindlin - the Magistrate Judge found Defendant negligent.  (Id. at 10.)  He awarded sanctions covering the costs of analyzing the hard drives of 9 key employees but not all of Defendant's computers.  (Id. at 10-12.)  And last, but as usual far from least, attorney fees and costs.  (Id. at 13.)  So, as Defendant writes a few checks, we hope it also makes a New Year's resolution to do better at discharging its e-discovery obligations in 2012.... 

12/15/11: Discovery Delaware Style.  Not to be outdone by the Southern District of New York (see our post from a fortnight ago), the U.S. District Court of Delaware issued default discovery guidelines last week.  These guidelines apply to cases in which the parties fail to reach agreement about discovery.  To the highlights!

(1)  The general provisions cover proportionality, preservation (including a list of items that need not be preserved absent a good cause showing) and privilege.

(2)  In Initial Disclosures, parties must identify the 10 custodians most likely to possess relevant information.

(3)  Patent cases are carved out with special rules, including a limit on discovery of 6 years from the filing of the complaint (again, absent good cause).

(4)  A requesting party may identify 10 search terms in addition to those employed and disclosed by the producing party.

(5)  Only materials in applications like Excel and Access should be produced in native format.

As more and more jurisdictions adopt e-discovery guidelines, we wonder if, when and how we'll move toward an articulated and accepted set of standards.  Perhaps this is another "brick in the wall."  See USDC DE Electronic Discovery Default Standard for the details. 

12/08/11: Do Your Own Issue Coding!  In U.S. v. Rubin/Chambers, Dunhill Insurance Services, Inc., 2011 WL 5448066 (SDNY), multiple defendants were indicted for alleged crimes committed in a purported price-fixing conspiracy in the municipal derivatives market.  (Rubin/Chambers at 1.)  Government prosecutors identified numerous financial transactions to support the charges.  To document these transactions, the prosecution produced audio files, documents and other materials.  (Id.)

Defendants did not dispute the comprehensiveness of these productions.  Rather, they cited the oft-cited Brady v. Maryland, 373 U.S. 83 (1965), arguing that the government should be ordered to re-organize and re-format portions of these materials.  (Id.)  The Defendants’ stated goal: to identify exculpatory or impeachment evidence by forcing the government to indicate which of four specific categories of accused transactions the produced fell into.  (Id.)

No dice.  Analyzing several cases in the Brady line, the court held that while the government must disclose materials favorable to the defense, it is under no obligation to do Defendants’ work by sorting or organizing such materials.  (Id. at 2.)  Absent bad faith or prosecutorial misconduct – e.g., a deliberate attempt to hide evidence within discovery – the government must only produce what it must produce.  (Id.)

The Rubin/Chambers court’s discussion of precedent highlights the variability of the circumstances of these cases; the differences in the amounts and types of data produced; and the searchability of the data.  (Id. at 3-4.)  In the instant case, the government provided significant amounts of metadata and indices to groups of files.  (Id. at 4.)  Factors like these will drive the outcome of applying the Brady analysis to discovery disputes within a given case, as they did in Rubin/Chambers

12/01/11: Old New York Joins Pilot Party.  In a classic "better late than never" move, the Southern District of New York has launched an e-discovery pilot program for its complex civil cases.  Judge Scheindlin, Chair of the SDNY's Judicial Improvements Committee, estimates that such cases account for 12-13% of the court's caseload.

But why now?  Did the venerable SDNY suffer a sudden case of pilot program envy?  Perhaps, judging by the number of similar programs that have sprung up in lower-rent area codes lately.  Or maybe Judge Scheindlin just wanted to formalize her reputation as the Undisputed World Champion E-Discovery Celebrity Superstar?  Far be it from us to speculate....

The program's procedures were developed with input from 32 real live practicing attorneys, to pursue the stated goals of expediting discovery and reducing costs in complex civil cases.  14 types of cases were designated as complex, and the program will run for a year and a half.

Read all about it in the Standing Order and attached Report of the Judicial Improvements Committee, which incorporate many best practices and good and great e-discovery ideas.  In line with Judge Scheindlin's frequent admonitions for parties to cooperate, this document mentions the word "joint" more often than an old Cheech & Chong bit: joint e-discovery submission requirement; joint preliminary trial report on the close of fact discovery; joint final trial report; and, well, you get the idea.
How much hand-holding and kumbaya-singing the program will in fact inspire on Gotham City's mean streets of e-discovery remains to be seen.

11/17/11: The Model Order – Beyond Trolls?  DCG Systems, Inc. v. Checkpoint Technologies, LLC, 2011 WL 5244356 (N.D. CA), is a patent infringement case in which a significant discovery order was entered recently.  The order addressed the timing and scope of the discovery of email in the case.
Defendant sought to obtain an order patterned on the much-discussed Model Order on E-Discovery in Patent Cases just issued by an Advisory Council subcommittee of the Federal Circuit.  The Magistrate Judge in DCG summarizes the Model Order as creating a two-stage process: first, core documents such as the patents and prior art are exchanged; then emails may be requested.  (DCG at 1.)  As regards the second stage, the Model Order sharply restricts the amount of discovery that can be obtained, allowing for only five search terms to be applied to five custodians' emails.
[Sidebar: We can almost imagine a version of the Model Order making its way into the presidential debates - and then of course onward and upward to The Daily Show with Jon Stewart.  Let's call it the 5-5-5 Plan: 5 search terms; 5 custodians; and "5 for fighting" if it goes south and the judge has to intervene.]
While it's premature to generalize about that Model Order, its initial reception by the IP community has been as an "Anti-Troll" measure, designed to limit the ability of "NPE's" ("Non-Practicing Entities," or "Patent Trolls," in the parlance of our times) to use discovery as a blunt tool to drive up the costs of litigation and thus drive settlements.
But DCG Systems is not a troll - it is a direct competitor.  Plaintiff's main argument in resisting application of the Model Order's terms was that the Model Order did not contemplate scenarios where two parties were competitors, as in this case.  (Id. at 2.)  However, the Magistrate Judge noted that no language in the Model Order limited its proposed application to NPE's.  (Id.)  More significantly, the court found "... no reason to believe that competitor cases present less compelling circumstances in which to impose reasonable restrictions on the timing and scope of email discovery."  (Id.)  However, the court also noted that it would entertain modifications to the limits at a later date, if appropriate.  (Id.)
This court's ruling won't be the last word on the Model Order.  But it stakes out a powerful position, and hands a big win to the Defendant in this case ....

11/10/11:  To the Cloud?  What about "from" the Cloud?  Our panel presentation at a forensics / e-discovery conference last month focused on the issue of litigation readiness in an increasingly cloud-based world.  The business case for going to the cloud can be strong.  But watch out: the full costs of accessing data, retrieving it for litigation and converting it to be reviewed and produced can add up!  Below are a few of the big picture points from that presentation.

What is cloud computing?  It simply refers to leasing access to a vendor's applications instead of buying all the hardware and software required to meet your needs internally.  Well-known cloud-based applications include gmail, and Dropbox.

What's important to keep in mind?  Beyond knowing a cloud-based solution will work in the way you need it to, a vendor's ability to provide support is crucial, as is knowledge that your data will be secure.

What happens when litigation hits?  It can be difficult to extract data from cloud-based applications in the ways required to review and produce information in a litigation context.  Be sure in advance that your cloud vendor has the appropriate tools and service capabilities to support you in accessing, searching and retrieving your data in a usable format.  Finally, be prepared to handle delays, corrupted data and the faulty capture of metadata before and during a document review.

None of the points above are meant to "dis" the cloud.  Clearly, we are headed there at a breakneck pace.  Just remember to buckle your seat belts, assuming the magic carpet you buy comes equipped with them! 

11/03/11: A Proportionality and Preservation Pickle.  In Pippins v. KPMG LLP, 2011 WL 4701849 (SDNY), Plaintiffs represent a putative class of accountants suing KPMG for wage and hour issues arising from their alleged mis-classification as exempt employees.  With discovery obligations looming as to a very large possible class, KPMG filed a motion to avoid preserving thousands of hard drives belonging to former and departing employees.  The firm's stated preference: to take random samples of 100 hard drives, or alternatively, to stick Plaintiffs with the costs of preserving the lot of them.  (Pippins at 2.)
The magistrate judge denied KPMG's motion, which was based primarily on the argument that spending millions of dollars to preserve hard drives would be disproportionate to the evidentiary benefit derived from the contents of the drives.  (Id. at 3.)  In response, Plaintiffs argued both that it was too early in discovery to allow the destruction of data; and that the sampling approach proposed by KPMG was inadequate.  (Id. at 3-4.)
The court's strong reluctance to apply a proportionality test to a party's preservation obligations was palpable in the opinion.  The magistrate judge articulated a strong presumption for preservation without clear rules or compelling reasons to the contrary.  (Id. at 6, citing precedent.)  Specifically, KPMG failed to show the contents of the drives would not be relevant; and the court also found the drives in question could indeed relate to "key players" in the instant and/or future litigations.  (Id. at 6-7.)  For these reasons, KPMG's attempt to shift preservation costs to Plaintiffs was rejected too.  (Id. at 10.)
Our takeaway is that pleading proportionality in the preservation context will continue to be an uphill battle.  Even where preserving is costly, it's just too early in the case, and thus too uncertain a time to evaluate the relevance of data, for most judges to feel comfortable signing off on the destruction of potential evidence.
So, as the saying goes, keep on keeping on.  And keep on keeping....

10/27/11: You’ve Got A Long Way to Go, FINRA.  The Financial Industry Regulatory Authority ("FINRA"), born from the ashes of NASD, is an independent regulator of broker dealers and other securities firms doing business in the U.S.  Its mandate: to protect investors by ensuring that the securities industry operates fairly and honestly.  (Please hold your cynical twitters - and your cynical Tweets, for that matter.)

FINRA's purview includes arbitration panels charged with adjudicating disputes that arise in the industry.  Like other arbitration settings, FINRA panels are less formal than courts as to evidentiary requirements and discovery.  The FINRA proceedings we've worked on combine elements of employment law cases and contractual disputes between securities firms and their employees.  These disputes can of course involve email and other types of ESI.

A recent article got us thinking about e-discovery in the FINRA context.  Turns out, the rules are quite bare bones.  Section 8200 of the FINRA Manual addresses investigations, empowering panels to require a "...person subject to FINRA's jurisdiction to provide information orally, in writing, or electronically (if the requested information is, or is required to be, maintained in electronic form)...."  (FINRA Manual § 8210.)

Additional wording in this section contemplates only inspecting and copying books, records and accounts.  (Id.)  Section 8300 deals with sanctions, but not sanctions specific to the discovery context.

So, what to do if you're involved in a FINRA proceeding and discovery issues arise?  It's reasonable to treat the forum like other arbitration settings.  A better practice, however, may be to conduct discovery as if you are in state or federal court, since FINRA panels are empowered to apply those rules and regulations.

Clearly, FINRA needs to step in and draft meaningful e-discovery guidance.  (Before an epic meltdown, preferably!)  To paraphrase Sean Penn's immortal Jeff Spicoli in Fast Times at Ridgemont High:

Hey!  You know, we got out of court 'cause it was bogus; so if we don't get some cool rules ourselves - pronto - we'll just be bogus too! 

10/20/11: The High Price of Being Sweet.  In Re Aspartame Antitrust Litigation, 2011 WL 4793239 (E.D. Pa), is a case in which multiple corporate defendants were alleged to have engaged in an unlawful worldwide conspiracy to allocate markets and keep the prices of the artificial sweetener Aspartame, well, artificially high.  Thanks to a successful statute of limitations argument, some defendants got out on summary judgment.  Which left only the discovery costs to fight about....
Noting that courts have split on the issue of awarding e-discovery costs to the prevailing party, the judge in the case at hand called the volume of discovery "staggering," with terabytes of ESI collected by defendants.  (Aspartame at 2.)  The complexity of the case also influenced the court, leading it to award e-discovery costs for the creation of a database; data searching, processing and hosting; tech support; OCR'ing; etc.  (Id. at 3.)  Also awarded were fees incurred for scanning, copying and the creation of CD's and DVD's.  (Id. at 6-7.)
Not so for costs associated with fancier tools.  The court disallowed requests for money spent on concept searching and clustering technology, deeming these convenient but not necessary to the defense of the case.  (Id. at 4.)
Bottom line here: As the prevailing parties, selected defendants were able to recover the majority of the e-discovery costs they sought.  The lesson to plaintiffs: as always, be careful what you ask for....

10/13/11: Oops, We Did It Again!   As many of you know, Podo Legal made a presentation in New York earlier this year at the Forensics Show, a 2-day conference that focuses on computer forensics and e-discovery issues.  Each year, the conference draws a cross-section of attendees from law firms, in-house legal departments and government agencies.
Well, we must have done something right, because the organizers invited us to present at the San Francisco incarnation of the conference next week.  We'll present on the morning of Tuesday, October 18.  Our topic: Litigation Readiness, E-Discovery & the Cloud.  We'll be the moderators for a fantastic panel we've assembled, with expertise in records and information management; IT management; litigation readiness; and e-discovery:

  • Eric Evans, Mayer Brown LLP
  • Virginia MacSuibhne, Roche Molecular Systems
  • Craig Strunk, Oakland City Attorney's Office
  • John Sugden, Podo Legal 

Please see Conference Site for more info on the conference and for registration information.  We hope you can join us there!  And if not, please feel free to email us to request a final copy of our presentation.

10/06/11: Be Zealous and Jealous or Waive Privilege.  In Williams v. District of Columbia, 2011 WL 3659308 (D.D.C.), an employee of Washington, D.C. sued the District for unlawful retaliation against her in violation of D.C.’s Whistleblower Protection Act.  During the proceedings, the District moved to preclude Plaintiff from using an allegedly privileged email that had been inadvertently produced.

The dispute arose from Defendant’s first production to Plaintiff, which contained a “recommendation to terminate” packet of 100+ pages of documents.  (WilliamsId. at 1.)  The District took almost 5 months to realize its mistake and request the return of the email.  (Id. at 1.)  Plaintiff did not reply.  There was no resolution of the issue – or follow-up from Defendant – until trial preparations began almost three years later, when the email appeared on Plaintiff’s exhibit list.  (Id. at 1-2.) at 1.)  Included in this packet was an email from the District’s former Deputy GC discussing matters relating to the proposed termination of Plaintiff.  (

The District was unable to exclude the email.  The court held that Defendant had taken neither proper steps to prevent disclosure; nor prompt and reasonable actions to rectify its error once aware of it.  On the first point, the judge castigated Defendant both for its reliance on unsworn averments alone to support its position, and for its complete failure to explain its methodology for reviewing and producing documents.  (Id. at 3-4.)  [Sidebar: As we’ve seen in many cases, judges usually don’t require perfection in discharging discovery obligations, but they do need to see a well-documented and clearly articulated plan.]

The judge also slammed the District for its failure to take timely action to assure the return of the email.  Citing Defendant’s delay in following up with Plaintiff, she wrote, “This sort of indifference is fundamentally at odds with the principle that the attorney-client privilege ‘must be jealously guarded by the holder of the privilege lest it be waived’” (citing precedent).  (Id. at 5.)

09/29/11: Criminal Court – The Last Frontier?  U.S. v. Briggs, 2011 WL 4017886 (WDNY), is a drug trafficking case that addressed an issue of first impression: the manner of production of data required in a criminal case.  The court noted that the Federal Rules of Criminal Procedure are silent on this issue.  (Briggs at 1, 4-5.)  Given that typical criminal cases do not feature large volumes of ESI, it made sense that individual judges could establish e-discovery plans on a case-by-case basis.  However, this practice made less and less sense as ESI volumes grew and grew.  (Id. at 7.)

At issue in Briggs were wiretap recordings and cell phone communications intercepted by the government.  These were produced as TIFF images that could not be searched.  Defendants’ Motion to Compel demanded that the government’s “…data be presented either in its native format or in a ‘text-accessible’ PDF.”  (Id. at 2.)

The government’s arguments to avoid re-producing the data rested mainly on its assertions that (1) it was not obligated to produce in the format most helpful to Defendants; and (2) it would be too costly.  (Id. at 4.)  These arguments fell on deaf ears.  The court decided the government was in a better position to organize data relating to over 20 defendants, and ordered re-production in native format, or as searchable pdf’s.  (Id. at 8.)  In so doing, it relied partly on the FRCP, emphasizing that the ability to retrieve and manipulate data from an indexed set of produced materials was required to render the data usable.  (Id. at 8-9.)

There's an old sheriff in town. 

09/22/11: Kati, Bar the Door!  As you might guess from the name, Katiroll Co., Inc. v. Kati Roll & Platters, Inc., 2011 WL 3583408 (D. N.J.) is the trademark tale of two dueling Kati's.  (I.e., two restaurants that sell kati rolls, rolled-up Indian flatbread sandwiches.)  The discovery imbroglio and sanctions requests by Plaintiff include accusations that Defendant deliberately destroyed important discoverable information on multiple occasions.  (Katiroll at 1.)

The alleged trademark infringement is based on the physical appearances of the two restaurants.  Plaintiff requested spoliation sanctions in a number of instances where Defendant changed or obscured images of the appearance of its restaurant before Plaintiff received them in discovery.  These instances include Defendant's modification of the exterior of the restaurant by painting test spots on it; the loss of video footage previously in Defendant's possession; and Defendant's changes to its Facebook profile and website.  (Id. at 3-4.)

The opinion noted a split in the district's jurisprudence between requiring intentional conduct to infer spoliation; or whether mere negligence could support such an inference.  ( 2.)  The court's pragmatic solution: to use the amount of prejudice to the opposing party as a yardstick for measuring the degree of fault required.  (Id. at 2.)

In so doing, it adjudicated each instance of alleged malfeasance, finding grounds for a spoliation inference in some scenarios; not in others; and directing the parties to meet and confer to resolve their differences in others.  (Id. at 2-8.)  Best of all, perhaps, a proud Garden State judicial admonition in which the court warned -- in a heading, no less! -- that "Counsel Are Directed to Conduct Themselves with the Collegiality and Good Faith that is Befitting of New Jersey Attorneys" (emphasis not added).  (Id. at 8.)


09/15/11: It’s A Family Affair.  In Abu Dhabi Commercial Bank v. Morgan Stanley & Co., Inc., 2011 WL 3738979 (SDNY), a Special Master in the employ of Judge Scheindlin confronted the issue of how to handle email attachments in an electronic production.  Deciding how to review and produce such document "families" can be tricky.  Depending on the situation, there can be good arguments for treating emails exactly like their attachments; or, alternatively, solid reasons to break them apart and consider them as distinct items.

In Abu Dhabi, Defendants filed a motion to compel SEI Investments Co. to produce attachments that appeared to be missing from emails that had been produced.  (Abu Dhabi at 2-3.)  The dispute focused on whether attachments whose dates fell outside the relevant time period - but were attached to responsive emails that fell within the relevant time period - needed to be produced.  (Id. at 3.)
The Special Master identified case law; anecdotal evidence; and verbiage in FRE 106 and FRCP 34 that support treating attachments exactly the same as the underlying emails are treated.  (Id. at 4-5.)  However, he also noted that the usual way of dealing with privileged attachments to non-privileged emails is to break them up and treat them as separate items.  (Id. at 4.)
In the absence of an "ironclad legal standard" (Id. at 5), the Special Master relied upon production habits developed earlier in the case, and upon SEI's failure to explain the missing attachments adequately.  These factors led to findings later adopted by Judge Scheindlin that required SEI, inter alia, to provide the missing attachments requested by Defendants.  (Id. at 6-7.)
Interesting to us is the amount of prevaricating and ambivalence in the report.  One might expect more of a tone of ringing clarity from someone reporting to Judge Scheindlin!  Not once but twice, the Special Master emphasized the importance for parties to agree in advance on how to handle these types of problems - even imploring them to do so.  (Id. at 4, 8.)  The takeaway: spats over production details will continue to be case-by-case, with few clear standards articulated by courts. 

09/08/11: Do the Waive!  Thorncreek Apartments III, LLC v. Village of Park Forest, 2011 WL 3489828 (N.D. Ill.), deals with the issue of privilege waiver in the e-discovery setting.  Plaintiff claimed Defendant's production of ESI constituted a privilege waiver as to a small subset of the production.

Defendant engaged a leading technology vendor, and used the following 3-step process for identifying and producing ESI.  First, potentially responsive documents on backup tapes were identified with search terms.  Next, the vendor made these documents available to Defendant via an online database, so Defendant could screen them for responsiveness and privilege.  Third, the vendor placed the documents approved by Defendant into a separate online production database for Plaintiff's counsel to access and review.  (Thorncreek at 1.)

Defendant's identification and screening of documents left a lot to be desired.  Defendant seems to have relied on a workflow in which all documents were deemed responsive, non-responsive or privileged in the initial pass at the documents. (Id. at 1.)  It's always better to define and implement a structured, multi-pass review.  A 7-month rolling production was made, with no claim at any time by Defendant that privileged materials had been produced inadvertently - despite numerous opportunities.  (Id. at 2.)  Only during a deposition when two of the allegedly privileged documents were introduced by Plaintiff's counsel, did Defendant protest.  (Id. at 2.)

The parties resolved their differences as to 153 contested documents but could not agree about the remaining 6.  (Id. at 2.)  The court made calls on whether or not each document was privileged, in part or entirely.  (Id. at 3-5.)  Next, applying FRE 502, the court found that although the production of privileged materials was inadvertent, Defendant had waived privilege.  Not only by neglecting to take adequate precautions against disclosure in the first place; but also by failing to rectify its error by notifying Plaintiff promptly of the disclosure.  (Id. at 5-8).

Two main lessons to be drawn from this case:
· Use of a leading technology vendor alone will not save you from running afoul of FRE 502; and 
· ALWAYS define and execute a proper document review workflow.

09/01/11: Accessible Enough!  In U.S. v. Universal Health Services, Inc., 2011 WL 3426046 (W.D. Va.), a corporate defendant under investigation for Medicaid fraud sought to force the state of Virginia to produce documents relevant to its defense.  In an earlier discovery battle, VA had objected to producing documents, and lost.  (However, the state failed to produce as required.)  The state's argument at that time was that it did not have control of the documents of all the agencies in question - there was no claim of undue burden to produce.  (Universal Health Services at 1.)

On the original due date of the production, VA's counsel claimed for the first time that producing would be unduly burdensome.  (Id. at 2.)  Much of the ESI involved was from shared network areas and easily accessible.  But back-up tapes for pre-2009 email apparently presented more of a problem, allegedly requiring the re-creation of an old Exchange server for multiple facilities.  The state's IT personnel estimated that restoring the older data in question would cost $100,000.  Other aspects of the search demanded by Defendant would allegedly require weeks or months.  Part of the problem was VA's mandatory use of a specific IT provider.  (Id. at 3.)

Defendant's e-discovery vendor denied that the data would require too much time and money to restore.  This vendor said it could accomplish the data retrieval in other ways than those proposed - more quickly and for less money.  (Id. at 4.)  Based on this position, Defendants sought production of disputed ESI; or sanctions in the form of an "'adverse spoliation inference'" favorable to its assertion about actions it had taken in regards to the fraud charges.  (Id. at 4, citing precedent.)

The magistrate judge found that VA had waited almost two years too long to enact a litigation hold.  (Id. at 5.)  Thus, inadequate preservation - not good faith adherence to policies in the ordinary course of business - had caused the materials to become less easily accessible.  (Id. at 5.)  The court ruled that VA had not demonstrated an undue burden to produce; and had only shown that a single method of production might be too time-consuming and expensive.  And the judge gave no weight at all to the state's IT department's concerns, pointing out that commercial vendors could get it done cheaper and faster.  (Id. at 5.)

Production of the ESI was compelled, with the court noting both the high value of the government's claims against Defendant ($10M+); and the probability that the documents sought would be highly relevant to the defense.  The only bad news for Defendant: it would need to foot the bill for the data retrieval.  (Id. at 6.)

08/25/11: Autonomy the "HP Way?"  You know us: we tend to stick to telling you about cool cases.  We usually avoid vendor chatter too.  But some news is big enough to warrant some ink, including last week's announcement that HP plans to acquire Autonomy for north of $10 Billion.  (See Article Re HP Acquisition of Autonomy.)

Autonomy is a leading information management software and e-discovery vendor.  HP is HP.  (Or it was, anyway.)  This move is stunning and bold.  First and foremost, it's a transformational decision for HP to shed its primary identity as a hardware company and morph into a provider of software and services.  Given Autonomy's size and rich price tag, the new combined company will face super-sized headaches of the types that challenge any mergers between two large entities.

Among those, weaving together the two corporate cultures will be quite a task.  The companies have very different reputations for the types of customer experience they deliver.  Also, judging by the people we know at each company, they are very, very different places to work.  The ink so far on this combo seems to be mixed.  Fasten your seatbelts; it should be an interesting ride....

08/18/11: Document Destruction Policy Designed to Duck Discovery?  Question: If your company's business plan is to litigate to enforce a patent portfolio, why not adopt "... a document retention policy which is that we don't retain any documents?"  These were the words of a co-founder of Plaintiff in Eon-Net LP v. Flagstar Bancorp, No. 2009-1308 (Fed. Cir. 2011) at 18.  Answer: Because federal judges will smack you silly, to the tune of $600K+ in sanctions, fees and costs.

The Eon-Net court affirmed the trial judge's findings in this patent infringement case.  Among them: determinations that Plaintiff's case was baseless, and that Plaintiff had engaged in discovery misconduct by destroying evidence.  The money awards were made for violations of FRCP 11; and as an "exceptional" case under 35 U.S.C. § 285.  (Id. at 7-9.)  The latter provision was invoked because Plaintiff had destroyed relevant documents before filing suit; and for the intentional non-implementation of a document retention plan.  (Id. at 18.)  So, sports fans, Plaintiff ably covered both the "Errors" and "Omissions" portions of our competition....

The quotable co-founder mentioned above served up another discovery doozy for the appellate record, in apparent reliance on the fact that litigation was the core of Plaintiff's business operations.  (And in disregard to the independent duties arising to preserve relevant documents.)  We'll let you guess how persuasive the "I don't save anything, so I don't have to look" explanation of discharging discovery obligations went over with the court.  (Id. at 18.)

In addition to the areas covered above, the opinion offers a good analysis of the issue of plaintiffs' ability to exploit the proverbial asymmetrical discovery obligations in many patent litigations to force settlements favorable to them.  (Id. at 23-24.)

08/11/11: Podo Legal in California Lawyer Magazine!  Check out the August issue of California Lawyer.  Dean's piece on the changing dynamics between law firms and their clients in the e-discovery setting appears on p. 36.  Or you can check out the online version instead: Podo Legal Article in California Lawyer.  But it looks much better in print, so check out the hard copy version if you can.  Thanks to all who contributed to this article!

08/04/11: U.S. Privacy Concerns Trump Euro-Zone Bankruptcy Laws.  In Re Toft, 2011 WL 3023544 (Bkrtcy. SDNY), deals with discovery issues caught in the cross-fire between the American and European sides of the pond.  Debtor in this German bankruptcy matter owed over $7M to his creditors.  (Toft at 1.)  The insolvency administrator won the authority to intercept Debtor's snail-mail and email in Germany and England.  Then he sought the same rights in the U.S., as he dogged the alleged debt-dodger transcontinentally.  (Id. at 1.)
The Toft court noted that a U.S. bankruptcy administrator would not be afforded the same rights - deemed analogous to the production of past emails from two U.S.-based ISP's, plus an ongoing wiretap.  (Id. at 1-2.)  The court considered the applicable bankruptcy laws thoroughly, and acknowledged deference is typically given to foreign courts.  Nonetheless, it found Toft "one of the rare cases" warranting an exception to this rule.  (Id. at 3.)  The reason: granting the relief sought would be "manifestly contrary" to U.S. public policy.  (Id. at 3, citing precedent).

The ruling summed it up neatly: "...any ex parte recognition and enforcement of the Mail Interception Order would directly contravene the U.S. laws and public policies" at issue.  Or, as the court explained in detail, granting relief to the administrator here would subvert American discovery principles; parts of the U.S.C. related to wiretapping; specific laws protecting ISP's; and stored communications laws.  (Id. at 8-9.)

Other than that, no problem.

07/28/11: Costly "Free Space."  Genger v. TR Investors, LLC, 2011 WL 2802832 (Del. Supr.), is the appeal of a stockholder rights case in which an investor group had won a judgment against an individual stockholder.  Plus sanctions for spoliation, which is where we come in.

The sanctions were awarded below because Mr. Genger had directed an employee to use special software to wipe clean portions of unallocated free space on a computer and a server, rendering files unrecoverable.  (Genger at 5.)  The sanctions imposed included raising Mr. Genger's evidentiary burden on every issue by one notch (from a "preponderance" to "clear and convincing"); ruling that his uncorroborated testimony would not be sufficient to establish a material fact; and significant money sanctions.  (Id. at 5.)

The Delaware Supremes upheld the lower court's spoliation findings and its sanctions.  They found that Genger had taken affirmative action to destroy relevant documents and that the lower court's sanctions were warranted even though it was impossible to know exactly which documents were destroyed.  (Id. at 7.)  The court also suggested that parties and trial courts address any issues of unallocated free space on machines before document retention and preservation orders are put in place.  (Id. at 8.)  Finally, the large amount of the money sanction - $3.2 million - was upheld too, both because it was not arbitrarily determined; and because Genger had expressly waived his right to challenge the reasonableness of the award.  (Id. at 9.)

Game, set and match!

07/21/11: When "Callous and Careless" Beat the Alternative.  After refereeing lengthy and well-documented discovery skirmishes, the judge in PIC Group, Inc. v. Landcoast Insulation, Inc., 2011 WL 2669144 (S.D. Miss.), appointed a Special Master.  His mission: to investigate and report on Defendant's identification, preservation, collection, search, processing and production of ESI - and to advise the court on how to handle Plaintiff's motion for sanctions.  (PIC Group at 1.)

As with many e-discovery cases, making that rec required the Special Master to decide whether Defendant was (a) evil; (b) incompetent; or (c) both of the above.  He leaned toward (b), finding Defendant's discovery efforts "...wholly devoid of competence, yet only once motivated by guile."  (Id. at 1.)  Talk about damning with faint praise!

Specifically, Defendant had no preservation policies or procedures in place; did not issue a proper litigation hold; and hired a lousy discovery expert to assist with the case.  (Id. at 2.)  For good measure, one instance of bad faith destruction of data was also noted.  (Id. at 2-3.)

Scorecard says: Defendant's "callous and careless" behavior outweighed any "craven" attempt to hide evidence.  (Id. at 3.)  Hardly cause for glee.

Noting Defendant's gross negligence and bad faith (id. at 8), the judge found that Defendant clearly had violated FRCP 37, and adopted the Special Master's recommendations almost wholesale.  These included allowing witnesses to be re-deposed; making Defendant re-pay Plaintiff for fees and costs; ordering Defendant to complete the production of certain ESI; and levying $50,000 in money sanctions to be borne by Defendant and specifically not to be covered by its insurance company.  (Id. at 10-13.)

07/14/11: Hold Off?  Hold On!  Any judge's menu du jour might include a delicious dispute over the date or event triggering a litigation hold.  But in Haraburda v. Arcelor Mittal USA, Inc., Defendant's claim that it need not implement a hold until after a FRCP 26(f) discovery conference left a bitter taste in the magistrate's mouth.
After Plaintiff filed her employment discrimination case, she became concerned that Defendant would fail to preserve emails potentially relevant to her case and therefore wrote to Defendant's HR departments to voice these concerns.  (Haraburda at 1.)  Judging by the ill-advised (and written!) response from an HR manager, Plaintiff had reason to be worried: Plaintiff was informed that Defendant would not implement a litigation hold or otherwise preserve evidence until after the Rule 26(f) conference was held.  (Id. at 1.)
With ample precedent, and admirably without demonstrating outrage, the judge held that the duty to preserve evidence arises when a party knows or should know that litigation is imminent.  (Id. at 1.)  Clearly, a party that has already been sued qualifies.  In fact, disputes about litigation hold duties in employment cases more often center on the initiation of an internal investigation; the filing of a union grievance; a formal EEOC proceeding; etc.
Notably, the Haraburda court states that large companies like Defendant can only discharge their preservation duties by creating "comprehensive" document retention policies and disseminating them to all employees.  (Id. at 1.)  High standard!
Citing Defendant's "pre-existing duty to seek strategies" to identify and retain potentially relevant information, the court rejected Defendant's attempt to push the line from knowledge of imminent litigation past the discovery conference of an active litigation.  (Id. at 2.)  It deemed emails between employees crucial to Plaintiff's case and found Defendant's behavior good cause for suspicion that evidence might be destroyed.  (Id. at 2.)  Defendant was thus ordered to implement a litigation hold at once.

07/07/11: You Needed A Magistrate for This?  Federal magistrate judges probably expect to preside over a fair amount of petty bickering.  And they're no doubt accustomed to refereeing discovery disputes they wish the parties could have resolved without judicial intervention.  But apparently, they don't appreciate being asked to access a litigant's Facebook account in camera to rule on the discoverability of selected parts of said litigant's postings.  It's a bit like calling Mom or Dad in from the study to the playroom to determine who did what to whom.

In Offenbeck v. L.M. Bowman, Inc., 2011 WL 2491371 (M.D. Pa.), a magistrate judge was required to tackle just such a project.  (Offenbeck at 1.)  This case is about a car crash in which Plaintiff alleged that he had sustained serious physical and psychological injuries.  The magistrate judge used Mr. Offenbeck's Facebook login credentials to conduct a thorough live review of his account, finding most of the material there completely irrelevant to the case.  But the court did find "...that some small segment of the public information contained in Plaintiff's account is properly subject to limited discovery in this case."  (Id. at 2.)

The judge ordered the production of some photos and Facebook updates that would seem to undercut Plaintiff's claims of physical injuries: Plaintiff's adventures by auto and motorcycle; Plaintiff on a hunting trip; and Plaintiff (allegedly) astride a mule.  (Id. at 2-3.)

There's nothing earth-shaking in these adjudications.  They make sense, and demonstrate how good, old-fashioned discovery principles can be applied in a social media context.  More interesting is a long footnote chastising both parties for failing to work out these disputes themselves: an indication that judges increasingly will expect parties to address these types of digital world challenges without baby-sitting.  (Id. at 3.)

06/30/11: The Liability Shell Game.  It's an understatement to say the delivery of legal services is changing before our eyes.  It's even less debatable to claim that the legal and business processes central to conducting discovery in large litigation matters is metamorphosing even more dramatically.  Law firms are embracing outsourcing and/or building internal capabilities to deploy technology and talent for lower cost to their clients.

As the world changes, it's crucial that law firm attorneys evolve into strong project and process managers; that service providers deliver the goods appropriately; and that clients know exactly who's responsible, and liable, for what.

A recent case filed against McDermott Will & Emery by a corporate client for malpractice because of the firm's management of the discovery process is the first of its kind.  It won't be the last.  The allegations are based on McDermott's alleged failure to provide appropriate supervision of the work of contract attorneys working with its technology vendor.  The company says these circumstances led to the inadvertent production of almost 4,000 privileged documents in a whistle-blower action.

We may never know exactly what happened.  We'd guess that behind the scenes right now, there is an epic finger-pointing contest underway worthy of a John Woo film's choreography, with the law firm, staffing agency personnel, the technology vendor and the GC's office all scrambling for cover.  We think McDermott would be well-advised to settle this one before any of the details see the sunlight.

There are many lessons to learn and points to make here.  We'll focus on the following: (i) e-discovery has become too specialized and important to be trusted to generalists; (ii) roles of all entities collaborating on large-scale discovery must be clearly defined; (iii) thoughtful, multi-entity contracts should be executed among corporations, law firms and service providers; and (iv) staffing agencies and consulting companies should carry E&O insurance and/or malpractice coverage.

06/23/11: Play Visions, Real Sanctions.  Play Visions, Inc. v. Dollar Tree Stores, Inc., (W.D. Wash., Case No. C-09-1769), is an IP case involving novelty toys.  The proceedings included discovery battles far past the point of play-fighting.  For example, in response to a letter from Defendants complaining about an inadequate document production, Plaintiff said all relevant records were kept only in paper format.  (Play Visions at 3.)  Soon after, Plaintiff made 360 boxes of documents available to Defendant for inspection, with little or no attempt to separate wheat from chaff.  (Id. at 3.)
Little by little, the truth trickled out.  The production had indeed been inadequate.  ESI actually did exist.  Worse yet, Plaintiff violated the court's protective order and inappropriately ghost-wrote its expert's report.  (Id. at 11.)
Takeaways from Play Visions include: (i) read the infamous Qualcomm case; (ii) counsel and client must communicate early and often; (iii) attorneys should work proactively to understand clients' IT systems and retention/destruction policies; (iv) start work early on an ESI plan; and (v) read Qualcomm again.
The court dismissed Plaintiff's case with prejudice and awarded Rule 26 and 41 sanctions jointly and severally against Plaintiff and Plaintiff's counsel.  In plain language that anyone who bothered to pay attention to Qualcomm could have drafted, the court laid down the law about e-discovery conduct: "While counsel may trust his client, he must make a reasonable inquiry into whether his client's responses to discovery requests are adequate."  (Id. at 15.)  After a detailed analysis and careful scrutiny of Defendant's costs and fees, the court also awarded over $137,000 in sanctions.  (Id. at 17.)  That's more than a little play money changing hands.....

06/16/11: Mirror, Mirror.  Weatherford U.S., L.P. v. Innis, 2011 WL 2174045 (D. N.D.) is an “employee departure” case in which a magistrate judge granted Plaintiff’s request to require the mirror imaging of Defendant’s computers.  In 2009, Mr. Innis was fired from his job at Weatherford, an oilfield services company.  Before bedtime that evening, he found time to make a quick stop at the office to access to download Weatherford data onto a thumb drive.  (Weatherford at 1.)

A few weeks later, Defendant formed his own company.  (Any guesses as to which industry?  That’s right: oilfield services.)  Plaintiff sued Defendant for mischief of one sort and another related to trade secrets.  While Defendant copped to the devious download, he claimed not to have reviewed the materials since copying them.  Unfortunately for him, the forensic expert who examined the thumb drive disagreed.  (Id. at 1.)

Plaintiff requested the imaging of all computers at Defendant’s company.  (Id. at 2.)  The court said imaging was warranted.  It found Weatherford’s claim that Defendant had made improper use of his knowledge of its business practices (based on the downloaded data) “neither vague nor unsubstantiated.”   Parameters for the imaging were also set forth:

• Defendant to select forensic expert to image the drives;
• Expert and all parties to be bound by confidentiality agreement and sign onto protective order; and
• Computers to be made available only to expert and expert’s employees, not to Plaintiff. 

Finally, the magistrate judge specified the types of files the expert should recover, and required Defendant to supplement his discovery responses appropriately after the expert’s work was done. 

06/09/11: Give the District of Columbia points for audacity.  D.C.'s proposal to produce documents during and even after trial amounted to a bad joke that failed to amuse the court in DL v. District of Columbia, 2011 WL 1770468 (D.D.C.).  Comparing the idea of post-trial production to "a plane with landing gear that deploys just after touchdown" (DL at 1), the court rejected Defendant's proposal, peppering its opinion with additional unflattering analogies and excoriations galore.  It also ordered Defendant to produce all remaining documents within a week of the end of trial, finding that all objections had been waived, including privileges.

At issue in DL: the alleged failure to provide Plaintiffs with appropriate free educations in accordance with the Individuals with Disabilities Act.  After 6 years of class action litigation, Defendants dumped documents on Plaintiffs on the eve of trial, and admitted it would not be able to discharge its remaining discovery obligations in good time.  (This after a number of discovery disputes in which Plaintiffs sought documents.)
While it isn't hard to understand the court's anger, following are the main areas that seemed to drive the holding.

• Defendant failed to inform the court earlier of its imminent inability to meet its discovery obligations (Id. at 2);

• D.C.'s blatant failure to supplement its responses per FRCP 26(e)'s mandate (Id. at 6, 7);

• The court's desire to deter Defendant from future transgressions of this sort (Id. at 6); and

• Defendant's "repeated, flagrant, and unrepentant failures to comply with Court orders" regarding discovery (Id. at 6).  

06/02/11: E-Discovery Rubber Meets Road.  In Race Tires America, Inc. v. Hoosier Racing Tire, Corp., 2011 WL 1748620 (W.D. Pa.), a tire supplier sued a rival supplier and an organization that sanctioned races and governed the use of equipment.  Plaintiff alleged antitrust violations connected to the requirement of a single type of tire to be used in sanctioned races, with Plaintiff excluded from taking a victory lap....
Defendants took the checkered flag in court as well, prevailing on summary judgment.  Subsequently, they applied for and received an award of costs from the clerk of the court, including over $350,000 in e-discovery charges.  Plaintiff appealed, and the district court undertook a de novo review of the award.
The district court set out to determine whether the e-discovery work performed was necessary (allowable), or merely convenient (not allowable), while admitting that "[t]he dividing line between 'necessary' and 'for the convenience of counsel,' however, is not particularly well established."  Race Tires America at 4.  Also crucial: whether the work was closer to reprographics (allowable), or to legal work (not allowable).
Analyzing cases that fell on both sides of these questions, the court concluded that some judges awarded such costs broadly; and others narrowly.  Id. at 6.  Ultimately, the following factors loomed largest in the decision to affirm defendants' award.

• The scanning was necessary to the production of ESI, not merely convenient to counsel or achieving an aesthetic presentation;
• Plaintiff asked for, and got, very large volumes of ESI;
• The parties had agreed to produce documents electronically; and
• The services performed were highly technical and beyond what an attorney or paralegal could do.

Zoom, zoom, zoom!

05/26/11: Sexy, Yes / Clear and Convincing, No.  For Thomas Davis and Claudia Spriggs, taking intimate pictures may have seemed like good, naughty fun within the boundaries of wedded bliss.  But when things went downhill between these two, they went bad dramatically and digitally.  Estate of Thomas Davis v. Claudia Spriggs, 2010 WL 4817348 (Ohio Ct. App.), involves a separation agreement contained in a divorce decree.  In that pact, Mr. Davis agreed not to distribute any of the "video tidbits" he'd produced of his ex-wife.
Lo and behold, within a few months, these very materials found their way to a little place called the Internet.  Ms. Spriggs tried and failed to have the pictures and videos of herself removed from the adult websites on which they'd been posted.  (By the way, footage of Mr. Davis's current girlfriend was identified on some of the same sites.)  Eventually, when Mr. Davis was forced to produce his computer in discovery, it was found to contain a program used to erase evidence from hard drives....
Despite the strong circumstantial evidence pointing to Mr. Davis, Ms. Spriggs failed to prevail in her contempt action against her former husband's estate, for his alleged violation of the divorce decree.  Ms. Spriggs' evidence was deemed not to be clear and convincing.  Because of the nature of his work duties, Mr. Davis apparently had good reason to own and use an evidence-erasing program.

05/19/11: Perils for Packrats.  Last month, Podo Legal presented at a computer forensics and e-discovery conference in New York.  Forensics aside, much buzz at the gathering was about records and information management ("RIM").  Bone-chilling tales were told of deficient digital data management causing exponentially expanding e-discovery expenditures during litigation.

Too often, corporate clients diligently keep gazillions of boxes of good, old-fashioned, decades-old paper.  As you can guess, these documents become potentially relevant to litigation matters that arise, although they should have been jettisoned long ago.

Heavily regulated industries aside, everyone keeps too much around.  End users skirt IT policies and keep ten years worth of PST files on laptops.  R&D groups send boatloads of documents offsite, where they lurk like ghost ships.  Once litigation hits, it's all discoverable.  It's fair to say that we have yet to work on a project that would have cost the client less time, money and stress if proper retention/destruction policies were in place; AND if they had been followed.
Why?  A few of our best guesses:

• If corporate culture can treat in-house legal departments as speed bumps on the path to world domination, then compliance/RIM people can be seen as bumps on those speed bumps.

• Corporate IT and legal departments still don't talk enough.

• Our aversion to discarding things (healthy to a point) trumps our ability to understand that less truly can be more.

• What high-level manager or in-house attorney really wants to be the company document cop (undercover or not)?

• What VP or C-level exec really wants to pay a high-level manager or in-house attorney to be the document cop?

As always, more questions than answers....

05/12/11: In the Soup with No Written Hold?  Among e-discovery cognoscenti, it's axiomatic that a litigation hold be in writing.  Now, don't get us wrong: nothing in Steuben Foods, Inc. v. Country Gourmet Foods, LLC, 2011 WL 1549450 (WDNY), suggests it's bad to have a written litigation hold.  But the ruling puts the brakes on assuming that the failure to do so means that spoliation sanctions are imminent.

In Steuben Foods, Defendant sought such sanctions based on Plaintiff's enactment of an oral rather than written hold telling employees to retain ESI relevant to the case against Country Gourmet (later bought by the Campbell Soup Company).  Steuben Foods at 1.  Defendant's argument rested on the fact that potentially responsive emails of which it was aware had not been produced by Plaintiff.  Id. at 2.

The court's analysis noted that actual loss or destruction of evidence was  required for spoliation sanctions; as was a showing that the evidence would have been relevant and probative of the other party's claim.  Id. at 3.  Taking each at-issue email in turn, the court found that they were either not destroyed or were not probative of Defendant's claim.  Id. at 4.
Notwithstanding its proximity to the venerable SDNY, the Steuben Foods court explicitly rejected both the letter and the spirit of Judge Scheindlin's landmark Pension Committee holding.  For one thing,Steuben Foods was distinguished because of the case's absence of an inference of the intentional destruction of documents.  Id. at 4.

Beyond that, and noting its freedom to rule on matters the Second Circuit had not touched, the Steuben Foods court took pains to eschew the "platinum standard" for written litigation holds championed by Judge Scheindlin: "Nor will the court find that the failure to issue a written litigation hold justifies even a rebuttable presumption that spoliation has taken place."  Id. at 4.  Or perhaps, "Take that back to Manhattan, baby."

05/05/11: Making the Circuit!  Lee v. Max Int'l, LLC (U.S. Court of Appeals, 10th Circuit, Case No. 10-4129), just decided May 3, 2011, is a movie we've all seen before.  Party shirks, re-shirks and re-re-shirks discovery obligations; party gets sanctioned (in this case, total dismissal); Podo Legal blogs about it.  Nothing even remotely cool in the particulars.

The coolness arises from the fact that this opinion is by an esteemed Circuit Court judge who deigned to dirty his digits with a discovery dispute and affirm the district court's sanction and general authority in the area of discovery.  As a bonus, it contains some nifty turns of phrase that support the gospel of good discovery behavior that we preach daily.  So, without further ado, let's go to the highlights.

• "How many times can a litigant ignore his discovery obligations before his misconduct catches up with him?"  (The answer turns out to be two, and definitely not three.)

• "We view challenges to a district court's discovery sanctions with a gimlet eye."  (We think the judge means the small boring tool, i.e., sharp and "squinty," but believe he could not have ignored the possibility that we might inplead the cocktail and derive some additional nuanced meaning from the "gimlet goggles" suggested.)

• "Discovery disputes are, for better or worse, the daily bread of magistrate and district judges in the age of the disappearing trial."  (Bittersweet, 100% true, beautifully put, and as far as cite-ability goes, an instant classic.)

• "But there is such a thing as discovery karma."  (We only wish that discovery karma went from 0 to 60 a tad faster.)

• "Discovery is not supposed to be a shell game, where the hidden ball is moved round and round and only revealed after so many false guesses are made and so much money is squandered."  (Amen again; although ample empirical evidence exists to show that, as always, what is not supposed to be, in fact very much can be....)

04/28/11: Facing down Facebook on ESI.  Facebook had a rough day in court earlier this month, emerging on the losing end of an e-discovery dispute.  In In Re Facebook PPC Advertising Litigation (2011 WL 1324516 (N.D. Cal.), a group of Plaintiffs prevailed on all aspects of a Motion to Compel against the social networking Goliath.  In this case, a group of advertisers sued Facebook for breach of contract and unfair competition.  At the heart of the matter: misrepresentations Plaintiffs said Facebook made about its click filters, whose shortcomings they claimed caused them to pay for inadvertent and unqualified clicks.

The Motion to Compel was based on Facebook's unwillingness to get together on a protocol for producing ESI; and on specific characteristics of the company's production to Plaintiffs.  Citing copious case law, the FRCP's finest and the Sedona sages for the position that playing nice in the sandbox is important for happy discovery, the Magistrate Judge ordered Facebook to meet and confer with Plaintiffs and hammer out an ESI protocol, which it had resisted doing.  In Re Facebook at 1-2, 4.

The Court also found Facebook's production of certain pdf's in lieu of native documents unacceptable due to lost metadata and a lack of searchability.  Id. at 2.  This approach included the static production of a dynamic database.  (See our blog last week on this topic!)  Id. at 2.

And the MJ ruled that routing Plaintiffs to an online repository where ESI had been produced for their review was "unduly burdensome," noting the lack of ability to print documents, inter alia.  Id. at 2.

In addition to forcing Facebook to the table to cooperate on ESI in general, the Order prohibited the company's further use of the upload site to produce ESI.  Id. at 3, 4.  Also, the company was required to re-produce ESI in searchable formats.  Id. at 3, 4.  Finally, Facebook was ordered to produce relevant source code from the click filter technology sold to Plaintiffs.  Id. at 3, 4.  Wonder what the "Winklevi" think?

04/21/11: Sedona Tackles Databases.   This week, the Sedona Conference Working Group on Electronic Document Retention and Production issued guidance on the preservation and production of databases and database information.  (Note the distinction!)  At a high level, the Working Group notes the proliferation of disputes over the discovery of information stored in databases, citing the increasing use of databases rather than discrete files to store enterprise-level information.  On the ground, we have been faced with the tricky issue of how to produce responsive portions of databases without producing them entirely.  It also can be challenging to produce redacted versions of large databases with numerous fields.
The Working Group lists the following six database principles, which are followed by thorough discussion and analysis:

• Absent specific showing of need or relevance, requesting party is entitled only to fields with relevant info, not entire database or underlying app or engine;

• Not all info in databases may be equally accessible, and requests for such info must be analyzed for relevance and proportionality;

• Parties should use empirical data, e.g., from test queries and pilots, to ascertain burden to produce database info and to reach consensus on scope of discovery;

• Responding party must validate ESI collected from databases to ensure completeness and accuracy of acquisition;

• Verifying info correctly exported from larger database or repository is separate from establishing accuracy, authenticity, or admissibility of substantive info contained therein; and

• How requesting party intends to use database info is important factor in determining appropriate format of production.

As always, we'll need to wait to see how this guidance plays out in live cases.  But we believe the Database Principles, sprinkled liberally with proportionality thinking, will be welcomed by corporate defendants.  See Sedona Conference Site, where you can download a .pdf of the piece.

04/14/11: Know When to Hold 'Em.   And preserve 'em.  A recent magistrate judge's rec in an employment action dealt effectively with the questions of when the preservation duty is triggered, and what sanctions are merited when discovery conduct is slipshod, but not intentionally evil.

Plaintiff in Northington v. H&M Int'l, No. 08-CV-6297, 2011 WL 663055 (N.D. Ill. 2011), sued her former employer for harassment, discrimination and wrongful termination.  The bad blood between the parties ran deep.  Almost a full year passed between Plaintiff's first complaint to HR and her termination.  Union investigations and an EEOC claim followed, with a civil court case underway not long afterwards.

Plaintiff's former supervisor and other players in the case left the company before discovery began, but after the EEOC charge was filed (and after the civil case got underway, in fact).  Their hard drives were wiped clean when they left.  Unfortunately for Defendant, the magistrate judge pegged the date Defendant received the EEOC charge as the trigger for a duty to preserve ESI.  Northington at 6.

Waiting until months after the filing of a lawsuit to initiate a hold is asking for trouble.  Id. at 9.  So is failing to have much of a retention policy.  Id. at 7-8.  As is destroying more emails when changing hosting services.  Id. at 9.  After analyzing FRCP 26 and 34, the court crystallized three key factors considered in its sanctions analysis as (i) the breach of duty; (ii) the level of culpability for the breach; and (iii) the prejudice to the aggrieved.  Id. at 13.  The court found Defendant grossly negligent and "at fault," although not in bad faith, because the destruction of evidence was deemed unintentional.

The court wrestled with the prejudice question, finding it could not be quantified.  In a neat summation of why depositions alone can fail to measure up: "At worst, deponents may be motivated to conceal evidence of their wrongful conduct.  At best, memories fade."  Id. at 20.
The court refused to impose liability on Defendant as a matter of law.  But it ordered Defendant to re-search all ESI and hard copy documents, dictating time frames and search terms.  A jury instruction re the failure to preserve was ordered too, and Defendant was barred from arguing that the absence of discriminatory statements proved that they were not made.  Finally, Defendant had to pay the fees and costs incurred by Plaintiff during the discovery dust-up.

04/07/11: Shaming the Shameless.  "A pure hand needs no glove to cover it." - Nathaniel Hawthorne, in "The Scarlet Letter."  Green v. Blitz USA, 2011 WL 806011 (E.D.Tex.), is one of multiple products liability cases involving Defendant's allegedly defective gas cans.  Green is a wrongful death suit that settled for much less than Plaintiff, heir of the deceased, had been seeking.

But Plaintiff's attorney in Green was counsel in other cases against Blitz too that were still pending when Green ended - including one in which Defendant produced documents of extreme interest and relevance that were conspicuous by their absence from the production set in Green.  In meting out sanctions, the Court took Defendant to task for conducting its entire discovery process through one person. Green at 3.  It didn't help that this person failed to issue a litigation hold; did not conduct any word searches of emails or other ESI; and held no discussions with the IT department about conducting discovery.  Id. at 4, 9.

The court found that Defendant willfully violated the Discovery Order in effect, and that the simplest of word searches through ESI would have turned up documents whose omission severely prejudiced Plaintiff.  Id. at 6-7.  Ditto as to the IT Department's failure to issue a hold and preserve ESI relevant to ongoing litigation.  Id. at 8.

Although Plaintiff's case was not re-opened because of the statute of limitations, the court hit Defendant with a $250,000 FRCP 37 sanction.  Interestingly, the judge also applied a sort of two-part "Scarlet Letter" sanction.  First, Blitz was required to give all Plaintiffs in current proceedings against it (initiated within the previous two years) copies of the Court's Order.  Second, Defendant was also ordered to attach a copy of the Order to the first pleading filed in all other cases in which it would be involved for the next five years - even those unrelated to the product at issue - in effect declaring itself a past discovery abuser to all litigants and judges in its cases.

03/31/11: ESI Lows on the High Seas.  "Ahoy, mateys!  A recent Florida case, Seven Seas Cruises S. De. R.L. v. V. Ships Leisure SAM, 09-23411-CIV, 2011 U.S. Lexis 19465 (S.D. Fla.), exemplifies a judge's proper, thoughtful approach to resolving a discovery dust-up with just enough liberty and justice for all involved.

The Seven Seas case involves breach of contract allegations by cruise ship owners against service providers engaged to manage and maintain the ships.  Plaintiffs filed a Motion to Compel the production of ESI, as well as a Renewed Motion to Compel.  They attacked both Defendants' methods in discharging their discovery obligations and the results of the production.  Specifically, they identified 10 custodians whose ESI had not been searched or produced at all; as well as unexplained gaps as to time frames among the custodian data that were produced.  The penalties sought for their troubles: default judgment and costs.

For their part, Defendants copped to failing to produce all relevant ESI, but argued that Plaintiffs had failed to show any actual resulting prejudice from these deficiencies.  They made the prerequisite excuses for their shortcomings too, just so we all knew it was a party.  Tellingly, though, they offered to re-run searches and produce additional data.

The judge found FRCP 37 default sanctions a bit too harsh and astringent for her taste.  Noting that discovery drama coulda, shoulda, woulda been avoided by better compliance with Rule 26(f)'s requirement for conferences, she found Defendants' methodology inadequate.  But she also deemed the prejudice to Plaintiffs speculative.

The court did a great job of digging into the weeds to give specific guidance on the search terms and the format that further productions needed to employ.  Ultimately, her suspicion that incompetence and not bad faith caused Defendants' deficiencies may have saved Defendants.  Nonetheless, she chastised Defendants for not knowing what they didn't know, and said they should have hired a discovery consultant.  Seven Seas Cruises at 9.  The final scorecard: 3-1.  To wit, Defendants (1) re-run searches and produce more; (2) lose on their MSJ; and (3) pay Plaintiffs' costs.  BUT, no default judgment for Plaintiffs.  Fair 'nuff.

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