The Ultimate Price–New York Court Dismisses Case as Spoliation Sanction

 

The Supreme Court in New York County recently dismissed a $20 million suit in a sanctioning order in response to the Plaintiff’s destruction of electronically stored information (“ESI”). In 915 Broadway Associates LLC v. Paul, Hastings, Janofsky & Walker, LLP, 34 Misc. 3d 1229A (N.Y. Sup. Ct. 2012), the court made clear that it would not tolerate spoliation of evidence and that it was willing to impose even the severest of sanctions.

The Plaintiff was initially a party to a separate action involving a failed real estate deal, as a result of which a litigation hold letter was issued in April, 2008. Broadway settled the real estate action and brought this malpractice suit against its former attorneys in August of 2008. The attorneys were allegedly responsible for failing to advise Broadway that the letter of credit provided to it in connection with the real estate deal expired during negotiations, in spite of evidence that Broadway was at least in partly responsible.

By 2008, it was well-established law, consistent with the Zubulake decisions, that once a party reasonable anticipates litigation, it must suspend its routine document retention and destruction policy and put in place a litigation hold to ensure the preservation of relevant documents. See Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D. N.Y. 2003). However, even though the litigation hold letter from April 2008 was sent to the primary custodians, at least one principal actively deleted relevant emails. Further, the company made no effort to suspend the automatic destruction policy of emails, which resulted in the permanent destruction of every email intentionally deleted. Additionally, the court found that nine of fourteen key custodians had deleted relevant documents. Perhaps the worst violation, however, occurred after the Defendant had raised its spoliation concerns with the court, when Broadway decommissioned and discarded an email served without preserving any of the relevant ESI.

The court reiterated that circulation of a litigation hold alone is not sufficient to meet a party’s discovery obligations. Instead, a party must take affirmative steps to ensure potentially relevant evidence is identified and preserved. This includes not only avoiding affirmative acts of destruction, but also taking active steps, if required, to stop automatic deletion features. When evidence is destroyed, even mere negligence is sufficient to warrant sanctions. And when documents are destroyed as the result of, at a minimum, gross negligence, the court will presume the destroyed documents were relevant.

In this instance, the court determined that dismissal was the only remedy capable of addressing the prejudice caused by the intentional and reckless destruction of ESI. In addition to dismissing the Plaintiff’s $20 million suit, the court also awarded attorney’s fees and costs.

This case reinforces the need to not only issue a litigation hold, but to monitor compliance with it and take affirmative steps to ensure that potentially relevant information is collected and preserved. Even negligence in document preservation can result in sanctions.

Posted in Articles

A Spoliation Ace in the Hole

       A district court case decided last month shows how a company’s email retention and litigation hold policies can affect claims of spoliation by adverse parties in litigation. In Danny Lynn Electrical v. Veolia ES Solid Waste, No. 2:09CV192-MHT, 2012 U.S. Dist. LEXIS 31685, at *2 (M.D. Ala. March 9, 2012), the Plaintiffs filed a motion for sanctions alleging the Defendants had “blatantly disregarded their duty to preserve electronic information in this case.” Specifically, the Plaintiffs alleged that the Defendants failed to implement a litigation hold, deleted a number of email accounts, and failed to disable an email “auto delete” function after litigation commenced. They requested the full spectrum of sanctions, including monetary penalties, adverse evidentiary inferences, and the striking of affirmative defenses.

          Despite the Plaintiffs’ accusations, the court found that sanctions were unwarranted. First, the court explained that to evaluate whether sanctions are appropriate in a spoliation case, it must consider the importance of the destroyed evidence, the culpability of the defending party, fundamental fairness, and whether the destroyed evidence is available from other sources. Applying these factors to the case at hand, the court questioned whether any spoliation had actually occurred. Even assuming spoliation had occurred, however, the court found that the Defendants had not acted in bad faith.

          In coming to its decision, the court noted that while a few emails may have been accidentally deleted due to a computer virus, from the very beginning of the litigation, the Defendants regularly made tape backups of all emails. The tape backup system was later replaced by a system that created email backups on the company network. Throughout the course of the litigation, the Defendants regularly supplied emails from these backup systems in response to Plaintiffs’ discovery requests. The court concluded that even if some emails had been lost, the Defendants did not act in bad faith because they “have expended great effort to insure that the plaintiffs receive information from both their live and archived email system by providing document review technology and allowing access to its database.” Therefore, the court decided sanctions were not appropriate.

          The decision highlights how an up-front investment in data management technologies and policies can lead to real cost savings from a litigation standpoint. These investments not only decrease the costs – in both time and money – of responding to discovery requests, but also show good faith effort should an adverse party allege spoliation and request sanctions. A company that formulates sound email retention and litigation hold policies, documents and disseminates these policies, and conducts regular audits to ensure these policies are properly implemented will have a readymade shield to employ any time another party makes a spoliation claim. In the long run, these investments can save the company from the tedium of having to justify every email deletion on a case-by-case basis. When it comes to defending against potential spoliation claims, being proactive, rather than reactive, will go a long way to ensure you always have the winning hand.

Posted in Articles

Flattened By Race Tires: The Third Circuit Limits What Types of E-Discovery Costs Are Recoverable by a Prevailing Party

On March 16, 2012, in Race Tires America, Inc. v. Hoosier Racing Tire Corp. et al.,[1] the U.S. Court of Appeals for the Third Circuit adopted a conservative view of the types of e-discovery costs recoverable by a prevailing party in federal court.  In a precedential opinion intended to “provide definitive guidance to the district courts in our Circuit,” the Third Circuit held that  the costs of “scanning and file format conversion” are recoverable by a prevailing party, but many other attendant e-discovery costs are not.

Federal Rules for Recovering Costs

            As e-discovery costs rise and become more common, a growing number of federal courts have been called upon to determine whether those costs are “taxable” – i.e., whether a prevailing party in federal court may recover the costs that it incurred in  producing ESI for discovery.  Federal Rule of Civil Procedure 54(d)(1) allows for “costs” (except for attorney’s fees) to be awarded to a prevailing party, and Congress defined what those “costs” are in 28 U.S.C. § 1920.  The debate over e-discovery costs arises almost entirely out of § 1920(4), which states that taxable costs include:

 Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case[.]

As federal courts grapple with § 1920(4) in the context of e-discovery, they key question tends to be what parts of the e-discovery process are encompassed by “exemplification” and “making copies of any materials.”

In Race Tires, the Third Circuit was presented the opportunity to address the applicability of § 1920(4) to e-discovery costs.  Last year, this blog wrote about an opinion from the U.S. District Court for the Western District of Pennsylvania that took a broad view of the terms in § 1920(4), and awarded to the successful defendants in an anti-trust case over $367,000 in e-discovery costs for work done by third-party vendors and consultants that was “highly technical” and “not the type of services that attorneys or paralegals are trained for or capable of providing.” 

The Third Circuit Opinion

The Third Circuit reversed that District Court’s decision in Race Tires, as the appellate court opted for a limited, rather than expansive reading of § 1920(4).  The court identified only  two e-discovery costs that were recoverable in the case: 1) the conversion of native files[2] to an ESI format which had been agreed upon by the parties, and 2) the scanning of physical documents to create digital duplicatesAs a result, the court reduced the defendants’ award of costs to just over $30,000.

In the opinion, Judge Vanaskie emphasized the historical purpose of § 1920 and its statutory predecessors, and the “‘American rule’ against shifting the expense of  litigation to the losing party.”  The court cited Supreme Court precedent for the principle that § 1920 was intended to provide “rigid controls on cost-shifting in federal courts” and thus that the statute “defines the full extent of a federal court’s power to shift litigation costs absent express statutory authority.”

“Making Copies”

            In its most important piece of analysis, the court concluded that e-discovery services such as ESI collection and preservation, indexing and processing, and keyword searching do not fall within the meaning of the term “making copies” found in § 1920(4).  The court expressly rejected the argument that because such services are a necessary part of the process of ESI production, they are the modern equivalent of making copies. Such notions, the court wrote, “are untethered from the statutory mooring.”

Prior to the ESI era, Judge Vanaskie noted, there could also be a lengthy process involved in producing copies for discovery which included collecting, processing, and reviewing paper files for relevancy and privilege, and the costs of those activities were never taxable under the statute.  Similarly, the court reasoned, the costs of “gathering, preserving, processing, searching, culling and extracting ESI” may be necessary expenses leading up to the production of ESI, but they cannot be considered the costs of “making copies.”

            Several components of e-discovery do qualify as “making copies,” according to the Third Circuit.  The court expressly approved of scanning paper documents into electronic form and transferring VHS tapes to DVD as taxable costs.  Additionally, because the parties in Race Tires had agreed to produce ESI in TIFF[3] format, the court allowed the defendants to recover the costs of converting non-TIFF electronic files into TIFF format.  These recoverable costs represented roughly $30,000 worth of the defendants’ e-discovery bill, which totaled more than $367,000.

Recovering E-Discovery Costs with Race Tires

            Race Tires offers reasonably clear guidelines for the recovery of e-discovery costs by a prevailing party in a district court in the Third Circuit.  Under Race Tires, a prevailing party should be able to recover 1) the cost of scanning physical documents and 2) the cost of converting electronic files into another format that has been agreed upon by the parties in a discovery plan or case management order.  A prevailing party should not expect, however, to recover the costs of gathering, preserving, processing, searching, culling and extracting ESI – services which will often represent the bulk of e-discovery costs.  In short, Race Tires gives some certainty, but little relief to litigants facing expensive e-discovery bills.  


[1] No. 11-2316, 2012 U.S. App. LEXIS 5511 (3d Cir. March 16, 2012).

[2] As the Third Circuit explained, “the native file format is the file structure defined by the original creating application.” For example, a document which was originally created in Microsoft Word is a Word (or .doc) file in its native file format.

[3]Tagged Image File Format,” a type of electronic file. 

Posted in Articles, costs, e-discovery consultants, e-discovery costs, e-discovery plan, eDiscovery, electronic communication, electronically stored information, ESI, exemplification, Race Tires, recovery of e-discovery costs

Simple Mistakes Lead to Discovery Sanctions Against Delta Air Lines

             Judge Timothy C. Batten, Sr., of the District Court for the Northern District of Georgia, imposed discovery sanctions against Delta Air Lines after it failed to disclose documents contained in backup tapes and hard drives that had been inadvertently overlooked by Delta’s counsel and IT personnel. The opinion is In re Delta/Airtran Baggage Fee Antitrust Litigation, 2012 U.S. Dist. LEXIS 13462 (N.D. Ga. February 3, 2012). 

In the underlying action, Plaintiffs allege that Delta conspired with other airlines to impose a baggage fee on a passenger’s first bag. During discovery, Plaintiffs served Delta with document requests, seeking all documents related to its decision to impose a first-bag fee on its air passengers. Delta responded by producing approximately 103,000 pages of documents prior to the close of discovery. Delta made a similar production to the Department of Justice, which was also investigating the baggage fees.

Later while responding to a discovery request from the Department of Justice in a separate investigation, Delta produced documents relevant to the baggage fee action that had not previously been produced. When the Department of Justice noticed the discrepancy and contacted Delta, Delta notified Plaintiffs and the court, and opened an investigation into its document production efforts.

The investigation revealed two sources of unproduced documents. First, the contents of a number of custodian hard drives were never uploaded to Delta’s electronic information management program. Only documents uploaded to the program were reviewed for production. Second, during its investigation, Delta’s IT personnel found an unmarked box containing backup tapes of server information in the office that manages document discovery responses. The tapes contained documents that were relevant to the baggage fee litigation. Delta eventually released an additional 60,000 pages of documents to Plaintiffs.

As a result, Plaintiffs sought discovery sanctions from Delta. The court found that Delta was subject to sanctions for two violations. First, the court determined that Delta had failed to make a reasonable inquiry into the completeness of its discovery responses as it had certified pursuant to FRCP 26(g). The court indicated that Delta should have done a better job making sure that the IT department followed its instructions and produced the correct documents. Based on the violation of FRCP 26(g), the court awarded Plaintiffs reasonable expenses, including attorney’s fees, caused by Delta’s violation. Second, the court determined that Delta had breached its obligation to supplement its discovery requests pursuant to FRCP 26(e). According to the court, Delta should have been more diligent in searching such an obvious area for tapes related to the investigation. Given its failure under FRCP 26(e), the court imposed sanctions under FRCP 37 and awarded Plaintiffs reasonable expenses and attorney’s fees caused by Delta’s failure, including fees and expenses related to the motion for sanctions, the extended discovery period, and a separate motion for spoliation sanctions.

                Errors in e-discovery practice can easily occur to any party. The key to avoiding the situation is taking an active role not only in creating sound e-discovery procedures, but also ensuring that all personnel are aware of the importance of diligently following them. A simple lack of vigilance on the part of any party can lead to an oversight, and as demonstrated by Judge Batten, such an oversight can lead to sanctions. 

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Posted in Articles, attorney's fees, discovery request, disovery sanctions, ediscovery misconduct, production, rule 37, Sanctions, unproduced documents

Magistrate Judge Peck’s Message to the Bar: Predictive Coding Should Be “Seriously Considered”

Ediscoverylawreview.com first discussed this emerging issue in its blog post on February 15, 2012. As anticipated, Magistrate Judge Peck issued an opinion detailing his reasons for authorizing the use of predictive coding in Da Silva Moore v. Publicis Group, No. 11-CV-1279 (S.D.N.Y. Feb. 25, 2012). Judge Peck’s position on predictive coding can be summarized by a single statement in his Opinion: “What the Bar should take away from this Opinion is that computer-assisted review is an available tool and should be seriously considered for use in large-data-volume cases where it may save the producing party (or both parties) significant amounts of legal fees in document review.”

            As Judge Peck noted, this Opinion appears to be the first wherein the Court approved predictive coding. He emphasized that while manual document reviews are still considered the “gold standard,” studies have shown that “computerized searches are at least as accurate, if not more so, than manual review.” Even keyword searches, in Judge Peck’s opinion, are the equivalent of a game of “Go Fish” because the “requesting party guesses which keywords might produce evidence to support its case without having much, if any, knowledge of the responding party’s ‘cards.’ i.e., the terminology used by the responding party’s custodians.”

            Judge Peck listed five considerations in his approving the use of predictive coding:

(1) the parties’ agreement; (2) the vast amount of ESI to be reviewed (over three million documents); (3) the superiority of computer-assisted review to the available alternatives (i.e., linear manual review or keyword searches); (4) the need for cost effectiveness and proportionality under Rule 26(b)(2)(C); and (5) the transparent process proposed by [the defendant].

Judge Peck particularly emphasized the importance of the transparency that the defendant used in its proposed ESI search protocol and the presence of e-discovery vendors at hearings to assist the Court in understanding various ESI issues.

            While Judge Peck recognized that predictive coding was not appropriate in every case, he emphasized that it should be considered in large-scale matters. Importantly, he stated, “[c]ounsel no longer have to worry about being the ‘first’ or ‘guiena pig’ for judicial acceptance of computer-assisted review.” As he stated, predictive coding “now can be considered judicially-approved for use in appropriate cases.”

            Predictive coding is a tool that should be examined and may be appropriate in a number of cases. It is important to involve counsel at the beginning of litigation so that document review tools, including predictive coding, can be considered for the matter and so that the company can be transparent – with the Court and its adversary – as to its e-discovery efforts.

Posted in Uncategorized

Federal Court Incentivizes Narrow e-Discovery Through Cost Shifting

            A case does not have to involve complex commercial litigation or technical patent disputes to create serious electronic discovery problems. An excellent example of just how messy e-Discovery can get, even with age-old claims, is found in Cannata, et al. v. Wyndham Worldwide Corp., et al.. There, employee plaintiffs brought claims against employer defendants, alleging sexual discrimination, sexual harassment, hostile work environment, constructive discharge, and retaliation.  In an order issued February 17, 2012, Magistrate Judge Cam Ferenbach of the United States District Court of Nevada took charge of an ongoing ESI back-and-forth between plaintiffs and defendants in this case.

            Over the course of the litigation, plaintiffs sought to broaden the scope of e-Discovery by increasing the number of search terms and custodians, while the defendants insisted on strictly adhering to a prior court order requiring narrow search terms. The prior order permitted only 10 search terms and avoided using “or” within the context of the searches if at all possible. Defendants further objected to including sexual terms in the searches, claiming that they were irrelevant because they had not been mentioned in any facts asserted by plaintiffs or in any depositions.

            Plaintiffs insisted that such an approach would not yield all of the evidence relevant to their case. Plaintiffs instead proposed that the parties jointly engage in a process by which the plaintiffs supply an initial list of 100 search terms and 50 email custodians. Defendants would then run the search terms through the custodians’ files and provide a search term “hit” report to the plaintiffs. Plaintiffs would then work with defendants to determine whether the searches were yielding too many duplicate items or irrelevant documents.

         Not surprisingly, this joint approach did not work and the court decided that it must appoint an e-Discovery Special Master to oversee the process. The court got even more specific though, stating that the process would include only narrowly tailored search terms. “Indiscriminate terms, such as a defendant’s name, are inappropriate unless combined with narrowing search criteria that sufficiently reduce the risk of overproduction.” The court went on to even provide the methods for conducting the searches (e.g. “Each disjunctive combination of analogous words shall be delimited by parentheses”).

To incentivize a narrowly tailored process, the court ordered that plaintiffs would be required to reimburse defendants for the e-Discovery costs incurred in complying with the order if the final set of combined search terms and sites searched exceeded 40. For each term over 40, plaintiffs would reimburse defendants 5% of their e-Discovery compliance costs from the date of the February 17, 2012 order through the end of discovery. 

As the Cannata v. Wyndham court recognized, the e-discovery process can be expensive and burdensome, even when narrowly tailored to address the parties’ claims. Just because a claim seems straightforward and grounded in the real world, rather than electronic data, that does not mean that parties should not begin planning and budgeting for e-Discovery as early as possible.   

           

Posted in Articles

All’s “Well” for Halliburton: No Sanctions Result from BP’s Spoliation Claims

United States District Judge Carl Barbier recently affirmed Magistrate Judge Sally Shushan’s denial of BP’s motion for spoliation sanctions against Halliburton Energy Services, Inc. BP alleged that Halliburton “intentionally destroyed evidence” and “violated the Court’s orders regarding the production of documents.” For these violations, BP sought sanctions including an adverse finding against Halliburton, attorneys’ fees, and an order compelling Halliburton to deliver a computer used in producing 3D modeling results. Judge Shushan refused to make an adverse finding and refused to award attorneys’ fees but ordered Halliburton to deliver the modeling computer for forensic testing. 

            By way of background, one of Halliburton’s main defenses in this multi-district litigation included the assertion that foam cement that Halliburton pumped into the Macondo well on April 19, 2010 was stable. Access to Halliburton’s testing results was integral to prove or disprove this defense. Another of Halliburton’s main defenses involved BP’s alleged engineering decisions to use fewer centralizers than Halliburton had recommended inside the well. Halliburton’s proprietary Displace 3D Simulator (“Simulator”) allowed engineers to predict with accuracy the possibility of channeling. Halliburton employees conducted an analysis of the April 19 cementing operation using the Simulator that allegedly indicated that there was no channeling at the Macondo well.

            BP asserted that Halliburton intentionally destroyed the results of physical slurry testing as it related to foam cement used in the wells because “it wanted to eliminate any risk that this evidence would be used against it at trial.” Judge Shushan, however, determined that BP failed to establish the three elements necessary to secure an adverse inference: 1) Halliburton’s duty to preserve; 2) Halliburton’s bad faith breach of the duty; and 3) that BP was prejudiced. Judge Shushan determined that BP had not demonstrated prejudice and refused BP’s request for an adverse finding as to the cement tests. 

            Similarly, BP sought Halliburton’s post-incident Simulator modeling. BP argued that the proprietary nature of the model rendered it unavailable to BP or other litigants. Halliburton, however, revealed that the results of the Simulator modeling were “gone.” BP then argued that Halliburton should transfer the computer on which the Simulator modeling had been completed to a third party for forensic testing. Halliburton agreed to submit the computer to a third-party and to make its software available to BP pursuant to a software escrow agreement. Judge Shushan ordered Halliburton to produce the computer for forensic testing and ordered the parties to split the costs. 

            The mysterious disappearance of evidence in most cases would result in a plethora of sanctions. How, then, did Halliburton fare so well? One possible reason might be Halliburton’s contention that the cement testing that BP referenced used off-the shelf materials that had little or no relevance to the case. Perhaps this fact contributed to Master Shushan’s finding that BP was not prejudiced. Another likely reason includes Halliburton’s willingness to cooperate with BP to conduct forensic testing of its computer. In contentious cases, a little cooperation goes a long way. In all cases, especially in the e-discovery context, sound record-keeping and cooperation with all parties remains essential to avoiding costly and embarrassing sanctions. 

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Posted in Adverse, Articles, attorneys', cooperation, faith, fees, Sanctions, spoliation

Southern District of New York Poised To Address Predictive Coding

 

On February 8, 2012, Magistrate Judge Andrew J. Peck heard arguments in Da Silva Moore v. Publicis Groupe, No. 11-CV-1279 (S.D.N.Y.) addressing the use of predictive coding as an alternative to an eyes-on review of millions of documents. To utilize predictive coding, an attorney must manually review a small subset of the total amount of documents that are potentially involved in the litigation. As the attorney codes or “tags” documents as relevant, the predictive coding software is “trained” as to the characteristics that make a document relevant and, at the end of that review, the software is fully “trained” to predict how the attorney will tag documents and able to review and tag the entire set of documents itself.

            At the February 8 hearing in Da Silva, Judge Peck discussed the review of 2.5 million documents. It was agreed that 2,399 documents would be manually reviewed for relevance and that the use of predictive coding remained subject to court approval. The parties were asked to submit an E-Discovery protocol, which will include predictive coding, as early as Thursday, February 16, 2012. Given Judge Peck’s statement: “[t]his may be for the benefit of the greater bar, but I may wind up issuing an opinion on some of what we did today,” we expect to see an opinion addressing predictive coding in the near future. This opinion is likely to be one of the first addressing this topic. Stay tuned to ediscoverylawreview.com for further details and analysis of this emerging issue.

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Posted in Articles, coding, Moore, predictive, protocol, review, Silva

Score One for Plaintiffs in Battle Over Discoverability of Facebook

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In the most recent decision to come out of Pennsylvania regarding the discoverability of social media, a Philadelphia judge denied a defendant’s request to gain access to a plaintiff’s Facebook page. 

In Martin v. Allstate Fire and Casualty Co., Case No. 110402438 (C.P. Phila. Dec. 13, 2011), the plaintiff, a pedestrian, was hit by a vehicle driven by a third-party tortfeasor.  The plaintiff collected the policy limit from the third-party’s insurer and then demanded the Uninsured Motorist coverage from her own insurer, the defendant.  During her deposition in October, defense counsel asked the plaintiff if she used Facebook, to which she responded that she did.  Upon asking for her password, defense counsel was met with an immediate objection.  In return, defense counsel filed a Motion to Compel such information.  Counsel for the plaintiff responded in opposition, arguing that any information on the plaintiff’s Facebook is not relevant to her claims or injuries and does not contradict her claims.  In a one-page, single-line Order, Judge Manfredi agreed and denied defendant’s Motion. 

This decision follows a November ruling from Judge Walsh, who determined that information posted on the plaintiff’s Facebook page was relevant and not privileged, and therefore discoverable.  See Largent v. Reed, Case No. 2009-1823 (C.P. Franklin Nov. 8, 2011); see also www.ediscoverylawreview.com/2011/12/articles/opinions/post-at-your-own-risk-pennsylvania-court-permits-discovery-of-information-on-personal-facebook-profile/.  Largent, along with two other defense-friendly decisions, Zimmerman v. Weis Markets Inc., Case No. CV-09-1535 (C.P. Northumberland May 19, 2011) and McMillen v. Hummingbird Speedway Inc., Case No. 113-2010CD (C.P. Jefferson Sept. 9, 2010) got the defense bar out to a 3-0 lead on the discoverability of information posted on Facebook.  While the Martin decision scores a big point for plaintiffs, it demonstrates that there is still a lot of uncertainty in the law surrounding the recent phenomenon of social media and its relevance to civil litigation. 

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Posted in Articles, discovery of social media in lawsuits, discovery of social networking sites, Facebook, social media and disclosure of confidential information

Top Ten E-Discovery Lessons For 2011

            As we bid adieu to 2011, the news and entertainment world is a flurry with the year’s greatest hits and most memorable, or un-memorable, moments. In the spirit of the season, and with homage to the great David Letterman, here are our Top Ten E-Discovery Lessons as addressed by the courts – and this Blog – this past year:

10.       Know Your Responsibilities

            In-house and outside counsel have a duty to ensure that their clients comply with e-discovery obligations. In- house counsel’s failure to give notice to preserve documents; provide criteria as to what should be saved; review documents being discarded; and failure to review existing document retention policies led to e-discovery sanctions. See I’m Responsible To Do What?” posted On Aug. 18, 2011.

9.         Know When The Duty To Preserve Arises

 

            The duty to preserve electronic evidence arises once a party “reasonably anticipates litigation.” Whether and when a party reasonably anticipates litigation depends on many factors, including but not limited to, who within the defendant organization anticipates the litigation, the clarity of the threat, and when privileged documents are created and labeled as such. See “When Does The Duty To Preserve Electronic Evidence Arise,” posted on Aug. 10, 2011.

8.         Know When To Issue A Litigation Hold

 

             A litigation hold should be issued when a party is reasonably aware that it will be a party to litigation. For a plaintiff, triggers could include filing a complaint, seeking advice of counsel, or sending a cease and desist letter. For a defendant, triggers could include receiving a summons or complaint, receiving official notice of a government investigation, or receiving notice of an accident, or receiving discovery requests. See “Litigation Holds, Take 1,” posted on Aug. 12, 2011.

7.         Know What A Litigation Hold Should Cover

             A Litigation Hold should describe the litigation in general terms with understandable language, and avoid legal terms at all costs.  It should broadly state where relevant data and information could be located and it should provide instructions on how to preserve relevant information. The consequences of non-compliance and the importance of not destroying or altering relevant information should be discussed.  See “Litigation Holds, Take 2,” posted on Aug. 16, 2011.

6.         Know Your Sources Of Potentially Relevant Information

             Explore all types of data. For example, this year, courts in Pennsylvania ruled that text messages and Facebook posts are discoverable. See “When Are Text Messages Admissible,” posted on Oct. 7, 2011; “Post At Your Own Risk,” posted on Dec. 5, 2011. See also When An Employee Tweets, posted on Sept. 7, 2011.

5.         Know The Standards Governing Production And How They Are Applied

            Courts have applied the proportionality standard with much variation in 2011. For example, in Pippins v. KPMG, the court ordered the defense, who had already spent over $1,500,000 in preservation costs, to preserve the hard drives of over 7500 potential class members. The court reasoned that there were too many unknowns, such as the ultimate length and cost of preservation, the relevance of the information on the hard drives, and the outcome of the motion for class certification to allow the hard drives to be destroyed. See “Weighing Burdens And Benefits In Hard Drive Preservation Dispute,” posted on Oct. 31, 2011.

              In I-Med Pharma Inc v. Biomatrix, Inc., by contrast, the court did not require the plaintiff to produce documents from “unallocated space” (i.e., the area where deleted files and temporary data are stored) because of the overwhelming cost in terms of time and money to do so and because the requesting party failed to show a likelihood that relevant and non-duplicative information would be recovered.  See “The Importance Of Negotiating With Your Adversaries,” posted on Dec. 23, 2011.

4.         Know The Consequences Of Non-Compliance

Sanctions in the form of adverse inferences, admitted facts, default judgment and fines continued to be levied in 2011. For example, the deliberate destruction of evidence despite knowledge of a Litigation Hold provided grounds for a default judgment. See “Document Preservation: Spoliation And The Ultimate Sanction,” posted on Nov. 14, 2011.

Another court, faced with defendants who were “unsophisticated in the requirements of litigation and preservation” rather than willfully destructive and who produced 7 computers, 10 hard drives, and 23 CDs of documents, concluded that the plaintiff had “plenty of information upon which to pursue their claims” and required a stronger showing of bad faith before granting a default judgment. See “Document Preservation: Spoliation And The Ultimate Sanction,” posted on Nov. 14, 2011.

A defendant’s refusal to disseminate a Court Order to preserve electronic evidence led to an adverse inference and a presumption of relevance when electronic discovery is willfully destroyed. See “E-Discovery Abuses Result In Permissive Adverse Inference Instruction,” posted on Dec. 23, 2011.

A defendant who failed to: issue a litigation hold; conduct any email search; or seek its IT department’s assistance; and, instead, instructed employees to delete electronic documents at least ten times during the litigation was fined and ordered to file a copy of the court’s memorandum and order with its first pleading or filing in every case in which the defendant was involved for the next five years. See “Ensuring Discovery Compliance: Sanctions Relating To Past, Present And Future Adverse Parties,” posted on Sept. 22, 2011.

3.         Know The Electronic Discovery Obligations of Non-Parties

            In Tender v. Cremer, New York’s Appellate Division ruled that while a non-party need not provide discovery of ESI from sources that are not reasonably accessible because of undue burden or cost except upon a showing of good cause, such good cause exists when the information at issue goes directly to the plaintiff’s claim. Under Tender, nonparties served with subpoenas for deleted ESI may not rely on the fact that the data has been deleted in the course of its normal business as a means for avoiding the costs of complying with the subpoena. Instead, the nonparty should undertake an active investigation into whether the data can be retrieved, the difficulty of such retrieval and the concomitant costs. See “Cost-Benefit Analysis Adopted By The New York Supreme Court For Determining When A Nonparty Must Undertake The Burden And Expense Of Recovering Deleted ESI,” posted on Sept. 27, 2011.

2.         Know When Electronic Discovery Costs Can Be Recovered

            Over $500,000 in costs related to processing native files, restoring back-up tape files, hosting and storing documents in electronic databases, scanning hard copy documents, de-duplicating documents, and filtering documents to capture the documents containing the agreed-upon search terms were awarded to prevailing defendants. See “Prevailing Parties May Recover E-Discovery Costs Under The Federal Rules,” posted on Aug. 30, 2011.

            Under 35 U.S.C. § 285 (which allows the court to award a prevailing party in a patent dispute reasonable attorney’s fees in “exceptional cases”), a plaintiff was sanctioned nearly $500,000 for litigation misconduct after adopting a policy that it would not retain relevant documents. See “Cost Recovery Toolbox: Exceptional Cases under 35 U.S.C. § 285,” posted on Aug. 19, 2011.

             28 U.S.C. § 1920, similarly, was used to reimburse successful defendants for over $367,000 in e-discovery costs. These costs included those incurred by third-party vendors to produce the requested electronic documents. The court deemed these services to be “an indispensable part of the discovery process” and their costs to be recoverable. See “Recovering E-Discovery Costs In Federal Court,” posted on June 16, 2011.

1.           Know Thyself

              Know the rules, your obligations, and when they are triggered. Know your company and the types of ESI you produce and store. Know how to be flexible and transparent with the E-Discovery process to comply with the rules in a manner that is reasonable, proportional, and cost effective.

              It has been our pleasure to bring you this E-Discovery Law Review this year and we look forward to continuing to keep you up to date in 2012. Please accept our best wishes for a happy and healthy New Year and, as always, Happy Reading!
 

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