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In This Issue:
 RECENT
E-DISCOVERY AND COMPUTER FORENSIC COURT DECISIONS
Appellate Court Declares Requesting Party Pays
for Backup Tape Discovery if Reasonable and Necessary
Toshiba Am. Elec. Components, Inc. v. The Superior Court of
Santa Clara County, 2004 WL 2757873 (Cal. App. Dec. 3, 2004).
Alleging misappropriation of trade secrets, breach of fiduciary
duty, and unfair competition claims, the plaintiff moved for production
of relevant evidence contained on more than 800 backup tapes and
asked that the defendant bear the costs of retrieving the data.
The defendant objected, claiming undue burden and expense. The defendant
also revealed that some of the tapes had become obsolete, making
the data accessible only through the use of specialized tools. The
plaintiff contended that it should not be penalized because the
defendant chose to keep records in a format difficult for retrieval.
Without comment, explanation or suggestion of a sampling protocol,
the trial court ordered the defendant to produce the backup tape
data and to bear production costs. On appeal, the court declined
to apply the Zubulake seven-factor cost-shifting test and
instead referenced California Code of Civil Procedure §2031,
stating that “our Legislature has identified the expense of
translating data compilations into usable form as one that, in the
public's interest, should be placed upon the demanding party.”
The appellate court required the plaintiff to pay for translating
the backup tape data. The court stated that the plaintiff could
seek a protective order or file a motion to compel production if
asked to pay costs that it finds unreasonable and unnecessary. The
court indicated that sampling would be an appropriate test for determining
necessity and remanded the case for a determination on whether the
backup tapes were necessary and reasonable.
Court Determines Production of Computer-Stored Data Not
Unduly Burdensome
Pamlab, L.L.C. v. Rite Aid Corp., 2004 WL 2358106 (E.D.La.
Oct. 13, 2004). The plaintiff sought to compel discovery from the
defendant, including information pertaining to when the defendant
received a prescription for and distributed a certain drug. The
defendant objected on the ground that privacy laws protected the
information and that the information would be too burdensome to
collect. The court determined that the request would only be unduly
burdensome if the defendant had to manually retrieve the data. In
this case, the court found the data would be easily retrievable
because it could be produced from a computer system. The court ordered
the defendant to determine which information must be retrieved manually
and which information could be produced from a computer system.
After receiving this information from the defendant, the court ordered
the defendant to produce all of the responsive data that could be
produced without identifying patient specific information. If the
data had to be manually produced, the court ordered the parties
to agree upon a sampling process.
Court Prohibits Defendant's Use of Plaintiff's Proprietary
Electronic Documents
Propath Services, LLP v. Ameripath, Inc., 2004 WL 2389214
(N.D.Tex. Oct. 21, 2004). Alleging the defendants violated a non-compete
employment contract, the plaintiffs sought a preliminary injunction
against the defendants. The court had previously issued a temporary
restraining order prohibiting the defendants from using confidential
information, deleting relevant emails or documents, and accessing
the plaintiffs’ email system. Among the items at issue were
electronic marketing materials and a confidential client list. The
defendant argued that the marketing materials – including
PowerPoint slides – were not confidential since they were
presented in public settings. While the court concluded that the
PowerPoint presentations were not confidential, it nonetheless prohibited
the defendants from having unrestricted access based on the plaintiffs’
right to protect their proprietary data. The court ordered the defendants
to refrain from using any PowerPoint slides produced or modified
during the defendants’ employment. Regarding the confidential
client list, the court found that one of the defendants accessed
the client list while simultaneously burning CDs and sending emails
that may have contained confidential information. Based on these
findings, the court ordered the defendants to refrain from deleting
or modifying any documents, emails or computer drives that contained
information about the plaintiff’s business. The court further
ordered the defendants to separate these materials from the rest
of their files and to store them in a confidential file.
Violation of Preservation Order Leads to Attorney Fees
Institute for Motivational Living v. Doulos Inst. for Strategic
Consulting, Inc., 110 Fed. Appx. 283 (3d Cir. 2004). The plaintiff
sued the defendant, seeking to retrieve its proprietary materials
and to recover damages for copyright and trademark infringement
and misappropriation of trade secrets. The district court previously
ordered the defendant to preserve relevant documents, software and
equipment. During settlement negotiations, the defendant agreed
to return a laptop – including the data stored on it –
to the plaintiff. Minutes before the parties signed the agreement,
the defendant violated the preservation order and deleted data from
the laptop. At a subsequent evidentiary hearing, a magistrate judge
recommended civil contempt sanctions against the defendant for “knowingly
and in bad faith violat[ing] the original discovery preservation
order and … deliberately deleting data from the laptop.”
The district judge found the defendant in civil contempt and awarded
$50,000 in costs and attorney fees against him. The appellate court,
however, reluctantly found the defendant not liable for violating
the settlement agreement since he deleted the data before signing
the agreement. Nonetheless, the court held the defendant liable
for violating the district court’s preservation order and
ordered the defendant to pay attorney fees attributed to the file
deletion.
Court Orders Production of Emails and Awards Sanctions
for Failure to Meet Discovery Obligations
Dziadkiewicz v. Blue Cross & Blue Shield of Rhode Island,
2004 WL 2418308 (D.R.I. Oct. 21, 2004). In a class action lawsuit,
the plaintiffs brought a motion to compel document production and
further alleged the defendant’s “obfuscation, deliberate
frustration of discovery, and ‘hide the ball’ tactics”
warranted sanctions. The plaintiffs contended that the defendant
waited until the “eleventh-hour” to produce documents,
including a CD containing information that would have affected the
plaintiffs’ expert witness’ analysis. The plaintiffs
also argued the defendant failed to disclose 400 to 500 emails that
the defense expert witness had relied upon in making his own findings.
In response, the defendant claimed its expert did not rely on the
emails and the plaintiffs failed to properly request the emails
during discovery. The court declared the plaintiffs should have
received the database material contained on the CD much earlier
– when the plaintiffs originally requested the data. Although
the court found both parties partly responsible for the discovery
dispute, it declared the defendant “must pay the greater price
as its tactics have led directly to this situation.” The court
ordered the defendant to produce all of the requested emails and
permitted the plaintiffs to review the emails and re-depose the
defense expert witness. The court also allowed the plaintiffs’
expert to review the emails and the documents on the CD and modify
his report if necessary.
Court Considers Electronic Document Privilege Claims and
Orders Parties to Review Unredacted Copies of Emails
Collaboration Properties, Inc. v. Polycom, Inc., 224 F.R.D.
473 (N.D. Cal. 2004). In a patent infringement case, the plaintiff,
inter alia, sought to compel production of electronic documents
and emails. The defendant claimed the disputed documents fell within
the attorney-client privilege since they were exchanged between
the defendant’s engineers and former defense counsel. In response,
the plaintiff argued the defendant had waived the privilege because
it was asserting an advice-of-counsel defense to charges of willfulness
and because it sent the documents to its current counsel. The defendant
maintained that the attorney-client privilege still existed because
its counsel never opened the email attachments containing the privileged
documents. Denying its motion to compel, the court found the plaintiff
did not present sufficient evidence to refute the defendant’s
argument. The plaintiff also disputed 58 emails identified by the
defendant as privileged. These emails were exchanged between non-attorney
employees but contained a forwarded exchange with an attorney. Although
the defendants had produced redacted copies of the emails, the plaintiffs
argued the redactions were overbroad because they blocked out information
about the author and the recipient of the emails. The court agreed,
ordering the defendant to show the plaintiff unredacted copies of
the emails in order to discuss the scope of privilege. This disclosure
conference, the court added, would not waive any existing attorney-client
privilege.
A current and comprehensive archive of case law summaries pertaining
to electronic discovery and computer forensics is available at http://www.krollontrack.com/legalresources/caselawlist.asp.
PRACTICE
POINTS: 2004 YEAR END REVIEW – GROUNDBREAKING ELECTRONIC DISCOVERY
CASE LAW DEVELOPMENTS – PART I
In 2004, the electronic discovery arena saw significant progress,
particularly in the area of electronic discovery case law. Cases
involving multimedia maven Martha Stewart, Credit Suisse First Boston
banker Frank Quattrone, and NBA all-star Kobe Bryant were just a
few of the electronic discovery headliners in 2004. Following are
some of the past year’s key electronic discovery cases, including
new duties for practitioners, cost allocation developments, and
vast sanctions awards.
New Duties
In Zubulake v. UBS Warburg, 2004 WL 1620866 (S.D.N.Y. July
20, 2004), the court addressed the general role of counsel in litigation,
stating "[c]ounsel must take affirmative steps to monitor compliance
so that all sources of discoverable information are identified and
searched." Specifically, the court concluded attorneys are
obligated to ensure all relevant documents are discovered, retained
and produced. Additionally, the court maintained that counsel must
guarantee relevant documents are preserved by placing a “litigation
hold” on the documents, communicating the need to preserve
them, and arranging for safeguarding of relevant archival media.
The court also stressed the need for counsel to continue communicating
with clients about their initial and ongoing preservation obligations.
Cost Allocation
The number of courts willing to shift electronic discovery costs
increased steadily this past year, giving attorneys grounds to carefully
assess the value cost shifting could have for their clients. In
particular, several courts addressed the proper application of the
Zubulake cost-shifting principles.
In some cost-allocation cases, parties articulated new arguments
in favor of shifting. In Wiginton v. CB Richard Ellis, Inc.,
2004 WL 1895122 (N.D.Ill. Aug. 10, 2004), a case involving a class
action sexual harassment lawsuit, the plaintiff requested the defendant
bear the costs of searching 94 “inaccessible” backup
tapes for relevant emails. In analyzing who should bear the costs,
the court adopted the seven-factor Zubulake test and added
an eighth factor, which required the court to weigh “the importance
of the requested discovery in resolving the issues at stake in the
litigation.” Balancing these eight factors, the court ordered
the plaintiff to pay 75 percent of the costs of restoring the backup
tapes, searching the data, and transferring it to an online review
tool.
The cost-shifting case law this past year affirms the notion that
counsel should prepare to engage in cost-shifting debates when the
stakes are high and the electronic data is complex.
Sanctions
The past year also saw the court’s increased aversion to the
destruction of relevant electronic evidence. Several notable cases
illustrate the range of sanctions levied upon parties for electronic
evidence spoliation.
The most significant e-discovery sanctions case of 2004 was United
States v. Philip Morris USA Inc., 223 F.R.D. 1 (D.D.C. 2004).
Even after the court ordered the defendants to preserve all potentially
relevant documents, the defendants maintained their normal monthly
email deletion policy, which called for the automatic deletion of
email
older than 60 days across the defendants’ entire computer
system. The deletion policy continued unrestrained for two years
after the court ordered the defendants to halt the policy. The relevant
deleted data included emails from at least 11 company supervisors
and officers. The court declared that “it is astounding that
employees at the highest corporate level in Philip Morris,
with significant responsibilities pertaining to issues in this lawsuit,
failed to follow [the] Order … which, if followed, would have
ensured the preservation of those emails which have been irretrievably
lost.” The court imposed $2,750,000 in sanctions against the
defendants and precluded their key employees associated with the
deleted data from testifying at trial.
As Philip Morris illustrates, courts will not hesitate
to impose sanctions for intentional or negligent spoliation of electronic
documents. Far from being out-of-the-ordinary, these cases represent
just a sampling of the many spoliation sanctions cases in 2004.
As 2005 looms near, courts will expect attorneys to be more educated
in their responsibilities for preserving their clients’ data
and more diligent in ensuring the data is preserved.
Look for Part II of this article in next month’s Practice
Points column. Part II will review electronic discovery rule developments
as well as technology advancements occurring in 2004.
KROLL
ONTRACK NEWS & EVENTS
Kroll Ontrack Unveils Multi-Million Dollar Data Center to Ensure
Fastest, Most Reliable, and Most Secure E-Discovery Services
Kroll Ontrack unveiled its new $10-million-plus,
state-of-the-art data center – an enterprise-class electronic
business environment designed to provide clients with the most extensive,
resilient, controllable, secure, and comprehensive legal technology
solutions available in the marketplace. Kroll Ontrack’s data
center is wholly dedicated to discovery services and designed and
maintained to meet the growing demands facing the industry. With
more than half a petabyte (one petabyte equals a thousand terabytes)
in capacity, its data center relies on proven computing technology,
including routers and switches from Cisco Systems and Extreme Networks;
diverse and redundant Internet connections through Sprint, Time
Warner and Onvoy; and, environmental monitoring by ADT Security
Services to provide unparalleled data protection and disaster tolerant
features. To provide the highest quality service to its customers,
Kroll Ontrack’s data center is scalable to support an unexpected
volume of information that could vary based on each customer’s
requirements.
California Proposed Local E-Discovery Rule Available for Public
Comment
California recently presented a model local rule – Proposed
California Rule of Court, C.R.C. Rule 332 Facilitation of E-Discovery
– relating to the discovery of electronic documents. Drafted
by retired State Commissioner Richard E. Best, the rule draws from
the “Default Standards for Discovery of Electronic Documents”
adopted by the United States District Court for the District of
Delaware. The Rule addresses key e-discovery issues, such as meet
and confer conferences, production format, the role of e-discovery
liaisons, costs, searching protocols, and privilege. A copy of the
Proposed Rule is available at http://www.krollontrack.com/legalresources/draftrule.asp.
Meet Kroll Ontrack Representatives at the Following Events:
Visit http://www.krollontrack.com/upcomingevents
for more information on these events and others.
KROLL
ONTRACK REQUESTS YOUR INPUT
Our legal consultants, project managers, and technology experts
strive to stay on top of e-discovery law. If you are aware of any
additional local court rules or new cases in this area of the law,
please contact us by writing to mlange@krollontrack.com.
Portions of this newsletter are written by Michele C.S. Lange,
staff attorney with Kroll Ontrack. Charity Delich, a Kroll Ontrack
law clerk, helped write the case summaries. Ms. Lange has published
numerous articles and speaks regularly on the topics of electronic
discovery, computer forensics, and technology’s role in the
law. She can be contacted by writing to mlange@krollontrack.com.
For more information about electronic discovery and computer forensics
services, contact Kroll Ontrack at 1-800-347-6105 or www.krollontrack.com
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