In This Issue:

	Recent ESI Court Decisions
	Practice Points: International Data Transmission – An Overview of International Discovery Laws
	News & Events

Recent ESI Court Decisions

Court Finds E-Mails Stored on Old Archiving System Reasonably Accessible; Costs Exaggerated
Starbucks Corp. v. ADT Sec. Servs., Inc., 2009 WL 4730798 (W.D. Wash. Apr. 30, 2009). In this discovery dispute, the plaintiff sought production of e-mails from a specified time period. The defendant argued the e-mails were archived on the company's "cumbersome" old system and were not reasonably accessible under Fed.R.Civ.P 26(b)(2)(B). In support of the position, the defendant's information technology representative made several claims, including that accessing the e-mails would be disruptive to business operations and would take nearly four years to restore. The representative also provided an initial cost estimate for the work of $88,000, but upped the ante six months later to $834,285. The court noted that the representative "provided exaggerated reasons and exaggerated expenses as to why the [defendant] allegedly [could not] or should not be ordered to comply with its discovery obligations." The court found that the plaintiff should not be disadvantaged since the defendant, a "sophisticated" company, chose not to migrate the e-mails to the now-functional archival system and thus determined that the e-mails were reasonably accessible. Furthermore, the court explained that even if the information was ruled not reasonably accessible, good cause existed to order production.

Court Finds $8 Million Default Judgment for Discovery Violations, Not Abuse of Discretion
Magaña v. Hyundai Motor Am., 220 P.3d 191 (Wash. Nov. 25, 2009). In this personal injury action, the Supreme Court of Washington reviewed the Court of Appeals' reversal of the trial court's imposition of a default judgment sanction on the defendant corporation. Among the defendant's violations: The defendant limited the search for documents to its legal department; made false, misleading and evasive responses; and willfully violated discovery rules. Arguing that the plaintiff's discovery requests were overly broad, the defendant claimed that the harshness of a default judgment sanction was not warranted. The court noted that the defendant is a "sophisticated multinational corporation experienced in litigation,� and it analyzed the three factors assessed by the trial court to determine the appropriateness of a default judgment sanction � willfulness of violation, substantial prejudice to opposing party, and availability of lesser sanctions. The court found that the record reasonably and substantially supported the trial court's conclusion, and it reinstated the $8 million default judgment.

Government Failure to Produce Forensic Images Not Sufficient for Brady Violation
United States v. Kimoto, 588 F.3d 464 (7th Cir. Dec. 2, 2009). In this criminal case, the defendant appealed his conviction, arguing that the government had destroyed or withheld exculpatory evidence and failed to provide forensic copies of hard drives, which resulted in a Brady violation. Specifically, the defendant claimed the government did not provide e-mails that he claimed would demonstrate the existence of a conspiracy between a witness and another party. The government rebutted these claims, asserting that copies of all electronic evidence reviewed and all original evidence to be used at trial was provided to the defendant. In affirming the conviction, the court determined there was no Brady violation. To support its ruling, the court noted that no destruction or spoliation on behalf of the government existed, there was a material lack of proof that certain alleged evidence was missing, and the defendant failed to make a request for forensic copies until immediately prior to trial.

Court Refuses to "Gut Rule 502 Like a Fish," Cites Failure to Take Reasonable Steps to Prevent Disclosure Grounds for Waiver
Amobi v. District of Columbia Dep't of Corr., 2009 WL 4609593 (D.D.C. Dec. 8, 2009). In this litigation, the court addressed the parties' motions related to the production of a memorandum created by an attorney for the defendants. The defendants argued the disclosure was inadvertent and steps were taken to rectify the error immediately, whereas the plaintiffs argued the memorandum was either not privilege-protected or privilege had been waived. After determining that the document was protected by the work product doctrine, the court used the three-part test set forth in Fed.R.Evid. 502(b) and found privilege was waived. In support of this finding, the court cited the defendants' failure to explain the methods used to prevent disclosure in order to establish the magnitude of the error. The court reasoned that "defendants' failure to take reasonable efforts to prevent the disclosure in the first place doom[ed] their reliance on the rule." However, the court refused to endorse the plaintiffs' argument that lawyers could never make inadvertent mistakes, claiming that would "gut [Rule 502] like a fish."

Court Holds Party in Contempt of Court and Issues Sanctions for Use of Wiping Software
TR Investors, LLC v. Genger, 2009 WL 4696062 (Del. Ch. Dec. 9, 2009). In this stockholders litigation, the plaintiffs sought default judgment sanctions, citing the defendant's destruction of electronic evidence in violation of a court order. The plaintiffs asserted that, following review and encryption of electronic evidence by a third-party firm, the defendant used wiping software to permanently delete temporary files in the unallocated space not reviewed by the neutral party for relevance. The defendant, an "international man of mystery" who performed sensitive tasks for the Israeli government and was concerned about the confidentiality of personal documents, claimed that he believed the wiping software only deleted duplicate copies. Finding the use of wiping software to be a clear violation of the unambiguous court order, the court determined sanctions were appropriate. The court declined to impose a default judgment and held the defendant in contempt, ordering him to pay $750,000 in attorneys' fees and costs. The court also ordered production of documents previously subject to a claim of privilege, elevated the defendant's required burden of persuasion on any counterclaims or defenses, and prohibited the defendant from prevailing on any material matter based solely on his uncorroborated testimony.

Parties' Failure to Rectify Erroneous Disclosure of Privileged Material Results in Subject Matter Waiver
Silverstein v. Federal Bureau of Prisons, 2009 WL 4949959 (D. Colo. Dec. 14, 2009). In this discovery dispute, the plaintiff filed a motion for determination of privilege waiver regarding a single relevant document, arguing its production resulted in a subject matter waiver. After its initial determination that the document was protected by both attorney-client privilege and work product, the court relied on Fed.R.Evid. 502(b) to establish the scope of the waiver. First, the court determined the disclosure was intentional—not inadvertent—as defined by Rule 502, since it was originally examined and withheld by the defendants' counsel. Citing the defendants' knowledge of the production and failure to take reasonable steps to rectify the erroneous disclosure, the court held that the defendants had intentionally disclosed the material to gain advantage in litigation, which justified a subject matter waiver. Noting the plaintiff was not entitled to a "discovery free-for-all," the court also held that opinion work product would remain protected.

Court Finds E-Discovery Service Provider's Fees Recoverable, Taxable Costs
CBT Flint Partners, LLC v. Return Path, Inc., 2009 WL 5159761 (N.D. Ga. Dec. 30, 2009). In this patent infringement action, the defendants filed a motion to tax the costs associated with using an e-discovery vendor to aid in the production of 1.4 million electronic documents and six versions of source code. Objecting, the plaintiff argued that fees associated with the collection of documents for production are not taxable under 28 U.S.C. § 1920. Although noting that a judicial division of opinion exists as to whether U.S.C § 1920 allows recovery, the court cited the highly technical nature and necessity of e-discovery services in the electronic age to overrule the plaintiff's objection and hold the $268,311.22 in costs to be recoverable. In supporting its finding, the court reasoned that the "[t]axation of these costs will encourage litigants to exercise restraint in burdening the opposing party with the huge cost of unlimited demands for electronic discovery."

Court Allows Forensic Imaging of Hard Drives Containing Medical Records
Cornwell v. N. Ohio Surgical Ctr., Ltd., 2009 WL 5174172 (Ohio App. 6 Dist. Dec. 31, 2009). In this wrongful death litigation, the defendants appealed the trial court's ruling allowing the plaintiff's forensic expert to create a mirror image of the defendants' hard drives. The defendants asserted such intrusive access was not authorized under Fed.R.Civ.P. 34 and would violate prohibitions against the disclosure of confidential medical information. In affirming the trial court's order, the appellate court dismissed the confidentiality argument, relying on testimony of the plaintiff's expert explaining that viewing confidential information was not necessary to the forensic imaging process. The court also discarded the defendants' Rule 34 argument, noting that the circumstances surrounding the case gave rise to an inference of improper conduct on part of the defendants. In further support of the trial court's decision, the court noted the direct relationship between the plaintiff's claims and the hard drives and said the specific protocol and search terms established by the trial court made the defendants' arguments meritless.

Court Imposes Adverse Inference Sanction for Party's Failure to Preserve Telephone Message
Vagenos v. LDG Fin. Servs., LLC., 2009 WL 5219021 (E.D.N.Y. Dec. 31, 2009). In this action brought under the Fair Debt Collection Practices Act, the defendant moved to prevent the plaintiff from offering at trial an alleged duplicate of the automated telephone message that served as the basis of the suit. The defendant asserted that the original message was destroyed with malicious intent and therefore was inadmissible. In opposition, the plaintiff maintained that the destruction of the original message was due to a change in cellular service providers and testified that the recording reflected the original. Despite finding no evidence of bad faith, the court determined that the plaintiff's duty to preserve evidence was breached. The court declined to preclude the evidence since it would be the "death knell" of the case, but it found an adverse inference sanction appropriate. In making this determination, the court noted that the destruction and the plaintiff attorney's failure to inform his client of the preservation duty were especially "egregious" and "highly troubling."

To view additional case summaries visit www.krollontrack.com/case-summaries/.

International Data Transmission – An Overview of International Discovery Laws

In a globalized world where oceans and national boundaries no longer create barriers in communication and business, clashes between seemingly incompatible discovery and privacy laws are inevitable. Tumultuous legal conflicts often arise when United States discovery rules necessitate the production of data stored in nations with laws that restrict the preservation, processing, and production of certain information. In these cross-border discovery disputes, the discovery of data located outside the borders of the U.S. is often subject to strict foreign data protection and privacy regulations.

United States Discovery Laws – Broad Discovery Leads to the Truth
The U.S. discovery system is based on the premise that broad discovery leads to the exposure of truth. The general scope of U.S. discovery, defined by Federal Rule of Civil Procedure 26(b)(1), allows parties to obtain materials regarding any non-privileged matter that is relevant to any party's claim or defense. Furthermore, the rule also provides that information requested for production need not be admissible at trial if it appears reasonably calculated to lead to the discovery of admissible evidence. This liberal system of discovery in the U.S., in contrast to many other nations, has developed to allow for extensive requests and productions.

As a result of this liberal approach, U.S., courts frequently employ long-arm jurisdiction to compel pretrial discovery of data located abroad. According to the Restatement (Third) of Foreign Relations Law of the United States, the rationale of the judicial system behind this practice is that persons and companies that conduct business in the U.S., or otherwise bring themselves within the jurisdiction of the U.S., receive benefits and legal protections through their connections and are correspondingly subject to the burden of U.S. law, including discovery laws. This approach is often used despite the fact that production of information abroad can result in a violation of the foreign statutes.

Foreign Discovery Laws – Restrictions on Liberal Discovery
Many other countries, including member states of the European Union, Canada and Asia, have a complex network of data protection, data privacy and state secrecy laws, which prohibit or restrict the liberal discovery approach utilized in the U.S. In addition, many civil code countries lack formal discovery processes in general and only provide access to evidence admissible at trial.

Europe particularly has a long history of fiercely preserving individuals' right to privacy. The European Union Data Directive 95/46/EC (Directive), adopted by the European Commission in 1995, established principles restricting the handling and production of electronically stored personal data. One such principle prohibits the onward transfer of data to countries that do not afford "adequate" levels of protection for personal information. According to the European Union, the U.S. has not been deemed to provide the necessary levels of protection. However, the EU and the U.S. have negotiated a "Safe Harbor" agreement, through which companies may sign up to the Safe Harbor regime and will thus be considered to offer adequate protection of personal data based on European requirements.

While the EU Directive establishes a basis of minimum protections, individual EU member states are free to and often have created more stringent protections. Elsewhere in the world, increasing numbers of nations have enacted laws and guidelines to protect data created or stored within their borders. These laws include:

• State-Specific Data Protection Laws: Specific laws and regulations that provide for the protection of personal data.
• State Secrecy Laws: Laws designed to protect information deemed to be a national secret. Violations of state secrecy laws are often punishable by criminal prosecution.
• Banking Laws: Nation-specific laws affecting the transfer of data internationally, with heightened protection for financial information.
• Blocking Statutes: Statutes specifically designed to block international data transmission, even if the collection processing or other use of information is permissible within the nation's borders.

Although the existence of foreign data protection statutes does create significant challenges for parties seeking the discovery of data located outside the U.S., these statutes do not operate as an absolute bar on recovery. For instance, in relation to blocking statutes, the U.S. Supreme Court stated in Societale Nationale Industrielle Aerospatiale v. U.S. District Court for the Southern District of Iowa, "[i]t is well settled that such statutes do not deprive an American court of the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate that statute."

Working Within the Constraints of Foreign Data Protection Laws
The Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, a multilateral treaty originally signed in 1970 and currently subscribed to by the U.S., the European Union and 67 other countries, developed a method for overcoming international data transmission hurdles involving a uniform procedure for letters of request, when seeking data outside party borders. However, many nations are not signatories to the Hague Convention, and even those who are may declare that it will not approve letters of request for the purpose of obtaining pretrial discovery.

The conflicts between sovereign laws are not insurmountable, although they may seem daunting at first. The key is to anticipate the conflicts, recognize them when they arise, and choose an appropriate resolution based on the facts and circumstances of each individual case. Familiarity with the EU Directive and nation-specific laws is a necessity, and counsel should be fully aware of foreign laws and restrictions to ensure compliance when approaching a cross-border discovery dispute.

News & Events

Upcoming Webinar: Trial Management in 2010 – Using Technology to Increase Effectiveness
Today, legal teams are under even greater pressure to develop winning case themes and deliver top-notch services although constricted by leaner client budgets and firm resources. Consequently, the increasing demand to perform more with less provides litigators a unique challenge of redefining the status quo and bringing to light new and efficient ways to prepare for trial in 2010. Join us at 1 p.m. EST on Thursday, February 25, for an online seminar discussing ways to streamline communications, capitalize on time and cost savings, and discover valuable insight into your trial venue. For more information or to register visit www.krollontrack.com/webinar-022510.

Download Kroll Ontrack's Recent Podcast, "2009 Year in Review, Upcoming Trends for 2010 & Contempt Sanctions"
Curious to know what e-discovery developments occurred in 2009? In this edition of the ESI Report, host Gina Jytyla, managing staff attorney in the Legal Technologies division at Kroll Ontrack, welcomes Andrea Marshall, legal consultant with Kroll Ontrack, and Tracey Stretton, legal consultant for Kroll Ontrack in the U.K. office, to discuss hot topics and themes that emerged from 2009 case law and upcoming trends for 2010. In the Bits & Bytes Legal Analysis segment, Kroll Ontrack Legal Correspondent Kelly Kubacki will take a look at the discovery order issued in TR Investors v. Genger. To listen to the podcast, visit www.krollontrack.com/redir/0110_2009YIRpodcast-CLU.asp.

Keep Up to Date with Kroll Ontrack Social Media
Become a fan of the Kroll Ontrack Facebook page: www.krollontrack.com/redir/FBpromo-CLU.asp.
Follow Kroll Ontrack on Twitter: www.krollontrack.com/redir/TWpromo-CLU.asp.
Visit Kroll Ontrack on LinkedIn: www.krollontrack.com/redir/LIpromo-CLU.asp.

Meet our representatives at the following events:

Visit www.krollontrack.com/upcoming-events/ for more information on these events and others.

Back To Top

We Request Your Input

This newsletter was written by Kelly Kubacki, Kroll Ontrack Staff Attorney, and Kelly Runkle, Kroll Ontrack Law Clerk. Ms. Kubacki can be contacted by writing to kkubacki@krollontrack.com.

For more information about electronic discovery and computer forensics services, contact Kroll Ontrack at 800 347 6105 or visit www.krollontrack.com.