In This Issue:

	RECENT E-DISCOVERY AND COMPUTER FORENSIC COURT DECISIONS
	TALKING TECHNOLOGY: E-MAIL ANALYSIS SOFTWARE EMERGES AS NEWEST TOOL FOR CORPORATE COUNSEL
	NEWS & EVENTS

RECENT E-DISCOVERY AND COMPUTER FORENSIC COURT DECISIONS

Appellate Court Reverses $1.58 Billion Morgan Stanley Judgment
Morgan Stanley & Co., Inc. v. Coleman (Parent) Holdings, Inc., 2007 WL 837221 (Fla. App. 4th Dist. Mar. 21, 2007). In this landmark e-discovery case, the Florida state appellate court reversed the $1.58 billion judgment against Morgan Stanley in the litigation brought by Coleman (Parent) Holdings. The court reversed the judgment on the grounds the plaintiff failed to prove compensatory damages. The plaintiff did not establish the actual value of the stock on the date of the merger, and the court held the jury must not speculate as to the stock value. The court did not reach a decision on whether the trial court improperly entered a partial default against Morgan Stanley as a sanction for discovery misconduct since the sale of stock decision was dispositive of the case. The court reversed both the compensatory and punitive damage awards and remanded the case to enter judgment for Morgan Stanley. The dissent firmly stated that the lower court's issuance of e-discovery sanctions was a legal error by the court and the jury is best equipped to award punitive damages.

Court Orders E-Mail Search and Production at Producing Party's Own Cost
Peskoff v. Faber, 2007 WL 530096, (D.D.C. Feb. 28, 2007). In a suit alleging fraud, breach of fiduciary duty, breach of contract, and conversion inter alia, the plaintiff moved the court to compel the discovery of e-mails relating to the suit. In a previous electronic document production, there were unexplained time gaps which, the plaintiff argued, suggested a complete and accurate search was not completed by the defendant. The defendant argued that he would be willing to submit his hard drive for imaging by the plaintiff, but that he would not endure the costs of production. After supplemental submissions by the parties regarding the extent of the search, the court determined the defendant only searched two of the five places where e-mail evidence may be found and that this was not a sufficient search for relevant electronically stored information (ESI). The court also ruled the defendant must endure the costs of producing relevant ESI contained on his hard drive, citing the new Federal Rules of Civil Procedure. The court stated that accessible data must be produced at the cost of the producing party and that "cost-shifting does not even become a possibility unless there is first a showing of inaccessibility." It cannot be argued, stated the court, that "a party should ever be relieved of its obligation to produce accessible data merely because it may take time and effort to find what is necessary."

District Court Reviews Magistrate's Orders Relating to Inadvertent Production of Privileged E-mails
Amersham Biosciences Corp. v. PerkinElmer, Inc., 2007 WL 329290 (D.N.J. Jan. 31, 2007). During a discovery dispute in a patent infringement case, the plaintiff alleged that it inadvertently produced over 500 privileged e-mails and moved for their return. During document review, the e-mails were identified as privileged, deleted from the Lotus Notes DVD, and submitted to the plaintiff's outside e-discovery vendor for final production processing. Because of the nature of the Lotus Notes application, the plaintiff claimed the privileged e-mails unknowingly remained in a larger subfolder which the vendor processed and were ultimately produced to the defendant. In an earlier decision on this matter, the magistrate judge ordered the privileged documents be returned because the plaintiff had not waived any privilege. The magistrate reasoned that the privileged e-mails were embedded in metadata and the privileged information was "not apparent on the face of the documents." Therefore, the magistrate found the defendant should have reasonably known that the retrieved e-mails were not intended for disclosure. The defendant objected to the magistrate's ruling and appealed to the district court judge. The district court judge reviewed the magistrate's decision de novo and found the magistrate based his conclusion on a misunderstanding of fact, because the magistrate ruled that the plaintiff was unable to detect the error before production. However, in its briefings before the district judge, the plaintiff admitted the inadvertent production of privileged documents was, in fact, apparent on the face of the documents because they had been Bates numbered and stamped as confidential. Since the magistrate based his decision upon a critical misunderstanding of this fact, the district court judge remanded the case to the magistrate for a reassessment of whether the plaintiff preserved the privilege and was thus entitled to their return. In addition, the district judge evaluated whether the plaintiff waived its privilege by producing 37 non-Lotus Notes documents that were marked as "unreadable" during document review. Affirming the magistrate's ruling that privilege had been waived, the court stated ".turning over unintelligible or unreadable documents to an adversary evidences a lack of reasonable precaution.."

Defendant's Refusal to Search Archived Database Results in Sanctions
Claredi Corp. v. SeeBeyond Tech. Corp., 2007 WL 735018 (E.D. Mo. Mar. 8, 2007). In a breach of contract claim, the plaintiff moved the court to order sanctions against the defendant for discovery misconduct. The plaintiff requested e-mail and documents from the defendant related to its dealings with competitors in the field. The defendant vehemently denied the existence of any e-mails or agreements with third parties and refused to search its systems or archived databases. The plaintiff obtained e-mail records from the third-party competitors and discovered the defendant had communicated and contemplated agreements with the third-party competitors. The plaintiff argued that sanctions in the amount of $317,000 should be awarded to cover the plaintiff's fees and expenses in bringing the discovery motions. The defendant argued that the plaintiff's claims were "merely a boy crying wolf, unnecessarily taking up the Court's time on baseless accusations." The court, however, agreed with the plaintiff and issued sanctions because the documents were material to the plaintiff's case, finding the defendant's discovery compliance "to be dilatory and inadequate." The court stated the case was filed almost two years ago and the defendant "has yet to run appropriate searches on its archived database for responsive documents, a search that should have been completed long ago." The court awarded the plaintiff $54,000 for its fees and costs related to bringing the motion to compel and issued sanctions in the amount of $20,000.

Court Orders Producing Party to Bear Costs Associated with E-mail Sample
AAB Joint Venture v. United States, 2007 WL 646157 (Fed. Cl. Feb. 28, 2007). In this construction litigation case, the plaintiff moved to compel discovery of e-mails from the defendant. The defendant listed several individuals who were known to have generated e-mail related to the subject matter of the litigation. However, the defendant produced e-mail from only a few of the individuals, and the production from those individuals revealed insufficiency and gaps in the production.

The defendant argued it produced thousands of e-mails already and further production required restoration of back-up tapes that would cost between $85,000 and $150,000. The defendant further argued many of the e-mails were protected as privileged communications. The plaintiff argued the defendant had a duty to preserve e-mail and costs should not have any bearing on whether the documents should be produced. The court agreed with the plaintiff and ruled that the defendant's production of e-mails was far from adequate. The court further ruled that cost is only one factor in ordering a motion to compel and the court "cannot relieve Defendant of its duty to produce those documents merely because Defendant has chosen a means to preserve the evidence which makes ultimate production of relevant documents expensive." As such, the defendant was ordered to restore a portion of its back-up tapes from time periods specified by the plaintiff and was ordered to bear the costs of the initial sampling. Any further production and cost allocation would be determined by the sample production.

Court Addresses Several Requests for Electronic Data and Considers Request for Native Production
Bolton v. Sprint/United Mgmt. Co., 2007 WL 756644 (D. Kan. Mar. 8, 2007). In an employment discrimination suit brought by employees terminated in a reduction-in-force, the plaintiffs compelled the defendant to produce certain electronic documents, such as databases and spreadsheets, related to the terminated employees. The defendants argued the requests were irrelevant, overly broad, and unduly burdensome. In addition, the defendants opposed the plaintiffs' demand for information in a native format with corresponding metadata, claiming a native production would be difficult, time-consuming and would reveal privileged information. The court granted some of the plaintiffs' document requests stating the benefit of the information outweighed the defendants' burden, but denied other document requests as overly broad. For the document requests that were granted, the court stated the plaintiffs' requests should be produced "in the form in which it is currently maintained, but in electronic format to the extent possible."

OTHER NEW CASE SUMMARIES ADDED TO THE ONTRACK DISCOVERY CASE LIST THIS MONTH:

• District Judge Upholds Magistrate's Electronic Discovery Order:
  Best Buy Stores, L.P. v. Developers Diversified Realty Corp., 2007 WL 333987 (D. Minn. Feb. 1, 2007).
• Court Rules Defendant's Litigation Hold Not Triggered by Pre-Commencement Notice Letters and Issues Spoliation Sanctions for Hard Drive Wiping During Litigation:
  Cache La Poudre Feeds, LLC v. Land O' Lakes, Inc., 2007 WL 684001 (D. Colo. Mar. 2, 2007).
• Court Refuses to Order Sanctions for Improper Litigation Hold and Discovery Insufficiencies:
  School-Link Techs., Inc. v. Applied Res., Inc., 2007 WL 677647 (D. Kan. Feb. 28, 2007).
• Court Compels Plaintiff to Amend Insufficient Privilege Logs:
  Heartland Surgical Specialty Hosp., LLC v. Midwest Div., Inc., 2007 WL 625809 (D. Kan. Feb. 23, 2007).
• Court Denies Sanctions against Party for Counsel's Failure to Preserve Evidence:
  Thompson v. Jiffy Lube Int'l, Inc., 2007 WL 608343 (D. Kan. Feb. 22, 2007).

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

TALKING TECHNOLOGY: E-MAIL ANALYSIS SOFTWARE EMERGES AS NEWEST TOOL FOR CORPORATE COUNSEL

Corporations are being faced more and more with the need to gain control and reduce costs associated with electronic evidence investigations and e-discovery productions. A new variety of technology that gives corporate counsel this power is quickly emerging — e-mail analysis software.

E-mail analysis software usually takes the form of a local desktop application that gives an attorney the power to analyze employee e-mail communication. The software allows users to explore e-mail messaging trends before employing an electronic evidence service provider or computer forensics expert. Using the software, corporate lawyers can investigate employee-related issues or prepare for a discovery production, all at the click of a mouse.

Features of E-mail Analysis Software
These tools have various features that ease the burden and costs of e-discovery. The central feature is the ability for lawyers to view who authored an e-mail, what was said, when it was authored, and who it was sent to. A lawyer is able to inspect a series of intuitive graphs and charts that demonstrate how often a particular person sent e-mails on a specific subject, who they sent e-mails to the most and the most frequent time of day the e-mails occurred. These features are particularly useful for identifying dominant themes of e-mails and establishing timeline for the events giving rise to the investigation or litigation. The software is also able to track e-mail sent to external individuals outside of the corporation. All of the information is gathered and inserted into specialized graphs and charts which prove to be useful in corporate meetings or as demonstrative evidence for opposing counsel or judges in Rule 26(f) conferences.

Internal Investigations
E-mail analysis can be useful during an internal investigation to uncover trends of misconduct. For example, the CEO of your company informs you, its in-house counsel, that the Board of Directors is interested in all information relating to stock option packages issued in the last two years because there may be some instances of misconduct. You need to determine the scope of the problem in preparation for the Board of Directors meeting. Using the e-mail analysis software, you are able to locate several key e-mails between the Controller and Chief Financial Officer revealing a blatant stock option backdating scheme.

Early Case Assessment
E-mail analysis software can also be useful when litigation is likely, or as soon as a complaint arrives. Using the software to see e-mail communication relating to the issues in the suit, general counsel can form legal strategies and determine whether to settle the case or hire outside counsel to contest the claims. For example, a civil suit has been filed against your corporation by a former employee alleging gender discrimination. Using e-mail analysis software, you can search the former employee's e-mail and all other relevant employee e-mail accounts to discover if any discriminating communications were sent involving the former employee.

E-Discovery
Preparing for e-discovery can often be a tedious task. Using e-mail analysis software, messages can be pre-filtered and key players can be identified based on communication patterns, time periods, and sent and received dates. By targeting data collection efforts and only submitting custodians that are known to contain potentially relevant data to an e-discovery service provider, parties can minimize e-discovery costs. For example, your corporation is being sued for trademark and patent infringement. It is your responsibility to identify custodians, keywords, and timeframes and begin preparing and collecting data to be sent to the corporation's e-discovery service provider. Using e-mail analysis software, you are able to isolate key timeframes and data custodians. Instead of sending the entire e-mail storage database for e-discovery processing, you create a few smaller PST files for transport to your e-discovery service provider.

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NEWS & EVENTS

NEW GUIDANCE FOR COURTS AND PRACTIONERS IN CALIFORNIA AND DELAWARE
On March 2, 2007, two states published documents relating to electronically stored information practices, designed to provide members of the bench and bar with additional e-discovery guidance. In California, according to a standing order issued in the Northern District of California, all judges will require identical information in Joint Case Management Statements filed pursuant to Civil Local Rule 16-9. The parties must include information in their statement about steps taken to preserve evidence relevant to the issues, including interdiction of any document-destruction program and any ongoing erasures of e-mails, voice mails, and other electronically-recorded material. See http://www.cand.uscourts.gov for a complete copy. Additionally, in Delaware, the Ad Hoc Committee for Electronic Discovery released an updated version of its Default Standard for Discovery of Electronically Stored Information ("E-Discovery"). For a complete copy, visit: http://www.ded.uscourts.gov/Announce/AdHoc-Disc.pdf.

KROLL ONTRACK LAUNCHES NEW E-MAIL INVESTIGATION & ANALYTICS SOFTWARE
On March 22, 2007, Kroll Ontrack announced the launch of Ontrack® Firstview™, an e-mail investigation analytics tool that helps in-house attorneys appraise the scope, volume and potential significance of e-mail communication. Enabling attorneys to investigate incidents of employee misconduct, form legal case strategy and intelligently collect data in preparation for discovery, this technology allows corporate counsel to gain more control of internal investigations upfront and minimize costs by reducing the volume of information processed during e-discovery. Through the use of this desktop platform, in-house counsel are better equipped to evaluate what happened and whether misconduct occurred, as well as what data should be processed for e-discovery and whether to retain an outside expert for further forensic or discovery analysis.

Specifically, Ontrack Firstview's features and functionality enables users to:

• Reveal the dominant themes present within e-mail communications.
• Establish the timeline for the events giving rise to the investigation or suit.
• Graphically display communication lines between internal and external people.
• Search for key people, words and phrases, or dates and times.
• Create graphs, charts and reports to help demonstrate conclusions and present to corporate executives, opposing parties or judges.

For more information about Ontrack Firstview, visit www.ontrackfirstview.com.

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WE REQUEST YOUR INPUT

This newsletter is written by Michele C.S. Lange, a staff attorney with Kroll Ontrack. 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, please call 800 347 6105 or visit www.krollontrack.com.