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In This Issue:
 Recent ESI Court Decisions
Court Grants Preclusion Sanctions for Pattern of Stubborn Defiance Regarding E-Discovery
Bray & Gillespie Mgmt. LLC v. Lexington Ins. Co., 2009 WL 2407754 (M.D. Fla. Aug. 3, 2009). In this ongoing insurance litigation, the defendants sought dismissal sanctions or preclusion of evidence pertaining to a key business interruption loss claim. The defendants argued the plaintiffs' violation of three court orders to compel production, misrepresentations that discovery was complete and production of 188 pages of key documents after the close of discovery warranted sanctions. In opposition, the plaintiffs argued they had no reason to know the production was incomplete. Finding that none of the court's previous efforts were effective to defer the plaintiffs from "continuing their pattern of stubborn defiance," the magistrate judge determined severe sanctions were warranted. In cataloging the plaintiffs' discovery failures, the magistrate judge noted that "no reasonable person could conclude" the plaintiffs' failure to timely produce documents was justified and that the plaintiffs' conduct was intended to deceive and prevent discovery. The magistrate judge also discussed the attorneys' role in the discovery misconduct, noting lawyers owe a duty of candor to the court and a duty to deal honestly and fairly with opposing counsel. Accordingly, the magistrate judge granted the motion for preclusion sanctions and determined the plaintiffs and counsel were jointly and severally responsible for the defendants' expenses and costs.
Court Orders Production of Litigation Hold Letters upon Preliminary Finding of Spoliation
Major Tours, Inc. v. Colorel, 2009 WL 2413631 (D.N.J. Aug. 4, 2009). In this discrimination litigation, the plaintiffs sought production of the defendants' two litigation hold letters. The plaintiffs argued the letters were relevant to their examination of the defendants' document production and whether spoliation occurred. In opposition, the defendants claimed the plaintiffs failed to demonstrate evidence of spoliation and thus the letters were protected from discovery. Noting that litigation hold letters are in general privileged and not discoverable unless spoliation occurs, the court found a preliminary showing of spoliation existed in this case. The court inferred that relevant evidence was lost given the failure to timely ask a number of pertinent custodians to preserve evidence in addition to the significant time lapse that occurred between the duty to preserve and the issuance of the first litigation hold letter. Accordingly, the court granted the plaintiffs' production request, limiting it to those portions of the letters pertaining to preservation.
Court Orders Return of Inadvertently Produced E-Mail Pursuant to Fed.R.Evid. 502
Coburn Group, LLC v. Whitecap Advisors LLC, 2009 WL 2424079 (N.D. Ill. Aug. 7, 2009). In this breach of an oral contract dispute, the defendant requested the return of a half-page long e-mail the defendant claimed was protected work product. In opposition, the plaintiff made several arguments including that the e-mail was not protected and that, if it was, the inadvertent production waived protection. After determining the e-mail constituted work product, the court considered the waiver issue under Fed.R.Evid. 502. The court interpreted the "inadvertent disclosure" portion of Rule 502 as asking whether the party intentionally produced a privileged or work product protected document and found the defendant did not intend to produce the e-mail. Next, the court considered prior case law regarding what constituted "reasonable steps" to prevent an inadvertent disclosure. The court discussed the defendant's thoroughly documented review process and noted that in this case only three documents slipped through the review of 72,000 document pages. Finding that Rule 502 would have no purpose if the inadvertent production of a single privileged document deemed the document review process unreasonable, the court granted the defendant's motion and ordered the plaintiff to return all copies of the e-mail.
Court Issues Sanctions for Preservation and Litigation Hold Failures
Green v. McClendon, 2009 WL 2496275 (S.D.N.Y. Aug. 13, 2009). In this breach of contract dispute, the plaintiff sought sanctions alleging the defendants failed to preserve and produce electronically stored information (ESI). Finding the duty to preserve arose no later than the lawsuit's filing, the court determined the defendants' counsel failed to meet discovery obligations by neglecting to issue a litigation hold and properly search for responsive documents. Despite these failures, the court declined to issue an adverse inference instruction since there was no proof that the defendants' actions created an unfair evidentiary imbalance, noting the absence of evidence that any relevant information was destroyed. However, the court held other sanctions were appropriate, including further discovery of ESI and an award of attorneys' fees and costs to be allocated among the defendants and counsel once the "respective blame-worthiness" was determined.
Court Foresees Day When a Lack of Internal E-Discovery Software Will not be Well Received
Capitol Records, Inc. v. MP3tunes, LLC, 2009 WL 2568431 (S.D.N.Y. Aug. 13, 2009). In this copyright infringement litigation, the court addressed several discovery disputes it claimed could have been avoided if the parties had "focused their attention on discussing their differences, rather than drafting dueling epistles." Addressing the defendant's issues, the court did not agree with the defendant that producing and searching files would be unduly burdensome. Thus the court ordered the defendant to conduct thirty searches proposed by the plaintiffs, which included additional custodians. The court then addressed the plaintiffs' arguments that the discovery sought by the defendant was unduly burdensome in part because they were unable to conduct centralized e-mail searches without relying on an outside service provider. Noting that the day will come when the burden argument based on a large organization's lack of internal e-discovery software will not be well received, the court found that e-discovery case law had not yet developed to this point. Therefore, the court upheld the plaintiffs' argument and concluded that the e-mail files the defendant sought to search were not reasonably accessible. Finally, the court considered the specific document requests from the defendant to the plaintiffs that were at issue, and restricted the search terms and production scope as appropriate for each request.
Court Characterizes Data Downgrading Practices as Madness
Covad Commc'ns. Co. v. Revonet, Inc., 2009 WL 2595257 (D.D.C. Aug. 25, 2009). In this ongoing trade secrets misappropriation litigation, the plaintiff sought compliance with the court's December 2008 order granting a motion to compel discovery. See Covad Comm. Co. v. Revonet, Inc., 2008 WL 5377698 (D.D.C. Dec. 24, 2008). The plaintiff argued production was incomplete, the production format was noncompliant and that a discrepancy existed between certain e-mails produced in both native format and hard copy. The court first deferred addressing the production issue until the results of a forensic search of relevant electronically stored information were discussed at a later hearing. Turning to the e-mail discrepancy, the court ordered the defendant to produce all missing e-mails in native format. Regarding the remaining production disputes, the court noted the parties were working to resolve the issues and ordered the defendant to answer whether the documents were either produced in native format or if they would be produced at all. Finally, the court expressed displeasure with data downgrading stating, "taking an electronic document...printing it, cutting it up, and telling one's opponent to paste it back together again, when the electronic document can be produced with a keystroke, is madness." Ultimately, the court stayed action on the motion pending the defendant's responses to the questions posed.
Court of Appeals Issues Guidelines for the Search and Seizure of Electronic Information
United States v. Comprehensive Drug Testing, Inc., 2009 WL 2605378 (Cal. App. 9 Dist. Aug. 26, 2009). In this federal investigation into steroid use by professional baseball players, the government appealed three orders entered by separate courts in the Ninth Circuit relating to the search and seizure of electronic information. The government argued it complied with the protocols set forth in United States v. Tamura and also that it was allowed to seize any additional data related to other players' steroid use under the plain view exception of the Fourth Amendment. Labeling the government's argument as "too clever by half," the court determined the government should "forswear reliance on the plain view doctrine or any similar doctrine" regarding seizure of data requiring segregation. The court also held that any future search warrant application should include a protocol that prevents agents from examining or retaining data other than that specified in the warrant, which may require segregation to be conducted by an independent third-party to protect privacy interests. Finally, the court acknowledged the reality that over-seizure of data is part of the electronic search process and issued five guidelines magistrate judges must follow when the government seeks a warrant regarding examination of electronic media. The guidelines aimed "to strike the proper balance between the government's legitimate interest in law enforcement and the people's right to privacy and property...as guaranteed by the Fourth Amendment."
State Supreme Court Applies State Rules of E-Discovery, Finding the Trial Court Abused its Discretion in Granting Direct Access to Party's Computer Systems
In re Weekly Homes, L.P., 2009 WL 2666774 (Tex. Aug. 28, 2009). In this breach of contract litigation, the defendant petitioned the Texas Supreme Court for writ of mandamus of a trial court order that directed the defendant to provide four employees' hard drives to the plaintiff's forensic experts to image, copy and search for deleted e-mails. The defendant argued that the plaintiff failed to comply with Texas Rules of Civil Procedure 196.4 which governs production requests for electronic data. Applying Rule 196.4, the court found the trial court did not abuse its discretion regarding the deleted e-mails request even though the plaintiff failed to satisfy the rule's specificity requirement since it became "abundantly clear" that this information was sought and no prejudice was suffered by the defendant. Turning to the imaging and forensic examination dispute, the court relied on the Federal Rules of Civil Procedure and case law since there are no express guidelines contained within Rule 196.4. Through this analysis, the court determined that the trial court abused its discretion since the search of the employees' hard drives was highly intrusive and unjustifiable. The court granted the writ of mandamus and remanded the case advising the trial court to be mindful of protecting sensitive information by utilizing the least intrusive means necessary to facility e-discovery.
Court Imposes Sanctions for Destruction of Information Contained on BlackBerry� Smartphones
Se. Mech. Servs., Inc., v. Brody, 2009 WL 2883057 (M.D. Fla. Aug. 31, 2009). In this ongoing computer fraud and abuse litigation, the plaintiff requested sanctions alleging the laptops and BlackBerry smartphones belonging to the defendants were wiped of data. The defendants argued that all evidence was preserved on the servers and that e-mails were produced in hard copy from the servers. Relying on explanations provided by computer forensics experts that the "wiped" state of the BlackBerry smartphones was attributed to intentional and deliberate actions, the court disagreed with the defendants' arguments and held that sanctions were appropriate. Given the nature of the destroyed evidence, including personal e-mails, telephone records, text messages and calendar entries, the court determined the evidence was likely unfavorable to the defendants and therefore issued an adverse inference instruction.
To view additional case summaries visit www.krollontrack.com/case-summaries/.
Practice Points: State Rule Making Efforts Regarding Electronically Stored Information
The Federal Rules of Civil Procedure (FRCP) were amended on December 1, 2006, with the intent to implement uniformity among Federal courts with respect to the discovery of ESI in the context of civil litigation. As we approach the third anniversary of these amendments, many states have followed suit and amended discovery rules to speak specifically to the discovery ESI. However, there are many state legislatures that have not yet passed e-discovery legislation and continue to be silent on the issue. This article discusses the state e-discovery rules that continue to be inconsistent with the Federal Rules and each other. Some states have implemented rules that mirror the FRCP, some states are considering rule changes and some states have forged their own path into e-discovery rule making.
Adopted FRCP Provisions in Whole or in Part
Currently, twenty states have adopted state rules that are substantially analogous to the FRCP amendments1. Of those states, California has received considerable press for the amendments enacted in the Electronic Discovery Act signed into law by Governor Schwarzenegger on June 29, 2009. The Electronic Discovery Act amended the California Code of Civil Procedure to address discovery of ESI, intending to create uniformity in regulation and enforcement regarding disputes that involve the exchange of ESI.
However, there is one significant difference between the California rules and the FRCP and that relates to the issue of data accessibility. Under Federal Rule of Civil Procedure (FRCP). 26(b)(5)(B), the initial evidentiary burden is placed on the responding party to demonstrate inaccessibility (in terms of undue burden and cost of production). Once this initial burden is met, the burden then shifts to the requesting party to demonstrate good cause for production. Under the Electronic Discovery Act, if a responding party fails to objects to the reasonable accessibility of data, the party may waive the right to seek a protective order. By switching burden of proof onto the responding party as opposed to the requesting party, as is the case under the Federal rules, California's Act essentially creates an assumption that all ESI is accessible.
Undertaking or Considering E-Discovery Rules
There are six states that are currently considering e-discovery rule amendments to varying degrees2. For example, in April 2009 the Wisconsin Judicial Council petitioned the Wisconsin Supreme Court to propose amendments that largely follow the 2006 FRCP amendments. The proposed Wisconsin rules contain a broader definition of electronically stored information, do not include a mandatory meet and confer, and do not provide inadvertent waiver protection in the form of a claw-back agreement.
New York currently does not have legislation rules explicitly governing e-discovery, however, Bill A06000 was introduced to the New York state legislature on February 23, 2009. This bill contains proposed amendments to the Civil Practice Law Rules (CPLR) that would change e-disclosure rules in civil cases, with the primary intention to clarify the treatment of ESI prior to the filing of a note of issue in civil cases. Bill A06000 does not include an amendment to address meet and confer conferences, which is common in a few other states that have adopted amendments largely analogous to the FRCP, including Minnesota, Ohio and Virginia.
"Texas Model"
Texas added Rules 196.3 and 196.4 to its Rules of Civil Procedure in 1999, marking it the first state to adopt rules explicitly governing e-discovery. Texas' rules differ in some key regards from the Federal Rules of Civil Procedure, and both Idaho and Mississippi have adopted rules similar to the Texas model.
The Texas Rules of Civil Procedure do not require a mandatory meet and confer conference, but rather provide that the court may direct parties and counsel to appear before the court. In addition, there is no rule equivalent to a safe harbor provision. Rather, the Texas rules include a presumption that costs for sanctions motions shall be born by the offending party unless circumstances make an award of expenses unjust. There is also a difference between the Texas rules and the FRCP regarding production. Texas Rules of Civil Procedure 196.4 requires the requesting party to specify the form in which it wants ESI produced and the responding party must state an objection if it cannot produce the ESI in that form through reasonable efforts. The court must also order the requesting party to pay expenses of any extraordinary steps required to produce the information if the court orders the responding party to comply with the request. Idaho and Mississippi did not include this mandatory cost-shifting rule in their amendments, but rather included a discretionary cost-shifting provision.
In sum, state rules vary widely from coast to coast, and smart litigants must understand the rules and regulations involving the exchange of ESI in any state that has primary or persuasive authority over a matter. An increase in the number of states that have passed e-discovery rules almost certainly means that e-discovery will play an increasingly important role in state court litigation in years to come. As demonstrated by recent case law, ignorance is not a defense to e-discovery failures under the Federal Rules of Civil Procedure and one can be certain that ignorance will not serve as a safeguard in state courts.
1 The twenty states are: California, Alaska, Utah, Arizona, Montana, Nebraska, Kansas, Louisiana, North Dakota, Arkansas, Iowa, Minnesota, Michigan, Ohio, Indiana, Tennessee, Virginia, Maryland, New Jersey and Maine.
2 These six states are: Washington, New Mexico, Illinois, Wisconsin, Connecticut and New York.
A complete listing of the up-to-date rules governing e-discovery for all states is available at: www.krollontrack.com/rules-statutes/.
News & Events
Download Kroll Ontrack's Recent Podcast, "State Rulemaking Activity, E-Discovery Tips & Production in Texas"
In this edition of the ESI Report, host Gina Jytyla, Managing Staff Attorney in the Legal Technologies division at Kroll Ontrack, welcomes Linda Sharp, Senior Legal Consultant, Jonathan Sachs, Client Relationship Manager, and Andrea Marshall, Legal Consultant from Kroll Ontrack, to discuss state rulemaking activity since the enactment of the 2006 amendments to the Federal Rules of Civil Procedure. Specifically they will discuss the various approaches in three major states: Texas, California and New York, and will explore best practices to efficiently navigate the e-discovery process. In the Bits & Bytes Legal Analysis segment, Kroll Ontrack Legal Correspondent, Kelly Kubacki will take a look at the discovery order issued in In re Weekly Homes, L.P. To listen to the podcast, visit www.krollontrack.com/legal-technologies-podcasts.
Enhanced E-Discovery Certification Course Propels Litigation Teams to New Heights
Given the current economic conditions, corporate clients are being forced to cut back legal and IT budgets, while the threat of sanctions due to improper ESI handling continues to rise. Become an e-discovery expert to prevent your firm or corporation from becoming the next headline. Kroll Ontrack's 2009 E-Discovery Certification Course is ideal for legal and technical professionals of all levels, especially in-house counsel, law firm attorneys, litigation support professionals, paralegals, IT staff and members of the judiciary. Upon completion of this program, you will be able to make informed decisions regarding ESI, be prepared to negotiate at the meet and confer and understand the most current e-discovery law. For more information and to register for the October 29-30 course, visit www.krollontrack.com/certification-courses.
Award-Winning Document Review Tool Ontrack Inview Supplies Legal Teams with Control and a Simplified Review Process
Kroll Ontrack announces the release of Ontrack� Inview� 6.0, an enhanced version of its industry leading online document repository. Building on its already robust suite of features, Ontrack Inview now has near-duplicate identification, e-mail threading, Eastern European language support and machine translation capabilities, giving legal teams the ability to more effectively manage e-discovery review. Legal teams looking for seamless e-discovery support, global review capabilities and the ability to minimize review costs will benefit from this online tool's cutting-edge secure functionalities and advanced search technologies. For more information, please visit www.krollontrack.com/ontrack-inview.
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This newsletter was written by Kelly Kubacki, Kroll Ontrack Law Clerk, with assistance from Regina Jytyla, Kroll Ontrack Managing Staff Attorney. 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.
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