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In This Issue:
 Recent ESI Court Decisions
Court Denies Production of 17 Gigabytes of Data Using the Federal Rules of Civil Procedure's "Proportionality Standard"
High Voltage Beverages, LLC. v. Coca-Cola Co., 2009 WL 2915026 (W.D.N.C. Sept. 8, 2009). In this trademark infringement litigation, the plaintiff filed a motion to compel 17 gigabytes of data, which amounted to about 1.5 million pages. The defendant did not object to producing the documents but argued that a review was unnecessary as it believed every document related to the merits of the underlying action had already been produced. Applying Fed.R.Civ.P. 26(b)(2)(C)'s proportionality standard, the court determined the plaintiff's request would be unreasonably duplicative of earlier efforts and outweighed its likely benefit because the plaintiff had ample opportunity to obtain the information, which in all likelihood, it had already obtained. The court further held that the defendant must extend to the plaintiff's counsel the opportunity to search data on the defendant's computers at the defendant's place of business.
Court Finds Waiver of Privilege Citing Party's Failure to Reasonably Rectify the Production Error
United States v. Sensient Colors, Inc., 2009 WL 2905474 (D.N.J. Sept. 9, 2009). In this cost recovery action filed under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) of 1980, the defendant filed a motion to compel production, alleging the plaintiff waived its privilege and work product objections. Subsequent to its production of approximately 45,000 documents, the plaintiff identified 214 as inadvertently produced. The plaintiff argued the joint discovery plan in place precluded a privilege waiver. Rejecting that argument, the court noted that the plan did not excuse the parties from meeting the requirements of Federal Rule of Evidence 502(b). Separating the documents into three different sets, the court conducted its Rule 502 analysis. Regarding the first set, the court found the plaintiff's production was inadvertent and that the plaintiff took reasonable efforts to rectify the error after responding to the defendants' letter describing the error within eight work days. However, the court found the plaintiff failed to reasonably rectify the error with respect to the last two document sets, and thus held the privilege was waived.
Court Dismisses "Stripped" Metadata Argument Relying on Expert's Testimony
United States v. Haymond, 2009 WL 3029592 (N.D. Okla. Sept. 16, 2009). In this criminal case, the defendant renewed his request for access to unlawful images allegedly contained on his computer that were seized by the government. The defendant argued the hard drive was "stripped" of metadata prior to the mirror image creation, which prevented him from preparing a forensic defense. The defendant also requested redacted copies of the images to support subpoenas to the Web sites where the images originated. Relying upon the defendant's expert's testimony that he was "99.99-percent sure" no metadata would be located, the court found no basis for the defendant's claim that metadata had been "stripped." The court further ordered the defendant to identify the images with embedded Web site information in advance of trial, at which point the government is to prepare redacted images for the defendant's use in conjunction with the subpoenas.
Court Holds Parties Accountable for Failure to Timely Produce Documents Stored on a "Shared" Directory
Wixon v. Wyndham Resort Dev. Corp., 2009 WL 3075649 (N.D. Cal. Sept. 21, 2009). In this litigation, the parties filed several motions regarding the special master's report. The report found the defendants' violation of a previous production agreement was harmless but still held the defendants responsible for 75 percent of the fees related to the special master proceeding. In particular, the plaintiffs objected to the special master's finding that the defendants' noncompliant production was harmless. Addressing the timeliness of the production, the court upheld the report with respect to 47 of the documents because they did not contain any keywords selected by the plaintiffs. However, the court rejected the portion of the report that pertained to the defendants' failure to produce documents stored on a "shared" directory in a timely manner, noting the defendants should have noticed a flaw in the custodian-based search when a group of potentially relevant documents had no custodian. Based on this failure, the court issued sanctions, which included requiring the defendants to bear expenses incurred by the plaintiffs in preparing the motion to strike and the full cost of the special master's fees.
Court Adopts Magistrate Judge's Report Denying Sanctions, Citing Party's Failure to Demonstrate Defenses Were Materially Prejudiced
Laethem Equip. Co., v. Deere & Co., 2009 WL 3064663 (E.D. Mich. Sept. 21, 2009). In this ongoing breach of contract dispute, the court adopted the magistrate judge's report that recommended denial of the defendant's motion for sanctions and additional discovery of trial witnesses. The defendant sought sanctions, arguing the plaintiff failed to produce relevant ESI and privilege logs before depositions were taken. The plaintiff denied the defendant's allegations, arguing the motion for sanctions was intended to "divert attention from [defendant's] misconduct." Noting that this motion was a further example of how discovery is now a "black hole" that has the power to "annihilate the case itself," the magistrate judge recommended denial of the defendant's motion, finding the defendant failed to establish its defenses had been "materially prejudiced." The report further found the defendant failed to demonstrate that it was unable to obtain information it had a right to seek during depositions, but recommended the court allow an additional opportunity to depose trial witness not already deposed.
Court Determines E-Mail Sent Through Company Server Is Not Protected by Attorney-Client Privilege
Leor Exploration & Prod. LLC v. Aguiar, 2009 WL 3097207 (S.D. Fla. Sept. 23, 2009). In this business litigation, the plaintiffs objected to the special master's ruling regarding two exhibits � both e-mails � in which the first was classified as attorney-client privileged and the second as protected work product. Discussing the first exhibit, the court found there was no reasonable expectation of privacy because the e-mail was sent by the defendant (a former employee of the plaintiffs) through the plaintiffs' server. The plaintiffs' employee handbook stated that all electronic communications were owned by the plaintiffs and that no expectation of privacy existed. Thus, the court overruled the special master's report and found no attorney-client privilege existed with the first exhibit. The court also granted the plaintiffs' objection regarding the second exhibit because it was not prepared in anticipation of litigation and could not therefore be protected work product.
Court Declines to Issue Sanctions Despite Party's Negligent Failure to Preserve ESI
Scalera v. Electrograph Sys. Inc., 2009 WL 3126637 (E.D.N.Y. Sept. 29, 2009). In this disability and employment litigation, the plaintiff sought adverse instruction sanctions, citing the defendants' loss of information contained on two e-mail backup tapes. The plaintiff claimed the defendants produced only "a handful of emails" after claiming the e-mails were stored on corrupted backup tapes that could not be restored. In addition, the plaintiff argued the hard drives of a defendant and the plaintiff were "wiped clean," which prevented a search of the computer. Denying the plaintiff's motion for sanctions, the court found the defendants' duty to preserve arose when the plaintiff's EEOC charge was received, which was more than 30 days after the plaintiff left her employment. The court further held that while the defendants acted negligently in failing to preserve ESI until almost two months after the duty to preserve arose, the plaintiff failed to demonstrate that the destroyed e-mails would have been favorable to her case.
To view additional case summaries visit www.krollontrack.com/case-summaries/.
Practice Points: Proper Preservation & Litigation Hold Management
Missing vital evidence? Electronic records not properly preserved? Organizations that do not have proper preservation and litigation hold management plans place themselves at risk for costly sanctions. While the Federal Rules of Civil Procedure and ensuing case law require preservation of data, the Rules do not dictate a proper preservation process and offer little guidance regarding when the duty to preserve arises. Case law has provided some insight, explaining the duty to preserve is triggered "upon reasonable anticipation of litigation." Zubulake v. UBS Warburg, 220 F.R.D. 212 (S.D.N.Y. 2003). No matter when the duty to preserve arises, it is imperative that parties understand how to effectively implement litigation holds in order to preserve pertinent information and avoid costly sanctions.
Litigation Holds
Upon reasonable anticipation of litigation, counsel must issue litigation holds and communicate them appropriately to employees of the organization. This ensures all department heads, IT personnel and pertinent employees are made aware of the hold. The hold issuance should include the purpose for the hold, a description of the lawsuit or investigation, and the guidelines for determining what data should be preserved and by whom. Counsel should then work jointly with IT to notify legal opponents and any relevant third parties of their duty to preserve potentially responsive information. Internal automatic destruction must also be suspended, which includes halting defragmentation software and other forms of automatic or routine drive "cleanup" activities.
Once a litigation hold letter is issued, counsel should actively monitor internal suspension measures and ensure compliance. This includes sending update notices to keep key players and new employees informed, reminding them of their preservation obligations. Detailed and accurate records should also be kept of what data have been preserved and how, should the opposing party bring preservation methods into question. Counsel should ensure the litigation hold is in effect until final judgment, a settlement has been reached and a formal release has been signed by all parties, or the case is dismissed and no related claims remain outstanding.
Sanctions
Counsel's failure to issue a litigation hold and preserve information appropriately may prove detrimental to the case. For example, the Western District of Kentucky recently issued an adverse inference instruction finding the defendant's deletion of data and failure to implement a litigation hold fell beyond the scope of a routine, good-faith operation of an electronic information system. KCH Servs., Inc. v. Vanaire, Inc., 2009 WL 2216601 (W.D. Ky. July 22, 2009).
However, courts are hesitant to impose severe sanctions—such as an adverse inference instruction or default judgment—if the moving party cannot demonstrate the favorability or relevancy of the lost evidence. In a recent case from the Southern District of New York, the plaintiff sought sanctions claiming the defendants failed to preserve and produce ESI. Green v. McClendon, 2009 WL 2496275 (S.D.N.Y. Aug. 13, 2009). While the court determined the defendants' counsel failed to meet discovery obligations by neglecting to issue a litigation hold, it declined to issue an adverse inference instruction because there was no proof provided that the defendants' actions created an unfair evidentiary imbalance. The court determined some sanctions were appropriate and allowed further e-discovery and an award of attorneys' fees and costs to be allocated among defendants and counsel. This was also the case in the recent matter of Scalera v. Electrograph Sys. Inc., 2009 WL 3126637 (E.D.N.Y. Sept. 29, 2009) [summary above]. In this action for employment discrimination, the court declined to issue sanctions, holding that while the defendant employer acted negligently in failing to preserve ESI until almost two months after the duty to preserve arose, the plaintiff failed to demonstrate that the destroyed e-mails would have been favorable to her case.
The decision of whether to issue sanctions for preservation failures depends on the jurisdiction because there are no uniform standards in place. In the Northern District of Oklahoma, if the failure to issue a litigation hold and meet preservation obligations is not intentional, the court may not impose a default judgment or adverse inference instruction. See Pinstripe, Inc. v. Manpower, Inc., 2009 WL 2252131 (N.D. Okla. July 29, 2009). In Pinstripe, the defendants' attorneys drafted a litigation hold, which the defendants failed to issue, resulting in the deletion of e-mails. Similar to Green, the court determined some level of sanctions were appropriate for the defendants' conduct and provided the plaintiff with the opportunity to petition the court for further relief if relevant e-mails were discovered. Additionally, the court ordered the defendants to pay $2,500 to the local bar association to fund a seminar on preservation and litigation holds.
Conclusion
Avoiding spoliation requires proper planning from the outset. One way to proactively approach the data management process is to create an application inventory and data map. This will identify key sources of ESI and important human resources that will provide organization to IT environments that can be an uncharted morass of ESI. An application and inventory map also allows for a quick identification of pertinent data and custodians that are key to the fulfillment of preservation obligations, and it prevents the need to search for information throughout the organization's electronic information. Investing resources in proper preservation and litigation hold management now will pay off in the long run by ensuring your corporation or client�s practices withstand judicial scrutiny in the unfortunate event opposing counsel files a motion seeking spoliation sanctions.
News & Events
Download Kroll Ontrack's Recent Podcast, "Electronic Search and Seizure, Fourth Amendment & Inadvertent Production"
In this edition of the ESI Report, host Gina Jytyla, Managing Staff Attorney in the Legal Technologies division at Kroll Ontrack, welcomes Joe DeMarco, Partner with DeVore & DeMarco LLP and Jason Paroff, Senior Director of Computer Forensics Operations at Kroll Ontrack to discuss a recent case from the Ninth Circuit Court of Appeals, United States v. Comprehensive Drug Testing, Inc. Mr. Demarco and Mr. Paroff will take an in-depth look into the court's analysis, including the potential impact on law enforcement agencies who conduct investigations where digital evidence is at issue. In the Bits & Bytes Legal Analysis segment, Kroll Ontrack Legal Correspondent, Kelly Kubacki, will take a look at the discovery order issued in United States v. Sensient Colors, Inc. To listen to the podcast, visit www.krollontrack.com/redir/1009ESISearchPodcast-CLU.asp.
Enhanced E-Discovery Certification Course Propels Litigation Teams to New Heights
Given the current economic condition, 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 December 3-4 course, visit www.krollontrack.com/certification-courses.
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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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