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In This Issue:
 Recent ESI Court Decisions
Court Denies Motion to Compel Without Prejudice and Directs Parties to Consider Rule 502 in Future Production and Cost Discussions
Spieker v. Quest Cherokee, 2008 WL 4758604 (D.Kan. Oct. 30, 2008). In this lawsuit seeking class action certification, the plaintiffs filed a motion to compel production of electronically stored information (ESI). The defendant argued undue burden and provided evidence that the estimated cost of production, including collection, processing, reviewing and copying costs, would be $375,000, while the plaintiffs'
claims were worth $100,000 or less. Determining the plaintiffs failed to explain the relevancy of the disputed ESI in relation to class certification, the court denied the plaintiffs' motion without prejudice. As the plaintiffs were granted leave to re-file its motion to compel, the court went on to address several additional issues raised by the parties. Ultimately the court instructed the parties to discuss Fed.R.Evid. 502 in future production and cost discussions, noting that Rule 502 was enacted "to reduce the costs of exhaustive privilege reviews of ESI."
Court Orders Expedited Discovery, Citing Preservation Concerns
Allcare Dental Mgmt., LLC v. Zrinyi, DDS, 2008 WL 4649131 (D.Idaho Oct. 20, 2008). In this libel case, the plaintiff sought limited expedited discovery prior to the Fed.R.Civ.P. 26(f) conference. The plaintiff sought permission to serve a subpoena duces tecum on the third-party internet service provider, requiring it to produce identifying information for the "Doe" defendants and also sought to image the named defendants' hard drives. The plaintiff argued the expedition was necessary to ascertain the "Doe" defendants' names and to preserve relevant ESI. Granting the plaintiff's motion, the court noted that service providers typically retain user activity logs for a limited period of time and that the information was necessary for the litigation. Additionally, the court ordered the defendants to make any computer, portable, or detachable hard drive available to the plaintiff's computer forensic expert for imaging, citing the defendants' previous behavior of service evasion, which gave rise to the assumption that it had little respect for the legal process or the requirement to preserve electronic data. In order to prevent prejudice to the defendants, the forensic expert was ordered to keep the images confidential and file them under seal.
Court Allows Party to Designate Entire Documents as "Confidential" to Avoid Burden of More Extensive Review During Discovery
Containment Technologies Group v. Am. Soc'y of Health Sys. Pharmacists, 2008 WL 4545310 (S.D.Ind. Oct. 10, 2008). In this defamation case, the defendants moved to compel production of documents containing trade secrets, and the plaintiff moved for a protective order. The parties began negotiating a proposed protective order, but could not agree to specific terms. The defendants argued that a protective order was unnecessary and that the "confidential" designation should only apply to those portions or pages that are confidential, while the plaintiff wanted to designate the entire document as confidential. Requiring higher scrutiny for a confidential designation for documents filed under seal as opposed to those produced during discovery, the court allowed the plaintiff to designate entire documents as confidential if done so in good faith.
Court Orders Party to Craft Search Protocol for Computer Inspection
Hoover v. Fla. Hydro, Inc., 2008 WL 4467661 (E.D.La. Oct. 1, 2008). In this contract dispute, the plaintiff moved to quash the defendant's subpoenas duces tecum issued to two third-party individuals demanding computer equipment for inspection. The plaintiff argued the subpoenas were unwarranted, unduly burdensome and were a "fishing expedition." The defendant disagreed with the plaintiff, arguing the subpoenas were issued with good cause. Finding the first individual sufficiently responded to a previous subpoena, the court granted the motion to quash. Regarding the second individual, the court denied the motion to quash determining there was relevant information on the requested computer. The court ordered the defendant to prepare a search protocol for inspection of the individual's computer that excluded privileged communications.
Court Creates Protocol to Govern Parties' E-Discovery
D'Onofrio v. Sfx Sports Group, Inc., 2008 WL 4737202 (D.D.C. Oct. 29, 2008). In this employment discrimination litigation, the defendants filed several motions, including a motion for leave to designate an expert to design a search protocol. Previously, the court stated the lawyers should rely on IT professionals to create a protocol that was easily understood. After the defendants proposed a highly technical search protocol, the court decided to create one of its own that included: search parameters and locations, time limits and a requirement that the defendants must restore newly discovered ESI.
Court Orders Production of Source Code
Metavante Corp. v. Emigrant Savings Bank, 2008 WL 4722336 (E.D.Wis. Oct. 24, 2008). In this contract litigation, inter alia, the defendant filed a motion to compel the discovery of the plaintiff's source code, claiming such information was essential to the defendant's counterclaim. The defendant argued the source code was the only evidence that may have revealed the quality of the product the plaintiff produced under the contract. The plaintiff argued against production of the source code, claiming undue burden in that it would cost $300,000 and take 5,000 hours. Due to the defendant's willingness to employ outside consultants to review the code for relevant information, thereby reducing cost, the court ordered its production finding the potential value of the source code outweighed the burden.
Court Denies Additional Production Following a Search Process Miscommunication
Ross v. Abercrombie & Fitch, Co., 2008 WL 4758678 (S.D.Ohio Oct. 27, 2008). In this securities litigation, the plaintiff requested the court to order the defendant to produce an additional 95,000 documents "hit" by a revised keyword search. The plaintiff argued these documents would most likely have been produced had the defendant understood the list of "Search Term Revisions" supplied by the plaintiff to be supplemental rather than replacing the plaintiff's previous list of search terms. The defendant argued it should not have to spend the time and resources to review and produce the additional documents under the revised search terms since the requested documents would likely be irrelevant and because it previously produced over one million pages of documents. Determining the plaintiff failed to meet its burden and show that the documents' likely relevance outweighed the review and production costs, the court denied the plaintiff's motion.
Court Declines to Order Government to Preserve Evidence
Almarri v. Gates, 2008 WL 4449858 (D.S.C. Oct. 2, 2008). In this case, the plaintiff, an enemy combatant in military custody, requested the court impose a preservation order to preserve documents related to his detention and determine if spoliation occurred. The plaintiff claimed the government destroyed relevant evidence, did not have a preservation policy and that a preservation order was necessary to prevent further evidence destruction. The defendants claimed they had issued several preservation directives calling for the retention of evidence pertaining to the plaintiff and that the loss or destruction of certain records was inadvertent. Finding the defendants' efforts to be in good faith, the court determined the plaintiff failed to demonstrate that there was significant risk relevant evidence would be destroyed absent a preservation order, thereby denying the plaintiff's motion.
Court Dismisses Appeal Finding No Further Harm Alleged Following Inadvertent Production
Truckstop.net, LLC v. Sprint Corp., 2008 WL 4710681 (9th Cir. Oct. 28, 2008). In this contract dispute, the defendant filed an interlocutory appeal following the district court's order. The district court's order redacted privileged portions of an inadvertently produced e-mail but found that other portions of the e-mail were not protected by the attorney-client privilege. Finding a lack of appellate jurisdiction under the collateral order doctrine because the privileged information had already been disclosed, the court dismissed the appeal. The court noted that while the disclosure of the e-mail was unfortunate, "the chicken has already flown the coop — the alleged harm from disclosure has already occurred."
Court Denies Motion to Compel After Party's Assertion Under Oath Regarding Production
Oldenkamp v. United Am. Ins. Co., 2008 WL 4682226 (N.D.Okla. Oct. 21, 2008). In this case involving the payment of health insurance benefits, the plaintiffs filed a motion to compel discovery responses or an adverse inference for spoliation. The plaintiffs claimed responsive documents were not produced, and that the defendants either destroyed or failed to preserve these documents after notice of litigation. The plaintiffs sought recordings of telephone conversations, e-mails and internal company communication reports. Arguing a litigation hold was in place, the defendant claimed all e-mails were produced and no records were destroyed. Noting a party cannot be ordered to produce documents which do not exist, combined with the defendant's assertion under oath that all responsive documents were produced, the court denied the motion to compel. The court also denied sanctions finding the plaintiffs failed to produce evidence of intentional destruction.
Court Declines to Require Perfection in Production
S. Capitol Enterprises, Inc. v. Conseco Services, LLC, 2008 WL 4724427 (M.D.La. Oct. 24, 2008). In this ongoing electronic discovery dispute, the plaintiffs sought sanctions and/or additional discovery orders claiming the defendants failed to comply with a previous discovery ruling. The plaintiff claimed the defendant failed to produce 1,000 relevant documents, however the court stated that the likely benefit in having more documents produced was outweighed by the burden and expense associated with retrieving the evidence. The court noted that "perfection in document production is not required," and held that experts were allowed to estimate based on the data already produced.
Court Treats Web Site Like an Electronic File, Imposes Adverse Inference Sanctions
Arteria Prop., Ltd. v. Universal Funding V.T.O., Inc., 2008 WL 4513696 (D.N.J. Oct. 1, 2008). In this litigation involving a long-term loan, the plaintiff sought an adverse inference based on the alleged lack of production and spoliation of two types of documents: a highly relevant letter and information relating to the defendants' web site as it existed at the time this dispute arose. Determining the defendants were in control of the relevant missing letter, the court found sanctions appropriate. The court refused to make a culpability determination, finding that an adverse inference was warranted regardless of whether a negligence or bad faith standard applied. Regarding the web site, the court treated it as any other electronic file, finding the defendants had the ultimate authority and control over it. Based on this willful destruction or withholding of evidence, the court also imposed an adverse inference regarding the web site, granting the plaintiff's motion in full.
Court Determines Hash Value Analysis of Computer Constitutes Search and Requires a Warrant Under the Fourth Amendment
United States v. Crist, 2008 WL 4682806 (M.D.Pa. Oct. 22, 2008). In this criminal action, the defendant filed a motion to suppress evidence recovered from his computer, claiming its search was warrantless, in violation of his Fourth Amendment rights. The defendant did not consent to the search of his computer; rather he reported it stolen upon learning that it was given away. However, upon receipt, the forensic examiner hashed the drive then took a forensic image. Then, the examiner hashed the image, later comparing the hash value to files known to contain pornographic images. The court determined that subjecting the computer to a hash value analysis constituted a search, reasoning that instead of the hard drive being analogous to an individual item, it constitutes multiple items as it is comprised of many platters with multiple data storage units. The court accordingly granted the defendant's motion to suppress the evidence obtained from the forensic search of his computer.
Court Stresses Importance of Rule 26 and Encourages Cooperation Among Parties in Discovery
Mancia v. Mayflower Textile Servs. Co., 2008 WL 4595175 (D.Md. Oct. 15, 2008). In this collective employment action, the plaintiffs raised issues regarding numerous discovery and supplemental interrogatory requests. The defendants objected to these requests with, "boilerplate, non-particularized objections." Frustrated with the party's inability to approach discovery responsibly, Chief Magistrate Judge Paul W. Grimm scheduled an in-court hearing to discuss the discovery violations and issued this opinion to explain concerns and instruct counsel on how to reach resolution. Judge Grimm stated that the failure to abide by Rule 26(g), requiring particularized facts for a discovery objection, was one reason for the excessive costs of discovery. He also stated that, "discovery must be initiated and responded to responsibly, in accordance with the letter and spirit of the discovery rules, to achieve a proper purpose, and be proportional to what is at issue in the litigation, and if it is not, the judge is expected to impose appropriate sanctions to punish and deter." Due to the lack of record establishing an estimated amount in controversy, the court ordered the parties to meet and confer in good faith to: estimate a likely range of provable damages to quantify a "discovery budge" that is proportional to what is at stake in the case, discuss the additional discovery sought by the plaintiffs and attempt to reach an agreement, and provide the court with a status report indentifying any unresolved issues.
English Court Cites American Law When Discussing Keyword Search
Digicel v. Cable & Wireless PLC, [2008] EWHC 2522 (CH) (23 October 2008). In this breach of statutory duty litigation, the Claimants (plaintiffs) applied (moved) for restoration of back-up tapes and the use of additional search terms. Previously, the law of the multiple jurisdictions in which the Claimants and Defendants conducted business changed to increase competition by statutorily requiring surrender of Defendant's exclusive telecommunication licenses, giving rise to the Claimant's allegation of deliberate delay and damages. During initial disclosures, the Defendants unilaterally declined to restore or search back-up tapes and chose 10 search terms with 6 similar stem words, for which it was criticized by the Claimants. Balancing Paragraph 2A of Part 31 Practice Decision calling for early discussion of issues with Rule 31.7 requiring a "reasonable search," the court ordered the Defendant to restore backup tapes of relevant employees' e-mail and employ a select few additional search terms that were requested by the Claimant. The court noted that, "the rules do not require that no stone should be left unturned," but was unwilling to allow one party to unilaterally decide which searches should be conducted.
To view additional case summaries visit www.krollontrack.com/case-summaries/.
Practice Points: Crossing the Professional Border: Achieving ESI Preparedness Through IT and Legal
In today's digital era, employee records, financial paperwork, and research and development memoranda live on hard drives, servers and back-up tapes, not in the bankers' boxes or file cabinets of yesterday. The ease of creation, manipulation and storage of electronically stored information (ESI) has lead to an explosion of data, resulting in a new approach to document management. These factors have led to the convergence of legal and IT professionals in ways few could have envisioned five years ago.
A recent survey highlighted the changes in document management systems. Kroll Ontrack's 2008 ESI Trends Report interviewed 400 in-house counsel and discovered that 70% of U.S. companies have document retention policies in place, up from 30% just one year prior. Interestingly, the 2008 ESI Trends Report also reveals that a growing number of organizations are entrusting IT professionals—who have no legal training—with increased responsibility for developing and enforcing ESI strategies and policies. IT departments, not legal departments, are taking primary responsibility for ESI policy creation in 35% of companies (up from 18% in 2007). This finding is not surprising when considering that in many organizations, IT is the driving force behind the transition from the bankers' boxes and file cabinets of yesterday to the back-up tapes of today.
The necessity of IT and legal convergence is not only seen in corporate settings, it is also seen in case law. In August 2008, the Honorable Elizabeth Laporte, Unites States Magistrate Judge for the Northern District of California, held in Keithley v. Home Store.com, Inc., that Home Store's failure to issue a written document retention policy well after its duty to preserve arose was among the "most egregious" discovery misconduct the court had seen. Keithley v. HomeStore.com, Inc., 2008 WL 3833384 (N.D.Cal. Aug. 12, 2008). Judge Laporte criticized the defendant for not involving IT in the preservation of electronic evidence that was crucial to the underlying suit and refused to excuse ignorance of the technical requirements for proper preservation when issuing sanctions.
The recognition of IT's importance marks a shift toward what must become a more collaborative and team-oriented approach to e-discovery. Few in-house attorneys understand the technical intricacies of IT, and few IT professionals understand the complexity of procedural and discovery rules in the context of litigation. As the imposition of sanctions in Keithley demonstrates, ignorance is not a legitimate excuse for e-discovery transgressions. Cooperation and communication are essential elements of the relationship which must exist between IT and legal in order for a corporate ESI policy to be a success.
Cases such Keithley serve to remind corporate counsel that improper handling of ESI can lead to serious consequences. Drafting, promoting and enforcing a litigation readiness policy, in addition to understanding the location of a company's electronic documents, perhaps with the help of a data map, is an increasingly important element of corporate risk management. Corporate counsel must work with IT professionals to ensure proper litigation preparedness measures are in place — before the process server steps off of the elevator.
News & Events
Kroll Ontrack Issues Another "ESI Report" on the Legal Talk Network
Kroll Ontrack has partnered with the Legal Talk Network to discuss cutting-edge issues and judicial opinions relating to electronically stored information. Michele Lange, Director of the Legal Technologies product line for Kroll Ontrack, hosts the radio show entitled "The ESI Report." The show's segments: the Spotlight, the Buzz, and Bits and Bytes Legal Analysis, concentrate on hot topics in the area of electronic discovery and give listeners a snapshot into important issues facing practitioners, including rapidly evolving case law. The current edition brings together a Kroll Ontrack systems engineer and its manager of document review services to shed light on the many tools and techniques available to litigation professionals to assist with successful navigation of the documents review process. Additionally, listeners will be briefed by Kroll Ontrack's legal correspondents on the e-discovery order issued in the case of Containment Technologies Group Inc. v. American Society of Health Systems Pharmacists, discussing the varying standard for a "confidential" designation in response to a discovery request as opposed to a filing with the court under seal. Become a part of the over 20,000 listeners to date by visiting http://legaltalknetwork.com/modules.php?name=News&new_topic=17.
#1 E-Discovery Provider 7th Year in a Row
Kroll Ontrack has been named the #1 electronic discovery provider in the 13th Annual Am Law Tech Survey. This survey, appearing in the October issue of Law Firm Inc., marks the seventh consecutive year that Kroll Ontrack has been awarded this honor. Of the firms surveyed, 62% of the respondents identified Kroll Ontrack as their electronic discovery provider of choice. Polling CIOs and IT directors from the largest 200 law firms in America since 1995, the Am Law Tech Survey aims to reveal information about hardware, software, budgets, new developments and the latest legal trends. For the full story, please visit: http://www.krollontrack.com/news-releases/.
Corporate ESI Policies Are On the Rise, But So Are E-Discovery Risks
A recent independent study of 403 in-house counsel—203 from the United States and the remainder from the United Kingdom—reveals in-house counsel understand the value in ESI preparedness but still struggle to gain executive support. The survey reported that 70% of US companies and 53% of those in the UK now have ESI policies in place, still leaving 28% of US and 40% of UK organizations at risk for substantial reputation damage and financial loss during litigation or investigations that involve the exchange of electronic evidence. The survey points to a lack of time and resources among corporations as the most common barriers to executing ESI policies. To download your complimentary copy of the survey, please visit: http://www.krollontrack.com/esitrends/.
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This newsletter was written by Gina Jytyla and Joni Shogren, Kroll Ontrack staff attorneys, with assistance from Kelly Kubacki and Meridith Socha, Kroll Ontrack law clerks. Ms. Shogren can be contacted by writing to jshogren@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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