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In This Issue:
 Recent ESI Court Decisions
Court Sanctions In-House Counsel for Failure to Issue a Litigation Hold and Ensure Preservation
Swofford v. Eslinger, 2009 WL 3818593 (M.D. Fla. Sept. 28, 2009). In this §1983 claim asserting excessive force, the plaintiffs sought sanctions, alleging the defendants destroyed key evidence, including a laptop and e-mails. Despite receiving preservation notices from the plaintiffs, the defendants' in-house counsel only forwarded a copy of the letters to senior-level employees (who did not ensure other employees complied with the defendants' preservation obligations) and failed to issue a litigation hold. Citing Zubulake V, the court found that it is insufficient for in-house counsel to simply notify employees of preservation notices, but rather counsel "must take affirmative steps to monitor compliance" to ensure preservation. Finding sanctions appropriate for the preservation failures, the court issued an adverse inference sanction for the laptop wiping and deletion of e-mails. The court also awarded attorneys' fees and costs to the plaintiffs, holding the defendants and in-house counsel jointly and severally liable.
Court Awards Attorneys' Fees and Costs Citing Party's Failure to Issue a Proper Litigation Hold
Tango Transp., LLC v. Transp. Int'l Pool, Inc., 2009 WL 3254882 (W.D. La. Oct. 8, 2009). In this contract dispute, the defendant sought monetary and adverse inference sanctions alleging that after months of repeated requests for e-mail documents, the plaintiff failed to ask employees to locate, preserve or produce e-mail documentation. The plaintiff placed a litigation hold on e-mail accounts of some custodians; however, in-house counsel for the plaintiff admitted a litigation hold was not placed on three key players until six months after the request. Citing the plaintiff's failure to issue litigation holds, the court determined sanctions were appropriate and awarded the defendant almost $13,000 in attorneys' fees and costs to serve as a deterrent against the plaintiff's future commission of similar discovery abuses. However, because the defendant failed to demonstrate the destroyed e-mails would have supported its case, the court denied the adverse inference request.
Court Finds Copies Made of Opponents' Computer Files Violate Computer Data Access and Fraud Act
Joseph Oat Holdings, Inc. v. RCM Digesters, Inc., 2009 WL 3334868 (D.N.J. Oct. 14, 2009). In this business dispute, the defendants alleged the plaintiffs copied the defendants' computer files in violation of the Computer Data Access and Fraud Act (CDAFA). Prior to the joint venture termination, the plaintiffs' computers were connected to the defendants' server via a virtual private network. After the joint venture ceased, the plaintiffs copied approximately 152,000 documents, including proprietary business information, contained on the defendants' server in an act the court labeled "brazen and surreptitious." The plaintiffs claimed the defendants knew access to the joint system existed, were concerned the defendants would destroy relevant information on the network and that the defendants' litigation hold letter required them to preserve all documents within their possession or control. Finding the plaintiffs' "clandestine copying of computer files" was not performed purely for e-discovery purposes, the court determined the copying of files created after the joint venture dissolved was a clear violation of the CDAFA. Accordingly, the court granted the defendants' motion for partial summary judgment.
Court Conducts Hardship Analysis and Orders Non-Party Compliance with Electronic Discovery Subpoena
Whitlow v. Martin, 2009 WL 33381013 (C.D. Ill. Oct. 15, 2009). In this employment dispute, the plaintiff subpoenaed a non-party seeking production of electronic information relevant to the defendants' employment practices. The non-party's numerous objections to the subpoena included that the requests were not reasonably likely to lead to the discovery of admissible evidence, could be obtained from more convenient sources, sought not reasonably accessible documents, and were overly broad and unduly burdensome. The non-party claimed complying with the subpoena would cost hundreds of thousands of dollars and would take more than two years to complete because several Microsoft® Exchange Servers and 200 to 300 file servers located across the state would have to be searched. Acknowledging the non-party status as a significant factor in determining whether a subpoena presents an undue burden, the court applied a relative hardship test to determine if the burden outweighed the value of the produced material. After considering such factors as relevance, need and particularity, the court, while slightly modifying the production requirements, ordered the non-party's compliance with the plaintiff's subpoena.
Court Sanctions Party for Reckless Spoliation of Video Evidence
Peschel v. City of Missoula, 2009 WL 3364460 (D. Mont. Oct. 15, 2009). In this §1983 claim asserting unreasonable force and lack of probable cause, the plaintiff sought default judgment sanctions alleging the defendants spoliated video-recorded evidence. The defendants argued sanctions were not appropriate because the video's deletion was accidental. Citing the defendants' failure to have a backup system in place to ensure adequate preservation, the court determined the spoliation was the result of recklessness that warranted sanctions. In determining the appropriate sanction, the court found that an adverse inference was insufficient to cure the prejudice to the plaintiff. Although the court did not find an outright default judgment sanction appropriate, the court held that the defendants used unreasonable force. The court recognized this determination would effectively grant summary judgment on the issue of unreasonable force, "and, as such, [was] tantamount to a default judgment."
Court Reprimands Both Parties for Failure to Develop Meaningful ESI Discovery Plan
Mirbeau of Geneva Lake LLC v. City of Lake Geneva, 2009 WL 3347101 (E.D. Wis. Oct. 15, 2009). In this discovery dispute, the plaintiff requested production of the defendants' "computers and other electronic storage devices" for computer forensics analysis. The defendants argued that the plaintiff failed to demonstrate the need for a sequestering of all of the defendants' electronic devices. Denying the plaintiff's motion, the court found the plaintiff failed to justify the need for the forensic mapping of the defendants' entire computer system. However, the court acknowledged the need for the defendants to develop an organized system for the preservation and production of relevant ESI. The defendants' "click through" process to search e-mails "did not meet the level of diligence required for a fair discovery process." The court noted that the primary motivation for its decision was the failure of both parties to advance alternatives for discovery methods and stated that it expected the parties to develop a meaningful ESI discovery plan.
Court Conducts "Comity Analysis" and Orders Foreign Corporation's Compliance with the Federal Rules of Civil Procedure
In re Global Power Equip. Group, Inc., 2009 WL 3464212 (Bkrtcy.D. Del. Oct. 28, 2009). In this bankruptcy proceeding, the debtors filed a motion to compel the claimants, a Dutch corporation, and its agent entity, a French corporation, to comply with discovery requests under the Federal Rules of Civil Procedure (FRCP). The claimants argued the French Blocking Statute prescribes sanctions for any French corporation that "engages in the discovery process of a foreign judicial proceeding without using the procedures established under the Hague Evidence Convention." According to a U.S. Supreme Court case, when a court is asked to use the Hague Evidence Convention procedures, it must conduct a "comity analysis" to determine whether the FRCP or the Hague Procedures apply. The "comity analysis" requires consideration of five factors: the importance of documents, degree of specificity of the request, whether information originated in the United States, availability of alternative means and the effect of noncompliance on interests of the United States or the state where the information is located. Concluding the chance of prosecution under the French Blocking Statute to be minimal, the court determined the factors weigh in favor of using the FRCP to govern discovery in this case.
Court Determines Metadata is a Public Record Subject to Disclosure
Lake v. City of Phoenix, 2009 WL 3461304 (Ariz. Oct. 29, 2009). In this employment discrimination claim, the plaintiff appealed the appellate court's ruling that metadata is not considered a public record. The plaintiff sought production of electronic public records, including embedded metadata, after suspecting hard copies produced by the defendants were backdated. The Supreme Court of Arizona found the metadata to be a part of the underlying electronic document that could not stand on its own. As a result of this analysis, the court found that any embedded metadata is part of the electronic public record and is subject to disclosure. The court noted that this decision would be unlikely to cause the administrative nightmare the city prophesied because properly responding to a request for metadata would only require producing a copy of the electronic record in native format.
Court Admonishes Parties Failure to Comply with Texas State Electronic Discovery Rules
MRT, Inc. v. Vounckx, 2009 WL 3491165 (Tex.App.-Dallas, Oct. 30, 2009). In this civil litigation case, the plaintiffs appealed from a jury verdict in favor of the defendants, arguing they were entitled to a new trial because the defendants failed to comply with discovery obligations and misrepresented the steps taken to search and produce backup tapes (some of which were destroyed). The defendants argued the plaintiffs failed to make a specific request for the backup tapes as required by Texas Rules of Civil Procedure 196.4. Citing In re Weekley Homes, L.P. and the specificity requirement of Rule 196.4, the court disregarded the plaintiffs' contentions and affirmed the lower court's judgment. The court noted Rule 196.4's purpose was to ensure the clear understanding by both parties of ESI requests and reiterated the duties of both parties to share pertinent information regarding electronic storage systems prior to e-discovery requests, which did not occur in this case. Finally, the court concluded that the plaintiffs failed to demonstrate that the defendants knew, or should have known, that the destroyed tapes contained relevant information, and they therefore were not entitled to spoliation instructions because the defendants did not have a duty to preserve the backup tapes in question.
To view additional case summaries visit www.krollontrack.com/case-summaries/.
What's on the Minds of Corporations? Preparedness, Response and Ownership of ESI
Kroll Ontrack recently conducted its Third Annual Electronically Stored Information (ESI) Trends survey, which aimed to track and understand the measures corporations in the United States and United Kingdom have in place to manage ESI. The survey also gauged the success of strategy implementation and collaboration between the two most critical seats at the e-discovery planning table – legal and IT. The results revealed important findings about overall ESI preparedness, response, ownership and challenges among legal and IT departments.
ESI Preparedness
According to the survey, 87% of U.S. and 80% of U.K. corporations have a document retention policy in place. However, a much smaller number, 46% in the U.S. and 41% in the U.K., claim to have an ESI readiness strategy. This disparity demonstrates a lack of knowledge regarding the difference between the two policies and suggests a false sense of security within corporations that the existence of a document retention policy is comprehensive enough to protect an organization when litigation and/or regulation strikes.
The failure to implement a litigation readiness protocol invites costly repercussions and risk. As demonstrated in recent case law, courts are unsympathetic to e-discovery shortcomings. For example, in Micron Technology, Inc. v. Rambus, Inc., the District of Delaware imposed evidence preclusion sanctions against the defendant after determining the defendant's engagement in "shred days" was intentional and in bad faith. Likewise, in Phillip M. Adams & Associates, LLC v. Dell, Inc., the District of Utah relied on an e-discovery expert's declaration that the destruction of e-mails was not the result of a "routine, good-faith operation" and denied application of the safe harbor provision. The court found the defendants' "[irresponsible data retention] practices invite the abuse of others" and found sanctions to be appropriate (the court stayed action on the final sanctions to be imposed until discovery closed).
ESI Response
Another core theme from the survey was ESI response. Seventy-seven percent of U.S. and 56% of U.K. companies believe their ESI discovery readiness policy is repeatable and defensible. However, only 57% of U.S. and 39% of U.K. corporations have an indentified means (such as a litigation hold policy) to preserve potentially relevant data when litigation or a regulatory investigation is anticipated. Without an appropriate means to suspend the expulsion of potentially responsive data, many corporations are not positioned to execute proper preservation protocol or claim their discovery policy is effective.
Corporations who fail to institute a repeatable litigation hold policy and are later sued will discover the defensibility of their policy is at issue. For instance, in Pinstripe, Inc. v. Manpower, Inc., the plaintiffs sought sanctions alleging the defendants failed to preserve relevant documents. The defendants' counsel had drafted a litigation hold, but the defendants failed to issue it and hired an outside vendor to recover deleted e-mails. The Northern District of Oklahoma determined that the defendants failed to meet preservation obligations by failing to issue a litigation hold and awarded future deposition costs to the plaintiff. The court also ordered the defendants to pay $2,500 to the local bar association to fund a seminar on litigation holds and preservation of electronic data.
Ownership
Implementing an ESI readiness strategy is important, but whose responsibility is it to put these measures in place? Thirty-five percent of U.S. and 21% of U.K. companies say responsibility lies jointly with IT and in-house counsel to develop and institute an ESI discovery strategy. Traditionally, these two departments have not always been on the same page, but good news exists for the legal-IT relationship as 84% of U.S. and 69% of U.K. companies surveyed believe legal and IT are working effectively together when responding to ESI requests.
While IT and legal have joined forces and taken steps in the right direction, ongoing differences in communication, priorities and expertise make implementing and monitoring repeatable and defensible protocol a daily challenge. In addition to the language barriers between IT and legal, other significant challenges in implementing and maintaining sound practices exist among these departments. These challenges include time restraints, differences in day-to-day priorities, and legal and technical expertise discrepancies. Corporations must still take steps toward soothing these challenges to provide an efficient and proactive relationship between these two vital departments. This cooperation will allow for more timely responses to requests involving ESI.
Everything learned from this year's ESI Trends Report suggests that awareness of ESI and acknowledgment of its relevance to litigation and regulation has reached a pinnacle. Managing the effects of increased litigation and increased government regulations while operating with tighter budgets presents unique challenges that corporations must face effectively. Implementing ESI readiness strategies now will help ease the strain on resources in the future once an e-discovery request occurs. Not being prepared increases the company's vulnerability to e-discovery shortcomings that could cost the organization significantly in the form of sanctions. Increasing collaboration among IT and legal departments is also important to ensure complete and efficient responses to ESI requests, from properly securing critical business data to establishing effective litigation hold procedures.
To download a complimentary copy of Kroll Ontrack's Third Annual ESI Trends Report, which details these survey findings, please visit www.krollontrack.com/esitrends.
News & Events
Upcoming Webinar: Third Annual ESI Trends Report – ESI Management Is Top of Mind, but Effective Implementation Is Falling Short
According to Kroll Ontrack's Third Annual ESI Trends Survey, 6 in 10 organizations have a document retention policy, but they lack or are unaware of an electronically stored information (ESI) readiness strategy – leaving them vulnerable when faced with a flood of litigation or investigations. See how your organization stacks up against its peers. Join us at 1 p.m. EST on Wednesday, December 16, for an online seminar discussing the survey and what the results mean to you as an industry professional. For more information or to register visit www.krollontrack.com/webinar-121609.
Kroll Ontrack Litigation Technology Workshop at LegalTech New York 2010
Join Kroll Ontrack at LegalTech NY on Tuesday, February 2 for the Litigation Technology Workshop track. Learn how advanced electronic discovery technology can support electronic data management from preservation through review and production. In addition, gain a better understanding of the ethical challenges of e-discovery. Attend one, two or all three sessions. Attendees to all three sessions will earn up to 4.5 CLE Credits, inclusive of 1.5 Ethics Credits, and a Kroll Ontrack ESI Technology Certificate. To register or for more information, visit www.krollontrack.com/LT2010workshop.
Download Kroll Ontrack's Recent Podcast, "The Economy's Impact on In-House Counsel & Metadata as a Public Record"
What effect has the economy had on in-house counsel's role, specifically with regard to managing electronically stored information? In this edition of the ESI Report, Kelly Kubacki, Kroll Ontrack legal correspondent, welcomes Everett Upshaw, senior litigation counsel with Nokia, and Lisa Spinelli, legal consultant for Kroll Ontrack, to discuss the expansion of corporate counsel's roles and responsibilities as a result of economic pressure and the need to streamline existing processes. In the Bits & Bytes Legal Analysis segment, Gina Jytyla and Kelly Kubacki take a look at the discovery order issued in Lake v. City of Phoenix. To listen to the podcast, visit www.krollontrack.com/redir/1109IHC-MetadataPodcast-CLU.asp.
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This newsletter was written by Kelly Kubacki and Kelly Runkle, Kroll Ontrack law clerks, 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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