Tuesday, December 1, 2009

Year in review: courts continue imposing sanctions for electronic discovery shortcomings

Kroll Ontrack analyzes electronic discovery trends and notable cases in 2009

Minneapolis – December 1, 2009 – Kroll Ontrack®, the industry's largest provider of paper and electronic discovery, computer forensics and electronically stored information (ESI) consulting, jury consulting, and courtroom presentation services, today announced its analysis of the most notable electronic discovery opinions in 2009. Among the dominant topics reoccurring in the 2009 judicial opinions were the continued unwillingness of courts to excuse discovery failures, the importance of cooperation and transparency in the e-discovery process, and the increased application of new privilege protections (namely Federal Rule of Evidence 502).

From Jan. 1, 2009 to Oct. 31, 2009, 108 significant opinions representing e-discovery rulings were analyzed. The breakdown of the major issues involved in these cases is as follows:

  • 39 percent of cases addressed sanctions
    • 66.67 percent of sanctions involved preservation and spoliation issues
    • 16.67 percent of sanctions involved production disputes
    • 16.67 percent of sanctions involved other discovery abuses
  • 27 percent of cases addressed various production considerations
  • 12 percent of cases addressed privilege considerations and waivers
  • 12 percent of cases addressed various procedural issues (such as searching protocol)
  • 4 percent of cases addressed cost considerations
  • 4 percent of cases addressed computer forensics protocols and experts
  • 2 percent of cases addressed preservation and spoliation issues (but not sanctions)
  • 1 percent of cases addressed discoverability and admissibility issues

Five notable e-discovery cases from 2009 that summarized these issues included:

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 court determined the government should "forswear reliance on the plain view doctrine or any similar doctrine" regarding seizure of data requiring segregation, and issued five guidelines magistrate judges must follow when the government seeks a warrant regarding examination of electronic media.

Court Issues "Wake-Up Call" Regarding Need for Cooperation and Effective Searching Techniques
William A. Gross Constr. Assocs., Inc. v. Am. Mfrs. Mut. Ins. Co., 2009 WL 724954 (S.D.N.Y. Mar. 19, 2009). In this multi-million dollar construction litigation, a non-party agreed to produce electronic documents but objected to the search terms both parties proposed. The court issued a "wake-up call" to attorneys about the need to effectively design search terms used in e-discovery. Citing this as the "latest example of lawyers designing keyword searches in the dark, by the seat of the pants," the court referenced a series of recent decisions on searching and endorsed the "Cooperation Proclamation" from the Sedona Conference®.

Court Imposes 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); 2009 WL 546429 (M.D. Fla. Mar. 4, 2009). In this ongoing insurance litigation, the defendants sought sanctions for the plaintiffs' various production shortcomings and misrepresentations. The court concluded the plaintiffs' conduct was intended to deceive and prevent discovery. Based on several examples of gamesmanship, the court granted evidence preclusion sanctions, and ordered the plaintiffs, the lead plaintiff attorney and the law firm to pay the defendants' expenses and costs.

Court Affirms Sanctions Order Finding Non-Party Failed to Comply with Discovery Deadlines
In re Fannie Mae Sec. Litig., 2009 WL 21528 (C.A.D.C. Jan. 6, 2009). In this litigation, the Office of Federal Housing Enterprise Oversight (OFHEO), a non-party, appealed the district court's order finding it in contempt for failing to comply with a discovery deadline. OFHEO sought several discovery extensions, hired 50 contract attorneys and spent over six million dollars—nine percent of the agency's entire annual budget—to comply. Finding these efforts legally insufficient, the court compared its treatment of the discovery deadlines as "movable goal posts" and directed OFHEO to supply documents withheld for privilege that were not logged by the deadline as a sanction for their discovery misconduct.

Court Denies Application of Safe Harbor Provision for Preservation Failures
Phillip M. Adams & Assocs., LLC v. Dell, Inc., 2009 WL 910801 (D. Utah Mar. 30, 2009). In this patent infringement litigation, the plaintiff inferred that spoliation occurred based on the defendants' non-production of certain relevant evidence and sought sanctions. The court denied application of the safe harbor provision, citing an e-discovery expert's declaration that failed to state the destruction was a result of a "routine, good-faith operation" and noting the defendants' "[irresponsible data retention] practices invite the abuse of others."

"While three years have passed since the adoption of the amendments to the FRCP, corporations and their counsel continue to struggle with preparing for and complying with e-discovery obligations," said Michele Lange, director of legal technologies, Kroll Ontrack. "Further complicating this conundrum was the economic downturn, which placed the additional burden on corporations to control costs and do more with less. In 2009, corporations responded by implementing early data assessment technology, hiring in-house discovery experts and demanding flexible, predictable pricing. For 2010, signs continue to point positively toward proactive corporate data management, proving that upfront preparedness is a valuable cost-saving and risk mitigating strategy."

The Legal Technologies division of Kroll Ontrack provides corporations, law firms and government agencies with technology and services for large scale electronic and paper-based discovery, computer forensics, trial graphics and presentations as well as electronically stored information (ESI) and jury consulting. Helping customers quickly and cost-effectively find, review, manage, produce and present relevant evidence, Kroll Ontrack is recognized as the leading electronic discovery provider by Am Law Tech (2002, 2003, 2004, 2005, 2006, 2007, 2008 & 2009).

About Kroll Ontrack Inc.

Kroll Ontrack provides technology-driven services and software to help legal, corporate and government entities as well as consumers recover, search, analyze, produce and present data efficiently and cost-effectively. In addition to its award-winning suite of software, Kroll Ontrack provides data recovery, advanced search, paper and electronic discovery, computer forensics, ESI consulting, and trial consulting and presentation services. Kroll Ontrack is a technology services division of Kroll Inc., the global risk consulting company. For more information about Kroll Ontrack and its offerings please visit www.krollontrack.com; www.ontrackdatarecovery.com; www.ontrackengenium.com.