Studeo Legal

Can You Be Sanctioned for Failing to Preserve a Former Client’s Email?

Given the explosion in social media and email data over recent years, it is not news that they have become extremely important in electronic discovery. Everyone is aware that the volume of email that needs to be preserved and reviewed is a major part of the increased cost of litigation. However, exactly what gets preserved and who is responsible for preserving it is still in a state of flux. What is the legal and ethical obligation of your firm regarding the preservation of a former client’s email?

Well, based on a recent case in the Eastern District of New York, it is more compli cated than we thought. It is clearly an area that must be considered by law firms as they move forward in their practice regarding electronic discovery issues.

In FDIC v. Malik, 2012 U.S. Dist. LEXIS 41178 (E.D.N.Y. Mar. 26, 2012 the Defendants’ preservation obligation started in 2008 during their representation of AmTrust in multiple contested loan transactions. The obligation to preserve documents was violated when Defendants’ employees were permitted to delete emails that were neither preserved in hard copy nor backed-up electronically.

During subsequent discovery in FDIC v. Malik, the Defendants produced a total of 89 emails concerning the 26 contested loans. After its review of the material the Court determined that the low number of emails “strongly suggests that additional emails related to those loans were created, but not preserved.” The Plaintiff then filed a motion for sanctions, including an adverse inference, against Defendants for spoliation.

Relying on Byrnie, the Plaintiff had argued that the Defendants had a duty to preserve the emails “arising from professional responsibility rules and attorney ethics opinions, citing the Assoc. of Bar of City of N.Y. Comm. On Prof. and Judicial Ethics, Formal Opinion 2008-1, A Lawyer’s Ethical Obligations to Retain and Provide a Client with Electronic Documents (July 2008)).”

In the opinion, the judge included a footnote that said, “ (a) regulation requiring retention of certain documents can establish the preservation obligation necessary for an adverse inference instruction where the party seeking the instruction is “a member of the general class of persons that the regulatory agency sought to protect in promulgating the rule.” Byrnie, 243 F.3d at 109.

The judicial opinion further stated:

“The Malik defendants have not responded to that argument and have made no attempt to explain why those rules and ethics opinions, which require lawyers to preserve electronic documents relating to a representation and seek to protect clients such as AmTrust, do not trigger an actionable duty to preserve under Byrnie. Therefore, I conclude that the Malik defendants had a duty to preserve in 2008 when they represented AmTrust in the loan transactions at issue. I also note that the Malik defendants have not argued that this retention obligation excludes the types of emails at issue in the instant motion.”

The judge has scheduled an evidentiary hearing to determine whether the e-mails were destroyed with a “culpable state of mind” which would result on the adverse spoliation inference and to rule on the request for sanctions.

The Takeaway
This case involves several key issues regarding litigation and electronic discovery that may impact future litigation matters. First, it provides a clear example of how the ethical duties and obligations of lawyers may intersect and impact with subsequent cases that a firm handles. New York ethics rules require certain preservation requirements by attorneys. Second, this case involves the general issue surrounding the preservation of electronic information,(e-mails) which are not always preserved in hard copy format and may be deleted or otherwise unintentionally lost. It points directly to the need for attorneys and their clients to develop and closely follow document retention rules, understanding that there may be an impact beyond the current litigation. While the determination over sanctions has not been made it, it should sound a cautionary note.

Taxation of EDiscovery Costs is Clearly Not Settled Law

The Past Ruling
On 5/7 (see post) , I wrote about the Third Circuits ruling in Race Tires Amer., Inc. v. Hoosier Racing Tire, Corp., --- F.3d ---, 2012 WL 887593 (3d Cir. Mar. 16, 2012 in which the court vacated the lower court’s approval of taxable costs incurred during electronic discovery.  The court concluded that none of the relevant vendors’ charges “would not qualify as fees for ‘exemplification’” and that “of the numerous services the vendors performed, only the scanning of hard copy documents, the conversion of native files to TIFF, and the transfer of VHS tapes to DVD involved ‘copying’” and were thus recoverable.

The court focused on whether 28 U.S.C. § 1920(4) “authorizes the taxation of an electronic discovery consultant’s charges for data collection, preservation, searching, culling, conversion, and production as either ‘exemplification [or] the . . . making [of] copies of any materials where the copies are necessarily obtained for use in this case.’”  This led many to believe that taxation would not be generally allowed until the Federal Rules were specifically modified to include EDiscovery costs.

The Current Ruling
Within a week of the Third Circuits ruling, a Northern District Court in California declined to follow Race Tires, and allowed some taxation of EDiscovery costs in,  In re Online DVD Rental Antitrust Litig., No. M 09-2029 PJH, 2012 WL 1414111 (N.D. Cal. Apr. 20, 2012).  The plaintiffs moved for review of the clerk’s taxation of costs, including those that were related to electronic discovery. Despite the Third Circuits recent narrow interpretation of 28 U.S.C. § 1920(4), the court granted the motion in part and denied in part the plaintiffs motion, refusing to disallow the costs related to electronic discovery in this case. 

While the order is rather short and easily read, I am supplying the two key paragraphs that outline the courts decision regarding why the costs were granted:

’Title 28 U.S.C. § 1920 authorizes a judge or clerk of the district court to tax costs. Pursuant to Federal Rule of Civil Procedure 54(d), costs (other than attorney’s fees) should be awarded to a prevailing party unless a statute, rule, or court order provides otherwise. Fed.R.Civ.P. 54(d)(1). “Rule 54(d) creates a presumption in favor of awarding costs to prevailing parties, and it is incumbent upon the losing party to demonstrate why the costs should not be awarded.” Stanley v. University of So. Cal., 178 F.3d 1069, 1079 (9th Cir.1999). The reasons offered by plaintiffs in support of their request to vacate the entire amount of costs taxed in favor of Netflix are not sufficient to overcome the presumption in favor of awarding costs. Therefore, plaintiffs’ request that the court deny any award of costs to Netflix is DENIED.”

Based on that interpretation the court then wrote:

“The court declines to disallow remaining costs on the grounds argued by plaintiffs (e.g., TiFF conversion costs; copying/”blowback” costs purportedly not documented; document productions purportedly not delivered; professional fees re visual aids).  Furthermore, although the court takes note of the Third Circuit's well-reasoned opinion in Race Tires Am., Inc. v. Hoosier Racing Tire Crop., ––– F.3d ––––, 2012 WL 887593 (3d Cir. Mar.16, 2012), the court concludes that in the absence of directly analogous Ninth Circuit authority, and in view of the court's prior order in connection with the Blockbuster subscriber plaintiffs' motion for review of the clerk's taxation of costs, broad construction of section 1920 with respect to electronic discovery production costs—under the facts of this case—is appropriate.  See also Taniguchi v. Kan Pacific Saipan, Ltd., 633 F.3d 1218, 1221 (9th Cir.2011) (although the court is restricted in awarding costs to the categories enumerated in § 1920, “[d]istrict courts are free to interpret the meaning of the cast of categories listed within § 1920”).”

The Courts Conclusion
Following adjustments to the clerk's original award, the court disallowed costs of $27,644.50; the total award to Netflix was adjusted from $737,838.79 to the amount of $710,194.23.   However the court then stayed the payment of this award until the conclusion and final resolution of any appeals related to this action.

The Takeaway

Clearly this is an area of law that is in a state of flux, with decisions on both sides of the issue.  It is not likely to be fully resolved until either the statutory language is addressed by Congress, or a case is accepted by the US Supreme Court for hearing.  In the meantime, recovery of these expenses is tenuous at best, and the most prudent court of action is for parties to control the costs of EDiscovery by relying on the concepts of “reasonableness” and “cooperation” between the parties, which is a hard road for many attorneys to follow.

2012 WL 1414111
Only the Westlaw citation is currently available

What Does Reasonableness have to do with Litigation?

 

Prelude
Unfortunately, I am old enough to remember when the major goal of defense firms was to delay the litigation process, bury the other side in millions of pages of unrelated documents and offer as little assistance as possible about the data that was produced.  During any number of the antitrust cases that I worked on in the mid 1980’s, defendants would literally back up the truck and dump documents on us with the claim that they were all “responsive” to our discovery requests.  Working in a state antitrust office, our only response was to band together with other state AG’s in an attempt to provide enough staff to plow through the mountains of data.  While the ‘responsive’ data may have been delivered (so the defendants were technically in compliance), locating useful information was not an easy task.   Gratefully, those methods are no longer acceptable behavior in the discovery process.

At Legal Tech 2012, Judge David Waxse (U.S. District Court Kansas) spent some time explaining what the courts are looking for from both parties in litigation.  In summary, one of his major focuses was on the concept of “reasonableness”.  He posited that the court understands that “perfection” is a laudable concept to shoot for in EDiscovery, but that courts do not expert parties to ever reach it.  The Federal Rules of Civil Procedure (FRCP) is a set of procedural rules that are to govern behavior, but they are not and can not be absolute.  Court’s do not expect clients to get everything right every time, they are asking litigants to be able to show that they have made all “reasonable” efforts to get it right..

An Attempt at Definition
Of course, the problem is now to try and reach agreement on what “reasonable” means in the context of litigation.  What should constitute “reasonable” attempts to comply with the FRCP?

A recent case helps to provide further guidance on this issue.  Bradley B. Larsen vs. Coldwell Banker Real Estate Corp (C.D. Ca Feb. 2, 2012) addressed the issue of insufficient discovery.  The plaintiffs alleged the defendants had failed to comply with the court’ discovery order.  They filed a motion to compel the defendant to go through a second round of electronic discovery, specifically requesting that a neutral third party “re-collect and process defendants ESI”.

The Court relied heavily on The Sedona Conference Principles when it ruled that  “the requesting party has the burden on a motion to compel to show that the responding party’s steps to preserve and produce relevant electronically stored information were inadequate.”

With this basic principle as the foundation, the court applied a proportionally test as described by FRCP 26(b)(2), to asses whether the responding party met its burden.  The relevant section states that
 (C) When Required. On motion or on its own, the court must limit the frequency or extent of discovery otherwise allowed by these rules or by local rule if it determines that:

(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;

(ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or

(iii) the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues. (EMPAHSIS ADDED)

The Courts Decision

The court denied the plaintiff’s motion to compel re-production, finding that the plaintiffs had failed to prove that the defendants were unreasonable in their e-discovery efforts, thus did not follow the court’s original discovery order. The court determined that the defendant’s response to the original order was adequate and that the burden of the second production did not outweigh the likely benefit.  This was based in summary on

The Burden: The original production consisted of over 1,000 hours of processing, at a cost of more than $100,000.  Revisiting the data would likely cost at least as much a second time.

The Benefit:  The defendants produced over 9.000 pages of discovery and the court found that only two examples existed of possible missing discovery.  Therefore, this was considered to be an acceptable error rate when dealing with a production of this size. 

The Takeaway

The judiciary is restricting the issuance of overly broad production requests and motions to compel that are not based on a solid foundation of fact that the party has acted unreasonably.  When determining whether to file a motion to compel for inadequate production with the court, parties need to consider whether they can provide some real evidence that the opposition has acted in an “unreasonable” manner, and this must be based on the inclusion of a proportionality analysis as outlined in the FRCP.  Without the ability to provide the court with real evidence, it is likely that their pleas will go unanswered.  The courts want the parties to work through these issues and in the end, focus on producing what is required in a manner that is cooperative… and reasonable.

 

Third Circuit Addresses Taxable Costs: Vacates Award of the District Court in Race Tires Amer., Inc. V Hoosier Racing Tire

The District Court
 In the original case, the District Court (U.S. District Court for the Western District of Pennsylvania) had granted the summary judgment motions of the defense.  The Clerk then considered the Bill of Costs that was submitted by the defendants and concluded the “electronic Discovery costs would be consider[ed] taxable, as opposed to just…..the cost of litigating”.  The Plaintiff immediately filed a Motion to Appoint an EDiscovery Special Master to review the taxation of costs.  The District Court refused to appoint a Special Master and subsequently affirmed the Clerk’s taxation of the vendor charges during EDiscovery.  The courts decision “essentially found that the steps of the third-party vendors performed appeared to be the electronic equivalent of exemplification and copying.”  The Plaintiff immediately appealed the decision

The Question on Appeal
The question considered by the Third Circuit was whether 28 U.S.C. § 1920(4) “authorizes the taxation of an electronic discovery consultant’s charges for data collection, preservation, searching, culling, conversion, and production as either ‘exemplification [or] the . . . making [of] copies of any materials where the copies are necessarily obtained for use in this case.’”  The argument forced an analysis of what types of expenses may be taxed, based on statutory language.

The Third Circuit

On appeal, Race Tires Amer., Inc. v. Hoosier Racing Tire, Corp., --- F.3d ---, 2012 WL 887593 (3d Cir. Mar. 16, 2012) the Third Circuit vacated the District Court’s approval of taxable costs incurred during  electronic discovery and remanded to the lower court with the instruction that they should  re-tax in accordance with the new opinion.  The court concluded that none of the the relevant vendors’ charges “would not qualify as fees for ‘exemplification’” and that “of the numerous services the vendors performed, only the scanning of hard copy documents, the conversion of native files to TIFF, and the transfer of VHS tapes to DVD involved ‘copying’” and were thus recoverable.

The Court based its decision on a review of the original language of § 1920(4), as well as a study of the related history surrounding the implementation of the section by Congress.  According to the court’s analysis, there was no indication that Congress intended to shift all the expenses of ESI discovery to the losing party.  Additionally, there was no support in Supreme Court interpretation which had always viewed the cost statutes very narrowly.  The Court however, did acknowledge that there might be strong policy reasons or equitable circumstances in particular cases to award the full costs of EDiscovery to the prevailing party, but concluded that the federal courts lack that type of authority under the current statutes.

The court concluded that none of the EDiscovery charges imposed by the plaintiff’s vendor are taxable and reduced the award in favor of defendant Hoosier from $125,580.55 to $30,370.42

The Takeaway
Cost-shifting may be achieved during the course of litigation, either by agreement or pursuant to court order issued under the authority of Fed.R.Civ.P. 26.  After litigation, cost-shifting may be ordered as a sanction for conduct that reflects bad faith on the part of parties.  But until the issue surrounding EDiscovery costs is addressed on a statutory level by Congress, attorneys should not count on any major recovery of EDiscovery costs. 

With the chances of recovering all ESI costs unlikely,  attorneys should continue work closely (and cooperatively) with opposing counsel to produce documents in the most cost-effective manner possible; using the best technology and human review possible to produce the least amount of documents in the most cost effective manner.  Partnering with experienced litigation support companies who can advise clients on the best and most cost effective way to produce documents is one way to help control these costs before the are incurred.

Juror Using Internet During Deliberations Held in Contempt - Why Lawyers Need to Pay Attention

Last week I wrote about the adverse impact of the use of social media by a juror while sitting on the jury.  This week, I am reporting on the juror use of the Internet during deliberations, despite direct orders from the judge not to engage in such behavior.  This trend is troublesome on a number of levels and again points to the need for lawyers to proactively monitor the use of social media and the internet by members of the jury in order to protect their client’s interests.

Summary
Daniel M Kaminsky, the jury foreperson was found to be in criminal contempt for violating several orders of the trial judge prohibiting jurors from engaging in any independent research during trial. (In re Kaminsky, (N.J. Sup. Ct., Bergen County, March 12, 2012).  After a mistrial was declared in the underlying criminal drug case, two other jurors reported that Kaminsky had been using the Internet during deliberations.  During an Order to Show Cause hearing and an in camera session, Judge Doyne determined beyond a reasonable doubt the following:

1) Kaminsky had conducted independent research
2) The act was in contempt of the court
3) The conduct was willfully disobedient, “with a complete disregard of the court’s authority and instructions”.
Although subject to a maximum punishment of six months in prison, a $1,000 fine or both, he as fined only $500 by the court.

The Facts
The jury was repeatedly advised by the court that the Internet and other independent research were prohibited because their deliberations and verdict should be based solely on the evidence that had been introduced and accepted by the court.  Instructions regarding these limitations were made at a number of points throughout the trial, including during: voire dire, after being sworn in as a jury, before each break and at the end of each day’s proceedings. 

In spite of these repeated directions, the jury foreperson researched the potential punishment options for the defendant and “concluded” that the penalty could range anywhere from ten to twenty years.  The foreperson felt that this length of punishment was to severe based primarily on the defendant’s young age.  The jury foreperson claimed that the possibility of such a lengthy sentence made him both physically and emotionally sick which impacted his thought process.

One of the jurors’s who had reported the actions of the foreperson felt that the foreperson had become ‘tainted” through his Internet research and therefore had influenced the direction of the deliberations by the entire jury pool.  Even though the foreperson had not researched any material specific to the ongoing case and the trial judge had not laid out every possible subject matter that was considered prohibited research, the Court concluded that the critical fact was that the foreperson was relying on information that was not admitted during trial and therefore the foreman had disobeyed the Court’s instructions. 

Judge Doyne acknowledged that in New Jersey, sanctions for violating jury instructions had not been issued before.  However the Judge made three separate points in his opinion:

1. He is concerned about the general level of juror disobedience and the failure of some jurors to “conscientiously discharge their duties.”
2. He separately praised the actions of the two jurors who had come forward to report the problem.
3. He emphasized that he did not believe that the foreperson had any malevolent intentions through his actions.
 

The Result
The Judge did not attack jurors in general and respects the function and purpose of jurors in the trial process went to great lengths.  As he has mentioned in other forums, Judge Doyne recommended that the State’s Model Criminal Jury Charges be revised to be more explicit and

1.  “to better communicate the importance of obedience to the court’s instructions”
2.   include an explanation of the “reasons for the prohibition on juror research”
3. and to describe clearly the “possible punishments for disobedience.”

 

Absent these types of explicit instructions, and without ongoing monitoring of jurors use of social media and the Internet, it is unlikely that this problem is going to disappear anytime soon.  It is important to the judicial process that certain rules be enforced to create a level playing field for both parties in litigation.  Lawyers need to strongly consider engaging the services of special trial consultants that can monitor the use of social media and the Internet during a trial to eliminate improper jury activities that can adversely impact decisions.  Enforcement of jury compliance with court instructions is not going to happen by itself, proactive steps need to be taken.

 

Heed the Judges Warning to Stay Away from Social Media Uses During a Trial

There are a number of reasons that judges, lawyers and jurors need to pay attention to the myriad uses of Social Media during trials.   Many people seem to feel that using Social Media communication is an “inalienable right” and that nothing should stop them from expressing their opinions at will.  However, when the use of these communication methods interferes with the conduct of a trial, judges are beginning to examine the impact and forcing people to pay attention.  The use of Social Media can now be easily monitored and determining negative impacts on a trial is becoming an increasing focus of litigation support firms.

Scenario
Jacob Jock, from Sarasota Florida, was selected for jury duty in December of 2011 for a car accident case. On the first day of the trial, he then attempted to “friend” the Defendant in the case using his FaceBook account (He was allegedly interested in going on a date with the defendant).  The defendant immediately told her attorney about the request, who informed the judge.
 
“Jock testified that he mistakenly hit "friend request" instead of "mutual friends" while checking his 1,300 Facebook contacts to see whether defendant Violeta Milerman was already among them, after lawyers asked potential jurors if they knew anyone in the case.”

The jury had received clear instructions from the judge about the use of FaceBook prior to the trial.  Based on that instruction, Circuit Judge Nancy Donnellan immediately dismissed the juror and admonished him for his actions.  It would likely have ended there, but…..

Jock then posted comments on his wall, boasting that he had gotten out of jury duty and had been dismissed from the panel for his attempts to “friend” the defendant.  His wall included the following comment, "Score...I got Dismissed!! apparently they frown upon sending a friend request to the defendant...haha!!!"  It was this second strike against him that resulted in further action by the court.

Unfortunately for the ex-juror, court officials became aware of the post, leading Judge Donnellan to call the ex-juror back into Court to face criminal contempt charges. At the end of a two-hour hearing, Judge Donnellan commented, “I cannot think of a more insidious threat to the erosion of democracy than citizens who do not care.” She sentenced the ex-juror to three days in jail, and he was led from the courtroom in handcuffs.

Social Media Impact

This is another example of social media impacting judicial proceedings. As the attorney for the plaintiff in this case commented, “it was a very big deal” to his client “who had $48,000 in medical bills on the line,” and if the female defendant had, for example, responded to the Friend request and went on a date with the juror, perhaps the juror would have found in her favor. The use (and misuse) of Social Media matter during legal proceedings.

What should attorneys be doing?
In light of these types of missteps, attorneys must pay close attention to the impact of social media on their client’s trials.  In the above instance, it was the fact that Jock had been dismissed from the jury pool that led someone to then to re-examine his FaceBook account a second time and find his comments.  But how can attorneys’ best serve their clients moving forward?

Studeo Legal is one of a  small number of litigation support companies in the United States that have developed an expertise surrounding the monitoring of social media use by jurors during selection and trial.  As part of a background check on potential jurors, a list of social media users can be compiled by the investigative team.  Using specialized software, we now have the ability to monitor on an ongoing basis the use of FaceBook, Twitter and Blogs to determine if court instructions are being followed by the participants. 

We provide a daily report to the legal team, pointing out any potential problems with the use of social media as it relates to the trial.  This service is just another tool that can benefit our clients during trial, helping to assure that a fair decision is made and that the courts requirements are being met by the jury.  While some may view it as an intrusion, it is really about providing an even playing filed during litigation and insuring that judges instructions are closely followed by everyone involved in the trial.

 Call us today.  We will be happy to speak to you about your case.

 

 

Jurors Ask Witnesses Direct Questions in Patent Case

Chief U.S. District Judge Leonard David (Eastern District of Texas) recently allowed jurors in a patent trial to ask questions of the witnesses.  The Chief Judge had wanted to try the experiment for a long time, especially in a complicated patent litigation, due to the amount of technical material that jurors were expected to interpret during the trial.  The idea emerged after a conference he attended that consisted of chief U.S. district judges.

Judge David said that he had been considering the concept for the last year based on post-trial polling that he had been conducting of jurors.  He feels that the truth seeking role of a jury is improved when the jury is more engaged in the process.  He asked jurors whether it would have been helpful to their understanding of the case if they had been allowed to ask questions.  Based on the responses that he received, he felt that it would be beneficial to have jurors submit questions for witnesses as long as it did not delay or complicate the patent trial.

The case that he elected to try his experiment on was CEATS Inc. v. Continental Airlines, et al.  The patent dispute involved ticketing software that passengers interacted with to select seats on commercial airlines.  Given the somewhat complicated nature of the software processes, he felt it would be useful to allow the jury to submit questions. 

The Rules Created by the Court
Davis did not set out to reinvent the wheel; in fact he relied heavily on a review of cases in the 5th U.S. Circuit Court of Appeals which permits jurors to ask questions of witnesses.  He developed the following set of parameters to guide the process and make the implementation transparent to both sides.

• All jurors received forms to record witness questions which were handed directly to the judge
• All jurors handed in the forms for each witness so that attorneys would not be able to determine which juror or jurors were asking a question.
• Attorneys were able to review the questions and make objections before the judge directed the questions to the witness.
• The Judge reserved the right to change the questions so that they would be presented as “neutral”, without a bias towards either side of the case.

The judge stated that he was impressed with the quality and preciseness of the questions.  He felt that they were often on point and helped to clarify the often lengthy, technical presentation by the witnesses. Davis felt that the questions really highlighted that the jurors understood the major issues and were seeking further clarification.  In summary Davis felt that:

• On average, jurors only added one or two questions for each witness during the trial so there was no major impact on the length of the proceedings.
• Most of the questions that were submitted were relevant and useful in understanding the complicated software issues.

Impact on Case Strategy

Counsel did not receive advance notice of the experiment before the trial, so there was little time to adjust any trial strategy to account for the new procedures.   However, witness preparation included an extra step not normally covered.  Witnesses were informed ahead of time that the judge might be asking questions that members of the jury had submitted and defense attorney Melsheimer, a partner with Fish and Richardson, make it clear that these questions would likely be the most important questions that they would be asked and that they would require full and complete answers.

In fact, some of the juror questions helped the attorneys refine their own questions and switch the emphasis of their planned witness presentations.  Listening to what is important to the jurors can allow the attorneys to adjust the information presented by witnesses to respond to those particular concerns and therefore impact the juries decision. 

The case resulted in a March 21 defense win.  After the trial, Judge Davis polled all the jurors and the 11 attorneys involved with the case and the response from all was that the experiment had been useful to the proceedings.  While Judge Davis has not said that juror questions will become a standard part of ongoing patent cases, attorneys should certainly be aware of the possibility and be prepared to incorporate it into their trial strategy.

 

There is no Denying the Key Role of Email in Business – and It’s Impact in EDiscovery

Email is likely the single most important tool in a business organization.  At some point in time, every important business policy and decision appears somewhere in the email servers, oftentimes in multiple postings as different divisions weigh in over time as company debates rage on about policy, process or practices.

As a result of this, litigating attorneys have focused on email electronic evidence whenever they are filing suit on behalf of a client.  Email is an area ripe for discovery.  The question is how can a company still benefit from the extensive use of this tool without providing a roadmap to the opposition during the discovery process?

Courts have consistently ruled against companies that make weak claims regarding their inability to find and produce information due to their lack of retention policies.  Arguments such as “Those emails can’t be found” or “apparently those were inadvertently deleted” are no longer taken at face value by the court.  They expect you to be able to produce information unless an organization can point to very specific policies that would explain why that information is no longer available.  Document retention policies that are formal and enforced are really the only effective way to explain why data is not available.

A properly formed document retention policy that is designed and disseminated to all employees and properly enforced will ensure that relevant documents are retained and that policies are defensible to the court.  One need only look at the DuPont Corporation for details on how an effective retention policy might be developed.

In a federal district court case in Virginia,  E.I. DuPont De Nemours and Company, Plaintiff v. Kolon Industries, Inc., Defendant (2011 U.S, Dist. LEXIS 45888), DuPont had a two part document retention system in place that destroyed emails under specific circumstances:
 

To ensure that inactive accounts are not needlessly occupying space on DuPont's servers, DuPont deletes inactive email accounts from its servers after an employee leaves the company. DuPont handles such inactive accounts two different ways. First, if an email account is inactive for 30 days, it "appears on an inactivity report, which is then circulated to Human Resources, Legal, and upper-level management.  "These individuals then have 30 days to remove the email account from the inactivity report or the account will be deleted." Under this practice, therefore, an inactive email account sits for sixty days before routine deletion from DuPont's servers if it is not subject to a litigation hold or removed from the inactivity report. "Alternatively, during the time in question, a departing employee's immediate manager or the human resources representative may request that the email account be deleted at the time of the employee's departure, or shortly thereafter, provided the email account is not subject to a Legal Hold Order.”Under these circumstances, “according to DuPont, "the email account is deleted without being placed on an inactivity report."

During discovery, it was determined that a number of documents sought by Kolon were destroyed as part of that process before a preservation order was triggered by the lawsuit.  Kolon asked the court to rule against DuPont and punish them for destroying documents that were part of their discovery request.  The Court rejected the motion because the material had been destroyed as part of defined corporate data management plan. 

The document retention plan employed by DuPont benefited the company in two major ways.  First, it gives them a way to manage the company’s vast storage demands given the size of the corporation.  Secondly, it provides a defensible policy of destruction that likely eliminated information that could have been harmful to the corporation during any subsequent lawsuits.

Comprehensive document retention policies can cut both ways.  Eliminating data on a schedule may protect you in the case of future litigation, but it also means that your internal institutional knowledge is periodically purged, which may be a bad business decision.  Document retention policies should be carefully weighed and debated before implementation in order to benefit both sides of the equation.  Creating a policy that focuses strictly on the destruction of data to avoid future litigation problems may be shortsighted when weighed against what the company loses in institutional knowledge.

A few guidelines to keep in mind when creating a document retention policy:

1. You can’t create a document retention system in a vacuum. If your company is in a highly regulated industry—financial services, health care or oil and gas – you need to make sure that you account for all the rules and regulations that govern your industry regarding compliance.  They often require retention beyond what might normally be considered “reasonable”.
2. The goal is to create a comprehensive data retention policy that contains guidelines regarding:
a. Length of time to retain documents
b. Types of documents included in destruction policy and exceptions to standard policy.
c. Method and responsibility for destruction
d. A pre-designed litigation hold policy that is immediately implemented when a party reasonably anticipates litigation in order to suspend routine document retention and destruction policies to ensure the preservation of relevant documents.
3. Your policy needs to weight the advantages and disadvantages of routinely disposing of information that may be important to the long term viability of your organization.   An unreasonable document destruction policy may help you in litigation, but may harm your company’s assets by destroying important information. 

Note:  The details of the case are far more complex than I have discussed in this post and the ruling should be read in detail to understand the full complexity of the matter.  The ruling includes discussions on the duty to preserve, culpable conduct and spoliation. 

ESI preservation and Spoliation – Have Litigation Hold Obligations Expanded?

Disintegration of Business Relationship Requires Preservation of ESI

Recently, in VOOM v. EchoStar, 2012 Slip Op. 00658 (from January 31, 2012), the First Department of the Appellate Division upheld a lower court’s decision imposing sanctions against EchoStar for spoliation of ESI.  What makes this case worth noting are the circumstances leading to the spoliation.  Effectively the court ruled that the disintegration of a business relationship is a trigger for reasonably anticipating litigation and therefore requires the implementation of a litigation hold.  This is likely not something that most attorneys have considered in the past. 

The Appellate Division noted that the standard for preservation that was adopted in Zubalake v. UBS Warburg was correct and “has been widely adopted by the federal and state courts.”  "Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold' to ensure the preservation of relevant documents"  (Zubulake, 220 FRD at 218). Further, the Zubulake standard “is harmonious with New York precedent in the traditional discovery context, and provides litigants with sufficient certainty as to the nature of their obligations in the electronic discovery context and when those obligations are triggered.”

Case Summary
The facts are briefly summarized here for context.  In 2005, Voom and EchoStar entered into a 15 year affiliation agreement whereby EchoStar agreed to distribute Voom's television programming. The agreement required EchoStar to include the Voom channels "as part of its most widely distributed package of HD programming services".  This meant that EchoStar could not “tier” the channels and charge customers more for Voom than the standard fee charged to customers for HD. EchoStar had the right to terminate the agreement if Voom failed to spend $100 million on the "service" in any calendar year, and retained the right to audit Voom's expenses and investments.

Voom stated that in 2007, EchoStar determined that the deal was disadvantageous, and therefore decided to falsely claim that Voom had not fulfilled its financial commitment in 2006 or had failed to meet is programming content obligations.  EchoStar allegedly sought to terminate the contract or “tier” Voom’s programming.  Under either scenario, Voom stated that it stood to lose billions of dollars.

The Events at Question

Based on the events above, EchoStar sent a series of letters to Voom alleging “material breaches” of the contractual programming requirements. Based on these letters, Voom anticipated potential litigation and implemented a litigation hold, including automatically preserving emails.
EchoStar began discussing “potential litigation” and these discussions continued until Voom finally filed suit. EchoStar did not implement their own litigation hold until after Voom filed suit.  Additionally, the litigation hold did not suspend EchoStar’s automatic deletion of emails (Company policy was that emails sent and deleted by an employee were automatically and permanently deleted after seven days). Not until four months after filing of the lawsuit and one year after EchoStar was on notice of anticipated litigation did EchoStar suspend automatic deletion of relevant emails.

The Court

Spoliation sanctions were sought by Voom and its motion was granted by the court. The court concluded that “EchoStar’s concession that termination would lead to litigation, together with the evidence establishing EchoStar’s intent to terminate, its various breach notices sent to VOOM HD, its demand and express reservation of rights, all support the conclusion that EchoStar must have reasonably anticipated litigation prior to the commencement of this action.”

EchoStar made the argument that “in the absence of pending litigation’ or notice of a specific claim,’ defendant should not be sanctioned for discarding items in good faith and pursuant to normal business practices.” The Appellate Court disagreed and this is the basis of the expansion of ESI preservation requirements.  The court stated, “[t]o adopt a rule requiring actual litigation or notice of a specific claim ignores the reality of how business relationships disintegrate.”  The Court concluded that while both sides may appear to be attempting to work things out, they may be preparing for litigation behind the scenes. The Appellate Court further noted that if EchoStar’s argument was adopted, it would encourage parties who actually anticipate litigation, but do not yet have knowledge of a “specific claim” to destroy documents with no recourse.

In conclusion, the Appellate Court stated that EchoStar should have reasonably anticipated litigation once it sent a letter to Voom demanding an audit and threatening contract termination. There was additional testimony that EchoStar knew that Voom would sue if EchoStar terminated the agreement.

The Take Away
Is this really an expansion of the duty to preserve and the understanding of when a litigation hold should be put in place?  You should read the opinion yourself and then check your client’s policies and procedures regarding litigation hold.  Like everything in the law, it is the details that are important.  Understanding the FRCP is a complex and difficult portion of litigation.  Staying current with rulings and interpretations is almost a full time job.  It is the responsibility of counsel to make sure that they remain current with the nuances of the procedural practice of law, either though dedicated legal staff or developing relationships with experts in the industry.

 

 

The Texas Supreme Court and Hyperlinked Electronic Briefs – the New Paradigm in Briefing Documents

The Texas Supreme Court signed an order on March 1, 2011 allowing the filing of hyperlinked electronic briefs for all documents reviewed by the court.  These include the Petition for Review, Responses and the Requests for a Full Merits Briefing. In fact, the Court prefers that all documents filed for their review be in hyperlinked format.  The justices like the way that a fully integrated brief filing allow them to instantly access all the supplemental material that are submitted as evidence. We have developed an Ebrief alternative that includes document compression so that a hyperlinked document can easily be submitted using the court’s Efiling system.

Since more than 67% of all cases are decided on the written record alone, without the advantage of oral argument, it is extremely important that you provide the Court with your argument in the most accessible format.  Hyperlinked EBriefs answer that need.

What is a Hyperlinked EBrief?
An EBrief is a powerful platform to send your message to the Court. Your brief or motion is transformed from a pile of paper to a living, interactive digital document which brings your case to life. Trial Brief Pro integrates exhibits, deposition video and transcripts, cases, rules, statutes, timelines, demonstratives and audio/video clips into a single hyperlinked document ready for review by the court. Your entire submission is available with the click of a mouse. It is then EFiled directly to the courts docketing system and made available to the Justices and their Clerks for analysis and review

What are the advantages of an EBrief?
In the courtroom, you have been eloquent, persuasive and focused. All your PowerPoint and demonstrative evidence have shown precisely why your argument should be accepted by the Court. While listening to your expert explain your case, the words, visual models and testimony form a powerful argument.

During the appellate process, you wonder what the best method is to engage the Court in your argument. You want to make your argument is as interactive as possible, providing instantaneous access to all your support documents, case law and prior presentations. You want to be able to answer all of the following questions:

Will the Judge be able to easily find your key evidence again that you know proves your case? And if they do, will they see it in the proper context? With the right testimony? How do you effectively continue your argument from the courtroom to the Supreme Court?  By submitting a hyperlinked electronic brief that contains all your documents the answer to all these questions is yes.

Why is Compression of Data Important to EBrief Filing?

Effective September 12, 2011, all attorneys are also required to file all documents with the Texas Supreme Court through the Texas.gov electronic filing system.  To use the electronic filing system you must select a qualified electronic filing service provider and register for their services.  Trial Brief Pro hyperlinked and compressed electronic briefs can be Efiled using any of the available services. 

Trial Brief Pro has the best solution to fulfill the Texas Supreme Court’s preference to receive hyperlinked electronic briefs for court submissions and have documents submitted using the EFiling system. Our hyperlinked EBrief service creates a highly compressed format that can be submitted directly into the courts docketing system using an approved EFiling service.  They are immediately available to all court personnel.

The compression and OCR algorithms that we use in our process means that electronic documents will be accessed faster, allow full text searching on documents that are scanned images and require much less storage space. We compress your document files, reducing file size, without sacrificing the quality of your documents. The reduction in document size is important when working with the courts system due to size limitations in EFiling processes and it also improves the document retrieval speed when accessed by the Court. The pages will appear instantaneously when accessed by the user.

Pricing and Services

We have developed a two stage pricing program to submit EBriefs to the Texas Supreme Court to serve your needs.

Petitions for Review
The cost to submit a completely hyperlinked Petition for Review brief is capped at the flat rate of only $695.00.  This price includes:
 1)  All links required in the 15 page brief, including the Table of Authorities and Table of Contents
 2)  All compression required up to 1,000 pages of documents
 3)  24-36 hour project completion

Full Merits Brief
The cost to submit a Merits Brief is determined on a case-by-case basis, depending on the size of the submission, the number of links included in the brief and the number of cases and exhibits that are referenced and need to be hyperlinked.  In general, hyperlinks are billed at a rate of $3.00 - $4.00 depending on the size of your project.  Once we have discussed the parameters of the project, we will submit a Project Proposal outlining the expected costs of the project. 

Please contact us directly to learn more about this new service to the Texas Supreme Court.  We can be reached at 877.275.2513.
Visit our Website, http://www.trialbriefpro.com/ for full details.