Stored Communications Act limits Gmail information obtainable pursuant to subpoena

Beluga Shipping GMBH & Co. KS Beluga Fantastic v. Suzlon Energy LTD., 2010 WL 3749279 (N.D. Cal., Sept. 23, 2010)

Court rules that under the Stored Communications Act, account holder consent is required to obtain copies of emails in Google’s possession. Before you issue a subpoena seeking copies of emails, read Beluga Shipping.

Suzlon is the third largest wind turbine manufacturer in the world. In an action pending in the Federal Court in New South Wales Australia, Suzlon brought cross claims for fraud and breach of fiduciary duty against several of its former employees who were imprisoned in India.

Suzlon believed that its former employees used internet mail accounts hosted by Google to perpetrate their fraud. Therefore, it filed a petition under 28 U.S.C. §1782 to obtain discovery from Google. 28 U.S.C. §1782 provides the means by which parties to a foreign proceeding can obtain discovery in the United States for use in that proceeding. The Federal Rules of Civil Procedure apply in §1782 proceedings unless the court prescribes a different procedure to follow. In Beluga Shipping, the district court applied the Federal Rules of Civil Procedure.

In its §1782 petition, Suzlon sought leave to issue subpoenas to Google to obtain all emails sent or received by its former employees using specific Gmail accounts. Suzlon also sought any records establishing when those Gmail accounts were created, the name provided to Google by the user of each account during the account creation process, the country in which each account was created, how Google stores or saves emails in its Gmail accounts and how information regarding when emails sent to and from a Gmail account is recorded and stored.

The district court permitted Google to intervene and oppose Suzlon’s petition. Google argued that under the Stored Communications Act, 18 U.S.C. §§2701-2712, consent of the individual account holders is required, and that unless their consent is obtained, it could not lawfully comply with Suzlon’s subpoena.

In response, Suzlon cited Zheng v. Yahoo, Inc., 2009 U.S. Dist. LEXIS 111886 (N.D. Cal., Dec. 2, 2009), and argued that the Stored Communications Act does not apply to foreign citizens. Therefore, Suzlon argued that Google was obligated to comply with its subpoena. However, the district court found Zheng inapplicable because “the email interceptions and disclosures occurred outside of the United States by a company whose servers were located outside the United States.” In the court’s view, these factors led to Zheng’s conclusion that the Stored Communications Act does not apply to foreign nationals. However, because Google and its servers are located in the United States, the district court concluded that the Stored Communications Act was applicable in the case before it.

Because Suzlon had not obtained the consent of its former employees, the district court denied, its petition to subpoena the emails of those employees, without prejudice to a renewed showing that the account holders’ consent had been obtained. The court did direct Google to produce documents which established when the specific Gmail accounts in question were created, the actual names of the email account holders provided to Google during the account creation process and the countries from which the specific Gmail accounts were created. The court further directed Google to continue to preserve the emails contained in the specific Gmail accounts in question pending a showing of consent by the account holders.

Despite the unusual procedural context in which this decision arose, the Beluga Shipping decision is significant for any litigant who seeks information from a provider of internet email service such as Google, Yahoo or Hotmail. Without the consent of the account holder, parties may be unable to obtain by subpoena emails that were sent or received by the account holder. So, first seek the consent of the account holder and if that fails, consider a motion asking the court to compel the account holder’s assent. Additionally, when communications occur through applications found in the “cloud,” the Stored Communications Act can raise a similar impediment to obtaining communications stored in the cloud.

Ediscovery ethics – use of clawback agreements – don’t forget to protect yourself when protecting your client’s information

The comments to Model Rule 1.6 explain that a lawyer “must act competently to safeguard” client information against the inadvertent or unauthorized disclosure by a lawyer or anyone who is subject to the lawyer’s supervision. The use of clawback agreements in electronic discovery has become commonplace given the exponentially greater volume of information typically involved and the heightened risk that privileged or protected information will be inadvertently disclosed. While the terms of clawback agreements can widely vary, under a typical clawback, the parties agree that if privileged or protected information is disclosed, it will be returned pursuant to that agreement.

The problem with clawback agreements is that they are not enforceable against third parties. If your client is involved in related litigation involving similar issues, should the parties involved in that litigation learn of the disclosure of privileged information in your case, they could seek its production, irrespective of your clawback, by arguing they were not parties to your agreement and that the privilege was waived by your disclosure. Indeed, that limitation is codified in Fed. R. Evid. 502(e) which provides: “[a]n agreement on the effect of disclosure in a federal proceeding is binding only on the parties to the agreement.” So while clawback agreements serve a worthwhile purpose, they are not risk free. Better protection against third-party waivers in a federal proceeding can be obtained if a federal court enters a nonwaiver order under Fed. R. Evid. 502(d). However, many states have not adopted the equivalent of Rule 502(d), and it remains an open question whether a non-waiver order entered in one state-court proceeding is enforceable in other state-court proceedings. See Hopson v. City of Baltimore, 232 F.R.D. 228 (D.Md. 2005).

Thus, there is a continuing need for clawback agreements, especially in state-court litigation. But before entering into a clawback agreement with your opponent, also consider protecting yourself against potential criticism over its use. In document intensive cases, or suits where a significant amount of ediscovery will be sought, discuss the use of a clawback agreement with your client, including its risks and benefits. Obtain your client’s consent before using a clawback. A best practices approach would involve written consent from the client to the use of a clawback agreement before it is entered into with opposing counsel. This can avoid any after-the-fact controversy over the nature of your discussions with the client or the decision to use a clawback to protect the confidentiality of your client’s information.

Rule 37(e)’s safe harbor provision used to limit sanctions requested under the court’s inherent authority

Grubb v. Board of Trustees of Univ. of Ill., 2010 WL 3075517 (N.D. Ill., Aug. 4, 2010)

One of the limitations in the protection provided by Fed.R.Civ.P. 37(e)’s “Safe Harbor” provision is that it ostensibly only applies to ediscovery sanctions “under these rules.” For that reason, I have referred to Rule 37(e) as a “wading pool,” rather than a safe harbor. So, when a court points to Rule 37(e) as a basis for exercising restraint when sanctions are sought under the court’s inherent authority, it bears highlighting.

Grubb involved a claim brought by a former professor at the University of Illinois that the University violated the Computer Fraud and Abuse Act when it accessed a laptop computer he had been using in order to remove University software. That laptop was not owned by the professor but rather by the American Board of Orthodontics (“ABO”), and allegedly contained personal and sensitive information as well as testing data and private patient information. After plaintiff filed suit, ABO gave him a new laptop to use and he returned the one that was involved in his claim against the University. Subsequently, ABO “wiped” the hard drive of that laptop. When the University learned of this development, it filed a motion which sought terminating sanctions under the court’s inherent authority arguing that plaintiff had permitted the destruction of evidence relevant to his claim. The University contended that plaintiff had allowed the spoliation of evidence to occur which rendered it impossible to refute the plaintiff’s Computer Fraud and Abuse claim.

In rejecting the University’s claim for sanctions, the district court noted that in Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991), the Supreme Court warned that a court’s use of its inherent powers “must be exercised with restraint and discretion.” Pointing to Fed.R.Civ.P. 37, the district court observed “restraint seems imminently sensible given the content of the federal rules.”

The district court in Grubb also pointed to the plaintiff’s lack of computer expertise as a basis for exercising restraint. The court noted that plaintiff’s computer expertise, “like most people, falls somewhere in that broad swath between technophobe and technophile.” Taking a common-sense approach to the issue, the district court aptly noted, “it cannot be said that everyday people would possess an understanding of how data are stored and how access history can be reconstructed (or destroyed).” Because plaintiff testified that while he knew how to turn on his laptop but little else about how computers work, the court had little difficulty in concluding that plaintiff did not take any actions for the purpose of hiding adverse information.

The court’s decision in Grubb should be contrasted with Green v. McClendon, 2009 WL 2496275 (S.D.N.Y. Aug. 13, 2009) where a defendant’s lack of computer expertise did not save her from the imposition of sanctions. The Green decision was critically analyzed in one of our prior posts, which can be found here. The outcomes reached in these decisions underscore the practical reality that parties and counsel now face – that the outcome of an ediscovery sanctions motion frequently turns on the approach generally taken in a given district court and by a given district court judge in particular. While uniformity will never be achieved, a more consistent approach would certainly ease the burdens of ediscovery on clients and their counsel, and is one of the reasons why various organizations are pushing to have the federal ediscovery rules amended.

Failing to issue a litigation hold letter is not per se evidence of sanctionable conduct

Haynes v. Dart, 2010 WL 140387 (N.D. Ill., Jan. 11, 2010)

Here at Practical Ediscovery, we are always on the lookout for decisions that bring a little bit of sanity to the crazy world of ediscovery. Therefore, we thought the Haynes decision was worth a mention. While Haynes involved the alleged failure to preserve paper records, not ESI or emails, the decision addressed a motion for sanctions which claimed that evidence was lost as a result of the alleged failure to impose a formal litigation hold at the onset of the case.

While a party has a duty to preserve potentially relevant information once litigation is “reasonably anticipated,” the court in Haynes, further explained that the duty to preserve potentially discoverable information does not require a party to retain every scrap of paper in its possession. In fact, the court acknowledged that the steps a party must take “to satisfy its obligation to preserve evidence may vary from case to case.” Significantly, the court in Haynes observed that while the failure to institute a litigation hold was a “relevant” consideration, it was “not per se evidence of sanctionable conduct.” The court observed that this case was one of many pending against the Sheriff’s Office, which runs the largest single site jail in the country, “and that the establishment of a formal litigation hold in every case could cause an undue burden.” Because of the “breadth of the plaintiffs’ claims and discovery requests,” the court in Haynes could not conclude “that the absence of a large-scale litigation hold was objectively unreasonable.” The court also found it significant that the lost evidence involved the handwritten notes of a jail superintendent and that there was “no evidence that relevant documents were destroyed pursuant to a routine destruction policy that defendants failed to curb.”

So, while Haynes is helpful, the decision does have its limits and should not be viewed as a “Get Out of Jail Free Card.” Obviously, the safest approach in any case is for the client to take reasonable steps to preserve potentially relevant information once litigation is reasonably anticipated. Decisions such as Haynes provide only a limited backstop, should a misstep occur.

Haynes bears mentioning for another reason. Various ediscovery decisions seemingly require an attorney to follow up and confirm that the client’s “key personnel” are aware of the litigation hold and are preserving potentially relevant ESI. Attorneys frequently ask how they can or should identify the key personnel to whom these decisions vaguely refer. After-the-fact criticisms always speak with the wisdom of 20-20 hindsight. The court in Haynes noted that the particular employee of the defendant whose notes were the subject of plaintiffs’ motion for sanctions had been listed in plaintiffs’ Rule 26(a)(1) initial disclosures as someone likely to have discoverable information. Therefore, the court concluded that the witness should have been instructed to preserve relevant information no later than the date of that initial disclosure. Accordingly, one common-sense approach to identifying the client’s “key personnel” is to work from the parties’ Rule 26(a)(1) disclosures. Occasionally, there may be other key employees, but in many, if not most instances, the witnesses listed in those initial disclosures will be the persons most likely to possess relevant information that should be preserved.