Model order for ediscovery is not just for patent troll cases

DCG Systems, Inc. v. Checkpoint Technologies, LLC, 2011 WL 5244356 (N.D. Cal. November 2, 2011)

In September 2011, the Federal Circuit promulgated a model order for courts to use in managing the high costs of ediscovery in patent cases. A key feature of the model order is restrictions on email production: requests to produce email must focus on particular issues. And the requesting party must further limit the requests by using a limited set of search terms, with production coming from a limited set of people (custodians).

Defendant Checkpoint asked the court to enter a version of the model order. (The proposed version differed from the model order in the number of keywords and custodians and on an issue of metadata.) The court granted defendant’s motion.

Plaintiff DCG objected to the entry of the order. It argued that since this was a case between competitors, and not a case brought by a nonpracticing entity (an “NPE,” or sometimes called a “patent troll”), the discovery would be improperly impeded by the model order’s limitations on email discovery.

NPE or patent troll cases often involve asymmetrical discovery – the plaintiff has few documents but the defendant has many. And some commentators have proposed that the model ediscovery order seeks to reduce the ill-effects of this asymmetry. In this case plaintiff argued that it would need discovery on legitimate issues that may have arisen with an actual competitor, e.g., whether defendant copied plaintiff’s technology and whether plaintiff was entitled to an injunction. Plaintiff’s argument presupposed that the model order’s limitations would cut into the scope of that purported legitimate discovery.

The court rejected plaintiff’s arguments. It found that: (1) nothing in the model order or the Chief Judge of the Federal Circuit’s speech unveiling the order suggested that it was intended only for NPE cases, and (2) there was no reason to believe that non-NPE (competitor) cases presented less compelling circumstances in which to impose reasonable restrictions on the timing and scope of email discovery.

The court also addressed the notion that the model order would help only in NPE cases or cases involving asymmetrical ediscovery. It observed that the model order could have double the benefit in competitor cases. If using the model order to relieve the burden on the producing party in an NPE case was a good thing, then using it in a suit between competitors benefit both sides and be twice as good.

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.

Relationship Between the Work Product Doctrine and the Duty to Preserve

Siani v. State Univ. of New York, 2010 WL 3170664 (E.D.N.Y. Aug. 10, 2010)

The duty to preserve electronically stored information (ESI) can arise long before a lawsuit is ever filed. Several of our prior posts, such as the ones found here and here, chronicle the problem of determining whether a pre-suit duty to preserve is triggered by a letter from a putative plaintiff which contemplates the possibility of litigation. So, any decision which recognizes a landmark that can be readily followed when navigating the pre-suit preservation minefield bears highlighting. Sinai provides such a beacon to follow.

The work-product doctrine encompasses documents that are prepared “in anticipation of litigation.” Siani reached “the common sense conclusion” that if litigation was reasonably foreseeable for one purpose, “it was reasonably foreseeable for all purposes.” 2010 WL 3170664 at *5. Thus, Siani recognizes a direct relationship between the assertion of the work-product doctrine and a duty to preserve ESI in a pre-suit context.

Thus, before asserting the protection of the work-product doctrine, an attorney would be wise to also confirm that the client has instituted a litigation hold to preserve potentially relevant ESI in the context of that anticipated litigation. Claiming the protection of the work-product doctrine means that litigation was reasonably anticipated and that a duty to preserve potentially relevant ESI has been triggered.

Identifying inaccessible sources of ESI just got a little easier

Fed.R.Civ.P. 26(b)(2)(B) explains that a party need not produce electronically stored information (“ESI”) from sources that are not reasonably accessible because of undue burden or cost. Parties are expected to produce relevant, non-privileged information from sources that are “reasonably accessible” subject to Rule 26(b)(2)(C)’s limitations that apply to all discovery under the federal rules. This “two-tier” approach to ediscovery is easy to recite but can be very difficult to apply in practice. At what point does a source of ESI cross the threshold from reasonable accessibility to inaccessibility under the Rule? Are there sources of information that parties can readily agree are not reasonably accessible? Alas, neither Rule 26(b)(2)(B) nor its accompanying committee note provide any helpful insight. Indeed, the 2006 Advisory Committee Note states “[i]t is not possible to define in a rule the different types of technological features that may affect the burdens and costs of accessing electronically stored information.”

The Report of the Judicial Conference Committee on Rules of Practice and Procedure (“Standing Committee Report”) which predated the enactment of the 2006 ediscovery amendments to the federal rules provided some insight. The Standing Committee Report did note that the features of an information system that make it burdensome or costly to access ESI can vary from system to system and will change over time. However, it provided several examples of “current technology” that do not generally fit under the rubric of reasonable accessibility. Those examples included “deleted information, information kept on some backup-tape systems for disaster recovery purposes, and legacy data remaining from systems no longer in use.” See THE NEW E-DISCOVERY RULES, Dahlstrom Legal Publishing, Inc. (2006) at p. 15. Unfortunately, that guidance was not carried over into the 2006 Advisory Committee Note to Rule 26(b)(2)(B).

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Sanctions rejected where evidence was destroyed pursuant to routine, good-faith records management practice before receipt of any notice of a likelihood of litigation

Today’s post demonstrates the importance of a document retention/destruction policy applicable to a company’s paper and electronic records that is consistently applied and routinely followed.

In Mohrmeyer, plaintiff sought discovery sanctions in the form of an adverse inference instruction because Wal-Mart failed to preserve certain records relevant to his accident. The particular record, a maintenance log, was not typically preserved in the ordinary course of the company’s business. It was routinely discarded on a weekly basis. Plaintiff noted that Wal-Mart employees attended to him immediately after his fall, called 911 and summoned an ambulance to take him to the hospital. As a result, the plaintiff in Mohrmeyer claimed that Wal-Mart’s duty to preserve all relevant documents was triggered immediately following his fall because Wal-Mart “should have known” that his accident would result in litigation.

Mohrmeyer is significant because the court recognized:

The law does not and should not require businesses to preserve any and all records that may be relevant to future litigation for any accidental injury, customer dispute, employment dispute, or any number of other possible circumstances that may give rise to a claim months or years in the future, and there is absolutely no contemporaneous indication that a claim is likely to result at the time the records are destroyed pursuant to a routine records management policy.

That Wal-Mart preserved some records relating to the plaintiff’s accident pursuant to its policy involving accidental injuries did not change the result in the court’s view because the particular maintenance log was only temporarily retained and was routinely discarded. Merely because Wal-Mart summoned an ambulance for the plaintiff did not make the litigation more likely to occur. The court found no deliberate or improper conduct by Wal-Mart involving its failure to preserve what the court described as a “transient record.”

The court recognized that a duty to preserve applies only when a party has been put on notice that evidence is relevant to pending litigation or which may be relevant to future litigation that is likely to occur. It concluded that at the time the maintenance log was discarded, there only existed a speculative possibility that a lawsuit might be brought. The court observed that before the log was destroyed Wal-Mart had received no telephonic or written warning from the plaintiff or his counsel raising the possibility of a lawsuit and there was no history of litigation between the parties which made a lawsuit more likely to occur. The court was not willing “to presuppose the likelihood of litigation for every slip and fall accident that occurs.”

The court in Mohrmeyer distinguished the factual scenario presented from an airline disaster where the “trigger date” for the preservation of evidence would clearly be the date of the disaster “because of the high likelihood of litigation following such [an event].” The mere fact that an accident had occurred was insufficient to establish that litigation was likely to ensue.

The court also noted that the plaintiff testified in his deposition that he did not even consider filing a lawsuit until a couple of months after the accident occurred, which was long after the maintenance records were destroyed in the ordinary course of the company’s business. This is a good practice point to remember in discovery in any matter where discovery sanctions potentially may be sought.

Accordingly, Mohrmeyer concluded that when evidence is destroyed pursuant to a company’s “routine, good-faith records management practices” before any notice of the likelihood of litigation is received, discovery sanctions of any type are not warranted.

Vitruvian Man image courtesy Flickr user Michael Licht under this Creative Commons license.

The Good, The Bad And The Ugly (of an ediscovery decision)

Scalera v. Electrograph Systems, Inc., 2009 WL 3126637 (E.D.N.Y. Sept. 29, 2009)

Today’s blog post is named after the 1967 epic spaghetti western starring Clint Eastwood. Wikipedia explains that the movie’s plot “centers around three gunslingers competing to find a fortune in buried confederate gold.” Intended by its director to be a “tongue-in-cheek satire on run-of-the-mill westerns,” Quintin Tarentino once called it “the best-directed film of all time.”

While that might be a bit of a stretch, The Good, The Bad and The Ugly aptly summarizes the court’s holding in Scalera v. Electrograph Systems. While you won’t find any confederate gold, bounty hunters or ghost towns in the decision, there are a number of important points that can be gleaned from the opinion. However, as with many ediscovery decisions, there are several bad, and at least one downright ugly finding entered by the court. Luckily, while the court concluded the company “unquestionably breached a duty to preserve emails,” the plaintiff failed to establish that any of the destroyed emails would have been favorable to her claim and, thus, the court denied plaintiff’s request for an adverse inference instruction. As a result, on several levels, Scalera is a decision that merits your attention.

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State court practitioners beware: sanctions can be entered against your clients for failing to preserve emails, even if your state has not adopted a set of ediscovery rules

Einstein v. 357 LLC, et. al. (N.Y. Supreme Court, October 21, 2009)

In Einstein, a trial judge in the Supreme Court of the State of New York recently entered sanctions against several defendants for their failure to implement a litigation hold which resulted in the loss of emails relating to the presale condition of a condominium unit purchased by the plaintiffs in Brooklyn, New York. The trial judge recognized that even though New York had not yet enacted any rules addressing electronic discovery, and that its Civil Practice Law Rules and common law decisions were silent on the need to institute a litigation hold, New York courts have turned to the Federal Rules of Civil Procedure and case law interpreting them for guidance in other contexts.

The crux of the problem in Einstein was the limited storage capacity of the company’s email server. Each of the company’s brokers were allocated 200 megabytes of space, and once that limit was reached, a broker could not send or receive emails until that space was cleared for more email traffic. As a result, brokers had to clear old emails from the system in the ordinary course of their business. Unfortunately, a litigation hold was never instituted, and as a result, emails (several of which the plaintiff’s produced to the defendants) were not preserved. While emails were forwarded through a central server, the company’s email system was configured in such a way that once an email was deleted by an individual user from the user’s inbox, it was also deleted on the central server. While daily, weekly and monthly backup tapes were made of the email server, the daily and weekly backups were periodically reused. Thus, if emails sent or received during a particular month were also deleted during that month, the monthly backup would not capture those deleted emails.

The court concluded the defendants’ counsel and the company’s IT director failed to investigate the basic mechanics of the company’s email system and its retention practices until 11 months after plaintiffs first served their document demands upon the defendants. The court further concluded that defendants were aware of the fact that the contents of their emails would be relevant to the litigation and recalled that it had repeatedly warned defendants about the need to make a complete production of those emails. Accordingly, the court ruled that the defendants’ failure to take any steps “to implement a litigation hold, relying instead on backup tapes that a reasonable investigation would have revealed failed to capture relevant emails deleted manually by individual users,” constituted gross negligence, and warranted a finding of spoliation.

Therefore, the court imposed sanctions in the form of an adverse inference instruction relating to the missing emails, and awarded attorneys’ fees as well as expert costs associated with the review of the defendants’ hard drives.

While admittedly, a trial court decision lacks any precedential value, Einstein amply demonstrates that parties who are sued in state court, even in those states which have not enacted their own set of ediscovery rules, are not immune from ediscovery sanctions. One of our recent posts identified those states which had adopted their own set of ediscovery rules. Outside counsel would be wise to advise their clients of the need to impose a litigation hold in every case in which they are retained, even state-court proceedings, and seek to preserve ESI in state-court litigation. Counsel also would be wise to investigate the client’s email and information systems as well as its paper and electronic retention/destruction policies. Companies and their counsel can no longer safely assume that because a particular state has not enacted its own set of ediscovery rules that the client has no obligation to preserve and produce relevant electronically stored information.

Photo courtesy Flickr user Mike Licht under this Creative Commons license.

View the opinion below or by clicking here.

Einstein_v_357

How the privilege applicable to a lawyer’s litigation hold letter may be forfeited, and the ethical dilemma it potentially triggers – the Morton’s Fork created by Major Tours v. Colorel.

Major Tours, Inc. v. Colorel, 2009 WL 2413631 (D.N.J. Aug. 4, 2009)

Wikipedia defines Morton’s Fork as “a choice between two equally unpleasant alternatives (in other words, a dilemma), or two lines of reasoning that lead to the same unpleasant conclusion. It is analogous to the expressions ‘between the devil and the deep blue sea’ or ‘between a rock and a hard place.’” Wikipedia explains that Morton’s Fork is “the opposite of the Buridan’s Ass.” It is similar to a “Catch 22” in that it involves a “no win situation,” but does not involve the use of circular logic.

What is the only area of law where a lawyer is required, under the pain of sanctions, to write a letter and provide advice to a client that potentially can be used as evidence against that client? Where else is “discovery about discovery” becoming the norm, rather than the exception? The answer is the post-Zubulake world of electronic discovery in which we now find ourselves.

Today, if a lawyer fails to issue written litigation-hold instructions, and/or then fails to take appropriate follow-up steps, the lawyer can be sanctioned if electronically stored information (“ESI”) is not properly preserved by the client. While a lawyer’s litigation-hold letters are generally considered privileged, e.g., Muro v. Target Corp. 250 F.R.D. 350, 360 (N.D.Ill. 2007), the court in Major Tours held that they must be produced when a preliminary showing of spoliation has been made. And, when that occurs, a lawyer’s litigation hold letter will invariably be used against the client as evidence that the client failed to heed the lawyers advice.

The court in Major Tours concluded that a duty to preserve was triggered by a letter sent to the New Jersey Attorney General and the Commisioner of the New Jersey Department of Transportation approximately twenty-two (22) months prior to suit being filed. A litigation hold was not issued until after suit was brought, and the court found it was “probable that relevant evidence was lost before the defendants issued their litgation hold.” Thus, in the court’s view, because a preliminary showing of spoliation had been made, the attorney’s litigation-hold letter had to be produced. In other words, the client forfeited the right to assert attorney-client privilege by failing to issue a litigation hold before the attorney’s privleged litgation hold letter was ever sent to the client.

The rationale applied in Major Tours could trigger an ethical dillemma, and the potential for a conflict for outside counsel in future cases when a duty to preserve ESI was arguably triggered before suit was filed, and the client failed to institute a litgation hold at that time. If the lawyer failed to send a litigation hold letter, the lawyer could be sanctioned. However, if the lawyer sends a hold letter and the court follows the approach taken in Major Tours, the attorney’s privileged communication potentially may become discoverable, and be used as evidence against the client. While a party may be entitled to learn what steps an opponent took to preserve ESI once a preliminary showing of spolilation occurs, finding the attorney-client privilege was forfeited in this scenario would appear to be an ill-concieved approach. It triggers for the lawyer a Morton’s Fork – a choice of protecting himself from sanctions knowing that his advice may potentially be used against the client. Thus, does Zubulake’s requirement that a lawyer issue written litgation-hold instructions inevitably create a conflict between the lawyer and his client?

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An opinion sure to make everyone’s “Top Ten” list of ediscovery decisions for the year

Goodman v. Praxair Servs. Inc., 632 F.Supp.2d 494 (D.Md. 2009)

Near the end of the year, various commentators and bloggers will typically post their list of top ediscovery decisions for the year. While it may be a bit early for predictions, one decision that should make everyone’s top ten list this year is Goodman v. Praxair Services. The decision was written by Judge Paul Grimm who also was the author of the Hopson, Victor Stanley and Mancia decisions. Judge Grimm always seems to be on the leading edge of ediscovery issues.

Praxair is notable for its comprehensive treatment of issues that frequently arise involving the preservation of electronically stored information (“ESI”) and sanctions that can result for the failure to do so. The decision contains more ediscovery law than many book chapters on the topic. Even the most experienced ediscovery practitioner will find some helpful insights in the decision. If there is one ediscovery decision you read this year, Praxair should be the one. The issues addressed by Judge Grimm in Praxair include:

• The trigger date for a duty to preserve
• The timeliness of a spoliation motion.
• Identifying the “key players” to whom the litigation hold should be directed.
• Determining what ESI is under a party’s control.
• Distinguishing the duty to preserve from the duty to produce.
• Ediscovery and small “mom and pop” companies.
• Whether sanctions can be imposed for the spoliation of evidence by an agent.
• State of mind required for spoliation sanctions.
• Four scenarios when costs and attorney fees are allowed.
• Sanctions for unilaterally preserving only the ESI that a party deems relevant.

Judge Grimm even traces the “historic roots” of spoliation to Armory v. Delamirie, 93 Eng. Rep. 664 (K.B. 1722), which he describes as a Dickensian tale of avarice and greed involving a chimney sweep’s discovery of a jewel and a goldsmith’s subsequent attempt to keep it for himself. Because of Judge Grimm’s comprehensive treatment of the issues noted above, we have divided our review and commentary on Praxair into multiple parts that will appear over the next few days on Practical Ediscovery. This first part outlines Praxair’s factual background and addresses when a duty to preserve is triggered.

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Blackberries ‘N SYNC’d with company servers did not prevent the imposition of sanctions for failing to preserve ESI on the Blackberries

Southeastern Mechanical Servs., Inc. v. Brody, 2009 WL 2883057 (M.D.Fla. Aug 31, 2009)

Blackberries, iPhones and similar devices used by a company’s employees contain electronically stored information (“ESI”), that must be preserved when a litigation hold is imposed. Many companies today have hundreds, if not thousands, of employees who use PDAs for company business, complicating the litigation hold process.

If you are a general counsel who believes the use of PDAs shouldn’t pose much of a litigation concern because they are synchronized to your company’s email servers so that any emails sent or received by your employees from those devices reside on your company’s servers, think again, and then read Brody. The fact that employee Blackberries were synced to the company’s email server did not preclude sanctions from being entered. Brody appears to be the first reported ediscovery decision where sanctions were imposed for failing to preserve data on individual Blackberries. Electronic information on individual PDAs must be preserved with no strings attached.

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