Electronic Discovery Navigator

Defendant ordered to jail for spoliation

Defendant ordered to jail for spoliation

"A recent e-discovery decision provides important lessons for lawyers and companies about spoliation sanctions.

The defendant’s e-discovery failures in Victor Stanley, Inc. v. Creative Pipe, Inc. - known as Victor Stanley II - were so serious that the company accepted a default judgment on the primary claim filed in the case.

And U.S. District Court Judge Paul Grimm was so angered by the actions of company president Mark Pappas that he ordered Pappas to serve two years in prison for contempt of court, unless and until he pays attorney fees and costs to the plaintiff."

Assigning Value to E-Discovery's Unknown

Assigning Value to E-Discovery's Unknown

"For U.S. District Judge for the Southern District of New York Shira A. Scheindlin, who authored the Jan. 15 decision in Pension Committee of the University of Montreal Pension Plan v. Bank of America Securities, and U.S. District Judge for the Southern District of Texas Lee H. Rosenthal, who authored the Feb. 19 opinion in Rimkus Consulting Group, Inc. v. Cammarata et al., the question was how to value discovery that may never have existed, i.e., data that should have been preserved to determine whether it needed to be produced as e-discovery but, due to the actions of the producing parties, was destroyed."

Discovery Sanctions Beyond Money

Discovery Sanctions Beyond Money

"It's been almost two years since the federal court system issued new discovery rules for electronically stored information. While there have been some high-profile sanctions for discovery violations since then, most observers say they haven't seen a huge uptick in penalties. But they do agree that judges are holding parties to a higher standard when it comes time to turn over digital materials in court.

"Judges are very quick to raise [discovery mistakes] as an issue, but they are not quicker as far as doling out penalties," says Liane Komagome, director of e-discovery at CRA International Inc., a Boston-based economic and business consulting firm. "The court is still even-tempered," adds Komagome, who was previously an in-house discovery counsel at both Wal-Mart Stores Inc., and Hewlett-Packard Co.

Experts say they aren't aware of any statistical surveys of sanctions since the federal e-discovery rules went into effect in December 2006. "I think there has been an increase in reported sanctions," says Brian Benjet, chief counsel for group insurance and litigation at Philadelphia-based Cigna Corp. But Benjet does acknowledge, "There is no question there is a trend in the plaintiffs bar [to raise e-discovery issues], where they understand they can gain tactical advantage and make it disproportionately expensive for corporate defendants."

Monetary sanctions can certainly hurt a company when they're imposed. Just ask Qualcomm Inc, which has been battling Broadcom Corporation in a nasty patent infringement fight. In January federal Magistrate Judge Barbara Major ruled that because Qualcomm had engaged in massive discovery violations, it had to pay $8.5 million in legal fees to Broadcom."

United States: E-Discovery Alert! Protect Against Court Sanctions

United States: E-Discovery Alert! Protect Against Court Sanctions

"Background. Under the new federal rules, companies must preserve e-mails and other electronic data when litigation is anticipated. At some point early in litigation, you also may receive a "litigation hold" letter, from an attorney who is representing a former employee. "Litigation hold" letters put you and your company under the responsibility to warn employees to preserve electronic data immediately.

Serious consequences arise when one ignores a litigation hold letter. Federal judges can enter "sanctions," against companies which do not preserve electronic data, or who alter electronic data. Sanctions also can be entered against employees."

Managing e-Discovery And Avoiding Sanctions Under The FRCP Amendments

Managing e-Discovery And Avoiding Sanctions Under The FRCP Amendments

"Since the amendments to the Federal Rules of Civil Procedure (FRCP) went into effect in December 2006 (and even before), the number one change we have seen is the an increased level of uncertainty and the fear of what might happen if changes are not made to how companies respond to e-discovery. At best, companies can continue to satisfactorily respond to discovery, but with higher costs and unpredictable outcomes as the response process is treated as a discrete event, often resulting in unnecessary fire drills. At worst, the company subjects itself to undue leverage and sanctions because it didn't do the right thing and can't defend its practices."

(Source: http://www.metrocorpcounsel.com/pdf/2008/January/15.pdf.)

Court Ordered Alleged Infringer to Produce All Missing Versions of Source Code

3Com Corp. v. D-Link Systems, Inc., Case No. 03-cv-02177 (N.D. Cal. Mar. 27, 2007)

In this patent infringement action, Plaintiff 3Com Corporation ("3Com") moved to compel production of documents and sanctions against Defendant-Intervenor Realtek Semiconductor Corporation ("Realtek").

Of particular interest is the discovery dispute over the source code of the Realteck products that allegedly infringed 3Com's patents.  Realtek produced the current and several other versions of the source code and stated that "it has now produced all the versions it maintains."  3Com argued that it has "good reason to believe" otherwise.  In fact, Realtek did not dispute 3Com's claim that although many versions of generation 3.xx were produced, versions of generations 4.xx, 5.xx, and 6.xx were not.  Realtek simply stated "[t]here can be many explanations for skipping a number when mulitple versions of the code are created," and did not expound on those "explanations."

Court Ordered Inadvertently Disclosed Privileged Document Destroyed

Pierce v. Girl Scout of Greater New York, Inc., Case No. 06-cv-05456 (S.D.N.Y. Mar. 9, 2007)

This discovery dispute shows how the court would handle an inadvertent disclosure of privileged information where no claw-back agreement exists between the parties.  (FRCP Rule 26(b)(5)(B) addresses the claw-back issue.)

Defendants sought sanctions and a protective order to require Plaintiff to return or destroy a single privileged email that was inadvertently produced in discovery.  The email was an inquiry seeking legal advice and the response from Defendants' counsel, which the court concluded was "a privileged communication."

Sanctions Not Justified for Production of Voluminous Data

Static Control Components, Inc. v. Lexmark Int'l, inc., Case No. 04-00084 (E.D. Ky. Mar. 16, 2007)

In this discovery dispute, counterclaim defendant Pendl Companies, Inc. ("Pendl") sought sanctions against defendant/counterclaim plaintiff Lexmark International, Inc. ("Lexmark").  Pendl contended that Lexmark sent them on a "wild goose chase" by producing approximately 6 million entries in a database of information that turned out to be non-responsive to Pendl's Interrogatory No. 5.  Lexmark countered that Pendl was simply complaining about a large amount of responsive data that they themselves had requested.  Lexmark pointed out that a portion of the information it produced was a large file of data provided by Environmental Reclamation Services, which Lexmark did not alter in any way (because it would have been improper to do so) and which it relied upon in the same format in which it had received them.  Lexmark also made clear that Interrogatory No. 5 requested information it did not possess.

Counsel Must Not Only Implement Litigation Hold But Must Also Oversee Its Compliance

School-Link Techs., Inc. v. Applied Res., Inc., Case No. 05-2088 (D.Kan. Feb. 28, 2007)

This is another case that illustrates why counsel needs to be proactive, not reactive, in handling matters during ediscovery, as discussed in my earlier posts here and here.  For example, counsel must not only implement a litigation hold to preserve evidence but must also oversee compliance with it, monitoring the efforts to retain and produce relevant electronically stored information ("ESI").

Failure to Implement Litigation Hold

In this litigation, one of Defendant's key employees testified at her deposition that she never received any instructions from Defendant or its counsel to preserve relevant ESI in her custody.  So, she took it upon herself "to search her computer and home for documents relevant to the parties’ dispute and to send those documents to Defendant’s chief executive officer."  Worse yet, she destroyed some of the ESI she gathered.

Six Hard-Learned Lessons About EDD

As a follow-up to my earlier post on the eDiscovery Survival Guide for Corporate Counsel, here are six important lessons learned from the recent case of In re NTL, Inc. Securities Litigation, Case No. 02-3013, -7377 (S.D.N.Y. Jan. 30, 2007).

1.  Plan ahead -- Start early to get a good understanding of a client's computer/storage systems and retention policies.

2.  Stay focused -- Don't neglect to follow up on the litigation hold memo after it is circulated.  The attorney must be proactive, not reactive, during the entire ediscovery process.

3.  Hide the ball at your peril -- Evading one's ediscovery obligations can result in severe sanctions.  In In re NTL, Inc. Securities Litigation, the court imposed an adverse inference spoliation sanction against the defendants.

4.  Know what you "control" -- Its definition is broader than you think, as the court in In re NTL, Inc. Securities Litigation explained:

Under [FRCP] Rule 34, "control" does not require that the party have legal ownership or actual physical possession of the documents at issue; rather, documents are considered to be under a party's control when that party has the right, authority, or practical ability to obtain the documents from a non-party to the action.  (Emphasis added; internal quotation marks omitted.)

5.  Don't overdelegate -- Make sure the attorney who has been delegated to litigate ediscovery issues understand their legal consequences.

6.  Or else -- Gross negligence in preserving documents can land one in hot water, as In re NTL, Inc. Securities Litigation illustrated:

[T]he Gordon plaintiffs have demonstrated that defendant NTL Europe's failure to preserve documents and ESI ["electronically stored information"] relevant to plaintiffs' allegations was at a minimum grossly negligent. In light of NTL Europe's failure to call the Demerger Agreement to the Court's attention, the Court could find bad faith, but it need not reach that issue. Thus, no extrinsic proof of relevance is necessary, and the Gordon plaintiffs are entitled to an adverse inference spoliation instruction.

(Source: Boehning, Christopher H. and Toal, Daniel J., "Six Hard-Learned Lessons About EDD" (Mar. 2, 2007).)