All posts tagged cooperation

Case Law: CBT Flint Partners, LLC v. Return Path, Inc.

Case Law

Federal Circuit Court of Appeals Vacates Taxation of Costs Decision

CBT Flint Partners, LLC v. Return Path, Inc., 2011 WL 3487023 (C.A.Fed. (Ga.)). Previously in this patent infringement litigation, the Northern District of Georgia court granted summary judgment of invalidity regarding the patent dispute. In addition, the district court determined $268,311.22 in costs related to ediscovery were properly taxable. See CBT Flint Partners, LLC v. Return Path, Inc., 2009 WL 5159761 (N.D. Ga. Dec. 30, 2009). On appeal, the Court of Appeals overturned the root issue in the underlying patent litigation, vacated the ruling regarding costs as the defendant was no longer the prevailing party and remanded to the district court for further proceedings.

Commentary

Although the 2009 opinion regarding taxation of costs was vacated, it is important to remember that the court’s ruling was a result of the Court of Appeals determining the District Court erred in its analysis of the underlying patent dispute – not the Court of Appeals determining that costs were not properly taxable. Indeed, the entire discussion regarding the cost order was brief:

In light of our disposition, Cisco was not a prevailing party and we therefore vacate the district court’s rulings on costs and we deny the cross-appeal. We remand to the district court for further proceedings consistent with this opinion.

Despite this ruling and others on the topic, parties still face the difficult issue of containing costs while navigating ediscovery effectively. How can this seemingly impossible task be achieved? The best advice is for parties to cooperate early on in pretrial conferences. Further, parties must navigate thediscovery process with an eye toward efficiency. Courts that are addressing the issue of costs are largely expressing frustration not only with the lack of cooperation, but the failure to limit discovery so as to keep costs reasonable. The discoverability standard remains extremely broad, and the costs of discovery will vary widely depending upon the facts of the case, but litigants should always do their best to ensure that discovery is at least reasonably scoped to avoid unnecessary expense. Parties should also make use of solutions such as Early Data Assessment and Intelligent Review Technology to conduct a proper, thorough and fast analysis and review of the data potentially at issue.

Ediscovery 2011: Gibson Dunn’s Mid-Year Ediscovery Update

Ediscovery 2011: Gibson Dunn’s Mid-Year Ediscovery Update

The paramount role ediscovery plays in modern litigation is thoroughly emphasized by the 2011 Mid-Year Ediscovery Update released by Gibson Dunn. This comprehensive analysis of court decisions and trends over the first half of 2011 provides a guide to where ediscovery has been and where it may continue to go. We have read through Gibson Dunn’s excellent report and include below the highlights that caught our eye.

Preservation and Legal Holds

Preservation continues to be the number one issue plaguing corporations and practitioners alike. This challenging concept was further complicated following Judge Scheindlin’s Pension Committee decision of 2010. Throughout 2011, courts struggled with tension arising from Scheindlin’s bright-line rule in Pension Committee as demonstrated by the number of courts – including in Judge Scheindlin’s own district – that declined to adopt this rule. For example, Magistrate Judge James Francis in Orbit One Communications, Inc. v. Numerex Corp., respectfully disagreed with the holding in Pension Committee and held that sanctions would not be warranted unless a party could prove relevance of the lost information.

While it appears that in some cases an oral notification may be sufficient, the best practice for companies and attorneys who find themselves confronted with the need to preserve information is to issue legal holds in writing. In a similar vein, courts are re-emphasizing that merely distributing a legal hold alone may not be sufficient preservation. Instead, attorneys should ensure compliance with the hold and take steps to facilitate preservation along the way.

Information Disclosure and Software

An additional topic covered by the report was the use of software and its impact in case law. As attorneys continue to shift their reliance to comprehensive software and solutions to aid them in the ediscovery process, courts continue to contemplate whether litigants have met the “reasonable steps” requirement to prevent the disclosure of privileged information pursuant to Federal Rule of Evidence 502(b). In Sidney v. Focused Retail Property I, LLC, the Northern District of Illinois cited to a 2010 case from its district, Kmart Corp. v. Footstar, Inc., in which the court found he party failed to take reasonable steps to prevent disclosure by failing to mention whether software was used to prevent disclosure of privileged documents. Reputable ediscovery software can cut costs, save time, reduce headaches – especially associated with document review – and provide defensibility to your process and actions.

Keeping the (Good) Faith: FRCP 37, Cooperation and Karma

The 10th Circuit Appeals Court recently issued an opinion, Lee v. Max International, LLC, that imparts valuable insight regarding the cause and effect of poor discovery behavior. In this case, the plaintiffs committed three repeated discovery violations that compelled the court to write, “[b]ut there is such thing as discovery karma. Discovery misconduct often may be seen as tactically advantageous at first. But just as our good and bad deeds eventually tend to catch up with us, so do discovery machinations.” The court affirmed the lower court’s dismissal of the case as an appropriate sanction. Considering the rise of sanctions cases identified in the Gibson Dunn report, parties must continue to educate themselves regarding ediscovery best practices and implement strategies to approach discovery efficiently and cost-effectively. Otherwise, you risk incurring sanctions that may impact you monetarily or even result in the dismissal of your case – before it even gets to the merits of the underlying litigation.

The Report also highlighted the growing trend within the judiciary to emphasize the importance of cooperation in the ediscovery process. Courts are increasingly endorsing the Sedona Conference® Cooperation Proclamation and are urging practitioners (and sanctioning them if they do not comply) to meet and confer in good faith to resolve disputes. For example, the District of Puerto Rico recently concluded an opinion that followed the filing of over 25 motions related to the discovery process with a call to litigants and the general Bar to adopt civility as a standard of professional conduct, noting that it the concept of civility is indeed not in direct contravention with zealous advocacy and that by adopting this standard, litigants can provide a better service to their clients. Baez-Eliza v. Instituto Psicoterapeutico de Puerto Rico, 2011 WL 2413051 (D. Puerto Rico June 16, 2011).

The Gibson Dunn report covered many other areas that are important in terms of case law and the ediscovery process. We here at Kroll Ontrack urge everyone involved in ediscovery to continue reading resources such as the report and resources found on our website in order to further cultivate their ediscovery knowledge. Once you better understand the case law, processes and best practices behind this exciting area of the law, you will be better equipped to navigate the murky waters effectively.

Case Law: Race Tires Am., Inc. v. Hoosier Racing Tire Corp

Case Law

Court Affirms Taxation of E-Discovery Costs to Prevailing Party Under 28 USC §1920

Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 2011 WL 1748620 (W.D. Pa. May 6, 2011). In this antitrust litigation, the plaintiffs moved to appoint a special master and to review the taxation of electronic discovery costs awarded to the defendants. Refusing to appoint a special master to review the reasonableness of the ediscovery costs this late in litigation, the court remarked that its “understanding that ediscovery has become a necessary and sometimes costly function of civil litigation” was the only special expertise necessary. Turning to the clerk of court’s taxation of electronic discovery costs – totaling $143,007.05 and $246,101.41 for the respective defendants – the court considered the plaintiffs’ objection that the costs were not taxable pursuant to Title 28 U.S.C. § 1920. As a matter of first impression for the court, it reviewed the varying case law among the jurisdictions but noted that since the section’s language was amended in 2008, “no court has categorically excluded ediscovery costs” under § 1920. Finding that the costs paid to third party vendors were necessary for highly technical services and not merely for the convenience of the parties, the court held they were properly taxable to the plaintiffs.

Commentary

This case has received notable attention throughout the industry as is to be expected from a decision that rules the taxation of costs pursuant to Title 28 U.S.C. § 1920 is permissible for costs incurred using an ediscovery vendor. As the court noted in its decision, there have been several cases on both sides of the “cost fence,” but it could find no court decision that excluded ediscovery costs as being an appropriate consideration under § 1920 following Congress’ amendment to the language in 2008. The court discusses this point in footnote 6 of this decision, citing the following language: “[a] judge or clerk of any court of the United States may tax as costs the following: … fees for exemplifications and copies of papers” to “fees for exemplification and the costs of making copies of any materials.” (emphasis added in the court decision). Based on this language, the court concluded that it is proper to consider the costs incurred for ediscovery under this statute.

In affirming the award of costs, the court also noted specifically that the costs requested by the defendants were not associated with any legal fees charged by attorneys or paralegals for document review. Instead, the costs were for the imaging of nineteen hard drives and data processing of five custodians for one defendant and for the imaging of four servers which contained over 490 gigabytes of data and 270,000 files for the other defendant.

Among the cases the court cited that awarded the taxation of ediscovery costs was a decision from the Northern District of Georgia, CBT Flint Partners, LLC v. Return Path, Inc., 2009 WL 5159761 (N.D. Ga. Dec. 30, 2009). In that case, the defendants enlisted an ediscovery vendor to aid compliance with the production of 1.4 million electronic documents and six versions of source code. Due to the excessive cost and time connected with the collection of the documents, the defendants filed a motion to tax the costs associated with the use of the vendor. Overruling the plaintiff’s objections and ordering recovery of taxable costs, the court sent a strong message to ediscovery litigants. According to the court, the highly technical nature of ediscovery in the electronic age, more often than not, requires the use of outside vendors. Therefore the “[t]axation of these costs will encourage litigants to exercise restraint in burdening the opposing party with the huge cost of unlimited demands for electronic discovery.”

Throughout the opinion the court also noted the fact that the parties had entered into an extensive ediscovery Case Management Order agreed to by the attorneys. The ediscovery that occurred was in accordance with this agreement and many of the costs incurred by the defendants were due to sizeable requests by the plaintiffs. While perhaps not the driving decision for the court, the fact that there was an agreement in place the defendants abided by undoubtedly helped make their case for taxation of ediscovery costs. We have blogged numerous times about the importance of cooperation and entering into smart agreements regarding ediscovery. In order to make the most of the meet and confer process, counsel must be prepared and understand the client’s data universe that may be at issue. In addition, counsel should engage in early data assessment processes and technology to conduct such acts as testing keywords to determine if they are appropriate and will result in a targeted set of responsive data (in this case, one of the plaintiffs imposed over 442 search terms). Conducting ediscovery in a targeted, well-thought out manner will help control costs and reduce the amount of data that must then be reviewed.

Cooperation & Proportionality – Essential Pieces to the Ediscovery Puzzle

Cooperation & Proportionality – Essential Pieces to the Ediscovery Puzzle

Like an unstoppable force meeting an immovable object, the rapid pace of technology and the staunchly conservative nature of the law could hardly be in greater conflict.

As the two forces continue to clash, the fallout can be seen in attorneys – doing what they believe is best – battling relentlessly while costs continue to soar. Caught in the middle of it all are the clients and courts, desperately searching for a resolution to the madness. In the midst of this chaos, two familiar concepts have emerged in an attempt to restore order – cooperation and proportionality.

Love it or hate it, electronic discovery is here to stay and parties must work together to curb the exorbitant (and increasing) costs involved in locating, reviewing and producing data in a lawsuit or regulatory matter. U.S. courts’ strong appetite for liberal discovery is tempered by the concept of proportionality, which recognizes that at some point ongoing discovery results in diminishing returns. Aside from its common law roots, proportionality is embodied in Federal Rule of Civil Procedure 1, stating that the rules should be “construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding,” as well as Rule 26, which permits courts to limit discovery if they determine the burden outweighs the benefit. As for proportionality’s counterpart, cooperation, its spirit can be found throughout legal opinions, scholarly commentary and model codes such as the American Bar Association’s Model Rules of Professional Conduct – particularly in Rules 3.2 and 3.4.1

With both of these concepts’ illustrious presence and history in litigation, one would think their application in ediscovery should be fairly straightforward. Yet court-ordered sanctions and costs related to ediscovery continue to rise at a startling pace.2 It is evident that although the basic framework to support proportionality and cooperation is in place, we still need to fill in the gaps. Thankfully, commentators and scholars from both the bench and bar, along with industry experts, have provided the missing pieces – we just need to put them together.3

Fear of the Unknown

In the ediscovery context, knowledge is power and ignorance is disabling. Unfortunately, the latter is far more common. No matter your professional background, the e-discovery process can be complex and daunting. Litigators who do not fully understand the process and intricacies are far more likely to make mistakes that can significantly prolong litigation and increase costs. Fear of the unknown and resulting defensiveness can be as (or more) problematic than being uneducated in this space. All attorneys naturally fear the fatal mistake of disclosing the proverbial “smoking gun” that sinks their client’s case.4 However, when discovery involves millions of pages of documents – as e-discovery commonly does – it is no wonder why costly production and spoliation disputes dominate e-discovery jurisprudence.

Thankfully, the solution is relatively simple and something attorneys are no stranger to – education. In the past few years, many organizations have been formed to encourage and help attorneys, clients and the judiciary to work together and better understand the nuts and bolts of ediscovery. For example, the Seventh Circuit’s Electronic Discovery Pilot Program’s Principles Relating to the Discovery of Electronically Stored Information has recognized the need for cooperation, proportionality and education “to reduce the rising burden and cost of discovery . . . brought on primarily by the use of electronically stored information (ESI) in today’s electronic world.”5 Important concepts from this effort include Principle 1.02, which states “[a]n attorney’s zealous representation of a client is not [emphasis added] compromised by conducting discovery in a cooperative matter” and also acknowledges that the “failure of counsel . . . to cooperate in facilitating and reasonably limiting discovery requests and responses raises litigation costs.” In addition, Principle 1.03 instructs that the application of the proportionality standard in discovery will be furthered by crafting discovery requests and responses that are “reasonably targeted, clear, and as specific as practicable.” Further, Principle 3.01 stresses the pressing need for education by calling for judges, attorneys and parties to “become familiar with the fundamentals of discovery of ESI,” and Principle 3.02 establishes a duty to pursue continuing education in this regard. According to the Phase One report from May 2010, “92 percent of the judges agreed that the Principles [set forth in the program] had a positive effect on counsels’ ability to resolve discovery disputes before requesting court involvement.” Also according to this report, Principle 1.02 was often viewed as incredibly useful and allowed counsel to cooperate with each other while fulfilling their obligation to zealously advocate on behalf of their clients.6

It is no secret that a lack of knowledge is at the root of many ediscovery failures and is a necessary precondition to effective cooperation, yet the calls for increased education have focused on short-term solutions. Familiarity with rules and best practices is not enough to solve a systemic problem. A long-term solution in the form of more in-depth, formalized education is necessary. Law schools must educate future attorneys on ediscovery principles, and knowledgeable practitioners must share their ediscovery expertise with their colleagues through continuing legal education (CLE) courses.

Building a Solid Foundation

While education may help foster cooperation, it is only one piece of the puzzle. In the meantime, courts still need practical tools to address the current lack of cooperation and skyrocketing discovery costs.

One of the more novel approaches has been the use of phased discovery. In a recent discovery order from the Northern District of Illinois, Magistrate Judge Nan R. Nolan (chair of the Seventh Circuit Pilot Program, discussed earlier) ordered the parties to engage in a “phased discovery schedule.”7 After familiarizing themselves with ediscovery principles including cooperation, the parties were ordered to engage in “cooperative discussions to facilitate a logical discovery flow.” Consistent with principles of proportionality and the Federal Rules of Civil Procedure, this flow was to begin with completing Rule 26(a) initial disclosures, followed by a narrowing of the discovery scope to “claims most likely to go forward” and, finally, prioritizing discovery efforts according to sources that are least “expensive and burdensome.”8 Last, and arguably most important, Judge Nolan dictated that “nothing in this Order shall prejudice the parties from conducting all forms of discovery” if necessary in the future, making clear that phased discovery does not mean limited discovery.

The concept of proportionality in the context of document production is well-suited to address many of the cost problems. Although relatively few courts have expressly ordered it, there is little conflict over its value. In the production context, proportionality is logical, cost-effective and in harmony with the underlying principle of liberal discovery.9 Unfortunately, production is only one part of the ediscovery process.

Preservation is no less important to the ediscovery process than production; however, its relationship with proportionality may be slightly more dubious. In Orbit One Communications v. Numerex Corp., the Southern District of New York rejected the standard of “reasonableness and proportionality” advocated in Victor Stanley II and Rimkus Consulting Group as “too amorphous to provide much comfort to a party deciding” what information to retain. Instead, the court favored the Zubulake IV standard of retaining “all relevant documents . . . in existence at the time the duty to preserve attaches.”10 Courts are understandably reluctant to grant too much leeway to parties to determine what information is worth saving on the reasonableness and proportionality criteria dictated throughout case law and the rules. Proportionality and “phasing” have become critical because litigants have been unable to effectively manage their growing masses of ESI. Data proliferation has shown no sign of slowing down, so there is little reason to believe that proportionality and phased approaches to ediscovery can be a viable long-term solution when neither addresses the underlying issue – proper ESI management.

Technology is designed to make difficult tasks easier. Many corporations are in a quandary, however, because they have adopted technology to create information more efficiently without also implementing technology to manage it more efficiently. In regard to ESI preservation, enterprise archiving technology that can manage vast stores of data with remarkable efficiency is readily available. In addition, hosted discovery repositories provide a cost-effective and secure location to preserve, filter and search large volumes of ESI that are, or may likely become, relevant to litigation and investigations. On the other end of the ediscovery process, technology-aided document review tools are poised to revolutionize this part of the process, which is typically the most expensive and time-consuming. Historically, there simply may not have been a strong enough countervailing incentive to manage the growing stores of information, but it is a safe bet that the interests of justice will soon fill that void and litigants will be expected to responsibly manage their information throughout its life cycle.

Conclusion

No doubt cooperation is imperative to managing an effective ediscovery process, but court orders and sanctions only go so far. Fostering cooperation in the long term will require a paradigm shift in the way litigators approach the ediscovery process. A key piece of this lies in ensuring that jurists and litigants understand this complicated process. As for proportionality, novel approaches such as phased discovery may be sufficient to stave off the tradition of liberal discovery for now, but there is a demonstrated need to revolutionize the process in terms of technology and efforts used to manage data more cost-effectively and efficiently. While the best answer may be unclear, what is perfectly evident is that we already have all the pieces to solve the puzzle – we just need to put them all together.

1 See American Bar Association Model Rules of Professional Conduct, Rules 1.1, 3.2 and 3.4, available at: www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/model_rules_of_professional_conduct_table_of_contents.html.

2 See Kroll Ontrack, Fourth Annual ESI Trends Report (2010) (Finding 13: On average, companies spend $1.25 million per year on discovery); also The Kroll Ontrack Year in Review 2010, available at: www.krollontrack.com/company/news-releases/?getPressRelease=61500.

3 The Sedona Conference® has provided numerous commentaries on proportionality and cooperation that practitioners should read. See The Sedona Conference® Cooperation Proclamation; also The Sedona Conference® Commentary on Proportionality in Electronic Discovery, available at: www.thesedonaconference.org.

4 See Mt. Hawley Ins. Co. v. Felman Prod., Inc., 2010 WL 1990555 (S.D.W.Va. May 18, 2010) (Plaintiff’s failure to perform critical quality-control sampling and other discovery failures resulted in the inadvertent production of an alleged “smoking gun” e-mail).

5 Available at: www.ilcd.uscourts.gov/Statement%20-%20Phase%20One.pdf.

6 Seventh Circuit Electronic Discovery Pilot Program Phase One Report available at www.7thcircuitbar.org/associations/1507/files/05-2010%20Phase%20One%20Report%20and%20Appendix%20with%20Bookmarks.pdf.

7 Tamburo v. Dworkin, 2010 WL 4867346 (N.D. Ill. Nov. 17, 2010).

8 Id. at 3.

9 Fed.R.Civ.P. 26(b)(1) (“Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense”).

10 2010 WL 4615547 (S.D.N.Y. Oct. 26, 2010).

Note: The above post appeared in the May 2011 issue of the free, monthly e-newsletter, Case Law Update & Trends published by Kroll Ontrack. This newsletter is designed to help busy legal professionals keep pace with case law and information pertaining to electronic evidence. Subscribe and gain valuable and timely information on new ESI court decisions, as well as informative articles and tips for both the corporate and law firm audience.

Case Law: Techsavies, LLC v. WDFA Mktg. Inc.

Case Law

Court Bars Introduction of and Reliance on Relevant Documents Not Timely Produced

Techsavies, LLC v. WDFA Mktg. Inc., 2011 WL 723983 (N.D. Cal. Feb. 23, 2011). In this discovery dispute, the plaintiff requested sanctions alleging the defendant failed to both timely produce documents and respond to an interrogatory. Despite the plaintiff’s multiple complaints that the first production of 32,000 documents was incomplete, the defendant did not produce approximately 120,000 additional responsive documents until after discovery closed, claiming it “moved offices and simply forgot about them.” Agreeing the defendant was on notice of its inadequate responses, the court found the defendant had an affirmative duty to investigate but failed to do so in a timely manner. Further, the defendant did not seek leave of the court before correcting its production. Concluding the defendant was unable to show its conduct was substantially justified or harmless, the court held sanctions were appropriate; however, the court also noted that the plaintiff contributed to the problems as it never moved to compel discovery. Thus, the court barred the defendant from introducing and relying on any untimely produced documents and ordered the parties to meet and confer regarding this issue.

Commentary

Rule 34(b) is often central to numerous discovery disputes. Whether practitioners seem to ignore the importance of this rule, are tied up with concerns relating to other aspects of the discovery process (such as preservation) or simply are unsure of proper production practices is unclear. What is clear is that fulfilling your production obligations appropriately will eliminate many disputes that are inherently unnecessary and costly both in terms of time and money.

In this case, the defendant “simply forgot” about the additional responsive documents claiming it had moved offices. The plaintiff had complained multiple times of the defendant’s incomplete production, but the defendant failed to acknowledge its duty to continue conducting searches for remaining documents that should have been produced. As a result of this failure, the court sanctioned the defendant by barring it from introducing and relying on any untimely produced documents. Had the defendant conducted its due diligence in fulfilling its discovery obligations under the Federal Rules of Procedure, the time and money spent litigating this motion would have likely been unnecessary. In addition, the defendant would not be faced with formulating case strategy with the absence of what could well be critical or influential documents.

A successful production begins with proactive planning. Planning should include determining what production options would be best for the case, including the timing and volume of productions, the output medium and whether multiple productions will be required. Counsel should formulate answers to these considerations prior to the meet and confer conference in order to be prepared to discuss production and other discovery issues. Prepared counsel at this conference will likely be able to secure a more favorable outcome regarding various discovery concerns. Be prepared as well to raise an objection to the format specified by the requesting party if necessary. Also, counsel is well-advised to simply play it straight, avoiding attempts to hide the ball. Nothing positive is gained by conducting discovery in bad faith, other than sanctions that could be detrimental to your case, your client and even your professional reputation and career.

2010: A Year in Review

 

Minneapolis, MN – Dec. 7, 2010 Kroll Ontrack, the leading provider of information management, data recovery, and legal technologies products and services, today announced its analysis of the reported electronic discovery opinions and five notable discovery themes in 2010. Among the dominant topics reoccurring in the 2010 judicial opinions were the pervasive struggle companies and practitioners continue to have with proper preservation techniques, the continued growth in intolerance by the judiciary for discovery failures and the renewed call for cooperation amongst counsel.

From Jan. 1, 2010 to Oct. 31, 2010, Kroll Ontrack summarized 84 of the most significant ediscovery cases. The number of discovery-related opinions continues to increase exponentially. These 84 opinions represent the trends demonstrated in jurisdictions across the nation. The breakdown of the major issues involved in these cases is as follows:

  • 39 percent of cases addressed sanctions
    • 49 percent of sanctions involved preservation and spoliation issues
    • 27 percent of sanctions involved production disputes
    • 24 percent of sanctions involved withholding discovery and other abuses
  • 18 percent of cases addressed various production considerations
  • 17 percent of cases addressed various procedural issues (such as searching protocol and cooperation)
  • 11 percent of cases addressed privilege considerations and waivers
  • 8 percent of cases addressed computer forensics protocols and experts
  • 2 percent of cases addressed cost considerations
  • 2 percent of cases addressed preservation and spoliation issues (but not sanctions)
  • 2 percent of cases addressed discoverability and admissibility issues

Almost every case that discussed preservation and spoliation issues also included a conversation regarding sanctions. This is not surprising given that 24 percent of respondents to the Fourth Annual ESI Trends Report published by Kroll Ontrack ranked preservation and collection difficulties as their number one concern.

Similar to both 2008 and 2009, the dominant pain point for courts and counsel was sanctions. Of the 33 sanctions cases summarized, 23 opinions (70 percent) awarded sanctions, while only 10 opinions (30 percent) denied sanctions.

“Information management and discovery protocols and processes are far from clear for most organizations. The lack of defined rules leaves organizations relying on case law, which can be contradictory depending on the jurisdiction,” said Michele Lange, director of discovery, Kroll Ontrack. “Consequently, organizations should not underestimate the value of conducting proactive measures with a discovery expert – from creating and communicating clear policies to testing those policies – so they are in the best possible position when required to respond to a request for ESI from a government agency or opposing party in a lawsuit, regulatory matter or investigation.”

Five notable cases themes from 2010 included:

Preservation
Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010). Seven plaintiffs who eventually issued written holds were found to have acted negligently, while the six plaintiffs who failed to issue any written litigation hold were found grossly negligent and subject to a permissive adverse inference sanction. The court found all thirteen plaintiffs worthy of monetary sanctions since they “conducted discovery in an ignorant and indifferent fashion,” and awarded the defendants reasonable attorneys’ fees and costs associated with the motion.

 

Rimkus Consulting Group, Inc. v. Cammarata, 2010 WL 645253 (S.D.Tex. Feb. 19, 2010). Court noted that “spoliation of evidence – particularly of electronically stored information – has assumed a level of importance in litigation that raises grave concerns” and “distract[s] from the merits of a case, add[s] costs to discovery, and delay[s] resolution.” Imposed a permissive adverse inference instruction and awarded the plaintiff attorneys’ fees and costs. Distinguished Pension Committee, finding the differences between circuits in relation to culpability of parties limited the applicability of the approach taken in that case and identified an additional distinction in regard to the burden of proof in relation to relevance and prejudice of spoliated evidence.

Victor Stanley, Inc. v. Creative Pipe, Inc., 2010 WL 3703696 (D. Md. Sept. 9, 2010). Court remarked the eight discrete preservation failures of the defendant “collectively constitute the single most egregious example of spoliation [that he has] encountered in any case . . . in nearly fourteen years on the bench.” Discussed preservation standards and spoliation laws among the Circuits, including in Pension Committee and Rimkus Consulting Group and issued a default judgment for one claim and held that the defendant president pervasively and willfully violated court orders in civil contempt of court, ordering him to be imprisoned for up to two years, or until he paid the attorneys’ fees and costs – estimated to be a “significant amount.”

Cooperation
Camesi v. Univ. of Pittsburgh Med. Ctr., 2010 WL 2104639 (W.D.Pa. May 24, 2010). Court ordered the parties to meet and confer and issued the defendants a “wake-up call” to “tighten up their discovery practices.” Court emphatically directed opposing counsel to act reasonably and in good-faith, working through “disagreements amicably whenever possible” as the court “has neither the time nor the resources to resolve every discovery agreement that surfaces in this or any other case.”

Privacy in the Workplace
City of Ontario, California v. Quon, 2010 WL 2400087 (U.S. June 17, 2010). United States Supreme Court declined to issue a “broad holding concerning employees’ privacy expectations vis-á-vis employer provided technological equipment.” However, the court found the employee should have understood or anticipated that it might be necessary for the City to audit the pager messages and deemed the employer’s search of the employee’s text messages reasonable.

Privilege
Mt. Hawley Ins. Co. v. Felman Prod., Inc., 2010 WL 1990555 (S.D.W.Va. May 18, 2010). Despite citing numerous steps the plaintiff undertook to prevent disclosure and the existence of a clawback agreement, the court found the plaintiff failed to perform critical quality control sampling and concluded the plaintiff did not take reasonable steps to prevent disclosure. As such, the efforts did not satisfy Fed.R.Evid. 502(b) and privilege was waived. In making its decision, the court also noted the e-mail was “a bell which cannot be unrung,” which influenced the defendants’ discovery requests and deposition questions. 

Discoverability of Additional Mediums
Romano v. Steelcase Inc., 907 N.Y.S.2d 650 (Sept. 21, 2010). Court found public portions of the plaintiff’s social networking sites contained content that was material and necessary to the litigation, and discerned a reasonable likelihood that the same would hold true as to the private portions. Noting commentary that “privacy is no longer grounded in reasonable expectations, but rather in some theoretical protocol better known as wishful thinking,” and that sharing personal information with others “is the very nature and purpose” of social networking sites the court ordered the plaintiff to provide necessary authorization for access to private Facebook and MySpace accounts.

Case Law: Leor Exploration & Prod., LLC v. Aguiar

Case Law

Court Strikes $1 Billion Pleadings to Sanction Defendant for E-Mail Hacking

Leor Exploration & Prod., LLC v. Aguiar, 2010 WL 3782195 (S.D. Fla. Sept. 28, 2010). In this consolidated commercial litigation, the plaintiffs sought sanctions and contempt, alleging the defendant violated court orders against witness tampering and hacked into the e-mail account of a principal plaintiff to gain a litigation advantage. The plaintiff charged that the e-mail account contained over 45,000 e-mails, including hundreds of attorney-client privileged communications, a compilation of which the defendant forwarded to his counsel and others. Introducing numerous factual, procedural and legal arguments, the defendant contended that the hacking was “spoofed,” the plaintiff tried to “goad” the defendant by filing frivolous lawsuits and, that “there is nothing wrong with wanting to win [the] lawsuit.” Disturbed by the defendant’s “win-at-all-costs mentality,” the court found the defendant gained an unfair advantage by obtaining unauthorized access to the e-mail and acted in bad faith, despite having a mental illness. Thus, the court affirmed and adopted the magistrate’s report and recommendation, striking the defendant’s pleadings at an alleged value of $1 billion. Satisfied that this sanction was both necessary and sufficient, the court declined to award attorneys’ fees and costs.

Commentary

Although this could potentially represent one of the largest sanctions in the history of ediscovery centric rulings, it is important to note that this $1 billion figure is not necessarily an outright or definite loss to the defendant. As the court pointed out in this decision, stating that the sanctions amount to a $1 billion dollar penalty would doubly assume that the defendant’s claims not only had merit but were worth what he said they were worth.

Regardless, attorneys can hardly help but note that courts are not shying away from imposing enormous sanctions in discovery cases, especially in cases of bad faith and where cooperation is lacking. In addition to potentially scaring out the would-be misconduct, however, decisions such as this one are welcomed by many attorneys who are eager for courts to crack down on egregious discovery misconduct, unfair practices, and attorneys and clients behaving badly. They would argue that too many lawyers get away with too much in discovery, and they view severe sanctions as a critical step to correcting an apparently rampant problem.

Attorneys must counsel their clients effectively and take active steps to preempt discovery misconduct even if such misconduct does not seem to rise to an extreme “win-at-all-costs” mentality as in this case. It is critical for lawyers to know, understand, and practice legal and fair discovery, and to educate their clients to achieve the same. In this case the attorneys escaped sanctions, but in many cases there is a gray line between client and lawyer liability when discovery failures arise, giving lawyers all the more reason to counsel and conduct discovery with caution, care and good faith.

Case Law: Alford v. Rents

Case Law

Court Sanctions Attorneys for “Scorched-Earth Approach to Discovery”

Alford v. Rents, 2010 WL 4222922 (S.D. Ill. Oct. 20, 2010). In this employment discrimination litigation, the court reviewed the magistrate judge’s recommendation advocating sanctions against both defendants’ counsels individually for discovery misconduct. Upon review of the record, the court found substantial and repeated violations of both the Federal Rules of Civil Procedure and the Illinois Rules of Professional Conduct based on the filing of over 14 discovery-related motions, incessant “accusation-laced, uncivil correspondence,” the need for judicial supervision of depositions and the appointment of a special master to decide discovery disputes. In light of counsels’ “scorched-earth approach to discovery” in which the attorneys “embarked upon a course entailing a conscious effort to maximize litigation and to make certain [it] was as time-consuming, difficult, unpleasant, and expensive as possible,” the court adopted the magistrate judge’s recommendation and held the two attorneys personally liable for sanctions in the amount of $3,750 each, to be paid without reimbursement from the law firms or clients.

Commentary

Cooperation in the discovery process has been increasingly stressed by courts around the country, as judges continue signing onto the principles expressed in the Sedona Conference® Cooperation Proclamation, which notes that zealous advocacy is consistent with cooperation in discovery. Despite these notable efforts and several court rulings admonishing counsel to simply get along with regard to discovery, the cultural change of a “reveal nothing, gain everything” mentality by attorneys has yet to occur on a significant scale. When will this shift happen? Perhaps movement on the cooperation front will not begin until clients start mandating to their counsel that cooperation in discovery is essential in order to prevent disputes and other roadblocks that only increase time spent in the discovery process which translates into a higher bill for the client.

Or, perhaps more ground will be gained through efforts such as the Seventh Circuit’s Electronic Discovery Pilot Program which seeks to develop and improve pretrial litigation procedures that provide fairness and justice to parties while reducing the cost and burden of ediscovery. Although only Phase One has been completed and reported on, the early results remain promising. According to the Phase One report, “92 percent of the judges agreed that the Principles [set forth in the program] had a positive effect on counsels’ ability to resolve discovery disputes before requesting court involvement.” Also according to this report, Principle 1.02 – which addresses cooperation – was often viewed as incredibly useful and allowed counsel to cooperate with each other while fulfilling their obligation to zealously advocate on behalf of their client.

Whatever the path shall be, it is clear that judges will not tolerate uncooperative counsel that disrupt the process with numerous discovery disputes and time-consuming arguments. As one prominent magistrate judge recently noted, he did not become a judge to resolve discovery disputes. Thus, don’t waste the court’s and your client’s time (and inherently money) by waging discovery warfare and losing sight of the big picture – the just, speedy, and inexpensive determination of every action and proceeding

 
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