All posts tagged sanctions

Looking Back, Peering Forward: The Top Ediscovery Cases of 2016

The 2015 FRCP amendments are now one year old and there are a full twelve months of case law to guide practitioners through the contours of the new rules. The last year in case law has seen stark developments on how courts interpret the proportionality, levy sanctions, utilize new technologies and reconsider costs to make ediscovery “just, speedy and inexpensive.”

Our webinar, The Top Ediscovery Cases of 2016, updates practitioners on the ediscovery highlights of the past year and features three ediscovery experts, offering the perspective of both counsel and judges:

  • Patrick Oot, Shook, Hardy & Bacon
  • Magistrate Judge Hildy Bowbeer, District of Minnesota
  • Magistrate Judge David J. Waxse, District of Kansas

Rule 26(b)(1): Proportionality Today

The webinar first discusses that the most drastic change of Rule 26(b)(1) is the essential change of mindset. The case Gilead Scis. v. Merck is used as an example to illustrate the place of proportionality in ediscovery. Gilead reveals the required sound reasoning both a party requesting discovery and a party objecting to discovery need to employ. In other words, “now the scope of discovery is neither broad nor liberal…it is proportional.” Attorneys that ignore proportionality do so at their own risk: the case Fulton v. Livingston Fin. is also used to show how the court imposed sanctions on a litigant who made arguments based on the old rule.

Rule 37(e): Sanctions Illustrated

The webinar then discusses the scope of Rule 37(e) and addresses the need to utilize “reasonable steps” to prevent sanctions, as this rule was formed with the intent of curtailing excessive ESI storage. The webinar uses the case Marten Transp. v. Plattform Adver. to show that the scope of a preservation duty is focused: courts expect “reasonable steps,” not perfection. The case Living Color is also used to highlight the fact that parties cannot simply make conclusory statements about prejudice resulting from ESI spoliation without any evidence and expect the court to levy sanctions.

One reason for excessive ediscovery costs is a cultural one and the webinar highlights that Rule 37(e) fits with Rule 1, which was amended for this reason. Cooperation between litigants is a key component of successful preservation, and a panelist observed, “Lawyers too often ignore their obligation to cooperate.”

Predictive Coding: New Frontiers

There are two myths underlying document review discussed in the webinar. The first is the myth that a response to discovery needs to be perfect when in fact the rules call only for “reasonable inquiry.” The second myth is that human review is the best way to ensure responsive documents are not missed when manual review has been shown to be imperfect. In this webinar, the discussion of these two myths sets the stage for asserting that predictive coding technology can be utilized to make ediscovery a more efficient practice.

2017: The Year of Ediscovery

In 2017, one common wish is that attorneys become better educated in ediscovery and the new technologies available. Courts will continue to dissect what constitutes reasonable steps for ESI preservation and also provide additional guidance for when discovery is proportional. Even though counsel may not be proficient in proportionality, the webinar concludes by stating that judges “recognize proportionality when they see it.”

With new opinions continuing to emerge, we expect the ediscovery landscape in 2017 to continue to evolve. Watch this webinar, The Top Ediscovery Cases of 2016, to learn more about the impact of the 2015 FRCP amendments and predictions for the upcoming year.

New Resources Available for Interpreting the FRCP

Ediscovery resources

The first couple of months after the Federal Rules of Civil Procedure (FRCP) amendments were enacted in December 2015 changed the ediscovery atmosphere. During that time, it was unknown to practitioners whether the changes to Rules 26(b)(1) and 37(e) would create any reaction by the courts, much less if they would substantially influence the course of discovery. The early opinions became a sounding board as both courts and parties struggled with the challenges of interpreting the new amendments and the impact they would have on their cases.

In just a few short months, the 2015 amendments will be one year old and many courts now have established expectations based on the new rules.  Practitioners can no longer afford to ignore the changes. In order to help practitioners avoid making their case a lightning rod, Kroll Ontrack has compiled a number of useful resources published this summer to help you navigate the current framework.

Summer 2016: New Ediscovery Resources

  • Published in mid-August 2016, Gibson, Dunn & Crutcher’s report, 2016 Mid-Year E-Discovery Update, highlights the current trends of courts in regards to 26(b)(1) and 37(e).
  • Kroll Ontrack’s e-Book, 6 Months of Case Law Under the New FRCP, which is mentioned in the Gibson, Dunn & Crutcher report, gives a six month overview of cases which have had the most impact due to the new amendments.
  • Nationally renowned ediscovery expert, Tom Allman, has released a new treatise entitled, Applying the 2015 Civil Rules Amendments. The article provides useful background information on the formation of the new amendments, as well as an analysis of how the rules are being utilized by the courts.
  • The recent Sedona Conference publication, TAR Case Law Primer, offers a comprehensive overview of the jurisprudence surrounding the use of TAR. The primer also includes a discussion of the use of TAR in an international context.

Don’t miss out on these great new resources!

6 Months of Case Law Under the New FRCP

Six months have passed since the December 1, 2015 amendments to the Federal Rules of Civil Procedure (FRCP) took effect. What has been the impact of the new rules on civil litigation and discovery?

In particular, Rule 26(b)(1) and Rule 37(e) have attracted a sizeable amount of jurisprudence, as both courts and parties grapple with the applications of these new rules. To aid today’s practitioner, Kroll Ontrack analyzed the most significant judicial opinions of the last six months relating to Rule 26(b)(1) and Rule 37(e).

How have the amendments impacted discovery? Download the FRCP case law digest.

Proportionality Reigns Supreme

In the first six months since the 2015 amendment to Rule 26(b)(1), courts have struggled with the removal of the “reasonably calculated” language, and the additional emphasis on proportionality. Pioneering lawsuits have fleshed out the most pressing questions such as what factors matter the most when arguing proportionality? In what way should a party object to discovery under the new rules? Looking at the totality of the case law, one new theme has emerged—there is no substitute for specificity. Both parties are required to state with specificity why they are requesting or objecting to discovery.

Safe Harbors for “Reasonable Steps”

In the past, organizations have been pressured to preserve massive amounts of ESI at tremendous expense. The 2015 amendments have attempted to require only “reasonable steps” be taken to preserve the information. But is it actually advancing adequate data preservation causes? What constitutes “reasonable steps” under the new FRCP amendments? If evidence was preserved and then lost, what level of intent is needed before a court will impose sanctions?

Each of these questions are addressed in Kroll Ontrack’s case summary digest, with the most relevant case law opinions highlighting the expectations from the courts in the first six months since the 2015 FRCP amendments. Download a copy of the FRCP case law digest by Kroll Ontrack, which not only summarizes key findings but also contains a circuit-by-circuit list of judicial opinions referencing FRCP amendments to Rule 26(b)(1) and Rule 37(e).

Still catching up on the 2015 amendments? Download a copy of Kroll Ontrack’s 2015 FRCP Amendments guidebook, which contains each of the December 1, 2015 amendments and full text of the Advisory Committee notes.

‘Tis the Season to Look Back: Ediscovery in 2012

Ediscovery in 2012

It’s that time again: The election is over, coma-inducing amounts of tryptophan were consumed, and families everywhere are breaking out hideous festive sweaters to show their holiday spirit .That can only mean one thing: 2012 is nearing its end—and it’s time to look back on the year that was ediscovery!

Major Ediscovery Case Law Trends Emerge

From January 1 to November 30, 2012, Kroll Ontrack summarized and categorized 70 of the most significant state and federal judicial opinions related to the preservation, collection, review and production of ESI. Major cases in 2012 discussed:

  • Sanctions (32%) for spoliation, production disputes and noncompliance with court orders
  • Procedural Issues (29%) such as search protocols, cooperation, production and privilege
  • Discoverability and Admissibility (16%) of specific types of information, such as corporate email stores and social media data
  • Cost considerations (14%) such as shifting and taxation of costs
  • Technology-Assisted Review (TAR) (9%), predictive technologies and other advanced search technologies

Several notable trends emerged from 2012 that will leave a lasting impression on the ediscovery landscape. However, all good things come to those who wait, so tune in tomorrow for part two of our three part series, where we’ll analyze these trends.

Read part two of our “year in review” report now.

Case Law: E.I. Du Pont De Nemours & Co. v. Kolon Indus., Inc.

Case Law

Court Imposes Adverse Inference Sanction for Bad Faith Spoliation

E.I. Du Pont De Nemours & Co. v. Kolon Indus., Inc., 2011 WL 2966862 (E.D. Va. July 21, 2011).
In this ongoing trade secrets litigation, the plaintiff sought sanctions alleging the defendant spoliated evidence by deliberately destroying relevant ESI and engaged in prolonged efforts to conceal misconduct. Offering a “no harm, no foul” defense, the defendant claimed that because many of the deleted files were recovered, no spoliation occurred and the plaintiff suffered no prejudice. Finding the defendant did not engage in a widespread effort to delete relevant information, the court however determined the litigation hold notices were inadequate and, according to forensic analysis, several key employees intentionally and in bad faith destroyed approximately 12,836 e-mails and 4,975 electronic files. Declaring these deletions significant in substance and number, the court imposed an adverse inference instruction and ordered payment of attorney fees and costs incurred as a result of the spoliation.

Commentary

This case highlights an issue that unfortunately is no longer an anomaly in the world of ediscovery. Parties continue deleting information and failing to adhere to a proper preservation and litigation hold protocol. In this case, the defendant attempted to avoid blame by noting that numerous documents were recovered – a hard sell to judges that continue to grow wearier of parties skirting their ediscovery obligations. Further, this case demonstrates the power of forensics. Professionals trained in the art of computer forensics are invaluable to investigations and uncovering the truth about data. However, unlike the portrayals in popular primetime dramas, forensics is a delicate art that requires diligence, proper chain of custody protocols and experience.

Curious to learn more?  Read our recent article: Computer Forensics – Not As Seen on TV.

Case Law: Genger v. TR Investors, LLC

Case Law

Court Upholds $3.2 Million in Sanctions for Intentional Deletion of Unallocated Space

Genger v. TR Investors, LLC, 2011 WL 2802832 (Del. Supr. July 18, 2011). In this shareholder litigation, the defendant (an “international man of mystery”) sought review of the Court of Chancery’s judgment including, its award of $3.2 million in attorney fees and costs for the spoliation of ESI in violation of a preservation order. On appeal, the defendant argued the sanctions were disproportionate and excessive as he merely erased unallocated free space, which was not specifically prohibited by the order and did not did not result in the spoliation of material evidence. The defendant further argued that because normal computer use causes similar overwriting to occur, sanctioning this behavior would require the suspension of all computer activities every time a court issued a preservation order. Rejecting both arguments, the court determined the trial court’s finding was based on narrow grounds related to evidence spoliation – not rewriting in general – and that the parties previously compromised, agreeing to the specified fee amount. In order to avoid future confusion, the court recommended that parties address the issue of unallocated free space in their preservation orders and document retention policies.

Commentary

The trial court’s decision issued in December 2009 highlighted the ever-growing need to bridge the proverbial gap between IT and legal. The independent technology consultants in the case were brought in by the supervising counsel. Whether the technology consultant’s failure to image unallocated space was the result of counsel’s failure to explain the legal implications of the data collection process, or the legal technology’s company’s inability to perform such operations is not clear. What is clear is the need to open the lines of communication between the IT and legal professionals and make sure everyone is on the same page. To do this, companies should form an ediscovery response team tasked with the responsibility of formulating document retention and litigation response policies. The response team should maintain knowledge of information regarding: Where company data resides, who has expert knowledge of the data, how it is maintained, how it can be accessed and when it is destroyed. Further, the ediscovery response team should develop and maintain a data map and ensure retention practices match the policies.

Want to learn more about the underlying litigation and the trial court’s ruling? Download a previous edition of the ESI Report where we discuss the discovery order issued in TR Investors, LLC v. Genger.

Case Law: Eon-Net LP v. Flagstar Bancorp

Case Law

U.S. Court of Appeals, Federal Circuit, Affirms Sanction for Failure to Preserve Evidence

Eon-Net LP v. Flagstar Bancorp, No. 2009-1308 (Fed. Cir., July 29, 2011). In this patent litigation, the plaintiff (sanctioned party-appellant) appealed an order from the Western District of Washington that imposed sanctions for litigation misconduct. The litigation misconduct included the failure to preserve and the destruction of documents. Indeed, the principal of the plaintiff organization testified that “I don’t save anything so I don’t have to look” and also testified that we “have adopted a document retention policy which is that we don’t retain any documents” because the companies have “evolved into patent enforcement companies which are involved in the business of litigation.” Pursuant to this document retention ideology, all documents were destroyed from a relevant infringement action despite being potentially responsive to other cases. Based on this misconduct, the Court of Appeals affirmed the award of almost $500,000 in attorney fees.

Commentary

As reported by Mark Michels of Law Technology News, the Court of Appeals for the Federal Circuit recently affirmed sanctions imposed by the Western District of Washington following litigation misconduct that included the failure to preserve and destruction of documents. Other litigation misconduct included failing to engage in the claim construction process in good faith, lodging incomplete and misleading intrinsic evidence with the court and submitting declarations that contradicted earlier deposition testimony.

Interestingly, the Federal Circuit discussed that the plaintiff had the ability to impose “disproportionate discovery costs” on the defendant based on the potentially “enormous” amounts of potentially relevant documents. Further, the court noted the Federal Rules of Civil Procedure and traditionally liberal notions of discovery often result in an accused infringer producing millions of pages from numerous repositories and custodians, with the costs generally borne by the producing party, referring to Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 358 (1978).

Clearly the plaintiff’s document retention policy is ill-advised at best. At worst, it contributed to an award of sanctions of nearly $500,000 in attorney fees. In this modern day of exponential growth in data volumes, it is hard for companies to strike the right balance between preserving everything and saving nothing. Over-retention does pose significant risks; however, it is possible to manage information in an effective manner. First, companies must determine retention periods and create record retention schedules that dictate how long each record classification should be preserved. Once it’s determined what should be maintained, the next step is deciding it should be maintained or destroyed. The retention policy should also be clearly communicated to all employee levels while strictly adhering to the policy.

Further, we recommend companies institute archiving solutions to ensure and assist with the following: regulatory compliance and corporate governance, operational efficiency, and litigation readiness and investigations. When considering what archiving solution is right for your company, research what features and options are most desirable. In addition, consider whether the archive can be used for ediscovery and how it interfaces with any existing ediscovery tools you may have installed in the organization. Also, ask whether there are considerations included in the contract for assistance with discovery. These questions merely touch the surface of the due diligence an organization should use in researching and vetting an archiving solution. Companies do not have to conduct this process alone. Seek out the help of a consultant who can provide valuable, trusted assistance in ensuring your organization makes the right choice from the beginning.

Case Law: Play Visions, Inc. v. Dollar Tree Stores, Inc.

Case Law

Plaintiff Corporation and Counsel Sanctioned for Discovery Misconduct

Play Visions, Inc. v. Dollar Tree Stores, Inc., No. C09-1769 MJP (W.D. Wash. June 8, 2011). In this intellectual property litigation, the defendants sought discovery sanctions in response to the plaintiff’s motion for voluntary dismissal, alleging a persistent pattern of discovery-related misconduct. In response to the defendants’ production requests, the plaintiff initially pointed the defendants to 360 boxes of unsorted records. Even though the plaintiff certified that its production was complete, the plaintiff’s counsel e-mailed multiple addendums to discovery, many times requiring the defendants to scramble to meet court deadlines or necessitating extensions. Although the plaintiff certified that none of its records existed in electronic form, it eventually turned over some of the demanded ESI, claiming the accessibility of the database was unknown because “no one bothered to ask” the company’s IT consultant (plaintiff’s counsel also put the CFO and CEO in charge of discovery responsibilities). Citing this litany of discovery mishaps, the court found sanctions appropriate and awarded the plaintiff over $137,000. Further, because the plaintiff’s counsel did not abide by Fed.R.Civ.P. 26(g)(1), which requires lawyers to make a “reasonably inquiry” before certifying discovery responses, the court ordered him to share the burden of the sanctions.

Commentary

This case should teach any potential litigant the importance of being proactive in discovery and forthright with the other party and the court. The plaintiff’s problems stemmed from a failure to think ahead. The plaintiff – and the plaintiff’s counsel – should have conducted a thorough effort to determine what records it had, where it kept them and what its retention policy was. Instead, the plaintiff reactively produced documents whenever the defendant found out that the prior production was insufficient.

Further, the court was notably frustrated with the fact that the plaintiff repeatedly submitted false certifications regarding the completeness of the discovery and the existence of ESI. The court concentrated on the fact that the defendants relied on these certifications to their detriment when responding to the plaintiff’s motions, thus providing the basis for many of the sanctions. Simply put, counsel must actually take steps to ensure that discovery is complete or ESI does not exist. The plaintiff’s counsel failed to be an active player in the process and he felt the court’s wrath in the form of sanctions along with his client.

Bottom line: Understand where your client’s data lives and what the applicable retention policies are. Simply relying on the client to do the discovery work for you will more often than not lead to negative consequences for you both personally and professionally.

Want to learn more about the facts and issues within this case? Download the latest edition of the ESI Report today!

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: Haraburda v. Arcelor Mittal USA, Inc

Case Law

Court Orders Defendants to Issue Litigation Hold Before Rule 26(f) Conference

Haraburda v. Arcelor Mittal USA, Inc., 2011 WL 2600756 (N.D. Ind. June 28, 2011). In this employment discrimination suit, the plaintiff requested the court order the defendant to preserve e-mail evidence, claiming the defendant previously deleted e-mails from the plaintiff’s account without her permission and refused to issue a litigation hold prior to the Fed.R.Civ.P. 26(f) meet and confer. The defendant argued the plaintiff’s request was premature as Rule 26(d)(1) prohibited a party from seeking discovery before the Rule 26(f) conference. Disagreeing with the defendant’s argument, the court noted Rule 26(d)(1) prohibited requesting production – not compelling preservation – and stated that ruling to the contrary would leave a party with knowledge of an intent to destroy evidence without a remedy. Accordingly, the court found the plaintiff could suffer measurable prejudice based on the suit’s heavy reliance on e-mails if evidence was destroyed and ordered the defendant to implement a litigation hold.

Commentary

Although the defendant put forth a novel argument, it failed to acknowledge the obligations each party has to proactively preserve evidence upon the reasonable anticipation of litigation. As the Sedona Conference® notes, the duty to preserve evidence “includes an obligation to identify, locate, and maintain, information that is relevant to specific, predictable, and identifiable litigation”. The Sedona Conference®, Commentary on Legal Holds: The Trigger and the Process.

However, the issue of when the duty actually arises is often a challenging one as different courts have found various triggers to be applicable. Generally, courts recognize that the “mere possibility of litigation” does not trigger the duty to preserve because litigation is “an ever-present possibility” in modern society. Cache La Poudre Feeds, LLC v. Land O’ Lakes, Inc.

Recently, the District of Colorado determined that the defendant’s duty to preserve evidence triggered when the plaintiff filed a formal complaint at work (racial discrimination lawsuit), which put the defendant on notice to preserve all existing and future video that included the plaintiff. The defendant failed to do so, and the court found the plaintiff was prejudiced by the defendant’s willful destruction of video recordings. Accordingly, the court issued both mandatory and permissive adverse inference instructions as well as attorney fees relating to the spoliation motion. McCargo v. Texas Roadhouse, Inc., 2011 WL 1638992 (D. Colo. May 2, 2011). In the 2009 case, Goodman v. Praxair Services, Inc., the District of Maryland concluded that the defendant’s duty to preserve triggered following receipt of a letter informing the defendant the plaintiff had consulted attorneys. Further, a ruling from the Southern District of New York found the duty to preserve arose no later than the lawsuit’s filing. Green v. McClendon.

As demonstrated by the sampling of cases above (which by no means present an exhaustive list of possibilities), it is no wonder parties are confused as to when the duty to preserve arises. It is better for parties to be safe than sorry by implementing a written legal hold sooner rather than later if litigation appears to be on the horizon. To increase defensibility, parties should maintain detailed notes of the preservation protocol followed, which includes when the hold was issued, what details were included in the hold, to whom the hold was issued and the efforts taken to continually monitor compliance.

 
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