The e-discovery experts at Applied Discovery provide Case Summaries to help you stay up to date on the quickly changing law of electronic discovery. This section, updated monthly, includes representative cases from around the country that address electronic discovery including: evidentiary issues, cost allocation, electronic evidence spoliation, formatting of electronic evidence, and other discovery issues.
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Featured Cases of the Month...
November, 2009
Oracle USA, Inc. v. SAP AG, 2009 U.S. Dist. LEXIS 91432 (N.D. Cal. Sept. 17, 2009).This case was featured in the November 2009 Applied Discovery Case Summary Alert, a complimentary monthly
e-mail service for registered users of AppliedDiscovery.com
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A magistrate judge sanctioned plaintiff for delay in supplementing its initial disclosures on damages by precluding plaintiff from presenting any evidence of damages beyond those damages included by plaintiff in its initial disclosures. The magistrate judge also ruled that its preclusion sanction was not a dispositive order that required a report and recommendation to the court.
Defendants in a copyright infringement action sought an order precluding plaintiffs from introducing evidence of damages due to lost profits beyond the type of lost profits described by plaintiffs in their initial disclosure. Plaintiffs initially referred to lost customer support revenue but later asserted loss of licensing revenue after the chief executive of a plaintiff testified at his deposition about other types of damages. Defendants' economic damages expert testified that analysis of new categories of damages claimed by plaintiff would take a year and add $5 million to the $8.8 million of expert fees and costs already spent or anticipated. Plaintiffs countered that trial was not scheduled until over a year later and that fact discovery was not scheduled to end for several more months.
The magistrate judge held that plaintiffs "provided no substantial justification for their two year delay in supplementing" the "conclusorily listed four highly general types of damages" in their initial disclosure. Fed. R. Civ. P. 26(a)(1)(A)(iii) required initial disclosure of "a computation of each category of damages," and Rule 37(c)(1) precluded use of information not provided in an initial disclosure or in supplemental discovery responses even in the absence of a finding of bad faith in the failure to disclose. Plaintiffs also failed to disclose their alternate damages theories until over one year after an order for damages discovery to proceed. Given the magnitude of the case involving plaintiff's claims of infringement of over a hundred copyright certificates and software products by plaintiff's principal competitor, "the expansion in damages discovery that would be necessitated by Plaintiffs' new categories of damages would prejudice Defendants and almost certainly derail the trial schedule."
According to the magistrate judge, "although the trial in this matter is a little over one year in the future, here the late disclosure is not harmless, because Defendants cannot conduct a meaningful analysis of Plaintiffs' far more complicated and extensive new damages claims within the current pretrial schedule given the much greater scope of this litigation and the complexity of the additional expert analysis that would be required." Allowing plaintiffs to present new and more extensive damage theories "would," according to the magistrate judge, "run directly contrary to the mandate of Rule 1 [of the Federal Rules of Civil Procedure], achieving a dubious trifecta of unfair, glacially slow and exorbitantly expensive litigation." The magistrate judge pointed out that "production of electronic data in this case has been huge," and that "[d]iscovery has already cost each party millions of dollars." Thus, "[f]undamental fairness as well as effective case management require that damages discovery not be dramatically expanded at this late date; otherwise, this already complex case may never be ready for trial."
The magistrate judge also held that she could order sanctions under Rule 37 without a report or recommendation to the district court. A magistrate judge was authorized to enter orders on non-dispositive motions, and motions for discovery sanctions under Rule 37 were non-dispositive matters. The magistrate judge noted that even after the sanctions limiting plaintiffs' proof of damages, plaintiffs still were being allowed to seek lost profits of the type initially disclosed that could total, according to plaintiffs' estimate, at least a billion dollars.
Defendants in a copyright infringement action sought an order precluding plaintiffs from introducing evidence of damages due to lost profits beyond the type of lost profits described by plaintiffs in their initial disclosure. Plaintiffs initially referred to lost customer support revenue but later asserted loss of licensing revenue after the chief executive of a plaintiff testified at his deposition about other types of damages. Defendants' economic damages expert testified that analysis of new categories of damages claimed by plaintiff would take a year and add $5 million to the $8.8 million of expert fees and costs already spent or anticipated. Plaintiffs countered that trial was not scheduled until over a year later and that fact discovery was not scheduled to end for several more months.
The magistrate judge held that plaintiffs "provided no substantial justification for their two year delay in supplementing" the "conclusorily listed four highly general types of damages" in their initial disclosure. Fed. R. Civ. P. 26(a)(1)(A)(iii) required initial disclosure of "a computation of each category of damages," and Rule 37(c)(1) precluded use of information not provided in an initial disclosure or in supplemental discovery responses even in the absence of a finding of bad faith in the failure to disclose. Plaintiffs also failed to disclose their alternate damages theories until over one year after an order for damages discovery to proceed. Given the magnitude of the case involving plaintiff's claims of infringement of over a hundred copyright certificates and software products by plaintiff's principal competitor, "the expansion in damages discovery that would be necessitated by Plaintiffs' new categories of damages would prejudice Defendants and almost certainly derail the trial schedule."
According to the magistrate judge, "although the trial in this matter is a little over one year in the future, here the late disclosure is not harmless, because Defendants cannot conduct a meaningful analysis of Plaintiffs' far more complicated and extensive new damages claims within the current pretrial schedule given the much greater scope of this litigation and the complexity of the additional expert analysis that would be required." Allowing plaintiffs to present new and more extensive damage theories "would," according to the magistrate judge, "run directly contrary to the mandate of Rule 1 [of the Federal Rules of Civil Procedure], achieving a dubious trifecta of unfair, glacially slow and exorbitantly expensive litigation." The magistrate judge pointed out that "production of electronic data in this case has been huge," and that "[d]iscovery has already cost each party millions of dollars." Thus, "[f]undamental fairness as well as effective case management require that damages discovery not be dramatically expanded at this late date; otherwise, this already complex case may never be ready for trial."
The magistrate judge also held that she could order sanctions under Rule 37 without a report or recommendation to the district court. A magistrate judge was authorized to enter orders on non-dispositive motions, and motions for discovery sanctions under Rule 37 were non-dispositive matters. The magistrate judge noted that even after the sanctions limiting plaintiffs' proof of damages, plaintiffs still were being allowed to seek lost profits of the type initially disclosed that could total, according to plaintiffs' estimate, at least a billion dollars.
October, 2009
Grider v. Keystone Health Plan Central, Inc., 2009 U.S. App. LEXIS 19642 (3d Cir. Sept. 1, 2009).This case was featured in the October 2009 Applied Discovery Case Summary Alert, a complimentary monthly
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Sanctions requiring defendants and their counsel to pay over $3.2 million of plaintiffs' attorney fees were vacated because the trial court failed to specify, as required by Fed. R. Civ. P. 26(g)(3), how defendants' general discovery objections were "without substantial justification."
A doctor and her medical practice filed an action alleging failure of a health maintenance organization to make payments promptly as required by statute. Although the action was eventually settled, three defendants and their counsel appealed two orders imposing sanctions in the form of plaintiffs' attorney fees of over $3.2 million. The trial court held that all appellants violated Fed. R. Civ. P. 26(g)(2)(A) and (B) and Fed. R. Civ. P. 37(c)(1) and that appellant law firms and their attorneys violated 28 U.S.C.A. § 1927 and a local rule of court.
Although lamenting the lack of "civility and professionalism one expects from such experienced attorneys," the court of appeals vacated the sanctions orders. The court first held that settlement of the action did not moot the appeals because the appellants suffered "reputational harm" from the sanctions. The court then ruled that sanctions entered under Rule 26(g)(3) had to be set aside because the trial court did not make any finding that good faith certifications of appellants in making their general discovery objections were—in the language of the Rule—"without substantial justification." Rule 37(c)(1) also required a finding by the trial court that any failure to provide required discovery was "without substantial justification," and sanctions against all appellants under that rule had to be set aside.
Sanctions against counsel imposed under Rule 37(c)(1) were set aside because reasoning of the Second and Seventh Circuits in deciding the rule did not permit sanctions against counsel was persuasive. Sanctions against counsel under 28 U.S.C.A. § 1927 and a local rule also were vacated because the trial court made only generalized findings of bad faith by counsel in unreasonably and vexatiously multiplying the proceedings in the case. The trial court in its 77-page opinion referred to bad faith of each sanctioned attorney, but the section of the opinion in which the trial court discussed imposition of sanctions on the attorneys due to their bad faith had “such little specificity that we cannot affirm.” According to the court, “individualized analysis” was required:
A doctor and her medical practice filed an action alleging failure of a health maintenance organization to make payments promptly as required by statute. Although the action was eventually settled, three defendants and their counsel appealed two orders imposing sanctions in the form of plaintiffs' attorney fees of over $3.2 million. The trial court held that all appellants violated Fed. R. Civ. P. 26(g)(2)(A) and (B) and Fed. R. Civ. P. 37(c)(1) and that appellant law firms and their attorneys violated 28 U.S.C.A. § 1927 and a local rule of court.
Although lamenting the lack of "civility and professionalism one expects from such experienced attorneys," the court of appeals vacated the sanctions orders. The court first held that settlement of the action did not moot the appeals because the appellants suffered "reputational harm" from the sanctions. The court then ruled that sanctions entered under Rule 26(g)(3) had to be set aside because the trial court did not make any finding that good faith certifications of appellants in making their general discovery objections were—in the language of the Rule—"without substantial justification." Rule 37(c)(1) also required a finding by the trial court that any failure to provide required discovery was "without substantial justification," and sanctions against all appellants under that rule had to be set aside.
Sanctions against counsel imposed under Rule 37(c)(1) were set aside because reasoning of the Second and Seventh Circuits in deciding the rule did not permit sanctions against counsel was persuasive. Sanctions against counsel under 28 U.S.C.A. § 1927 and a local rule also were vacated because the trial court made only generalized findings of bad faith by counsel in unreasonably and vexatiously multiplying the proceedings in the case. The trial court in its 77-page opinion referred to bad faith of each sanctioned attorney, but the section of the opinion in which the trial court discussed imposition of sanctions on the attorneys due to their bad faith had “such little specificity that we cannot affirm.” According to the court, “individualized analysis” was required:
Where attorneys' reputations (and, therefore, their livelihood and ability to practice their chosen profession) are at stake, we require a judge to analyze the sanctionable conduct with greater specificity than [the trial court] did in this case in imposing sanctions under 28 U.S.C. § 1927 and Local Rule 83.6.1.
On other topics, the court underscored “that a privilege log may not be required for communications with counsel that take place after the filing of a lawsuit.” Also, the court was “aware of no authority for the proposition that a parent corporation, simply by virtue of ownership, may be held responsible for its subsidiary’s discovery violations.” The court additionally concluded that “[t]he mere fact that Defendants had entered into a joint-defense agreement did not support imputation of the actions of one party’s attorney to another party or its attorney.”
September, 2009
Coburn Group, LLC v. Whitecap Advisors LLC, 2009 U.S. Dist. LEXIS 69188 (N.D. Ill. Aug. 7, 2009)This case was featured in the September 2009 Applied Discovery Case Summary Alert, a complimentary monthly
e-mail service for registered users of AppliedDiscovery.com
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An email containing work product was inadvertently disclosed within the meaning of Fed. R. Evid. 502(b)(1) because its inclusion in a document production simply was a mistake. Return of the email was ordered because use of experienced paralegals to review documents was reasonable, and counsel promptly sought return of the document once he learned it had been produced inadvertently.
Defendant in a breach of contract action sought the return by plaintiff of an email document that defendant claimed contained attorney work product. The document — included in a production of about 40,000 pages to plaintiff — was an email from an employee of defendant to a principal of defendant with information on dealings between plaintiff and defendant. The information was gathered to respond to requests by attorneys representing defendant in the lawsuit. An attorney for defendant first learned that the document had been included in the production when the employee was deposed. Although use of the document was objected to and return of the document was sought, plaintiff contended that the document contained no opinion work product and that defendant waived protection for the document. Counsel for plaintiff also contended that they had a right and perhaps a duty to use the document in order to represent their client zealously.
The court ordered plaintiff and its counsel to return the document and not to use the document for any purpose. While the document was not opinion work product because it did not include attorney opinion or theories, it still was work product. Facts in the document were not protected, but the work done by the employee in preparing responses to attorney questions was protected unless defendant waived work product protection.
After analyzing the elements of Fed. R. Evid. 502, which became effective September 19, 2008, the court concluded that there had been no waiver:
Defendant in a breach of contract action sought the return by plaintiff of an email document that defendant claimed contained attorney work product. The document — included in a production of about 40,000 pages to plaintiff — was an email from an employee of defendant to a principal of defendant with information on dealings between plaintiff and defendant. The information was gathered to respond to requests by attorneys representing defendant in the lawsuit. An attorney for defendant first learned that the document had been included in the production when the employee was deposed. Although use of the document was objected to and return of the document was sought, plaintiff contended that the document contained no opinion work product and that defendant waived protection for the document. Counsel for plaintiff also contended that they had a right and perhaps a duty to use the document in order to represent their client zealously.
The court ordered plaintiff and its counsel to return the document and not to use the document for any purpose. While the document was not opinion work product because it did not include attorney opinion or theories, it still was work product. Facts in the document were not protected, but the work done by the employee in preparing responses to attorney questions was protected unless defendant waived work product protection.
After analyzing the elements of Fed. R. Evid. 502, which became effective September 19, 2008, the court concluded that there had been no waiver:
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The production had been inadvertent when measured under the simple test intended by Rule 502 of whether its disclosure was a mistake (in contrast to tests of prior case law of factors such as number of documents reviewed and procedures used);
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Reasonable steps (in contrast to "all reasonable means" required in other case law) had been taken to prevent disclosure of the document considering that 72,000 pages of documents were reviewed to produce 40,000 documents and that counsel for defendant supervised two paralegals with 17 and 16 years’ experience in following a protocol for a five-week review of documents for privilege and work product;
- Although counsel did not conduct a post-production review of documents produced to plaintiff, counsel acted promptly after learning of the mistake in producing the document and sought to rectify the mistake.
The court also concluded that plaintiff had not shown a substantial need for the document. Plaintiff contended the document would show that defendant had not accurately portrayed jurisdictional facts in a motion to dismiss for lack of personal jurisdiction. However, the court had denied the motion without reference to the disputed facts. Also, according to the court, plaintiff's counsel did not have a right or duty to use the document to represent their client. A 1999 advisory opinion by the Illinois State Bar Association suggested that a party could use information in confidential materials supplied through error or inadvertence of opposing counsel if the party did not know of the error. The court suggested the opinion no longer had validity due to evolution of the law and recent revision of the Illinois Rules of Professional Conduct to require a lawyer to notify the sender about an inadvertently sent document.
August, 2009
KCH Services, Inc. v. Vanaire, Inc., 2009 U.S. Dist. LEXIS 62993 (W.D. Ky. July 21, 2009).
This case was featured in the August 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
A call from a competitor's president about defendant's use of the competitor's software should have put defendant on notice of future litigation, and defendant's deletion of the software without first giving the competitor an opportunity to inspect led the court to sanction defendant with an adverse inference jury instruction.
Plaintiff's president called an executive with defendant – a competitor of plaintiff -- to state he believed defendant was using plaintiff's software. Defendant's executive then instructed employees to delete any software from defendant's computers that was not purchased or owned by defendant. Plaintiff filed a complaint in the next month, and counsel for plaintiff sent an evidence-preservation letter to defendant three weeks after the complaint was filed. Plaintiff filed a motion for sanctions due to defendant's alleged spoliation in deleting software and later failing to preserve email.
The court held that the call from plaintiff's president should have put defendant on notice that issues concerning software "may be relevant to future litigation." Defendant's executive who received the call from plaintiff's president had been involved in litigation with plaintiff ten years earlier and knew that plaintiff was willing and able to file suit. Also, defendant continued to delete and overwrite files even after receiving plaintiff's evidence-preservation letter. The court concluded that an adverse inference instruction to the jury concerning software and email that defendant failed to preserve would be sufficient to compensate plaintiff for lost evidence
This case was featured in the August 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
A call from a competitor's president about defendant's use of the competitor's software should have put defendant on notice of future litigation, and defendant's deletion of the software without first giving the competitor an opportunity to inspect led the court to sanction defendant with an adverse inference jury instruction.
Plaintiff's president called an executive with defendant – a competitor of plaintiff -- to state he believed defendant was using plaintiff's software. Defendant's executive then instructed employees to delete any software from defendant's computers that was not purchased or owned by defendant. Plaintiff filed a complaint in the next month, and counsel for plaintiff sent an evidence-preservation letter to defendant three weeks after the complaint was filed. Plaintiff filed a motion for sanctions due to defendant's alleged spoliation in deleting software and later failing to preserve email.
The court held that the call from plaintiff's president should have put defendant on notice that issues concerning software "may be relevant to future litigation." Defendant's executive who received the call from plaintiff's president had been involved in litigation with plaintiff ten years earlier and knew that plaintiff was willing and able to file suit. Also, defendant continued to delete and overwrite files even after receiving plaintiff's evidence-preservation letter. The court concluded that an adverse inference instruction to the jury concerning software and email that defendant failed to preserve would be sufficient to compensate plaintiff for lost evidence
July, 2009
Kipperman v. Onex Corp., "Kipperman II", 2009 U.S. Dist. LEXIS 44457 (N.D. Ga. May 26, 2009).
This case was featured in the July 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
Although tempted by defendants' discovery abuse to strike defendants' answer, the court instead ordered defendants to reimburse plaintiff $1,022,700 in attorney fees and costs. The court explained that striking defendants' answer could have resulted in the largest default judgment in U.S. history in a case that presented novel issues.
The trustee for a bankruptcy litigation trust in a constructive transfer and fraud case sought an order striking defendants' answer and entering a default judgment against them. Email obtained from the debtor indicated that defendants had not produced all responsive email. Defendants contended the email was on backup tapes that they would not restore except at plaintiff's expense. Defendants argued that the costs of restoring the email would be high and that the value of information on the tapes was minimal.
The court stated that it did not fault defendants for their initial refusal to restore backup tapes but it did "condemn Defendants, however, for making blatant misrepresentations about the value of e-mail discovery in this case in an effort to influence the court's ruling, for refusing to follow the court's ruling once made, and for behaving as if they, and not the court, got to decide what electronic material was relevant and discoverable under Rule 26 and what material was not." The court concluded that "it now appears that defense counsel's statements were either purposefully misleading or made with a reckless disregard for the truth." Although defendants decided that a search conducted pursuant to court order was producing irrelevant material that would be redacted, the court observed at a hearing that some of the email documents examined by the court for relevance "certainly are hot and they certainly do smell like they have been discharged lately."
This was "a textbook case of discovery abuse," according to the court. The trustee was prejudiced by not having documents needed for depositions and expert reports after defendants "blatantly ignored orders of the court." However, the court limited sanctions to reimbursement of $1,022,700 of plaintiff's attorney fees and costs. The court stated that it was tempted to grant plaintiff’s request to strike the answer and enter default judgment against defendants, but plaintiff now had the "raw material and documentation" needed to present a case and the court would allow re-depositions and supplemental expert reports. The court explained that there were novel issues of liability and a default judgment might be the largest default judgment "in the history of the nation."
This case was featured in the July 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
Although tempted by defendants' discovery abuse to strike defendants' answer, the court instead ordered defendants to reimburse plaintiff $1,022,700 in attorney fees and costs. The court explained that striking defendants' answer could have resulted in the largest default judgment in U.S. history in a case that presented novel issues.
The trustee for a bankruptcy litigation trust in a constructive transfer and fraud case sought an order striking defendants' answer and entering a default judgment against them. Email obtained from the debtor indicated that defendants had not produced all responsive email. Defendants contended the email was on backup tapes that they would not restore except at plaintiff's expense. Defendants argued that the costs of restoring the email would be high and that the value of information on the tapes was minimal.
The court stated that it did not fault defendants for their initial refusal to restore backup tapes but it did "condemn Defendants, however, for making blatant misrepresentations about the value of e-mail discovery in this case in an effort to influence the court's ruling, for refusing to follow the court's ruling once made, and for behaving as if they, and not the court, got to decide what electronic material was relevant and discoverable under Rule 26 and what material was not." The court concluded that "it now appears that defense counsel's statements were either purposefully misleading or made with a reckless disregard for the truth." Although defendants decided that a search conducted pursuant to court order was producing irrelevant material that would be redacted, the court observed at a hearing that some of the email documents examined by the court for relevance "certainly are hot and they certainly do smell like they have been discharged lately."
This was "a textbook case of discovery abuse," according to the court. The trustee was prejudiced by not having documents needed for depositions and expert reports after defendants "blatantly ignored orders of the court." However, the court limited sanctions to reimbursement of $1,022,700 of plaintiff's attorney fees and costs. The court stated that it was tempted to grant plaintiff’s request to strike the answer and enter default judgment against defendants, but plaintiff now had the "raw material and documentation" needed to present a case and the court would allow re-depositions and supplemental expert reports. The court explained that there were novel issues of liability and a default judgment might be the largest default judgment "in the history of the nation."
June, 2009
Securities and Exchange Commission v. Schroeder, 2009 U.S. Dist. LEXIS 39378 (N.D. Cal. Apr. 27, 2009).
This case was featured in the June 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
A motion to compel production of internal notes and draft memoranda of a non-party law firm generated during preparation of a special committee report on a company’s stock option practices was denied. The law firm documents had not been disclosed outside the law firm, and the defendant executive in the stock option backdating case did not demonstrate that the law firm materials were crucial to his defense.
The retired chief executive officer of a company was named in an SEC enforcement action alleging improper backdating of stock options at the retired CEO’s company. He sought an order compelling the company and its law firm, including individual attorneys at the firm, to produce documents. The company and the law firm, which prepared a report on stock option backdating for a special committee of the company, were not named as parties in the SEC action against the retired CEO. The law firm opposed the retired CEO’s motion for a production order on the ground that the retired CEO already had received pertinent documents from the SEC and on the ground that documents were protected from disclosure by the attorney client privilege and the work product doctrine.
The court held that the law firm did not have to produce notes and draft memoranda used in producing the special committee report. Internal notes of the law firm following interviews of employees of the company and draft memoranda were disclosed only to attorneys within the firm. Also, the retired CEO had not shown that access to the internal law firm materials was crucial to his defense in the SEC action because the executive would in effect use the materials only to cross-check information already provided to him by the SEC. The court separately held that the law firm’s communications with the special committee were protected by the attorney client privilege and that the law firm’s communications with its forensic accounting expert concerned opinion work product that did not have to be disclosed to the retired CEO.
This case was featured in the June 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
A motion to compel production of internal notes and draft memoranda of a non-party law firm generated during preparation of a special committee report on a company’s stock option practices was denied. The law firm documents had not been disclosed outside the law firm, and the defendant executive in the stock option backdating case did not demonstrate that the law firm materials were crucial to his defense.
The retired chief executive officer of a company was named in an SEC enforcement action alleging improper backdating of stock options at the retired CEO’s company. He sought an order compelling the company and its law firm, including individual attorneys at the firm, to produce documents. The company and the law firm, which prepared a report on stock option backdating for a special committee of the company, were not named as parties in the SEC action against the retired CEO. The law firm opposed the retired CEO’s motion for a production order on the ground that the retired CEO already had received pertinent documents from the SEC and on the ground that documents were protected from disclosure by the attorney client privilege and the work product doctrine.
The court held that the law firm did not have to produce notes and draft memoranda used in producing the special committee report. Internal notes of the law firm following interviews of employees of the company and draft memoranda were disclosed only to attorneys within the firm. Also, the retired CEO had not shown that access to the internal law firm materials was crucial to his defense in the SEC action because the executive would in effect use the materials only to cross-check information already provided to him by the SEC. The court separately held that the law firm’s communications with the special committee were protected by the attorney client privilege and that the law firm’s communications with its forensic accounting expert concerned opinion work product that did not have to be disclosed to the retired CEO.
May, 2009
William A. Gross Construction Associates, Inc. v. American Manufacturers Mutual Insurance Co., 2009 U.S. Dist. LEXIS 22903 (S.D.N.Y. Mar. 19, 2009).
This case was featured in the May 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
The court issued a “wake-up call” to lawyers in the Southern District of New York “about the need for careful thought, quality control, testing, and cooperation with opposing counsel in designing search terms or ‘keywords’ to be used to produce emails or other electronically stored information.”
The owner of the project in a construction defects case agreed to produce project-related documents from its current construction manager, which was not a party in the case. The owner proposed search terms for email at the manager’s office that included names of the parties and the project. Other parties requested use of “thousands of additional search terms” which the owner contended would require production of the entire email database of the non-party manager.
The court, left “in the uncomfortable position of having to craft a keyword search methodology for the parties, without adequate information from the parties” or the non-party, ruled that the search should include names of personnel involved in the construction project in addition to the terms proposed by the owner. The court added that lawyers had not gotten the message yet from decisions of Magistrate Judges Grimm and Facciola in Baltimore and Washington, D.C., that “where counsel are using keyword searches for retrieval of ESI, they at a minimum must carefully craft the appropriate keywords, with input from the ESI's custodians as to the words and abbreviations they use, and the proposed methodology must be quality control tested to assure accuracy in retrieval and elimination of ‘false positives.’"
This case was featured in the May 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
The court issued a “wake-up call” to lawyers in the Southern District of New York “about the need for careful thought, quality control, testing, and cooperation with opposing counsel in designing search terms or ‘keywords’ to be used to produce emails or other electronically stored information.”
The owner of the project in a construction defects case agreed to produce project-related documents from its current construction manager, which was not a party in the case. The owner proposed search terms for email at the manager’s office that included names of the parties and the project. Other parties requested use of “thousands of additional search terms” which the owner contended would require production of the entire email database of the non-party manager.
The court, left “in the uncomfortable position of having to craft a keyword search methodology for the parties, without adequate information from the parties” or the non-party, ruled that the search should include names of personnel involved in the construction project in addition to the terms proposed by the owner. The court added that lawyers had not gotten the message yet from decisions of Magistrate Judges Grimm and Facciola in Baltimore and Washington, D.C., that “where counsel are using keyword searches for retrieval of ESI, they at a minimum must carefully craft the appropriate keywords, with input from the ESI's custodians as to the words and abbreviations they use, and the proposed methodology must be quality control tested to assure accuracy in retrieval and elimination of ‘false positives.’"
April, 2009
Independent Newspapers, Inc. v. Brodie, 2009 Md. LEXIS 18 (Md. Feb. 27, 2009).
This case was featured in the April 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
In a case of first impression, the Court of Appeals of Maryland sets forth a process for balancing an individual’s First Amendment right to speak anonymously on the internet against a plaintiff’s right to seek judicial redress for defamation. Independent Newspapers, Inc. v. Brodie, 2009 Md. LEXIS 18 (Md. Feb. 27, 2009). In this well-reasoned opinion, the Court surveys the balancing tests adopted by federal courts and sister state courts. The Court discusses the distinction between libel per se and libel per quod and reviews the standard for establishing a prima facie case of defamation.
The balancing factors set forth by the Maryland Court of Appeals in the context of a trial court confronted with a defamation action in which anonymous speakers or pseudonyms are involved, include:
This case was featured in the April 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
In a case of first impression, the Court of Appeals of Maryland sets forth a process for balancing an individual’s First Amendment right to speak anonymously on the internet against a plaintiff’s right to seek judicial redress for defamation. Independent Newspapers, Inc. v. Brodie, 2009 Md. LEXIS 18 (Md. Feb. 27, 2009). In this well-reasoned opinion, the Court surveys the balancing tests adopted by federal courts and sister state courts. The Court discusses the distinction between libel per se and libel per quod and reviews the standard for establishing a prima facie case of defamation.
The balancing factors set forth by the Maryland Court of Appeals in the context of a trial court confronted with a defamation action in which anonymous speakers or pseudonyms are involved, include:
(1) require the plaintiff to undertake efforts to notify the anonymous posters that they are the subject of a subpoena or application for an order of disclosure, including posting a message of notification of the identity discovery request on the message board; (2) withhold action to afford the anonymous posters a reasonable opportunity to file and serve opposition to the application; (3) require the plaintiff to identify and set forth the exact statements purportedly made by each anonymous poster, alleged to constitute actionable speech; (4) determine whether the complaint has set forth a prima facie defamation per se or per quod action against the anonymous posters; and (5), if all else is satisfied, balance the anonymous poster's First Amendment right of free speech against the strength of the prima facie case of defamation presented by the plaintiff and the necessity for disclosure of the anonymous defendant's identity, prior to ordering disclosure.
Independent Newspapers, 2009 Md. LEXIS 18, at *66-67.
This is a rigorous balancing analysis in deference to “the panoply of protections that the First Amendment, U.S. Const. amend. 1, provides [to] the right of an individual to speak anonymously” while acknowledging that the right “is not absolute and may be limited by defamation considerations.” Independent Newspapers, 2009 Md. LEXIS 18, at *21.
Cases balancing internet anonymity in the face of music copyright infringement have been de rigueur for several years. Universities are routinely complying with subpoenas to disclose the identities of students using an internet protocol address to share music files. See the featured case this month of Virgin Records America, Inc. v. Doe, 2009 U.S. Dist. LEXIS 21701 (E.D.N.C. Mar. 16, 2009). The Court in the Independent Newpapers case provides an engaging review of case law regarding internet communication resources including instant messaging, chat rooms and discussion forums.
Judge Adkins concurs in most of the Independent Newspapers opinion by Judge Battaglia, but believes the balancing test is unnecessary and needlessly complicated, asserting that the summary judgment test is itself the balance. Independent Newspapers, 2009 Md. LEXIS 18, at *70. Judge Adkins states “[t]his ‘anything goes’ mindset, coupled with the virtually unlimited circulation available to bloggers at minimal cost, heightens the danger of injury to the subject of the communication from false or exaggerated statements. I would venture to guess that on the Internet, defamation occurs more frequently and is broadcast to more people than via any other medium, past or present.” Id. at *69. The issue of imposing limitations on internet anonymity is gaining prominence as social networking sites impact job applications and offers. Many individuals have lost jobs or had job offers rescinded based upon anonymous postings about them. Speech on social networking sites often encompasses the posting of compromising photographs; whether those photographs are defamatory is likely to depend upon the authenticity of the photograph.
Searching and collecting communications beyond an organization’s servers is commonplace in electronic discovery. The frequency with which the ‘unguarded’ communication over the internet becomes a central piece of evidence in an investigation or litigated matter is on the rise. Anonymous postings by employees may have an intended or an unintended impact on their own organization or a competitor. Courts have consistently set a lower threshold to breach anonymity in the context of commercial speech. This is an evolving body of law; internet host providers and users need to be aware that anonymity may not be guaranteed in the face of reckless disregard for the truth of their postings.
This is a rigorous balancing analysis in deference to “the panoply of protections that the First Amendment, U.S. Const. amend. 1, provides [to] the right of an individual to speak anonymously” while acknowledging that the right “is not absolute and may be limited by defamation considerations.” Independent Newspapers, 2009 Md. LEXIS 18, at *21.
Cases balancing internet anonymity in the face of music copyright infringement have been de rigueur for several years. Universities are routinely complying with subpoenas to disclose the identities of students using an internet protocol address to share music files. See the featured case this month of Virgin Records America, Inc. v. Doe, 2009 U.S. Dist. LEXIS 21701 (E.D.N.C. Mar. 16, 2009). The Court in the Independent Newpapers case provides an engaging review of case law regarding internet communication resources including instant messaging, chat rooms and discussion forums.
Judge Adkins concurs in most of the Independent Newspapers opinion by Judge Battaglia, but believes the balancing test is unnecessary and needlessly complicated, asserting that the summary judgment test is itself the balance. Independent Newspapers, 2009 Md. LEXIS 18, at *70. Judge Adkins states “[t]his ‘anything goes’ mindset, coupled with the virtually unlimited circulation available to bloggers at minimal cost, heightens the danger of injury to the subject of the communication from false or exaggerated statements. I would venture to guess that on the Internet, defamation occurs more frequently and is broadcast to more people than via any other medium, past or present.” Id. at *69. The issue of imposing limitations on internet anonymity is gaining prominence as social networking sites impact job applications and offers. Many individuals have lost jobs or had job offers rescinded based upon anonymous postings about them. Speech on social networking sites often encompasses the posting of compromising photographs; whether those photographs are defamatory is likely to depend upon the authenticity of the photograph.
Searching and collecting communications beyond an organization’s servers is commonplace in electronic discovery. The frequency with which the ‘unguarded’ communication over the internet becomes a central piece of evidence in an investigation or litigated matter is on the rise. Anonymous postings by employees may have an intended or an unintended impact on their own organization or a competitor. Courts have consistently set a lower threshold to breach anonymity in the context of commercial speech. This is an evolving body of law; internet host providers and users need to be aware that anonymity may not be guaranteed in the face of reckless disregard for the truth of their postings.
March, 2009
Grand River Enterprises Six Nations, Ltd. v. King, 2009 U.S. Dist. LEXIS 12940 (S.D.N.Y. Feb. 9, 2009).
This case was featured in the March 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
In this month’s featured case, Grand River Enterprises Six Nations, Ltd. v. Troy King, Judge John F. Keenan issued a decision that deals with a litigation topic near and dear to the hearts of corporate counsel: the protection of proprietary or confidential business information. In my prior corporate practice, I often found that it could be an uphill battle to ensure that our own counsel sought protection of proprietary corporate information. Because the engine of corporate America runs on the competitive edge derived from proprietary data, it is critical that outside counsel seek this protection with the same fervor typically reserved for the protection of attorney-client and work product privilege.
In Grand River, the District Court upheld the Magistrate Judge’s order allowing state agency defendants to withhold from discovery econometric data previously submitted to the Federal Trade Commission by cigarette manufacturers. The data had been developed over ten years by the manufacturers and was submitted during three arbitrations in 2005 among the cigarette manufacturers and the defendants. Plaintiff’s central argument for production of the econometric data in this litigation was plaintiff’s inability to calculate net wholesale prices without the data.
Plaintiff objected to the Magistrate Judge’s order because it: 1) presumed that the disclosure of the FTC data and computer programs required to analyze the data would harm the cigarette manufacturers, 2) withheld the subject data even from plaintiff’s counsel and experts, 3) considered failure of plaintiff’s experts to agree to onerous confidentiality requirements, 4) considered the costs incurred by the cigarette manufacturers in assembling the FTC data, and 5) deprived plaintiff of evidence relevant to its claims.
After in camera review, the Magistrate Judge concluded that the FTC data was extremely competitively sensitive and plaintiff’s alleged need for it was outweighed by the risks to the cigarette manufacturers of disclosure. Plaintiff argued that its experts would not exploit the knowledge gained from reviewing the commercially sensitive materials but would “compartmentalize” whatever they learned. The District Court had previously rejected this argument in an earlier dispute that withheld R.J. Reynolds Tobacco Company’s operating and strategic plans from discovery. As Magistrate Judge Eaton stated: “Expert witnesses do not merely write reports; they have numerous discussions with attorneys for current litigants and prospective litigants… ‘[They] have worked for other fourth-tier competitors in the past and may do so again in the future. The competitive insights they gain and conclusions they draw from their review…, including what they learn about each [cigarette manufacturer’s] respective competitive strengths and vulnerabilities constitute a bell that cannot be “unrung” in their future work, no matter how scrupulous their compliance with the [confidentiality order].’”
Grand River is essential reading for every corporate counsel charged with the protection of a company’s hard earned competitive edge. Courts routinely recognize and give deference to the proprietary nature of intellectual property. It is more difficult for courts to recognize the necessity to protect the proprietary nature of an organization’s analysis of its industry from which the organization derives its competitive edge. Additionally, the existence of a joint defense agreement may be inadequate in the eyes of the organization to protect the exchange of confidential business information for use by joint defense experts.
This case was featured in the March 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
In this month’s featured case, Grand River Enterprises Six Nations, Ltd. v. Troy King, Judge John F. Keenan issued a decision that deals with a litigation topic near and dear to the hearts of corporate counsel: the protection of proprietary or confidential business information. In my prior corporate practice, I often found that it could be an uphill battle to ensure that our own counsel sought protection of proprietary corporate information. Because the engine of corporate America runs on the competitive edge derived from proprietary data, it is critical that outside counsel seek this protection with the same fervor typically reserved for the protection of attorney-client and work product privilege.
In Grand River, the District Court upheld the Magistrate Judge’s order allowing state agency defendants to withhold from discovery econometric data previously submitted to the Federal Trade Commission by cigarette manufacturers. The data had been developed over ten years by the manufacturers and was submitted during three arbitrations in 2005 among the cigarette manufacturers and the defendants. Plaintiff’s central argument for production of the econometric data in this litigation was plaintiff’s inability to calculate net wholesale prices without the data.
Plaintiff objected to the Magistrate Judge’s order because it: 1) presumed that the disclosure of the FTC data and computer programs required to analyze the data would harm the cigarette manufacturers, 2) withheld the subject data even from plaintiff’s counsel and experts, 3) considered failure of plaintiff’s experts to agree to onerous confidentiality requirements, 4) considered the costs incurred by the cigarette manufacturers in assembling the FTC data, and 5) deprived plaintiff of evidence relevant to its claims.
After in camera review, the Magistrate Judge concluded that the FTC data was extremely competitively sensitive and plaintiff’s alleged need for it was outweighed by the risks to the cigarette manufacturers of disclosure. Plaintiff argued that its experts would not exploit the knowledge gained from reviewing the commercially sensitive materials but would “compartmentalize” whatever they learned. The District Court had previously rejected this argument in an earlier dispute that withheld R.J. Reynolds Tobacco Company’s operating and strategic plans from discovery. As Magistrate Judge Eaton stated: “Expert witnesses do not merely write reports; they have numerous discussions with attorneys for current litigants and prospective litigants… ‘[They] have worked for other fourth-tier competitors in the past and may do so again in the future. The competitive insights they gain and conclusions they draw from their review…, including what they learn about each [cigarette manufacturer’s] respective competitive strengths and vulnerabilities constitute a bell that cannot be “unrung” in their future work, no matter how scrupulous their compliance with the [confidentiality order].’”
Grand River is essential reading for every corporate counsel charged with the protection of a company’s hard earned competitive edge. Courts routinely recognize and give deference to the proprietary nature of intellectual property. It is more difficult for courts to recognize the necessity to protect the proprietary nature of an organization’s analysis of its industry from which the organization derives its competitive edge. Additionally, the existence of a joint defense agreement may be inadequate in the eyes of the organization to protect the exchange of confidential business information for use by joint defense experts.
February, 2009
SEC v. Collins & Aikman Corp., 2009 U.S. Dist. LEXIS 3367 (S.D.N.Y. Jan. 13, 2009)
This case was featured in the February 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
This case was featured in the February 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
The Honorable Shira Scheindlin issued the decision we are featuring for February, S.E.C. v. Collins & Aikman Corp., 2009 U.S. Dist. LEXIS 3367 (S.D.N.Y. Jan. 13, 2009). This opinion joins a growing number of decisions that are further refining the definition of 'work product privilege' in an era of electronic document production. Additionally, this decision illustrates the judiciary's adherence to standards of cooperation and fairness in electronic document production. This opinion is also instructive for entities responding to SEC investigations or inquiries and should be read together with Applied Discovery's white paper on recent revisions to the SEC Enforcement Manual, available for download at our website.
The SEC elected to respond to defendants request for production of documents identified in 54 separate categories with a 1.7 million electronic document data dump, equivalent to 10.6 million pages. Additionally, the "dump" derived from 36 separate Concordance databases, many of which used different metadata protocols. Defendants objected to the form of production on the bases that: 1) SEC failed to identify which documents or document ranges were responsive to particular factual allegations of the SEC's complaint, as requested by defendants; 2) the SEC unilaterally limited its search to three divisions and further limited the search to centralized compilations of non-privileged documents, based upon the SEC's evaluation of undue burden; 3) the SEC asserted "deliberative process privilege" with regard to certain documents, and; 4) failed to search its own emails and attachments, on the assertion that "most" would be privileged.
The Court rejected the SEC's asserted that data dump was acceptable under Fed.R.Civ.P R 34(b)(2)(E)(ii), as the form in which the documents were kept in the ordinary course of business. The Court determined that documents organized for trial or investigation into Concordance databases is not an "ordinary course of business", such as a business entity that routinely creates databases for the operation of the business.
Noting that the SEC had already delineated the responsive documents into 175 electronic files, the Court order those files be produced. The Court further refused to attach any work product or deliberative process privilege to the SEC compilations of documents, stating that 'would result in impermissible gamesmanship and an unwarranted expansion of the work product doctrine." Judge Scheindlin also references the Sedona Conference Cooperation Proclamation as a mandate for counsel to act cooperatively to stem the cost of discovery disputes. The parties had failed to hold an R 26(f) conference, as the SEC had refused to negotiate workable search protocols. The Court additionally rejected the SEC's blanket refusal to produce any emails. The parties were ordered to conduct sampling of search terms "to test the cost and yield" of locating responsive, non-privileged emails. The parties were directed to complete the meet and confer process by February 13th, at which time the Court will determine if the appointment of a Special Master is required to moderate further discovery disputes.
The SEC elected to respond to defendants request for production of documents identified in 54 separate categories with a 1.7 million electronic document data dump, equivalent to 10.6 million pages. Additionally, the "dump" derived from 36 separate Concordance databases, many of which used different metadata protocols. Defendants objected to the form of production on the bases that: 1) SEC failed to identify which documents or document ranges were responsive to particular factual allegations of the SEC's complaint, as requested by defendants; 2) the SEC unilaterally limited its search to three divisions and further limited the search to centralized compilations of non-privileged documents, based upon the SEC's evaluation of undue burden; 3) the SEC asserted "deliberative process privilege" with regard to certain documents, and; 4) failed to search its own emails and attachments, on the assertion that "most" would be privileged.
The Court rejected the SEC's asserted that data dump was acceptable under Fed.R.Civ.P R 34(b)(2)(E)(ii), as the form in which the documents were kept in the ordinary course of business. The Court determined that documents organized for trial or investigation into Concordance databases is not an "ordinary course of business", such as a business entity that routinely creates databases for the operation of the business.
Noting that the SEC had already delineated the responsive documents into 175 electronic files, the Court order those files be produced. The Court further refused to attach any work product or deliberative process privilege to the SEC compilations of documents, stating that 'would result in impermissible gamesmanship and an unwarranted expansion of the work product doctrine." Judge Scheindlin also references the Sedona Conference Cooperation Proclamation as a mandate for counsel to act cooperatively to stem the cost of discovery disputes. The parties had failed to hold an R 26(f) conference, as the SEC had refused to negotiate workable search protocols. The Court additionally rejected the SEC's blanket refusal to produce any emails. The parties were ordered to conduct sampling of search terms "to test the cost and yield" of locating responsive, non-privileged emails. The parties were directed to complete the meet and confer process by February 13th, at which time the Court will determine if the appointment of a Special Master is required to moderate further discovery disputes.
January, 2009
Cintas Corp. No. 2 v. Transcontinental Granite, Inc., 2008 Va. Cir. LEXIS 153 (Va. Cir. Ct. Oct. 27, 2008).This case was featured in the January 2009 Applied Discovery Case Summary Alert, a complimentary monthly e-mail service for registered users of AppliedDiscovery.com
This month we feature a Virginia Circuit Court opinion that highlights the nuances of "work product privilege", which is instructive for in-house counsel who work with experts and colleagues on legal/ business issues that may, or may not, become litigated matters. This issue dovetails with the considerations on developing specific email guidance on "string emails" and attention to distribution lists in order to avoid inadvertently impairing the work product privilege, as the documents in dispute include "string emails".
In Cintas Corp. No. 2 v. Transcontinental Granite, Inc., the Court clarifies that work product protection applies to documents prepared in anticipation of any litigation, rather than in anticipation of only the litigation for which the work product protection was asserted. The language of Va. Sup. Ct. R. 4:1(b)(3) mirrors that of Fed. R. Civ. P. 26(b)(3). In Cintas, the issue arose in the context of real estate litigation, however, the same documents concerning remediation and environmental inspection could forseeably be at issue before federal or state environmental agencies in future matters and it is important to preserve the privilege.
The Court is very specific on its consideration of each of the 18 documents reviewed in camera. Only three documents were clearly prepared in anticipation of litigation; within this group was a memorandum prepared by the remediation company at the direction of counsel and addressed solely to counsel — the 'gold standard' for work product privilege. A "suggestion of litigation" in a document addressed to in-house counsel and an employee of the remediation company was not sufficient to sustain the privilege.
Labeling a document with "Confidential Work Product" can not create the privilege where the document was not prepared by, or at the direction of, counsel. The Court queries whether litigation or trial preparation materials should ever be shared with employees of an outside company (absent engaging such employees as litigation experts.) The Court examines an email string among numerous parties discussing remediation work and finds the portion relating to communications with counsel for adverse parties to be insufficient to assert the privilege. The written opinion is instructive and succinct; we recommend it to in-house counsel for review within the legal group.
Note also that the Court expressed dissatisfaction with Cintas' preparation of its privilege log and ordered that an updated version be filed removing redundancies, discrepancies and ensuring documents were readily identifiable. Other courts may not be as forgiving of a sloppy privilege log.
