Case Law

eDiscovery Trends: Third Party Vendors Named in McDermott eDiscovery Malpractice Case

 

You might remember eDiscovery Daily's blog post a few weeks ago about the filing of an eDiscovery malpractice lawsuit against McDermott Will & Emery by J-M Manufacturing Co., a former client of McDermott's.

This case has struck a chord in the eDiscovery community since its filing on June 1, drawing attention to the practices and standards that are at the heart of eDiscovery and outsourced review. Now, the First Amended Complaint has revealed the third party vendors involved in the eDiscovery malpractice suit.

Navigant Consulting, Stratify and Hudson Legal Named in First Amended Complaint

On July 28, J-M Manufacturing filed the amended complaint to its case against McDermott. The amended malpractice complaint describes the role of the third party vendors hired by McDermott, as follows:

  • According to J-M Manufacturing, McDermott hired both Navigant Consulting, Inc. and Stratify, Inc. to run documents through a filter intended to identify and separate materials that were covered by attorney-client privilege and any documents not responsive to subpoenas.
  • Prior to the second production of privileged documents to the federal government, Hudson Legal was also hired by McDermott, and was tasked with reviewing documents identified as potentially privileged and classifying them as either: a) responsive and privileged, b) responsive and not privileged, or c) nonresponsive.

Despite the efforts of these three companies, approximately 3,900 privileged documents were included in the 250,000 discovery documents that were turned over to the government and, in turn, given to relators for examination. The relators subsequently refused to return the privileged documents on the grounds that McDermott twice conducted privilege reviews before producing the documents.

J-M Manufacturing Claims McDermott Held Files Hostage

The new amendment also includes the assertion that McDermott held relevant case files “hostage” against payment of an outstanding invoice of $530,477 after it was replaced as J-M Manufacturing's attorney. A McDermott partner reportedly emailed the president of J-M Manufacturing and said, "I'm told that our firm policy is not to release all files until full payment is made. If you'd like all the files now, please send a check for the entire $530,477 and we'll get them out to you promptly."

In the amended complaint, J-M Manufacturing contends that McDermott’s contact (including the above referenced email) violated the California Rules of Professional Conduct, preventing J-M from recognizing the “true nature and extent of the negligent disclosure” until it was too late.

In its own filing, McDermott responded to the amended complaint by criticizing J-M Manufacturing for "scandalous and irresponsible allegations that could not have been the result of a reasonable pre-filing inquiry." McDermott indicated that they’re “willing and able to set the record straight”, but has “resisted the temptation to tell the full story without first giving J-M the opportunity to withdraw its complaint”.  McDermott also warned that “J-M’s interests could be seriously compromised” if McDermott is forced to fully disclose the facts.

So, what do you think? Has this case degenerated into "scandalous and irresponsible allegations", or are McDermott and its vendors at fault? Will we see more cases like this? Please share any comments you might have or if you'd like to know more about a particular topic.

eDiscovery Case Law: Court Upholds Sanctions for Intentional Spoliation of Unallocated Space Data

The Supreme Court of Delaware recently upheld the sanctions against the defendant for wiping the unallocated space on his company’s computer system, despite a court order prohibiting such destruction.

In Genger v. TR Investors, LLC, No. 592,2010, 2011 WL 2802832 (Del. July 18, 2011), Arie Genger, CEO of Trans-Resources, Inc., argued that sanctions against him were unreasonable and made a motion for the court to overturn its previous decision regarding spoliation of discovery materials. Instead, after due process, the court upheld its earlier decision, as follows:

  • In TR Investors, LLC v. Genger, 2009 WL 4696062 (Del. Ch. Dec. 9, 2009), the defendant was found to have intentionally spoliated electronic discovery documents by instructing an IT consultant to wipe unallocated space on his company’s computers. This action was taken in contempt of court and in contravention of a Status Quo order directing all parties to prevent alteration or destruction of any company documents.
  • Genger was penalized with an order to produce 10 documents for discovery that had previously been considered privileged, the raising of the burden of persuasion with regard to his defense, a preclusion from his testimony being permitted as factual evidence, and several sanctions.
  • The sanctions included attorney’s fees and expenses related to the sanctions motions, which totaled roughly $3.2 million. At the time, this amount was agreed upon by all parties.
  • Following this 2009 order, the defendant appealed the sanctions, arguing that because the court’s Status Quo order did not explicitly refer to unallocated hard drive space, the obligation to preserve documents and discoverable materials found there became “an impossible burden… effectively requiring the company to refrain from using its computers entirely.”
  • On July 18, the court decided in favor of upholding the sanctions against Genger. The reasoning behind this decision revolved around the fact that Genger did not unknowingly delete discoverable documents in the normal course of using his company’s computers, but instead, deliberately set out to destroy information that was included in the court’s Status Quo order.
  • The court was clear in emphasizing that this decision is meant to apply only in such a situation, “where a party is found intentionally to have taken affirmative steps to destroy or conceal information to prevent its discovery at a time that party is under an affirmative obligation to preserve that information.”
  • The court also recommended that, in the future, parties be clear in discussing unallocated space on computer hard drives and in deciding to either include or exclude such space from preservation orders like this one.

So, what do you think? Have you been involved in any cases resulting in sanctions associated with deletion of unallocated space data? Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: Court Orders Sanctions in Response to "Callous and Careless Attitude" of Defendant in Discovery

A Special Master determined that multiple discovery failures on the part of the defendant in an indemnity action were due to discovery procedures “wholly devoid of competence, yet only once motivated by guile”. Accordingly, the court ordered sanctions against the defendant and also ordered the defendant to pay all costs associated with its discovery failures, including plaintiff’s attorney fees and costs.

The defendant’s discovery efforts in PIC Group, Inc. v. LandCoast Insulation, Inc., No. 1:09-CV-662-KS-MTP, 2011 WL 2669144 (S.D. Miss. July 7, 2011) resulted in several discovery failures, including spoliation of data, mostly through carelessness and incompetence:

  • After consideration of the computer forensics experts recommended by the parties in this case, the court rejected all seven recommendations and appointed its own Special Master (Craig Ball, a previous thought leader interviewee on eDiscovery Daily) to conduct an investigation into the indemnity case, which would revolve around the collapse of scaffolding erected by the defendant.
  • The defendant’s efforts resulted in multiple discovery failures, including: 1) failure to impose “any corporate policy, procedure, or concerted effort [to] preserve electronic data”; 2) no effort to preserve or collect ESI until it was too late to protect the relevant data; 3) the theft of an employee’s laptop and subsequent loss of the backup of that hard drive; and 4) the erasure of another computer containing relevant ESI sometime two or three months after the collapse of the scaffolding at issue in this lawsuit.
  • As a result, the Special Master recommended sanctions against the defendant for its “callous and careless attitude” and sloppy measures taken in the course of discovery.
  • In response to these proposed sanctions, the defendant argued that none of its failures in the course of discovery were due to bad faith, and demonstrated that the plaintiff suffered only minimal prejudice.
  • Although the Special Master determined that the discovery failures were caused by a lack of caution while collecting and preserving evidence, rather than willful intent to alter discovery, he still recommended, and the court ordered, sanctions against the defendant.
  • Accordingly, the defendant was ordered to pay the plaintiff’s attorney fees and expenses accrued as a result of the defendant’s discovery failures, as well as pay the Special Master’s fees and expenses.  The defendant was also compelled to produce an image of the laptop that had been erased (from imaging conducted after the erasure) and the court reopened discovery in this case.  The court declined the Special Master’s recommendation for additional monetary sanctions ($50,000), though it did adopt his recommendation that the defendant “shall not seek indemnification or reimbursement from their insurance company” to pay the assessed fees.

So, what do you think? Were these sanctions merited, or should there be clear intent to deceive for such sanctions to be awarded? Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: Meet and Confer is Too Late for Preservation Hold

A US District court in Indiana ruled on June 28, 2011 in favor of a motion for an Order to Secure Evidence in an employment discrimination lawsuit.

The defendant in Haraburda v. Arcelor Mittal USA, Inc., No. 2:11 cv 93, 2011 WL 2600756 (N.D. Ind. June 28, 2011) had given the plaintiff reason to believe that emails and other relevant documents might be destroyed prior to Rule 26(f) meeting between the parties or Rule 16(b) discovery conference with the court. As a result, the plaintiff formally requested a litigation hold on all potentially relevant documents, which was approved by US Magistrate Judge Andrew Rodovich.

  • Shortly after filing a complaint of employment discrimination, the plaintiff, Marie A. Haraburda, became concerned that the defendant might destroy evidence that she intended to request in discovery. She emailed Sharon Stillman, a human resources manager of the defendant, Arcelor Mittal, about emails that had previously been deleted from her account and was informed that “files stored on company computers are company property and can be assessed and/or deleted as the company views appropriate”.
  • The defendant refused the plaintiff’s request that the defendant place a litigation hold on evidence or take other measures to protect potentially relevant documents, with the comment that such a request by the plaintiff was “premature”.
  • The plaintiff came to believe that the defendant would destroy relevant evidence before the Rule 26(f) discovery confidence, and, therefore, moved for an Order to Preserve Evidence.

In ruling, the court reminded all parties that they have “a duty to preserve evidence when [they know], or should have known, that litigation was imminent.” “Evidence” includes any materials that are relevant or could be deemed relevant during the litigation, including such emails as the plaintiff had brought to the defendant’s attention via Ms. Stillman. A large corporation, therefore, has a duty to not only create a “comprehensive” data protection plan to ensure that documents are preserved, but to inform its employees of that policy so that it will be scrupulously upheld, said the court.

The court also expressed the belief that given the plaintiff’s potential for difficulty if relevant materials were not protected, and in the absence of additional burden on the defendant to preserve existing evidence, the plaintiff’s motion was reasonable.  Accordingly, the court ordered a litigation hold placed “on any and all documents and information that may reasonably be related to the pending litigation”.

So, what do you think? Given previous case law examples, are you surprised that the defendant tried to delay the litigation hold? Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: A Pennsylvania Court Conducts Its Own Social Media Relevancy Review

Pennsylvania seems to be taking the lead in setting social media discovery precedents, as evidenced by this case summarized on eDiscovery Daily earlier this week.  In this case, a Pennsylvania court agreed to review a plaintiff’s Facebook account in order to determine which information is subject to discovery in a case relating to the plaintiff’s claim of injury in a motor vehicle accident.

The plaintiff in Offenback v. L.M. Bowman, Inc., No. 1:10-CV-1789, 2011 WL 2491371 (M.D. Pa. June 22, 2011) was directed to allow the court to access his Facebook and MySpace accounts in order to determine which parts of his social media accounts are subject to discovery. After a thorough review, the court expressed its “confusion” over the plaintiff’s inability to conduct this review himself in order to present discoverable information to the court:

  • The plaintiff claimed that he suffered injuries in a car accident on November 6, 2008 that “limited his ability to sit, walk, stand, ride in a vehicle, bend, stoop, push, pull, and lift”. He also claimed he could not work and was unable to relocate as he’d planned to do before the accident.  Additionally, the plaintiff claimed that he “suffers anxiety, depression, and post-traumatic stress as a result of the accident”.
  • The court found the client’s physical and emotional experience relevant in this case, and sought discovery of key information in his social media accounts that might shed light on his health and well-being at the time of the accident and thereafter.
  • The court initially requested access to both the plaintiff’s Facebook and MySpace accounts, but changed the order to request access exclusively to his Facebook account once the plaintiff had asserted that he had not accessed MySpace since November 2008 and had lost the requested login information in the intervening period.
  • After its review, the court consulted both the plaintiff and the defendant about the Facebook photos, updates, and other materials it considered relevant, in consideration of the “broad scope of relevance” argued by the defendants.
  • Notably, the court ordered discovery of photographs and Facebook updates indicating that the plaintiff purchased a motorcycle in 2010 and may have ridden it from Kentucky to Pennsylvania and possibly on a trip to West Virginia.
  • The court ended its review by expressing its “confusion about why the parties required the Court’s assistance in deciding which information within the plaintiff’s Facebook account is responsive to Defendants’ discovery requests”. The court stated its desire that, in future cases of a similar nature, the plaintiff be accountable for reviewing his own Facebook profile, presenting discoverable materials and raising objections if so desired.

So, what do you think? Should the court have conducted the review itself? Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Trends: Is eDiscovery Malpractice More Widespread Than You Think?

 

Last month, we discussed the eDiscovery malpractice case filed against McDermott Will & Emery for allegedly failing to supervise contract attorneys that were hired to perform the client’s work and to protect privileged client records.  This case is still continuing to generate much buzz in the eDiscovery community and I’m sure it will be closely followed as it progresses.

At least one attorney from another firm has weighed in on the possibility of eDiscovery malpractice in other cases.  Dennis Kiker, a partner with LeClair Ryan noted in their blog The e-Discovery Myth that eDiscovery malpractice is probably more widespread than most people think.  Among his observations:

  • “E-Discovery is a discipline.  Far too many attorneys in firms large and small think that e-discovery is something they can do on the side, when they are not drafting motions to dismiss an antitrust class action or preparing to depose a scientist in a patent infringement matter.  Unfortunately, this is simply not true.”
  • “[E]-discovery goes far beyond the rules.  It is one thing to understand that there are different possible forms of production permitted for electronically stored information under Rule 34, and quite another to know how to effectively and defensibly identify, preserve, collect, process, review and produce ESI.”
  • “Not even IT professionals pretend to understand all of the different information systems that exist in a single company.  Do we really expect every trial attorney to have greater expertise and understanding than the professionals that work in the field every day?”
  • “A large document review is, by definition, a large project requiring significant project management skills… In short, this is a complex, high-risk task that requires specialized skills and experience.  It is not something one does once a year and gets good at.”
  • “Malpractice claims are just one of the possible consequences of practicing in a complex area without the requisite expertise.  Loss of client goodwill, damaged reputations for lawyer and firm alike, monetary sanctions – all of these are the dancing partners of those that believe that e-discovery is something that every litigator knows how to do.”

It’s an excellent post with a number of good points.  There are some attorneys who have really worked hard at developing their eDiscovery expertise and knowing when to rely on others with the expertise they don’t have.  But, as I have observed, there are many attorneys that have tried to play “part-time eDiscovery expert” with less than terrific results (at best).  In many cases, their saving grace is that the opposing attorney is equally inept when it comes to eDiscovery best practices.

So, what do you think? Is eDiscovery malpractice more widespread than we think? Please share any comments you might have or if you'd like to know more about a particular topic.

eDiscovery Case Law: Social Media Posts Deemed Discoverable in Personal Injury Case

A Pennsylvania court recently ordered the plaintiff in a personal injury lawsuit to disclose social media passwords and usernames to the defendant for eDiscovery.

On May 19, the court ruled in favor of a motion to compel the plaintiff in Zimmerman v. Weis Markets, Inc., No. CV-09-1535, 2011 WL 2065410 (Pa. Comm. Pl. May 19, 2011) to disclose his usernames, login names and passwords for Facebook and MySpace accounts that contained hidden or private posts. Discoverability of social media continues to be a hot topic in eDiscovery, as eDiscovery Daily has noted in summaries of prior cases here, here and here that reflect varied outcomes for requests to access social media data.

In Zimmerman v. Weis Markets, Inc., the court ruled in favor of the defendant’s motion for several reasons involving the plaintiff’s use of public social media as well as the circumstances of the case:

  • The plaintiff’s public postings on the social media sites in question included discussion of his injury, which was deemed relevant to his claim of serious and permanent impairment. These public postings were construed by the court as sufficient to demonstrate likelihood that his non-public postings would also contain relevant information about his injury.
  • Although, the court did not wish its decision in this matter to be viewed as authorizing “fishing expeditions” to private social media accounts in personal injury cases in general, it reasoned that since examination of the public portions of the plaintiff’s Facebook and MySpace accounts turned up relevant evidence on the subject of the plaintiff’s injury, discovery of the remaining private postings was also likely to do so.
  • The court also reasoned that the plaintiff’s choice to bring this issue to trial, as well as his decision to share information about his injury online (showing pictures of him in shorts with his scar visible, as well as recent pictures with his motorcycle), meant that he could not have a reasonable expectation of social media privacy.

Although courts often permit eDiscovery of private and hidden social media postings, this decision by the court illustrates a need for relevance of the evidence to be shown before that permission is granted.

So, what do you think? Was the court wrong in allowing eDiscovery of personal Facebook and MySpace accounts, or does the plaintiff in a personal injury case waive his right to social media privacy? Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: Discovery Violations Result in Sanctions Against Plaintiff and Counsel

Yesterday, we reported on a case with no sanctions; today, we report on a case with a different outcome.

Both the plaintiff and plaintiff’s counsel have been ordered to pay sanctions for discovery abuses in a lawsuit in Washington court that was dismissed with prejudice on June 8, 2011.

In Play Visions, Inc. v. Dollar Tree Stores, Inc., No. C09-1769 MJP (W.D. Wash. June 8, 2011), the plaintiff moved to voluntarily dismiss its case with prejudice. The defendants did not argue against dismissal but did seek sanctions from the plaintiff based on what they considered to be “a pattern of sanctionable discovery misconduct.” The court ruled that discovery abuses had occurred, and fined the plaintiff and plaintiff’s counsel $137,168.41 “jointly and severally”. The misconduct of the plaintiff, Play Visions, Inc., included:

  • Misrepresentation of Available Documents: Play Visions claimed that all relevant documents were kept in hard copy only; however, deposition of Play Visions’ CFO revealed that electronic records existed that should have been presented months earlier under discovery.
  • Falsified Expert’s Report: The plaintiff’s expert report was prepared by plaintiff’s counsel Mark Lorbiecki and only signed and “approved” by the expert. In addition, the court discovered that the plaintiff had violated the court’s protective order by revealing confidential information to the same expert witness.

As a result of these misrepresentations and discovery abuses and others, the court ruled for the defendant’s motion and demanded the plaintiff and its counsel pay sanctions:

  • The court found that Play Visions, Inc. had falsely certified that all relevant records had been saved in paper format and delayed the search and production of documents. Play Visions’ counsel was found to have been negligent in familiarizing himself with Play Visions’ document practices and to have failed in assisting his client in mandatory discovery.
  • Accordingly, the court considered every case where the defendant was forced to do extra work as a result of the plaintiff’s delays and inaccuracies, and fined Play Visions, Inc. and its counsel $137,168.41 jointly and severally, due within 15 days of the order.
  • Not finding “that the discovery violations in this case merit finding the entire case exceptional under 35 U.S.C. § 285”, the court ruled against shifting any attorney’s fees in this case.  Otherwise, the sanctions award could have been even higher!

So, what do you think? Do the discovery violations committed by Play Visions and by its attorney demand monetary sanctions on this scale? Did Play Visions actually believe that they had no relevant electronic files?  Please share any comments you might have, or let us know if you’d like to know more about a particular topic.

eDiscovery Case Law: No Sanctions Ordered for Failure to Preserve Backups

A sanctions motion has been dismissed by the U.S. District Court of Texas in a recent case involving electronic backups and email records, on the grounds that there was no duty to preserve backup tapes and no bad faith in overwriting records.

The plaintiffs in Ajay Gaalla, et al v. Citizens Medical Center, et al, No. V-10-14, 2011 WL 2115670 (S.D. Tex. May 27, 2011) had made a motion for sanctions against the defendant for alleged damage to backup tapes, including emails and other electronic documentation. On May 27, the court denied the motion for sanctions against the defendant, although new instructions on maintaining copies of disaster recovery files have been imposed in this case.

  • Plaintiffs presented the argument that the “recycling” or overwriting of disaster recovery backup tapes by the defendant, performed on a 7- or 14-day cycle after the lawsuit was filed, represented spoliation. Accordingly, the plaintiffs requested the maximum sanctions against the defendant for “failure to preserve the backup tapes.”
  • Preservation of backup tapes was not previously been discussed in this case until this motion for sanctions on grounds of data spoliation, but plaintiffs alleged that the failure to preserve backups, coupled with the failure to take snapshots of particular email accounts and “evidence that certain CMC employees had deleted emails from their account at some point in the past”, warranted harsh sanctions.
  • The defendants argued that they had no duty to preserve backups of records, since disaster recovery systems are “rarely” backed up after litigation has begun. They also presented “snapshots” taken of email accounts to demonstrate that there was no intent to destroy information and that attempts had been made to record all relevant evidence.
  • The court referred to the ruling in Zubulake v. UBS Warburg LLC, 220 F.R.D. (S.D.N.Y. 2003), which states: “[A] litigation hold does not apply to inaccessible backup tapes (e.g., those typically maintained solely for the purpose of disaster recovery), which may continue to be recycled on the schedule set forth in the company’s policy.” Under this standard, the court found that the defendant was within its rights to overwrite the existing backups as often as such maintenance was normally scheduled.
  • The court also ruled that, with no prior discussion of the backup tapes and “in the context of this case,” there was no cause for sanctions against the defendant, lacking evidence that the defendant acted in bad faith in recycling the tapes used to make the recovery backups.
  • However, the court did order additional discovery efforts to be undertaken in the form of “disaster recovery first of the month” email files to be preserved in their current state and that plaintiffs’ expert be allowed to search them (at defendant’s expense) as well as a “journaling” process to retain email accounts of key parties in the case.

So, what do you think? Do parties have an obligation to maintain copies of all backup tapes for litigation? Please share any comments you might have, or let us know if you’d like to know more about a particular topic.

eDiscovery Case Law: Never Mind! Judge Scheindlin Withdraws FOIA Requests Opinion

Back in February, eDiscovery Daily reported that Southern District of New York Judge Shira A. Scheindlin’s latest opinion regarding eDiscovery best practices.  In National Day Laborer Organizing Network v. U.S. Immigration and Customs Enforcement Agency, 10 Civ. 3488, she ruled that the federal government must provide documents “in a usable format” when it responds to Freedom of Information Act (FOIA) requests.

In this case, the National Day Laborer Organizing Network, Center for Constitutional Rights and the Immigration Justice Clinic at the Benjamin N. Cardozo School of Law sued to require production of a wide range of documents under the Freedom of Information Act in August 2010.  In response, the government agency defendants produced documents grouped together in large files that were not searchable, for which individual documents could not be easily identified, with emails separated from their attachments.

In ruling at that time, Judge Scheindlin noted that “Once again, this Court is required to rule on an eDiscovery issue that could have been avoided had the parties had the good sense to ‘meet and confer,’ ‘cooperate’ and generally make every effort to ‘communicate’ as to the form in which ESI would be produced.”, and ruled that federal agencies must turn over documents that include “metadata,” which allows them to be searched and indexed.  Indicating that “common sense dictates” that the handling of FOIA requests should be informed by “the spirit if not the letter” of the Federal Rules of Civil Procedure, Judge Scheindlin indicated the government offered “a lame excuse” for delivering non-searchable documents.  A copy of the original opinion and order can be found here.

Now, that opinion has been withdrawn.

In a very short order withdrawing the opinion, Judge Scheindlin stated:

“This court has been informed that the parties have recently resolved their dispute regarding the form and format in which records will be produced by defendants in this Freedom of Information Act lawsuit.  In the interests of justice, this Court now believes that it would be prudent to withdraw the opinion it issued on February 7, 2011 (Docket #41).  I do so because, as subsequent submissions have shown, that decision was not based on a full and developed record.  By withdrawing the decision, it is the intent of this Court that the decision shall have no precedential value in this lawsuit or in any other lawsuit.

The Court also withdraws its Supplemental Order dated February 14, 2011 (Docket # 50).”

So, as Emily Litella would say, “Never Mind!”

So, what do you think?  What impact does the withdrawal of the opinion have on future eDiscovery cases?  Please share any comments you might have or if you’d like to know more about a particular topic.