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eDiscovery Case Law: Written Litigation Hold Notice Not Required

The Pension Committee case was one of the most important cases of 2010 (or any year, for that matter).  So, perhaps it’s not surprising that it is starting to become frequently cited by those looking for sanction for failure to issue a written litigation hold.

In Steuben Foods, Inc. v. Country Gourmet Foods, LLC, No. 08-CV-561S(F), (W.D.N.Y. Apr. 21, 2011), a U.S. District Court in the Western District of New York declined to follow the Pension Committee decision in the Southern District of New York to the extent that the Pension Committee decision held “that implementation of a written litigation hold notice is required in order to avoid an inference that relevant evidence has been presumptively destroyed by the party failing to implement such written litigation hold.”

Steuben Foods alleged that Country Gourmet breached its exclusive supply contract with Steuben when County Gourmet sold all its assets except the supply contract to Campbell Soup. Campbell sought sanctions against Steuben when several emails were not produced by Steuben and Steuben conceded that its litigation hold procedure had not included a written notice. Steuben’s corporate counsel had orally directed each of eight managers and corporate officers to identify all electronically stored information, including paper documents and email communications, pertaining to Country Gourmet or Campbell and not to discard or delete or otherwise destroy such documents pending the litigation.

Campbell pointed to the Pension Committee decision, Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, 685 F. Supp. 2d 456, 476 (S.D.N.Y. 2010), “in which the court found that the absence of a written litigation hold notice supported its conclusion that plaintiffs had been grossly negligent in their obligations to preserve relevant electronically stored documents and that plaintiffs’ document production failures, coupled with the absence of a timely written litigation hold, permitted the inference that relevant documents were culpably destroyed or lost as a result.”

The court declined to infer from the absence of a written litigation hold, as the Pension Committee court did, that relevant documents were culpably destroyed or lost:

“Accordingly, the court in this case declines to hold that implementation of a written litigation hold notice is required in order to avoid an inference that relevant evidence has been presumptively destroyed by the party failing to implement such written litigation hold.”

The court noted that the relatively small size of Steuben with 400 employees “lends itself to a direct oral communication of the need to preserve documents relevant to Plaintiff’s case” and was a reason “why a written litigation hold is not essential to avoid potential sanctions for spoliation.” In any event, according to the court, Campbell was not prejudiced by any failure of Steuben to produce email because Country Gourmet provided copies of the email to Campbell and Campbell could show no prejudice resulting from any claimed negligence of Steuben in not having a written litigation hold.

So, what do you think?  Should a written litigation hold be required in every case?  Would that have made a difference in this one?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: Applied Discovery (free subscription required).  For eDiscovery news and best practices, check out the Applied Discovery Blog here.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

eDiscovery Case Law: Facebook Did Not Deduce That They Must Produce

In this case, United States Magistrate Judge Howard Lloyd of the Northern District of California compelled Facebook to produce ESI that was previously produced in a converted, non-searchable format and further ordered Facebook not to use a third-party vendor’s online production software to merely “provide access” to it.  The court’s order granting the plaintiff’s Motion To Compel Production in In re Facebook PPC Advertising Litigation, 2011 WL 1324516 (N.D.Cal. Apr. 6, 2011) addressed the importance of ESI Protocols, the requirement to produce ESI in native formats, and production of documents versus providing access to them.  A copy of the order can be found here.

Several plaintiffs brought a class action against Facebook for breach of contract and violation of California’s Unfair Competition Law, suing Facebook for allegedly misrepresenting the quality of its “click filters,” which are filters used to prevent charging merchants when advertisements are inadvertently clicked.  When discovery disputes occurred, plaintiffs filed their Motion To Compel, alleging:

  1. Facebook refused to agree to an ESI Protocol to establish the manner and form of electronic production, including agreement on search words or phrases, custodians and time frames for production,
  2. Facebook uploaded its responses to discovery requests to a commercial website (Watchdox.com) in a manner that seriously limited the plaintiffs’ ability to review them.  Documents on Watchdox.com could not be printed and Facebook, citing confidentiality concerns, retained the ability to cause documents to expire and no longer be accessible after a period of time.
  3. The documents loaded to Watchdox.com, as well as others that were actually produced, were not in their native format, and thus were unsearchable and unusable.  One such document was an 18,000 page customer complaint database printed to PDF which lacked any searchable features.

With regard to the refusal to agree to an ESI protocol, Facebook argued that such a protocol would result in “forcing the parties to anticipate and address all potential issues on the form of electronic production” and “would likely have the result of frustrating and slowing down the discovery process.” The court rejected this argument, noting “The argument that an ESI Protocol cannot address every single issue that may arise is not an argument to have no ESI Protocol at all”.

In reviewing Facebook’s production protocol, the Court noted that “each of these steps make the discovery process less efficient without providing any real benefit.” and found that Facebook’s privacy concerns were unreasonable since a two tiered protective order already existed in the case as well as the fact that confidential documents could be marked as such to prevent inadvertent disclosures.  The Court held that Facebook’s use of Watchdox.com was unduly burdensome on the Plaintiffs and thus ordered Facebook to produce any documents that had been uploaded to Watchdox.com in their native searchable formats.  The Court also ordered Facebook to reproduce previously produced documents that were provided in an unsearchable format in their native searchable formats.

So, what do you think?  Is merely providing access to documents sufficient for production?  Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Trends: Apple Responds to the iPhone/iPad Location Controversy
 

Yesterday, we talked about the latest litigation for Apple, which was sued for alleged privacy invasion and computer fraud by two customers in a federal complaint in Tampa, Florida who claim the company is secretly recording and storing the location and movement of iPhone and iPad users.  Yesterday, Apple issued a press release response to questions regarding this controversy, published here on Business Wire.

Highlights:

  • Apple reiterated that they are “not tracking the location of your iPhone. Apple has never done so and has no plans to ever do so.”
  • Instead, according to Apple, the iPhone is “maintaining a database of Wi-Fi hotspots and cell towers around your current location, some of which may be located more than one hundred miles away from your iPhone, to help your iPhone rapidly and accurately calculate its location when requested.”
  • Apple says that the “database is too big to store on an iPhone, so [they] download an appropriate subset (cache) onto each iPhone. This cache is protected but not encrypted, and is backed up in iTunes whenever you back up your iPhone.”
  • Geo-tagged Wi-Fi hotspot and cell tower data is sent to Apple in an anonymous and encrypted form” and “ Apple cannot identify the source of this data.”
  • The reason the iPhone stores up to a year’s worth of location data is “a bug we uncovered and plan to fix shortly”.  “We don’t think the iPhone needs to store more than seven days of this data.”
  • The iPhone sometimes shouldn’t continue updating its Wi-Fi and cell tower data when Location Services is turned off.  “This is a bug, which we plan to fix shortly”.
  • Apple also noted that they will release a free iOS software update “sometime in the next few weeks” that: “reduces the size” of the database cached on the iPhone, “ceases backing up the cache”, and “deletes this cache entirely when Location Services is turned off”.

We’ll see how this press release impacts the litigation and various regulatory investigations.

So, what do you think?  Have you been involved in a case where GPS location data was relevant?   Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Trends: It’s 10 PM, Does Apple Know Where You Are?
 

Over 30 years ago, local TV stations across the country ran this ad, asking the question “It’s 10 PM, do you know where you children are?”

Today, they could ask the question of many iPhone and iPad users, “It’s 10 PM, does Apple know where you are?”

According to Bloomberg on Monday, “Apple Inc. (AAPL) was sued for alleged privacy invasion and computer fraud by two customers who claim the company is secretly recording and storing the location and movement of iPhone and iPad users, according to a federal complaint filed…in Tampa, Florida.”

Vikram Ajjampur, an iPhone user in Florida, and William Devito, a New York iPad customer, sued April 22 in federal court in Tampa, Florida, seeking a judge’s order barring the alleged data collection and requesting refunds for their phones.

The lawsuit references a report from two computer programmers who indicated that “those of us who own either an iPhone or iPad may have been subjected to privacy invasion since the introduction of iOS 4.0” (operating system).  The report claims that Apple’s iOS4 operating system is logging latitude-longitude coordinates along with the time a spot is visited, is collecting about a year’s worth of location data, and logs location data to a file called "consolidated.db", which is unencrypted and unprotected.

“We take issue specifically with the notion that Apple is now basically tracking people everywhere they go,” Aaron Mayer, an attorney for the plaintiffs, said. “If you are a federal marshal, you have to have a warrant to do this kind of thing, and Apple is doing it without one.”

In addition to the Florida lawsuit, the Illinois Attorney General has asked to meet with Apple executives to discuss these reports and French, German, Italian and South Korean regulators are also investigating the alleged location collection feature as a result of the programmers’ report.

So far, Apple has not commented – officially.  However, MacRumors reports that Steve Jobs has responded to one emailer who requested “Maybe you could shed some light on this for me before I switch to a Droid. They don't track me.”  To which Jobs allegedly responded, “Oh yes they do. We don't track anyone. The info circulating around is false.  Sent from my iPhone.”

True or False?  We’ll hopefully see.  It seems that every week there is a new type of data that can be relevant to the eDiscovery process, doesn’t it?

So, what do you think?  Have you been involved in a case where GPS location data was relevant?   Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: Conclusion of Case Does Not Preclude Later Sanctions

In Green v. Blitz U.S.A., Inc., (E.D. Tex. Mar. 1, 2011), the defendant in a product liability action that had been settled over a year earlier was sanctioned for “blatant discovery abuses” prior to the settlement. Defendant was ordered to add $250,000 to its settlement with plaintiff, to provide a copy of the court’s order to every plaintiff in every lawsuit against defendant for the past two years or else forfeit an additional $500,000 “purging” sanction, and to include the order in its first responsive pleading in every lawsuit for the next five years in which defendant became involved.

Defendant, a manufacturer of gasoline containers, was named in several product liability lawsuits, including this case in which plaintiff alleged that her husband’s death was caused in part by the lack of a flame arrestor on defendant’s gas cans. The jury in plaintiff’s case returned a verdict for defendant after counsel for defendant argued that “science shows” that flame arrestors did not work. The case was settled after the jury verdict for an undisclosed amount, but two years later, counsel for plaintiff sought sanctions and to have the case reopened after learning in another case against defendant that while the gas can lawsuits were underway, defendant had been instructing its employees to destroy email.

The court described defendant’s failure to implement a litigation hold as gas can cases were filed. A single employee met with other employees to ask them to look for documents, but he did not have any electronic searches made for documents and he did not consult with defendant’s information technology department on how to retrieve electronic documents.

The court held that defendant willfully violated the discovery order in the case by not producing key documents such as a handwritten note indicating a desire to install flame arrestors on gas cans and an email noting that the technology for flame arrestors existed given the common use of flame arrestors in the marine industry. “Any competent electronic discovery effort would have located this email,” according to the court, through a key word search. Defendant’s employee in charge of discovery did not conduct a key word search and, despite acknowledging that he was as computer “illiterate as they get,” did not seek help from defendant’s information technology department, which was routinely sending out instructions to employees to delete email and rotating backup tapes every two weeks while the litigation was underway.

The court declined to reopen the case since it had been closed for a year. However, based on its knowledge of the confidential settlement of the parties, the court ordered defendant to pay plaintiff an additional $250,000 as a civil contempt sanction to match the minimum amount that the settlement would have been if plaintiff had been provided documents withheld by defendant. The court also ordered a “civil purging sanction” of $500,000 which defendant could avoid upon showing proof that a copy of the court’s decision had been provided to every plaintiff in a lawsuit against defendant for the past two years. The court added a requirement that defendant include a copy of the court’s opinion in its first pleading in any lawsuit for the next five years in which defendant became a party.

As Yogi Berra would say, “It ain’t over ‘til it’s over”.

So, what do you think?  Should cases be re-opened after they’re concluded for discovery violations?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: Applied Discovery (free subscription required).  For eDiscovery news and best practices, check out the Applied Discovery Blog here.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

eDiscovery Trends: Jurors and Social Media Don’t Mix

Discovery of social media is continuing to increase as a significant issue for organizations to address, with more and more cases addressing the topic, including this one and this one that have reached various conclusions regarding the discoverability of social media.  However, when it comes to social media, courts agree on one thing: jurors and social media don’t mix.  Courts have consistently rejected attempts by jurors to use social technology to research or to communicate about a case, and have increasingly provided pre-trial and post-closing jury instructions to jurors to dissuade them from engaging in this practice.

A recent example of juror misconduct related to social media is this case, where one of the jurors actually attempted to “Friend” one of the defendants on Facebook.  With so much information at our disposal these days and so many ways to communicate, some jurors can be easily tempted to ignore court instructions and behave badly.

At its December 2009 meeting, the Judicial Conference Committee on Court Administration and Case Management (CACM) endorsed a set of suggested jury instructions for district judges to consider using to help deter jurors from using electronic technologies to research or communicate about cases on which they serve.  These proposed instructions were published in thisMemorandum in late January.  These instructions were designed to prevent jurors from two activities:

  1. Independently researching a case, including through the internet or other electronic means,
  2. Communicating about the case, including by electronic means such as email or social media sites such as Facebook.

Several states, such as California and New York, have crafted and adopted their own instructions to regulate the use of social media and other electronic means to research a case.  It seems like a “no-brainer” that every state will eventually be forced to promote or adopt such instructions.  Of course, it also seems like a “no-brainer” for jurors to refrain from such activities anyway, but I guess this is the world we live in today, right?

So, what do you think?  Does your state have standard jury instructions prohibiting social media use?   Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: Destroy Data, Pay $1 Million, Lose Case

A federal judge in Chicago has levied sanctions against Rosenthal Collins Group LLC and granted a default judgment to the defendant for misconduct in a patent infringement case, also ordering the Chicago-based futures broker’s counsel to pay “the costs and attorneys fees incurred in litigating this motion” where plaintiff’s agent modified metadata related to relevant source code and wiped several relevant disks and devices prior to their production and where the court found counsel participated in “presenting misleading, false information, materially altered evidence and willful non-compliance with the Court’s orders.”

In Rosenthal Collins Group, LLC v. Trading Techs. Int’l, No. 05 C 4088, 2011 WL 722467 (N.D. Ill. Feb. 23, 2011), U.S. District Judge Sharon Johnson Coleman assessed a sanction of $1 million to Rosenthal Collins (RCG) and granted defendant/counter-plaintiff Trading Technologies’ (TT) motion for evidentiary sanctions and default judgment.  Much of the reason was due to the actions of RCG’s agent, Walter Buist.  Here’s why:

  • During Buist’s deposition, he admitted to “turning back the clock” to change the “last modified” date on the previously modified source code to make it appear that the modifications had occurred much earlier.  Despite clear evidence of these facts, RCG continued to deny them, even calling the claims “libelous,” “audacious,” and “Oliver Stone-esque.”
  • Buist also later admitted “wiping” six of seven zip disks that originally contained the relevant source code.  While he did not admit wiping the seventh disk, it was also wiped, and the Court found that it was “impossible to believe that it is merely coincidence that the seventh disk happened to be wiped on May 2, 2006, which just happened to be the same day that TT was scheduled to inspect it.”
  • The Court found that here was evidence that “virtually every piece of media ordered produced by the Court in May 2007 and July 2008 was wiped, altered, or destroyed.”
  • Despite RCG’s (and its counsel’s) attempts to distance itself from “its own agent, employed for the purposes of pursuing this litigation” and disavowing any “actual knowledge” of wrongdoing, Buist was RCG’s agent and, therefore, RCG was bound by Buist’s behavior and actions.
  • Even if RCG and its counsel had no knowledge of the destruction of the evidence, the destruction might have been avoided if RCG had complied with the Court’s orders in a timely manner to produce the materials and/or preserved the evidence by taking custody of it.

So, what do you think?  Should parties and their counsel be liable for the actions of an agent on their behalf?  Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: Read Inadvertent Email, Get Disqualified from Case

Lesson of the day: When you receive an inadvertently sent privileged email, read it and don’t disclose receipt of it, you can get kicked off the case.

In Terraphase Engineering, Inc., et al. v. Arcadis, U.S., Inc, the court disqualified defendant’s in-house and outside counsel for their handling of a disputed privileged email that was inadvertently sent by the plaintiffs’ counsel to the defendant and shared with defendant’s outside counsel.  For more information regarding this case, check out this Law Technology News article.

When a group of employees left Arcadis to form a competing company, relations between the two soured quickly and led to litigation.  Just prior to filing their lawsuit, the plaintiffs’ attorney sent a strategy email to his clients, which contained an attachment that, according to the former employees, included “Plaintiffs’ privileged recitation of background and comments to and from legal counsel.” Unfortunately for the attorney (or maybe fortunately, as it turned out), the email system’s auto-complete function (which completes a saved email address as soon as you begin entering it) entered an old Arcadis email address for one of the employees, which wasn’t caught before sending. The email and the attachment went directly to Arcadis, which had been monitoring the plaintiffs’ email accounts since they resigned from the company.

Arcadis’ in-house counsel read the email and the attached document and apparently shared the email with their general counsel and Arcadis’ outside counsel (Gordon & Rees, LLP), neither of whom notified the plaintiffs’ attorney that they had received the email.  Arcadis’ counterclaim contained certain information that caused the plaintiffs to suspect that Arcadis and its counsel had reviewed their privileged communications, and Arcadis, when confronted, acknowledged that it had received the email and agreed to destroy all copies, but refused to identify who reviewed the e-mail.  Eventually, the plaintiffs filed a motion for a protective order to disqualify Arcadis’ counsel and prevent Arcadis from using the email or the attachment during the case, stipulating that attorneys are prohibited from using privileged material that they receive from an opposing party, and are under an ethical obligation to immediately notify the opposing party when such information is received.

Arcadis opposed the motion, arguing that in-house and outside counsel only conducted a cursory review of the email and attachment, and stated that it was not privileged because it was sent “unsolicited” to the plaintiff’s work e-mail, in which he had no reasonable expectation of privacy. Arcadis also argued because the information itself was not privileged and would be disclosed during discovery, the plaintiffs would suffer no irreparable harm. And, since there was no active litigation between the parties when Arcadis received the email, they argued that the rules of professional conduct did not apply.

The court rejected Arcadis’ arguments and ruled for the plaintiffs, disqualifying Arcadis’ outside counsel and the in-house counsel who reviewed the emails, also ruling that Arcadis’ general counsel must be “removed from all aspects of the day-to-day management of the case, including . . . making any substantive or strategic decisions with regard to the case.”.  Arcadis was also ordered to dismiss its counterclaim and the plaintiffs were awarded their costs and fees in connection with bringing the motion against Arcadis.

A copy of the order can be found here.

So, what do you think?  Have you ever been burned by an inadvertently sent email?  Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: Deliberately Produce Wrong Cell Phone, Get Sanctioned
 

In Moreno v. Ostly, No. A127780, (Cal. Ct. App. Feb. 22, 2011), the California Court of Appeals affirmed the trial court’s award of monetary sanctions imposed against the plaintiff and her law firm in the amount of $13,500 for counsel and plaintiff’s discovery misconduct related to the preservation of text messages.

The plaintiff sued her former law firm employer alleging sexual harassment, retaliation and failure to pay back wages.  She claimed that a partner at the firm “forced himself on her sexually” on a daily basis and that she was fired when she notified the partner that she wished to sever the “intimate aspect of their relationship.”  In discovery, defendants sought copies of relevant e-mails and text messages between the plaintiff and the partner.  After the parties' meet and confer efforts failed, the court ordered the plaintiff to produce her personal computer and cell phone for inspection.  The inspection revealed that the cell phone produced was different from the one plaintiff had during her course of employment.  When questioned regarding the discrepancy, plaintiff’s counsel responded that the defendants would have to undertake further discovery efforts to determine what happened to the relevant equipment.  The plaintiff’s attorney conceded that many of the text messages on the prior phone had been used against the defendants before the EEOC, but had not been preserved prior to the disposal of the cell phone.

The defendants filed a motion for terminating and monetary sanctions or, in the alternative, a willful suppression of evidence jury instruction.  The trial court awarded monetary sanctions, finding the plaintiff and her counsel deliberately withheld the fact that the plaintiff failed to preserve her cell phone data, causing opposing counsel and the court to expend unnecessary resources.  The court found plaintiff’s counsel’s conduct willful and his explanation citing a conflict between the duty of loyalty to the client and the duty of candor to opposing counsel and the court “not very credible.”

The court of appeals concluded the trial court's award of monetary sanctions was supported by substantial evidence, and was well within the discretion of the court.

So, what do you think?  Are you aware of any other blatant examples of evasive discovery?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: eDiscovery Case Law Update, by Littler Mendelson P.C.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

eDiscovery Case Law: Spoliate Evidence, Don’t Go to Jail, but Pay a Million Dollars
 

As previously referenced in eDiscovery Daily, defendant Mark Pappas, President of Creative Pipe, Inc., was ordered by Magistrate Judge Paul W. Grimm to  “be imprisoned for a period not to exceed two years, unless and until he pays to Plaintiff the attorney's fees and costs that will be awarded to Plaintiff as the prevailing party pursuant to Fed. R. Civ. P. 37(b)(2)(C).”.  Judge Grimm found that “Defendants…deleted, destroyed, and otherwise failed to preserve evidence; and repeatedly misrepresented the completeness of their discovery production to opposing counsel and the Court.”

However, ruling on the defendants’ appeal, District Court Judge Marvin J. Garbis declined to adopt the order regarding incarceration, stating: “[T]he court does not find it appropriate to Order Defendant Pappas incarcerated for future possible failure to comply with his obligation to make payment of an amount to be determined in the course of further proceedings.”

So, how much is he ordered to pay?  Now we know.

On January 24, 2011, Judge Grimm entered an order awarding a total of $1,049,850.04 in “attorney’s fees and costs associated with all discovery that would not have been un[der]taken but for Defendants' spoliation, as well as the briefings and hearings regarding Plaintiff’s Motion for Sanctions.”  Judge Grimm explained, “the willful loss or destruction of relevant evidence taints the entire discovery and motions practice.” So, the court found that “Defendants’ first spoliation efforts corresponded with the beginning of litigation” and that “Defendants’ misconduct affected the entire discovery process since the commencement of this case.”

As a result, the court awarded $901,553.00 in attorney’s fees and $148,297.04 in costs.  Those costs included $95,969.04 for the Plaintiff’s computer forensic consultant that was “initially hired . . . to address the early evidence of spoliation by Defendants and to prevent further destruction of data”.  The Plaintiff’s forensic consultant also provided processing services and participated in the preparation of plaintiff’s search and collection protocol, which the court found “pertained to Defendants’ spoliation efforts.”

So, what do you think?  Will the defendant pay?  Or will he be subject to possible jail time yet again?  Please share any comments you might have or if you’d like to know more about a particular topic.