Collection

eDiscovery Case Law: District Court Judge Affirms $1 Million Sanction to Pappas in Victor Stanley

 

One of the first posts ever published in eDiscovery Daily was this one, where 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.”

Upon 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.”

Then, in January of this year, 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.”  As a result, the court awarded $901,553.00 in attorney’s fees and $148,297.04 in costs, including the costs for the Plaintiff’s computer forensic consultant, finding 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.”

Naturally, the award was appealed.

On Tuesday, June 14, Judge Garbis affirmed Judge Grimm’s prior Report and Recommendation ordering the award.  Judge Garbis noted that “The Court’s stated standard for includible fees and costs is consistent with the purpose of designing a sanction that will ‘restore the prejudiced party to the same position he would have been in absent the wrongful destruction of evidence by the opposing party.’  Judge Garbis discussed and rejected all of Creative Pipe’s objections as to the amount of the award, adopting Judge Grimm’s findings that all of these fees were in fact related to the discovery malfeasance.

With Creative Pipe having already paid a total of $478,409.92, a balance remains under the order of $571,440.12, which concluded with Judge Garbis stating that “Defendants shall, by July 15, 2011, pay Plaintiff…the balance due”.  No mention of Judge Grimm’s original automatic jail sanction for non-payment of the fees, though, Judge Garbis originally said he might impose jail sanctions for non-payment.

So, what do you think?  Will the defendant pay the rest?  Appeal to the Circuit Court?  Could he still go to jail?  Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: Downloading Confidential Information Leads to Motion to Compel Production

The North Dakota District Court has recently decided in favor of a motion to compel production of electronic evidence, requiring imaging of computer hard drives, in a case involving the possible electronic theft of trade secrets.

In Weatherford U.S., L.P. v. Chase Innis and Noble Casings Inc., No. 4:09-cv-061, 2011 WL 2174045 (D.N.D. June 2, 2011), the court ruled to allow the plaintiff to select and hire a forensic expert at its own expense to conduct imaging of the defendants’ hard drives. The purpose of this investigation was to discern whether or not confidential data that was downloaded from the plaintiff’s computers was, in fact, used in the building of the defendants’ own oil services firm.

Although the judge noted that courts are generally “cautious” in authorizing such hard drive imaging, this motion was substantiated by the defendant, Innis’s, “acknowledgment that he downloaded [plaintiff’s] files to a thumb drive without permission.” The court believed that circumstances of the case warranted further investigation into the defendant’s computer history:

  • The plaintiff, Weatherford US LP, had previously alleged that Chance Innis, a former employee, had downloaded confidential and proprietary information and used it to his advantage in starting his own competing company, Noble Casing Inc.
  • Innis had admitted to returning to Weatherford US offices late in the evening of the day he was terminated and downloading files onto a thumb drive without permission. Two weeks later, he launched his own competing oil services company, the co-defendant in this case, Noble Casing Inc. However, Innis maintains that he did not later access the files stored on his thumb drive and never used them in the process of starting his own company.
  • Contrary to these assertions, forensic examination of the thumb drive showed that the files were later accessed; whether or not they were instrumental in the startup of Noble Casing Inc. remains in question.
  • The plaintiff requested access to the defendant’s computers in the pursuit of previously subpoenaed documents, proposing that they select, hire, and pay for the services of a forensic investigator to image the defendants’ hard drives.
  • The defendants objected, proposing instead that an expert be chosen in agreement by all parties.
  • The court ruled in favor of the plaintiff’s motion in this instance, agreeing that all materials imaged will be shown to the defendant to screen for privilege before being shared with the plaintiff.
  • The court maintained that it is not unusual for imaging of hard drives to be allowed by the court in cases such as this, “particularly in cases where trade secrets and electronic evidence are both involved.”

So, what do you think?  Do you agree that Weatherford should have been allowed to examine images of the defendants’ hard drives, or should Innis’ privacy and that of his company have been protected?  Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Best Practices: Avoiding eDiscovery Nightmares: 10 Ways CEOs Can Sleep Easier

 

I found this article in the CIO Central blog on Forbes.com from Robert D. Brownstone – it’s a good summary of issues for organizations to consider so that they can avoid major eDiscovery nightmares.  The author counts down his top ten list David Letterman style (clever!) to provide a nice easy to follow summary of the issues.  Here’s a summary recap, with my ‘two cents’ on each item:

10. Less is more: The U.S. Supreme Court ruled unanimously in 2005 in the Arthur Andersen case that a “retention” policy is actually a destruction policy.  It’s important to routinely dispose of old data that is no longer needed to have less data subject to discovery and just as important to know where that data resides.  My two cents: A data map is a great way to keep track of where the data resides.

9. Sing Kumbaya: They may speak different languages, but you need to find a way to bridge the communication gap between Legal and IT to develop an effective litigation-preparedness program.  My two cents: Require cross-training so that each department can understand the terms and concepts important to the other.  And, don’t forget the records management folks!

8. Preserve or Perish: Assign the litigation hold protocol to one key person, either a lawyer or a C-level executive to decide when a litigation hold must be issued.  Ensure an adequate process and memorialize steps taken – and not taken.  My two cents: Memorialize is underlined because an organization that has a defined process and the documentation to back it up is much more likely to be given leeway in the courts than a company that doesn’t document its decisions.

7. Build the Three-Legged Stool: A successful eDiscovery approach involves knowledgeable people, great technology, and up-to-date written protocols.  My two cents: Up-to-date written protocols are the first thing to slide when people get busy – don’t let it happen.

6. Preserve, Protect, Defend: Your techs need the knowledge to avoid altering metadata, maintain chain-of-custody information and limit access to a working copy for processing and review.  My two cents: A good review platform will assist greatly in all three areas.

5. Natives Need Not Make You Restless: Consider exchanging files to be produced in their original/”native” formats to avoid huge out-of-pocket costs of converting thousands of files to image format.  My two cents: Be sure to address how redactions will be handled as some parties prefer to image those while others prefer to agree to alter the natives to obscure that information.

4. Get M.A.D.?  Then Get Even: Apply the Mutually Assured Destruction (M.A.D.) principle to agree with the other side to take off the table costly volumes of data, such as digital voicemails and back-up data created down the road.  My two cents: That’s assuming, of course, you have the same levels of data.  If one party has a lot more data than the other party, there may be no incentive for that party to agree to concessions.

3. Cooperate to Cull Aggressively and to Preserve Clawback Rights: Setting expectations regarding culling efforts and reaching a clawback agreement with opposing counsel enables each side to cull more aggressively to reduce eDiscovery costs.  My two cents: Some parties will agree on search terms up front while others will feel that gives away case strategy, so the level of cooperation may vary from case to case.

2. QA/QC: Employ Quality Assurance (QA) tests throughout review to ensure a high accuracy rate, then perform Quality Control (QC) testing before the data goes out the door, building time in the schedule for that QC testing.  Also, consider involving a search-methodology expert.  My two cents: I cannot stress that last point enough – the ability to illustrate how you got from the large collection set to the smaller production set will be imperative to responding to any objections you may encounter to the produced set.

1. Never Drop Your Laptop Bag and Run: Dig in, learn as much as you can and start building repeatable, efficient approaches.  My two cents: It’s the duty of your attorneys and providers to demonstrate competency in eDiscovery best practices.  How will you know whether they have or not unless you develop that competency yourself?

So, what do you think?  Are there other ways for CEOs to avoid eDiscovery nightmares?   Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Best Practices: Competency Ethics – It’s Not Just About the Law Anymore

 

A few months ago at LegalTech New York, I conducted a thought leader interview with Tom O’Connor of Gulf Coast Legal Technology Center, who didn’t exactly mince words when talking about the trend for attorneys to “finally tak[e] technology seriously”.  As he noted, “lawyers are finally trying to take some time to try to get up to speed – whining and screaming pitifully all the way about how it’s not fair, and the sanctions are too high and there’s too much data.  Get a life, get a grip.  Use the tools that are out there that have been given to you for years.” 

Strong words, indeed.  The American Bar Association (ABA) Model Rules of Professional Conduct (Model Rules) require that an attorney possess and demonstrate a certain requisite level of knowledge in order to be considered competent to handle a given matter.  Specifically, Model Rule 1.1 states that, "[a] lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation."

Preparation not only means understanding a specific area of the law (for example, antitrust or patent law, both highly specialized.).  It also means having the technical knowledge and skills necessary to serve the client in the area of discovery.

The ethical responsibilities of counsel these days includes competently directing and managing the identification, preservation, collection, processing, analysis, review and production of electronically stored information (ESI) required to be produced pursuant to lawful discovery requests.  If counsel does not have that level of competency in a particular area, he or she is obligated to either acquire the knowledge or skill necessary to support those needs, or include someone else who does have the requisite skills as part of the representation.

Not too long ago, I met with an attorney and discussed how they handled preservation obligations with their clients.  The attorney indicated that he expected his clients to self-manage their own preservation and collection.  When I asked him why he didn’t try to get more involved to make sure it was being handled properly, he said, “I don’t want to alarm them.  They might decide they need a bigger firm.”

Recent case law is full of cases where counsel didn’t fully understand their eDiscovery obligations, and got themselves and their clients “burned” in the process.  If your organization gets involved in litigation, make sure to include eDiscovery competence among the factors you consider when determining counsel qualifications to represent you.

So, what do you think?  Is your counsel eDiscovery savvy?  If not, do they use a provider that is?  Please share any comments you might have or if you’d like to know more about a particular topic.

Social Tech eDiscovery: Use of Smarsh for Social Media Archiving

 

The online world thrives on social media, but for attorneys who must preserve sensitive social media data for discovery, the widespread growth of social technology presents a laundry list of problems.

Not only is it challenging to trace the communications shared on popular sites like Facebook, LinkedIn and Twitter when privacy settings can be turned on and off at whim, it’s also difficult to know whether the information available at any given time is complete, as content can be edited by users at any time or lost due to technical malfunctions.

In some cases, like this example, courts have ruled that even locked or private content on Facebook and other social networking sites is not protected from being requested as part of discovery. In other cases, such as this one, they have ruled differently.  You don’t know for sure how courts will rule, so you have to be prepared to preserve all types of social media content, even possibly content that is changed frequently by users, such as Facebook profiles and blog posts.  And, even though Facebook has introduced a self-collection mechanism, it may not capture all of the changes you need.  And, other social media sites have not yet provided a similar mechanism.  If items are changed or lost after the duty to preserve goes into effect, your organization can be sanctioned with steep fines even receive an adverse inference judgment based on the information you are unable to produce.

Fortunately, there are viable solutions that enable you to create a backup of all social networking activity and archive such information in the event it has to be produced in discovery. Portland-based Smarsh has archiving and compliance tools, including social media archiving and compliance that automate the archiving of social media accounts, preserving all necessary data in case you need it later for discovery.

Some of the benefits of Smarsh’s social media archiving tools include:

  • A complete, logged, and quantifiable record of all social media posts and administrator activity
  • The ability to define which social media features your employees have access to and to track all business communications
  • Compliance with SEC and FINRA regulations (including Regulatory Notice 10-06)
  • The tools to identify and minimize risk, saving your business time, effort, and money

Smarsh has been designed to satisfy all regulatory compliance objectives, transforming the data management hazards of social media into a system that automatically updates and archives itself – an attorney’s dream when litigation strikes. This application creates a simple and proactive approach to archival of social media data, enforcing preservation to ensure that the duty to preserve is met.

So, what do you think?  Do you use Smarsh or any other social media archival tool?  Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Trends: Forecast for More Clouds

 

No, eDiscoveryDaily has not begun providing weather forecasts on our site.  Or stock forecasts.

But, imagine if you could invest in an industry that could nearly sextuple in nine years? (i.e., multiply six-fold).

Well, the cloud computing, or Software-as-a-Service (SaaS), industry may be just the industry for you.  According to a Forrester report from last month, the global cloud computing market will grow from 40.7 billion dollars in 2011 to more than 241 billion dollars by 2020.  That’s a 200 billion dollar increase in nine years.  That’s enough to put anybody “on cloud nine”!

The report titled Sizing The Cloud by Stefan Ried (Principal Analyst, Forrester) and Holger Kisker (Sr. Analyst, Forrester), outlines the different market dynamics for three core layers of cloud computing, as follows:

  • Public Cloud: From 25.5 billion dollars to 159.3 billion dollars by 2020;
  • Virtual Private Cloud: From 7.5 billion dollars to 66.4 billion dollars by 2020;
  • Private Cloud: From 7.8 billion dollars to 159.3 billion dollars by 2020.

Public cloud providers include everything from Facebook and Twitter to Amazon.com and Salesforce.com.  As the name implies, a private cloud is where companies implement their own cloud environment to support its own needs.  A virtual private cloud is simply a private cloud located within a public cloud.

Forrester is not the only analyst firm that expects big things for cloud computing.  The Gartner Group projected that the cloud computing industry will have revenue of 148.8 billion dollars by 2014, even higher than Forrester’s forecast of 118.7 billion dollars for the same year.  Clearly, the benefits of the cloud are causing many organizations to consider it as a viable option for storing and managing critical data.

What does that mean from an eDiscovery perspective?  That means a forecast for more clouds.  If your organization doesn’t have a plan in place for managing, identifying, preserving and collecting data from its cloud solutions, things could get stormy!

So, what do you think?  Is your organization storing more data in the cloud?  Does your organization have an effective plan in place for getting to the data when litigation strikes?  Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Best Practices: Usefulness of Facebook’s Self Collection Mechanism

 

We’ve written about Facebook a lot on this blog.  Shortly after this blog was launched, we provided information on Facebook’s subpoena policy.  We’ve also talked about the eDiscovery implications associated with the rollout of Facebook’s new email messaging system, dubbed “Facemail”.  And, just last week, we chronicled a case involving Facebook where they were ordered to produce documents instead of just merely providing access to them.  And, we haven’t even mentioned the latest revelations that Facebook may have secretly hired a PR firm to plant negative stories about Google (oops, we just did!).

But perhaps our most popular post regarding Facebook was regarding the self collection mechanism that they rolled out last October, which we found out about via our LegalTech interview with Craig Ball published back in March after our February interview (Craig also wrote an article about the feature in Law Technology News in February).

Now, another article has been written about the usefulness of Facebook’s self collection mechanism (called “Download Your Information”) in the blog E-Discovery Law Alert, entitled How Useful is Facebook's "Download Your Information" Feature in E-Discovery?, written by Patrick V. DiDomenico.

The author of this article conducted a test by downloading his information via the utility, deleting some information from his Facebook profile – “an email message, some wall posts, comments, photos, and even a friend (not a close friend)” – hopefully, he added the friend back.  Then, he downloaded his information again, every day for four days, with no change for the first three days.  On the fourth day, most of the deleted information disappeared from the download, except the email message (which disappeared when he ran the utility one more time).

The conclusion was that the mechanism “does not appear to ‘look back’ and recover deleted information in the user’s account”.  Thoughts:

  • With no change in the download in the first three days, the author notes that “Facebook did not take a fresh snapshot of my account every day – it just re-downloaded the same file three days in a row”.  He doesn’t mention whether he added any content during this time.  It would be interesting to see if that would force a change.
  • I don’t believe that there is any specific documentation from Facebook as to how it handles additions and deletions and how often the snapshot is updated.  If not, it might behoove them to create some, it might save them some subpoena requests.
  • The author notes that “it is inadvisable for lawyers to rely solely on the Download Your Information feature for discovery of an adversary’s Facebook information” as it “gives no assurance that a litigant’s attempt to delete evidence will be revealed”.  On the other hand, it may be still an appropriate mechanism to use for your own discovery to preserve your own information.  Facebook may also store deleted information on backup tapes, so a subpoena could catch your opponent red-handed if you can justify the discovery of those tapes.  Food for thought.

So, what do you think?  Have you had any Facebook discovery requests in your eDiscovery projects?   Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Best Practices: Does Anybody Really Know What Time It Is?

 

Does anybody really know what time it is?  Does anybody really care?

OK, it’s an old song by Chicago (back then, they were known as the Chicago Transit Authority).  But, the question of what time it really is has a significant effect on how eDiscovery is handled.

Time Zone: In many litigation cases, one of the issues that should be discussed and agreed upon is the time zone to apply to the produced files.  Why is it a big deal?  Let’s look at one example:

A multinational corporation has offices from coast to coast and potentially responsive emails are routinely sent between East Coast and West Coast offices.  If an email is sent from a party in the West Coast office at 10 PM on June 30, 2005 and is received by a party in the East Coast office at 1 AM on July 1, 2005, and the relevant date range is from July 1, 2005 thru December 31, 2006, then the choice of time zones will determine whether or not that email falls within the relevant date range.  The time zone is based on the workstation setting, so they could actually be in the same office when the email is sent (if someone is traveling).

Usually the choice is to either use a standard time zone for all files in the litigation – such as Greenwich Mean Time (GMT) or the time zone where the producing party is located – or to use the time zone associated with each custodian, which means that the time zone used will depend on where the data came from.  It’s important to determine the handling of time zones up front in cases where multiple time zones are involved to avoid potential disputes down the line.

Which Date to Use?: Each email and efile has one or more date and time stamps associated with it.  Emails have date/time sent, as well as date/time received.  Efiles have creation date/time, last modified date/time and even last printed date/time.  Efile creation dates do not necessarily reflect when a file was actually created; they indicate when a file came to exist on a particular storage medium, such as a hard drive. So, creation dates can reflect when a user or computer process created a file. However, they can also reflect the date and time that a file was copied to the storage medium – as a result, the creation date can be later than the last modified date.  It’s common to use date sent for Sent Items emails and date received for Inbox emails and to use last modified date for efiles.  But, there are exceptions, so again it’s important to agree up front as to which date to use.

So, what do you think?  Have you had any date disputes in your eDiscovery projects?   Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Best Practices: 4 Steps to Effective eDiscovery With Software Analytics

 

I read an interesting article from Texas Lawyer via Law.com entitled “4 Steps to Effective E-Discovery With Software Analytics” that has some interesting takes on project management principles related to eDiscovery and I’ve interjected some of my thoughts into the analysis below.  A copy of the full article is located here.  The steps are as follows:

1. With the vendor, negotiate clear terms that serve the project's key objectives.  The article notes the important of tying each collection and review milestone (e.g., collecting and imaging data; filtering data by file type; removing duplicates; processing data for review in a specific review platform; processing data to allow for optical character recognition (OCR) searching; and converting data into a tag image file format (TIFF) for final production to opposing counsel) to contract terms with the vendor. 

The specific milestones will vary – for example, conversion to TIFF may not be necessary if the parties agree to a native production – so it’s important to know the size and complexity of the project, and choose only an experienced eDiscovery vendor who can handle the variations.

2. Collect and process data.  Forensically sound data collection and culling of obviously unresponsive files (such as system files) to drastically decrease the overall review costs are key services that a vendor provides in this area.  As we’ve noted many times on this blog, effective culling can save considerable review costs – each gigabyte (GB) culled can save $16-$18K in attorney review costs.

The article notes that a hidden cost is the OCR process of translating extracted text into a searchable form and that it’s an optimal negotiation point with the vendor.  This may have been true when most collections were paper based, but as most collections today are electronic based, the percentage of documents requiring OCR is considerably less than it used to be.  However, it is important to be prepared that there are some native files which will be “image only”, such as TIFFs and scanned PDFs – those will require OCR to be effectively searched.

3. Select a data and document review platform.  Factors such as ease of use, robustness, and reliability of analytic tools, support staff accessibility to fix software bugs quickly, monthly user and hosting fees, and software training and support fees should be considered when selecting a document review platform.

The article notes that a hidden cost is selecting a platform with which the firm’s litigation support staff has no experience as follow-up consultation with the vendor could be costly.  This can be true, though a good vendor training program and an intuitive interface can minimize or even eliminate this component.

The article also notes that to take advantage of the vendor’s more modern technology “[a] viable option is to use a vendor's review platform that fits the needs of the current data set and then transfer the data to the in-house system”.  I’m not sure why the need exists to transfer the data back – there are a number of vendors that provide a cost-effective solution appropriate for the duration of the case.

4. Designate clear areas of responsibility.  By doing so, you minimize or eliminate inefficiencies in the project and the article mentions the RACI matrix to determine who is responsible (individuals responsible for performing each task, such as review or litigation support), accountable (the attorney in charge of discovery), consulted (the lead attorney on the case), and informed (the client).

Managing these areas of responsibility effectively is probably the biggest key to project success and the article does a nice job of providing a handy reference model (the RACI matrix) for defining responsibility within the project.

So, what do you think?  Do you have any specific thoughts about this article?   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.