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Evidence

eDiscovery Case Law: Sanctions for Spoliation, Even When Much of the Data Was Restored

A Virginia court recently ordered sanctions against the defendant in a case of deliberate spoliation of electronic discovery documents.

In E.I. Du Pont De Nemours & Co. v. Kolon Indus., Inc., No. 3:09cv58, 2011 WL 2966862 (E.D. Va. July 21, 2011), the defendant was found to have committed spoliation “in bad faith” in a manner that constituted a “violation of duty… to the Court and the judicial process,” as follows:

  • The defendant, Kolon Industries Inc., was charged with misappropriation of trade secrets, conspiracy, information theft, and other allegations.
  • Within two days of receiving the plaintiff’s February 4, 2009 complaint, the defendant issued a litigation hold to upper-level employees. Several days after that, on February 10, a second hold notice was sent to all employees in English – even though most of Kolon’s staff members did not speak English.
  • Subsequently, many of the defendant’s key employees were found to have deleted files and emails that may have been relevant for discovery. After extensive investigation, the plaintiff’s expert discovered that the defendant had demonstrably deleted at least “17,811 files and email items” that should have been preserved for discovery.
  • The court determined that employees had deleted ESI “in bad faith,” conducting intentional spoliation and alteration of relevant evidence in direct contravention of the demands of discovery.
  • Even though many (but not all) of the documents were recovered (most from backup tape), the court rejected the defendant’s argument that “there can be no spoliation finding because many documents were recovered” and eventually produced, stating: “The fact that technology permits the undoing of spoliation does not change at all the fact that spoliation has occurred.”
  • Accordingly, the court leveled sanctions against the defendant, ordering it to pay the plaintiff’s legal fees, costs and expenses on this motion, and ordered an adverse inference instruction to the jury.  However, the court found that default judgment requested by the plaintiff was not appropriate, citing defendant’s attempts to place two litigation holds and the “good fortune that many deleted items were recoverable because of the preservation of Kolon’s backup tapes.”

So, what do you think? Were the sanctions appropriate, or should recovery of much of the deleted data have spared the defendant in this case? Have you ever been involved in a case where deleted electronic documents were recovered and sanctions avoided? Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: "Untimely" Motion for Sanctions for Spoliation Denied

A recent ruling by the US District Court of Tennessee has denied a motion for sanctions for spoliation on the grounds that the motion was “untimely.”

In Am. Nat’l Prop. & Cas. Co. v. Campbell Ins., Inc., No. 3:08-cv-00604, 2011 WL 3021399 (M.D. Tenn. July 22, 2011), the plaintiff argued that the defendants’ admitted failure to preserve evidence “warrants a harsh penalty,” but the court found in favor of the defense that the motion was untimely.

  • The defendants, Tommy Campbell, Marshall C. Campbell and Campbell Insurance, Inc. were previously found to have failed to preserve email evidence from the period between April and July 2009. The plaintiff claimed that these emails contained “damning evidence” and that this discovery spoliation was deliberate.
  • This spoliation was discovered in May 2010, but the plaintiff did not file a motion for sanctions until July 16, 2011 – more than fourteen months after the spoliation was discovered and almost five months after discovery closed in February of 2011.
  • With the trial less than seven weeks way, the court considered this motion for sanctions for spoliation in the light of the summary of the law on spoliation that was provided in Goodman v. Praxair Services, Inc., 632 F.Supp.2d 494 (D.Md.2009). Among other points, the district court in Goodman v. Praxair encouraged courts to be aware of the time between the close of discovery and a motion related to spoliation, as well as cautioning against spoliation motions “made on the eve of trial.”
  • The court rejected the plaintiff’s excuse for the timing on the basis that “because the relevant emails were deleted and cannot possibly be produced, the Motion for Sanctions ‘is not a discovery motion.'”
  • Because of the “disruptive” timing of the motion, and the inability of the plaintiff to effectively explain why they delayed so long in filing a motion after this spoliation was encountered in discovery, the court ultimately ruled against the motion for sanctions, calling it “untimely”.

So, what do you think? Does spoliation of evidence “expire” or should timeliness matter at all in a case like this one? Please share any comments you might have or if you’d like to know more about a particular topic.

eDiscovery Case Law: Bankruptcy Court Denies Foreign Access to Debtor's Emails

A Southern District of New York United States Bankruptcy Court denied access to a debtor’s emails on July 22, in a foreign request involving international eDiscovery.

In re Toft, No. 11-11049 (ALG), 2011 WL 3023544 (Bankr. S.D.N.Y. July 22, 2011), the U.S. Bankruptcy Court determined that to permit a relief request from a German insolvency administrator would directly contravene the “fundamental principles” of U.S. public policy by undermining the right to privacy in electronic communications and the right of parties involved in any court order to receive notice of such proceedings and of their involvement.

  • Dr. Martin Prager, in his role as authorized insolvency administrator in a German bankruptcy proceeding, sought permission to access the mail and electronic correspondence of Dr. Jurgen Toft. Although the majority of such correspondence was located under European purview, two of the email accounts belonging to the debtor were found to be stored on servers owned by U.S. Internet Service Providers (“ISPs”).
  • The Munich District Insolvency Court had previously approved a Mail Interception Order, which had been granted recognition by the English High Court of Justice before being brought before the United States Bankruptcy Court.
  • Prager sought a U.S. court order that would grant comity to his German Mail Interception Order and compel the two American ISPs to provide him with “all of the Debtor’s e-mails currently stored on their servers and to deliver to Prager copies of all e-mails received by the Debtor in future,” without notice being provided to the debtor by either the court or the ISPs.
  • Despite the approval of the English High Court of Justice, the US Bankruptcy Court found that it could not grant relief to Prager’s request. The court determined that to grant access to emails as requested by Prager would be “banned under U.S. law, and it would seemingly result in criminal liability under the Wiretap Act and the Privacy Act for those who carried it out.”
  • In addition, the court observed that providing permission for access to emails without informing the debtor would also be contrary to U.S. law, which requires that all parties involved in any court order must receive notice.
  • As a result, the court concluded that the relief request was impossible to grant without running “manifestly contrary” to U.S. law and public policy, and did not honor Prager’s request.

So, what do you think? Was the court’s rejection of Prager’s request the only answer, or were there other routes that could have been taken in dealing with this international eDiscovery request? Please share any comments you might have or if you’d like to know more about a particular topic.

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 Breaking News: News International to Suspend Deletion of Emails and Other Documents
 

According to The Independent, staff at Rupert Murdoch’s newspapers has been warned to stop deleting any documents that may be relevant to the current investigations, as a suspension of its usual policy about deletion of documents goes into effect.

Over the course of the 2011 investigation into illegal voicemail hacking by News International employees, there has been contention over the ongoing deletion of documents at the newspaper and its subsidiaries. But only during this past weekend did News International's parent company, News Corp, finally send an email to all of its employees instructing them to take measures preventing the deletion of documents that might be related to the investigation, including emails and other ESI.  Specifically, the email instructed employees to “Please suspend any automatic deletion or discarding of any documents, whether electronic or paper, including emails or drafts of documents… If you are uncertain whether a document is relevant… you should preserve it.”

Of course, the News Corp scandal has been not only significant eDiscovery news, but major world news as well.

  • Since January 2011, police have been investigating a list of roughly 4,000 potential targets whose voicemails may have been hacked as part of this scandal – including Hollywood celebrities, sports figures, politicians, and even members of the British Royal Family, most of whom were unaware of how easily their cell phone functions were hacked.
  • The newsroom at News of the World, the newspaper implicated in the systematic phone hacking, has been closed.
  • Sean Hoare, the whistle-blower who disclosed phone hacking at News of the World, was found dead in his home in Watford, Hertfordshire.  No cause of death has yet been identified.
  • During testimony to Parliament last week, Rupert Murdoch was attacked – by a pie wielding comedian, who was thwarted by Murdoch’s wife Wendi.

Although this email sends a positive message about News Corp's willingness to protect eDiscovery information from this point forward, the instruction arguably comes too late to protect the documents and other ESI that have potentially been destroyed in the months since the investigation into the paper's illegal phone hacking began as well as the years when News Corp faced numerous hacking claims during key periods associated with the those claims.  News International has acknowledged that some messages may be recoverable on backup disks, and the police are trying to recover that information now, said Tom Watson, a Labor Party member of Parliament.

From an eDiscovery perspective, this story may become “Enron-esque” before it’s all over.

So, what do you think? Is this instruction from News International a step toward greater openness and responsibility in this investigation, or is it simply a case of too little, too late? Please share any comments you might have or if you'd like to know more about a particular topic.

eDiscovery Trends: How Blocking Statutes Affect International eDiscovery
 

Over the past few weeks, we’ve discussed the general challenges of international eDiscovery, use of the 41 year old Hague Convention for requesting ESI from other countries, use of Section 1782 for foreign entities to request ESI from US entities, and the effect of privacy laws in other countries on discovery requests.

In the course of pursuing discovery requests in foreign nations, US lawyers also often run into another serious legal snag: blocking statutes. These statutes prevent certain types of information from leaving the country where it originates, and can interfere with discovery of evidence in a number of ways.

The purpose of blocking statutes – also known as "secrecy laws" – is to protect information that is considered commercially significant or relevant to national security in the country where it is located, or where it originated. Certain countries have blocking statutes that protect particular industries or types of information. In Switzerland, for instance, the disclosure or transmission of bank account information is forbidden by blocking statutes. Other countries, such as France and Germany, have created blocking statutes that make certain types of discovery illegal within their borders, complicating matters for attorneys requesting information.

A French blocking statute dating back to 1980 has been known to cause problems in the past few years for attorneys, by criminalizing cooperation with US discovery – in one case, resulting in hefty fines for a French lawyer who contravened that blocking statute. In other cases, a refusal to submit documents for discovery based on blocking statutes and the Hague Convention may be overruled by national courts depending on the circumstances of the case and the type of discovery being ordered.

Blocking statutes present an odd legal conundrum, because they don't prevent American attorneys from requesting privileged information or American courts from ordering discovery – they simply make it illegal for that information to be disclosed by nations of the foreign country in question. As a result, American courts and attorneys have sometimes expressed skepticism about the validity of these statutes and the likelihood of penalties being enforced against those who contravene them.

In fact, those who contravene these blocking statutes are seldom charged or fined. When the statutes are enforced, however, the penalties are steep.

Blocking statutes can be frustrating to organizations responding to discovery requests, because they put foreign individuals and organizations who are ordered to submit privileged information in the untenable position of either breaking their own country's laws – and facing penalties for contravening blocking statutes – or receiving sanctions from US courts for refusal to produce discovery documents. In many cases, foreign entities prefer to confront US courts rather than risk penalties in their own home countries, which forces US courts to address the failure to comply with these requests.

So, what do you think? Have you ever had a discovery request denied because of a blocking statute? 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 Trends: Privacy is a Priority When Conducting International Discovery
 

US lawsuits are very public, involving discovery and other public disclosures that go against the cultural traditions and laws of many nations in other parts of the world. In the European Union (EU), for instance, many countries have privacy protection laws that forbid the disclosure of "personal information" – and the definition of personal information here can mean anything from addresses and phone numbers to even the names of individuals if they are used in work reports and business documents.

Despite the complications created by these privacy laws, US courts will apply the Federal Rules of Civil Procedure to non US entities if it has jurisdiction over them.  Nonetheless, litigators often find themselves in a bind where they must either impel evidence through means that are potentially illegal in the country of the non US entity, or lose traction in a US-based lawsuit. That means lawyers pursuing discovery in foreign locales often must take pains to familiarize themselves with the laws of the country and province where they are seeking information.

  • The EU Data Protection Directive does not forbid the transfer and processing of electronically stored information (ESI), but it does complicate the process considerably where it corroborates other European data protection laws.
  • US companies and litigators may legally request and receive documents protected under the Data Protection Directive if the company is a member of the US Department of Commerce Safe Harbor, a group whose mandate is based on seven key principles of data protection.
  • Even where the Safe Harbor and Data Protection Directive allows US companies to access information for pre-trial discovery, the laws of specific EU states may not permit businesses to disclose information without being subject to harsh penalties for violating national privacy laws.

Although US courts don’t always recognize the limitations placed on international discovery by these privacy laws, they do appreciate the balance of delicate factors involved in seeking discovery internationally. In assessing the importance of gaining access to specific ESI, the courts will generally consider a combination of factors, including the importance and origin of the information, the availability of access, the effects of non-compliance with international privacy laws on the US and the nation state where the information is located, and the potential hardship that would be imposed on the individuals or businesses who have the power to produce the information. A careful weighing of the privacy needs of individuals versus the needs of the parties involved in litigation must be assessed.

Individuals are capable of providing their consent to allow documents containing their personal information to appear in an international court. However, they can revoke this consent at any time. Even where consent is given, and certainly where it is not, every effort must be taken to protect the security of private information and to destroy such information within a reasonable amount of time. Electronically stored data must be anonymized or protected by pseudonyms, and personal identifiers such as names, addresses and phone numbers must be purged from information presented in eDiscovery.

So, what do you think? Have you ever dealt with privacy protection laws in international jurisdictions? Please share any comments you might have or let us know if you'd like to learn 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: Section 1782 – For Foreign Parties to Request U.S. Discovery
 

We've discussed international eDiscovery issues and the process that U.S. attorneys have to go through as they request electronic documents and evidence from locations in other countries around the world in a couple of recent posts. But what about the reverse? Does the Hague Evidence Convention cover international requests for electronic information that is held by U.S. businesses and individuals?

In fact, it does, but the Hague Convention is not the primary legal statute used by foreign entities to request discovery within the United States. Section 1782 of Title 28 of the United States Code, widely known as "Section 1782," is a federal statute that allows attorneys outside the U.S. to request discovery in American courts from an American citizen or business. This statute lays out the requirements that must be met by any international requests for either testimonial evidence or documents – including electronic documents requested in the discovery process.

In many ways, it's easier for foreign attorneys and interested parties to request data within the U.S. Section 1782 than it is for U.S. lawyers to request discovery in other countries. Section 1782 is designed to simplify the process and spell out what U.S. courts are trying to acquire through these international discovery requests. There are three requirements in Section 1782 for anyone applying for discovery information:

  1. The applicant under Section 1782 must demonstrate that he or she is an "interested person" in a proceeding outside the U.S.;
  2. The proceeding must be conducted before a foreign "tribunal"; and
  3. The application under Section 1782 must be filed in the district of the person or entity from which evidence is requested.

Section 1782 discovery isn't effortless by any means – it requires several types of proof of relevance before discovery will be permitted – but it does provide a framework for legal discovery across national boundaries, one that is arguably much friendlier and more transparent than the rules U.S. attorneys must navigate when conducting discovery requests in other nations in the European Union (E.U.), Asia, Africa, and elsewhere around the world.

So, what do you think? Have you ever been involved in a proceeding that involved Section 1782 discovery? Please share any comments you might have or if you'd like to know more about a particular topic.