Evidence

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: 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.

eDiscovery Case Law: When is Attorney-Client Communication NOT Privileged?

One answer: When it’s from your work email account, and your employer has a written policy that company email is not private and subject to audit.  Oh, and you’re suing your employer.

In Holmes v. Petrovich Dev. Co., LLC, 2011 WL 117230 (Cal. Ct. App. Jan. 13, 2011), a California court of appeals upheld a trial court ruling that emails from a plaintiff to her attorney via her company’s computer “did not constitute ‘confidential communication between client and lawyer’ within the meaning of Evidence Code section 952” and thus were not privileged.

The plaintiff, Gina Holmes worked as an executive assistant at Petrovich Development of Sacramento, California.  When hired, she read and signed the company’s policies regarding use of computers, which informed employees that they had no right of privacy to any personal information created or maintained on company computers, and that such information was subject to monitoring.

Holmes claimed Petrovich Development became hostile when it found out she was pregnant shortly after being hired in 2004 and used her company’s computer to communicate with an attorney, eventually quitting her job and suing her employer.  During the case, emails between her and her attorney were introduced at trial “to show Holmes did not suffer severe emotional distress, was only frustrated and annoyed, and filed the action at the urging of her attorney”.  Despite plaintiff’s protests that the emails were privileged, they were not excluded from evidence at trial.  Rather, the trial court ruled that the emails “were not protected … because they were not private.”  Because the plaintiff did not prevail on any of her claims, she appealed, claiming the court erred in failing to exclude the emails.

In a 3-0 decision by the Sacramento Third Appellate District, they affirmed the findings of the trial court, stating that the plaintiff’s use of the company computer after being expressly advised that her messages were not private was “akin to consulting her attorney in one of defendants’ conference rooms, in a loud voice, with the door open, yet unreasonably expecting that the conversation overheard … would be privileged.”.  The court also noted that “communication under these circumstances is not a “‘confidential communication between client and lawyer’ “ within the meaning of section 952 because it is not transmitted “by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation….”.

So, what do you think?  Was justice served?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Law: Spoliate Evidence and Go to Jail–OR NOT?!?

As previously referenced in eDiscovery Daily, defendant Mark Pappas, President of Creative Pipe, Inc., was ordered by 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.”  As a result, he ordered “that Pappas’s pervasive and willful violation of serial Court orders to preserve and produce ESI evidence be treated as contempt of court”, resulting in the severe sanction.

Pursuant to Magistrate Judge Grimm’s September 9 decision and order and the relevant local rule, however, defendants were allowed to object to the same order. In that briefing, Mr. Pappas’ counsel argued that “[t]his Court’s power to impose a coercive civil contempt sanction … is limited by a party’s ability to comply with the order,” and further that, “[i]f the fee awarded is so large that Mr. Pappas is unable to pay it, the ordered confinement would not be coercive, but punitive, and could not be imposed without criminal due process protections.” Defendants thus requested that Magistrate Judge Grimm’s order be modified such that, following the quantification of the fee award, Mr. Pappas be permitted to demonstrate his inability to pay it, and further to provide that Mr. Pappas would only be confined if he is able to pay but refuses to do so. The District Court agreed with Mr. Pappas’ counsel and, on November 1, 2010, issued a Memorandum and Order holding as follows: “[T]he Court does not find it appropriate to Order Defendant Pappas incarcerated for a future possible failure to comply with his obligation to make payment of an amount to be determined in the course of further proceedings. Certainly, if Defendant Pappas should fail to comply with a specific payment order, the Court may issue an order requiring him to show cause why he should not be held in civil contempt for failure to comply with that payment order. Also, under appropriate circumstances, criminal contempt proceedings might be considered.”

That same day, the Court further ordered that defendants must pay plaintiff the amount of $337,796.37 by November 5 and, if such payment is not made, defendants must appear on November 8 for a civil contempt hearing. Moreover, if defendants failed to pay and Mr. Pappas failed to appear at the civil contempt hearing, “a warrant may be issued for his arrest so that he shall be brought before the Court as soon as may be practicable.” From the docket it appears that ultimately the parties resolved the issue between them without the need for a further contempt proceeding.

So, what do you think?  What will happen next?  Please share any comments you might have (including examples of other cases where sanctions included jail time) or if you’d like to know more about a particular topic.

Case Summary Source: E-Discovery Law Alert, by Gibbons 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.

Thought Leader Q&A: Jim McGann of Index Engines

 

Tell me about your company and the products you represent.  Businesses today face a significant challenge organizing their files and email to ensure timely and cost efficient access, while also maintaining compliance to regulations governing electronic data. Founded in 2003, Index Engines’ mission is to organize enterprise data assets, and make them immediately accessible, searchable and easy to manage. 

Index Engines’ discovery platform is the only solution on the market to offer a complete view of electronic data assets. Online data is indexed in-stream at wire speed in native enterprise storage protocols, enabling high-speed, efficient indexing of proprietary backup and transfer formats. Our unique approach to offline records scans backup tapes, indexes the contents and extracts relevant data, eliminating the time-consuming restoration process. Index Engines provides the only comprehensive discovery platform across both online and offline data, saving time and money when managing enterprise information.

What has caused backup tapes to become so relevant in eDiscovery?  Tape discovery actually appeared on the map after the renowned Zubulake case in 2003, and was reinforced by the FRCP amendments in 2006 and then again last year with the adoption of California’s eDiscovery act AB-5. Each of these milestones propelled tape discovery further into the eDiscovery market. These days, tapes are as common as any other container to discover relevant electronically stored information (ESI).

What can companies proactively do to address tape storage?  Needlessly storing old backup tapes is both a potential liability and a wasted expense. The liability comes from not knowing what information the tapes contain. The cost of offsite tape storage –  even if it is only a few dollars a month per tape –  quickly adds up. Tape remediation is the process of proactively discovering data contained on legacy backup tapes, and then applying a corporate retention policy to this tape data. Once the relevant data has been identified and archived accordingly, the tapes can be destroyed or recycled. 

How can a legal or litigation support professional substantiate claims of processing speed made by eDiscovery vendors?  Without an industry standard vendor-neutral benchmarking process, this is a difficult challenge. I would recommend performing a proof of concept to actually see the performance in action. Another idea would be to question the components of the technology. Is the technology simply off-the-shelf freeware that has been repackaged, or is it something more powerful?

You have recently had patents approved for your technology. Can you explain this in greater detail?  Index Engines has engineered a platform that performs sequential processing of data. We received both US and European patents for this unique approach towards the processing of enterprise data, which makes the data searchable and discoverable across both primary and secondary (backup) storage. Our patented approach enables the indexing of electronic data as it flows to backup, as well as documented high speed indexing of network data at 1TB per hour per node.

About Jim McGann
Jim is Vice President of Information Discovery for Index Engines. Jim has extensive experience with the eDiscovery and Information Management. He is currently contributing to the Sedona working group addressing electronic document retention and production. Jim is also a frequent speaker for industry organizations such as ARMA and ILTA, and has authored multiple articles for legal technology and information management publications.  In recent years, Jim has worked for technology based start-ups that provided financial services and information management solutions. Prior to Index Engines, he worked for leading software firms, including Information Builders and the French based engineering software provider Dassault Systemes. Jim was responsible for the Business Development of Scopeware at Mirror Worlds Technologies, the knowledge management software firm founded by Dr. David Gelernter of Yale University. Jim graduated from Villanova University with a degree in Mechanical Engineering.