2008-10-31 Source Code Production Compelled in Commercial Dispute - From Both Parties

In a decision from last week, a motion to compel production of source code was granted by a federal court in Wisconsin. In Metavante Corp. v. Emigrant Sav. Bank Slip Copy, 2008 WL 4722336 (E.D.Wis. 2008), Judge Stadtmeuller found that weighing all the factors, the balance tipped in favor of production (that Emigrant produced its source code to Metavante was also not lost on the court):

"The court finds that the source code Metavante utilized in its performance under the outsourcing agreement is relevant, or may reasonably lead to admissible evidence. See Fed.R.Civ.P. 26(b)(1). Metavante's source code may reveal the quality of the online banking product that Metavante delivered, and whether Metavante fully performed under the agreement. In balancing the value of the source code against the burden of producing it, the court finds that the potential value outweighs the burden. While Metavante asserts that the cost of producing its source code will be great, Emigrant has offered to mitigate the cost by using Emigrant's outside consultants to review the code and parse out any relevant information. Moreover, the parties have experience in exchanging the source code in this case. The court also recognizes that any confidentiality concerns that Metavante may have are addressed by the court's May 14, 2008 protective order. (Docket # 125)."

The production of source code will in all likelihood be more frequently requested, and produced (or production compelled) in future cases. Remarks in uncompiled code may reveal much about what code does (or fails to do) once compiled. It's not at all improbable that compilers may also be sought in future discoverty requests.

2008-10-26 Technology, Business and Litigation: Sword, Weakening Shield

This excerpt from AAB Joint Venture v U.S. , 75 Fed Cl. 432 (2008) provides what is perhaps an emerging judicial resistance to the defense of excessive burden presented by eDiscovery (as contradistinguished from non-e-Discovery):

"To permit a party “to reap the business benefits of such technology and simultaneously use that technology as a shield in litigation would lead to incongruous and unfair results.” Linnen v. A.H. Robins Co., No. 97-2307, 1999 WL 462015, at *6 (Mass.Super. Ct. June 16, 1999)."AAB Joint Venture v U.S. , 75, Fed Cl. 432, 443 (2008)

2008-10-25 Custody or Control Decision Includes Computers at Work or at Home

The Court in Allcare Dental Management, LLC v. Zrinyi, 2008 WL 4649131 (D.Idaho 2008) addresses the scope of a discovery request "custody and control language. The Court held that custody or control expressly included those computing equipment regardless of geographic location.

"Defendants Zrinyi and Greene are further ordered to make available to Plaintiffs' designated computer forensics expert any and all computers and portable or detachable hard-drives in Defendants' possession, custody, or control and used by Defendants since August 24, 2008, including but not limited to any computer or portable or detachable hard drive in their homes or place of business. Defendants shall make available all of the computer equipment described above, at their places of business or residences, to Plaintiffs' designated computer forensics expert immediately upon being served with a copy of this Memorandum Decision and Order."

2008-10-20 Discovery Abuse Sanctions in the District of Columbia Circuit

In Perez v. Berhanu --- F.Supp.2d ----, 2008 WL 4604065 (D.D.C. 2008) the Court provides a good analysis of discovery sanctions approach by the D.C. Circuit. In this case, the Court discusses that an imposition of the most severe sanctions, and the D.C. Circuit's requirement that “willfulness or at least gross negligence” is required to justify the most severe discovery sanctions). In this matter, the discovery abuse was so egregious (failure to respond to discovery requests) that the Court granted a default judgment rather than compelling response from the defendant.

2008-10-04 No Ask, Maybe Get: TIFF Files Held Not Reasonably Searchable

In a September 15, 2008 decision in the case of Goodbys Creek, LLC v Arch Ins. Co., Inc. (2008 WL 4279693 (MD FL 2008), Magistrate Judge Snyder, while recognizing that a failure to ask for native data format may waive a later request for same, nevertheless accepted the assertion that a production of a tiff format file made searching them "much more difficult" and compelled defendant to (and apparently in the alternative) to:

"provide any documents previously supplied as TIFF images in their native data format, provide any documents in another comparably searchable format, or supply Goodbys with software for searching the TIFF images."

This decision represents a departure from recent decisional authority that (1) holds a requesting party to its first request language, and in the absence of a specific format request, (2) permits a producing party to provide only "reasonably usable" ESI.

2008-10-03 Jury Acquits Former McAfee GC of 4 of 5 Counts, Hung on Fifth

The most appropriate commentary on the what appears to be an inexcusably late production of emails that would have bolstered the defendant's case here is the jury's verdict of acquittal.

2008-10-03 eMail Production Delay Blamed on Contract Lawyers

Add these ingredients together and you may see why Judge Patel said "heads will roll":
1. Subpoena to company whose former general counsel is on trial for options backdating served two years before trial.
2 On the eve of trial, relevant emails (reportedly critical to defense argument) are produced.
3. Delay excuse: Blame for the delay was place on "contract attorneys.

Most states (and the ABA) require that an attorney maintain adequate supervision over others working for them --- and this requirement extends to "contract" lawyers.

Update: McAfee attorneys claimed the delay was "inadvertant," and defendant's counsel was "astonished." Judge Patel ordered McAfee's counsel to provide an explanation of how the discovery system worked. Judge Patel toned down a bit and stated "Ok, nobody's head rolled."

I don't think we've seen the last of these incidents.

2008-09-04 Nursing Home Pension Fund v Oracle - Spoliation Decision

In this decision Judge Ilston found that Oracle had spoliated evidence, imposed sanctions, and took spoliation into account in deciding a summary judgment motion.

Judge Ilston first states the basis for the imposition of sanctions, noting the Court has the power to sanction, either under its inherent powers or in consequence of a failure "to obey an order to provide or permit discovery" pursuant to through Fed. R. Civ. P. Rule 37:

"The Court has inherent powers to [sic] arising out of “‘the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.’” UnigardCase 3:01-cv-00988-SI Document 1478 Filed 09/02/2008 Sec. Ins. Co. v. Lakewood Eng’g & Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992) (quoting Chambersv. NASCO, Inc., 501 U.S. 32, 43, 111 S. Ct. 2123, 2132 (1991)); see also Toste v. Lewis Controls, Inc.,1996 WL 101189, *2 (N.D. Cal. Feb. 27, 1996). In this regard, “[a] federal trial court has the inherent discretionary power to make appropriate evidentiary rulings in response to the destruction or spoliationof relevant evidence.” Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir. 1993). Federal courts also have authority to sanction a party “who fails to obey an order to provide or permit discovery” under FederalRule of Civil Procedure 37(b)(2)(A). Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006)(internal quotation marks omitted).

Moreover, as other (but not all) courts have ruled, a showing of bad faith is not required:

I. Standard for Imposing Spoliation/Discovery Abuse Sanctions

The Court need not find bad faith by the offending party before issuing sanctions for destruction of evidence; willfulness or fault can suffice. Id.; Unigard, 982 F.2dat 368 n.2 (citing Halaco Eng’g Co. v. Costle, 843 F.2d 376, 380 (9th Cir. 1988)). Sanctions may beappropriate when a party knew or should have known that the destroyed evidence was potentiallyrelevant to litigation. Glover, 6 F.3d at 1329 (“Surely a finding of bad faith will suffice, but so will simple notice of potential relevance to the litigation.”) (internal quotation marks omitted)."

Judge Ilston then reinforces the notion that negligence (simple notice, and ordinary negligence, at that) may be sufficient trigger for a Court to use its inherent powers to sanction.

"The Court has inherent powers to arising out of “‘the control necessarily vested in courts to
manage their own affairs so as to achieve the orderly and expeditious disposition of cases.’” UnigardUnigard, 982 F.2d at 368 n.2 (citing Halaco Eng’g Co. v. Costle, 843 F.2d 376, 380 (9th Cir. 1988)). Sanctions may be appropriate when a party knew or should have known that the destroyed evidence was potentiallyrelevant to litigation. Glover, 6 F.3d at 1329 (“Surely a finding of bad faith will suffice, but so willsimple notice of potential relevance to the litigation.”) (internal quotation marks omitted)."

II. Type of Sanction

Judge Ilston then describes the types of sanctions available for destruction of evidence:

"Courts have developed three types of sanctions for destruction of evidence. First, a court can instruct the jury that it may infer that evidence made unavailable by a party was unfavorable to that party. See, e.g., id.; Akiona v. United States, 938 F.2d 158, 161 (9th Cir. 1991); Cedars-Sinai Med. Ctr.v. Superior Court of Los Angeles, 18 Cal. 4th 1, 11-12 (1998); Trevino v. Ortega, 969 S.W.2d 950, 960(Tex. 1998). Second, a court can exclude witness testimony based on the spoliated evidence. See, e.g.,Unigard, 982 F.2d at 368-69; BTO Logging Inc. v. Deere & Co., 174 F.R.D. 690, 692-93 (D. Or. 1997).The third and harshest of sanctions is to dismiss the claim of the party responsible for the spoliation.See, e.g., Allstate Ins. Co. v. Sunbeam Corp., 53 F.3d 804, 806-07 (7th Cir. 1995); see also Chambers,501 U.S. at 45 (noting that “outright dismissal . . . is a particularly severe sanction, yet is within thecourt’s discretion”); Cedars-Sinai Med. Ctr., 18 Cal. 4th at 12."

The triad of adverse inferences, exclusions of testimony based on spoliated evidence, and dismissal of a spoliating party's claims, which is considered an "ultimate" sanction.

III. Factors to Be Considered in Determining Type of Sanctions

Judge Ilston then discusses (and is guided by) the 3rd Circuit's approach in choosing a sanction, which involves an examination of the degree of fault of spoliating party, degree of prejudice to non-spoliating party, and the adequacy of a lesser sanction. The Court then discusses 9th Circuit approach to imposing the ultimate sanction of dismissal (or judgment), which in turn involves a consideration of (1) public interest in expeditious resolution; (2) Court's need to manage docket; (3) risk of prejudice to non-spoliating party; (4) public policy favoring disposition on the merits, and (5) availability of lesser sanctions:

"In determining whether and what type of sanctions to issue, the Third Circuit has explained that courts should consider three factors: 1) “the degree of fault of the party who altered or destroyed theevidence,” 2) “the degree of prejudice suffered by the opposing party,” and 3) “whether there is a lesser sanction that will avoid substantial unfairness to the opposing party.” Schmid v. Milwaukee, 13 F.3d76, 79 (3rd Cir. 1994); see also Toste, 1996 WL 101189 at * 2 (“[A] party’s motive or degree of fault in destroying evidence is relevant to what sanction, if any, is imposed.”). The Ninth Circuit has also explained that “[b]efore imposing the ‘harsh sanction’ of dismissal,” courts should consider “(1) the public’s interest in expeditious resolution of litigation; (2) the court’s need to manage its dockets; (3)the risk of prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.” Leon, 464 F.3d at 958. However,district courts “need not make explicit findings regarding each of these factors.” Id."

Judge Ilston adopted the recommendation of the Special Master, agreeing that adverse inferences were warranted as to evidence "not produced or preserved" In particular, the Court found that Oracle's spoliation did not warrant terminating sanctions, finding that Oracle had provided substantial discovery, that public policy favored disposition on the merits, and that lesser sanctions were warranted.

This was a PLSRA case, and by statute the culpapble state of mind (culpability) standard threshhhold necessary for the imposition of an adverse inference was "willfulness:"

"In order for a court to impose an adverse inference sanction, plaintiffs must demonstrate “‘(1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that[evidence was] destroyed with a culpable state of mind; and (3) that the destroyed evidence was relevant to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.’” Napster, 462 F. Supp. 2d at 1078 (quoting Hamilton v. Signature Flight SupportCorp., 2005 WL 3481423, *3 (N.D. Cal. Dec. 20, 2005)). Here, the parties agree that the culpable stateof mind is willfulness, because plaintiffs’ claims arise under the Private Securities Litigation ReformAct (“PSLRA”), which provides that a party may apply for an award of appropriate sanctions where itis “aggrieved by the willful failure of an opposing party to” preserve relevant evidence. 15 U.S.C. §78u-4(b)(3)(C)(ii)."


IV: When Showing of Prejudice Required for Dismissal Sanction.

Judge Ilston recognizes that the decisional authority has been somewhat unclear as to whether a showing of prejudice must be made in order to support a sanction of dismissal. The Court then follows a recent 9th Circuit decision (which in turn follows other jurisdictions) holding that while a finding of prejudice is required for a terminating sanction in a Fed. R. Civ. P. 37 hearing (failure to obey discovery order, etc.), a showing of prejudice is not required where a court is acting sua sponte, or in the use of its "inherent powers"

"The parties debate whether plaintiffs must demonstrate prejudice before the Court can impose lesser sanctions. The Ninth Circuit has recognized that it has sent conflicting signals regarding whether prejudice must be shown in order for the sanction of dismissal to be appropriate. Anheuser-Busch, Inc.v. Natural Beverage Distribs., 69 F.3d 337, 353 (9th Cir. 1995) (collecting cases). A court in this districtrecently clarified that the Ninth Circuit has required a showing of prejudice only when courts are actingunder Federal Rule of Civil Procedure 37, which applies when a party disobeys a court order regardingdiscovery. Napster, 462 F. Supp. 2d at 1075 n.4; cf. Halaco Eng’g Co. v. Costle, 843 F.2d 376, 382 (9thCir. 1988) (prejudice is an optional factor when courts are acting under their inherent authority); withHenry v. Gill Indus., Inc., 983 F.2d 943, 948 (9th Cir. 1993) (prejudice is a “key factor[]” when courtsare acting under the authority of Rule 37); Wanderer v. Johnston, 910 F.2d 652, 656 (9th Cir. 1990)(showing of prejudice is essential when courts are acting under the authority of Rule 37). When acting under its inherent authority, however, a district court need not consider prejudice to the party moving partyfor sanctions, Napster, 462 F. Supp. 2d at 1075 & n.4, and prejudice has not been required when a partymoves for lesser sanctions, id. at 1078. "

Judge Ilston does tip her hat to the difficulty of proving prejudice where the evidence that might have demonstrating that prejudice has been destroyed or otherwise been made unavailable:

"Here, the Court is considering lesser sanctions in the form ofan adverse inference, and even assuming prejudice is required, the Court notes that it would be quite difficult for plaintiffs to demonstrate how they were harmed by evidence to which they do not have access."

What remains to be seen is where there is a massive of amount of discovery provided (arguably showing some compliance with the rules, but where there also is established substantial document alteration.

The Court found:

1. No willfulness in failure to preserve backup tapes

2. Wilful failure to preserve Larry Ellison's email

The Court's finding merits some discussion. First, it appears that only 16 emails were produced from Ellison's own email account (i.e., sent directly from or received directly to), although more than 1,650 of Ellison's emails were referenced in the email threads of other Oracle employees:

"As to Ellison’s email files, the Court finds that sanctions are appropriate. It is undisputed thatdefendants produced only 15 emails sent or received by Ellison from Ellison’s own email files, anddefendants do not contend that all of Ellison’s emails were preserved in his files. Instead, defendantsnote that over 1,650 of Ellison’s emails were produced to plaintiffs from the files of other Oracleemployees. Defendants, relying on Wachtel v. Health Net, Inc., 2007 WL 1101436 (D.N.J. Apr. 10,2007), argue that plaintiffs are not entitled to receive multiple copies of Ellison’s emails. The Court disagrees. It could have been helpful to plaintiffs to demonstrate that certain emails were discoveredin Ellison’s files; otherwise, for instance, Ellison could argue that he never actually read or received anemail that was sent to him, and thus had no knowledge of its contents. Moreover, having establishedwith certainty that numerous emails were not produced from Ellison’s email files – because the emailswere produced from other files or accounts – it is impossible to know whether additional unproducedemails were also deleted or not turned over. This uncertainty about the existence of other emails isprecisely the reason all of Ellison’s emails should have been preserved and produced."

Notably, the last sentence's language, stating that "uncertainty about hte existence of other emails" may act as a preservation duty trigger in other cases.

V. Control and Spoliation

One required element in order to show spoliation is that a spoliating party had control over the evidence it had a duty to preserve. Here, "notes, transcripts and tape recordings" relating to the book "Softwar"(considered relevant evidence to the underlying proceedings) had been permitted to be destroyed:

"The Court also finds that an adverse inference is appropriate with regard to materials created inconnection with the drafting of the book Softwar. The materials in question, according to plaintiffs, are“at least 135 hours of tapes and transcripts of [] interviews with Ellison on topics such as Suite 11i,insider trading, forecasting, the economy, and Oracle’s billion dollar savings claim.” Plaintiff’sSupplemental Motion at 27. Plaintiffs first moved to compel production of these materials on October30, 2006, and on December 29, 2006, Special Master Infante granted plaintiffs’ motion to compelproduction of “any interview notes, transcripts or tape recordings relating to the book.” Winkler Decl.ex. 194 at 4. Many of these materials were never produced to plaintiffs, however, because it appearsthat sometime in late 2006 or January 2007, Symonds, the author of Softwar, destroyed the materialsin question by directing a computer repair shop to dispose of the laptop on which Symonds had storedthe recorded audio files of interviews with Ellison. Winkler Decl. ex. 214. It is undisputed thatdefendants were able to produce to plaintiffs roughly 200 pages of transcripts from interviews conductedin 2002, but were not able to produce any recordings or transcripts from interviews conducted in 2001"

The Court found that although defendant did not have physcial control over the laptop containing the transcripts and recordings, it did have a duty to attempt to preserve prior to their destruction:

"Even assuming defendants did have copies of the materials and were powerless to preventtheir destruction, the Court finds sanctions necessary because Ellison knew of the litigation at the timemost interviews were conducted, and failed to take any efforts to preserve the materials despite hisobligation to do so."

VI. Spoliation and Summary Judgment

Whether a finding of spoliation can help defeat a summary judgment motion has not received much judicial attention. There is some decisional authority from NY that indicates that a finding of spoliation may or may not defeat a motion for summary judgment, but it appears that the spoliated evidence must be shown to be fairly damaging. This does set up a very difficult requirement of proving a negative (show how spoliated evidence --- the content of which may never be known, might present a genuine issue of material fact). Judge Ilston appears to take the position that Oracles spoliation will provide support sufficient to defeat a summary judgement motion for at least some of the plaintiff's claims:


"To summarize, the Court holds that plaintiffs are entitled to adverse inference instructions with regard to Ellison’s emails and the Softwar-related materials, but not with regard to other evidence. The Court will take these adverse inferences into account when deciding the parties’ summary judgment motions. Specifically, the Court believes that it is appropriate to infer that the emails and Softwarmaterials would demonstrate Ellison’s knowledge of, among other things, problems with Suite 11i, the effects of the economy on Oracle’s business, and problems with defendants’ forecasting model, but theCourt notes that such inferences will not assist plaintiffs in demonstrating the existence of genuine issues of material fact for every element of their § 10(b) claims, such as the element of loss causation.To assist the Court with the resolution of these issues, the Court asks that both parties revise and re-filetheir motions for summary judgment to clearly specify the precise contours of the adverse inferencesthat should be drawn from the emails and Softwar materials, and to take these inferences into account with regard to the propriety of summary judgment."

2008-08-24 Pre-Litigation Duty to Preserve, Even Without Court Order - Fourth Circuit

In an August 20, 2008 decision in Buckley v. Mukasey, 2008 WL 3854498, 12 (4th Cir. 2008) the U.S. Court of Appeals for the 4th Circuit recognizes that a duty to preserve material evidence may extend to the "period before" litigation. A showing of "when" a party should know that evidence may be relevant to anticipated litigation becomes the next point of contest, and a risky one for evidence "producers."

"[W]e simply observe that (even absent a court order) “[t]he duty to preserve material evidence arises not only during litigation but also extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation.” Silvestri v. Gen. Motors Corp., 271 F.3d 583, 591 (4th Cir.2001)."

2008-08-24 Spoliation under Illinois Law Mirrors Residential Funding's Ordinary Negligence Analysis

In a recent decision, the District Court provides an examination of spoliation principles under Illinois law. While noting that the spoliation does constitute a separate cause of action, it points out that both Illinois state courts as well as the 7th Circuit have embraced the "ordinary negligence" standard for a finding of spoliation, aligning the 7th Circuit with the 2d Circuit's Residential Funding decision.

In Stoner v. Wal-Mart Stores, Inc., 2008 WL 3876077, 2 (C.D.Ill.,2008), the District Court analyzed the 7th Circuit's approach to spoliation in Illinois, and under Illinois law, imposing a negligence approach to showing of destruction of evidence, i.e., duty, breach, and, damages:

"In Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502 (7th Cir.2007), the Seventh Circuit summarized Illinois law regarding spoliation of evidence, as follows:[P]laintiffs brought their spoliation charges in two separate claims-one for intentional spoliation of evidence and one for negligent spoliation. The Supreme Court of Illinois has emphasized, however, that the state does not recognize a tort of intentional spoilation of evidence, and that negligent spoliation is not itself an independent tort but rather a type of negligence. Boyd v. Travelers Ins. Co., 652 N.E.2d 267, 273 (Ill.1995); see Cangemi v. Advocate S. Suburban Hosp., 845 N.E.2d 792, 815 (Ill.App.2006)(“Plaintiffs cite to no case that specifically recognizes intentional spoliation of evidence as a tort in Illinois. Neither have we found such an Illinois case.”). We thus analyze the two charges of spoliation as an ordinary negligence claim, which to prevail will eventually require showing a duty (in this case to protect documents), a breach of that duty, causation, and damages. Boyd, 652 N.E.2d at 270. Borsellino, 477 F.3d at 509-510. See also, Dardeen v. Kuehling, 821 N.E.2d 227, 231 (Ill.2004)."

2008-08-19 Government Ordered to Perform ESI Search, Provide Detailed Privilege Log in Criminal Case

In the second instalment of U.S. v O'Keefe, 2006-cr-0249 (D.C.D.C. 2008), Magistrate Judge Facciola extends the adoption of ESI discovery principles to criminal matters. In this decision, the Court first requires that the Government stop equivocating as to the existence of ESI, and

"examine the pertinent files and state unequivocally whether it is in possession of any documents that would fall within this discovery request, i.e. whether there have come into existence since April 1, 2006 written matter, to include electronically stored information, such as Department analyses, or other documents that concern or mention the 21 employees specified in the discovery request. It must also produce them.

Judge Facciola then applies FRCP Rule 26 to the instant criminal proceeding:

"If it believes that any of them are privileged and seeks to withhold them, then I will once again borrow a rule from the Federal Rules of Civil Procedure and require the government to "describe the nature of the documents, communications, or tangible things not produced or disclosed—and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim." Fed. R. Civ. P. 26(b)(5). I expect this document, most commonly called a "privilege log," to so explicitly describe the documents that in camera review is unnecessary. See Victor Stanley, Inc. v. Creative Pipe, Inc., --- F.R.D. ---, 2008 WL 2221841, at *10 (D. Md. 2008)."

The first O'Keefe "borrowing," which imported Fed R. Civ. P. Rule 34 ESI discovery principles, was blogged here on 2008-02-20. The Victor Stanley decision discussing keyword search efficacy challenges was blogged here 2008-06-03. Judge Facciola's insistence on a meaningful (i.e., detailed) privilege log has significant implications for civil as well as criminal proceedings. Privilege logs are typically scant, and often go unchallenged by the requesting party. A detailed privilege log may reveal that a document is not privileged, expose discovery abuses, or constitute an admission. While assuming that the work product privilege applies in criminal cases, Judge Facciola leaves for another day (and further briefing) whether the privilege "if it applies, could trump either the government’s discovery obligation or its constitutional obligation to produce evidence that would tend to exculpate the defendant."

Link to the decision:
https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2006cr0249-129

2008-08-12 Spoliation and Discovery Abuse Analysis: Convergence Continues

The distinction between spoliation and failure to produce evidence continues to blur.

In Alden v. Mid-Mesabi Associates Ltd. Partnership, 2008 WL 2828892 (D.Minn. 2008). the District Court held that "[We] understand that, as we have previously warned the Plaintiff, the failure to produce evidence, without just cause, which is relevant within the context of Rule 26, bears a close relationship to the “spoliation of evidence,” and is sanctioned accordingly. See, Sylla-Sawdon v. Uniroyal Goodrich Tire Company, supra at 280; Dillon v. Nissan Motor Co., Ltd., 986 F.2d 263, 267 (8th Cir.1993); SDI Operating Partnership, L.P. v. Neuwirth, 973 F.2d 652, 655 (8th Cir.1992); Scout v. City of Gordon, 849 F.Supp. 687, 690-91 (D.Neb.1994); Capellupo v. FMC Corp., 126 F.R.D. 545, 551 (D.Minn.1989); cf., Baker v. General Motors Corp., 86 F.3d 811, 817 (8th Cir.1996), rev'd on other grounds, 522 U.S. 222 (1998)."

In the Second, Ninth, and Eleventh Circuits, failure to withhold evidence may result from a finding of "purposeful sluggishness." The seminal case for this is the Residential Funding Corp. v DeGeorge Financial Corp. 306 F.3d 99 (2d Cir. 2002).

2008-08-11 Spoliation and Work Product Privilege - Assertion Presumes Anticipation

It should be kept in mind that a party asserting the work product privilege in order to limit production of requested information is presumed to have anticipated that litigation (and triggered the invocation of Zubulake, Residential Mortgage and progeny) as of the date relevant to the underlying information for which privilege status is sought. In other words, the privilege presumes relevance as well as the foreseeability of litigation, and if Zubulake and progeny apply, a duty to preserve (including the duty to suspend routine document destruction) may be triggered.

Courts have held that an assertion of work product privilege (whether core or "fact") on a privilege log may be deemed an admission. The central prerequisite for an assertion of the work product privilege, a "party must show, as to each document, that the work product in question was: (1) prepared by, or under the direction of, an attorney and (2) was prepared in anticipation of litigation." Rambus, Inc. v. Infineon Technologies AG, 220 F.R.D. 264, 272 (E.D.Va. 2004). This duty to preserve (or to suspend routine document destruction) is triggered, arguably, contemporaneously with the time the evidence in question was prepared, and in the digital evidence world, created or generated. See U.S. Fire Ins. Co. v. Bunge North America, Inc., 2008 WL 2548129 (D.Kan. 2008). Once the duty to preserve/suspend is triggered, it is also triggered for all relevant (and forseeably relevant) digital evidence generated as of the time of the privileged document's preparation.

2008-07-23 Negligent Destruction of Evidence Tort Makes "Appearance" in NY

In the July 16, 2008 decision in Newton v. City of New York 2008 WL 2775646 (S.D.N.Y. 2008), Judge Scheindlin states that while "New York does not recognize the tort of “third-party negligent spoliation of evidence...” [t]he courts appear to permit an action for the negligent destruction of evidence so long as the plaintiff can meet the requirements of a standard negligence action."

What this portends for negligent destruction of computer generated information claims remains to be seen. It is relatively clear that an independent cause of action for spoliation may not be brought in the 2d Circuit. That said, a negligent destruction of evidence claim, brought against a third party, involves fewer pleading elements than a spoliation claim. The most onerous pleading element in a spoliation claim is a showing that what was spoliated would have either supported the non-spoliator's claims or disproved the spoliating party's claims. Porivng that negative presents a very imposing barrier to a successful spoliation claim, although there are some decisions that support an approach that permits the actions of the spoliating party to support an inference that the spoliated evidence was supporting/damaging.

Another unanswered question is whether a negligent destruction of evidence claim can be asserted as an independent claim by a party against a party (independent of a District Court's inherent powers to sanction, or Fed. R. Civ. P. 37).

2008-07-18 Cost-Shifting Relief Requests are Preventive

Failure to Raise Cost Shifting Issue in Timely Fashion Results in Denial of Motion

In a decision from the Eastern District of Michigan [Cason-Merenda v. Detroit Medical Center, 2008 WL 2714239 (E.D.Mich. 2008)] defendant Detroit Medical Center moved the court for an order requiring the plaintiff to pay for third party vendor costs in connection with ESI production. Magistrate Judge Scheer issued this decision, denying the motion to shift costs, and in a rather strongly worded opinion, puts out the message that requests to shift costs must be made in a timely fashion, or be denied.

Relevant Rule:

The Court began with a recitation of relevant excerpts from Fed. R. Civ. P. 26:

"Fed. R. Civ. P. 26(b)2(B) provides as follows: A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)2(C). The court may specify conditions for the discovery.

The parties did undertake a Rule 26(f) meet and confer, issue a proposed joint ESI Order, and that Order was in fact signed by the Court:

"In this action, the parties entered a Stipulated Order for Discovery of Electronically Stored Information, which was adopted by the court on June 20, 2007. The Order notes that the parties held several discussions regarding the possibility of limiting the scope and extent of discovery and that future agreements might be reached. They also reserved the right to petition the court to limit the scope and burden of discovery and to request that the opposing party share the costs."

The issue raised before the Court involved the reservation of rights provision, permitting either party to petition the court to limit the scope and burden of discovery, and request cost sharing presented the issue to the court.

So how did defendant run afoul of both the Rule 26 and their discovery Order, and in effect waive their rights to request cost shifting to plaintiff? Defendants Motion failed for two reasons; the first relating to the discovery order itself, and the second having its basis in Fed. R. Civ. P. Rule 26(b)2(b) and 26(c):

Here, the defendant apparently engaged a third party ESI vendor to produce the relevant requested ESI, paid for same, and then decided to seek costs. It did not object to the request, nor did it file a motion for a protective order seeking relief by way of cost shifting or cost sharing.

The Court determined that the procedure for asserting a cost shifting or sharing claim is identical to the assertion of any other objection to a request for production. In other words, a disagreement about cost shifting is a discovery dispute, and should have been handled in the same way as any other discovery dispute. The ESI discovery Order in this case specifically provided that any all motions to compel discovery were required to be discovery be filed within 14 days of a party's "receipt of notice of such disputed discovery" Defendant here failed to so file, and the Court deemed the filing of the motion to shift costs untimely as a first basis for denial of that motion.

The second basis for the Court's denial of the motion for cost shifting focused on an interpretation of Fed. R. Civ. P. Rule 26 and relevant decisional authority on cost-shifting that in essence requires an assertion of cost-shifting to be made prior to the what the Court termed defendant's choice at "self-martyr[dom], i.e., the undertaking of, and incurring costs of production first, and seeking redress for costs after such undertaking.

"[Defendant] DMC surely was, or should have been, aware of the substantial cost of responding to Plaintiffs' discovery requests before it undertook to do so. Rather than raising the issue of undue burden and cost before they were incurred, when there would have been an opportunity for the court to demand a showing of good cause by the requesting party, explore alternatives, impose conditions or otherwise encourage compromise, DMC elected to suffer the expense and only then seek contribution from the Plaintiffs."

The relevant decisional authority supporting the proposition that a motion for cost-shifting or sharing be made (by way of a motion for protective order, etc.) before the discovery is undertaken will be familiar to eDiscovery aficionados:

"The federal rules contemplate that discovery will proceed without judicial intervention unless a party moves for a protective order or an order compelling discovery. Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 98 S.Ct. 2380, 57 L.Ed.2d 253 (1978). Ordinarily, a party must bear the expense of complying with discovery requests, although he may invoke the district court's discretion to grant orders protecting him from undue burden or expense, including orders conditioning discovery upon cost shifting. Id., at 358. There is authority that “[a] court should consider cost shifting only when electronic data is relatively inaccessible, such as in back up tapes.” Zubulake v. U.B.S. Warburg LLC, 217 F.R.D. 309, 324 (S.D.N.Y.2003). Thus, to the extent that DMC maintains that the information produced by it in discovery was accessible, court ordered cost shifting is inappropriate."

The Court also noted that by not acting in a timely fashion, the defendant actually deprived the Court of the ability to decide a priori, from a variety of relief options it might have imposed:
"The clear import of the language employed is that the court has wide discretion to prevent undue burden or expense. But for Defendant's delay, the court would have been in a position to select from a range of alternative actions:

In [the Court's], the provisions of that rule simply underscore the untimeliness of the instant motion. The rule provides, in pertinent part, that “[t]he court may, for good cause, issue an order to protect a party or person from ... undue burden or expense, including one or more of the following:
(A) Forbidding the disclosure or discovery;
(B) Specifying terms, including time and place, for the disclosure or discovery;
(C) Prescribing a discovery method other than the one selected by the party seeking discovery;
(D) Forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to certain matters;Fed.R.Civ.P. 26(c)(1)."

In addition, had the court determined to impose conditions upon DMC's production, Plaintiffs presumably would have been in a position to elect either (a) to accept the conditions or (b) to forego the discovery and save DMC the burden and expense of producing it. Unfortunately, DMC's tardy filing has deprived this court of its most valuable prerogatives. Having elected to martyr itself rather than to seek relief in a timely fashion, DMC seeks an order imposing the cost of its choice upon its opponents. I find neither substantive merit nor equity in its request."

Takeaway: Cost-shifting or cost-sharing are by definition discovery disputes, and accordingly, requests relief must be by way of appropriate preventive (perhaps even preemptive) procedure (i.e., a motion for a protective order, or a response to a motion to compel). Oh, and don't be a martyr.

2008-07-07 Peskoff v Faber III: eDiscovery Cost Allocation - Chipping Away at Cost Sharing

In this third eDiscovery decision in Peskoff v Faber 04-526 (HHK/JMF), Magistrate Judge Facciola revisits eDiscovery costs allocation issues. Here, a $33,000 forensic email recovery was held reasonable (especially in light of the $2.5 million in underlying claims at issue).

The Court first noted that the ESI sought by Plainiff Peskoff from Defedant Faber could not be obtained without the aid of a forensic examination. The Court then states that "[e]ven though the forensic examination necessarily involves the search of sources “not reasonably accessible because of undue burden or cost" such discovery could be compelled with a showing of "good cause," and notes that the "[The Court] has already conducted much of this analysis and has held that the Rule 26(b)(2)(C) factors weigh strongly in favor of the discovery."

The Court finds here that good cause exists, citing Peskoff v. Faber I: "requested discovery is supported by the needs of the case, the sophistication of the parties, the amount in controversy, the importance of the issues at stake, and the importance of the requested discovery to the issues in the litigation "

Cost Allocation

The second issue addressed by the Court was cost allocation. The Court summarizes its rationale in stating:

"The question presented can thus be summarized as follows: does the cost of the forensic examination represent to Mr. Faber, the responding party, a burden or expense so undue as to justify an exercise of the Court's discretion to break from the traditional presumption and shift some or all of that cost to Mr. Peskoff, the requesting party?"

In seemingly neutral sounding wind-up, the Court takes a "reap what you sow" approach to the actions of defendant Faber in his ESI management:

"As has already been explained in prior opinions and will be summarized below, the need here for a forensic examination is directly attributable to what was and was not done by Mr. Faber to preserve electronically stored information. Peskoff, No. 04-cv-526, 2006 WL 1933483, at *4-6 (D.D.C. July 11, 2006); Peskoff, 240 F.R.D. 26, 29-31 (D.D.C. 2007); Peskoff, 244 F.R.D. at 56-66.

What follows is a sharply worded:

"Taken together, those acts and omissions shatter any argument that the burden or expense of that forensic examination, if incurred by Mr. Faber, would be "undue.'"

The Court then reprises defendant Faber's actions (and inaction) in connection with the pendency of the litigation:

"First, Mr. Faber’s efforts to search for responsive electronically stored information can, at best, be described as inadequate. As was stated in the Court’s Memorandum Opinion of February 21, 2007:

'In this case, a hard drive, never searched, was produced and the plaintiff’s sent and received emails were produced, but (1) there are significant and unexplained gaps in what was produced, and (2) other searches of electronic data that I specifically suggested could be done were not. Furthermore, all of the unopened emails in the Inbox—a total of fourteen—are dated the same day, a date following plaintiff’s departure from NextPoint. The 10,436 emails in the "Old Mail" subfolder are all unopened. The emails in the "Old Mail" subfolder are for the period June 25, 2003, to April 14, 2004, but the emails in the 65 other subfolders are all dated for the period June 2000 to June 2001. Thus, there are gaps of several years among the various subfolders with no emails whatsoever during these time periods. While there may be reasons why this is so, on this record all one can say is that this phenomenon is inexplicable.' "

It doesn't stop there. The Court then takes defendant Faber to task for not taking his discovery obligations seriously:

"Mr. Faber’s unwillingness to take his discovery obligations seriously have contributed to the need for a forensic examination."

"Second, Mr. Faber failed to deactivate network maintenance tools that automatically delete electronically stored information. On February 6, 2004, the day Mr. Peskoff threatened suit, Mr. Faber had an obligation to make a conscientious effort to preserve electronically stored information that would be relevant to this dispute. "

We can see where this is headed, and the Court sums it up in one tidy sentence:

"That this deleted information can only be recovered by a forensic examination, if it can be recovered at all, is directly attributable to Mr. Faber’s inaction."

Finding that this "a problem of Mr. Faber’s own making" the Court then determined that "consequently, the expense and burden of the forensic examination can hardly be described as 'undue.'" and found no reason to depart from tradition (producing party pays).

Result: Defendant Faber was ordered to bear costs of forensic examination.

2008-07-05 Independence Weekend Musings - How Good is That Search Tool?

Well, if you haven't invested 1,000 "person-years of work" in development it might not be good enough. In the Viacom et. al. v Google, Inc. et. al. 1:07-cv-02103-LLS (SDNY 2008), Google was ordered to turn over contributor and viewer records to determine potential copyright infringement. Google's search code was also requested, but that relief was denied. Plaintiffs asserted that Google's search code was modified to facilitate the search for copyrighted material. Defendant Google/YouTube countered by asserting that no code in existence can distinguish between infringing and non-infringing video clips, especially without some action by the rights holder.

Another surprise: At issue is 12 terabytes of data. Ok, a terabyte is 1000 gigabytes. This seems to support a growing decisional perspective that mere volume of data searched is really no longer at issue in eDiscovery cases, as plaintiffs assert: "While the Logging database is large, all of its contents can be copied onto a few “over-the-shelf” four-terabyte harddrives"

As for privacy concerns, Google provided an affidavit stating in part that "'YouTube does not guarantee any confidentiality with respect to any User Submissions.'"

2008-06-11 Evidence Eliminator used to er, Scramble Files

The Wall Street Journal reports today that the designer of the Bratz doll line of children's toys used Evidence Eliminator to "rename" (scramble is term used by the WSJ reporter) files on a hard drive set to be copied for production to Mattel's counsel. It will be interesting to see whether, and how, a spoliation motion is argued.

2008-06-09 No Ask, No Get - With a Twist

In a May 29, 2008 decision in Perfect Barrier LLC v Woodsmart Solutions, Inc. the Court provides a reminder as well as a twist on what is fast becoming "native format" wars. First, the Court notes that it is the obligation of the requesting party pursuant to Fed. R. Civ P. 34(a) and (b) to specify with particularity the format and manner of ESI. (For those of you just tuning in, ESI is short for "electronically stored information" as set forth in the 2006 amendments to the Federal Rules of Civil Procedure). It cannot be stressed often enough that a failure to do so waives the right to so specify, and permits the producing party to produce what it likes, so long as it may be considered reasonably usable. That determination will, and in this case was, made by the Court. What is interesting about this decision is that the requesting party chose not to request "native format data," and upon having received NFD, instead asked for "static images."

Rule 34 is being increasingly interpreted to mean one chance to request format of production. Unlike baseball, with three strikes, and unlike softball, with two strikes, courts will give a requesting party one chance to articulate what they want, and how they want it produced.

Relevant excerpt:

"Perfect Barrier did not request that the emails be produced in a particular form, yet Perfect Barrier now asks this Court to force Woodsmart to produce the electronic emails as Static Images with a bates-number identifier. Woodsmart objects to this request because it would cost a substantial sum of money to convert the documents from the form in which the documents are normally kept, Native format, to Static Images."

"Woodsmart has already produced the emails on a disc in Native format. Woodsmart maintains the email documents in such a format. Fed.R.Civ.P. 34 only requires Woodsmart to submit the emails in the format in which it keeps them, Native format , and nothing more. While it may be more convenient for Perfect Barrier to have the emails as Static Images, Fed.R.Civ.P. 34 does not provide that convenience is a basis for requiring electronic discovery to be produced in a different format than normally maintained. If Perfect Barrier wanted the emails as Static Images, it should have specified this request in its requests for production, which it did not do." Perfect Barrier LLC v. Woodsmart Solutions Inc. 2008 WL 2230192, 3 (N.D.Ind.,2008)

2008-06-03 Search Protocol Sufficiency Challenges Recognized; Testability Required

In a May 29, 2008 opinion in Victor Stanley, Inc. v. Creative Pipe, Inc. 2008 WL 2221841, 3 (D.Md. 2008) Judge Grimm acknowledges that challenges to eDiscovery protocol adequacy may be made by a party. Of course, it does help know how to challenge, which in turn speaks to counsel core competency (assisted by expert testimony) in making the assertion.

Nevertheless, Judge Grimm sums it up in one sentence in noting that "all keyword searches are not created equal" and acknowledges that a test of any assertion of adequacy must be made.

Excerpt from the decision:

"First, the Defendants are regrettably vague in their description of the seventy keywords used for the text-searchable ESI privilege review, how they were developed, how the search was conducted, and what quality controls were employed to assess their reliability and accuracy. While it is known that M. Pappas (a party) and Mohr and Schmid (attorneys) selected the keywords, nothing is known from the affidavits provided to the court regarding their qualifications for designing a search and information retrieval strategy that could be expected to produce an effective and reliable privilege review. As will be discussed, while it is universally acknowledged that keyword searches are useful tools for search and retrieval of ESI, all keyword searches are not created equal; and there is a growing body of literature that highlights the risks associated with conducting an unreliable or inadequate keyword search or relying exclusively on such searches for privilege review. Additionally, the Defendants do not assert that any sampling was done of the text searchable ESI files that were determined not to contain privileged information on the basis of the keyword search to see if the search results were reliable. Common sense suggests that even a properly designed and executed keyword search may prove to be over-inclusive or under-inclusive, resulting in the identification of documents as privileged which are not, and non-privileged which, in fact, are. The only prudent way to test the reliability of the keyword search is to perform some appropriate sampling of the documents determined to be privileged and those determined not to be in order to arrive at a comfort level that the categories are neither over-inclusive nor under-inclusive. There is no evidence on the record that the Defendants did so in this case. Rather, it appears from the information that they provided to the court that they simply turned over to the Plaintiff all the text-searchable ESI files that were identified by the keyword search Turner performed as non-privileged, as well as the non-text searchable files that Monkman and M. Pappas' limited title page search determined not to be privileged."