Ordering a “company-wide” search is not enough to shield outside counsel and client from a potentially embarrassing electronic discovery sanction allocation hearing in the Southern District of New York.
In In re A & M FLORIDA PROPERTIES II, the parties disputed the terms and obligations relevant to a purchase and sale agreement for property. The plaintiff claimed the defendant failed to disclose information that would ultimately have the effect of increasing plaintiff’s purchase price. The defendant claimed that the plaintiff was fully informed of the transaction details and requested emails and other documents from plaintiff to prove plaintiff had knowledge of the details. During e-discovery, the plaintiff’s counsel made the following two costly errors that led to a potentially embarrassing sanction show down with his client:
- Issuing a broad instruction to perform a “company-wide” search without more detailed instructions
- Failure to communicate with key IT personnel and employees to understand the client’s retention policies and data systems
The plaintiff’s early productions raised red flags for the defendant because they did not include any internal emails or an email that had previously been exchanged between the parties. In response, the plaintiff’s outside counsel ordered his client to conduct a “company-wide” search to straighten out the email production issues. The plaintiff’s Chief Technology Officer (CTO) was tasked with overseeing the search, but the search was limited to email in the “live” system and did not include employee archives that the CTO knew existed. The plaintiff’s counsel later admitted that he did not know the difference between archives and live inboxes and the CTO claimed access to the archives would have been provided to the defendant if only she had been asked. Following multiple searches by a forensic examiner and months of delay, over 9,500 additional emails were eventually produced from the archives that were initially overlooked.
Judge Gonzalez refused to order dismissal or an adverse instruction since the evidence was eventually produced and there was no evidence of bad faith. However, Judge Gonzalez showed little sympathy for counsel’s failure to “understand the technical depths to which electronic discovery can sometimes go” or to “gain a better understanding of GFI’s [defendant’s] computer system” and issued monetary sanctions to cover the cost of defendant’s attorney fees and forensic examiner. To make matters worse, the judge also ordered a future hearing to determine how to allocate the cost of sanction between the plaintiff and their lawyers.
Can You Say Embarrassing?
This type of hearing tends to uncomfortably pit client and counsel against each other in a game of he said, she said. This isn’t Qualcomm revisited where sanctions were in the millions and attorneys from top law firms were scrapping to keep their licenses to practice law. Nonetheless, the stakes are always high when you’re dealing with sanctions. I can hear the arguments now:
Outside Counsel: “When I said ‘company-wide’ search I meant a ‘company-wide’ search!”
Client: “Well, if you would have been more specific, I would have known to search the archives. You’re the lawyer after all. Haven’t you done this before?”
Only a few know the details of what actually transpired and getting into the blame game with your client is something most attorneys want to avoid.
The lessons learned in this case are many, but here are a few key points to consider for both law firms and the clients they represent:
- Counsel and corporate IT must over-communicate: at the onset of litigation lawyers and IT should caucus to discuss critical e-discovery items and communicate with each other throughout the entire e-discovery process to ensure risk items related to technology (or anything else) are identified and minimized.
- Senior corporate executives need to take e-discovery seriously: the risk of poorly executed e-discovery isn’t just an issue for the GC. These issues can expose other senior executives (the CTO in this case) to embarrassment and their companies to monetary sanctions.
- The duty to preserve ESI is broad and organizations should utilize the right technology solutions to minimize the risk of error: searching email servers and ignoring other sources where relevant files may exist can harm the business as well as the personal reputations. Companies should leverage technology solutions that allow for automated and repeatable data collections from multiple data sources like servers and laptops/desktops simultaneously to reduce the risk of human error and sanctions.
In Re Florida A&M Properties II serves as yet another reminder that the bench in the Southern District of New York has little tolerance when practitioners fail to understand the intersection between law and technology. Since other jurisdictions often look to decisions from the Southern District of New York as persuasive authority, lawyers in other jurisdictions should take note.