e-discovery 2.0

In many ways sanctions cases are the lifeblood of the electronic discovery industry.  While the FRCP, Sedona Conference and EDRM are all out there as shining examples of what to do, it seems like more practitioners learn from the scared straight cases like Zubulake, Morgan Stanley, Pension Committee, etc.  Well, if you liked those horror stories, Philips Elecs. N. Am. Corp. v. BC Tech., may certainly keep you up at night.

In this intellectual property (IP) case with copyright infringement, misappropriation of trade secrets, and associated claims, the court entered a number of discovery orders compelling both production and preservation. The court found that, despite these orders, a proper litigation hold was not issued until 19 months after the duty to preserve arose and thousands of files were deliberately deleted from five key players’ computers. Not surprisingly, the plaintiff moved for a finding of contempt and for terminating sanctions.

In this decision, Magistrate Judge Samuel Alba goes the extra mile in his initial opinion (which was upheld on appeal) to detail the defendant’s significant errors.  While it doesn’t quite rise to the maliciousness demonstrated in Victor Stanley 2 (by the “gang that couldn’t spoliate straight”), it still provides a textbook example of “worst” practices.

To begin, Magistrate Alba cites Pension Committee for the general notion that “[c]ourts cannot and do not expect that any party can meet a standard of perfection. Nonetheless, the courts have a right to expect that litigants and counsel will take the necessary steps to ensure that relevant records are preserved when litigation is reasonably anticipated, and that such records are collected, reviewed, and produced to the opposing party.”  Despite the early recognition that the electronic discovery process need not be perfect, he then uses most of the 48 page opinion to detail the parade of horrors committed by the defendant:

“BCT’s behavior, such as failing to timely issue a litigation hold, failing to follow up on that litigation hold, failing to request discovery documents from key employees, and so forth, reveals its intentional failure to meet discovery obligations and its flagrant disregard of the obvious great risk that it was highly probable the destruction of relevant documents would result from its behavior, and BCT’s conscious indifference to the consequences of that risk.”

Magistrate Alba honed in on the culpability analysis because terminating sanctions were being sought and the case law requires the judge to consider lesser sanctions before dismissing a case (“Because dismissal with prejudice ‘defeats altogether a litigant’s right to access to the courts,’ it should be used as ‘a weapon of last, rather than first, resort.’”).  The Defendant not surprisingly proffered a host of unpersuasive arguments about their behavior, attempting to portray many of the key player’s actions as merely inept and rogue.  Examples include:

• Employee “deleted files and folders for over 5 1/2 hours” and then started “loading five movies onto his computer” which comprised approximately twenty gigabytes of data, permanently overwriting the files recently deleted, eliminating the possibility of forensic recovery.
• Employee “deleted and intentionally wiped files from his computer” the day after Philips demanded his laptop be turned over.  He also “twice ran a Microsoft program called “’Cipher.exe’.”
• Employee deleted 97,000 files from his My Documents file, of that 41,000 were lost files covered up by AbsoluteShield (a file wiping program).

But, Magistrate Alba found the requisite scienter anyway, despite lacking express malice.  He held: “[b]ad faith, or culpability, ‘may not mean evil intent, but may simply signify responsibility and control.’” This control component was critical since the defendant attempted to convince the court that it did not have sufficient power over its employees during the legal hold and preservation process.

“BCT argues that it is not responsible for the ESI’s destruction because the executives and employees who destroyed the documents were acting individually and contrary to BCT’s express directives not to delete documents from their laptops.”

Magistrate Alba was not convinced:

“Also, other commonsense actions were not taken to preserve evidence, such as interviewing key employees, or even asking them to produce discoverable information. BCT appears to have been merely going through the motions rather than genuinely trying to preserve evidence since this method of communication was known to be unreliable and ineffective within the company; thus, BCT was not fulfilling its responsibility to diligently and thoroughly ensure that relevant documents were preserved. …  BCT’s sparse and ineffective communication with its employees does not relieve it of its responsibility of its employees’ actions in disobeying direct court orders and destroying massive numbers of electronic documents…. BCT is the party; it has the responsibility; it must follow the court’s orders. The justice system would break down if company employees could claim that they did not know about the court orders and simply disregard them.”

To further complicate the spoliation allegations, the timing of the deletions were extremely suspect (“almost all of the deletions took place a day or two before the BCT laptop computers in question were sent to be imaged”).  And, the number of the deletions were significant as well, with thousands of files that were forensically unrecoverable.

At the end of the day, the Defendants’ underlying incompetence was compounded by attempts to obscure the facts, ultimately dooming any shred of credibility.

“BCT’s dishonesty and efforts (perhaps even strategy) to hide and destroy ESI shred BCT’s credibility and reveal BCT’s overall contumacious and dishonest attitude toward this case, this court, and the system of justice. This inexcusable behavior and attitude greatly contribute to this court’s finding of bad faith. BCT must be excoriated for filing false sworn declarations, giving testimony riddled with lies and deceit, and making false representations to this court.”

These repeat offenses shut the door on any potential “do-over” with the Magistrate noting that the integrity of the judicial process cannot function when litigants so blatantly disregard their obligations.

“Civil litigation and discovery demand a level of integrity from the parties in order to properly function. When parties disregard that responsibility and/or ignore the court’s mandates, there must be strong consequences. Having examined the degree of prejudice to Philips, the interference with the judicial process, BCT’s culpability, whether BCT was warned in advance that its non-compliance may result in dismissal, and the efficacy of lesser sanctions, the court concludes that extreme sanctions are warranted in this case where discovery abuses of a serious magnitude involving bad faith and willful disregard of two direct court orders occurred.”

And, to pour further salt on the Defendant’s wound, the Magistrate recommended perjury sanctions for lying under oath:  “[I]n light of the above findings, the court recommends that this matter be referred to the United States Attorney’s Office for investigation and criminal prosecution.”

Searching for a singular takeaway amongst all the culpable behavior is a bit hard.  But certainly it is easy to point out that the Defendant’s legal hold process (and technology) was woefully behind the times.  If a litigant is going to utilize a manual, custodian based litigation hold process it needs to recognize the risks.  This isn’t to say that this type of approach won’t work, but an unsupervised process (via outside counsel) means that internal employees who may have something to hide can easily put their employer in the cross hairs, as was seen in Phillips.  Once files are destroyed, it’s not surprising to see an ensuing cover-up, and then terminating sanctions aren’t far behind.  We’ll see how many folks are scared straight by this latest horror story.

Surprisingly, a large percentage of the population has been captivated by what many characterize as a public melt down by Two and a Half Men star, Charlie Sheen. Following his well-publicized split with the show’s executive producer, Chuck Lorre, Sheen’s media interviews have been harder to avoid than cowboy hats at a Kenny Rogers concert. Regardless of whether or not you’re a pop-media junkie, fan of Two and a Half Men, or completely disinterested in the entire saga, it’s clear that many of Mr. Sheen’s ramblings have stirred controversy.

What do all Mr. Sheen’s seemingly random musings mean? Has he lost his mind? Is he pulling the wool over the eyes of the media by flawlessly executing the biggest Hollywood hoax in history? Maybe, just maybe, Mr. Sheen is a stealth e-discovery expert, secretly providing the legal community with a guide for handling litigation. Don’t agree? Well, maybe you’ll be a believer after reading my interpretation of how some of Mr. Sheen’s most popular quotes can serve as an e-discovery 101 guidebook.

“It was so gnarly I can’t remember.”

It’s hard to remember that the first Zubulake decision was penned by Judge Scheindlin long ago in 2003, but the gnarly $29.2 million jury verdict against UBS Warburg by a single plaintiff, in a fairly routine employment lawsuit, is one that most legal departments in Corporate America won’t soon forget.[1] Many industry experts feel the jury’s massive verdict could have been avoided if it wasn’t for repeated electronic discovery errors that resulted in the jury receiving an adverse jury instruction about UBS Warburg’s failure to produce emails. Eight years later, the incredible growth of electronic information continues to present e-discovery challenges for organizations, even though clearer guidelines have evolved.

“Sorry man, didn’t make the rules.”

Prior to Zubulake, the Federal Rules of Civil Procedure (FRCP) did not squarely address the unique challenges of electronic evidence. Although she didn’t actually make the rules, Judge Scheindlin served as a member of the committee that helped draft the 2006 amendments to the FRCP. The amendments address many electronic evidence challenges faced by legal departments, and topics such as data sampling, proportionality, and data accessibility that were tackled in Zubulake, ultimately made their way into the notes or text of the amendments.

The amendments seek to minimize discovery disputes and provide clarity by, among other things, requiring parties to “discuss any issues about preserving discoverable information” and by outlining a protocol for dealing with electronically stored information (ESI) characterized as “not reasonably accessible because of undue burden or cost.”[2] Despite these guidelines, the rules are not always bright line instructions so the conduct of the parties is typically evaluated based on “reasonableness” standards when a discovery dispute arises. Some are lobbying for further clarification regarding issues such as when the duty to preserve electronic evidence is triggered and there seems to be a movement afoot that could lead to additional Rule amendments as evidenced by last year’s Civil Litigation Review Conference at Duke University.[3]

“Your perimeter’s been breached.  You got work to do bro.”

No lawyer wants to be responsible for having the organization’s perimeter breached as a result of data spoliation. However, failing to take proper data preservation steps continues to be the number one reason organization’s face e-discovery sanctions.[4] In Zubulake IV, Judge Scheindlin explained that an organization has work to do when it “reasonably anticipates” litigation since the anticipation of litigation is enough to trigger counsel’s duty to issue a litigation hold notice to employees.[5] The duty is easy to understand, but determining the “triggering” event and the best approach for preserving data can be challenging. To minimize the risk of spoliation, many organizations are moving away from using email notifications and spreadsheets to track when, who, how, and why employees are notified of a litigation hold in favor of more automated solutions and repeatable workflows. Automated solutions allow notices, reminders, and surveys to be created with easy-to-use templates and the “reasonableness” of the entire litigation hold process can be illustrated since reports can be automatically generated with the click of a button.

“I’ve got tiger blood and Adonis DNA”

Although the line between “reasonable” and “unreasonable” conduct can be very blurry in some cases, in other situations the offending party simply chooses to flagrantly disregard the rules as if they have tiger blood and Adonis DNA. For example, in Daylight, LLC v. Mobilight Inc., the Utah Appellate court upheld the lower court’s entry of a default judgment after defendants threw a laptop off a building, ran it over with a vehicle and stated: “if this gets us into trouble, I hope we’re prison buddies.”[6] Uh, sorry Charlie….

Typically, most parties are not so cavalier about disregarding their legal obligations and the judge’s decision to issue sanctions when evidence is lost or deleted is not a slam dunk. One challenge is that the 2006 FRCP Amendments allow litigants to request any “Electronically Stored Information” stored in “any medium” that is reasonably calculated to lead to the discovery of admissible evidence.[7] That means the scope of the duty to preserve, collect, and produce information as part of litigation may be very broad and very complicated, even though data growth continues to increase exponentially and corporate information technology systems continue to become increasingly complex.

To meet these burdens, many organizations are demanding technology solutions that do more than manage the legal hold process because they also need to collect, analyze, and review ESI to evaluate the case. The holy grail of e-discovery is being able to leverage a single technology solution to manage all these tasks as well as the litigation hold process. The value is twofold. First, automating e-discovery steps related to preservation and collection that have traditionally been managed manually minimizes the risk of human error and makes it easier to demonstrate a repeatable process that is defensible. Second, using the same technology solution to filter, analyze, and review key documents faster results in significant cost savings and strategic advantages.

“You make a choice to win, and you win”

Despite the fact that organizations continue to make e-discovery mistakes, smart organizations choose to leverage a combination of repeatable workflows and legal technology solutions to help them win. Although the new technological era we live in has created new discovery challenges, legal technology can be used to streamline data preservation, collection, processing, and review. Legal technology can also be used to quickly find important documentary evidence earlier in the case, thereby resulting in strategic advantages so smart organizations can “just keep winning.”

[2] See Fed. R. Civ. P. 26(f)(2) and Fed. R. Civ. P. 26(b)(2)

[3] John G. Koeltl, 2010 Civil Litigation Review Conference Introduction: Progress in the Spirit of Rule 1, 60 Duke L.J. 537 (2010).

[4] See Dan H. Willoughby, Jr., Rose Hunter Jones, and Gregory R. Antine, SANCTIONS FOR E-DISCOVERY VIOLATIONS: BY THE NUMBERS, 60 Duke L.J. 789 (2010), at 803 stating (“FAILURE TO PRESERVE ESI IS THE MOST PREVALENT SANCTIONABLE CONDUCT”

[5] Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003)

[6] Daylight, LLC v. Mobilight Inc., 2011 UT App. 28 (2011)

[7] Fed. R. Civ. P. 34(a)(1)(A).

In continuing my Five e-Discovery Questions series, I had the pleasure of sitting down with and interviewing (ok, e-mailing five questions to) Ralph Losey, electronic discovery expert extraordinaire.

Ralph is the writer, lawyer, and educator behind the e-Discovery Team blog. He has been practicing law since 1980 and playing with computers and cyber-communications since 1978. He holds the highest AV peer rating by Martindale Hubbell and is identified as a SuperLawyer in the field of IT.

The questions I posed to Ralph were:

1. We have always loved the name of your Blog -”e-Discovery Team.” It succinctly sums up your overall approach and philosophy of e-discovery. What’s the current state of the “e-discovery team” in most organizations? How has it progressed over the last few years? Where does it need to go to next?

2. Should there be an adverse inference distinction between cases where e-discovery may have been conducted in a sloppy, incomplete fashion, but without malice, versus one in which the party actively sought to hide or suppress documents in the case?

3. Are judges equipped with enough information to be able to make this distinction (between intentional and accidental destruction)?

4. What is the biggest gap today between e-discovery vendor offerings and what legal end-users need?

5. How much time does it really take you to crank out one of your blog posts? Does the hot Florida sun keep you indoors typing away at your computer? Or do you have some sort of waterproof laptop that allows you to write while floating in your screened in pool?

To read Ralph Losey’s answers and more, read the full version (complete with all cinematic references in video) at his e-Discovery Team blog article, “Five Easy Pieces – An Interview Without Toast.”