Upcoming Events – September 2009
August 28, 2009
What You Need to Know About Records Management
September 2, 2009
Podcast hosted by Karl Schieneman
9:00 AM EDT
K&L Gates Partner Thomas J. Smith will speak on the topic of what every company should know about records management.
Click here to learn more.
E-Discovery: Achieving Litigation Readiness While Cutting Costs & Improving Outcomes
September 10, 2009
Rogers Centre
One Blue Jays Way
Toronto, Ontario M5V1J1
K&L Gates partner David Cohen will co-present this interactive workshop addressing a number of important e-discovery issues related to litigation readiness, including recent developments, minimizing risk and maximizing cost savings, and how to start planning for and developing the necessary foundation for e-discovery readiness that can grow with you.
Click here to learn more.
IQPC: Information Retention & E-Disclosure Management, Europe
September 30 – October 1, 2009
Marriott Hotel
Auguste Orts 3-7/Grand Place
1000 Brussels, Belgium
K&L Gates partner David Cohen will present “Turning Theory Into Practice: Practical Steps to Take NOW to Reduce E-Disclosure/E-Discovery Risks and Costs” on Wednesday, September 30th at 11:00 AM. This presentation will provide a “roadmap” of practical steps to take when dealing with e-disclosure challenges, including improving records management and other concrete measures to reduce liability, exposure, and cost.
Click here to learn more.
9th Circuit Sets Doctrine for Electronic Searches, Finds Steroids Case Search Unlawful
August 27, 2009
Law.com, August 27, 2009
By Dan Levine
The Justice Department's aggressive steroids probe has led the 9th U.S. Circuit Court of Appeals to enunciate a new set of Fourth Amendment protections for the digital age.
In an en banc opinion Wednesday that split conservatives on the court, Chief Judge Alex Kozinski said federal agents were wrong to seize swaths of drug test results from labs in Nevada and California. The computer files taken by the government revealed information about far more people -- including professional baseball players and others -- than allowed by a search warrant.
The decision reverses an earlier panel upholding the search. It also represents the second high-profile drubbing that the U.S. Attorney's Office for the Northern District of California has received from the 9th Circuit in as many weeks: The appeals court just tossed former Brocade CEO Gregory Reyes' backdating conviction because of prosecutorial misconduct.
Click here to read the full article.
Click here to read the full opinion.
Holistic Privilege Protection: Protecting Privilege by Taking “Reasonable Steps” Throughout the Process of Production
August 26, 2009
By K&L Gates partner Todd Nunn.
This article appears in the summer edition of DRI’s E-Discovery Connection, and begins:
There are now rules specifically designed to protect the attorney-client privilege during document production: Federal Rule of Civil Procedure 26(b)(5) and Federal Rules of Evidence 502. These rules provide a procedure for clawing back inadvertently produced attorney-client privilege and work product documents and a consistent framework for determining whether the privilege was waived. However, protection of privilege remains one of the primary concerns, and cost drivers, of parties producing documents in discovery.
The goals of the holistic approach to privilege protection are to protect attorney-client privilege and work product documents from being produced. Further, in the event of production, the goal is to have taken “reasonable steps” to protect the privilege from waiver under Federal Rules of Evidence 502(b). The goal is to do this while also producing documents that are responsive to discovery requests in a timely and economical way. This is made more challenging by the increasing volumes of electronically stored information (“ESI”) that must be screened for privilege.
Read a copy of the full article here.
Court Orders Monetary Sanction for Failure to Preserve to be Paid by Defendant and Counsel
August 25, 2009
Green v. McClendon, 2009 WL 2496275 (S.D.N.Y. Aug. 13, 2009)
Upon one of the defendant’s revelation that she had lost all original versions of electronic files when she transferred those files to CD and then reinstalled her operating system, plaintiff filed a motion for sanctions. Finding that the defendant and counsel violated their duty to preserve evidence, the court authorized additional discovery and awarded plaintiff his costs, including attorney’s fees, to be paid by the defendant and her counsel.
Despite repeated representations by the defendant and her counsel that they had conducted thorough searches for responsive documents and had produced everything in the defendant’s possession, upon plaintiff’s successful motion to compel, a relevant spreadsheet was produced in hard copy for the first time. Thereafter three additional electronic versions of the spreadsheet were also produced, but with “clear differences” from the hard copy. Counsel was in possession of the electronic spreadsheets for several weeks prior to their production. Additionally, despite being asked, minimal information was provided about the author(s) of the spreadsheet.
Plaintiff filed a motion to compel forensic examination of the defendant’s computer. In response, the defendant revealed that she had transferred her files to CD and reinstalled the operating system on her computer. Thus, the original version of any information stored thereon was lost. Plaintiff then filed a motion for sanctions, including an adverse inference.
Beginning its analysis, the court first established that a party seeking an adverse inference must establish: 1) the obligation to preserve, 2) that the records were destroyed with “a culpable state of mind,” and 3) that the destroyed evidence was relevant to the party’s claim.
The court found that the defendant had an obligation to preserve the original files. Regarding the scope of the obligation to both a litigant and counsel, the court stated:
"Once a 'litigation hold' is in place, a party and her counsel must make certain that all sources of potentially relevant information are identified and placed 'on hold' ...." Id. Then, "[c]ounsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched." Id.
Next addressing culpability, the court found that the defendant and her counsel had been “at least negligent” in failing to implement a litigation hold, properly search for documents, and supplement discovery responses. The court reasoned:
"The preservation obligation runs first to counsel, who has 'a duty to advise his client of the type of information potentially relevant to the lawsuit and of the necessity of preventing its destruction.' " In re NTL, Inc. Securities Litigation, 244 F.R .D. 179, 197-98 (S.D.N.Y.2007) (quoting Chan, 2005 WL 1925579, at *6); see also Fayemi v. Hambrecht and Ouist, Inc., 174 F.R.D. 319, 326 (S.D.N.Y.1997). Moreover, this responsibility is "heightened in this age of electronic discovery." Qualcomm Inc. v. Broadcom Corp., 05 Civ.1958-B, 2008 WL 66932, at *9 (S.D.Cal. Jan. 7, 2008), vacated in part on other grounds, 2008 WL 638108 (S.D.Cal. March 5, 2008).
Indeed,for the current 'good faith' discovery system to function in the electronic age, attorneys and clients must work together to ensure that both understand how and where electronic documents, records and emails are maintained and to determine how best to locate, review, and produce responsive documents. Attorneys must take responsibility for ensuring that their clients conduct a comprehensive and appropriate document search.
Id. [Citations omitted.]
There is no question that Mrs. McClendon's counsel failed to meet these discovery obligations. Unless Mrs. McClendon brazenly ignored her attorney's instructions, counsel apparently neglected to explain to her what types of information would be relevant and failed to institute a litigation hold to protect relevant information from destruction. Moreover, despite numerous representations to the contrary, it is highly unlikely that counsel actually conducted a thorough search for relevant documents in Mrs. McClendon's possession in connection with their initial disclosure duties or in response to the plaintiff's first document request. If that had been done, counsel certainly would have found the spreadsheet from Mrs. McClendon's personal computer files. As one court has aptly stated,
The client is charged with knowledge of what documents it possesses.... [The defendant's counsel cannot] simply react to plaintiff's fortuitous discovery of the existence of relevant documents by making disjointed searches, each time coming up with a few more documents, and each time representing that was all they had. Under the federal rules, the burden does not fall on plaintiff to learn whether, how and where defendant keeps relevant documents.
Tarlton v. Cumberland County Correctional Facility, 192 F.R.D. 165, 170 (D.N.J.2000); see also Metropolitan Opera, 212 F.R.D. at 221 (quoting Tarlton ).
The court also expressed its displeasure at the delay in production of the electronic spreadsheets.
The court determined an adverse inference was not appropriate, however, where it was uncertain that the plaintiff had been deprived of any information in light of the transfer of the files at issue to CD before the reinstallation of the operating system.
Finding some sanctions were warranted, the court authorized further discovery regarding the spreadsheet, including further deposition of the defendant, and awarded the plaintiff costs and attorney’s fees, in an amount to be determined, to be allocated between the defendant and her counsel. Interestingly, the court offered the defendant and counsel the opportunity to work out the allocation between them, and to involve the court only if necessary.
A copy of the full opinion is available here.
Court Articulates Analysis Under FRE 502, Finds No Waiver of Inadvertently Produced Email
August 21, 2009
Coburn Group, LLC v. Whitecap Advisors, LLC, 2009 WL 2424079 (N.D. Ill. Aug. 7, 2009)
In this case, defendant, Whitecap Advisors LLC (“Whitecap”), sought to compel the return of one privileged email and to strike deposition testimony regarding the same. Plaintiff, Coburn Group, LLC (“Coburn”), resisted returning the email arguing that it was not protected work product, that privilege was waived by production, and that Coburn was “entitled” to the email because it revealed that Whitecap had mislead the court. Finding that the email was protected as work product and that no waiver occurred, the court granted Whitecap’s motion.
In responding to Coburn’s discovery requests, Whitecap provided its counsel with approximately 72,000 pages of potentially responsive documents. Counsel assigned two experienced paralegals to review the documents and to separate them into categories, including privileged materials. 40,000 pages were eventually produced. Counsel learned of the inadvertent production only when Coburn’s counsel began to question the author of the email about it at deposition. Counsel for Whitecap objected at that time and re-stated his objection in following days, including in writing. Coburn resisted returning the email and the parties agreed to allow Coburn time to research the issue. Coburn agreed to “quarantine” the email in the interim. Resolution could not be reached, and Whitecap filed a motion to compel the email’s return.
The court first determined that the email was indeed work product and was thus subject to protection absent a showing of “substantial need.” The court then turned to Fed. R. Evid. 502 to determine if the protection was waived by production.
Addressing the threshold issue of whether the email was in fact produced inadvertently, the court distinguished it’s analysis from a prior decision in Heriot v. Byrne in which the court considered “‘factors such as the total number of documents reviewed, the procedures used to review the documents before they were produced, and the actions of producing party after discovering that the documents had been produced’” and “also applied the first two of these factors to the analysis under subpart (b)(2), considering whether the producing party took reasonable steps to prevent disclosure.” 2009 WL 742769 (N.D. Ill. Mar. 20, 2009). The court stated:
In this court's view, the structure of Rule 502 suggests that the analysis under subpart (b)(1) is intended to be much simpler, essentially asking whether the party intended a privileged or work-product protected document to be produced or whether the production was a mistake. To start, the parallel structure of subparts (a)(1) and (b)(1) of Rule 502 contrasts a waiver that is intentional with a disclosure that is inadvertent. [FN5] More importantly, subparts (b)(2) and (b)(3) separately address the reasonableness of the privilege holder's steps to prevent disclosure and to rectify the error. That they are set out as separate subparts distinct from the question of inadvertent disclosure strongly suggests that the drafters did not intend the court to consider for subpart (b)(1) facts such as the number of documents produced only to repeat the consideration of those same facts for subparts (b)(2) and (b)(3).
The court determined that production of the email was inadvertent.
The court turned next to Whitecap’s reasonable steps to prevent inadvertent disclosure, noting that, “[a]ccording to the Judicial Conference Rules Committee.... [C]onsiderations bearing on the reasonableness of a producing party's efforts include the number of documents to be reviewed and the time constraints for production.’” The court began its analysis with “the scope of discovery,” “a logical starting point in many cases because ‘[w]here discovery is extensive, mistakes are inevitable and claims of inadvertence are properly honored so long as precautions are taken.’” [Citation omitted.] Accordingly, the court pointed to the size of the production (40,000 pages) and noted that such a production exceeded the number of documents characterized by other courts as “large.” The court went on to discuss the protocol implemented for review of the approximately 72,000 pages identified as potentially responsive, including review by experienced paralegals under specific direction of counsel and the length of the process - approximately five weeks.
Rejecting Coburn’s criticism of the use of paralegals, especially contentions that it was “unreasonable” to expect paralegals to identify work production that was not apparent on the face of a document (as was the case for the email at issue), the court acknowledged the difficulties asserted but stated, “[t]he document review can not be deemed unreasonable solely because a document slipped through which in close examination and with additional information turns out to be privileged or work product. If that were the standard, Rule 502(b) would have no purpose; the starting point of the Rule 502(b) analysis is that a privileged or protected document was, in fact, turned over.”
After pointing out that only three documents “slipped through the review” (only one remained at issue in this opinion), the court also rejected Coburn’s reliance on Relion v. Hydra Fuel Cell Corp. in which the court held that privilege was waived as to two inadvertently produced emails (out of “40 feet” of documents that were produced) because of the party’s failure to take “all reasonable means” to preserve the privilege, specifically by failing to re-review documents selected by opposing counsel for copying prior to production. 2008 WL 5122828 (D. Or. Dec. 4, 2008). The court stated:
This court respectfully disagrees with the Relion decision. The standard of Rule 502(b)(2) is not "all reasonable means," it is "reasonable steps to prevent disclosure." Furthermore, the decision appears to be contrary to the view of the Judicial Conference Rules Committee that Rule 502 "does not require the producing party to engage in a post-production review to determine whether any protected communication or information has been produced by mistake."
The court then found Whitecap took reasonable steps to prevent disclosure.
Addressing next the issue of “reasonable steps to rectify the error,” the court first resolved the question of which time period was relevant to this question:
The Committee's comment that Rule 502 does not require a post-production review supports this view that the relevant time under subpart (b)(3) is how long it took the producing party to act after it learned that the privileged or protected document had been produced.
Concluding that the time Whitecap took to file the motion to compel was not unreasonable, the court acknowledged that Whitecap was unaware of the inadvertent production until it came up in deposition, that counsel immediately objected to its use and requested its return, and that the delay was caused in part by agreement of both parties to allow time to investigate. Accordingly, the court concluded that Whitecap did not waive the work-product protection of the email.
The court also found that Coburn did not establish a substantial need for the email such that the work product protection could be overcome.
A copy of the full opinion is available here.
For Discovery Violations, Court Sanctions Plaintiff and Counsel… Again
August 21, 2009
Bray & Gillespie Mgmt. LLC v. Lexington Ins. Co., 2009 WL 2407754 (M.D. Fla. Aug. 3, 2009)
In this case, plaintiff Bray & Gillespie Management, LLC (“B&G”) sought to recover payment for, among other things, business interruption losses allegedly suffered as the result of damage from Hurricane Jeanne in 2004. Defendant, Lexington Insurance Company (“Lexington”), refused payment for several reasons, including its belief that the damages alleged were caused by two prior hurricanes and that the hotel at issue was not open at the relevant time. In this opinion, one of several addressing discovery issues in this ongoing litigation, the court addressed Lexington’s motion for sanctions following numerous discovery violations on the part of B&G and its counsel. The alleged violations revolved around the untimely production of “room folios” – evidence which would have shown who, if anyone, had stayed at the hotel following Hurricane Jeanne, and thus, the extent of the business interruption losses sustained. Finding in favor of Lexington, the court prohibited B&G from presenting evidence in support of their claim for business interruption losses, struck the portions of their expert’s report addressing that claim, and ordered B&G and counsel jointly and severally liable for Lexington’s reasonable expenses.
While the details are numerous, the crux of Lexington’s motion for sanctions was B&G’s failure to adequately and timely respond to discovery, including its failure to timely and diligently search for and produce requested room folios. Moreover, as established in the court’s opinion, plaintiff’s counsel acted in a “deplorable” manner by making misrepresentations regarding the completeness of plaintiff’s production and by purposefully delaying the production of the room folios in order to obtain strategic advantage during the deposition of Lexington’s expert witness, even in the face of numerous court orders directing production of the information withheld, among other things.
Specifically, the court’s opinion established that:
• B&G failed to search for the room folios until more than a year after the initial request, despite two court orders directing their production;
• B&G’s counsel failed to require B&G to search for room folios, even after learning at deposition that no search had been undertaken;
• B&G’s initial search for room folios was incomplete and counsel for B&G failed to verify the completeness of the search;
• B&G’s counsel made misrepresentations to the court regarding the diligence of B&G’s search efforts and the completeness or production;
• B&G’s counsel directed additional searching for room folios only after determining the folios may be helpful to B&G’s position; and
• B&G’s counsel deliberately withheld supplemental production of additional room folios until after the deadline for supplementation (set by the court) in order to gain strategic advantage at deposition, despite two outstanding court orders to produce, among other things.
After determining that B&G and its attorneys’ behavior was neither substantially justified nor harmless, the court turned to the issue of appropriate sanctions pursuant to Fed. R. Civ. P. 37, in conjunction with rules 16 and 26. The court concluded that the appropriate sanction was to prohibit B&G from presenting evidence in support of its claim for business interruption losses and therefore, to also strike portions of its expert’s report regarding the same. The court also prevented B&G’s introduction of or reliance upon the information in the room folios. Regarding B&G’s argument that it should not be sanctioned for decisions made by its lawyers, the court stated:
The affidavits of Martin, Berringer, and Beaudine show that B & G's in-house counsel, Bruce DelValle, and legal assistant Katherine Martin made decisions regarding, and personally participated in, the conduct which resulted in the late production of Treasure Island room folios to Lexington. Moreover, I warned B & G and its in-house counsel repeatedly and unequivocally that B & G could not blame the conduct of its outside counsel to avoid discovery sanctions. See, e.g., Doc. No. 460 at 43. Yet, the pattern of refusal to comply with Court orders has continued. Because B & G is responsible for the conduct of its counsel, sanctions against it are warranted. [Citations omitted.]
…
Moreover, sanctions for discovery violations must also address "the institutional values that Rule 37 is designed to protect. Rule 37 sanctions are imposed not only to prevent unfair prejudice to the litigants but also to insure the integrity of the discovery process." Aztec Steel Co., 691 F.2d at 482. If B & G is permitted to hide behind its chosen counsel to avoid discovery sanctions, " 'other parties to other lawsuits would feel freer than we think Rule 37 contemplates they should feel to flout other discovery orders of other District Courts.' " Id. (quoting Nat'l Hockey League, 427 U.S. at 643).
The court also determined that Lexington was “entitled to be compensated for the reasonable expenses it had incurred, including expert’s and attorney’s fees and costs” and found B&G jointly and severally liable with its counsel to pay those expenses. Specifically addressing the conduct of counsel, the court stated:
Both Attorney Berringer and Attorney Beaudine advised B & G regarding production of the Treasure Island room folios. Attorney Berringer informed the Court that B & G was conducting another "due diligence" search for documents, including ESI, that Lexington requested and I ordered to be produced. Yet, even after attending a deposition in which B & G's corporate representative revealed that IQWare had not been searched for requested room folios, Attorney Berringer did not require a prompt search for and production of the room folios.
Similarly, at the close of the reopened sanctions hearing, Attorney Beaudine represented to the Court that Lexington already had all documents regarding Treasure Island, without determining that, in fact, B & G had made all reasonable efforts to produce all documents that Lexington requested in its RFPs and that the Court had ordered be produced. Attorney Beaudine did not take steps to ensure that B & G searched thoroughly for all room folios in its possession before the expiration of the period for supplementing responses to written discovery requests established by Court order. Finally, in flagrant disregard of the January 7 Order, Attorney Beaudine deliberately and deceptively withheld from Lexington 138 Treasure Island room folios he received from B & G on May 4, 2009, until May 18, 2009, after the close of all discovery. Only after Lexington filed the instant motion did Beaudine attempt in his May 29, 2009, letter to concoct a cover story to partially, but not fully, explain his deceptive actions.
A copy of the full opinion is available here.