In this matrimonial action, plaintiff sought access to her husband’s (the defendant) office computer to determine his true financial condition.  After denying plaintiff’s initial motion, the court directed (by stipulated order) that a clone of defendant’s office hard drive be made at plaintiff’s expense.  Thereafter, the court denied plaintiff’s motion for access to the cloned drive upon finding her request for unrestricted access overbroad.  “Equally important” to the court was plaintiff’s failure to propose any protocol for investigation of defendant’s hard drive.  The court instructed that should the plaintiff wish to renew her motion, her renewal “must contain a detailed, step-by-step discovery protocol that would allow for the protection of privileged and private material.”  Moreover, the court provided detailed instruction for what such a protocol should contain:

(a) Discovery Referee:  The parties will have until the renewal deadline to agree on an attorney referee, preferably someone with some technical expertise in computer science, to be appointed pursuant to CPLR 3104(b) to supervise discovery (the referee).  [FN10]  If the parties fail to agree on a referee before the renewal deadline, they will submit two names each to the court (along with a summary of the proposed referee's qualifications, not to exceed one page, and hourly rate), and the court will select a referee from among the candidates submitted.

(b) Forensic Computer Expert:  The parties will have until the renewal deadline to agree on a forensic computer expert who will inspect and analyze the clone (the expert).  If the parties fail to agree on an expert before the renewal deadline, they will submit two names each to the court (along with a summary of the proposed expert's qualifications, not to exceed one page, and the expert's fee structure), and the court will select an expert from among the candidates submitted.  The expert will execute a confidentiality agreement (to be agreed upon by the parties) governing non-disclosure of the contents of the clone and its re-delivery to defendant's counsel after completion of electronic discovery.

(c) File Analysis:  The expert will analyze the clone for evidence of any download, installation, and/or utilization of any software program, application, or utility which has the capability of deleting or altering files so that they are not recoverable (a drive-wiping utility).  The expert will then (i) extract from the clone all live files and file fragments, and (ii) if the files on the clone have been deleted or altered using a drive-wiping utility, will also recover all deleted files and file fragments.

(d) Scope of Discovery:  Plaintiff will list the keyword and other searches she proposes to have the expert run on the files and file fragments, subject to a reasonably short time frame (to be agreed upon by the parties) in which such files or file fragments were created or modified.  Plaintiff is cautioned that she should narrowly tailor her search queries so as to expedite discovery and reduce the costs of litigation to the parties.  To illustrate, a search query for all documents with an .xls (Microsoft Excel) extension, created or modified within a three-year period preceding the commencement of this matrimonial action, will not be permitted.

(e) First-Level Review:  The expert will run keyword or other searches on all of the extracted files and file fragments.  After performing searches, the expert will export to CDs or DVDs a copy of the native files and file fragments which were hit by such searches, and will deliver such media to defendant's counsel to conduct a privilege review.  An exact copy of the media delivered to defendant's counsel will be contemporaneously delivered by the expert to the referee.  The expert will also concurrently deliver to the referee and to counsel for both parties a report (i) detailing the results of its searches, (ii) listing the file types for all files hit by the searches, with the file extensions and number of files for each, and (iii) stating whether or not it found evidence of the use of a drive-wiping utility.

(f) Second-Level Review:  Within twenty days after delivery of the media containing the extracted files and file fragments, defendant's counsel will deliver to plaintiff's counsel in electronic format (to be agreed upon by the parties) all non-privileged documents and information included in the extracted files and file fragments, together with a privilege log which identifies each document for which defendant claims privilege and describes the nature of the documents withheld (but without revealing information which is itself privileged), so as to enable plaintiff to assess the applicability of privilege.

(g) Discovery Disputes:  The referee will resolve any disputes concerning relevancy and privilege. Subject to the parties' agreement, the referee's determination will be final.

(h) Cost Sharing:  All costs for the expert will be borne by plaintiff, subject to any possible reallocation of costs at the conclusion of this action.  Plaintiff will indicate if she is willing to bear any other discovery-related costs and, if so, specify her proposed share.

(i) Discovery Deadline:  The parties should agree to a fast-track discovery schedule, subject to an outside ninety-day deadline within which discovery should be completed.

(j) Retention of Clone:  The discovery referee will keep the clone until the action is concluded, at which time the clone will be returned to defendant's counsel for disposal.

A copy of the full opinion is available here.

August 19, 2010
Webinar/Teleconference
10:00 – 11:30 AM PDT

This CLE webinar will provide counsel with strategies to contain e-discovery costs without sacrificing quality or increasing legal risks or potential court sanctions. The panel, including K&L Gates Partner Todd Nunn, will review and evaluate emerging tools and ongoing developments within the legal profession.

To learn more or to register, click here.

National Business Institute
Discovery Strategy:  Finding the Smoking Gun

August 26, 2010
9:00 AM – 4:30 PM PDT
Washington State Convention Center
800 Convention Place
Seattle, WA

K&L Gates Partner Julie Anne Halter will present a discussion entitled “Ethics: How far is Too Far?” in which she will discuss a myriad of issues, including attorney’s duties under the federal rules, the rules of professional responsibility, and case law; the right to obtain discovery vs. the right to privacy; privilege and accidental disclosure; and confidentiality issues.

To learn more or to register, click here.

Observing that plaintiff and counterdefendants had insisted upon “a review process that guarantees that they will not finish this extensive project in any reasonable amount of time”, namely reviewing large volumes of information without first narrowing the material using search terms, the court acknowledged the need to expedite production and directed plaintiff and counterdedendants to retain a third party vendor to assist in their discovery efforts.  Accepting defendant’s offer, the court further ordered that Cisco would bear half the cost.

In response to defendant’s requests for production, plaintiff and counterdefendants undertook the review and rolling production of responsive materials.  Citing costs, plaintiff and counterdefendants rejected the idea of hiring an outside vendor to search and narrow their electronically stored information.  Consequently, relying on approximately five attorneys, those parties undertook the review of “every bit of that giant mass of information for responsive documents.”  Unsurprisingly, the review did not proceed quickly and, as the discovery deadline approached, it became clear that the production would not be completed with enough time to allow Cisco to “actually do anything” with the documents.  Accordingly, Cisco sought an order directing the plaintiff and counterdefendants to retain a third party vendor to assist them in their efforts.  Moreover, Cisco offered to pay for half the cost.  Recognizing that “something must be done”, the Magistrate Judge recommended an order directing the retention of a third party vendor.  Having reviewed the relevant record, the District Court agreed and adopted the recommendation, including that Cisco pay half of the cost.

Recognizing the likelihood of future disagreement between the parties as to topics including plaintiff and counterdefendants’ document collection protocol, the best approach for narrowing the scope of the review, and the scope and production of privilege logs, the Magistrate Judge also recommended the appointment of a Special Master.  Moreover, the Magistrate Judge recommended that the Special Master be given the authority to “choose a third party vendor (if the parties cannot agree on one), craft a search protocol, establish deadlines, and otherwise resolve any future discovery disputes or objections in this case.”  This recommendation was also adopted by the District Court.

A copy of the full order is available here.

Citing a lack of evidence that defendants “engaged in the ‘bad faith’ destruction of evidence for the purpose of hiding adverse evidence” and Fed. R. Civ. P. 37(e), the court denied plaintiff’s motion for sanctions for defendants’ destruction of relevant videotape, despite the existence of a duty to preserve.

On July 31, 2008, defendants terminated plaintiff’s employment alleging that she had “filed [sic] out false credit slips”.  In her subsequent lawsuit, plaintiff alleged she was terminated for discriminatory reasons.  The alleged theft was apparently recorded on videotape on July 22, 2008.  Plaintiff asked to see the tape upon her termination.  It is unclear if her request was granted at that time.  The tape was also requested in the normal course of discovery, although the date of that request is also unclear.  Regardless, defendants were unable to produce the tape because it had been erased.  Plaintiff sought sanctions precluding defendants from producing evidence of the alleged theft and an award of expenses for bringing the motion.

Defendants argued that they were protected from sanctions pursuant to Rule 37(e), which precludes the imposition of sanctions where electronically stored information is lost as the result of “routine, good faith operation[s] of an electronic information system.”  Specifically, the defendants asserted that the lost recording was created using a digital video recorder that saved surveillance footage for approximately 29 days before automatically recording over it.  Defendants further asserted that they were unaware of the possibility of litigation until receipt of a letter from plaintiff’s counsel on February 24, 2009 – approximately seven months after the alleged theft occurred (and long after the tape had been erased).

Based on the dates of correspondence between the parties (and their counsel), the court determined that the defendants were aware of the possibility of litigation by August 11, 2008 and thus had a duty to preserve the evidence.  The court further determined that as of that date, the video recording had not been overwritten.

Citing Rule 37(e), the court nonetheless declined to impose sanctions absent evidence that the destruction was in “‘bad faith’ for the purpose of hiding evidence” - a “prerequisite to imposing sanctions for the destruction of evidence.”

A copy of the full opinion is available here.

Defendants sought production of electronically stored information for a period of 18 years - a significant departure from the default period of five years previously imposed.  Upon plaintiffs’ showing that retrieval of the additional data by a vendor would cost approximately $1 million to $1.5 million (not including the cost of review), the court found the information was “not reasonably accessible”.  However, the court also found that defendants had shown good cause to compel the requested production.  Considering the relevance of the data and its possible unavailability from an alternative source as well as plaintiffs' costs from producing the ESI, the court reasoned that “in relation to the importance of the interest at stake … including the likely very substantial financial stakes, [the] costs may be justified.”  Accordingly, the court granted defendants’ motion to compel and held that if plaintiffs employed an outside vendor to assist in fulfilling their obligation, defendants would bear 80 percent of the reasonable vendor costs incurred.

A copy of the order is available here. 

Appealing an order from the magistrate judge, plaintiffs argued that defendants should bear the costs of producing inaccessible data where it was defendants’ failure to preserve that resulted in the data’s inaccessibility.  The court declined to support such a rule, finding that defendants’ culpability was merely a factor for consideration when deciding whether to compel production for good cause.  The court also found that the magistrate judge had adequately considered defendants’ culpability when crafting the underlying order and did not abuse his discretion.  Accordingly, the order was affirmed.

Plaintiffs sought to compel production of inaccessible data which had been deleted from defendants’ active servers and was available only on backup tapes.  Defendants sought a protective order to avoid production asserting the estimated cost of recovery was $1.5 million.  The magistrate judge found that despite a duty to preserve the information at issue, defendants failed to properly issue a formal litigation hold for almost four years.  The magistrate judge also found the data was inaccessible and, after conducting the analysis to determine if plaintiffs had nevertheless demonstrated good cause for production, ordered that plaintiffs could request the production of information on specific tapes if willing to bear part or all of the retrieval costs, depending on which tapes were at issue, and that some tapes need not be produced at all.  Plaintiffs appealed and argued that “Defendants’ failure to maintain the emails in an accessible format should not provide a basis upon which to avoid having to produce them, because Defendants had an obligation to produce them for litigation.”

Taking up the issue, the court first questioned “whether, as a matter of law, a protective order under Rule 26(b)(2)(B) can ever be granted to a party when the evidence is inaccessible because of that party’s failure to institute a litigation hold” and concluded that “no such bright line rule exists.”  Moreover, the court declined to create such a bright line rule, finding instead that defendants’ culpability in failing to preserve the information was merely one factor for consideration when determining whether to compel production.  In response to plaintiffs’ assertions that without such a rule "future parties would have a road map to avoiding discovery obligations", the court made clear that it took no position “as to the question of whether a bright line rule exists with respect to a party intentionally permitting relevant evidence to become inaccessible, rather than negligently failing to preserve it.”  The court also noted the existence of “penalties available for spoliation wholly apart from whether the Court will order production of backup tapes” and clarified that “the lack of a bright line rule should not be equated with the existence of the opposite rule;  it does not mean that any given defendant will avoid the obligation of expensive retrieval of backup information.”

Considering whether the magistrate judge adequately considered defendants’ culpability in the present case, the court found that he did and affirmed his order.  Specifically, the court noted the magistrate judge’s findings that in light of the volume of evidence produced by defendants, the backup tapes were “likely to produce evidence of only marginal, cumulative benefit and at great expense” and that “this outweighed the slim likelihood of the discovery of non-cumulative evidence even if there was some unknown degree of negligent spoliation.”

A copy of the full opinion is available here.

Finding “willful” spoliation of 43 hard drives “in the sense that Plaintiff was aware of its responsibilities to preserve relevant evidence and failed to take necessary steps to do so”, a special master ordered a jury instruction which allowed the jury to infer that the destroyed evidence was unfavorable to plaintiff and for the parties to split the cost of defendants’ litigation of the spoliation issue.  Upon a motion to modify the order, the magistrate judge affirmed the imposition of the jury instruction, but found plaintiff should pay all of defendants’ reasonable expenses and ordered payment of $89,365.88.

A special master found that plaintiff’s destruction of 43 relevant hard drives was “willful, in the sense that Plaintiff did not do enough to preserve the hard drives”, but acknowledged that ‘Defendants have not established … that [Plaintiff] has … violated any discovery order … and there is no substantial evidence that its destruction of hard drives or the recycling of its work-stations was anything other than what [Plaintiff] would do in the ordinary course of business.”  Accordingly, the special master ordered a jury instruction entitling the jury to infer that the destroyed hard drives would have contained unfavorable evidence and for the parties to split defendants’ costs for litigating the issue.  Defendants moved to modify the order, arguing the sanctions imposed did not cure the prejudice caused by plaintiff and seeking terminating sanctions or the admission of certain facts.  Noting the defendants’ lack of objection to the special master’s factual findings, the court limited its de novo review to whether the facts justified harsher penalties, as argued by defendants.

Beginning her analysis, the magistrate judge noted agreement with the standard set forth in Pension Comm. of Univ. of Montreal Pension Plan v. Bank of Am. Secs., LLC, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010) for determining the type of sanctions justified for spoliation, namely that “’[t]he determination of an appropriate sanction, if any, is confined to the sound discretion of the trial judge and is assessed on a case-by-case basis” and that “appropriate sanctions should ‘(1) deter the parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore “the prejudiced party to the same position [it] would have been in absent the wrongful destruction of evidence by the opposing party.”  The court also highlighted the “well accepted” premise that “a court should always impose the least harsh sanction that can provide an adequate remedy.”

Regarding defendants’ specific request for dismissal, the court undertook its analysis pursuant to the factors set for in Ehrenhaus v. Reynolds, 965 F.2d 916 (10th Cir.1992): “(1) the degree of actual prejudice to the defendant; (2) the amount of interference with the judicial process; ... (3) the culpability of the litigant; (4) whether the court warned the party in advance that dismissal of the action would be a likely sanction for noncompliance; and (5) the efficacy of lesser sanctions.”  Addressing each factor in turn, the court determined that dismissal was not appropriate.  Specifically regarding the culpability of the plaintiff, the court made clear that while it did not condone plaintiff’s ineffective efforts, it could not conclude that “the destruction of hard drives in the ordinary course of business was done with a sufficiently culpable state of mind to warrant a terminating sanction.”

As to the last factor, the court’s analysis affirmed the sufficiency of the special master’s sanction noting the lack of evidence that plaintiff’s destruction was “anything other than inadvertent in the sense that nothing on the record indicates that Plaintiff set out to intentionally destroy evidence relevant to the parties’ claims” and that plaintiff was able to provide “substitute information” that, “while not replicating the lost evidence, may be sufficient to replace it.”

Next, finding that plaintiff’s conduct was “negligent rather than intentional” and that the jury instruction adequately addressed defendants’ concerns, the magistrate judge denied defendants’ request to have facts admitted into evidence “indicating that Plaintiff’s spoliation was intentional and knowing”.

Finally, regarding the special master’s determination that fees should be split, the magistrate judge disagreed.  Instead, the magistrate judge made clear that the payment of reasonable fees was warranted, and rejected the amount arrived at by defendants:  $130,276.13.  Instead, the court awarded the sum of $89,395.88.  The court’s reduction of fees and costs took into account that “too much time was spent by counsel on the matter”, that “Defendants did not receive all of the relief they were seeking”, and that “the wrong has been at least partially remedied by other means.”

A copy of the full opinion is available here.

July 22-25, 2010
Suncadia Resort, Washington

On Friday, July 23rd at 9:45 AM, join K&L Gates Partner Todd Nunn for his presentation entitled, “E-Volving Discovery:  Dealing with ESI in the Discovery Process”.

To learn more or to register, click here.

HalfMoon Seminars Presents: Ethical Use of Business and Law Office Technology

July 28, 2010
8:30 AM – 4:15 PM
Best Western Executive Inn
200 Taylor Avenue North
Seattle, Washington 98109

K&L Gates Partner Todd Nunn will make two presentations at this event.  The first, entitled “Ethical Issues in the Creation, Maintenance and Destruction of Electronic Records”, will address issues including setting up, maintaining, and eventually destroying electronic files, discarding devices with electronic memory, and advising clients regarding the same.  His second presentation, entitled “Managing Ethical Issues in Electronic Discovery”, will discuss topics including the current Federal and State rules on electronic discovery, understanding technology, and the impact of e-discovery on practitioners’ ethical obligations, among other things.

To learn more or to register, click here.

Yesterday, the U.S. Supreme Court issued its opinion in City of Ontario v. Quon, a case addressing whether a government employer’s search through an employee’s text messages, sent and received on a work-issued pager, violated the Fourth Amendment.  Reversing the Ninth Circuit, the Supreme Court held that the search was reasonable and that the employee’s Fourth Amendment rights were not violated.

The facts of this case have been recounted previously, and do not require repeating in their entirety.  Suffice it to say, Quon, a police officer for the City of Ontario, was allegedly disciplined following his employer’s discovery of many personal (and sometimes sexual) text messages sent from his work-issued pager.  The nature and frequency of the text messages were discovered during an investigation to determine why Quon had repeatedly exceeded the monthly character limit (one other employee’s messages were also searched).  During that investigation, the city reviewed transcripts of Quon’s messages for a period of two months.  The city asserted the investigation was not motivated by a desire to uncover wrongdoing, but rather to determine the appropriateness of the character limit, i.e., was the character limit too low to accommodate work-related messages, or were the overages due to personal use.  Alleging a violation of his Fourth Amendment rights, Quon (and those with whom he had been communicating) sued the city.

The District Court held that Quon had a reasonable expectation of privacy as to the content of the messages but that, in light of the motivation for the search, namely to determine the efficacy of the character limits, the search was reasonable and did not violate the Fourth Amendment.  On appeal, the Ninth Circuit reversed in part and held that the search was not reasonable in scope and thus violated the Fourth Amendment.  The city’s petition for certiorari was thereafter granted.

In its analysis, the Supreme Court relied substantially upon O'Connor v. Ortega, 480 U. S. 709 (1987), a case addressing the application of the Fourth Amendment when the Government acts in its capacity as an employer.  In that case, a four-justice plurality concluded that the correct analysis had two steps:  1) determining the applicability of the Fourth Amendment based on “operational realties of the workplace” and 2) applying the standard of “reasonableness under all the circumstances” to the employer’s intrusion on that expectation “for noninvestigatory, work-related purposes, as well as for investigations of work-related misconduct.”  Justice Scalia, concurring in the opinion, crafted a different approach which would dispense with the inquiry into “operational realities” and conclude that offices of government employees are covered by the Fourth Amendment and that “government searches to retrieve work-related material or to investigate violations of workplace rules – searches of the sort that are regarded as reasonable and normal in the private employer context – do not violate the Fourth Amendment.”

Establishing the boundaries of its holding in this case, the Supreme Court declined to issue a “broad holding concerning employees’ privacy expectations vis-à-vis employer provided technological equipment” and indicated it was “preferable to dispose of this case on narrower grounds.”  Accordingly, for purposes of the analysis, it was assumed arguendo that “Quon had a reasonable expectation of privacy in the text messages sent on the pager”, that the city’s review of the messages “constituted a search within the meaning of the Fourth Amendment”, and that “the principles applicable to a government employer’s search of an employee’s physical office apply with at least the same force when an employer intrudes on the employee’s privacy in the electronic sphere.”

Under the approach of the O’Connor plurality, a government employer’s warrantless search is reasonable when it is “justified at its inception” and if “‘the measures adopted are reasonably related to the objectives of the search and not excessively intrusive in light of’ ‘the circumstances giving rise to the search.’”  In the present case, the Court held that the search was justified because “there were ‘reasonable grounds for suspecting that the search was necessary for a noninvestigatory work-related purpose’”, namely to determine the sufficiency of the character limit on text messages.  The Court further held that the scope of the search was reasonable “because it was an efficient and expedient way to determine whether Quon’s overages were the result of work-related messaging or personal use” and because the review was not “excessively intrusive.”  Accordingly, the search did not violate Quon’s Fourth Amendment rights.  In so holding, the Court noted that the search would also satisfy the approach of Justice Scalia where, because the employer had a legitimate reason for the search and because the search was not excessively intrusive in light of that justification, “the search would be ‘regarded as reasonable and normal in the private employer context’”.

The Court also held the rights of those with whom Quon was communicating were not violated.

A copy of the full opinion is available here.

Defendant subpoenaed several social networking sites seeking disclosure of plaintiff’s subscriber information and communications relevant to the underlying dispute.  Plaintiff sought to quash the subpoenas arguing that such disclosure would violate the Stored Communications Act (“SCA”).  The magistrate judge denied plaintiff’s motion to quash upon finding the SCA was inapplicable. Plaintiff moved for reconsideration of the order.

Granting reconsideration, the district court judge found the SCA was applicable to the social networking websites at issue (Facebook, MySpace, Media Temple) and quashed the subpoenas to the extent they sought private messages.  However, the court recognized a distinction between strictly private messages and those posted more openly, such as on plaintiff’s Facebook wall or MySpace comments.*  Specifically, the court noted the inapplicability of the SCA to information that is readily available to the general public.  Thus, a review of plaintiff’s privacy settings was necessary to determine the extent of access allowed to his Facebook wall and MySpace comments (although the court recognized that the record implied that access was restricted).  Accordingly, the district court vacated the magistrate judge’s order as to those comments and remanded for further investigation.

A copy of the full opinion is available here.

* For the unfamiliar, comments posted to an account holder’s Facebook wall or MySpace comments are displayed such that they are immediately viewable by any visitor to the account holder’s website.