Data image by The Economist

Sat, 13 Mar 2010 23:15:57 GMT

The cover article in this week’s The Economist magazine is The data deluge, featuring a 14-page special report on information management entitled Data, data, everywhere. This article, and our collective situation of data overload, reminds me of one of my favorite Star Trek episodes, The Trouble With Tribbles. The cute little ESI files that everyone owns are now [...]

Do You Comply with the New Massachusetts Information Security Regulation?

Thu, 11 Mar 2010 16:32:05 GMT

By Bruce H. Nielson, K&L Gates Partner, Washington D.C.

What Does the Regulation Require?

Every business that “owns or licenses personal information” about a Massachusetts resident must “develop, implement, and maintain” a comprehensive written information security program (WISP). “Owns or licenses” is defined as “receives, stores, maintains, processes, or otherwise has access to personal information in connection with the provision of goods or services or in connection with employment.” “Personal information” (PI) means first name (or initial) and last name combined with a Social Security number, driver’s license or state-issued ID card number, or financial account or credit or debit card number (with or without any required password, security or access code, or personal identification number).

The WISP must contain administrative, technical and physical safeguards for PI that are “appropriate to (a) the size, scope and type of business . . .; (b) the amount of resources available . . .; (c) the amount of stored data; and (d) the need for security and confidentiality” of the PI.

WISP – Required Elements

The elements required in a WISP include:

Designating one or more employees to maintain the program
Identifying and assessing foreseeable internal and external risks to the security, confidentiality or integrity of records containing PI
Evaluating and improving safeguards for limiting risks, including employee training and compliance and means for detecting and preventing security failures
Developing security policies regarding storage, access and transportation of records containing PI outside of business premises
Imposing disciplinary measures for violations of security rules
Preventing terminated employees from accessing records containing PI
Imposing restrictions on physical access to records containing PI
Regular monitoring of the operation of the WISP
Reviewing security measures annually or whenever a material change in business practices implicates the security or integrity of records containing PI
Documenting responsive actions taken in connection with any security breach incident and conducting post-incident reviews
Selecting service providers capable of maintaining appropriate measures to protect PI
Contractually requiring service providers to maintain appropriate security measures (every service provider contract entered into before March 1, 2010 is deemed to comply)

Computer System Requirements

For businesses that electronically store or transmit personal information, the WISP must also include the establishment and maintenance of a computer security system (including any wireless system) that, “at a minimum, and to the extent technically feasible,” contains:

Secure user authentication protocols, including control of user IDs, a “reasonably secure” method of assigning and selecting passwords (or use of unique identifier technologies), control of data security passwords, restricting access to active users, and blocking access after multiple unsuccessful attempts
Secure access control measures that restrict access to PI to only those who need such information to perform their jobs and that assign unique identifications plus passwords that are designed to maintain the security of access controls
Encryption of all transmitted records and files that contain PI and travel across public networks
Encryption of all PI transmitted wirelessly or stored on laptops or other portable devices
Reasonable monitoring of systems for unauthorized use of or access to PI
For files containing PI on a system connected to the Internet, reasonably up-to-date firewall protection and operating system security patches designed to maintain the integrity of the PI
Reasonably up-to-date versions of system security agent software, including malware protection and patches and virus definitions
Education and training of employees on the proper use of the computer security system and the importance of PI security

What is the Penalty for Non-Compliance?

Violators may be subject to a $5,000 civil penalty for each violation. How violations will be counted for purposes of the penalty is unclear. If violations are counted on a per-record basis, businesses with thousands of records containing PI of Massachusetts residents could potentially face fines of millions of dollars.

How Can My Business Comply?

The revised, final regulation is not quite as demanding as earlier versions, but it is still a tough regulation that may require businesses to revise existing – or create new – WISPs. The regulation is also indicative of the direction in which state and federal information security laws are heading. Because of this, even businesses not subject to the regulation may want to consider creating and implementing WISPs that comply with the standards of the Massachusetts regulation.

Hitler Explains Why RIM Matters

Thu, 11 Mar 2010 00:41:31 GMT

Yesterday, on the e-Disclosure Information Project blog, Chris Dale's post Hitler and Cloud Computing Security gives us a super discovery-related entry in the crowded and growing "Hitler and..." series of spoofs. I can't get enough of these videos and was giddy  to find a related gem on YouTube just days ago, in which Hitler laments the exclusion of records management from the discovery process. Brilliant.

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Sun, 07 Mar 2010 17:39:31 GMT

This three minute video is designed for view with a high-speed connection in high definition (HD), full screen mode. This video supplements last week’s blog on the keyword search debate at LegalTech. It is a video excerpt of a law school class where I respond to a question by co-professor William Hamilton. In Bill’s question, not included [...]

Fraud Lawsuits In Connecticut - Is A Promise of Happiness Fraud or Puffery?

Sat, 06 Mar 2010 22:02:34 GMT

Debra Cassens Weiss yesterday posted on article on the ABA's website about the psychic Sean Morton who is being sued for fraud for taking 6 million dollars from investors on the promise of piles of money and spiritual happiness. The Securities and Exchange Commission is bringing the suit and the main theory is that Morton is a fraud. No kidding.

For this post, I review what constitutes fraud in Connecticut under the common law. In Connecticut, fraud is committed when:

a person makes a false representation as a statement of true fact
the person knows the statement is not true
the person makes the statement to induce another person to act upon the statement
the person who acts upon the statement sustains damages

When a lawsuit is brought for fraud in Connecticut, an attorney must allege more than simple facts stating these elements. The lawsuit must contain specific allegations describing the actual fraud. In general the false statements must relate to an existing fact, past fact, or a promise to do something in the future with no intent to do so. Although generally affirmative statements must be made to support fraud, there are circumstances where a failure to speak can be fraud if there is a duty to speak.

When you bring a lawsuit for fraud in Connecticut, there is also a higher standard of proof. Ordinarily, in civil cases, the plaintiff must prove the elements of the case by a preponderance of the evidence. Many people describe this standard as greater than 50% or more likely than not likely. In fraud cases, the plaintiff must prove the elements of fraud by clear and convincing evidence. This standard is greater than a preponderance of the evidence.

If a plaintiff is successful in proving fraud, there are two categories of damages that generally apply. First, a plaintiff may rescind or get out of the induced transaction (i.e. cancel the contract) and sue for restitution type damages. This type of remedy seeks to put the plaintiff in the same position as if the fraud never occurred. Alternatively, a plaintiff may affirm the transaction and seek compensatory damages. This type of remedy may apply when a plaintiff wants to keep some consideration from a transaction but sue for fraud damages.

In addition to these two categories of damages, a successful lawsuit for fraud could also result in an award of punitive damages, which is generally the cost of suit less expenses or the attorneys fees incurred in the case.

Here is a short list of some of the types of fraud lawsuits attorneys bring in Connecticut:

Contract fraud - you enter contract based on false statements
Consumer fraud - think about the recent Toyota lawsuits
Advertising fraud - you buy a product based on a false claim, bait and switch
Investment fraud - think Bernie Madoff, Sean Morton, Ponzi schemes
Real estate or mortgage fraud - false appraisals, straw buyers

When you consider the allegations against the psychic Sean Morton, it is evident he would be subject to a fraud lawsuit in Connecticut. There might be a legitimate defense, however, to the some of the claim. In general, puffery, opinions, exaggerations, and comments made in jest are not fraud.

So what do you think, is a promise of happiness and piles of money by a self proclaimed prophet fraud?

Knowledge Management Controls Your Destiny

Thu, 04 Mar 2010 21:29:16 GMT

In case you missed it, KMWorld recently announced its 100 Companies That Matter in Knowledge Management. Many of those on the list are familiar names, with offerings familiar to the eDiscovery world, but many are unfamiliar names with unusual offerings. Among the 100 are at least a handful of true pioneers that will pierce new dimensions at the intersection of knowledge and technology (or plant the seeds to do so), transforming the way we coexist with our technologies. As the technological landscape transforms, data and information hunter-gatherers (we) should pay attention.

eDiscovery is fundamentally concerned with hunting down then gathering records and naturally overlaps with Records Management (RM). Knowledge Management (KM), on the other hand, is concerned with putting the information in an organization's records to their best possible use. An organization's KM efforts drive data structures and records management. If you want a glimpse at how eDiscovery will be conducted tomorrow, keep an eye focused on the bleeding edge of KM. Today's internal wikis, blogs, IM clients, enterprise search, and intranets will be replaced with new tools that use and store data in new, more complex ways.

We still haven't figured out how to simply and cost-effectively collect and review email and office documents. Yet we are a on the edge of bold new frontiers. Of tangled, organic data jungles, where algorithms are continuously applied to extract meaning from organizational information, data is mashed up and remixed in countless and novel ways to tease out meaning, and cloud storage structures make the whereabouts of specific data as easy to predict as the location of an electron. All that may not even approach the complexity created when we finally develop quantum computing.

Bring it on. w00t!

Plan Ahead: Proposed Amendments to Rule 26 Would Extend Work-Product Protection

Thu, 04 Mar 2010 18:08:16 GMT

One of the great things about the current rule-making process is the ability to see change on the horizon and adapt accordingly. This year, absent any unforeseen objection or delay, Rule 26 will be amended to extend the scope of the work-product doctrine to encompass draft expert reports and most communications between experts and counsel. Currently, the proposed amendment (and all proposed rule amendments, for that matter) is being considered by the Supreme Court. Pursuant to statute, the Court must transmit prescribed amendments to Congress by May 1st. Thereafter, absent legislation to reject, modify, or defer the rules, the prescribed amendments will take effect as a matter of law on December 1st.

The proposed amendment to Rule 26 would “apply work-product protection to the discovery of draft reports by testifying expert witnesses, and, with three important exceptions, communications between those witnesses and retaining counsel.” The exceptions would allow for discovery of communications between the lawyer and expert regarding: “(1) compensation for the expert’s study or testimony; (2) facts or data provided by the lawyer that the expert considered in forming opinion; and (3) assumptions provided to the expert by the lawyer that the expert relied upon in forming an opinion.”

Among the reasons cited in support of the proposal was evidence of lawyers and experts taking “elaborate steps to avoid creating any discoverable record”, including, for example, the retention of two experts: “one for consultation, to do the work and develop the opinion, and one to provide the testimony…” The Judicial Conference also cited evidence showing that lawyers often devote significant time at deposition attempting to uncover evidence showing that the expert’s opinion was shaped by the retaining lawyer, rather than on the substantive strength or weakness of that opinion. On a more positive note, the Judicial Conference also provided information that the State of New Jersey was successful in implementing a rule like the one proposed and that “practitioners reported a remarkable degree of consensus in enthusiasm for and approval of the amended rule.”

Briefly addressing concerns that the proposed amendment could “prevent a party from learning and showing that the opinions of an expert witness were unduly influenced by the lawyer retaining expert’s services”, the Judicial Conference concluded that “the best means of scrutinizing the merits of an expert’s opinion is by cross-examining the expert on the substantive strength and weaknesses of the opinions and by presenting evidence bearing on those issues.”

The full Report of the Judicial Conference discussing all proposed amendments is available here.

Court Provides Detailed Analysis of Law of Spoliation, Orders Adverse Inference Instruction, Monetary Sanctions for Intentional Spoliation of ESI

Tue, 02 Mar 2010 18:11:35 GMT

Rimkus Consulting Group, Inc. v. Cammarata, 2010 WL 645253 (S.D. Tex. Feb. 19, 2010)

For intentional spoliation, the court declined to order terminating sanctions but ordered an adverse inference instruction and for defendants to pay plaintiff’s attorneys fees and costs.

In this litigation arising from accusations of misappropriation of trade secrets, violation of non-compete agreements, and related claims, plaintiff accused defendants of spoliating relevant evidence, including electronically stored information (“ESI”). The court found that defendants had indeed participated in intentional spoliation of evidence, including failing to preserve relevant ESI, manually deleting ESI, and destroying or giving away laptops containing relevant ESI, among other things. The court nonetheless declined to grant plaintiff’s request for terminating sanctions because plaintiff was unable to show a sufficiently high degree of resulting prejudice. Specifically, the court found that because defendants had produced a large volume of evidence despite their spoliation of other ESI, because plaintiff had obtained some of the deleted evidence from other sources, and because evidence revealed that some of the deleted records would have been favorable to defendants, the resulting prejudice was “far from irreparable” – the necessary showing to justify terminating sanctions: “The sanction of dismissal or default judgment is appropriate only if the spoliation or destruction of evidence resulted in “irreparable prejudice” and no lesser sanction would suffice.” [Citation omitted.]

Accordingly, the court ordered an adverse inference instruction to be given to the jury. The instruction would allow the jury to determine whether the destruction was intended to prevent the use of the destroyed evidence at trial and, if so, would allow the jury to further determine whether to infer that the content of the deleted evidence would have been unfavorable to the defendants. The court also ordered monetary sanctions and ordered defendants to pay plaintiff’s reasonable costs and attorney’ fees “required to identify and respond to the spoliation.”

Although relatively straightforward in its facts (at least those surrounding defendants’ spoliation), the court’s lengthy analysis of “the framework for analyzing spoliation allegations” (the title of section II of the court’s opinion) provides an insightful discussion of spoliation much like that found in the recent opinion from the Honorable Judge Shira Scheindlin 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) and, in fact, specifically remarks upon the analysis of that opinion throughout. Unlike Judge Scheindlin’s opinion in Pension, though, the facts of this case involve intentional spoliation. Accordingly, this case provides a unique perspective that makes it well worth the time to read it.

A copy of the full opinion is available here.

[Note: this opinion also addresses a motion for summary judgment and includes analysis of claim and issue preclusion.]

*?b

Sat, 27 Feb 2010 21:27:48 GMT

At LegalTech New York a few weeks ago, Jason R. Baron and I staged a debate over search strategies and cooperation ethics. As you probably already know, Jason is the Director of Litigation for the National Archives and Records Administration and Co-Chair of The Sedona Conference Working Group on Electronic Document Retention and Production. Jason came [...]

Thank You to Hartford Business Journal and Advanced Copy

Fri, 26 Feb 2010 20:51:18 GMT

Thank you to Advanced Copy for nominating me for Best Use of Blogs for the Hartford Business Journal's Strateg E Awards for 2010. Thank you to the Hartford Business Journal for selecting this Blog as a finalist and putting on a great event yesterday.

Congratulations to Thomas Clifford who won for his Blog, Bringing Brands to Life. Tom is a big fan of Daniel Pink who has some revolutionary ideas for business management. I just read Pink's latest book "Drive: The Surprising Truth About What Motivates Us." Great read.

You Must Preserve Evidence If A Lawsuit Is Likely

Thu, 25 Feb 2010 19:03:36 GMT

In the recent federal district court decision of Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities (download here) , Judge Shira Scheindlin clearly explained and amplified the obligations to preserve and produce electronically stored evidence in litigation cases. The case was brought by a group of investors seeking to recover 550 million dollars in losses from a hedge fund liquidation.

The defendants in the case alleged that the plaintiffs failed to preserve electronically stored documents and filed misleading statements regarding discovery. In deciding against the plaintiff's on discovery issues, Judge Scheindlin summarized discovery obligations and stated:

the courts have a right to expect that litigants and counsel will take 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....when this does not happen, the integrity of the judicial process is harmed and the courts are required to fashion a remedy...By now, it should be abundantly clear that the duty to preserve means what is says and that a failure to preserve records - paper or electronic - and to search in the right places for those records, will inevitably result in the spoliation of evidence.

Judge Scheindlin's decision is very lengthy and detailed. You might ask, why should a company doing business in Connecticut care about what Judge Scheindlin says in a New York federal district court case? Well, for starters, Judge Scheindlin is perhaps the most quoted and cited trial judge in the United States concerning electronic evidence following her series of decisions in the now famous case of Zubulake v. UBS Warburg. Another reason is that Connecticut state court rules on obligations to preserve and produce electronically stored information are not well established or defined. As such, a state court trial judge in Connecticut is very likely to be persuaded by anything Judge Scheindlin says on the issue of electronic discovery and, in particular, on obligations to preserve and produce electronic evidence, sanctions for failure to do so properly, and the cost and expense of producing such evidence.

Anyone facing potential litigation or reasonably anticipating litigation in Connecticut should understand the obligations to preserve and produce evidence. Although Judge Scheindlin stated that these obligations should be abundantly clear, the fact is, they either are not clear or they are often ignored. Every week, there are numerous case reports from across the country involving spoliation, destruction, and mishandling of electronic evidence. Many times, the failure to preserve critical evidence happens well in advance of the litigation because the duty to preserve is overlooked, ignored, or not understood.

The full scope and extent of discovery obligations is too in depth for a blog post. Nevertheless, Judge Scheindlin's decision provides a framework for understanding some basic obligations and rules. Here is my summary take away from the case:

Any individual or business that reasonably anticipates litigation must issue a "timely" litigation hold in writing. This means steps must be taken to preserve evidence and to stop its destruction. This also means that the duty to preserve evidence arises before litigation ever happens. The duty to preserve arises when litigation is "reasonably anticipated."
Failure to initiate a written litigation hold may constitute gross negligence.
Failure to properly collect evidence from key players in the dispute is gross negligence or willfulness. This means that evidence must be collected from the individuals that are most involved in the dispute. This type of conduct is more culpable and likely to lead to sanctions.
Destruction of emails or backup tapes after the duty to preserve arises may also consitute gross negligence and willful misconduct.
Failure to obtain evidence from "all" employees, as opposed to key players, is likely ordinary negligence and a lower degree of culpability.
Failure to take all appropriate measures to preserve electronically stored information is negligence and less culpable.

Failure to follow the above framework may result in sanctions ranging from fines and cost shifting to dismissal, preclusion of evidence, or an adverse inference instruction to the jury at the time of trial. The sanction will depend on the degree of culpability ranging from negligence to gross negligence to intentional conduct. The scope of sanctions will also depend on the relevance of the missing evidence and the prejudice to the innocent party.

The obligation to preserve evidence must be taken seriously once litigation is "reasonably anticipated." The sanctions that can result from failure to abide by these obligations can dramatically impact the result of a lawsuit and can cause a party to lose an otherwise meritorious claim or defense. Improper handling of electronic discovery can also cause an expensive detour in a litigation case that can be avoided with proper care and attention to discovery obligations.

10 Minute Attention Rule lecture at U.F.

Tue, 23 Feb 2010 20:52:27 GMT

Many experienced presenters and educators have found that people tend to get bored after ten minutes of listening to the same thing. The brain seems to be hard-wired to receive new stimulus after that time and it is hard for most people to focus their concentration longer than that. This is especially true for arcane [...]

Author of the Zubulake Opinions Decides New E-Discovery Case

Mon, 22 Feb 2010 13:54:17 GMT

Federal district court judge Shira Scheindlin -- who penned five seminal opinions in the case of Zubulake v. UBS Warburg -- has weighed in again on a litigant's duty to preserve electronically stored information (“ESI”) relevant to pending or reasonably foreseeable litigation. In Pension Committee of University of Montreal Pension Plan v. Banc of American Securities, LLC 05-CIV-9016, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010), Judge Scheindlin sanctioned thirteen plaintiff investors for their failure to preserve ESI. Along the way, she sketched a general framework for determining how much to blame a litigant for its failure to preserve ESI and what sanctions to impose when a litigant's conduct is blameworthy. She titled her opinion, "Zubulake Revisited: Six Years Later."

Judge Scheindlin begins Pension Committee with some rough definitions, tailored to the discovery context, of three familiar classes of misconduct: negligence, gross negligence, and willfulness. She writes that negligence can result from "a pure heart and an empty head" -- for example, if a litigant acting in good faith fails to collect the records of employees who are peripherally connected to the litigation. A heart somewhat less pure (or perhaps a head more empty) can result in grossly negligent or even willful misconduct. A litigant is at least grossly negligent it fails to collect records from key players in pending or reasonably foreseeable litigation or if it destroys relevant email or certain backup tapes.

Pension Committee then discusses the sanctions that a court may apply when a litigant wrongfully destroys, alters, or loses ESI -- and thus "spoliates" that evidence. These sanctions include requiring additional discovery, awarding a monetary remedy to the innocent party, imposing a fine on the litigant, issuing special instructions to the jury, excluding certain evidence at trial, or terminating the case with a default judgment or dismissal. A court should always elect the least punitive sanction that can remedy the harm to the innocent party and wield enough force to work as a deterrent. Terminating a case as a discovery sanction is appropriate "in only the most egregious cases, such as where a party has engaged in perjury, tampering with evidence, or intentionally destroying evidence by burning shredding, or wiping out computer hard drives."

Pension Committee also addresses the difficult question who should bear the burden of establishing that missing or destroyed ESI was relevant to the litigation and that the innocent party has been harmed by its loss. Judge Scheindlin's answer is that the burden may shift depending on how badly the litigant responsible for losing or destroying information has behaved. A willful or grossly negligent litigant is responsible for showing that no harm fell upon the innocent party. But the innocent party must shoulder the burden of proof if the offending litigant behaved only negligently.

In deciding the case at hand, Judge Shelindlin rejected the defendants' claim that the plaintiffs had engaged in willful misconduct -- and turned down the defendants' request for dismissal as a sanction -- but still found that each plaintiff had been negligent or grossly negligent. All the plaintiffs had failed to timely issue a written litigation hold directing employees to preserve all relevant records and creating a mechanism for collecting the preserved records for discovery. Each grossly negligent plaintiff also had made one or more of the following mistakes: deleting or failing to preserve and collect electronic documents, failing to request documents from key players in the litigation, delegating search efforts without any management supervision, destroying backup data that might have contained the only copies of some key players' documents, and describing their discovery efforts in misleading or inaccurate ways in court submissions.

Judge Scheindlin used a jury instruction to sanction the plaintiffs who were grossly negligent. She informed the jury that these plaintiffs had been grossly negligent in performing their discovery obligations and had lost evidence as a result. She instructed the jury that it could choose to adopt a rebuttable presumption that the lost evidence was relevant and would have favored the defendants. She also permitted the jury to consider the egregiousness of the plaintiffs' conduct when deciding whether to adopt this presumption.

Judge Scheindlin imposed monetary sanctions on all the plaintiffs, ordering them to pay the defendants' reasonable attorney's fees and costs attributable to the discovery dispute. She also ordered two of the plaintiffs to provide further discovery if possible, noting that the goal of discovery is "to obtain evidence, not to issue sanctions."

Pension Committee serves as a cautionary tale: Shoddy discovery efforts can result in serious consequences even when intentions are good. A complicated discovery dispute is not cheap to litigate, and the Pension Committee plaintiffs ended up paying the other side's legal fees in addition to their own. Those found grossly negligent also must now persuade a jury not to presume that any lost evidence was favorable to the defendants, even as they try to focus the jury's attention on the merits of their case.

But the opinion will be more than just a warning. If Zubulake's reception is any guide, the analytical framework laid out in Pension Committee will greatly influence judicial thinking about the discovery of ESI. Practitioners would be wise to be familiar with its contents.

Author of the Zubulake Opinions Decides New E-Discovery Case, Chiding Those With A "Pure Heart and Empty Head"

Mon, 22 Feb 2010 13:54:17 GMT

In Pension Committee of University of Montreal Pension Plan v. Banc of American Securities, LLC 05-CIV-9016, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010), Judge Scheindlin sanctioned thirteen plaintiff investors for their failure to preserve ESI. Along the way, she sketched a general framework for determining how much to blame a litigant for its failure to preserve ESI and what sanctions to impose when a litigant's conduct is blameworthy.

Judge Scheindlin begins Pension Committee with some rough definitions, tailored to the discovery context, of three familiar classes of misconduct: negligence, gross negligence, and willfulness. She writes that negligence can result from "a pure heart and an empty head" -- for example, if a litigant acting in good faith fails to collect the records of employees who are peripherally connected to the litigation. A heart somewhat less pure (or perhaps a head more empty) can result in grossly negligent or even willful misconduct. A litigant is at least grossly negligent it fails to collect records from key players in pending or reasonably foreseeable litigation or if it destroys relevant email or certain backup tapes.

In deciding the case, Judge Scheindlin rejected the defendants' claim that the plaintiffs had engaged in willful misconduct -- and turned down the defendants' request for dismissal as a sanction -- but still found that each plaintiff had been negligent or grossly negligent. All the plaintiffs had failed to timely issue a written litigation hold directing employees to preserve all relevant records and creating a mechanism for collecting the preserved records for discovery. Each grossly negligent plaintiff also had made one or more of the following mistakes: deleting or failing to preserve and collect electronic documents, failing to request documents from key players in the litigation, delegating search efforts without any management supervision, destroying backup data that might have contained the only copies of some key players' documents, and describing their discovery efforts in misleading or inaccurate ways in court submissions.

N*?y?%

Sat, 20 Feb 2010 13:19:07 GMT

In my CLEs around the country I usually mention at some point my three keys to successful e-discovery. They are the top three things to do in order to do e-discovery right. All involve fundamental changes to the way most lawyers practice. For that reason, these suggestions seem novel and difficult, if not impossible to [...]

Court Sanctions Plaintiff for Accessing Password-Protected Documents and Other Violations, Reduces Sanction based on Behavior of Plaintiff's Counsel and Defendant

Fri, 19 Feb 2010 22:53:01 GMT

Lawson v. Sun Microsystems, Inc., 2009 WL 5842136 (S.D. Ind. Oct. 16, 2009); Lawson v. Sun Microsystems, Inc., 2010 WL 503054 (S.D. Ind. Feb. 8, 2010)

Where plaintiff accessed privileged, password-protected documents in defendant’s production, “carelessly” produced poor and incomplete copies of relevant taped conversations, and intentionally lied regarding taped conversations in deposition, the magistrate judge declined to recommend dismissal but recommended monetary sanctions instead. The amount of sanctions recommended was reduced by 25% upon the magistrate judge’s finding that plaintiff’s counsel mitigated plaintiff’s violations by ignoring plaintiff’s emails regarding the password-protected documents. The magistrate judge also found plaintiff’s “improprieties” mitigated “by the part [the defendant] and its counsel played in creating this perfect storm of a disaster” and reduced the sanction an additional 25%. While the magistrate judge recommended plaintiff’s counsel be ordered to pay monetary sanctions equal to a 25% reduction in plaintiff’s maximum sanction, the district court declined to adopt that recommendation. The recommendation was otherwise adopted.

In the course of discovery, defendant produced to plaintiff a hard drive containing large volumes of electronically stored information, some of which was privileged and password-protected. Prior to this production, the parties entered into a protective order and an agreement that plaintiff would provide defendant with fourteen days notice before using any information on the hard drive and that defendant would have seven days to object. It was apparently upon these agreements that defendant relied when producing privileged materials as well as a prior arrangement in which plaintiff had been allowed to return his company issued computer with privileged material encrypted to maintain its protection. Plaintiff's counsel denied the existance of any agreement regarding password-protected documents.

In the transmittal letter accompanying the hard drive, defendant indicated the password-protected documents were privileged. Later, there was disagreement as to whether this letter was provided to plaintiff by his attorneys.

Plaintiff accessed the password-protected documents. Thereafter, he sent an email to counsel disclosing his access with the subject line “Password protected files – Unlocked!” Although disputed amongst the parties, the magistrate judge determined that plaintiff’s attorneys did not open the email and remained unaware of plaintiff’s access. It was also determined that counsel did not see a later email in which the “unlocked documents” were mentioned. Counsel later withdrew.

Upon learning of plaintiff’s activities, defendant moved for sanctions. In addition to the password-protected documents, the magistrate judge was asked to consider defendant’s allegations that plaintiff intentionally produced an incomplete and low quality copy of a recorded conversation, failed to reveal the existence of other relevant tape recordings, and lied about those recordings in deposition.

Sifting through the contradictory assertions from all interested parties (plaintiff, former counsel, and defendant), the court found the following:

plaintiff’s attorneys did not read the email from plaintiff indicating he had accessed password-protected materials;
plaintiff did not speak with his attorneys prior to accessing the password-protected documents;
plaintiff intentionally accessed and viewed password-protected documents meant to remain confidential and privileged;
plaintiff’s attorneys had no knowledge of plaintiff’s activities;
plaintiff acted carelessly in responding to discovery when he produced an incomplete and poorly reproduced copy of a relevant taped conversation;
plaintiff’s failure to disclose the existence of other taped conversation was “careless and sloppy” but not intentional;
plaintiff intentionally lied about taped conversations at deposition.

The magistrate judge held that Rule 37 and “the inherent power of the court” provided authority for sanctions and that sanctions were appropriate. Plaintiff’s inappropriate behavior was “mitigated” however, by his own behavior, as well as that of his attorneys and the defendant. Specifically, for example, the magistrate judge credited plaintiff with his decision to volunteer certain information at deposition and his apparent lack of effort to hide his access to the privileged documents (as evidenced by his email to counsel). The magistrate judge also found plaintiff’s behavior mitigated by that of his attorneys because counsels’ failure to read or respond to plaintiff’s email “contributed to the situation” and because “[Plaintiff] cannot be blamed for the lack of attention paid to him by his attorneys.” Finally, the magistrate judge found that defendant’s behavior mitigated that of the plaintiff where defendant and defense counsel contributed to the “perfect storm of a disaster” by failing to remove the privilege documents from production in the first place, among other things.

Accordingly, having determined the maximum appropriate sanction to be $54,500, the magistrate judge recommended plaintiff’s sanction be discounted by 25% to account for the contributory behavior of his counsel and recommended counsel be ordered to pay an amount equal to the reduction. Similarly, the magistrate judge further reduced plaintiff’s sanction by another 25% to account for defendant and defendant's counsel's contributions to the problem.

Upon the district court’s consideration of these recommendations, counsels’ objections to the recommended sanction were sustained and the order of sanctions modified to reflect that counsel should not be sanctioned.

A copy of the magistrate judge’s Report and Recommendation is available here.

A copy of the district court’s opinion is available here.

Electronic Discovery - cover of the third book on the subject by Ralph Losey

Tue, 16 Feb 2010 15:19:30 GMT

My new book has just been published by West Thomson and is called Electronic Discovery: New Ideas, Trends, Case Law, and Practices. This is my third book in as many years and is, I think, my best. It is 448 pages and provides a good reference for anyone in the world of e-discovery. The new [...]

Footnote Nugget

Tue, 16 Feb 2010 01:28:51 GMT

In a recent Court of Chancery letter opinion in Dawson v. Pittco Capital Partners, CA No. 3148-CC, at page 2 in footnote 3, Chancellor Chandler wrote:

Federal Court decisions are “of great persuasive weight in the construction of parallel Delaware rules” due to the analogous nature of the Court of Chancery Rules and the Federal Rules of Civil Procedure. Cede & Co. v. Technicolor, Inc., 542 A.2d 1182, 1191 n.11 (Del. 1988).

Interesting. Or, as Jimmy Stewart would say, "Well, that's very in'resting."

Unfair and Deceptive Trade Practices in Connecticut

Sun, 14 Feb 2010 21:41:17 GMT

Each state generally has some type of consumer protection or trade protection law that seeks to prohibit and punish unfair conduct and deceptive acts in trade or commerce. Most states, including Connecticut, model their laws after section 5 of the Federal Trade Commission Act. Section 5 of the FTC Act prohibits unfair or deceptive acts and unfair competition in the marketplace.

Connecticut's Unfair Trade Practices Act (commonly referred to as CUTPA by attorneys and judges), is codified at Connecticut General Statutes section 42-110b. CUTPA states, in relevant part, that:

(a) No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.

(b) It is the intent of the legislature that . . . the courts of this state shall be guided by interpretations given by the Federal Trade Commission and the federal courts to Section 5 . . . .

(c) The commissioner may . . .establish by regulation acts, practices or methods which shall be deemed to be unfair or deceptive. . . Such regulations shall not be inconsistent with the rules, regulations and decisions of the federal trade commission and the federal courts . . .

(d) It is the intention of the legislature that this chapter be remedial and be so construed.

CUTPA's provisions can be far reaching for businesses and consumers. For example, under section 42-110g, attorneys who successfully prove a CUTPA violation in Connecticut business litigation may be able to recover attorneys fees, punitive damages, and costs for their clients. CUTPA's provisions also provide for the ability of attorneys to bring class action lawsuits in Connecticut for unfair or deceptive acts. Additionally, courts can order injunctive relief or other equitable remedies for CUTPA violations.

CUTPA's provisions may be enforced by the various State's Attorneys and the Attorney General, such as the AG's recent lawsuit against Net Health over its loss or exposure of personal identifiers (date of birth, social security number) of Connecticut residents. Private citizens and businesses may also bring actions for unfair competition or deceptive acts under CUTPA, including class action lawsuits such as the recent case against AT&T over Internet access.

To establish a violation of CUTPA, attorneys in Connecticut have to prove that their clients suffered "any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110g. . ." Generally speaking, this requirement means Connecticut attorneys have to show that their clients sustained damages as a result of an unfair or deceptive act in trade or commerce.

To determine what constitutes an unfair or deceptive act, Connecticut courts specifically refer back to the Federal Trade Commission and what is commonly referred to as the "cigarette rule." The cigarette rule defines what type of conduct may qualify as unfair and deceptive justifying an award of compensatory or punitive damages. This rule dates back to 1964 and comes from legislative policy making by the Federal Trade Commission concerning requirements for warning labels on cigarette packages.

The three prongs of the cigarette rule are as follows:

whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise-in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness;
whether it is immoral, unethical, oppressive, or unscrupulous;
whether it causes substantial injury to consumers, [competitors or other business persons]. . . .

All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.

It is important to note that not every act or conduct that might seem to fit the criteria will be a violation of CUTPA. For example, generally speaking, mere negligent acts or simple breaches of a contract do not constitute unfair or deceptive acts under CUTPA. It is also important to note that some conduct automatically violates CUTPA or is considered a per se violation, such as failure to follow the Home Improvement Act or to register a trade name.

There are many nuances to CUTPA and the above is only a brief summary. Any business or consumer trying to determine whether they were damaged by conduct constituting a violation of CUTPA should contact a business litigation attorney or the Attorney General's office.

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