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eDiscoveryDaily

Someone Else’s Money – eDiscovery Best Practices

Leave it to Craig Ball to liken lawyers’ delegation of eDiscovery to Prince Akeem’s “royal backside wipers” in the Eddie Murphy movie Coming to America.

In Craig’s blog post E-Discovery and the Zamundan Royal Backside Wipers, he notes “everywhere I’m met with the attitude that electronic discovery isn’t a lawyer’s concern:  ‘It’s something you hire people to do,’ they say.”

“Certainly, we must hire people to do things we cannot possibly do.  But I contend that we hire people to do many things we could learn to do ourselves, and do economically.  Remember Eddie Murphy’s royal backside wipers in Coming to America? All it takes is money to burn; and if it’s someone else’s money, who really cares?”

The problem, as Craig notes, is that lawyers who refuse to educate themselves on eDiscovery and IT concepts run the risk that they may “go the way of the local bookseller and video rental shop”.  “Clients will not pay for Royal Wipers forever, and we should not ask them to do so.”

Craig then proceeds to provide five categories (with over 40 sub-categories) of “top-of-my-head list of lawyer duties” for eDiscovery.  It’s a great list and I won’t steal his thunder – you can click on the link above to view his post and the list.

Working for an eDiscovery provider, you might think that we prefer lawyers to remain ignorant regarding eDiscovery and turn everything over to us.  In fact, I find we get more work from attorneys that understand and appreciate the importance of managing eDiscovery effectively.  Those who understand the issues associated with electronic files, that processing files require a sound process, that you should test your search terms early and that cloud-based eDiscovery is secure are the attorneys who make the best clients as they understand the benefits of the services we provide.  Knowledge is power!

Craig finishes his post relaying the story of a recent speech, where afterward, he was approached by a woman who had expressed “frustration that IT folks use a lot of jargon and initialism when they discuss their work”, to which Craig noted that “perhaps lawyers should learn to speak a little geek”.  “[I]f you’re going to live in France, it makes sense to gain a little fluency in French.”

If not, you may find yourself a bit behind.  Sorry, I couldn’t resist.

So, what do you think?  What do you do to educate yourself on eDiscovery best practices?   Please share any comments you might have or if you’d like to know more about a particular topic.

For more of Craig’s thoughts about lawyers and eDiscovery education, check out his three-part thought leader interview from earlier this year.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Use of Model Order Doesn’t Avoid Discovery Disputes – eDiscovery Trends

In MediaTek, Inc. v. Freescale Semiconductor, Inc. (N.D. Cal. Aug. 28, 2013), when the parties could not agree on search terms, California Magistrate Judge Jacqueline Scott Corley ordered one party to run test searches before lodging objections and required both parties to meet and confer before approaching the court with further discovery disputes.

The parties in this patent infringement matter “took steps to rein in” the exorbitant expenses of e-discovery in patent litigation by adopting the Federal Circuit’s Model E-Discovery Order. The parties proposed, and the district court approved, limitations on discovery. In addition to other limitations on interrogatories and depositions, they also agreed to limits on e-mail production. Specifically, they agreed that “production would be phased to occur after basic document production, that such production would be limited to seven custodians per producing party, and that each requesting party would ‘limit its email production requests to include no more than fifteen (15) search terms per producing party for all such requests, with no more than seven (7) search terms used to search the email of any one custodian.’”

However, as the court noted, the “parties’ laudable efforts at controlling discovery costs . . . imploded.” As discovery closed, the plaintiff filed 10 joint discovery letters seeking additional discovery from the defendant; simultaneously, the defendant filed a non-joint letter to “‘preserve its right to discover [] withheld documents.’”

MediaTek asked the court to order Freescale to produce the e-mail of seven custodians based on 15 search terms and “further identified the 7 search terms to be applied to each custodian’s email as required by the stipulated ESI Discovery Order.” Freescale objected and refused to run any searches.

The court addressed certain search terms, ruling as follows:

“The search terms which are variants of the word “United States,” including “domestic,” are considered one search term. The terms”*mcf* OR *mx* OR *mpc* OR *ppc* OR *pcf* OR *sc*” are not variants of the same word; instead, each term applies to a different accused product. Accordingly, each is a separate search term. The same is true for *845* OR *331* etc.; each refers to a different patent, not a variant of the same word. Thus, for example, MediaTek’s first proposed search term (Dkt. No. 133-1 at 3) is actually six search terms.”

The judge ruled the remaining objections to search terms and date ranges premature. Although Freescale claimed the terms were overly broad, it had “not run a test search on a single identified custodian for any of the proposed searches.” If it were to do so, it might learn “that the searches will not return a disproportionately burdensome number of hits.” If, on the other hand, they returned too many irrelevant documents, then the parties needed to work together to narrow the requests.

Therefore, the court ordered MediaTek to provide amended search requests and for Freescale to run test searches before asserting that any request was too broad. If Freescale did find the requests objectionable, the parties had to “meet and confer in person.” As the court noted, the “[t]he process is designed to be collaborative, something that has not occurred up to this point.”

So, what do you think?  Should courts require producing parties to test searches before declaring them overly broad?   Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: Applied Discovery (free subscription required).  For eDiscovery news and best practices, check out the Applied Discovery Blog here.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

New Survey Sheds Light on How Corporate Legal Departments Handle Outsourcing – eDiscovery Trends

These days, it seems as though every company is outsourcing work overseas.  Are corporate legal departments following suit?

Only to a point, according to a new survey available from ALM Legal Intelligence and discussed on David Hechler’s article on Corporate Counsel (The 2013 Legal Process Outsourcing Survey).  According to the article, “The LPO industry is like sex: There’s plenty of talk about it, but no one knows what goes on behind closed doors. Vendors will tell you that it’s really taking off—or is about to. They cite numbers in the billions of dollars, but these always seem to be projections.”

So, as the author notes, “we decided to ask corporate law departments (but not their law firms) to tell us about their experiences. We created an online survey and sent it out to lots of departments. We also posted links on CorpCounsel.com and invited readers to click in. And we asked not only whether they’ve made the leap, but, for those who have, where they’re sending work, what kind of work they outsource, what motivated them, and how they feel about the results.”

Here are some of the published results:

  • 54 percent of the respondents have outsourced legal work at some point;
  • Of the respondents who have outsourced legal work, 26 percent were “very satisfied” with the results, 41 percent were “satisfied”, 29 percent were “somewhat satisfied” and only 3 percent were “not at all satisfied” – meaning that over 2/3 of the respondents were at least satisfied with the work performed;
  • 65 percent of the respondents who have outsourced legal work have only done so within the US, while 35 percent have outsourced abroad (64 percent of those have sent work to India);
  • Document review and electronic discovery were the most frequently cited types of work being outsourced;
  • Asked why they outsourced legal work, fully 35 percent said “to test the idea.” This was the third most common reason, behind “lowering costs” and “reducing the time required to complete the work.”

Based on the survey, it appears that, while more organizations outsource legal work than don’t, most still haven’t dipped their toe in overseas waters (at least yet).

The full survey is available from ALM Legal Intelligence here for $599.

So, what do you think?  Did you expect overseas outsourcing to be more prevalent?   Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Need to Better Understand Litigation? This White Paper is for You – eDiscovery Best Practices

If you enjoyed Jane Gennarelli’s Litigation 101 for eDiscovery Tech Professionals series that was published recently on this blog, now you can get that same information (and more) in a consolidated, easy-to-reference white paper!

The white paper, entitled An Introduction to Litigation for eDiscovery Professionals, covers many of the things that litigation support professionals need to know to provide greater value to the attorneys that they support, including:

  • Bare-Boned Basics of different types of litigation;
  • Types of Legal Documents;
  • Types of Parties involved in a case;
  • Determining Jurisdiction for the case;
  • Initiating the Case and Defendant’s Response, which could include their own claims filed;
  • Establishing Guidelines via Meet and Confer and Case Management Conference;
  • Vehicles for Gathering Information during discovery;
  • What gets Turned Over and What is Withheld;
  • A review of the EDRM steps for Handling Discovery Documents;
  • Information about Settlements, Pre-Trial Motions and Pre-Trial Conference;
  • A comprehensive look at the components and phases of a Trial;
  • Circumstances for Appeal and process for proceeding with an appeal;
  • Appendices for mechanisms for Alternative Dispute Resolution and also Types of Litigation.

The white paper presents many of the topics covered in Jane’s ‘Litigation 101’ series, as well as some additional material not previously presented.  In addition to being a terrific resource for eDiscovery professionals, the white paper also covers the eDiscovery life cycle, making it a useful resource for all legal professionals.  Enjoy!

To download a copy of the white paper, click here.

So, what do you think?  Do you understand the “ins and outs” of litigation?   Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Great Resource for Status of State eDiscovery Rules – eDiscovery Trends

Ever wonder about your state and what eDiscovery rules it has?  Or if it has any at all?  The graphic of the US map you see here provides the key.

Winston & Strawn has a handy interactive map of the US (which looks just like this graphic) that enables you to click on any state (assuming that it has any information about rules) and get a page with links to the actual rules for that state (or documents related to rules being considered).  Wonder what the colors mean?  Here’s a key:

  • Green: This state essentially follows the Federal Rules of Civil Procedure (FRCP) eDiscovery model.
  • Blue: This state follows its own independent eDiscovery model.
  • Yellow: This state is in the process of undertaking and/or considering eDiscovery rules.
  • Orange: This state has not undertaken eDiscovery rulemaking activity to date.

Simply click on a state and you’ll be taken to a page with a listing of rules, orders, sample orders, etc., which, in turn, are also interactive and clickable.  For example, here is the list for Texas, my home state:

State Rules

  • TX_R. CP 196.4 Electronic or Magnetic Data

Federal Rules

  • TX_ S D LR Patent Cases Rules of Prac
  • TX_ S. D. Ct Procedures of Lee Rosenthal
  • TX_ S.D. Ct Procedures of J. Atlas
  • TX_E.D. Notice of Scheduling Conf
  • TX_N. D. District Misc Order No. 62

There are a few states that don’t seem to be clickable, but they are “orange states”, so it’s my guess that they simply have no documents available for that state.  This is a very useful and handy guide to eDiscovery rules in each of the states – well done, Winston & Strawn!

So, what do you think?  Can you believe that there are still apparently ten states with no eDiscovery rules?   Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Apple Wins Case, But Loses its Bid to Have Most of its Costs Covered – eDiscovery Case Law

In Ancora Technologies, Inc. v. Apple, Inc., (N.D. Cal. Aug. 26, 2013), California District Judge Yvonne Gonzalez Rogers granted in part and denied in part Ancora’s Motion for Review of Clerks’ Order on the Bill of Costs of prevailing party Apple, reducing the awarded amount from $111,158.23 down to $20,875.48, including disallowing over $71,000 in storage and hosting costs.

On May 13 of this year, after the court granted Apple summary judgment in the case, Apple filed with the Clerk of the Court a Bill of Costs seeking $116,366.87 in costs, including $94,400.71 for “fees exemplification and the costs of making copies.”  On May 28, Ancora filed objections to that Bill of Costs.  Ancora specifically objected to recovery of many of Apple’s fees based on the Supreme Court’s recent decision in Taniguchi v. Kan Pacific Saipan, Ltd, 132 S. Ct. 1997, 182 L. Ed. 2d 903 (2012), which had reversed the Ninth’s Circuit’s decisions reading the items of recoverable costs under Rule 54(d)(1) and Section 1920 broadly.  On June 24, the Clerk of the Court issued an order awarding Apple $111,158.23, leading to the motion by Ancora discussed in this ruling.

In its motion, Ancora sought review of the Clerk’s Order on Apple’s Bill of Costs as to six categories of costs.  Here are the categories and the judge’s ruling regarding each:

  1. Conversion of documents produced by Ancora in eDiscovery: As Judge Gonzalez noted, “Ancora produced many documents in a format that was not ‘text searchable’ and did not provide the associated load files or OCR data in a .TXT file format”, which was contrary to their own production format agreement.  So, the judge denied the motion and upheld Apple’s request for $3,471.61 for conversion costs.
  2. Storage and hosting of electronic documents: Apple sought “online hosting costs for several hundred gigabytes (GB) of electronic document storage, though it only produced documents amounting to around 3.5 GB of data”. Finding that “Taniguchi did not directly address the issue of taxing e-discovery costs, it did establish the principle that section 1920 does not cover all costs that are necessarily incurred in litigation, but only a narrow subset”, Judge Gonzalez upheld Ancora’s motion and reduced Apple’s award by $71,611.52.
  3. “Custom work” and “replacement” costs for electronic documents: Apple claimed costs incurred for “replacing corrupted electronic documents and resolving technical issues during the processing of documents for production”, but Judge Gonzalez found no support or justification for the costs and reduced Apple’s award by $5,375.46.
  4. Printing of documents in connection with deposition preparation and Markman hearing: Finding that “Local Rule 54-3(d)(3) allows the ‘cost of reproducing disclosure of formal discovery documents when used for any purpose in the case’”, Judge Gonzalez upheld Apple’s request for $3,998.05 for those costs.
  5. Costs related to visual aids, including equipment rental and graphics services: Again, adopting the narrow interpretation of Taniguchi, Judge Gonzalez denied $13,097.75 of the $13,227.95 requested.
  6. Costs associated with deposition transcripts: With regard to deposition transcripts, because “Local Rule 54-3(c)(1) allows costs for an original and a copy”, Judge Gonzalez upheld Apple’s request for $4,891.95, which included a second copy.

So, what do you think?  Were the correct decisions made regarding cost reimbursement?   Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Electronic Discovery on a First Date – eDiscovery Trends

Amy Bowser-Rollins in her excellent Litigation Support Guru blog raised an interesting question this week.  How should we describe “electronic discovery” to someone who has never heard the term before or had very little exposure to the legal industry?

In her post Electronic Discovery on a First Date (you should especially check it out for the cute animation), she identifies various scenarios (a recent college graduate you just hired, curious or confused family members, your students, a stranger at a cocktail party) to answer the “what do you do for a living” question if you’re a litigation support provider.  Some of us refer to this as the “elevator speech” in that you should be able to describe what you do in the time span of an elevator ride (no more than thirty seconds).

Amy tackles the question by breaking down “electronic discovery” into components, as follows:

  • The practice of law
  • Attorneys, more specifically litigators
  • The discovery phase of a litigation matter, more specifically identifying, collecting, reviewing and producing documents
  • Client documents, more specifically documents in electronic format

I might argue that “electronic discovery” sometimes also includes searching and reviewing the documents produced to you in litigation as well, not always just your client documents, but the components that Amy uses are certainly predominant for a litigation support professional and certainly fit the standard Electronic Discovery Reference Model (EDRM) that most use when they think of electronic discovery.

She then provides some examples of how she might use those components to answer the question.  She uses the easiest document type for the layperson to identify with – email – to describe how she (or any typical litigation support person) helps litigators with the discovery process.  I won’t steal her thunder – check out the link to her post above to see the examples that she proposed.  Obviously, we all know that we work with more than just emails, so the example descriptions might be a bit oversimplified, but for the newbie, that’s probably the right way to start.

I can relate to Amy’s question with recent examples – explaining to my girlfriend on our first date what I do (a true “first date” scenario!) and explaining to a couple of recent entry-level candidates for positions at CloudNine Discovery.  It’s a question that many of us wrestle with and a timely topic.  Thanks, Amy!

So, what do you think?  If you’re a litigation support or eDiscovery professional, how do you describe to others what you do?   Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

If You’re Feeling “Innovative”, This is the Conference For You – eDiscovery Trends

When it comes to informative sites regarding eDiscovery, IT-Lex is one of our favorites.  We’ve referenced several of their stories over the past couple of years and have also conducted a two part thought leader interview with their president and editor-in-chief, Adam Losey.  Now, IT-Lex is hosting their first conference and, we’re happy to have Samir Mathur, Managing Director and General Counsel of IT-Lex to provide a guest post to tell you more about the their inaugural Innovate conference next Thursday and Friday, October 17 and 18:

IT-Lex is an Orlando-based not-for-profit focused on the advancement of technology law, and next week, we’re hosting our inaugural Innovate conference at the newly-opened Alfond Inn, in beautiful Winter Park, Florida. We’ve put together an impressive agenda, featuring panels covering electronic discovery, privacy and data security, and social media, and speakers including a member of the FBI’s Cyber Intrusions Squad, and – government shutdown permitting –  Peter Miller, the Chief Privacy Officer of the Federal Trade Commission.

But this being eDiscoveryDaily, I figure that anyone reading this is probably more interested in our eDiscovery-themed panels. We’re starting strong on Thursday, October 17th: Anthony Mendenhall, a 2013 law graduate from the University of Tennessee, won the first IT-Lex/Foley & Lardner writing contest, with an essay about whether our current discovery system, where the producing party is generally expected to pay for everything, violates procedural due process. It’s an interesting argument, and so Innovate will kick off with Anthony talking about his essay, and then discussing it with such luminaries as Judge Facciola, Judge Nolan and Ken Withers of the Sedona Conference ®.

The following morning, Friday October 18th, will begin with the eDiscovery A-Team, Jason Baron, Maura Grossman and Ralph Losey, getting together for the first time to talk about predictive coding. Will it be the game-changer that some hope it will, making review faster and simultaneously more cost-effective? We’ll see what these three all-stars have to say.

Later that day, we’ll have a couple of panels that will really appeal to the more advanced eDiscovery folks out there. Firstly, a discussion of Preservation and Collection: best practices to minimize the chance of spoliation; and again, keep costs down. Later is the panel entitled Clawbacks, Cooperation and Competence, where our esteemed panelists will discuss clawback agreements: a possible way of saying goodbye to the privilege log. They’ll also explain why “cooperation” doesn’t have to be a dirty word or a foreign concept to litigators.

Innovate will close out with a Judicial Roundtable, at which our guests from the bench will offer their thoughts on the state of technology law today, and our audience will be able to ask any questions of the panel. To that end, any attendee can submit a question for any panel ahead of time by emailing innovate@it-lex.org, or tweeting us at @ITLexOrg. In order to keep things interactive, we’re not having any Power Point-based presentations – we want to emphasize discussion and audience involvement.

If you’re reading this post, then you’re likely already the kind of person whom we’d love to see at the conference! Please head to register online, and we look forward to welcoming you to Orlando and to Innovate.

Thanks, Samir, for the information!  It sounds like a very interesting and informative conference.  Check it out if you’re going to be in the area in Florida.

So, what do you think?  Will you be attending the inaugural Innovate conference?   Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

For Successful Discovery, Think Backwards – eDiscovery Best Practices

The Electronic Discovery Reference Model (EDRM) has become the standard model for the workflow of the process for handling electronically stored information (ESI) in discovery.  But, to succeed in discovery, regardless whether you’re the producing party or the receiving party, it might be helpful to think about the EDRM model backwards.

Why think backwards?

You can’t have a successful outcome without envisioning the successful outcome that you want to achieve.  The end of the discovery process includes the production and presentation stages, so it’s important to determine what you want to get out of those stages.  Let’s look at them.

Presentation

As a receiving party, it’s important to think about what types of evidence you need to support your case when presenting at depositions and at trial – this is the type of information that needs to be included in your production requests at the beginning of the case.

Production

The format of the ESI produced is important to both sides in the case.  For the receiving party, it’s important to get as much useful information included in the production as possible.  This includes metadata and searchable text for the produced documents, typically with an index or load file to facilitate loading into a review application.  The most useful form of production is native format files with all metadata preserved as used in the normal course of business.

For the producing party, it’s important to save costs, so it’s important to agree to a production format that minimizes production costs.  Converting files to an image based format (such as TIFF) adds costs, so producing in native format can be cost effective for the producing party as well.  It’s also important to determine how to handle issues such as privilege logs and redaction of privileged or confidential information.

Addressing production format issues up front will maximize cost savings and enable each party to get what they want out of the production of ESI.

Processing-Review-Analysis

It also pays to determine early in the process about decisions that affect processing, review and analysis.  How should exception files be handled?  What do you do about files that are infected with malware?  These are examples of issues that need to be decided up front to determine how processing will be handled.

As for review, the review tool being used may impact production specs in terms of how files are viewed and production of load files that are compatible with the review tool, among other considerations.  As for analysis, surely you test search terms to determine their effectiveness before you agree on those terms with opposing counsel, right?

Preservation-Collection-Identification

Long before you have to conduct preservation and collection for a case, you need to establish procedures for implementing and monitoring litigation holds, as well as prepare a data map to identify where corporate information is stored for identification, preservation and collection purposes.

As you can see, at the beginning of a case (and even before), it’s important to think backwards within the EDRM model to ensure a successful discovery process.  Decisions made at the beginning of the case affect the success of those latter stages, so don’t forget to think backwards!

So, what do you think?  What do you do at the beginning of a case to ensure success at the end?   Please share any comments you might have or if you’d like to know more about a particular topic.

P.S. — Notice anything different about the EDRM graphic?

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Leaving Your Hard Drives in a Rental House is Negligent, Court Rules – eDiscovery Best Practices

In Net-Com Services, Inc. v. Eupen Cable USA, Inc., No. CV 11-2553 JGB (SSx) (C.D. Cal. Aug. 5, 2013), the plaintiff’s destruction of evidence was negligent where its principal failed to take steps to preserve evidence he had stored in a home he rented to nonaffiliated lessees.

A principal of the plaintiff, Steve Moffatt, had custody and control over the company’s documents, which included its financial information. The company was using one accounting system but switched to another when it moved into a new location. When the employee looked for this data and could not find it, he assumed it had been “lost or stolen.” However, he did not report the loss to the company’s insurer or to the police.

Over the previous three years that the company was in operation, it was based in Moffatt’s home office. The company went out of business in October 2011, and as the company wound down, Moffatt stored all of the company’s computer hardware and software in his garage. Around that same time, in September or October 2011, Moffatt rented his home. The only precaution he took was to instruct his lessees not to throw any equipment or software away. Despite this instruction, he drove by the home either in September or October and noticed that the renters “had put a ‘big pile of office equipment and everything else in the front yard’” and were throwing them in dumpsters. As associate retrieved the computers’ hard drives from the renters’ trash in September 2011. The hard drives stored the company’s most recent accounting system; another back-up drive stored the same information, but it was most likely thrown out as well.

In 2012, during discovery, the court granted Eupen’s motion to compel “production of ‘missing accounting information,’ including financial data believed to be stored on purportedly ‘dead’ hard drives. Net-Com responded that the data “may no longer exist” and that its principals had had “no luck” accessing the information on the drives. The court ordered Net-Com to produce the missing information, aside from the company’s federal and state tax returns. It also required Net-Com “to produce ‘the computer hard drives containing potentially relevant ESI that Net-Com has been unable to restore’ to allow Eupen USA ‘to test Net-Com’s assertion that the information is inaccessible.’”

In July 2013, Eupen filed a motion for sanctions based on the loss of data and suggested that Net-Com “be precluded from offering evidence of its damages because its production of financial data was incomplete and insufficient due to the loss of information ‘allegedly contained on a computer hard drive that was apparently no longer functional.’” In response, Net-Com argued that no evidence existed that he hard drives had been “‘irreparably damaged’ such that their contents [were] irretrievable.’” The court declined to preclude the evidence but ordered Net-Com to send the hard drives to a vendor for forensic analysis.

Net-Com complied and submitted the drives to a vendor, Ai Networks. The vendor found “‘recoverable data on at least one of the hard drives,’” said it could retrieve it within three weeks, and estimated the cost to recover it would be between $2,000 and $3,000.

The court found that Net-Com’s duty to preserve arose at least by February 8, 2011, when it filed the lawsuit. The complaint alleged that Net-Com’s damages amounted to “millions of dollars”; therefore, the complaint placed the company’s financial and accounting data at issue. But “seven months after filing suit, Moffatt effectively abandoned the hardware and software containing Net-Com’s financial records by leaving the equipment and data in a garage in a house he rented out to third parties. Even if the eventual loss and destruction of evidence was not intentional, it was definitely negligent.”

The court found sanctions appropriate, noting that an adverse inference instruction is “‘adverse to the destroyer not because of any finding of moral culpability, but because the risk that the evidence would have been detrimental rather than favorable should fall on the party responsible for its loss.’” Although the court could not yet determine whether Eupen had been prejudiced, it ruled that Net-Com had to “bear the full cost of restoring and producing data on the hard drives” and ordered the company “to restore and produce any relevant data from the subject hard drives within fourteen days of the date of this Order.”

So, what do you think?  Were the sanctions severe enough?   Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: Applied Discovery (free subscription required).  For eDiscovery news and best practices, check out the Applied Discovery Blog here.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.