WHAT YOU NEED TO KNOW ABOUT E DISCOVERY

Transcription

1 WHAT YOU NEED TO KNOW ABOUT E DISCOVERY Presented and Prepared by: Christine A. Heinsz cheinsz@heylroyster.com Edwardsville, Illinois Prepared with the Assistance of: Melanie E. Riley mriley@heylroyster.com Edwardsville, Illinois The cases and materials presented here are in summary and outline form. To be certain of their applicability and use for specific claims, we recommend the entire opinions and statutes be read and counsel consulted. Heyl, Royster, Voelker & Allen PEORIA SPRINGFIELD URBANA ROCKFORD EDWARDSVILLE 2009 Heyl, Royster, Voelker & Allen G-1

2 WHAT YOU NEED TO KNOW ABOUT E-DISCOVERY I. PRODUCING ELECTRONIC DISCOVERY IN ILLINOIS... G-4 A. Defining Documents to Include Electronically Stored Information Illinois Supreme Court Rule 201(b)(1)... G-4 B. Producing in Printed Format Illinois Supreme Court Rule G-4 II. PRODUCING ELECTRONIC DISCOVERY IN FEDERAL COURT... G-4 A. Defining Documents to Include Electronically Stored Information Federal Rules of Civil Procedure, Rule G-4 B. Limitations on Requesting Electronically Stored Information Federal Rules of Civil Procedure, Rule 26(b)... G-5 C. Limitations on Scope of Request for Electronically Stored Information Federal Rules of Civil Procedure, Rule 26(b)... G-5 D. Safe Harbor for Good Faith Implementation of a Document Retention Policy Federal Rules of Civil Procedure, Rule 37(e)... G-5 E. The Process for Requesting and Responding to the Form of E-Discovery Federal Rules of Civil Procedure, Rule 34(b)... G-5 F. E-Discovery Planning and Pre-Trial Conference Federal Rules of Civil Procedure, Rule 26(f) and Rule 37(f)... G-6 G. Party Verification That Discovery Responses Are Complete and Accurate Federal Rules of Civil Procedure, Rule 26(g)... G-6 H. Resolving Disclosures of Privileged or Protected Information Federal Rules of Civil Procedure, Rule 26(b)(5)(B)... G-7 I. Subject Matter Waiver Protection Through Inadvertent Disclosure Federal Rules of Evidence, Rule 502(a) and (b)... G-7 J. Planning for Intentional or Inadvertent Disclosure and Protection from Non-Party Disclosure Federal Rules of Evidence, Rule 502(c) and (d)... G-7 III. E-DISCOVERY CASES: WHAT YOU SHOULD KNOW... G-7 A. Relevant Data That Is Reasonably Accessible Must Be Produced at Plaintiff s Cost Zubulake v. UBS Warburg LLC (Zubulake I), 217 F.R.D. 309 (S.D.N.Y. 2003)... G-7 B. Relevant Data That Is Not Reasonably Accessible May Be Subject to Cost-Shifting Analysis and the Use of Sampling in Cost-Shifting Analysis Zubulake v. UBS Warburg LLC (Zubulake I), 217 F.R.D. 309 (S.D.N.Y. 2003); Zubulake v. UBS Warburg LLC (Zubulake III), 216 F.R.D. 280 (S.D.N.Y. 2003)... G-8 C. A Party s Document Retention Policy Need Not Maintain Electronically Searchable Formats Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340 (1978)... G-9 G-2

3 D. Discovery Issues Parties Must Address Hopson v. Mayor and City Council of Baltimore, 232 F.R.D. 228 (D.Md. 2005)... G-9 E. Courts May Require Federal Rules of Evidence, Rule 702 Expert Advice for Information Technology Issues Equity Analytics, LLC v. Lundin, 248 F.R.D. 331 (D.D.C. 2008)... G-10 F. Requests for Forensic Investigation Requires Reasonable Justification Balboa Threadworks, Inc. v. Stucky, No , 2006 WL (D.Kan. 2006)... G-10 G. Forensic Costs of Discovery Borne by Embezzling Defendant United States v. Gordon, 393 F.3d 1044 (9th Cir. 2004)... G-11 IV. E-DISCOVERY CASES: WHAT YOU SHOULD AVOID... G-11 A. Faulty Document Review Methods Could Result in Waiver of Attorney-Client Privilege or Work Product Protection Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251 (D.Md. 2008)... G-11 B. Circumstances That Triggered the Duty to Preserve, Finding of Bad Faith Not Necessary for Sanctions, and Sanctions Imposed for Improper Litigation Hold Procedures Keithley v. Home Store.com, Inc., No. C , 2008 WL (Aug. 12, N.D.Cal. 2008)... G-12 C. Circumstances That Triggered the Duty to Preserve and Sanctions Imposed for Finding of Fault Regarding Dilatory Electronic Document Production and Partial Compliance with Previous Discovery Order In re Kmart Corp., 371 B.R. 823 (Bkrtcy. N.D.Ill. 2007); Zubulake v. UBS Warburg L.L.C. (Zubulake IV), 220 F.R.D. 212 (S.D.N.Y. 2003)... G-13 D. Monetary Sanctions Imposed for Ineffective Monitoring and Compliance with a Litigation Hold Zubulake v. UBS Warburg LLC (Zubulake V), 229 F.R.D. 422 (S.D. N.Y. 2004).... G-14 E. Failing to Reasonably Investigate and Timely Produce Relevant Information Resulted in Defendants and Their Counsel Sustaining Monetary Sanctions Phoenix Four, Inc. v. Strategic Resources Corp., No. 05-Civ.-4837, 2006 WL (S.D. N.Y. May 23, 2006)... G-14 F. Metadata and Embedded Data, When Relevant, Must Be Produced Williams v. Sprint/United Management Co., 230 F.R.D. 640 (D. Kan. 2005)... G-15 G. Court Disapproval of Data Degradation In Re Verisign, Inc. Securities Litigation, No. C , 2004 WL (N.D. Cal. March 10, 2004)... G-16 H. Parties Have an Obligation to Notify the Opposition of Relevant Evidence Not In Their Control or Possession Silvestri v. General Motors Corp., 271 F.3d 583 (4th Cir. 2001)... G-16 G-3

4 WHAT YOU NEED TO KNOW ABOUT E-DISCOVERY I. PRODUCING ELECTRONIC DISCOVERY IN ILLINOIS A. Defining Documents to Include Electronically Stored Information Illinois Supreme Court Rule 201(b)(1) Illinois Supreme Court Rule 201(b)(1) defines documents to include all retrievable information in computer storage. The Committee comments explain that the amendment of the definition of documents obligates a party to produce on paper those relevant materials which have been stored electronically. B. Producing in Printed Format Illinois Supreme Court Rule 214 Illinois Supreme Court Rule 214 provides that a party served with a written request shall (1)... produce all retrievable information in computer storage in printed form.... (emphasis added). The Committee comments explain that the amendment is intended to prevent parties producing information from computer storage on storage disks or in any other manner which tends to frustrate the party requesting discovery from being able to access the information produced. The facts in Sattar v. Motorola, Inc., 138 F.3d 1164 (7th Cir. 1998) demonstrate a potential reason for the amendment to Illinois Supreme Court Rule 214. In Sattar, an employee sued an employer and two supervisors for religious discrimination under Title VII. In response to discovery requests, the defending employer produced magnetic tapes containing 210,000 pages of information to the plaintiff who had no means to process the tapes information. However, the 7th Circuit held that the district court did not abuse its discretion in denying the plaintiff's motion to compel the employer to reproduce the information in printed format. The district court decided that a more reasonable accommodation was some combination of downloading the data from tapes to conventional computer disks or computer hard-drive and loaning the plaintiff a copy of the necessary software, offering him on-site access to the system, or having parties share the cost of processing the information in paper format. The 7th Circuit held that the district court s solution was entirely reasonable. II. PRODUCING ELECTRONIC DISCOVERY IN FEDERAL COURT A. Defining Documents to Include Electronically Stored Information Federal Rules of Civil Procedure, Rule 34 In General. A party may serve on any other party a request... to produce... items in the responding party s possession, custody, or control [including]: (A) any designated documents or electronically stored information including writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations stored in any medium from G-4

5 which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form.... B. Limitations on Requesting Electronically Stored Information Federal Rules of Civil Procedure, Rule 26(b) Federal Rules of Civil Procedure, Rule 26(b)(2)(C) dictates that the court may limit the frequency or extent of discovery if it determines that: (i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome or less expensive; (ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit.... C. Limitations on Scope of Request for Electronically Stored Information Federal Rules of Civil Procedure, Rule 26(b) Federal Rules of Civil Procedure, Rule 26(b)(2)(B) further specifies limitations on the scope of electronically stored information. The rule states that a party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On a motion to compel discovery or on a motion for a protective order, the rule requires that the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. However, even if that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C). D. Safe Harbor for Good Faith Implementation of a Document Retention Policy Federal Rules of Civil Procedure, Rule 37(e) Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, goodfaith operation of an electronic information system. However, once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold to ensure the preservation of relevant data and documents. Intentional or inadvertent failure to preserve accessible or inaccessible information relevant to the litigation could result in sanctions by the court. E. The Process for Requesting and Responding to the Form of E-Discovery Federal Rules of Civil Procedure, Rule 34(b) Federal Rules of Civil Procedure, Rule 34(b) specifies the procedure both for requesting and responding to e-discovery. The request may specify the form or forms in which electronically stored information is to be produced. Rule 34(b)(1)(C). If the responding party objects to a requested form, or if no form was specified in the request, the responding party must state the form or forms it intends to use. Rule 34(b)(2)(D). G-5

6 Federal Rules of Civil Procedure, Rule 34(b)(2)(E)(i)-(ii) dictates that unless otherwise ordered by the court, [a] party must produce documents as they are kept in the usual course of business, or [i]f a request does not specify form... a party must produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms. However, a party does not need to produce the same electronically stored information in more than one form. F. E-Discovery Planning and Pre-Trial Conference Federal Rules of Civil Procedure, Rule 26(f) and Rule 37(f) In conferring, the parties must... discuss any issues about preserving discoverable information. Rule 26(f)(2). Inter alia, the discovery plan must detail the parties views and proposals on: any issues about disclosure or discovery of electronically stored information, including the form or forms in which it should be produced. Rule 26(f)(3)(C). The parties must also specify what limitations on discovery will be imposed in the litigation. Furthermore, a discovery plan must state the parties views and proposals on: any issues about claims of privilege or of protection as trial-preparation materials, including if the parties agree on a procedure to assert these claims after production whether to ask the court to include their agreement in an order. Rule 26(f)(3)(D). If a party or its attorney fails to participate in good faith in developing and submitting a proposed discovery plan as required by Rule 26(f), the court may, after giving an opportunity to be heard, require that party or attorney to pay to any other party the reasonable expenses, including attorney s fees, caused by the failure. Rule 37(f). G. Party Verification That Discovery Responses Are Complete and Accurate Federal Rules of Civil Procedure, Rule 26(g) Federal Rules of Civil Procedure, Rule 26(g) mandates that [e]very disclosure... and every discovery request, response, or objection must be signed by at least one attorney of record [and that]... [b]y signing, an attorney or party certifies that to the best of the person s knowledge, information, and belief formed after a reasonable inquiry: (A) with respect to a disclosure, it is complete and correct as of the time it is made. Rule 26(g)(1). If a certification violates this rule without substantial justification, the court, on motion or on its own, must impose an appropriate sanction on the signer, the party on whose behalf the signer was acting, or both. The sanction may include an order to pay the reasonable expenses, including attorney s fees, caused by the violation. Rule 26(g)(3). The Advisory Committee Notes to the 1983 Amendments to Rule 26(g) emphasize that an attorney cannot simply pass-through discovery responses from the client to the opposing party. Rule 26(g) imposes an affirmative duty [on the attorney] to engage in pretrial discovery in a responsible manner that is consistent with the spirit and purposes of Rules 26 through 37. However, an attorney is entitled to rely on the assertions of the client (or the client s in-house G-6

7 counsel), provided that the investigation undertaken by the attorney and the conclusions drawn therefrom are reasonable under the circumstances. H. Resolving Disclosures of Privileged or Protected Information Federal Rules of Civil Procedure, Rule 26(b)(5)(B) After being notified of disclosure of privileged or protected information, the receiving party must promptly return, sequester, or destroy the specified information and any copies it has; must not use or disclose the information until the claim is resolved; must take reasonable steps to retrieve the information if the party disclosed it before being notified; and may promptly present the information to the court under seal for a determination of the claim. Furthermore, the producing party must preserve the information until the claim is resolved. I. Subject Matter Waiver Protection Through Inadvertent Disclosure Federal Rules of Evidence, Rule 502(a) and (b) Federal Rules of Civil Procedure, Rule 502 protects litigants from subject matter waiver resulting from inadvertent disclosures. Rule 502 provides that disclosures will not waive privilege or protection as long as the party takes reasonable steps to prevent disclosure and acts promptly to retrieve the disclosure. See also Resolving Disclosures of Privileged or Protected Information, above. J. Planning for Intentional or Inadvertent Disclosure and Protection from Non- Party Disclosure Federal Rules of Evidence, Rule 502(c) and (d) Pursuant to Federal Rules of Civil Procedure, Rule 502, parties may seek a court order providing that disclosures of privileged or protected information, whether intentional or inadvertent, do not constitute waiver. A court order may also provide that a nondisclosure agreement between the litigating parties bind non-parties as well. III. E-DISCOVERY CASES: WHAT YOU SHOULD KNOW A. Relevant Data That Is Reasonably Accessible Must Be Produced at Plaintiff s Cost Zubulake v. UBS Warburg LLC (Zubulake I), 217 F.R.D. 309 (S.D.N.Y. 2003) In Zubulake v. UBS Warburg LLC, a former employee brought an action against her former employer asserting gender discrimination and retaliation claims. The plaintiff sought discovery of relevant s of key employees of her former employer that were stored only on backup disks; the estimated cost was over $292, The court reasoned that because electronic evidence is no less discoverable than paper evidence... the presumption is that the responding party must bear the expense of complying with discovery requests. G-7

8 B. Relevant Data That Is Not Reasonably Accessible May Be Subject to Cost- Shifting Analysis and the Use of Sampling in Cost-Shifting Analysis Zubulake v. UBS Warburg LLC (Zubulake I), 217 F.R.D. 309 (S.D.N.Y. 2003); Zubulake v. UBS Warburg LLC (Zubulake III), 216 F.R.D. 280 (S.D.N.Y. 2003) Despite many of the relevant s being on inaccessible backup tapes that were costly to restore, the Zubulake I court held that cost-shifting may be considered when electronic discovery imposes an undue burden or expense on the responding party. [W]hether production of documents is unduly burdensome or expensive turns primarily on whether it is kept in an accessible or inaccessible format. The court provided examples of accessible and inaccessible formats. Active, online data, nearline data, and offline data were determined reasonably accessible such that defendants should presumptively pay for producing information in these electronically stored mediums. However, backup tapes and data that had been erased, fragmented, or damaged are considered inaccessible and amenable to cost-shifting analysis. In Zubulake I, the court ordered that the plaintiff was to choose five of the total 77 backup tapes to restore at the defendant s expense and the Court would then analyze cost-shifting after the sampling restoration. In Zubulake III after restoration of the five backup tapes, 600 of 1,075 restored s were determined to be relevant. The plaintiff filed a motion to compel production of all remaining backup s at the employer s expense. The United States District Court in the Southern District of New York held that the plaintiff was entitled to discovery of all relevant but that cost-shifting considerations should be examined. The court considered seven factors in its cost-shifting analysis: 1. The extent to which the request is specifically tailored to discover relevant information; 2. The availability of such information from other sources; 3. The total cost of production, compared to the amount in controversy; 4. The total cost of production, compared to the resources available to each party; 5. The relative ability of each party to control costs and its incentive to do so; 6. The importance of the issues at stake in the litigation; and 7. The relative benefits to the parties of obtaining the information. Based on these factors, the court held that the plaintiff should pay 25 percent of the approximately $166,000 total cost of restoring and searching the 77 backup tapes. The court stated that the plaintiff should pay 25 percent of this cost ($58,000) because many of the s restored from the backup tapes may not contain evidence of discrimination, but would still need to be processed. However, the court held that 75 percent of the costs ($108,000) of producing G-8

9 s restored from the 77 backup tapes should be borne by the defendant employer because the restored s would no longer be inaccessible and the employer had the exclusive ability to control the costs of reviewing the documents and determining their relevance. C. A Party s Document Retention Policy Need Not Maintain Electronically Searchable Formats Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340 (1978) In Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 98 S.Ct (1978), the plaintiffs brought a class action against an open-end investment fund, its management corporation, and others to recover the amount of the artificially inflated price each plaintiff had paid for fund shares. The plaintiffs sought a list of the putative class members' names and addresses that would require a third party to sort manually through many records, keypunch 150,000 to 300,000 computer cards, and create several new computer programs.... as no program existed to effectively retrieve the information requested by plaintiffs. Plaintiffs argued that defendant should bear the costs of compiling the list because had the defendant used different systems, the compilation cost could have been substantially less. However, the Supreme Court rejected this argument and held that a business should not be penalized for not maintaining records in the form most convenient to some potential future litigants whose identity and perceived needs could not have been anticipated. D. Discovery Issues Parties Must Address Hopson v. Mayor and City Council of Baltimore, 232 F.R.D. 228 (D.Md. 2005) In Hopson v. Mayor and City Council of Baltimore, 232 F.R.D. 228 (D.Md. 2005), the court explained that, at a minimum, the following issues should be discussed by the parties regarding an electronic discovery plan: the type of information technology systems in use and the persons most knowledgeable in their operation; preservation of electronically stored information that may be relevant to the litigation; the scope of the electronic records sought (i.e. , voice mail, archived data, back-up or disaster recovery data, laptops, personal computers, PDA's, deleted data) the format in which production will occur (will records be produced in native or searchable format, or image only; is metadata sought); whether the requesting party seeks to conduct any testing or sampling of the producing party's IT system; the burdens and expenses that the producing party will face based on the Rule 26(b)(2) factors, and how they may be reduced (i.e. limiting the time period for which discovery is sought, limiting the amount of hours the producing party must spend searching, compiling and reviewing electronic records, using sampling to search, rather than searching all records, shifting to the producing party some of the production costs); G-9

10 the amount of pre-production privilege review that is reasonable for the producing party to undertake, and measures to preserve post-production assertion of privilege within a reasonable time; and any protective orders or confidentiality orders that should be in place regarding who may have access to information that is produced. Recognizing the discovery burden imbalance between plaintiffs and defendants in certain types of cases, the Hopson court went on to advise the plaintiffs to have reasonable expectations as to what should be produced by the defendant. E. Courts May Require Federal Rules of Evidence, Rule 702 Expert Advice for Information Technology Issues Equity Analytics, LLC v. Lundin, 248 F.R.D. 331 (D.D.C. 2008) In Equity Analytics, LLC v. Lundin, 248 F.R.D. 331 (D.D.C. 2008), when faced with computer technology arguments beyond its understanding, the court ordered a forensic expert to prepare an affidavit explaining why the defendant s proposed search of his computer would be insufficient to find relevant evidence. In Equity, the defendant, a former employee, was alleged to have illegally accessed his former employer s corporate systems eighteen times over a 90-day period and potentially reviewed and/or copied confidential information. After the employee s alleged clandestine access, the defendant employee installed a new operating system upon his file structure. The plaintiff argued that the defendant s proposed keyword and file type searches would be insufficient to determine whether the employer s confidential information had been accessed. The court explained that determining whether a particular search methodology, such as keywords, will or will not be effective certainly requires knowledge beyond the ken of a lay person (and a lay lawyer) and requires expert testimony that meets the requirements of Rule 702 of the Federal Rules of Evidence. See also United States v. O'Keefe, 537 F. Supp. 2d 14, 24 (D.D.C. 2008). F. Requests for Forensic Investigation Requires Reasonable Justification Balboa Threadworks, Inc. v. Stucky, No , 2006 WL (D.Kan. 2006) In Balboa Threadworks, Inc. v. Stucky, No , 2006 WL (D.Kan. March 24, 2006), the court had to decide whether to permit the plaintiffs request for forensic copies of the computer hard drives of the defendant husband and wife. In Balboa, the plaintiffs asserted that defendants wrongfully copied digital embroidery designs and then sold the designs to at least one third party. The Balboa court stressed that while it is not unusual for a court to enter an order requiring the mirror imaging of the hard drives of any computers that contain documents responsive to an opposing party's request for production of document... [c]ourts have been cautious in requiring the mirror imaging of computers where the request is extremely broad in nature and the connection between the computers and the claims in the lawsuit are unduly vague or unsubstantiated in nature. In finding that mirrored image copies should be made at the plaintiffs expense, the court explained that because the alleged infringement in this case is G-10

11 claimed to have occurred through the use of computers to download copyrighted material, the importance and relevance of computer evidence is particularly important. G. Forensic Costs of Discovery Borne by Embezzling Defendant United States v. Gordon, 393 F.3d 1044 (9th Cir. 2004) In U.S. v. Gordon, 393 F.3d 1044 (9th Cir. 2004), an employer, after discovering missing stock shares, suspected the defendant was embezzling from the company and requested his laptop computer for examination. The employer specifically instructed the defendant not to delete any information from the hard drive before the examination. Despite this instruction, a computer forensic analysis revealed that the defendant attempted to overwrite files on the computer by running evidence eliminator, a software wiping program, at least five times before turning over the computer to his employer. The defendant was convicted of embezzlement and ordered to reimburse the employer for a portion of the investigation costs. On appeal, the defendant argued that the trial court should not have awarded the employer investigation costs. The Appellate Court rejected this argument noting that the defendant had purposefully covered his tracks as he concealed his numerous acts of wrongdoing from [his employer] over a period of years. The Appellate Court held that the employer cannot be faulted for making a concerted effort to pick up his trail and identify all the assets he took amid everything he worked on. IV. E-DISCOVERY CASES: WHAT YOU SHOULD AVOID A. Faulty Document Review Methods Could Result in Waiver of Attorney-Client Privilege or Work Product Protection Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251 (D.Md. 2008) In Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251 (D.Md. 2008), the ineffective review procedures implemented by defendant attorneys resulted in the waiving of attorney-client privilege or work product protected status for electronically stored documents that had previously been voluntarily produced by defendant pursuant to discovery requests. The defendant attorneys claimed that in order to meet time deadlines, they could not review the content of documents whose title page did not imply potential privilege or protection and whose content they claimed were not text-searchable. The plaintiff countered that the majority of the electronically stored documents were in an Adobe.pdf format that was searchable using readily available computer search tools and that the remainder of the documents not in a searchable.pdf format could have been made searchable using readily available OCR [optical character recognition] software, i.e. computer software that converts non-searchable images of text into searchable text. In denying the defendant s privilege claims, the court explained that the defendants had not taken reasonable steps to protect the privilege before disclosure by failing to have qualified persons construct the search criteria for privileged documents and by not testing the results to determine whether they were under or over inclusive. Furthermore, the court explained that the defendants had not acted reasonably promptly in correcting the error after disclosure. G-11

12 B. Circumstances That Triggered the Duty to Preserve, Finding of Bad Faith Not Necessary for Sanctions, and Sanctions Imposed for Improper Litigation Hold Procedures Keithley v. Home Store.com, Inc., No. C , 2008 WL (Aug. 12, N.D.Cal. 2008) In Keithley v. Home Store.com, Inc., No. C , 2008 WL (N.D.Cal. Aug. 12, 2008), a patent infringement case regarding internet software for accessing industry specific information, such as real estate properties for sale through multimedia personal computers, the plaintiff filed a motion to impose sanctions for defendant s spoliation of evidence, i.e. source code; early architectural, design and implementation documents; and reports. Setting the tone of the decision, the court stated that the defendant s conduct during discovery was the most egregious this Court has seen. The court stopped short of the extreme measure of terminating the case in favor of the plaintiff because it found that the defendant had not engaged in deliberate spoliation. The court recognized that, pursuant to Federal Rules of Civil Procedure, Rule 37, the lack of bad faith does not immunize a party or its attorney from sanctions, although a finding of good or bad faith may be a consideration in determining whether imposition of sanctions would be unjust.... The Keithley court noted that imminence of litigation is sufficient to trigger the duty to preserve and stay normal destruction procedures if normal procedures would destroy information relevant to the litigation. Citing Zubulake IV and Hynix Semiconductor Inc. v. Rambus, Inc., No. C , 2006 WL (N.D.Cal. January 5, 2006) as precedents, the Keithley court recognized that the duty to preserve documents attaches when a party should have known that the evidence may be relevant to future litigation [and] future litigation must be probable, which has been held to mean more than a possibility. The Keithley court held that although defendants had notice of infringement at least by 1998 in a letter to the defendants regarding licensing, the duty to preserve arose well before the lawsuit was filed on October 1, The court found the duty to preserve had certainly arisen by August 3, 2001, when Plaintiffs sent Defendants a letter stating that we assume that Homestore.com wishes to litigate this matter. Unless we hear otherwise by close of business Tuesday, August 7, 2001, we will advance this matter accordingly. Despite the duty to preserve having been triggered, the defendants never issued a written litigation hold to its employees. The court held that the lack of a written document retention and litigation hold policy and procedures for its implementation, including timely reminders or even a single notice to relevant employees, exemplifies Defendants' lackadaisical attitude with respect to discovery of these important documents. The defendants had verbally instructed their employees to preserve relevant information, but they never explained what information might be relevant. Consequently, when the IT personnel G-12

13 destroyed old source code logs, the court found that the duty to preserve had been violated. Defendants had a duty to notify and periodically remind technical personnel of Defendants' preservation obligation and ensure that they took adequate steps to safeguard the data. At a minimum, Defendants were reckless in their conduct regarding the Development Computer. Had Defendants imposed a proper litigation hold in this case, the evidence on the Development Computer, in particular, the log of changes to the websites source code, would have been preserved. Instead, evidence of prior versions of source code was destroyed. The court also found that the defendants were dilatory because it was not until fifteen months after the Court's express order to produce all versions of source code, did Defendants make any real effort to fulfill their discovery obligations to search for and gather source code. Ultimately the court imposed monetary sanctions and an adverse inference instruction regarding the destroyed evidence. C. Circumstances That Triggered the Duty to Preserve and Sanctions Imposed for Finding of Fault Regarding Dilatory Electronic Document Production and Partial Compliance with Previous Discovery Order In re Kmart Corp., 371 B.R. 823 (Bkrtcy. N.D.Ill. 2007); Zubulake v. UBS Warburg L.L.C. (Zubulake IV), 220 F.R.D. 212 (S.D.N.Y. 2003) In In re Kmart Corp., 371 B.R. 823 (Bkrtcy. N.D.Ill. 2007), the plaintiff filed a motion for entry of a default judgment as to liability, imposition of an adverse inference, and/or the imposition of a fine for the defendant s alleged spoliation of evidence. The court explained that three types of improper behavior could warrant sanctions for evidence spoliation: willfulness (intentional defiance), bad faith (intentional or grossly negligent conduct intended to hide adverse information by), or fault (unreasonable conduct). Furthermore, sanctions should correspond to the quantum of proof regarding the severity of the conduct. In cases where spoliation is the result of fault, as opposed to willfulness or bad faith, courts often use prejudice [to the opposing party] as a balancing tool to tip the scales in favor of or away from severe sanctions. Before imposing sanctions, however, a complaining party must demonstrate that the duty to preserve had been triggered. In a discrimination suit against her former employer, the Zubulake IV court had found the defendant s duty to preserve had been triggered months before the complaint was filed because the plaintiff/employee provided evidence that almost everyone associated with [the plaintiff] recognized the possibility that she might sue. However, the Kmart court found that, although two executives were concerned about potential litigation prior to the filing of the complaint, the duty to preserve was not triggered until the [plaintiff s] administrative claims... were filed... or a short period thereafter. Finding that the defendant s conduct evidenced fault, the Kmart court determined that the plaintiff failed to establish that [defendant] knew there was relevant, discoverable information among the documents being destroyed... [and that] it is not entirely clear that such information was, in fact, destroyed. G-13

14 Ultimately, the court held that despite the defendant producing a massive amount of documents, the defendant s actions constituted dilatory and disjointed disclosure and production efforts [as well as] fractional compliance with the [court s previous] Order. Consequently, the court awarded some of the attorney's fees and costs incurred by [plaintiff] in the drafting, presentation, and trial of its motion, such award to be determined after trial... D. Monetary Sanctions Imposed for Ineffective Monitoring and Compliance with a Litigation Hold Zubulake v. UBS Warburg LLC (Zubulake V), 229 F.R.D. 422 (S.D. N.Y. 2004) In Zubulake V, a former employee had brought an action against her former employer asserting gender discrimination and retaliation claims. The employer faced sanctions as a result of its failure to produce relevant material and its tardy production of other relevant material. The court emphasized the importance of counsel effectively communicating to her client its discovery obligations so that all relevant information is discovered, retained, and produced. The court particularly focused on the duty to preserve and that counsel must identify all sources of relevant information once this duty attaches. To preserve all relevant information, counsel must impose a litigation hold and must monitor employees compliance with the instructions. As a sanction for the willful destruction of relevant s by employees despite the litigation hold and corporate counsel s instructions not to do so, the court permitted an adverse instruction to be given to the jury. As a sanction for its tardy production of relevant s, the employer was required to pay the costs of any depositions or re-depositions required by the late production and to the pay the costs of the plaintiff s motion for sanctions. E. Failing to Reasonably Investigate and Timely Produce Relevant Information Resulted in Defendants and Their Counsel Sustaining Monetary Sanctions Phoenix Four, Inc. v. Strategic Resources Corp., No. 05-Civ.-4837, 2006 WL (S.D. N.Y. May 23, 2006) In Phoenix Four, Inc. v. Strategic Resources Corp., No. 05-Civ.-4837, 2006 WL (S.D. N.Y. May 23, 2006), plaintiff alleged, inter alia, breach of fiduciary duty, common law fraud, and negligent misrepresentation. When moving into new offices and establishing a new business, the defendants abandoned documents and computer workstations. Of the computers and servers retained by defendant, defendants only searched one of the computers believing that no relevant documents were on the other computer systems. When no relevant electronic documents were found on the searched computer, the defendants advised their counsel that no relevant electronic files existed, only hard-copy documents that the defendants counsel then reviewed and produced. By chance, a freelance computer technician responding to a maintenance call discovered 25 gigabytes ( boxes four times the original production) of potentially relevant data in a separate partition of the server. The newly found electronic documents were then promptly produced. G-14

15 The court refused to give an adverse inference instruction based on defendant s abandoning information at its former worksite because plaintiff had failed to adduce any evidence that the abandoned evidence would have supported [plaintiffs ] claims or defenses. However, the court found that the information newly discovered by the technician was very relevant to the litigation. The Phoenix Four court reiterated the mandate to outside counsel found in Zubulake v. UBS Warburg, 229 F.R.D. 422 (S.D.N.Y. 2004) (Zubulake V): Counsel has the duty to properly communicate with its client to ensure that all sources of relevant information [are] discovered. To identify all such sources, counsel should become fully familiar with [its] client's document retention policies, as well as [its] client's data retention architecture. The Phoenix Four court found that the defendants counsel s conduct constituted gross negligence because it had simply accepted the defendants' representation that, because [the former company] was no longer in operation, there were no computers or electronic collections to search. The court found the defendant s conduct negligent by carelessly representing to counsel that there were no computers... to search when they knew that they still possessed, and were actually using at least one of, the servers.... Because the newly discovered information was immediately reported and quickly produced, the court believed an adverse inference instruction would be too severe. But the court did award monetary sanctions under its inherent authority. Both the defendants and defendants attorneys were ordered to reimburse plaintiff equally for costs and fees associated with the filing of the motion for sanctions. The district court had to approve the amount once time records were produced. Defendants and their counsel were also ordered to pay $10,000 for each of the redepositions of three witnesses for the limited purpose of inquiring into issues raised by the documents newly recovered from the defunct server. The district court further ordered that the defendants monetary sanctions could not be paid by their insurers. F. Metadata and Embedded Data, When Relevant, Must Be Produced Williams v. Sprint/United Management Co., 230 F.R.D. 640 (D. Kan. 2005) In Williams v. Sprint/United Management Co., 230 F.R.D. 640 (D. Kan. 2005), plaintiffs that had been terminated during a reduction in force brought a class action against their former employer alleging age discrimination. The plaintiffs objected to the redacted form in which the employer had disclosed spreadsheets containing the names of candidates for the reduction in force. The employer had scrubbed metadata from the spreadsheets in addition to locking and hiding certain data in the spreadsheets. The court held that because the court had repeatedly stated that the spreadsheets were to be disclosed in the native format in which they were maintained in the ordinary course of business, the spreadsheets should have been produced with the relevant metadata intact. In addition, the court held that the employer could not unilaterally and without notice lock data and cells within the spreadsheets as doing so was not in the spirit of producing information as it was maintained in the ordinary course of business. G-15

16 G. Court Disapproval of Data Degradation In Re Verisign, Inc. Securities Litigation, No. C , 2004 WL (N.D. Cal. March 10, 2004) In In Re Verisign, Inc. Securities Litigation, No. C , 2004 WL (N.D. Cal. March 10, 2004), the defendants sought to produce hundreds of thousands of documents in Tagged Image File Format ( TIFF ) despite the court s previous order stating that the [p]roduction of TIFF version alone is not sufficient, and that [t]he electronic version must include metadata as well as be searchable. The defendants argued that converting the voluminous amount of documents back to their.pst format (a Microsoft Outlook native format) would be extremely time-consuming, expensive, and burdensome. The court held that the documents must be produced in their native.pst format. The court explained that the defendants had ample notice of the production requests and that due to their noncompliance regarding a series of court orders, the defendants are solely at fault for their now inconvenient predicament. H. Parties Have an Obligation to Notify the Opposition of Relevant Evidence Not In Their Control or Possession Silvestri v. General Motors Corp., 271 F.3d 583 (4th Cir. 2001) While not specifically related to electronic evidence, the analysis is instructive for potential spoliation claims regarding evidence not in possession of a litigating party. In Silvestri v. General Motors Corp., 271 F.3d 583 (4th Cir. 2001), the plaintiff filed a products liability claim against defendant when the airbag did not deploy as warranted in an automobile crash. The court dismissed the claim because the car the sole piece of evidence in this case was repaired four months after the accident but three years before the defendant was given notice of the claim and an opportunity to inspect. The plaintiff argued that because he was not the car s owner and because he did not have possession of the car that the spoliation claim should not be imputed to him. The court disagreed. The court explained that the duty to preserve extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation. More specifically, the court held that if a party cannot fulfill this duty to preserve because he does not own or control the evidence, he still has an obligation to give the opposing party notice of access to the evidence or of the possible destruction of the evidence if the party anticipates litigation involving that evidence. The court found that during the months before the car was repaired that the plaintiff had sufficient access to the car in its damaged state to allow his attorney and his retained experts, apparently hired for future litigation, unlimited access to the vehicle for inspection purposes. The plaintiff also argued that dismissal was too harsh a sanction. However, in justifying the dismissal of the case under these facts, the court determined that while the spoliation conduct G-16

17 may or may not have been so egregious as to amount to a forfeiture of [the] claim,... the effect of the spoliator's conduct was so prejudicial [to the defendant] that it substantially denied the defendant the ability to defend the claim. G-17

18 Christine A. Heinsz - Associate Christine focuses her practice in civil litigation, particularly the defense of asbestos personal injury matters, class actions, real estate litigation, and employment-related disputes. Christine is responsible for preparing numerous defense motions and, given her business background in technology, handles many of the firm's electronic discovery issues. In asbestos matters, she regularly defends the firm's clients at depositions of plaintiffs and co-workers. Prior to receiving her law degree, Christine earned her MBA from the University of Chicago and worked for several years in the technology industry. During law school, she clerked for the Missouri Office of the Attorney General, Consumer Protection Division, and for a St. Louis law firm assisting with products liability, insurance and medical malpractice cases. Christine was a member of the Law Review: Journal of Law and Policy. She also participated in Moot Court and was a member of the Trial and Advocacy Team. Christine joined the firm's Edwardsville office as an associate in August Significant Cases Bowling & Amesquita v. Flavors of North America v. Frutarom USA Mediation, 2nd Chair, regarding products liability in popcorn lung case. Professional Associations Madison County Bar Association Illinois State Bar Association The Missouri Bar American Bar Association Court Admissions State Courts of Illinois and Missouri Education Juris Doctor, Washington University School of Law, 2005 Master of Business Administration- Marketing/Finance, University of Chicago, 1985 Bachelor of Science-Physical Education/Mathematics (Cum Laude), Southern Illinois University, 1973 G-18 Learn more about our speakers at