ILS: International Litigation Services

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FDIC Proposes Distinct Plaintiff ESI Protocol

In the case Federal Deposit Insurance Corporation v. Brudnicki, Case No. 5:12-cv-00398-RS-GRJ (N.D.Fl. 2013), FDIC, as receiver for the now-defunct People’s First Community Bank, is suing defendants, People’s former directors. Multiple electronic discovery disputes were pending before the district court in this case, including one regarding the proposed plaintiff ESI Protocol Order.

The defendants filed 94 separate document requests, and the “lion’s share of documentary information in this case has been converted to ESI.” Plaintiff proposed a unique ESI Protocol Order; it agreed to produce the requested ESI in two phases. The first phase would be the plaintiff ESI production of over 61,000 documents regarding categories of highly relevant requested data.

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A Brief Look at Spoliation and Prejudice

In Sekisui v. Hart, a magistrate judge decided an electronic evidence spoliation issue. The magistrate issued a memorandum and order finding that while Sekisui acted “grossly negligent” in deleting emails and ESI after the duty to preserve evidence arose, the innocent party failed to demonstrate relevance or prejudice.

In a summary of the case, Sekisui, acquired a company, ADI, from the defendants, the Harts. After sending a notice of claim alleging breach of contract, Sekisui deleted Hart’s emails and emails of an ADI former employee. After issuing a litigation hold after the emails were deleted, Sekisui failed to inform its own IT vendor. After the Complaint was filed, the IT vendor then permanently deleted the ESI.

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“Dead” Computers Could Be Brought Back to Life Through Court Order

In an interim memorandum and order dated August 5, 2013 in the case Net-Com Services, Inc. v. Eupen Cable USA, No. CV 11-2553 JGB(SSx)(C.D.Cal. 2013), Steve Moffatt, admitted that he was responsible for the custody and control of certain relevant financial records. Net-Com had ceased business operations in October 2011, around the same time Moffatt rented out his house, which stored Net-Com’s computers and records in his home.Despite his claim that he instructed the renters to not throw anything away, Moffett claimed everything was in dumpsters when he came to check on the house. A few hard drives were retrieved from the dumpsters while other data was “lost or stolen,” and the hard drivers were alleged to be “dead.”

The court ordered Net-Com to produce the “dead” hard drives that contained potentially relevant electronically stored information (ESI) to the other party’s computer forensics expert.

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Can People Keep Facebook Profiles “Private” to Shield from eDiscovery?

“Postings on Facebook and other social media present a unique challenge for courts, due to their relative novelty and their ability to be shared by or with someone besides the original poster.” Such was the issue facing a district court in Higgins v. Koch Development Corporation, No. 3:11-cv-81-RLY-WGH(S.D.In. July 5, 2013).

The plaintiffs argued that the accounts should not be included in plaintiff ESI production because:

1. The requests violated their privacy, since their pages only allowed certain people to see the accounts;

2. The requests violated the privacy of third-parties “tagged” on photographs; and

3. The requests were over broad, vague and ambiguous, not limited in time and scope.

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Appeals Court Considers Proper Form of Document Production and Confidentiality

In the state court case Hull, et al. v. WTI, Inc., A13A0003 (Ga.Ct.App. June 18, 2013), the Court of Appeals in Georgia took up an interlocutory appeal regarding sanctions imposed on defendants for the trial court’s finding of discovery abuses.

The underlying court case involved complex business litigation, and as such, there was concern about the release of confidential, proprietary business information.  To remedy this problem, the court entered a detailed, 12 page stipulated protective order that the parties could designate documents “confidential,” or “highly confidential.” Documents deemed “highly confidential” could only be viewed by the attorneys, not their clients.

At the hearing, plaintiff trial attorneys pointed out some examples of documents that were labeled “highly confidential,” but did not meet that description. Defendants reclassified those documents at the hearing, so about 83 percent of the remaining documents were labeled “highly confidential.”

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Computer Glitches Raise Questions of eDiscovery and Electronic Data Spoliation

Prior to the onset of electronic data saved in native file format, paper documentation in large banker boxes ruled the discovery process for physical evidence. This has completely changed in the last 10 to 15 years, as electronic files in native format are now commonly requested and produced in civil litigation. This presents a slew of challenges and issues of first impression for courts across the country.

Noting that the First Department in New York has clarified the standard for electronic data spoliation, the court then turns to that standard:

The party in control of the evidence has a duty to preserve it;

The records or data was destroyed with a culpable state of mind;

The destroyed evidence was “relevant” to the moving party’s claim or defense.

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Atlanta-based paper company Georgia-Pacific intended to use studies it commissioned into the safety of its products as part of its defense in ongoing asbestos litigation against the company. However, it did not want to turn over internal communication and underlying scientific and electronic data used in those studies to the plaintiff trial attorneys, citing attorney-client privilege. The court adopted the Special Master’s recommendation to order the defendant to produce microscopy images, data generated and numerical calculations. “Plaintiffs will be prejudiced if they are prevented from discovering the data, protocols, process, conduct, discussion, and analysis underlying these studies,” the court wrote.

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Many plaintiffs in civil litigation have to face requests for production of information and electronic data regarding social media websites. Both the public and private data from Facebook accounts are commonly requested by defendants as part of the plaintiff ESI production.

While many courts will require a “threshold evidentiary showing” that the public portion of the account contains relevant information, the court may order a plaintiff to produce data from the private portion of the account if the defendant can make such a showing. However, Magistrate Judge A. Kathleen Tomlinson of the Eastern District of New York used a different way to rule.

In Giaccehtto v. Patchogue-Medford Union Free School District, the underlying case alleged violations of the Americans with Disabilities Act and the New York Human Rights Law. The plaintiff claims that the defendant, her employer, discriminated against her due to her disability and retaliated against her after she filed a complaint with the New York State Division of Human Rights.

At first, the defendant sought unfettered access to the accounts, but ultimately reduced the requests to:

Postings about plaintiff’s emotional and psychological well-being;

Postings about plaintiff’s physical damages;

Any accounts of the events alleged in her Amended Complaint.

In this case, the magistrate judge chose to rule based on a traditional relevance analysis instead of using the “threshold evidentiary showing.” 

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The case U.S. ex rel. Becker v. Tools & Metals, Inc. addressed a common plaintiff eDiscovery law topic of interest in regards to what ESI costs and expenses can be shifted to a losing party. A qui tam plaintiff was awarded $174,395 for uploading ESI and creating a search index as well as $271,110 for electronic holding costs. The court noted that 42 USC §3730(d) of the False Claims Act (FCA) does not limit recovery of costs and expenses, and the fact that only five documents were ultimately used at trial did not change that.

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Plaintiffs Can Be Accused of Spoliation Too

Defendants are not the only parties accused of spoliation. In Research Foundation of State University of New York v. Nektar Therapeutics, the defendant filed a Motion for Sanctions against the plaintiff for alleged spoliation of electronic evidence. The court initially reviewed the standard for spoliation of evidence: 

A duty to preserve evidence was in place when the documents or data was destroyed

The evidence was destroyed with a culpable state of mind

The evidence was relevant to a party’s claims or defenses

While the defendant alleged that the plaintiff was grossly negligent in failing to preserve documents that were relevant to the defense, the plaintiff argued that the  preservation of evidence was sufficient and that the defense failed to meet the relevancy requirement for spoliation. The court ultimately found that the plaintiff had a comprehensive preservation policy, verbal and written litigation holds were implemented, email back-up tapes were preserved and it confirmed that no custodian had deleted data regarding the matter. Because everything about the plaintiff eDiscovery strategy and preservation of evidence was sufficient and the defense failed to offer any evidence of what the alleged “destroyed data” was or whether that alleged data was relevant, the Motion for Sanctions was denied.

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In E.I. DuPond De Nemours and Company v. Kolon Industries, Inc., the court awarded the plaintiff attorney fees and costs totaling $4,497,047.50. In this case, the defendant company committed egregious electronic discovery spoliation when its employees deleted files on their computers only a few days after litigation commenced. A computer forensics expert hired by the plaintiff searched the files and produced proof that “pointed to the probative value of the deleted electronic information…”

The costs amounted to roughly half of the total sanctions award, with the other half being attorney fees. Expenses recouped by the plaintiff included:

$119,745 for foreign language translation of documents and data

$877,085 for the computer forensics expert

$973,698 for contract attorneys for document review

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In Campbell v. Sedgwick, the plaintiff received an initial defense production which contained certain emails that the plaintiff believed were evidence of an additional person’s direct involvement in the case. While the plaintiff sought leave to amend the pleadings to name additional defendants and to add causes of action, the defendant objected and sought a protective order to limit the supplementary discovery served.

The Court addressed three issues following the electronic discovery issue:

1.      It granted the plaintiff leave to add one of the two persons as an additional defendant to the action. While the defendant argued this should have been barred by the statute of limitations, the Court agreed with the plaintiff that the claim related back to the initial complaint.

2.      The Court granted leave to the plaintiff to add an additional claim for breach of contract because of the liberal approach to pleadings embodied by Rule 15.

3.      The Court also rejected the defendant’s claim that “the discovery requests were voluminous, overly burdensome and harassing.” 

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…the parties and their attorneys can expect stiff monetary and other sanctions to be imposed against the losing party in any discovery-related motions.

The stringent warning that concluded the court ruling in W Holding Company, Inc. v. Chartis Insurance Company of Puerto Rico. The court specifically addressed:

Form of Production for Email

Form of Production for Other WESI (Windows-Based ESI)

Form of Production for Spreadsheets

Load Files

Data culling

Duplicates

Other Methods to Streamline Discovery

Production Media

Color

Physical Documents (Subjecting TIFF files to an OCR process.)

Inaccessible Data

Labeling

Claw-Back (Providing that any privileged document inadvertently produced to be promptly returned.)

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SCOTUS Makes Unanimous Ruling in Standard Fire

In Standard Fire Insurance v. Knowles, 568 U.S. ____(2013), the Supreme Court grappled with whether, under the Class Action Fairness Act of 2005 (CAFA), plaintiffs may stipulate to damages below $5 million to avoid automatic removal from state court to federal court. In a ruling that will affect class action lawsuits across the nation, Justice Beyer noted that “stipulations must be binding,” and that currently class members cannot legally bind proposed class members before certification.  Prior to this decision, plaintiff trial attorneys had hoped that by stipulating damages, the case would be kept in state court, which are known to be more pro-plaintiff than the federal courts, which tend to favor defendants.

  ILS – Plaintiff Electronic Discovery Experts 

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SCOTUS Rules in Favor of Comcast and Against Class Action Plaintiffs

Last week, the Supreme Court issued a 5-4 decision in Comcast Corp. v. Behrend, 569 U.S. ____(2013), where the plaintiffs alleged that the cable company was in violation of anti-trust laws that damaged plaintiffs by inflating prices of the services.  Although the appeals court found commonality based on the damages model proffered by plaintiff trial lawyers and certified the class, Scalia disagreed and penned an opinion that four other justices joined. The majority held that the damages model used “falls far short of establishing that damages are capable of measurement on a classwide basis.” Therefore, the injured plaintiffs did not establish commonality and the class could not be certified.

  ILS – Plaintiff eDiscovery Experts 

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More plaintiff electronic discovery requests are now seeking text messages from Smartphones, and defendants who do not comply or lose the evidence may be hit with sanctions. In today’s world, is there is no longer a practical difference between a text message and an email; if a difference still exists, it is negligible for eDiscovery purposes.

  In Christou v. BEATPORT, LLC, No. 10-cv-02912-RBJ-KMT (D.Co. 2013), the defendant claimed to have lost his iPhone containing text messages requested in discovery. The plaintiffs sought sanctions and an adverse jury instruction for spoliation of evidence; the defendant claimed the text messages were irrelevant to the litigation.

  The court found that “Defendants had a duty to preserve…text messages as potential evidence, but they did not do it. These text messages, few as they might have been, should have been preserved…” Id. However, the court categorized the loss as negligent, and granted plaintiff permission to argue at trial that the defense failed to preserve certain evidence, and that the plaintiff could argue whatever inference they hoped the jury would draw.

  ILS – Plaintiff eDiscovery Experts 

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The Supreme Court released its decision on February 27 in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 568 U.S. ___ (2013). The majority opinion decided in favor of the plaintiffs and certified the class in a securities-fraud case.

The court looked to federal Rule 23(b)(3) that “the questions of law or fact common to class members predominate over any questions affecting only individual members.” The defendant argued that the plaintiffs would have to prove that the alleged misrepresentations and misleading omissions materially affected the stock price at issue to certify the class, the plaintiffs argued they are only required to plead the allegations for the initial class certification stage.

Justice Ginsburg wrote the majority option and noted that the defendants’ argument “would have us put the cart before the horse.” Id. at 3. A 23(b)(3) ruling is not an adjudication of the merits of the case, rather only to select whether a class action would best serve the purpose of the suit.

This is a win for plaintiff class action lawsuits in securities claims based on “fraud on the market” theories. Had the court decided otherwise, it would have not only impacted future plaintiffs’ abilities to bring a class action suit, but the timing and cost of electronic discovery prior to class certification.

ILS – Plaintiff eDiscovery Experts