Business Litigation Perspectives - Insights & Commentary on Business Legal Issues

In 2006, the federal rules of civil procedure were amended to include the phrase "electronically stored information" or ESI.  While the term is not defined, it is generally understood to include anything that can be digitally stored.   

Since the time of the amendment, ESI in litigation has taken on a life of its own.  It has become a complex minefield requiring careful planning, preparation, and execution, and when you consider the fact that 80% of litigation cost is related to discovery alone, the proposition of ESI can be very frightening.

While some have yet to experience ESI and all its glory, the reality is that that will change.  Technology has become so much a part of how we all do business, it's hard to imagine being without it.  ESI will undoubtedly change how corporations conduct their business over time, if it hasn't already, as well as how lawyers litigate their cases.  ESI is everywhere and it affects everything we do.

Proof of that is a recent article written by Seth Row. The article takes an interesting look at ESI and the Penn State-Sandusky cases.  While it spares the troubling details of the Penn State scandal, it talks about how lawyers representing the victims will use ESI to attack their case.  It sheds light on the types of discovery they will try and obtain to prove keys facts in their cases and provides insight on how lawyers can use ESI to build their cases.

From videotapes of the Penn State athletic facilities to Sandusky's credit card information to personnel records, including Internet search histories and email accounts, it's all ESI and it's all potentially discoverable.  As Row points out, the cases will provide crucial lessons in records management, preservation of ESI, and the interplay between the paper era and the electronic era.  Undoubtedly, we will be watching to see how it all unfolds and to see how those lessons can be applied.

I’ve been dedicating much of my tweeting, over the past few months (@GarySchaafEsq) to warning businesses about the pitfalls of failing to preserve documents, and particularly e-documents, when the prospect of litigation rears its ugly head.

Since the landmark Zubulake [PDF] decisions out of the Southern District of New York federal court, in 2003, businesses have been on notice that failing to preserve documents relevant to impending litigation (which can be considered “spoliation of evidence”), even occurring negligently as opposed to intentionally, could result in sanctions at trial, including (1) an instruction to the jury (or an inference by the court) that the missing evidence would have been unfavorable to the party responsible for its destruction, (2) the exclusion of testimony based on the missing evidence, or (3) dismissal of a party’s claims or defenses, where the court finds that such party has deliberately engaged in deceptive practices.

In its recent decision, in Vieste, LLC v. Hill Redwood Development [PDF], the Northern District Court of California, in the process of awarding attorneys’ fees and costs against a defendant which had been less than forthcoming with its discovery, provided a comprehensive examination of the e-discovery issues considered by the courts in the wake of Zubulake and its progeny.

Vieste points out that courts, in determining appropriate sanctions for destruction of relevant documents, including e-documents, will consider (1) the degree of fault of the party who altered or destroyed the evidence, (2) the degree of prejudice suffered by the opposing party, and (3) what sanction will best avoid substantial unfairness to the opposing party. The courts will also consider (1) the public’s interest in the expeditious resolution of litigation, (2) the court’s need to manage its dockets, (3) the risk of prejudice to the party seeking sanctions, (4) the public policy favoring disposition of cases on their merits, and (5) the availability of less drastic sanctions.

The court in Vieste cited Zubulake for the proposition that litigants are under a duty to preserve “what [they know] or should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request.”

While awarding only limited sanctions for the defendant’s failure to comply with the court’s discovery orders, the court found troubling that (1) the defendant’s representatives had been warned, only after the litigation had begun, to preserve documents, including emails, which would clearly be relevant in the suit, (2) the defendant had not taken steps, in light of the impending litigation, to suspend normal document destruction policies, to preserve such relevant documents, and (3) the defendant was accused of having produced only a very limited number of emails (two), which (if proved) could have led to a finding of spoliation.

In light of Zubulake, Vieste, and the increasing number of federal and state court decisions addressing these e-discovery issues, businesses need to understand the importance of preserving documents, including e-documents such as emails and text messages, maintained on their servers, hard drives, cell phones and flash drives, anytime they may be headed to litigation. Failure to do so may well result in monetary sanctions, exclusion of witness testimony, or dismissal of their claims or defenses.

To avoid sanctions or prejudice to their legal positions, businesses are well advised to put policies in place to guard against the destruction - accidental or otherwise - of documents and e-documents which could prove relevant to impending legal disputes.

Electronic discovery (aka e-discovery) refers to discovery in civil litigation that deals with information in electronic format, also referred to as “Electronically Stored Information” (ESI).

Lawyers (and their clients) know that e-discovery can be a very tricky area, with lots of traps and land-mines for the unwary.  But the patience of judges with lawyers who don’t follow the rules seems to be waning big-time. 

“Imagine a stand-up comic who delivers the punch-lines of his jokes first, a plane with landing gear that deploys just after touchdown, or a stick of dynamite with a unique fuse that ignites only after it explodes.” That’s Chief U.S. District Court Judge Royce Lamberth from the District of Columbia in a recent opinion, bench-slapping defense counsel in a pending class action lawsuit (DL v. District of Columbia)[PDF]

Judge Lamberth was furious over the conduct of the attorneys for the District of Columbia in producing thousands of emails just days before trial, as well as their plans to continue their late e-discovery production up to and during the trial itself!  Here is how the Judge described the mess:

“Whether the District made a good-faith effort to produce all responsive e-mails before the trial is irrelevant. … [I]t was not sanctioned for failing to make a good-faith effort. It was sanctioned for openly, continuously, and repeatedly violating multiple Court orders, failing to adhere to or even acknowledge the existence of the Federal Rules’ discovery framework, and committing a discovery abuse so extreme as to be literally unheard of in this Court.”

Ouch!  No lawyer ever wants to be on the receiving end of that, so better brush up on your e-discovery know-how (or make sure your firm and client have an IT department that knows how to handle e-discovery).

Apple has recently been under fire from privacy advocates after it was disclosed that the iPhone records and saves its user’s location history on a hidden file. When the phone syncs with the user’s computer, the hidden file is transferred from the phone to the computer's hard drive. The hidden tracking has led to several lawsuits alleging that Apple engaged in unfair and deceptive practices and fraudulent misrepresentation by secretly recording the data.

The incident is a reminder for business litigation attorneys and their clients that we are in a brave new world of electronic data.  New forms of data exist.  Attorneys operating in a paper world may not even think to request GPS records.  But, imagine your case turns on whether the opposing party's CEO was at a specific meeting. Does the CEO use an iPhone? You can now potentially obtain the iPhone tracking data through the discovery process and determine where the CEO was at the time of the meeting.

While not every case will involve electronic data, from the practitioner's perspective, I am increasingly sending out discovery requests that ask what types of digital devices and online services the opposing party is using.  At a minimum, I want to know whether the opposing party has an iPhone and uses Facebook so that I can tailor my discovery requests to obtain relevant information.

In a world moved by technology, we lawyers are finding that we have to become more efficient to become more competitive.  Is technology the answer?  Does this mean computers are making our profession obsolete? 

Certainly not, but I personally cannot imagine my life without a computer in it.  For anyone who watched “Jeopardy!” recently, they saw two human contestants beat by a computer named Watson.  While some view this is as scary, others see this is a game changer.  But, can computers really make us better at our jobs?  Perhaps.

In an article written by John Markoff for The New York Times, he takes a look at how e-discovery technologies are changing the legal profession.  In particular, he sites to a law firm’s usage of certain software which enabled the firm to search through over a half million documents in two days - a task which would have taken the lawyers over 185 days to complete! 

Seeing this makes it hard to deny that our clients would be better served and would save more money by utilizing this technology.  I for one am convinced.  While technology will never be able to fully replace humans, it does make you wonder just how far technology can take us.