All Relevant Employee ESI Must Be Disclosed

Posted by Gregg Mayer on Friday, April 18th, 2008   

As recently discussed on CIOLaw.org , when a litigation hold is triggered, it affects not only the email of a CEO of a company, but also all of the email and other ESI for relevant employees.

This same principle holds true for initial disclosures of ESI at the forefront of litigation, as discussed in the 2007 case of Metro Wastewater Reclamation District v. Alfa Laval, Inc.

In this case, Alfa wanted to see all of the electronic files related to the plaintiff’s employees who worked on a project related to the litigation. The plaintiff complained that the request was “irrelevant, overly broad, overly burdensome, and costly.” In other words, not every employees’ ESI was necessary.

The court disagreed and required the disclosure of all the employees’ ESI. The Federal Rules of Civil Procedure favor a broad discovery of information, the court noted.

Consequently, not only did the plaintiff have to disclose all of the employees’ ESI, it had to pay for its retrieval. This can be a costly venture for an ill-prepared company.

Court Orders Inspection Of Hard Drive After Delays In ESI Disclosures

Posted by Gregg Mayer on Monday, April 14th, 2008   

In a March 26 opinion, a Florida federal magistrate ordered a plaintiff to open up the computer hard drives of various employees so that the defendant could search for responsive email and other electronically stored information (“ESI”).

The plaintiff was also ordered to pay the attorney fees for the various motions to compel that the defendant had to file before being granted access to the hard drives.

Since this is a case where the court had to intervene and order the defendant to open up certain computer hard drives, this case will likely be one of the more important e-Discovery decisions of early 2008.

In U&I Corporation v. Advanced Medical Design, Korean-based U&I filed a breach of contract case in October 2006 against American Medical for failing to pay a balance due for medical equipment. As part of the litigation, both sides sought various ESI, including email sent by U&I employees.

After some haggling over what ESI should be disclosed, U&I belatedly acknowledged that it could not retrieve email from 2004. U&I explained that a “failure of the hard drive caused the 2004 e-mail account to be ‘unloadable’ or unretrievable.” U&I agreed to produce email from 2003, 2005, 2006 and 2007.

However, American Medical discovered that not all of the 2005 and 2006 email was produced because when American Medical subpoenaed a third-party company, that company disclosed various email messages from U&I employees that U&I never disclosed.

In short, American Medical argued that U&I delayed in telling American Medical that its 2004 email was not recoverable, and it failed to disclose all of the email from 2005 and 2006. American Medical sought sanctions.

In response, U&I argued that – despite another company’s production of some email that U&I did not disclose – there was no evidence that U&I deliberately withheld ESI. U&I also noted it disclosed approximately 14,500 documents. In addition, U&I threw out a host of other excuses for failing to disclose all of its ESI, including “language barriers of its employees” and “confusion.”

In weighing the arguments, the court sided with American Medical.

U&I’s assertion that the delay in providing documents to American Medical was caused by the international travel requirements of its employees, server and software problems, confusion, language barriers of its employees and the lack of understanding of the American legal system does not excuse U&I’s tardy and incomplete responses. After all, U&I was the party which filed this lawsuit…At the outset of the litigation, U&I and its counsel had the responsibility to take affirmative steps to ensure that all sources of discoverable information were identified, searched, and reviewed so that complete and timely responses to discovery requests could be provided.

It is not the court’s role, nor that of opposing counsel, to drag a party kicking and screaming through the discovery process. U&I has failed to show substantial justification for its failure and unwillingness to abide by discovery rules and the court’s prior orders…

Consequently, the court ordered U&I to pay American Medical’s attorney fees for bringing the motion to compel. Moreover, the court ordered that American Medical be allowed to inspect the hard drives of certain U&I employees in search for responsive ESI. A forensic examiner would conduct the search.

U&I highlights the importance of maintaining a strong archiving system. When doubts are raised about whether a company has disclosed all of the relevant ESI, then courts are likely to step in and let the opposing side take a look for themselves.

Archiving The Internet – One Snapshot At A Time

Posted by Gregg Mayer on Friday, April 11th, 2008   

CIOs undoubtedly have a difficult job – managing a companywide ESI archive in a demanding e-Discovery world.

Now imagine having to archive everything on the Internet. Of course, no one can do it. But a multiplicity of Websites around the world are trying the next best thing:

By virtue of its shear enormity and its warp-speed evolution, the task of archiving the internet in its entirety is clearly impossible, like trying to catalog every grain of sand on the world’s beaches. But as it is easy to take a photograph of a beach, it also is possible to grab snapshots of the internet, or specific portions of it, to preserve for future generations.
And that’s exactly what researchers at the Internet Archive, the Library of Congress, the National Archives and libraries worldwide are working on.

There have been some remarkable strides already, starting with the Mountain View, Calif.-based Internet Archive and its Wayback Machine, where its creator hopes to build a sort of second coming of the Library of Alexandria, the long-ago destroyed institution that housed much of the ancient world’s recorded knowledge.

The project has archived some 85 billion web pages on computers that measure data in unfathomably large quantities called petabytes.

One petabyte, by the way, is the equivalent of approximately 20,000 personal computers with 50-gigabyte hard drives. It’s a lot of stuff.

Read the rest of this fun article here in The Star Ledger.

Suspicious Email Results In Dismissal Of Employee’s Claims

Posted by Gregg Mayer on Thursday, April 3rd, 2008   

In an employment discrimination lawsuit in New York, a printed-out copy of an alleged “smoking gun” email message took center stage when its authenticity was called into doubt.

The case, Bell v. Rochester Gas & Electric Corp., involves Bell’s claim that he was illegally fired from the company Energetix because of his race. As part of his proof, Bell provided the court with an alleged hard copy of an email message. The hard copy was allegedly found either “weeks or months” after Bell’s termination by another employee within a stack of recently printed papers.

The email, purportedly written by Bell’s supervisor to another supervisor, contained racist statements about Bell’s firing. The supervisors denied ever writing or receiving the email. Energetix investigated the alleged email, as described in the March 26 court opinion:

Energetix conducted an internal investigation to determine whether [the email] had originated there. After a search [of the supervisors’] hard drives gave no indication that the message had ever been sent, received, stored, deleted or printed from their e-mail files, Energetix retained the services [of an outside vendor] to restore backup tapes of its e-mail server and search for electronic copies of the message between April 2002 and December 2002.

Again, nothing turned up. Energetix then hired another vendor to analyze the hard drives of the supervisors.

Despite these efforts, neither Energetix nor the two outside firms were able to find any evidence that the purported e-mail was ever written, sent, received or printed…

Bell argued that the email, which was marked as sent on May 21, 2002, was completely obliterated from the company’s servers before the implementation of backup tapes on June 2, 2002.

In a Sherlock Holmes-twist of logic, the court rejected Bell’s argument:

[O]ne need not be an expert in the field of computer forensics to recognize that if the e-mail had been sent by [one supervisor] on May 21, 2002 but deleted and overwritten at some point within the next twelve days to eradicate any trace of its existence such that it would not appear on any of the named defendants’ hard drives or Energetix’s daily backup tape for June 2, 2002, it would have been impossible…to have printed it…weeks or months after May 21, 2002, when [the other employee] allegedly discovered it, commingled with papers she had just printed and removed from a copier the previous day.

Taking all of the evidence as a whole, including evidence that Bell tampered with Energetix’s computer systems over billing, the court ruled there was sufficient evidence that Energetix fired Bell for non-discriminatory reasons. It dismissed Bell’s claims.

Although the court never directly called Bell’s email a fraud, it did note the ease with which email messages can be faked:

It is undisputed that e-mail messages can be easily fabricated, and a host of websites offer software and instructions for creating and/or sending faux e-mails…As such, a practical understanding of the available technology, both with respect to the fabrication of e-mails, and their preservation through electronic data, dictates that authentication of a printout as the hardcopy of a bona fide e-mail message now requires something more than a bar conclusion that the printout ‘appears to be’ an e-mail message.

Obviously, companies that have implemented effective and objective archiving systems have little fear of forged email messages since they can easily detect which email messages were sent or received within the system.

New Opinion Illustrates How Quickly ESI Issues May Proceed in Court

Posted by Gregg Mayer on Wednesday, April 2nd, 2008   

In a court opinion from March, a federal magistrate ordered an expedited forensic imaging of computers relevant to the litigation. In fact, within two days of the March 17 order, the computer servers and other electronic storage devices, including one employee’s laptop, were to be made available to a forensic examiner to make mirror images of the devices.

In the case, XPEL Technologies Corp. v. American Filter Film Distributors, XPEL worried that electronically stored information (“ESI”) could be altered or destroyed just by the day-to-day activities of the defendants’ computer use unless an expedited order permitted an immediate imaging of the computers. XPEL believes most of the relevant ESI was in metadata and other deleted – but still retrievable – files.

The court agreed to expedite the imaging, and it named a forensic examiner to move quickly to copy the servers. In addition, the court ordered that XPEL would pay for the costs of the forensic examiner, explaining:

The forensic images shall be copied and retained by the Forensic Examiner until such time the court or both parties request the destruction of the forensic image files.

The Forensic Examiner will maintain all mirrored images and do so in the strictest confidence, and not disclose any information obtained to unauthorized persons.

With this case as persuasive precedent, parties may more frequently seek to immediately make mirror images of opponents’ servers.

Court Sides With The Terminator In ESI Dispute

Posted by Gregg Mayer on Tuesday, April 1st, 2008   

In a class action lawsuit involving California Gov. Arnold Schwarzenegger, a federal magistrate sided with Schwarzenegger in denying plaintiffs’ request to observe computer databases.

The lawsuit, L.H. v. Schwarzenegger, is a class action involving juvenile parolees suing California over the parole revocation process. Schwarzenegger, as governor, is one of the named defendants.

The plaintiffs wanted the defendants to demonstrate the capabilities of the Ward Information Network (WIN) and the Offender Based Information Tracking System (OBITS), both of which are relevant to the litigation. Moreover, the plaintiffs wanted a list of scheduled trainings and to attend the trainings for the use of those two systems.

The magistrate on March 20 denied the request, explaining other means were available to obtain the same information. For example, the plaintiffs could ask an official from the state during a deposition about how the systems work.

Consequently, the defendants do not have to perform a demonstration of the systems. On hearing the news, Schwarzenegger reportedly said: “Hasta La Vista, Baby.”

Plaintiffs, however, did win a smaller ESI victory. The magistrate ordered certain electronically stored information in databases – such as ESI relating to appeals of parole revocation – to be disclosed to the extent the defendants had not already turned it over.

Sanctions For Failing To Disclose ‘Unstripped’ ESI, But Not For Deleting ‘Smoking Gun’ Email

Posted by Gregg Mayer on Thursday, March 27th, 2008   

In an ongoing intellectual property lawsuit between ClearOne Communications and WideBand Solutions, the judge was recently faced with two e-Discovery issues: (1) should he sanction WideBand for failing to disclose a “smoking gun” email, and (2) should he sanction WideBand for only disclosing a stripped version of a source code when ClearOne had requested another version of source code with comments.

In the end, the court sanctioned WideBand for misrepresenting it did not have a source code with comments. The court ordered an adverse inference instruction.

The court did not sanction WideBand for failing to disclose the “smoking gun” email. The court reasoned that since the email was automatically deleted from the company’s “sent” folders as part of its routine retention policy, then sanctions were not warranted. However, the court did describe this type of retention policy as a “significant irregularity” and “questionable.”

Here’s a more detailed rundown of the e-Discovery issues:

First, ClearOne sought a sanction against WideBand for failing to disclose an email sent by WideBand’s founder that was relevant to the litigation. The email surfaced when the company that received it disclosed the email in litigation. WideBand said the email had been automatically deleted from its system as part of its policy not to retain any items in the “sent” folder.

The court found WideBand’s deletion policy unusual:

For any business this is a significant irregularity; almost unimaginable for a technology company; and even more unlikely for a person of [the founder’s] importance in such a company.

However, since WideBand followed its routine policy in good faith, then the court opted not to sanction the company since it was not under a duty to preserve that email right after it was sent.

Second, ClearOne accused WideBand of stripping comments from source code that WideBand had provided to another party. The source code was at the heart of the infringement litigation.

ClearOne wanted “any and all versions, derivatives, and forms of the computer code.” WideBand only disclosed a stripped version of the code.

Of course, as it was discovered at the end of May, there was another copy of the source code and it does contain comments. Very shortly after this discovery, the source code with comments was provided to ClearOne.

During a deposition, a WideBand representative failed to disclose there existed a source code with comments, even though he was asked about it. As a result, the court ordered an adverse inference instruction against WideBand.

This is a serious remedy for a serious situation. It is not dispositive or case-terminating remedy, but it is significant. Such a jury instruction will have a considerable impact on the jury.

Read an analysis of the case and the court’s opinion here.

Court Rules ESI Records Kept Past Statute Of Limitations Still Have To Be Disclosed

Posted by Gregg Mayer on Wednesday, March 26th, 2008   

A court recently ordered a company to disclose old employee records even though the statute of limitations – a time period in which a lawsuit may be filed related to those records – had expired.

This is an illustrative case that shows if a company has records – including ESI – within its possession, and those records are relevant to litigation, then the records will have to be disclosed even if the law would have permitted destroying those records earlier.

In Thong v. Andre Chreky Salon, a Fair Labor Standards Act (FLSA) lawsuit filed in 2006, the employee wanted time cards, work schedules, notes and any other reports dating back to 1998. The employer, who had disclosed payroll records, objected to going back for the other records. The employer argued that going back to 1998 was too far. The statute of limitations to bring a claim under the FLSA is three years. Essentially, the employer said it should not have to provide documents past 2003.

The court disagreed in an opinion rendered earlier this year:

This Court finds that the request is reasonably calculated to lead to admissible evidence related to matters other than the alleged FLSA violations, including plaintiff’s claim that Mr. Chreky reduced plaintiff’s work schedule as a form of punishment for resisting his alleged sexual advances.
…
To the extent that defendants have within their possession, custody or control documents – other than payroll records and time cards previously produced – evidencing hours worked, this Court shall order defendants to provide such documents to plaintiff. If, in fact, defendants have no additional documents responsive to Request No. 19, this Court shall require defendants to provide an amended, verified discovery response stating that fact.

In short, even though the company could have destroyed those documents and deleted ESI under the law, when it decided to retain the information, then that information became open for disclosure in litigation. CIOs should consider the implications about unnecessarily retaining ESI for too long.

Court Recently Ordered Third-Party Company To Disclose ESI

Posted by Gregg Mayer on Monday, March 24th, 2008   

As CIOLaw.org recently discussed , courts have the authority to require businesses to retrieve and disclose electronically stored information (“ESI”) even if those businesses are not named in a lawsuit. This occurred in a recent case this year.

Taubman Centers, Inc., a company in Michigan, was on the receiving end of a third-party subpoena recently as part of a lawsuit in Nevada. Taubman was not a named party in the lawsuit.

The subpoena sought 20 categories of ESI going back to 2001. After a preliminary review of the subpoena, Taubman determined it would take three employees working full time for four weeks to retrieve and review all of the 250,000 files at issue. Taubman argued this rendered the subpoena “unduly burdensome.”

The court disagreed, although the judge told the parties to work in good faith to reduce the scope of the subpoena, such as by shortening the time frame or changing key word searches.

Discovery of electronic files…is commonplace in business litigation. The Court believes that the parties should be able to narrow the scope of this subpoena so that it does not generate an overly burdensome amount of documents.

Regardless of the amount, the non-party company still has to bear the costs of disclosing the ESI. The case highlights the importance of companies being ready to retrieve and respond to subpoenas in the most cost-efficient way possible.

Read more about the case here.

New E-world Replaces Musty Boxes in Basement

Posted by Gregg Mayer on Friday, March 21st, 2008   

“Electrons have replaced ink and paper,” according to an article in The Journal of Legal Technology Risk Management.

Archiving in the past meant “moving around dusty boxes of paper in the basement.”  Today, it means the dynamic world of storing email and other electronically stored information (“ESI”).

Increasingly, regulations and litigation are forcing companies to take stronger and broader strides in ensuring retention programs are up to date and effective. As the article explains:

New regulations, such as Sarbanes-Oxley and the December 2006 revisions to the United States’ Federal Rules of Civil Procedure have made the need for archiving electronic information in a manner that makes the information retrievable without crippling the enterprise more urgent. A fully functional enterprise archiving system is no longer “nice to have,” but should be now a “must have” for all business enterprises, particularly those in highly regulated environments such as the financial or healthcare industries. Unfortunately for business, most enterprises have no such system; those that do often find the employees not following the rules. Without such an implemented system, the enterprise must spend massive amounts of time and money finding documents that may be kept in backup media because the enterprise does not have useful archives, or that may be kept on CDs or DVDs tossed in some employees’ desk drawers.

The article offers 13 tips to consider when developing an archiving system. Here are the first three:

1. Understand that archiving is a long term project that sheds a whole new light on needs and may test all existing technological knowledge and assumptions, requiring constant monitoring and revising;

2. Assess the enterprise’s current electronic policies and define or redefine processes and procedures to account for worldwide regulation affecting the enterprise;

3. Assess the total document repository size in terms of the number of individual documents rather than in storage capacity, which is a misleading metric since the number of documents not their size defines scale;

Read the entire article from The Journal Of Legal Technology Risk Management here. 

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