Litigation Hold Impacts All Relevant Employees, Not Just CEO Or Executives

Posted by Gregg Mayer on Wednesday, March 12th, 2008   

A company’s failure to implement a legal hold for its employees’ email was likened by a Minnesota court to a game of “blind man’s bluff.” The court, of course, will win that game every time.

In 3M Innovative Properties Co. v. Tomar Electronics, Inc., a patent infringement lawsuit, problems arose during discovery – the initial phase of litigation where parties exchange evidence. Here is how the court summarized the issues:

3M makes three basic assertions: (1) Tomar gave false discovery responses; (2) Tomar failed to retain, collect, and produce court-ordered documents [including email]; and (3) Tomar engaged in deposition misconduct.

The court concluded Tomar’s president lied during his deposition. The president also interrupted other employees’ depositions. Moreover, the president failed to have his company implement a legal hold on email once the company was under a duty to preserve evidence for the litigation. The court wrote:

Discovery requests served on a company solicits information known to the company, not solely information known by the president, CEO, or other person directed to respond to the discovery requests. Accordingly, a reasonable investigation by a company would include an inquiry of a company’s employees for relevant information. A company need not question all employees, but must question those that would reasonably have relevant information.
…
Testimony indicates that [the president] never contacted any company employees to inquire about responsive information or documents. Tomar has presented no evidence or argument to this court that it has conducted a reasonable investigation for responsive information or documents, other than to assert that [the president] was in possession of all relevant documents and therefore an inquiry of other employees for relevant information was not necessary. Evidence indicates, however, that this position is not reasonable nor supported by evidence before this court.

In a last ditch effort to avoid a spoliation sanction, Tomar told the court it retrieved some 6,000 email messages from Tomar employees. The email messages had not been destroyed, as Tomar had earlier said.

By that time, however, it was too late. The court rejected Tomar’s effort to produce the email at that late stage, noting : “this discovery has all the earmarks of a game of blind man’s bluff.”

The court said an adverse instruction should be given against Tomar at trial, which will make it difficult for Tomar to win.

Several other sanctions were also imposed by the court, including not allowing the Tomar president to appear at any future depositions.

As Tomar learned the hard way, litigation holds impact an entire company.  Any employee with relevant evidence pertaining to the litigation will be under a duty to preserve that evidence, email and all.

E-Discovery In A Criminal Setting

Posted by Gregg Mayer on Thursday, February 28th, 2008   

The Federal Rules of Civil Procedure (”FRCP”) only govern civil proceedings.  Criminal cases have their own set of procedural rules.  Occassionally, however, a federal judge overseeing a criminal case comes across an unusual aspect of procedure and turns to the FRCP for guidance.   This happened recently with an e-Discovery issue in a criminal case.

In United States v. O’Keefe, the defendant, an employee of the Department of State in Canada, is charged with receiving gifts for expediting visa requests for his co-defendant. As part of the criminal case, the government was ordered to search its electronic files for relevant evidence.

O’Keefe complained that the government’s e-Discovery disclosures were inadequate. Specifically, O’Keefe argued the government did not specify what process it used to preserve ESI, did not disclose metadata, and did not use the correct search terms in retrieving ESI for the case.

In the court’s Feb. 18, 2008 opinion, the judge noted that since there was no criminal rule of procedure governing ESI, the court would look to the Federal Rules of Civil Procedure:

In criminal cases, there is unfortunately no rule to which the courts can look for guidance in determining whether the production of documents by the government has been in a form or format that is appropriate. This may be because the “big paper” case is the exception rather than the rule in criminal cases. Be that as it may, Rule 34 of the Federal Rules of Civil Procedure speak specifically to the form of production…It is foolish to disregard [the rules] merely because this is a criminal case, particularly where, as is the case here, it is far better to use these rules than to reinvent the wheel when the production of documents in criminal and civil cases raises the same problems.

I. Preservation Of Government’s ESI 

Utilizing the FRCP, the court looked to the rationale of the FRCP 37(e) – the “safe harbor” provision – to reject O’Keefe’s argument that the government failed to preserve ESI.

The court explained that the government could not be liable for destroying ESI as part of its good faith, routine operation. The government’s ESI retention policy provided for ESI to be put on backup tapes for two weeks, and then those tapes would be reused. No other backup archive existed. The government enforced this policy. As explained in the opinion:

The government’s destruction of evidence pursuant to a neutral policy and without any evidence of bad faith does not violate the due process clause if the evidence was destroyed before the defendants raised the possibility that it was exculpatory and the government had no objective reason to believe that it was exculpatory.

This principle finds its analogue in the Federal Rules of Civil Procedure, which indicate that, absent exceptional circumstances, sanctions will not be awarded for a party’s failure “to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.” Fed. R. Civ. P. 37(e).

Consequently, unless O’Keefe could offer specific evidence that the government destroyed ESI it was “obliged to preserve,” then there was no claim for failure to preserve ESI.

II. Metadata 

On the metadata argument, the court explained that the government appeared to have complied with the FRCP.  The government disclosed the ESI as PDF or TIF images.  O’Keefe had not specifically requested the ESI in its native format with metadata.  As a result, the government’s production in PDF or TIF was appropriate unless there was a specific reason the metadata was needed. The court explained:

Under Rule 34 of the Federal Rules of Civil Procedure, a distinction between documents and electronically stored information is made in terms of the form of production. As established above, a party is obliged to either produce documents as they are kept in the usual course of business or it “must organize and label them to correspond to the categories in the request.” Fed.R.Civ.P. 34(b)(E)(i). But if, as occurred here, electronically-stored information is demanded but the request does not specify a form of production, the responding party must produce the electronically-stored information in the form in which it is ordinarily maintained or in a reasonably usable form or forms. Fed.R.Civ.P. 34(b)(E)(ii). Additionally, a party “need not produce the same electronically stored information in more than one form.” Fed.R.Civ.P. 34(b)(E)(iii).

If one were to apply these rules to this case, it appears that the government’s production of the electronically stored information in PDF or TIFF format would suffice, unless defendants can show that those formats are not “reasonably usable” and that the native format, with accompanying metadata, meet the criteria of “reasonably usable” whereas the PDF or TIFF formats do not.

However, the opinion noted that the government seemed willing to re-disclose the ESI with metadata after O’Keefe complained. If for some reason that did not work out, the judge wrote that O’Keefe should file a motion to compel – a legal maneuver where one party requests the court force another party to do something.  If a motion to compel was filed, the court would then decide whether the government needed to disclose metadata.

III. Search Terms 

Last, the court rejected O’Keefe’s arguments pertaining to the search terms used unless O’Keefe could offer more specific arguments about why they were deficient.  The court explained:

Whether search terms or “keywords” will yield the information sought is a complicated question involving the interplay, at least, of the sciences of computer technology, statistics and linguistics…Given this complexity, for lawyers and judges to dare opine that a certain search term or terms would be more likely to produce information than the terms that were used is truly to go where angels fear to tread.

O’Keefe illustrates the expanding use of ESI in the courtroom. Moreover, O’Keefe highlights the importance of a routine retention policy. When followed, that policy may preclude sanctions during litigation, even in a criminal setting.

Glossary For E-Discovery Terms

Posted by Gregg Mayer on Friday, February 22nd, 2008   

The Sedona Conference, a legal think tank, has released an updated glossary of terms related to e-Discovery. Here’s a sample entry:

Legal Hold: A legal hold is a communication issued as a result of current or reasonably anticipated litigation, audit, government investigation or other such matter that suspends the normal disposition or processing of records. Legal holds may encompass procedures affecting data that is accessible as well as data that is not reasonably accessible. The specific communication to business or IT organizations may also be called a “hold,” “preservation order,” “suspension order,” “freeze notice,” “hold order,” or “hold notice.”

The glossary is a helpful resource in maneuvering through e-Discovery terminology. Get the entire glossary here.

Be Ready for Legal Holds

Posted by Gregg Mayer on Monday, February 18th, 2008   

What’s a legal hold? A legal hold is a communication throughout your company that all information that may be relevant to litigation must be preserved, including the outpourings and influx of hundreds of email messages. A legal hold is triggered when your company reasonably anticipates litigation.

No universal answer exists for when litigation is “reasonably anticipated.” It is a highly fact-intensive analysis. Generally, reasonable anticipation of litigation “arises when an organization is on notice of a credible threat it will become involved in litigation or anticipates taking action to initiate litigation,” according to The Sedona Conference Commentary On Legal Holds: The Trigger & The Process. The Sedona Conference is a popular and well-regarded think tank made up of judges, lawyers and academics who discuss issues of complex litigation.

Once triggered, a legal hold must be implemented efficiently. Failing to properly preserve ESI after litigation is reasonably anticipated may result in sanctions from a court, including an adverse jury instruction that whatever the company destroyed should be considered in the worst possible light against the company.

As explained by the Sedona Conference:

Once the duty to preserve information arises, an organization must decide what to preserve and how to accomplish that preservation. In some circumstances, the duty to preserve requires only that a limited number of known historical documents be located and preserved. In other circumstances, the scope of the information is larger and the sources of the information may not be known to counsel.

Knowing about legal holds, and having the capability to implement them quickly and seamlessly, is critical to being ready when your company faces legal trouble.

To read the complete Sedona report on legal holds: The Sedona Conference Commentary On Legal Holds: The Trigger & The Process.

What is Reasonably Anticipated Litigation?

Posted by Gregg Mayer on Thursday, January 31st, 2008   

It’s a simple phrase with a lot of importance: “reasonably anticipated litigation.”

What does it mean? Once you “reasonably anticipate litigation,” then a duty is triggered for you to start preserving electronically stored information, including the hundreds of email messages your company deals with on a daily basis.

In court opinions, such as the case of Eckhardt v. Bank of America, the duty is described generally as:

(A) party has a duty to preserve evidence when the party is placed on notice that the evidence is relevant … or when the party should have known that the evidence may be relevant to future litigation.

That language means what it says. The problem is knowing when you’re on “notice” of litigation or when you “should have known” that evidence may be relevant to future litigation. The answer is: it depends on the facts of each case.

No single case out there will explain if you should “reasonably anticipate” litigation. You need to talk about it with your lawyer.

As far as understanding the concept of “reasonably anticipate,” however, a recent case nicely laid out the facts for when the defendant in a lawsuit should have “reasonably anticipated” litigation and started preserving email.

The case is Peskoff v. Faber, 244 F.R.D. 54 (D.D.C. 2007). In it, Peskoff, a former managing partner of a venture capital firm, brought a lawsuit against the other partner, Faber. As the court explained:

Peskoff gave notice of potential litigation against Faber in a meeting of February 6, 2004, confirmed by letter of Faber’s counsel of February 19, 2004. Peskoff filed his complaint in this case on March 31, 2004. (emphasis added)

In short, Peskoff told Faber he was going to sue in Feburary, but he didn’t actually file a lawsuit until March 31, 2004. At what point should Faber have started preserving email because he could “reasonably anticipate” litigation? The court said in February when told about the potential claims. Although there was no actual lawsuit until late March, Faber could “reasonably anticipate” he was going to be sued on February 6. The court explained:

The most recent time period commences with the notification of potential litigation by Peskoff on February 6, 2004 (affirmed by defense counsel’s letter of February 19, 2004), through the date of Peskoff’s departure and any continued activity of his email account. The Advisory Committee comments to amended Rule 37(f) make it clear that any automatic deletion feature should be turned off and a litigation hold imposed once litigation can be reasonably anticipated.

As always, discuss with your lawyer anything you think may trigger the duty to preserve evidence. Preserving email once litigation is “reasonably anticipated” will likely save money – and heartache – down the road.

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