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UPDATE:

I hate to say I told you so, but...wait, no I don't.

Yesterday, the Delaware Supreme Court issued its opinion in this matter affirming the Court of Chancery's spoliation finding. The Court held the spoliation finding proper, because Genger took affirmative steps to overwrite unallocated space, saying:

We do not read the Court of Chancery’s Spoliation Opinion to hold that as a matter of routine document-retention procedures, a computer hard drive’s unallocated free space must always be preserved. The trial court rested its spoliation and contempt findings on more specific and narrow factual grounds—that Genger, despite knowing he had a duty to preserve documents, intentionally took affirmative actions to destroy several relevant documents on his work computer. These actions prevented the Trump Group from recovering those deleted documents for use in the Section 225…

Compare with my statements below that

The [Court of Chancery] opinion in this case does not require preservation of all unallocated space in every case. Genger was sanctioned because he took affirmative steps to overwrite unallocated space, in violation of the Court's order... [T]here is nothing in this opinion that creates any requirement to preserve unallocated space. Rather, the opinion only says you shouldn't go out of your way to destroy it.

I feel quite vindicated in my defense, considering there were some persons and organizations of import in the eDiscovery community lined up on the other side. Obviously, reasonable minds can disagree, especially in interpreting court decisions. Ultimately, I am thankful that the Supreme Court's decision should allay any fears created by certain interpretations of the Court of Chancery's spoliation decision.

ORIGINAL POST (2011-03-11 13:20:45):

I had almost given up on writing this post considering how long it has been since I posted In Defense of Genger, Part I and (more importantly) how long it has been since the publication of the posts I am taking issue with.  However, the ongoing confusion about this case has prompted me to action. 

If you have read Part I, you are familiar with the Court of Chancery's decision in TR Investors LLC v. Genger, C.A. 3994-VCS (December 9, 2009) and with the allegations made by Leonard Deutchman, General Counsel at LDiscovery LLC, in a two-part post hosted by Law.com. <!--You also understand why there's a picture of Austin Powers.--> For those who are not familiar, Mr. Deutchman asserts that the Court got the decision wrong because it (1) does not understand the technology involved (Part 1) and (2) does not understand the law of eDiscovery (Part 2).

It's sufficient to say that I respectfully disagree with Mr. Deutchman on both charges. Rebutting his posts was a fun, interesting exercise for me, but it didn't seem terribly important. I saw it as an esoteric debate between eDiscovery geeks. That has changed, because, today, a prominent media outlet has published a post that elevates the confusion about this opinion and will cause unnecessary fear among corporate counsel.

The latest case of hand-wringing and confusion over this decision comes to us from none other than Forbes by way of Daniel Fisher's post "Delaware Ruling Would Require Massive Data Backups."  Mr. Fisher opens his post stating that:

A little-noticed decision by a Delaware court has the potential to impose huge costs on companies unless it is reversed, computer-security experts say...[e]xperts say retaining such data would be prohibitively expensive since the unallocated space is essentially a trash bin that is altered each time a key is tapped.

<!--Scary, huh?-->

Despite the fact that Mr. Fisher twice refers to "experts" (plural) as the source for these hyper-ventilations, his lone identified source for the post is Daniel Garrie, a lawyer and managing director at Focused Solution Recourse Delivery Group LLC , a computer consulting firm in Seattle. <!--Garrie and Deutchman are both lawyers with eDiscovery vendors. Is there anything to that?--> Mr. Fisher's post continues:

“It’s almost impossible for large companies with massive amounts of equipment to comply,” said Garrie... “I don’t even know if it’s possible,” said Garrie. “I mean, anything’s possible with enough money,” but companies would have to take bit-level images of their hard drives on a regular basis and store them somewhere, to be retrieved each time they are sued. That means all the time for most large companies. The costs would be “exponentially larger,” than current electronic discovery measures. “Several large global companies,” clients he declined to name, “have expressed concern.”

Let me clear up the confusion: The opinion in this case does not require preservation of all unallocated space in every case. Genger was sanctioned because he took affirmative steps to overwrite unallocated space, in violation of the Court's order and without first telling anyone. The routine, passive overwriting of unallocated space was NOT the cause for any sanctions here, so there is nothing in this opinion that creates any requirement to preserve unallocated space. Rather, the opinion only says you shouldn't go out of your way to destroy it. Big, BIG difference. <!--If there are doubts about the Court of Chancery's understanding of eDiscovery, please see their recently released "Guidelines for Preservation of Electronically Stored Information" that clearly embraces the principles of cooperation, reasonableness, and proportionality.-->

To Mr. Garrie's credit, he is consistent—he is co-author of an article in the Northwestern Journal of Technology and Intellectual Property that makes the same mistaken arguments, and he filed a brief with the Delaware Supreme Court arguing for reversal of the Genger opinion. I obviously disagree with Mr. Garrie's opinions on this matter, but I am here to help, so I say:

Mr. Garrie, for the “[s]everal large global companies [that] have expressed concern,” please send them a link to this post and tell them not to worry.

I don't actually expect Mr. Garrie will do that, but perhaps some of his clients will stumble upon this post, in which case here is my advice to them:

If you act cooperatively and transparently, you will be fine. If you find yourself in a similar position to Mr. Genger's, share your concerns with opposing counsel and the court before you do anything. Don't take matters into your own hands and violate a court order by wiping a hard drive in the middle of the night—it's bad form and will only get you in trouble.

Stayed tuned for the decision of the Delaware Supreme Court—I may have a lot of words to eat...

<!--Thanks to flickr user cliff1066™ for the Austin Powers pic.-->

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No doubt jealous of all the attention our beloved Judge Shira Scheindlin receives, two days ago U.S. Court of Appeals for the Tenth Circuit Judge Neil M. Gorsuch issued an order in Lee v. Max International, LLC affirming a terminating sanction in discovery. Woo hoo!

In one fell swoop, Judge Gorsuch does the following:

1) Establishes a "3 Strikes and You're Out!" rule:

How many times can a litigant ignore his discovery obligations before his misconduct catches up with him? The plaintiffs in this case failed to produce documents in response to a discovery request. Then they proceeded to violate not one but two judicial orders compelling production of the requested materials.

After patiently affording the plaintiffs chance after chance, the district court eventually found the intransigence intolerable and dismissed the case as sanction. We affirm. Our justice system has a strong preference for resolving cases on their merits whenever possible, but no one... should count on more than three chances to make good a discovery obligation. (emphasis added)

2) Enlightens us on the karma of discovery:

[T]here is such thing as discovery karma. Discovery misconduct often may be seen as tactically advantageous at first. But just as our good and bad deeds eventually tend to catch up with us, so do discovery machinations.

3) Establishes the "gimlet eye" standard of review:

We view challenges to a district court’s discovery sanctions order with a gimlet eye.

The lesson: Don't mess with District Judges and Magistrates in discovery.

Read the coverage at Above the Law where ALL YOUR DOCS ARE BELONG TO US.

<!--Thanks to flickr user Andrew Scott for the Gimlet Eye pic (to the left).-->

<!--Thanks to flickr user Malingering for the grand pic of Barry Bonds striking out!-->

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UPDATE:

I have amended my post based on some very thoughtful clarification from Dennis Kiker in the comments. Added text is underlined, and deleted text is struckthrough.

ORIGINAL POST (February 28, 2011):

LTN reports that national home builder Pulte Homes was caught deleting emails and wiping hard drives in direct violation of a court order:

Forsyth County Superior Court Chief Judge Jeffrey S. Bagley has ordered sanctions against Pulte Home Corp. for destroying e-mails and other electronic evidence in an environmental lawsuit.

The sanctions... include paying attorney fees for plaintiffs...

"We expect that attorney fees and costs will be in the range of $400,000 -- making it the largest award of sanctions for willful spoliation of electronically stored information in Georgia history," said Michael P. Carvalho, attorney for Adele and Tim Simerly, who are suing Pulte over stormwater runoff...

In September 2009, Bagley ordered an investigation by a special master into allegations that Pulte's vice president of land development, George "Ted" Turner, had deleted e-mails related to the case. The order followed a deposition in which Turner said he had deleted e-mails and intended to continue doing so, according to Carvalho...

The Special Master's report concluded that Pulte employees violated Bagley's order on spoliation of evidence, specifically deleting e-mails as well as replacing and reformatting hard drives in some computers...

"Pulte argued that despite the fact that significant efforts had been undertaken by the court-appointed forensic expert, 'only 160 documents' had been produced as potentially deleted emails," wrote Bagley. "And of these 160 documents, none of the emails was ultimately determined to be a 'smoking gun,' which would have otherwise caused this court to conclude that Turner's deletion was intended to hide, cover up or obfuscate the truth.

"Despite this court's prior order prohibiting the continued deletion of emails, Pulte continued to engage in a pattern of … spoliation," the judge added.

Read the full post...

Generally, the destruction of information only rises to the level of sanctionable spoliation when (1) the duty to preserve information has attached to a party, (2) the party commits a culpable breach of that duty, and (3) the resulting destruction causes prejudice to the other party. The post above does not mention any direct evidence of prejudice caused by the information destruction, yet the Court—rightfully—still found spoliation. Good.

Why do I say the Court was right in finding spoliation even though one of the elements of spoliation seems missing? Because the requirement that culpably destroyed evidence be shown to have caused prejudice—i.e. to show that what was destroyed was in fact relevant—unfairly shifts the burden to the non-culpable party to prove it was harmed by another's bad act. To address that inequity, "prejudice may be presumed when the spoliating party acted in bad faith or in a grossly negligent manner..." Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010) (Amended Order).

The Delaware Court of Chancery employed this logic in TR Investors LLC v. Genger, C.A. 3994-VCS in which the defendant, Genger, culpably knowingly, willfully, and in bad faith destroyed evidence then argued he should not be found to have spoliated evidence sanctioned absent proof from plaintiffs that the documents he destroyed were relevant. The Court had this to say about Genger's specious argument:

For a party to intentionally violate an order not to destroy or tamper with information and then to claim that he did little harm because no one can prove how much information he eradicated takes immense chutzpah. For a court to accept such a defense would render the court unable to govern situations like this in the future, as parties would know that they could argue extenuation using the very uncertainty their own misconduct had created.

Judge Bagley should say the same thing to Pulte.

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UPDATE:

Sorry for the quasi-necropost, but I just stumbled upon relevant case law.  In reading Cecil Lynn's excellent recent article on Law.com, Drama & Destruction, that provides a great rundown of 2010 case law, I came across this case summary:

In Ross v. Abercrombie & Fitch, defense counsel argued unpersuasively that the defense had no obligation to search for or locate known documents that did not turn up using the parties' agreed-upon search terms. 2010 U.S. Dist. Lexis 47620, at *11-14 (S.D. Ohio May 14, 2010).

I haven't read the case, but this seems to support the proposition that a producing party's obligation to produce relevant materials is not limited by the application of search terms.  In other words, search terms are not a shield to producing known, relevant documents. Thank you very much.

ORIGINAL POST (2009-09-18 12:22:33):

This isn't exactly timely, but it's been on my mind for months, and I wanted to share and get your feedback.

I had the pleasure of attending The Sedona Conference® Institute this past March in Philadelphia.  During the last day lunch, a particularly interesting conversation started up at my table.  I was sitting with people I had never met before and probably wouldn't be able to pick out of a crowd now, but we managed to have a brief and interesting discussion about keyword searching and the obligation to produce.  I don't remember how it started, but the terms of the debate were this:  Is there an obligation to produce responsive data that was not hit by negotiated keyword terms?  That is, you have positive knowledge that responsive documents have been excluded by keyword searching.  Are you obligated to produce them?

I thought, and still do, that there is absolutely an obligation to turn the documents over.  Keyword searching is a method for finding responsive documents that are mixed in with a morass of non-responsive documents.  But, if you have a collected group of documents that are responsive, there's no need to dump them in the unsorted pile in the first place.  They should be set aside for production without having to be keyword searched at all.

I casually shared my opinion with the table and saw several nodding heads, but I was surprised to find that two gentlemen did not agreed at all.  Their view was that, if the keywords were negotiated, then the results are the results and there's no obligation to turn over anything not hit by them.  One gentleman (a litigator, if I recall correctly) flatly said he would not turn over the responsive documents.  The other gentleman (a vendor, I think) rather snidely remarked something to the effect that 'You wouldn't tell the other side what to ask during depositions, would you?'  I agreed with that but thought it was a specious analogy.  Not wanting to ruin a  pleasant lunch with a heated debate, I let the discussion go, but it's been eating at me ever since.

Compare the view of these two gentlemen to the view of those of us who use sampling techniques to test the accuracy of keyword searches.  When testing for false negatives (exclusion of responsive documents), many people are of the opinion that even one false negative requires that the whole pile of excluded documents be manually reviewed.  On the other hand, for the gentlemen at my table, it would make no sense to ever test keyword search results, because they wouldn't produce any false negatives they found.  To me, not producing documents you know are responsive just because they weren't hit by negotiated keyword searches is like using keyword searching as a shield.  That not only violates the principles of cooperation but amounts to bad faith.

So which is right?  Am I being naive and Pollyanna-ish, or do these two guys not get it?  Or maybe it's a little of both?

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UPDATE:

Apparently I am the only one who seems to be concerned with the Court of Chancery's unqualified allowance for parties to agree to forgo discovery of ESI.  Here are the other blog posts I found that have reported on the new guidelines, not a single one raises any concern:

Delaware Court of Chancery Provides Good Advice on Preservation (Losey)

Court of Chancery Issues Guidelines for Preservation of Electronically Stored Information (Brady)

Delaware’s influential Chancery Court issues preservation guidelines likely to have wide impact

Delaware Court of Chancery Issues Guidelines for Preservation of Electronically Stored Information

Delaware Court of Chancery Recently Established Guidelines for Preservation of ESI

ORIGINAL POST:

Last week, the Delaware Court of Chancery—one of the nation's premier business Courts—unexpectedly issued a one and a half page "Guidelines for Preservation of Electronically Stored Information."  Surprisingly, the Guidelines seem to allow parties to opt-out of document discovery entirely (see the last item below).  In summary, the Guidelines are as follows:

• There is a common law duty to preserve potentially relevant electronically stored information (ESI) within a party's possession, custody, or control once litigation is commenced or when litigation is "reasonably anticipated."
• Parties must take reasonable steps in good faith to meet their duty to preserve ESI.
• Parties and their counsel should confer early in the litigation regarding the preservation of ESI.
• Parties and their counsel must develop, oversee, and document a preservation process in collaboration with the appropriate client information technology personnel.
• Parties and their counsel should discuss the need to identify how custodians store their information, including document retention policies and procedures as well as the processes used to create, edit, send, receive, store, and destroy information for the custodians.
• Counsel should take reasonable steps to verify information they receive about how ESI is created, modified, stored, or destroyed.
• The preservation process should include a written litigation hold notice to individual custodians instructing them to take reasonable steps, act in good faith, and with a sense of urgency in preserving potentially relevant information.
• Parties and their counsel may face "serious consequences" for failing to take reasonable steps to preserve ESI.
• The reasonableness of a party's preservation process is judged on a case-by-case basis.
• Counsel for all parties should confer about the scope and timing of discovery of ESI and may agree to limit or forgo the discovery of ESI.

I am very interested to hear comments on this development.

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UPDATE:

A colleague recently spoke to Vice Chancellor Laster about this opinion, and the Vice Chancellor reportedly said, "No self-collection in my Court."  I'm not sure that statement addresses my distinction between collection and review, but it does reinforce the Vice Chancellor's opposition to unsupervised custodian document collection.

Also, below is the presentation I made for use in briefing this case for the Herrmann Technology Inn of Court:

ORIGINAL POST:

Recently, Vice Chancellor Laster gave some of us a jolt with a bench ruling on a discovery dispute in Roffe v. Eagle Rock Energy GP, et al., C.A. No. 5258-VCL (Del. Ch. Apr. 8, 2010). The ruling addresses the issue of client self-collection and a lawyer's oversight duties.

The Association of Corporate Counsel's (AAC) website carried a summary of the ruling authored by Morgan Lewis & Bockius LLP that stated:

Vice Chancellor Laster ruled from the bench that confirmatory discovery—like formal discovery—requires the defendant’s attorney to be physically present during the collection of electronically stored information from his/her client; self collection by the client is not permitted.

Well-known eDiscovery expert, Kevin Brady of Connolly Bove in Delaware, explained that the ruling:

[P]ointed out that lawyers have an affirmative duty to be actively engaged in the collection process to the point that a lawyer should meet in person with the client to physically review his or her electronic information repositories wherever they may be located (including, if necessary, personal computers if that is where relevant information is stored).

I think Kevin's summary is much closer to the mark, and I'll explain why in a minute. First, the language causing concern is on lines 12-19 on page 10 of the attached transcript and reads as follows:

[Y]ou do not rely on a defendant to search their own e-mail system... There needs to be a lawyer who goes and makes sure the collection is done properly... we don't rely on people who are defendants to decide what documents are responsive, at least not in this Court.

The AAC article suggests there are two things implicated by this, and other supportive, language in the ruling: (1) client self-collection is not allowed, and (2) an attorney must be present during data collection. I think that interpretation assumes the worst and goes too far.

On the issue of self-collection, when the Court says not to "rely on a defendant to search their own e-mail system" and "we don't rely on people who are defendants to decide what documents are responsive," I believe the Court refers specifically to the practice of a client acting as document reviewer and sole arbiter of responsiveness. That is well understood to be a bad practice, so there is nothing shocking about this pronouncement.

I do not think the Court, in this ruling, has said that client bulk self-collection is impermissible. I see nothing in this ruling that would prohibit a client from gathering a mass of potentially responsive documents, e.g. full email accounts for all custodians, with guidance from counsel and turning them over to counsel for review. Counsel must review all potentially responsive documents and make final responsiveness determinations.

On the issue of requiring counsel's physical presence during collection, I again think the AAC article's interpretation of the Court's ruling goes too far. The AAC article seems to rely on the word "goes" in the Court's statement that "[t]here needs to be a lawyer who goes and makes sure the collection is done properly" for the proposition that counsel must 'go' and be physically present for collection. I think we get the spirit of the Court's statement by removing the 'go' part: "[t]here needs to be a lawyer who... makes sure the collection is done properly." That is well understood to be a best, if not required, practice, so there is nothing shocking about this pronouncement either.

To be fair, there are other references in the ruling to lawyers 'getting on a plane' to get data, but these suggestions seem to be case specific.  In this case, Plaintiff was supposed to be conducting confirmatory discovery on three board directors but only collected from two.  The third was a Mr. Smith. So the Vice Chancellor suggests that someone get on a plane to go get Mr. Smith's documents ("And you certainly need to put somebody on a plane to go out and see Mr. Smith." page 10, line 20; "So the question for me would be, one, how fast can you do this right? And that means not only the e-mails from Mr. Smith. As I say, somebody should have been on a plane a long time ago to go through his e-mails. And if he chose to use his personal computer, well, that was his bad choice. All right? And if he has it mixed in other stuff that he gets, 150 e-mails a day, or whatever, that was his bad choice. That makes it all the more essential that a lawyer get on a plane, and go and sit down with Mr. Smith, and go through his e-mail and make sure that what is produced is -- what is responsive is appropriately produced." page 12, lines 1-13). This seems to be a specific issue with Mr. Smith in this particular case requiring the physical presence of counsel to ensure collection of, perhaps, an unwilling participant.

I think my reading of this transcript aligns with Kevin Brady's in that lawyers need to be engaged in the discovery process and may need to be physically present during data collection. If, however, my interpretation is wrong and a lawyer is required to be present during collection that may only be conducted by a vendor, the cost of discovery in Delaware may be on the rise.

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Morris James is pleased to congratulate the lawyers listed below who were the most recommended by their professional peers, as determined by a Delaware Today survey of Delaware attorneys.

Gretchen S. Knight
Divorce
Family Law

Mary M. Culley
Elder Law

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Personal Injury
(Dover Office)

Jill S. Di Sciullo
Family Law

To view the entire list of "Top Lawyers", please click here.

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We are very pleased to receive this honor from the Delaware State Chamber of Commerce," said David H. Williams, Managing Partner of Morris James LLP, "Our firm is deeply rooted in Delaware and we are committed to providing our community with top-tier legal services.”

The Marvin S. Gilman Superstars in Business Award, named for one of Delaware’s leading small business entrepreneurs, honors businesses and non-profit corporations for their outstanding achievements and model approaches to business and management. The awards are presented to companies that have been in business for at least three years, are small businesses based on number of employees, and are members of the Delaware State Chamber of Commerce. Awards of Excellence are also granted to deserving companies.

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