The State of eDiscovery in Delaware: The Final Chapter

As I suppose we could have expected, 2009 has delivered the most important eDiscovery cases to date, and we’re only half way through the year (or we were when I started writing this series). The District Court started us off before the last of the New Year’s confetti had been swept up by issuing its decision in Micron Technology, Inc. v. Rambus, Inc., C.A. No. 00-792-SLR on January 9, 2009, declaring certain patents unenforceable as a sanction for spoliation. In a suit for patent infringement, Micron claimed Rambus employed a document retention policy that destroyed documents while they had a duty to preserve. The Court said that Rambus was an “aggressive competitor” so should have foreseen litigation as far back as December 1998. All relevant documents destroyed by Rambus after that time was spoliation. As a sanction, the Court decided the patents at issue were not enforceable against Micron.

Not to be out done, and what has really made 2009 interesting, the Court of Chancery has recently issued three opinions with significant eDiscovery implications. On May 18, the Court issued its decision in Triton Constr. Co. v. Eastern Shore Elec. Servs., Inc., 2009 WL 1387115, granting an adverse inference as a sanction for spoliation. In a suit for breach of fiduciary duty, Triton alleged that defendant Kirk had intentionally destroyed evidence on his office computer with a wiping program. Triton’s forensic expert found evidence that Kirk had used the program to annihilate files and emails. Kirk had also been required to produce his personal laptop and thumb drive, which he failed to produce claiming he no longer owned them. The Court didn’t buy it, and issued an adverse inference.

Just days later, on May 29, the Court issued two—yes, two—significant decisions: Omnicare, Inc. v. Mariner Health Care Mgmt. Co., 2009 WL 1515609; and Beard Research, Inc. v. Kates, 2009 WL 1515625. (Oh, what a glorious time it was for eDiscovery nerds everywhere!) In Omnicare, the Court ruled that just because data is on a backup tape doesn’t automatically make it ‘not reasonably accessible.’ Omnicare sued Mariner for breach of contract and moved to compel Mariner to restore backup tapes to retrieve old emails deleted pursuant to their data retention policy. Mariner asked the Court to force Omnicare to pay for the restoration or to allow it hold off on restoration and produce emails from its active files so the parties could assess whether the restoration could reasonably be anticipated to lead to relevant information. The Court looked to Zubulake to analyze the cost-shifting argument, and decided that cost-shifting was not warranted in this case, noting that just because “ESI is now contained on Backup Tapes instead of in active stores does not necessarily render it not reasonably accessible.” Nonetheless, the Court opted not to order the restoration, opting instead for the active file sampling Mariner proposed.

In Beard Research, the Court brought the hammer down on Kates for blatant, repeated, audacious spoliation. Beard sued Kates for tortuous interference and asked the Court to impose sanctions on Kates for spoliation. Kates repeatedly reformatted his laptop’s hard drive, then replaced the drive (but kept it), then wiped the new drive on the eve of the hearing in which he was explicitly told he would be required to turn the laptop over. The Court awarded attorneys’ fees and imposed an adverse inference, and Kates should thank his lucky stars the Court decided to go easy on him.

Ralph Losey posted an outstanding analysis of the issues involved in Beard Research.  Francis Pileggi also had Beard Research well covered along with Omnicare and Triton.

There we have it—the State of eDiscovery in Delaware. I’m off to the beach for a week.

The State of eDiscovery in Delaware, Pt. II

In Part I of this series, we looked at two cases from the 1990's dealing with Attorney/Client Privilege and Work-Product protection.  The next significant case doesn't appear until 2002, when the Court of Chancery tangles with the issue of backup tape restoration.

In Kaufman v. Kinko's Inc., 2002 WL 32123851 (Apr. 16, 2002), in slight contrast to the current view of backup tape restoration, the Court was unmoved by Kinko’s “cost and convenience arguments” explaining that restoration of the backup tapes would be cumulative and cost up to $100,000.  Plaintiffs sued over stock valuation in a merger and sought emails between December 1999 and April 2002.  They argued that no less burdensome means of discovery exists for the information sought.  Kinko’s argued that the information was not readily accessible and that the burden of production outweighed the potential evidentiary benefit.  The Court didn’t agree, explaining that,
Upon installing a data storage system, it must be assumed that at some point in the future one may need to retrieve the information previously stored. That there may be deficiencies in the retrieval system (or inconvenience and cost associated with the actual retrieval) cannot be sufficient to defeat an otherwise good faith request to examine the relevant information.
The current view on this issue is to consider the principles of proportionality in such situations.  When a party claims that meeting a discovery request would cause an undue burden and excessive cost, courts now typically employ a balancing test to weigh the burden against the benefit.  In Kaufman, the Court of Chancery summarily dismissed Kinko's undue burden pleas.  The Court has since modified its view, adopting the principle of proportionality.  Even if the Court had used a balancing test, it may not have changed the outcome in Kaufman, but it would have changed the analysis.
 
Just days later, in Tulip Computers Int'l v. Dell Computer Corp., 2002 WL 818061 (Apr. 30, 2002), the Delaware District Court approves the Tulip’s proposal to use keyword searching to identify potentially responsive emails of Dell executives.  In a patent infringement case, Tulip sought, inter alia, to compel production of certain emails from Dell executives.  Dell argued that none of the executives from who Tulip sought emails would have responsive information.  Tulip proposed running mutually agreed upon search terms to identify responsive emails then allow Dell to review for privilege and confidentiality.  The Court found that “the procedure that Tulip has suggested for the discovery of email documents seems fair, efficient, and reasonable.” 
 
In late 2002, in Liafail, Inc. v. Learning 2000, Inc., 2002 WL 31954396 (Dec. 23, 2002), the District Court addresses defendant’s allegations of ESI spoliation by plaintiff.  In this consolidated contract action, defendant, Learning 2000, Inc. (“L2K”), alleges that Liafail intentionally destroyed relevant, even incriminating, documents from one employee laptop and failed to disclose the inadvertent destruction of data on two other employee laptops.  Liafail, although previously asserting that the documents had been destroyed and were not available, claimed the documents had been backed up and were available for production.  The Court said Liafail’s contradicting stories indicated it “may have engaged in questionable discovery tactics.”  But the Court declined to sanction Liafail, opting instead to allow them to produce the documents they claimed were available.  The Court then went to great lengths to warn Liafail that, if they did not produce the documents, the Court would issue an adverse inference jury instruction.
 
Almost a year later, in Rhodia Chimie v. PPG Industries, Inc., 218 F.R.D. 416 (Oct. 8, 2003), the District Court again deals with issues caused by large ESI volumes, this time considering the expense of production and declaring it a relevant consideration.  Rhodia sued PPG for willful patent infringement.  Rhodia requests documents from PPG back to 1981 that “substantially” pre-dates the existence of the patent and PPG’s knowledge of the patent.  The Court orders the production but recognizes the “magnitude of the labor” and that production would be a “daunting task.”  The Court then cites Zubulake v. UBS Warburg LLC, 216 F.R.D. 280, for the proposition that a cost-shifting analysis may be warranted.
 
In August 2004, the Advisory Committee on Civil Rules published proposed FRCP amendments designed to address growing issues in the discovery of ESI.  (Of course, a modified version of the Committee’s proposal was eventually adopted and became effective December 1, 2006.)  In November 2004, the Superior Court dealt with instant messaging issues in Smoot v. Comcast Cablevision, 2004 WL 2914287.  We’ll pick up with that case in Part III.  In the meantime, if you know of significant Delaware eDiscovery cases between 2002 and 2004 that you think I should have included, please post a comment to let everyone know.