The State of eDiscovery in Delaware, Pt. IV

Posted on July 21, 2009 by Christopher Spizzirri

In Part III, we saw the Superior Court deal with instant messages, the Court of Chancery issues sanctions for failure to produce and dealt with issues of commingled data, and the District Court sets a fine example of wisdom and humility by reversing its prior order and deftly applying the principle of proportionality.  We pick up where we left off, in fall 2005.

A few days after the Rockwell decision, the District Court decided Fenster Family Patent Holdings, Inc., Elscint Ltd. v. Siemens Medical Solutions USA, Inc., 2005 WL 2304190 (Sept. 20, 2005).  In this patent infringement suit, the Fenster renewed a motion access to Siemens’ corporate Intranet.  The Court previously denied the motion, because Siemens represented that it would produce the requested data in a searchable electronic format.  Fenster claimed Siemens did not make good on their representation because they produced over one million pages in hard copy, requiring document-by-document review without the benefit of electronic search.  Fenster also claimed Siemens produced other large batches of documents in a non-searchable electronic format.  Siemens responded that it would re-produce the unsearchable electronic documents and that other documents were produced in the format in which they had been maintained.  The Court found that Fenster had not demonstrated a change in circumstances warranting a different outcome and denied the motion.

In late 2005, the Court of Chancery decided In re Instinet Group, Inc. Shareholders Litig., 2005 WL 3501708 (Dec. 14, 2005).  After settling a class action shareholder lawsuit, plaintiffs sought $1,450,000 in fees and more than $173,000 in costs.  Although agreeing plaintiffs were entitled to some fees and expenses, Instinet objected to the amount requested claiming plaintiffs' attorneys' inefficiently managed the discovery process.  In considering the award, the Court noted that prior to settlement plaintiffs obtained several hundred thousand pages of documents and devoted a substantial amount of time to document review.  The court issued a total award of only $450,000, stating,

[T]he obvious inefficiencies involved in this case, highlighted by the plaintiffs' decision to pay nearly $125,000 to convert documents produced in a digital format into a paper format.  Rather than simply copying the electronic media to permit the plaintiffs' lawyers working on the case to search and review the document production on a computer screen, the plaintiffs spewed the digital production onto paper and, then, copied the paper for review.  This approach both added unnecessary expense and greatly increased the number of hours required to search and review the document production.  In fact, the time records submitted include a large number of hours, by multiple attorneys, spent reviewing the documents… Additionally, it would be inappropriate to award the full amount of out-of-pocket expenses, as the very costly decision to “blow back” the digitized document discovery onto paper lacks justification.

I have had several vendors tell me they still periodically get requests to print out everything in a production.  To their credit, despite the fact that printing everything would have generated enormous of revenue, the vendors had mostly managed to talk their clients out of these ill-conceived decisions.  Please resist all automatic urges to print out entire productions, and consider In re Instinet a cautionary tale.

In early 2006, in Barker Capital LLC v. Rebus LLC, 2006 WL 247114 (Jan. 12, 2006), the Superior Court issues sanction for obstruction in discovery.  Barker Capital sued for, inter alia, breach of contract and unjust enrichment.  Defendants provided non-responsive interrogatories, offered an unprepared (and ‘obstructionist, arrogant, rude, insolent, sarcastic, and condescending’) 30(b)(6) witness, and, contrary to an affidavit from its general counsel, had failed to disclose various e-mails and other electronic documents.  The Court ordered production of all relevant documents, and simply asked Barker Capital to submit an affidavit setting forth all costs related to defendants’ efforts to frustrate discovery.

On April 12, 2006, without comment or dissent, the US Supreme Court approved the entire package of proposed FRCP amendments concerning discovery of electronically stored information.  The package included revisions and additions to Rules 16, 26, 33, 34, 37, and 45, as well as Form 35.

In June 2006, the Committee on Rules of Practice and Procedure adopted the recommendations of the Advisory Committee on Evidence Rules, approving proposed Evidence Rule 502 (Attorney-Client Privilege and Work Product; Limitations on Waiver) for publishing for public comment.

There are five more cases in 2006, four in 2007, and seven in 2008.  We’ll pick up with those case in Part V.  In the meantime, if you know of significant Delaware eDiscovery cases from 2005 or the first half of 2006 that you think I should have included, please post a comment to let everyone know.

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The State of eDiscovery in Delaware, Pt. III

Posted on July 13, 2009 by Christopher Spizzirri

In Part II of this series, we looked at four cases from 2002 and 2003 in which the Court of Chancery and the District Court each got into the eDiscovery thicket, addressing issues with backup tape restoration, keyword searching, allegations of spoliation, and cost-shifting.  The next significant case isn’t until 2004 when the Superior Court steps back into the eDiscovery realm.

In late 2004, the Superior Court faces instant messaging issues in Smoot v. Comcast Cablevision, 2004 WL 2914287 (Nov. 16, 2004).  Smoot was fired by Comcast for engaging in a “four-hour ‘instant message’ conversation with two of her co-workers on her company laptop. The conversation included numerous sexual references and allusions as well as racially derogatory remarks and instances of profanity.”  Smoot applied for unemployment benefits and was denied.  She appealed to an Appeals Referee who upheld the denial of benefits.  She then appealed to the Unemployment Insurance Appeal Board who also upheld the denial.  She then appealed to Superior Court.  The Court affirmed the Board’s decision.  Comcast caught Smoot because the instant message conversation created a 24-page transcript on her company-owned laptop.  This case shows us that ESI isn’t just Word documents and emails; it’s created in myriad ways.

In early 2005, in Beck v. Atlantic Coast PLC, 868 A.2d 840 (Feb. 11, 2005), the Court of Chancery sanctioned plaintiff and plaintiff’s counsel for failure to disclose relevant material from the plaintiff’s web site.  In an attempted class action, Beck sought to be class representative in a suit against Atlantic Coast for breach of warranty and fraud related to Atlantic Coast’s software.  Unfortunately, Beck never purchased or used the software at the heart of the allegation.  Atlantic Coast’s counsel found Beck’s web site where he posted his belief that the software did not work and emails exchanged with the developer in which he posed as potential buyer.  The Court dismissed the case with prejudice and ordered Beck and his counsel to pay Atlantic Coast $25,000 and $2,500 to the Court.  This is comparatively minor in a post-Qualcomm world, but significant at the time.  As the case above, this case also expanded the horizon of discoverable ESI.
 
Less than a month later, in TIG Insurance Company v. Premier Parks, Inc., 2005 WL 468300 (Mar. 1, 2005), the Superior Court reconsiders its own discovery order after misapprehending just how difficult it is to find needles in haystacks of ESI.  TIG insured Premier Parks (“Six Flags”) who was being sued in a class action.  The Court ordered TIG to produce information regarding law firms it had chosen to defend class actions against other insureds over the previous five years.  TIG tried to comply but had no way to sort by matters which resulted in defending a certified class action so they proposed searching for matters with similar expenditure levels (more than $750,000).  Six Flags rejected that proposal.  TIG proposed to broaden the search to matters with $500,000 in expenditures.  Six Flags again rejected, and proposed sending its expert in to TIG’s systems to search for the information.  TIG filed for reargument, asking the Court to refine its discovery order.  Six Flags, using language very similar to the Court’s in Kinko’s, argued that “TIG may not use its inadequate computer system as an excuse to avoid valid discovery obligations.”  The Superior Court did not agree and amended its prior order to require TIG to search its system for matters with $500,000 in expenditures.  This is an excellent example of a court employing the principle of proportionality, principle number two of The Sedona Principles.

In the fall of 2005, in Rockwell Automation, Inc. v. Kall, 2005 WL 2266592 (Sept. 9, 2005), the Court of Chancery deals with commingled personal and proprietary data.  The defendant had been terminated by the plaintiff.  The plaintiff sought recovery of proprietary materials in defendant’s possession.  Defendant returned “computer hardware” to the plaintiff containing the proprietary materials and defendant’s personal and privileged information.  The Court ordered that plaintiff “retain, at its expense, a third-party service provider to retrieve and review all documents.”  The service provider was to identify plaintiff’s proprietary or confidential documents from the corpus and return them to plaintiff.  The Court did not provide any guidance on what method the service provider should use to find plaintiff’s proprietary or confidential documents.

We’ll finish up 2005 in Part IV.  In the meantime, if you know of significant Delaware eDiscovery cases from 2005 that you think I should have included, please post a comment to let everyone know.  If you do it soon enough, you may make it into the next post!

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The State of eDiscovery in Delaware, Pt. II

Posted on July 13, 2009 by Christopher Spizzirri

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.
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